Why the Welfare State Breaks Down

America is at a turning point. The radical nature of the period is recognized even by conservatives. When he was sworn in as secretary of the Treasury last summer, G. William Miller said that the nation had “inherited the most distressing economic environment in 50 years.” Leaving aside the evasiveness of Miller’s verb—it is a way to ignore the failure of more than two years of the Carter administration—his central point is quite true. If the times are not as dramatically miserable as the years between the stock market crash of 1929 and Franklin Roosevelt’s inauguration in 1933, they are at least as confused and bewildering. Simultaneous inflation and chronic unemployment subvert all the theories, and theory-based policies, of the past generation.

Does the moment simply mark the reassertion of traditional capitalist contradictions? That would be the diagnosis of a vulgar radicalism and it is, as we shall see, quite wrong. But then, are our difficul...