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The Curious Origins of Airline Deregulation: Economic Deregulation and the American Left

Published online by Cambridge University Press:  20 January 2020

Reuel Schiller
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Abstract

This article examines the politics of airline deregulation in the 1970s, and the events that led to the passage of the Airline Deregulation Act of 1978. It links the antibureaucratic, antiregulatory policies of the 1970s to ideas closely connected to the New Left, the counterculture, and other left-wing subcultures that dominated high and low thought in the 1960s. By linking this source of antibureaucratic sentiment to the politics of airline deregulation, this article suggests a new direction for historians who study the American state in the last decades of the twentieth century. As they focus their attention on the rise of market-based, neoliberal regulatory policies, they should look for their origins not only in the growing strength of the intellectual and political right, but also in the political thought and practice of the 1960s left.

Keywords

administrative stateAirline Deregulation Act of 1978airline industryderegulationliberalismneoliberalismregulation
Type
Research Article
Information
Business History Review , Volume 93 , Issue 4: New Perspectives in Regulatory History , Winter 2019 , pp. 729 - 753
Copyright
Copyright © The President and Fellows of Harvard College 2020

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References

1 For the history of airline regulation, see Rose, Mark H., Seely, Bruce E., and Barrett, Paul F., The Best Transportation System in the World: Railroads, Trucks, Airlines, and Transportation Policy in the Twentieth Century (Columbus, OH, 2006), 76–96Google Scholar, 186–95; Peterson, Barbara Sturken and Glab, James, Rapid Descent: Deregulation and the Shakeout in the Airlines (New York, 1994), 22–32Google Scholar; Vietor, Richard H. K., Contrived Competition: Regulation and Deregulation in America (Cambridge, MA, 1994), 23–90CrossRefGoogle Scholar; Brown, Anthony E., The Politics of Airline Deregulation (Knoxville, 1987), 5–10Google Scholar; and Bailey, Elizabeth E., Graham, David R., and Kaplan, Daniel P., Deregulating the Airlines (Cambridge, MA, 1985), 11–26Google Scholar.

2 This is nicely explained in Derthick, Martha and Quirk, Paul J., The Politics of Deregulation (Washington, DC, 1985), 13–19Google Scholar; and in Vietor, Contrived Competition, 50.

3 For the story of airline deregulation, see the sources cited in notes 1 and 2 as well as Petzinger, Thomas J. Jr., Hard Landing: The Epic Contest for Power and Profits That Plunged the Airlines into Chaos (New York, 1995), 96–105Google Scholar; McCraw, Thomas K., Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn (Cambridge, MA, 1984), 222–99Google Scholar; Breyer, Stephen, Regulation and Its Reform (Cambridge, MA, 1982), 317–340Google Scholar; and Vernetti, Michael, Senator Howard Cannon of Nevada: A Biography (Reno, 2008), 147–67Google Scholar.

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5 Brown, Politics of Airline Deregulation, 138; Derthick and Quirk, Politics of Deregulation, 35, 52–53, 56.

6 William J. Novak argues that the dominant (and incorrect) origin story for the idea of agency capture places it with right-wing thinkers such as George Stigler and Richard Posner. Novak, “A Revisionist History of Regulatory Capture,” in Preventing Regulatory Capture: Special Interest Influence and How to Limit It, ed. Daniel Carpenter and David Moss (New York, 2013), 25–48. For a recent example of locating the origins of market-driven, anti-statist thought on the right, see Binyamin Appelbaum, The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society (Boston, 2019). For an excellent discussion of the historical literature on the nature of postwar conservatism, see Kim Phillips-Fein, “Conservatism: A State of the Field,” Journal of American History 98, no. 3 (2011): 723–43. The canonical texts of this literature are Phillips-Fein's own Invisible Hands: The Businessmen's Crusade against the New Deal (New York, 2009) and Lisa McGirr, Suburban Warriors: The Origins of the New American Right (Princeton, 2001). For the story of the rise of the intellectual right, see Angus Burgin, The Great Persuasion: Reinventing Free Markets since the Depression (Cambridge, MA, 2012); and Daniel Rodgers, The Age of Fracture (Cambridge, MA, 2011), chaps. 2 and 7.

7 On an “administered society,” see Herbert Marcuse, One-Dimensional Man: Studies in Ideology of Advanced Industrial Society (Boston, 1965), 239. For a nice summary of Frankfurter School thinking on the administrative state, see Doug Brown, “Institutionalism, Critical Theory, and the Administered Society,” Journal of Economic Issues 19, no. 2 (1985): 559–66.

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9 C. Wright Mills, The Power Elite (New York, 1956).

10 Mills, 229.

11 Mills, 231.

12 Mills, 338.

13 Mills, 298.

14 This pungent description—quoted in Dickstein, Gates of Eden, 59—was from Mills's other famous work, White Collar: The American Middle Classes (New York, 1951), not from The Power Elite.

15 Gabriel Kolko, Railroads and Regulation: 1877–1916 (Princeton, 1965).

16 Gabriel Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900–1916 (New York, 1963), 255–78.

17 Kolko, Triumph of Conservatism, 2–3.

18 Kolko, 3.

19 Grant McConnell, Private Power and American Democracy (New York, 1966), 293. See also Henry S. Kariel, The Decline of American Pluralism (Stanford, 1961); and E. E. Schattschneider, The Semi-Sovereign People: A Realist's View of Democracy in America (New York, 1960).

20 McConnell, Private Power, 27.

21 Theodore Lowi, The End of Liberalism (New York, 1969), 146–47.

22 The traditional starting places for the history of the New Left are James Miller, Democracy Is in the Streets: From Port Huron to the Siege of Chicago, 2nd ed. (Cambridge, MA, 1995); and Todd Gitlin, The Sixties: Years of Hope, Days of Rage (New York, 1987).

23 Students for a Democratic Society (SDS), The Port Huron Statement (New York, 1964).

24 SDS, 10, 16.

25 SDS president Paul Potter, quoted in Brick, Age of Contradiction, 132.

26 See, for example, Theodore Roszak, The Making of a Counter Culture: Reflections on the Technocratic Society and Its Youthful Opposition (New York, 1969), 1–41; Lewis Yablonsky, The Hippie Trip (New York, 1968), 321–22; and Joan Didion, Slouching towards Bethlehem (New York, 1968), 29–32.

27 Roszak, The Making of a Counter Culture, 267.

28 Joshua Clark Davis, From Head Shops to Whole Foods: The Rise and Fall of Activist Entrepreneurs (New York, 2017).

29 Fred Turner, From Counterculture to Cyberculture: Stewart Brand, the Whole Earth Network, and the Rise of Digital Utopianism (Chicago, 2006).

30 Arthur Marwick, The Sixties: Cultural Revolution in Britain, France, Italy, and the United States, c. 1958–c. 1974 (Oxford, 1998), 54.

31 Brick, Transcending Capitalism, 204–7.

32 Rebecca E. Klatch, A Generation Divided: The New Left, the New Right, and the 1960s (Berkeley, 1999), 112–25, 155–56, 188. For a detailed discussion of the use of law to harass subaltern groups in postwar America, see Risa Goluboff, Vagrant Nation: Police Power, Constitutional Change, and the Making of the 1960s (New York, 2016).

33 Frances Fox Piven and Richard A. Cloward, Regulating the Poor: The Functions of Public Welfare (New York, 1971), xv.

34 Piven and Cloward, 148.

35 Rodger D. Citron, “Charles Reich's Journey from the Yale Law Journal to the New York Times Best-Seller List: The Personal History of The Greening of America,” New York Law School Law Review 52 (2007–2008): 387; Jesse Kornbluth, “‘The Greening of America,’ a #1 Best Seller, Has Been Out of Print. Now It's Back, Just as Relevant as It Was in 1970,” Huffington Post, 12 Mar. 2012, https://www.huffingtonpost.com/jesse-kornbluth/the-greening-of-america-a_b_1378727.html.

36 Charles A. Reich, The Greening of America (New York, 1970).

37 Reich, 89, 119.

38 Reich, 58.

39 Reich, 101.

40 Reich, 89.

41 Reich, 212–16, 208–12.

42 According to Reich, all power was abusive: “It is not that the misuse of power is the evil; the very existence of power is an evil.” Reich, The Greening of America, 125.

43 Reich, 107–17. Also see Reich's equally famous article, “The New Property,” Yale Law Journal 73, no. 5 (1964): 733–87.

44 Brick, Age of Contradiction, 124–45.

45 Turner, From Counterculture to Cyberculture.

46 Thomas Frank, The Conquest of Cool: Business Culture, Counterculture, and the Rise of Hip Consumerism (Chicago, 1997).

47 Art Kleiner, The Age of Heretics: Heroes, Outlaws, and the Forerunners of Corporate Change (San Francisco, 2008), 13.

48 Arthur Marwick, “The Cultural Revolution of the Long 1960s: Voices of Reaction, Protest, and Permeation,” International History Review 27, no. 4 (2005): 780; Marwick, The Sixties, 13–14.

49 Maurice Isserman and Michael Kazin, “The Failure and Success of the New Radicalism,” in The Rise and Fall of the New Deal Order, 1930–1980, ed. Steve Fraser and Gary Gerstle (Princeton, 1989), 214.

50 Isserman and Kazin, 229, 228.

51 Ian McDonald, Revolution in the Head: The Beatles’ Records and the Sixties, 3rd ed. (Chicago, 2007).

52 Reuel E. Schiller, “Enlarging the Administrative Polity: Administrative Law and the Changing Definition of Pluralism, 1945–1970,” Vanderbilt Law Review 53, no. 5 (2000): 1389.

53 Karen M. Tani, “Flemming v. Nestor: Anticommunism, the Welfare State, and the Making of New Property,” Law and History Review 26, no. 2 (2008): 379; Reich, The New Property; Schiller, Enlarging the Administrative Polity, 1428–35.

54 See “History of the Center for the Study of Responsive Law,” CSRL website, n.d., accessed 9 Jan. 2019, http://csrl.org/about/.

55 For a list of all CSRL publications from the late 1960s and early 1970s, see the front matter of Franklin D. Chu and Sharland Trotter, The Madness Establishment: Ralph Nader's Study Group Report on the National Institute of Mental Health (New York, 1974).

56 Mark Green and Ralph Nader, “Economic Regulation vs. Competition: Uncle Sam the Monopoly Man,” Yale Law Journal 82, no. 2 (1973): 871, 883–87; Ralph Nader, introduction to The Monopoly Makers: Ralph Nader's Study Group Report on Regulation and Competition, ed. Mark J. Green (New York, 1973), xii–xv.

57 See Green, The Monopoly Makers; Edward F. Cox, Robert C. Fellmeth, and John E. Schultz, The Nader Report on the Federal Trade Commission (New York, 1969); Fellmeth, The Interstate Commerce Omission: The Public Interest and the ICC (New York, 1970).

58 See John C. Esposito, Vanishing Air: Ralph Nader's Study Group Report on Air Pollution (New York, 1970); James S. Turner, The Chemical Feast: Ralph Nader's Study Group Report on Food Protection and the Food and Drug Administration (New York, 1970); and David Zwick and Marcy Benstock, Water Wasteland: Ralph Nader's Study Group Report on Water Pollution (New York, 1971).

59 Fellmeth, Interstate Commerce Omission, 15.

60 Fellmeth, 22.

61 Fellmeth, 20n*.

62 Cox, Fellmeth, and Schultz, Nader Report on the FTC, 127–60.

63 Harrison Wellford, Sowing the Wind: A Report from Ralph Nader's Center for Responsive Law on Food Safety and the Chemical Harvest (New York, 1972), 314.

64 Turner, Chemical Feast, vi–vii.

65 Zwick and Benstock, Water Wasteland, 395.

66 Chu and Trotter, Madness Establishment, xxi. Someone had clearly read their Foucault!

67 Beverly C. Moore Jr., “The FCC: Competition and Communications,” in Green, Monopoly Makers, 35–73; Howard Saxner, “On Troubled Waters: Subsidies, Cartels, and the Maritime Commission,” in Green, Monopoly Makers, 103–38; K. G. J. Pillai, “The CAB as Travel Regulator,” in Green, Monopoly Makers, 159–89; Marshall Beil, “Power for the People: Electricity and the Regulatory Agencies,” in Green, Monopoly Makers, 193–224; and Howard Knee, “The $20 Billion Import Protection Racket,” in Green, Monopoly Makers, 319–45.

68 Green and Nader, “Economic Regulation vs. Competition,” 883.

69 See, for example, Kahn, Alfred, The Economics of Regulation: Principles and Institutions (New York, 1970 and 1971)Google Scholar, 1:8, 2:27, 2:78, 2:246, 2:335, 2:344, 2:353 (citing Kolko, McConnell, Nader, and Reich); Noll, Roger G., Reforming Regulation: An Evaluation of the Ash Council Proposals (Washington, DC, 1971), 14, 37–38Google Scholar, 91 (citing Lowi); Breyer, Regulation and Its Reform, 415, 419, 468 (citing Nader); Breyer, Stephen, “Analyzing Regulatory Failure: Mismatches, Less Restrictive Alternatives, and Reform,” Harvard Law Review 92, no. 3 (1979): 547CrossRefGoogle ScholarPubMed, 553n15, 571n87, 573n97 (citing Kolko and Nader); Breyer, “Afterword,” Yale Law Journal 92, no. 8 (1983): 1614, 1616n6 (citing Lowi and two CSRL monographs: Fellmeth, Interstate Commerce Omission; and Turner, Chemical Feast); Noll, Government Regulatory Behavior: A Multidisciplinary Survey and Synthesis (Pasadena, CA, 1982), 17, 21 (citing Lowi and Kolko); and Noll and Owen, Bruce M., Political Economy of Deregulation: Interest Groups in the Regulatory Process (Washington, DC, 1983), 155Google Scholar (citing Kolko).

70 For a description of the preparation for the hearings and the hearings themselves, see Brown, Politics of Airline Deregulation, 106–10; Derthick and Quirk, Politics of Deregulation, 39–45, 51–53; Breyer, Regulation and Its Reform, 323–40; Peterson and Glab, Rapid Decent, 33–48; Petzinger, Hard Landing, 86–105; and Stephen Breyer, interview by James Sterling Young, 17 June 2008, transcript, Edward M. Kennedy Oral History Project, 1–12, http://web1.millercenter.org/poh/transcripts/ohp_2008_0617_breyer.pdf.

71 Kennedy, Edward M., True Compass: A Memoir (New York, 2009), 314Google Scholar.

72 Breyer, interview, 3.

73 Breyer, interview, 4.

74 Adam Clymer, Edward M. Kennedy: A Biography (New York, 1999), 227–30; Breyer, Regulation and Its Reform, 323–27.

75 Breyer, Regulation and Its Reform, 317–23; Breyer, interview, 5–6.

76 Breyer, interview, 5–6.

77 Oversight of Civil Aeronautics Board Practices and Procedures: Hearings Before the Subcomm. on Administrative Practice and Procedure of the Comm. on the Judiciary, 94th Cong., 1st sess. (1975), 56–99, 452–94.

78 Quoted in McCraw, Prophets of Regulation, 224.

79 Oversight of CAB: Hearings, 88.

80 Airline Charter Fares: Hearings Before the Subcomm. on Administrative Practice and Procedure of the Comm. on the Judiciary, 93rd Cong., 2nd sess. (1974).

81 Peterson and Glab, Rapid Descent, 33.

82 Peterson and Glab, 34.

83 Airline Charter Fares: Hearings, 2.

84 Airline Charter Fares: Hearings, 191.

85 Airline Charter Fares: Hearings, 198.

86 Oversight of CAB: Hearings.

87 Oversight of CAB: Hearings, 1.

88 Oversight of CAB: Hearings, 17.

89 Oversight of CAB: Hearings, 761–1053

90 Oversight of CAB: Hearings, 855.

91 Oversight of CAB: Hearings, 761, 791

92 Oversight of CAB: Hearings, 819.

93 Oversight of CAB: Hearings, 947.

94 See Oversight of CAB: Hearings, 1150–68.

95 Oversight of CAB: Hearings, 1161, quoted in Derthick and Quirk, Politics of Deregulation, 51.

96 Oversight of CAB: Hearings, 936, 938, 946–47, 1227, 1246–48, 1261–62.

97 Oversight of CAB: Hearings, 664-71, 1189-93, 1773-82.

98 Oversight of CAB: Hearings, 666.

99 Oversight of CAB: Hearings, 1744.

100 Oversight of CAB: Hearings, 1745.

101 Oversight of CAB: Hearings, quoting Thill Securities Corp. v. New York Stock Exchange, 433 F.2d 264, 273 (7th Cir. 1970).

102 Oversight of CAB: Hearings, 1058–119.

103 Oversight of CAB: Hearings, 540, 546, 553, 576, 582, 634, 648, 652, 674, 689, 696, 729–30.

104 The entire eighth day of the hearings was devoted to this issue. See Oversight of CAB: Hearings, 2299–469.

105 Oversight of CAB: Hearings, 2300–3.

106 Carole Shifrin, “Reform Snaps at Heels of Regulatory Agencies,” Washington Post, 16 Feb. 1975, G1, G6.

107 Shifrin, G1.

108 Carole Shifrin, “Senate Panel Urges Reform of CAB,” Washington Post, 22 Feb. 1976, 2.

109 Douglas B. Feaver, “Suicide Left Data on Gifts by Airlines,” Washington Post, 3 Mar. 1975, A1; Feaver, “Bureaucratic ‘Stupidities’ Sparked CAB Official's Suicide: Enforcement Chief Overwhelmed by Sense of Failure to Cope,” Washington Post, 6 Mar. 1975, B1; William H. Jones, “2 Airlines Accused of Illegal Gifts: Braniff Named in Funds Case,” Washington Post, 13 Mar. 1975, A1.

110 “Cracking Down at the CAB,” editorial, Washington Post, 27 Mar. 1975, A22.

111 David Burnham, “Ford to Seek a Reduction of C.A.B. Regulatory Role,” New York Times, 7 Feb. 1975, 61; “Nader Says C.A.B. Didn't Act on Political Gifts from Airlines,” New York Times, 26 Feb. 1975, 16; “Kennedy Denounced C.A.B. Moratorium on New Route Competition for Airlines,” New York Times, 27 Feb. 1975, 69; “2 U.S. Aides Back Suicide Note Saying C.A.B. Chief Cut Off Politics Inquiries,” New York Times, 5 Mar. 1975, 18; “C.A.B. Officials Differ on Inquiry,” New York Times, 22 Mar. 1975, 64. There was also a long article by Robert Lindsey: “Airline Deregulation Is Weighed,” New York Times, 18 Feb. 1975, 37.

112 “Airline Reform: The Protagonists Are Unusual,” New York Times, 23 Feb. 1975, sec. 4, p. 2; “A Suicide Note Accuses C.A.B. Chairman,” New York Times, 9 Mar. 1975, sec. 4, p. 5; David Burnham, “It Took a Suicide Note,” New York Times, 30 Mar. 1975, 142.

113 David Burnham, “Senate Study Says C.A.B. Broke Rules for Airlines,” New York Times, 30 June 1975, 1, 32. The draft report was almost certainly leaked by Breyer, who had been cultivating Burnham for months. Derthick and Quirk, Politics of Deregulation, 44; Breyer, interview, 6; Breyer, Regulation and Its Reform, 337.

114 Burnham, “Senate Study Says.”

115 New York Times, 6 July 1975, sec. 4, p. 2.