It seems hard to believe now, but it wasn’t that long ago that the elites in both the United Kingdom and the United States had largely given up on capitalism.
In the 1970s, there was broad agreement that we had entered a new era in which the hard-knuckled edges of traditional capitalism were no longer appropriate. In America, President Nixon — a Republican — announced plans to provide a guaranteed income to families with children. Throughout that decade, the top tax rate in the United States was 70 percent. Businesses were tightly regulated.
In Great Britain, the situation was even more severe — large parts of the economy, such as the coal industry and the steel industry, were simply nationalized. Even as the economic performance of the English-speaking world deteriorated throughout the ’70s, few elites expected a return to full-scale capitalism. After all, hadn’t capitalism led to the Great Depression? Wasn’t it too controversial and out of date? Even Ronald Reagan’s own future running mate, George H.W. Bush, famously referred to Reagan’s ideas as “voodoo economics.”
But Reagan — like Margaret Thatcher in the United Kingdom — remembered something that many of the smart people on both sides of the Atlantic had forgotten: No one can ever run a business as efficiently as the person whose own money, effort, and sweat have gone into it. The great strength of capitalism is that people work harder, and better, when their own future is at stake. By unleashing the forces of capitalism, both here and in the U.K., Reagan and Thatcher freed business from the clammy hands of bureaucracy, and set off two decades of booming economic growth. That performance ended most doubts about the potential benefits of capitalism. By the end of the 1990s, even Bill Clinton — a Democrat — was telling voters that the “era of big government is over.”