Illusions of Progress
By Brent Cebul
University of Pennsylvania Press, 2023
The Biden administration’s multifaceted industrial strategy of the past two years has ushered in an ill-defined transition away from neoliberalism. In response to the lingering supply chain constraints created by the pandemic and Russia’s war in Ukraine, as well as growing wariness over China’s market-share of dual-use technologies, the administration has promised to stimulate capital expenditure to maximize labor’s share of economic growth, build climate resilience, and promote energy independence. The goal is to expedite new allocations of labor and capital across sectors reeling from shortages, which have raised the cost of living for most workers and middle-class households.
Described as a novel approach to liberal-left policymaking, supply-side progressivism (also referred to as supply-side liberalism) primarily entails a wide range of government initiatives to strengthen market capacities. It combines incentives and parameters to accelerate production of critical goods that, in theory, sustain tighter labor markets, higher wages, and increased public revenue. As indicated by Treasury Secretary Janet Yellen, supply-side strategies to kickstart a new era of national economic dynamism are meant to also exemplify a renewed commitment to economic justice and opportunity by American liberals. They are a corrective, we may surmise, to neoliberal austerity and regional disinvestment, whose harms cannot be made up for in welfare alone.
Contrary to what some contemporary commentators have claimed, however, supply-side progressivism has been one of the leading traditions of American political economy for a century. “This worldview,” argues historian Brent Cebul in his new book, Illusions of Progress: Business, Poverty, and Liberalism in the American Century, “was born in the late New Deal, when liberals situated targeted public investments in and insurance for commercial, industrial, and residential development as wellsprings of virtuous cycles of economic growth and expanding tax revenues that might also underwrite a broader progressive social agenda.” If New Deal liberalism—a combination of a regulated market economy with expanded public sector responsibilities and union rights in core industries—amounted to a diluted version of European social democracy, then supply-side progressivism is the American analogue of indicative planning.
Cebul reconstructs how this method of market-making and developmentalism was implemented during the New Deal order and beyond. He interrogates supply-side progressivism’s historical propensity to preserve—and effectively underwrite—the discretion of private business over major investments that shaped the general welfare of local populations. This orientation, Cebul argues, is intrinsic to the supply-side logic: its goal is not to reserve spheres of the economy for long-term public ownership, but to use state stimulus, various public-private bodies, and regulation to make private investment more productive. In essence, it combines Hamiltonian and voluntarist traditions to strengthen the reciprocity of local capital formation and modern liberal government.
The upshot for Cebul is that, in key instances, the record of supply-side progressivism did not serve egalitarian ends. Cebul’s account illustrates how the approach failed to buttress efforts toward racial equality and economic advancement for Black Americans, and even inflicted new hardships.
But the book also offers insights on the strategy’s persistence as a stealthy political maneuver to bypass, fragment, or otherwise placate conservative opposition to any hybrid developmental-welfare state. New Deal planners, administrators, and economists faced formidable political constraints, as Cebul himself notes. Despite the accommodation of local elite interests, their developmental strategies nonetheless leveraged cross-class coalitions to support regional planning projects that were previously considered politically infeasible.
Today, as in the New Deal, supply-side progressivism remains a means of eluding reflexive opponents of “big government” while seeding development and expectations of shared prosperity. If supply-side progressivism is indeed a recurrent feature of American industrial strategy, Cebul’s history is vital for understanding how to avoid its past mistakes.
Forging local partners
Though guided by a belief in the virtues of democratic localism and voluntarism, liberals’ affinity for supply-side methods was, Cebul writes, ultimately pragmatic. It was structured by the reality of federalism, in which the ideology of states’ rights and a mercurial and dispersed hostility to national authority compelled progressives to embrace public-private partnerships. Although their underlying goals may have diverged, Franklin Roosevelt’s advisers and agency leaders, urban Northern Democrats, and Southern developmentalists all found it politically advantageous to execute New Deal policies in a way that suited local needs as articulated by pro-growth business allies. The array of national, regional, and subregional planning boards formed in the 1930s and 1940s reflected a conscious attempt to link cities and regions, not just state governments, to New Deal agencies. At the very least this cultivation of municipal and regional interests would undercut conservatives in both parties who jealously opposed greater federal intervention in economic affairs.
In addition to channeling federal money, planning boards promised a level of coordination, scalability, and support for new infrastructure and innovation that local business associations and municipalities could not muster on their own. These efforts modernized a “decentralized administrative state,” which typically subordinated state activism to the whims and prejudices of local politics. New administrative capacities were pliant—and business elites ensured they wielded maximum discretion over local development.
In this respect, planning boards and local divisions of public works agencies augmented rather than superseded the “boosterism” that had characterized urban development initiatives before the New Deal. Meanwhile, decentralized planning stimulated regional and interregional competition over federal contracts for public works and other projects. These included “roads, sewage systems, airports, public buildings, improved utilities,” which were distributed through agencies such as the Works Progress Administration, Public Works Administration, and Civil Works Administration. These kinds of contracts created much needed local capital, which firms then absorbed to build infrastructure. Local business associations lobbied aggressively for their share of funds despite their espoused faith in “free enterprise.” Reconciled to the merits of planning and confident in the long-term growth it would generate, they eschewed the dogma of national organizations such as the National Association of Manufacturers and US Chamber of Commerce that were hostile to the New Deal. As Cebul writes, “Even the Tennessee Valley Authority , then among conservatives’ and national business elites’ most hated liberal initiatives, was a boon to smaller-scale business-people, who benefited from its cheaper and more reliable electricity as well as its developmental ripple effects.”
The spread of public-private planning, underpinned by the advance of social science and its integration with a burgeoning administrative state, thus led to an unprecedented consensus over government’s role in development. While it caused business associations to identify more closely with their regional interests, this orientation was nevertheless constrained by biases and insular practices, including an ideological defense of the associations’ civic prerogatives. Business leaders decried “waste” in other locales while inflating the merits of their own pet projects. Financing, in fact, was significantly furnished via local banking intermediaries that disbursed federal loans made available by the Reconstruction Finance Corporation; the expectation was that loans would generate sufficient productive investment to be “self-liquidating.” This arrangement, Cebul explains, only reinforced business leaders’ predilection to raise capital through municipal bonds—and later, increase tax abatements for enterprise—at the expense of regular taxpayers and municipal finances far into the future.1
Ultimately, supply-side progressivism in its New Deal iteration was capacious enough to transcend ideological and partisan divides over economic planning. It facilitated growth in comparatively capital-starved locales while promising new avenues of development for more prosperous areas, without specifying what the sectoral or social outcomes should be. Even as it expanded a web of public-private administration that was inscrutable to the average citizen, supply-side progressivism was not a manifestation of “command-style” big government as caricatured by the New Deal’s most hostile opponents, but a means to prime private initiative and lending, industrial diversification and competition, mass consumption, and homebuilding, especially where state governments were unable or unwilling to. As long as government agencies could support private development geared toward elite-mediated notions of civic improvement, Cold War-era debates over economic policy mattered relatively little in practice. From the perspective of supply-side progressivism’s architects in the private sector, federal spending, properly delegated, promised more prosperity, more business opportunities, and patterns of investment and consumption that generated municipal revenue without the threat of wealth redistribution.
Cebul illustrates these dynamics by comparing the developmental trajectory of Cleveland, Ohio—a historical bedrock of Republican-aligned manufacturing interests and business associations—with that of Rome, Georgia, a small city representative of the intraparty divisions brewing in the Democratic Solid South between the 1930s and 1960s. Both cases exemplified a prevailing ethos of “business producerism,” in which the authority of local capitalists over development decisions sprang from “the notion that because businesspeople risked their capital, they were entitled to special consideration from political authorities.”
Beneath its premise of serving the public interest, this producerism was intrinsically undemocratic. Its purpose was not merely to guard against federal overreach but to uphold businessmen’s self-image as responsible and paternalistic yet also forward-looking. Following the depths of the Depression, and reeling from a period of labor insurgency, private enterprise was keen to demonstrate that it was a knowledgeable collaborator, not an implacable foe, of economic recovery. New Dealers, meanwhile, needed local partners to realize the fiscal multipliers promised by public and commercial infrastructure. Ultimately, they saw the expansion of social welfare policies—and in the South, democratization and civil rights—as proceeding from economic development.
Cebul argues that supply-side progressivism reinforced the authority of local white elites because of its tendency to accept, a priori, the virtues of localism and existing civic associations. This often intensified the consequences of Jim Crow in the South while fueling new forms of segregation and ghettoization in the North. The New Deal state’s deference to prevailing local distributions of power thus made it incapable of tackling deep racial inequalities. At the same time, it arguably fostered broad support for regional planning among whites, whether or not they named it as such. Consequently, it was able to generate cross-class constituencies who counted on federal stimulus to realize local development goals. At their most sagacious, advocates of planning incubated new industries and firms critical to upward mobility.
Crucially, this catalyzed a transformative if still elite-centered shift in power in the South. For those Southern interests that were most eager to pursue rapid industrialization, supply-side progressivism was a boon that facilitated the rise of a new generation of Southern moderates—Georgia governors Ellis Arnall and Jimmy Carter among them—who successfully challenged the arch reactionaries opposed to development. While they had their own manifest limitations on issues of desegregation and racial equality, these politicians were determined to overcome abject poverty and sectional backwardness—characterized by low literacy rates, widespread child labor, and stagnating or even declining capital formation—that distinguished the region from the more advanced Northern states. Georgia’s Agricultural and Industrial Development Board, Institute of Technology, Coosa Valley Area Planning and Development Association, and other organizations were emblematic of a broader Southern developmentalism that unabashedly harnessed federal support to expand a new middle-class composed of Southern whites. Once achieved, however, the region’s dominant interests generally disposed of liberalism, even as elements of planning were preserved by organizations such as the Southern Growth Policies Board.
In Cebul’s account, the most impressive fruits of public-private development during the postwar era are overshadowed by the inequalities and racism that it perpetuated. Although contributing to the celebrated economic growth of the period, supply-side progressivism was chronically undermined by its administrative logic, market orientation, and elite capture. Nearly all gains, one may infer from Cebul’s book, accrued to whites at the expense of poor and even middle-class Black people. At seemingly every turn, supply-side progressivism privileged the commercial possibilities entertained by local magnates, chambers of commerce, and, later, the burgeoning financial and luxury real estate sectors, with city-operated municipal services and public housing a secondary concern. Amid the surge in home ownership among working-class whites, facilitated in part by the Federal Housing Authority, most business elites deemed public housing construction a poor investment that would amplify blight and deter growth oriented around white-collar employment and upscale consumption.
In the worst cases, local development did not merely exacerbate segregation, legal or otherwise. Public-private partnerships repeatedly failed to promote the economic integration that appeared so essential to self-sustaining growth and the advance of “colorblind” liberal democracy. As illustrated in Cebul’s case studies, the very opposite occurred. Under the sweeping authority granted by ordinances for slum clearance, entire Black neighborhoods were leveled for new development. This destroyed decades of painstaking capital formation among African-American businesses and civic groups and often pushed Black families into areas afflicted with serious environmental hazards.
By the early 1970s, Black communities were pressed between rising unemployment in major Northern cities and racist efforts across the country to ostensibly preempt the spread of urban crime and poverty. Black Americans found themselves struggling to exercise newly won political rights within an unstable New Deal coalition whose dominant forces had so often undercut and fractured their communities. Though Cebul highlights campaigns waged by Black community activists in the late 1960s and 1970s that sometimes resulted in more Black political influence over local development, he shows that increased representation on city councils and even the election of Black mayors could not fundamentally alter the patterns of urban development that supply-siders had sanctioned. With the exception of the Community Action Programs set up by Lyndon Johnson’s Great Society, Black participation in economic development was largely thwarted or co-opted.
The spread of George Wallace-style populism during a period of growing economic uncertainty compounded the pattern of marginalization. As with the broader evolution of American liberalism, the scope of supply-side progressivism hinged on the changing politics of working-class Southern whites and Northern white ethnics. While the spirit and vernacular of the New Deal order can be construed as meshing economic populism with Keynesian expertise, its electoral linchpin had consisted of a rising tide of homeowners, the majority of whom were single-wage white families dependent on manufacturing employment or adjacent white-collar services.
Deindustrialization in the advanced economic core of the Northeast and Midwest posed an acute threat to living standards, not least because non-commercial property taxes were an important source of municipal and state revenue. In the growing suburbs of the South, meanwhile, hostility to further federal enforcement of desegregation dovetailed with an ideological insurgency against the fiscal system that helped furnish Southern prosperity—the fear was that Northern states with heavy fiscal burdens would restructure the federal budget during stagflation and the energy crisis to their advantage.2
While elites in both the North and the South may have steered local development, they still had to accommodate the aspirations and concerns of the demographics that swung elections. Rocked by anti-tax populism in the face of staggering municipal debts, declining revenue due to white flight to the suburbs, and the growing economic demands of civil rights activists, the cross-class (and frequently bipartisan) coalitions of postwar urban development frayed as the fiscal crises of the 1970s mounted. Pervasive anti-government sentiment enervated the mainstream appeal of economic planning, hastening the turn toward neoliberalism.
While the macroeconomic changes of the Reagan revolution resulted in severe austerity for many cities and regions, in some ways they accentuated a process of adaptation and consolidation for local development practices that was already underway. Countering the scholarly and popular tendency to sharply segment American political economy between New Deal and neoliberalized “orders,” Cebul makes the case that, with certain modifications, supply-side progressivism was the throughline that bridged the policies, strategies, and ultimate convictions of most New Deal liberals and their New Democrat heirs. Community Development Block Grants—a cornerstone of Richard Nixon’s “New Federalism” and implemented by Presidents Ford and Carter—effectively restored elite control over state and local development, following the grassroots experiments of the Great Society. Instead of challenging the block grant model, which helped enable Reagan to make sweeping cuts to federal aid, the Clinton administration adopted it for welfare reform.
Bipartisan resistance to “big government”—exemplified by this fiscally-restrained form of federalism—ignored other economic changes that hindered the desired revival of associational life. Amid increasing trade liberalization, excessive deference to capital would ultimately undermine the localism that generations of liberals had supported. Clinton, for instance, extended corporate subsidies for job training in a labor market increasingly divided between low-wage service workers and salaried professionals. Beyond advancing free-market prescriptions over federal and municipal reinvestment, this approach concentrated power in the hands of multinationals, rather than medium-size domestic firms that were more embedded in and dependent upon their regional economies.
Cebul echoes historians Lily Geismer, Claire Dunning, and Gary Gerstle in noting that Third Way governance, with its decentralized and deregulatory thrust, was not merely a form of liberal acquiescence to conservative arguments about poverty, bureaucracy, and economic growth. An ad-hoc “post-industrial policy” based around advanced technology, venture capital, and a plethora of development corporations promised to stimulate entrepreneurship, but it primarily advanced financialization and a new wave of corporate mergers. Although the era’s private-public partnerships were heralded as a fresh approach, they reflected the continuation of earlier development strategies. What had changed was a regulatory framework that had once forced business to substantiate its claims to a “producerist” ethos. Midcentury investments in public infrastructure and diversified manufacturing were replaced with high visibility private projects—from medical research centers to stadiums—with relatively limited long-term employment opportunities. Without guardrails, an overreliance on tax abatements fueled a race to the bottom, as municipalities struggled to attract fixed investment amid secular stagnation and rampant outsourcing.
Developmental coalitions, past and future
While the book highlights the indisputable failures of this approach, it also suggests that the strategy will likely continue to mark American developmental policymaking. We must consider, then, the leaps in human development that supply-side progressivism aided under daunting political conditions. Cebul writes that when Franklin Roosevelt and his allies identified the South as “the Nation’s No.1 economic problem,” they fatefully “emphasized developmental over democratic solutions for social and racial crises of poverty.” This framing was conditioned by the Democrats’ bipolar, bisectional coalition. As Cebul acknowledges, committed New Dealers had to defang the most anti-industry, anti-Black, anti-statist, and patriarchal elements within their own party to promote market diversification in the South and wean the region off its utter dependency on a few crops.
The federal government thus had a range of urgent socioeconomic problems to solve, many of which originated from inter-elite bargains that were struck post-Reconstruction. Planning boards and industrial policy were a way to circumvent deep-seated hostility to national authority, even as their function favored gradualism in electoral politics over empowerment.3
These problems manifested in the North as well. Prior to the New Deal realignment, the formal two-party system was arguably characterized as much by disorganized, insular, and personalistic opposition to the status quo as it was by the commercial and industrial interests that controlled the distribution and benefits of economic growth. Labor-oriented politics, haphazardly harnessed and mediated by Northern Democrats, was repeatedly subsumed by the developmental paradigm of the Republican Party. Despite periods of labor militancy and vigorous social reform, the North had wanted for a clear developmental alternative as it underwent successive and overlapping stages of what we would now call growth-based politics—industrial protectionism, municipal boosterism, and the market-making and technological focus of Herbert Hoover’s “associative state.” Together, these stages had structured the sectors, social networks, and nexus of corporate-Northern interests which the New Deal state had to alternately penetrate and accommodate to advance democratic capitalism.
Throughout the greater industrial Northeast and Midwest, pragmatic partnerships with local business associations tempered the ascent of the labor left, further inhibiting the possibility of a national labor party. But this in part was because New Dealers had to build upon a preexisting form of state activism, over which labor-friendly Democrats in the Gilded Age and Progressive Era had sporadic influence, at best. Their unenviable task was to figure out how to both restore manufacturing employment in the North to solidify the support of workers there and create manufacturing employment in the South to isolate some of the region’s most obstructionist demagogues.
Given this challenge under the emergency conditions of the Depression, it is not surprising that Republican-aligned business associations proved critical to supply-side progressivism’s structure and content in Northern cities. While this arrangement had obvious limits, bringing Northern industry back online was an unavoidable precondition of moving forward with Roosevelt’s “No.1 economic problem.” Furthermore, federal income tax revenue leaned on productivity in the industrial North through the late postwar era. New Deal liberals, therefore, were disinclined to contest business producerism’s negative consequences for labor movements and racial equality.
What should policymakers conclude about supply-side progressivism’s historical flaws, particularly as they look to overcome regional divisions that show few signs of abating? If not accompanied by policies that halt the displacement of low-income and minority communities, contemporary supply-side progressivism risks replicating earlier injustices. Its advocates must focus on inclusive growth that corrects the mistakes and deliberate exclusions that Cebul documents. This entails forging a patchwork of regional developmental coalitions that bypass the enduring obstacles presented by federalism and gerrymandering; overcome high rates of civic disengagement and broad distrust of all levels of government; and arrest the spread of anti-growth politics from the right to the left.
How these coalitions might differ from historical precedent is a question of great concern. Beneath rightwing rhetoric, there is, in fact, a growing bipartisan enthusiasm for electric vehicles and clean energy diversification, alongside an emerging consensus that the country’s flagging industrial base demands reinvestment. However, this very tentative accord does not signal agreement over whether government policy should promote dynamic growth, equality of opportunity, demographic-specific “equity,” or universal socioeconomic security. It is also unclear if these competing ideas can somehow be reconciled in order to weaken the disproportionate power of far-right reactionaries.
Other complications loom. Three decades of hyper financialization and asset stripping have hollowed out the civic obligations that an older species of industrial capitalists had intermittently charged itself with. Compared to today’s footloose capital and the reign of shareholder value, midcentury business leaders’ self-designation as stewards of civic welfare, however compromised, seems quaint. Of course, it is highly debatable whether progressives would ever welcome a revival of business producerism along these lines. Indeed, Cebul’s book raises profound doubts over whether such localist forces are truly compatible with democratic oversight and social democracy.
Although there are promising signs of investment in decarbonization—itself the linchpin of an economy that will maximize social utility—it is unclear if Biden’s industrial strategy will generate durable constituencies for the green energy transition. In a party system where ideology and polarization make it extremely difficult to launch state owned enterprises and other forms of public ownership, sustainable progress will demand the kind of multifaceted pluralism that the developmental coalitions examined in Cebul’s book failed to embrace.
New Deal administrators generally wagered that economic growth would indeed result in self-liquidating debts, deferring questions of who might have to pay more in taxes in leaner times, and how that might affect the country’s overall macroeconomic performance.↩
Cebul rightly gestures to the sectional dynamic that preceded the pivot to neoliberalism, noting the formation of the bipartisan Northeast-Midwest Congressional Coalition, though its impact on actually existing neoliberalism arguably deserves greater analysis from political scientists and economic historians.↩
We should not discount that in the period roughly spanning 1965 to 1980, Black Americans overall experienced meaningful wage growth and upward mobility.↩