For 30 years, the Republican Party dominated American political life, winning five of the seven presidential elections before 2008. But the GOP has taken its lumps of late, culminating in its loss of Congress in 2006 and the White House last November.

The party's future direction is unclear.

But as America struggles to emerge from a financial crisis, any renewal of the right will require Republicans to rethink their approach to the economy. An agenda focused chiefly on tax cuts, as the Republicans' has been since Ronald Reagan's presidency, is no longer enough.

In 1980, Reagan won the election by attracting a substantial portion of Democrats with three simple ideas.

First was the fight against the Soviet Union.

Second, the battle against the excesses of the state: "Government is the problem, not the solution," Reagan famously said.

Third, and most relevant to this discussion, was faith in economic growth.

Growth improves everyone's well-being, lifting the underprivileged from poverty and eliminating the need for costly fiscal redistribution. With growth as the objective, a deep cut in tax rates for higher-income people was justifiable and necessary because it would increase the incentive to work and foster productivity.

Lower taxes became a winning political weapon for the Republican Party. In 1980, when the highest marginal income-tax rate stood at 70%, this economic platform was extremely attractive, as were Reagan's other key ideas. The country had just seen a decade of low growth and high inflation, defeat in Vietnam, the Soviet invasion of Afghanistan and the humiliation of the American hostages in Tehran. It was ready for change.

An entire generation adhered to the Republican Party, forming a majority so solid that it lifted George W. Bush to the presidency 20 years later. A golden era of economic growth began in the early '80s and continued, aside from a few minor recessionary interludes, until 2007 - a quarter-century of unparalleled prosperity.

Yet today the Republican brand, so successful for over two decades, has lost some of its luster. In part, it's simply the curse of success. The war against the evil empire has been won. Taxes were substantially reduced. The battle for deregulation has achieved many of its main objectives.

In part, too, Reagan's platform lost its appeal because the Republican Party frequently betrayed it. The size of government increased by 33% during W's first term, the largest increase in federal spending since Lyndon Johnson. Bush's last Treasury secretary, Hank Paulson, orchestrated the most massive state intervention in a Western economy since Francois Mitterrand's nationalization of French banks.

The situation of Americans has changed, too. Though American GDP has doubled in real terms the past 25 years, median real income has grown by only 17%. While the richest 1% of the population has tripled its real income, with the richest 0.01% finding its real income quintupled, the bottom 10% has increased its income by only 12%.

Now the financial crisis has created significant discontent. In a survey taken last December, 60% of Americans declared themselves "angry" or "very angry" about the economic situation.

If Republicans ignore this popular anger, as the party establishment did last autumn, they leave a powerful and potentially disruptive force in the hands of Democrats. The Democrats could channel popular anger into protectionism, 90% tax rates and onerous new market constraints.

In Republican hands, populism could become a strong force for positive change.

The Republican Party has to move from a pro-business strategy that defends the interests of existing companies to a pro- market strategy that fosters open competition and freedom of entry.

While the two agendas sometimes coincide, they are often at odds. Established firms are threatened by competition and frequently use their political muscle to restrict new entries into their industry, strengthening their positions but putting their customers at a disadvantage.

A pro-market strategy aims to encourage the best conditions for doing business, for everyone. Large banks benefit from trading derivatives (such as credit default swaps) over the counter, rather than in an organized exchange.

They can charge wider spreads that way, and they can afford to post less collateral by using their credit ratings.

For this reason, they oppose moving such trades to organized exchanges, where transactions would be conducted with greater transparency, liquidity and collateralization - and so with greater financial stability. This is where a pro-market party needs the courage to take on the financial industry on behalf of everyone else.

A pro-market strategy rejects subsidies because they're a waste of taxpayers' money and because they prop up inefficient firms, delaying the entry of new and more efficient competitors.

And a pro-market approach holds companies financially accountable for their mistakes - an essential policy if free markets are to produce sound decisions.

A pro-market party will fight tirelessly against letting firms become so big that they cannot be allowed to fail, since such firms may take risks that ordinary companies would never dream of.

A pro-market party should favor a robust safety net - for people, not companies. Of course, this safety net should be run on market principles as much as possible. Unemployment insurance should retain incentives for people to look for work, and the health-insurance industry should be opened up to competition. But defenders of markets cannot ignore the importance of providing such security for citizens.

They also cannot ignore the nation's growing income inequality and the widespread loss of confidence that the future will be better than the past. The knee-jerk Democratic reaction is to give these poorer citizens entitlements disguised as rights.

The Republican response should focus on providing opportunities. Parents should have access to good schools for their kids, regardless of their financial means or where they live. The best way to deliver on that promise is through a voucher system.

Students should have better access to loans to finance their education because everyone gains from a better-educated work force. The unemployed should have access to retraining, which can also be designed through a voucher system.

Health care should be available in the marketplace. The current system, in which only employers get a tax deduction for health insurance, reduces labor mobility and increases the cost of becoming unemployed.

The U.S. has been the inspiration for all who believe in freedom, both political and economic. Its identity, however, is predicated on maintaining a political consensus that supports market values.

Growing income inequality, the financial crisis and the perceived unfairness of the market system are undermining this consensus. If Republicans don't stand up for markets, who will?