Here, liberal capitalism faces Keynesian capitalism in a battle for the soul of America.
Here, liberal capitalism faces Keynesian capitalism in a battle for the soul of America. It's a Wonderful Life

The question we must ask on the 75th anniversary of the American holiday classic It's a Wonderful Life is: Why did the FBI see it, between 1946 and 1956, as "Communist propaganda?" The answer will not be found in its own period but that which followed, what some historians call the Golden Age of American Capitalism, 1947 to 1971. The FBI of the mid-1940s, which was led by J. Edgar Hoover, understandably confused the film's Keynesianism with communism because both were responses to class struggles that became acute after another stable period of capitalist accumulation (1850 to 1873) ended with the Long Depression.

Already before World War II, the world of the villain in It's a Wonderful Life, the robber baron Henry F. Potter, portrayed by the stern face of Lionel Barrymore, was long over. The glory period of his kind did not rise from the combined ashes of the First World War and the Crash of 1929. But no one knew what was to come next. Would the USA become another USSR? The 1930s were called the Red Decade for a good reason. Was the hero of It's a Wonderful Life, George Bailey (played by the drawl of James Stewart), a Red? Sure looked like it in 1946.

During the Great Depression (the Red years), capitalism in its liberal form, that is to say, as it was practiced in the 19th century, classical capitalism, was no longer viable. Trade unions had become too militant, and the power of mass culture was matching, if not at times surpassing, that of the bourgeois class. Was there another path other than that of communism, which is the domination of the economy by the working classes? There was. And it took the form of George Bailey. Let's look at him in his movie world.

The goal of Bailey's bank, Building & Loan, which runs at a loss, is to pull workers out of poverty—indeed, out of the slums that make Potter's bank huge profits. Bailey's dream, when he isn't dreaming of banking but doing interesting things with this life, is to expand the middle class. But the realization of this kind of banking requires an investment that first appears in the books as a loss. This is Bailey's dilemma.

Those familiar with the story of this movie, directed by a fascist, Frank Capra (but keep in mind, fascism and Keynesianism are by no means incompatible) can place the structure of my economic background on it and find it fits perfectly. Bailey is a Keynesian, and this is the economic program that directed worker militancy in America from a fascination with the USSR to the utopia of the suburbs. The US government realized the Building & Loan's reasoning by providing long-term loans that made home-ownership for wage earners possible. With this came the famous white-flight from apartments to single-family homes, the rise of car culture, and profits that satisfied the business class that replaced the Potters of the old world order, managerial capitalists.

By 1956, Keynesian capitalism became dominant and no longer a threat to the American way of life, and so It's a Wonderful Life was redeemed. The FBI finally left it alone. But during the 1970s, falling average profits and commodity price inflation in an economic environment conditioned by the demands of strong unions, initiated a massive attack by the business class on the very system that saved capitalism from communism, Keynesianism.

The attack was so successful that by the 1980s, Keynesianism, in its social form (but not its military one, which is with us to this day) was forced to relocate from the mainstream to the fringes, to the radical left, to what is now known as the post-Keynesian position. In the new economic dispensation, identified as neoliberalism, Big Government spending on social needs was registered as no better than Marxism. What was called for instead was an end to the kind of budget deficits that were in the books of Bailey's small-town bank.

If we in the post-2008 world see Bailey in a favorable (and even leftist) light, it's because we do not identify him with the peak of American capitalism but, instead, as the main-street man who opposed the power of the big banks, of Wall Street. We see him, in short, as the FBI first saw him. Happy birthday, It's a Wonderful Life.