WHEN LIBERALISM RULED

By Richard Stengel

THE MAN NEWT GINGRICH DESCRIBED as the greatest President of the 20th century distrusted the states, was suspicious of Big Business and believed that government was the best instrument for building a morally better world. Franklin Delano Roosevelt's own contract with America pledged that government would help the one-third of the nation that was "ill-housed, ill-clad and ill-nourished."

In the Age of Newt, the Washington evoked in Alan Brinkley's masterly The End of Reform: New Deal Liberalism in Recession and War (Alfred A. Knopf; 371 pages; $27.50) seems like another planet. In the late 1930s and '40s, the word liberal was a badge of honor, not an epithet. Federal officials castigated "economic royalists," denounced predatory monopolists and seemed to regard the words free enterprise as a cloak for corporate exploitation. Big Business, not Big Government, was seen by Americans as the source of economic injustice.

The End of Reform is a dense, rich intellectual history of how the antimonopolist reform impulses of the early New Deal--in which modern industrial capitalism was seen as a flawed system that needed to be repaired--gave way to a rights-based liberalism that accepted capitalism as it was and concentrated instead on civil rights and a full-employment economy. The subtext of Brinkley's book is that the unremembered battles fought by idealistic liberal bureaucrats in the '30s and '40s are part of a never ending American struggle between the conflicting national impulses that Alexis de Tocqueville described as communitarianism versus individualism.

The book comes at a time when Republicans are making a fetish of balanced budgets, tilting at the last remnants of the New Deal and threatening to pass laws that limit the ability of ordinary citizens to sue companies for negligence. The End of Reform is a reminder that there was a time when popular reform was not about protecting corporations from consumers but shielding consumers from corporations.

Brinkley sketches out the beginning of the era of mass consumption, recounting how America evolved from an economy driven by production to one stimulated by consumer spending. The prophet of this change was the British economist John Maynard Keynes, who preached that the way out of the U.S.'s 1937 recession was the triggering of demand, not the revival of investment. This idea was new to the industrial age, which had always followed Say's Law of Markets in asserting that production drove consumption.

F.D.R., however, proved a reluctant convert; in 1937 he was still pining for a balanced budget, something that Keynesian economists warned would turn the "Roosevelt recession" into another full-fledged depression. Roosevelt's advisers accordingly persuaded him to seek to increase consumption. The answer to the question "What can you do for your country?" became "Consume." Thrift became wasteful, shopping patriotic--laying the groundwork for the I-consume-therefore-I-am society of today.

Brinkley's scholarship suggests that while the convictions of liberals have changed, those of ordinary Americans have remained consistently contradictory. In 1936, he writes, "much of the American electorate welcomed (even expected) assistance from government in solving their problems but nonetheless remained skeptical of state power." As evidenced by the 1994 elections, that skepticism has apparently intensified; millions of voters benefit from Social Security and Medicare and simultaneously complain that government is evil and inept.

William O. Douglas once remarked that liberalism is the spirit that is not too sure it's right. Brinkley suggests that liberals were certain they were right but were never exactly sure what they stood for. Brinkley illuminates the rather arcane arguments in which some liberals urged "managed competition" (a phrase the Clinton Administration considered and abandoned for its health plan), while others advocated economic decentralization, and still others promulgated an expanded welfare state.

Even so, by 1942 a coalition of conservative Republicans and Democrats was attempting to dismantle the mechanisms of the New Deal, such as the National Resources Planning Board. The House Un-American Activities Committee began a campaign to link liberalism with communism, suggesting that liberals were not simply lukewarm about capitalism but were actively plotting to upend it. Brinkley, a professor of American history at Columbia University, suggests that the compromises made by New Dealers in the early '40s--backing down on their antimonopolism and support of industrial "planning"--explain in part why "modern American liberalism has proved to be a so much weaker and more vulnerable force than almost anyone would have imagined a generation ago." Brinkley seems to take what is a deeply unpopular line these days: it is not that the New Dealers went too far, but that they did not go far enough.

The book suggests that the question for liberals today is no different from the one they faced before and during World War II: What is the role of the state in remedying economic inequities without eroding individual liberties? Or, as the question might be phrased for Gingrich: When does decreasing the role of the state unfairly increase the hardship on those whom the nation needs to help?