The Policy-Formation Process
excerpted from the book
The Powers That Be
by G. William Domhoff
Vintage Books, 1978
The policy-formation process is the means by which the power elite
formulates policy on larger issues. It is within the organizations
of the policy-planning network that the various special interests
join together to forge, however slowly and gropingly, the general
policies that will benefit them as a whole. It is within the policy
process that the various sectors of the business community transcend
their interest-group consciousness and develop an overall class
The staid and dignified policy-formation process is very different
from the helter-skelter special-interest process. It appears to
be as detached from day-to-day events as the special-interest
process seems totally immersed in them. It appears as disinterested
and fair-minded as the special-interest process seems self-seeking
and biased. Whereas the special-interest process is usually staffed
by lesser members of the power elite men and women of the policy-formation
network are often from the "oldest" and wealthiest of
families, the biggest and most powerful of corporations, and the
most prestigious of law schools and university institutes. It
is a world where "expertise" and a mild disdain for
the special interests are the coin of the realm. Only the "national
interest" is of concern. "Nonpartisan" and "objective"
are the passwords.
The policy-formation process begins in corporate board rooms
and executive suites. It ends in the innermost private offices
of the government in Washington, where reporters and sociologists
never tread. In between the beginning and the end there are a
handful of huge foundations that provide the experts with money
for research, as well as blue-ribbon presidential commissions
which legitimate the policies to the general public and present
them formally to the President. Research institutes and think
tanks also are to be found in the inner circles of the network,
and influential newspapers and magazines are important in bringing
the views of the policy groups to the attention of government
personnel. However, the central units in the policy network are
such official-sounding organizations as the Council on Foreign
Relations, the Committee for Economic Development, the Business
Council and the American Assembly, which are best categorized
as the policy-planning and consensus-seeking organizations of
the power elite. They are also the training grounds in which new
leaders for government service are informally selected.
The policy-discussion organizations bring together, in groups
large and small, members of the power elite from all over the
country to discuss general problems like overseas aid, tariffs,
the use of nuclear weapons, tax problems, the population problem,
labor relations and the targeting of national goals. They provide
an off-the-record, informal setting in which differences on various
issues can be thrashed out and the opinions of various experts
can be heard. In addition to their numerous small-group discussions,
these organizations encourage general dialogue within the power
elite by means of luncheon and dinner speeches, special written
reports and position statements in journals and books. It was
in these groups that the basis for capital-labor détente
was worked out at the turn of the century, that the plans for
Social Security were created, that the ideas behind the Marshall
Plan were developed, and that the foreign policy of the Carter
administration was formulated.
Since the policy-planning groups are at the center of things,
they provide a good starting point for understanding the policy
network as a whole. By discussing several of the major policy
groups in a general way, it will be possible to show how they
connect to the corporations and foundations on the one hand, and
the government on the other, as well as to give a more concrete
idea o$ how they function.
The Council on Foreign Relations
The best known of the policy organizations is the Council
on Foreign Relations. Founded in 1920-21 by East Coast bankers,
lawyers and academicians who were fully cognizant of the enlarged
role the United States would play in world affairs in the wake
of World War I, the council's importance in shaping foreign policy
has been noted by numerous journalists. However, it has been the
object of only two academic studies during its history, an impressive
commentary in itself on how little social scientists know about
policy-making in the United States.
There are about 1,500 members in the Council, half from the
New York area, half from the rest of the country. The members
are primarily financiers, executives and lawyers, with a strong
minority of journalists and academic experts. The biggest banks
and corporations are the most heavily represented organizations.
The council receives its general funding from wealthy individuals,
corporations and subscriptions to its influential periodical,
Foreign Affairs. For special projects, however, it relies upon
major foundations for support. Especially important sources are
the Ford, Rockefeller and Carnegie foundations, which have numerous
director and executive interlocks with the council leadership.
The council operates an active program of luncheon and dinner
speeches at its New York clubhouse, featuring major U.S. government
officials and national leaders from all over the world. It also
encourages dialogue and disseminates information through books,
pamphlets and articles in Foreign Affairs. However, the most important
aspect of the CFR program is its discussion groups and policy
groups. These small gatherings of about twenty-five bring together
business executives, government officials, scholars and military
officers for detailed discussions of specific topics in the area
of foreign affairs. Discussion groups are charged with exploring
problems in a general way, trying to define issues and alternatives.
Such groups often lead to a study group as the next stage.
Study groups revolve around the work of a council research
fellow (financed by Ford, Rockefeller and Carnegie foundations
) or a staff member. This group leader and other experts present
monthly papers which are discussed and criticized by the rest
of the group. The goal of such study groups is a detailed statement
of the problem by the scholar leading the discussions.
In 1957-58, for example, the council published six books which
grew out of study groups. The most famous of these, Nuclear Weapons
and Foreign Policy, was written by Harvard professor Henry Kissinger,
who had been asked by CFR leaders to head the study group. The
book received a very careful reading in the Kennedy administration.
In addition to several bankers and corporate executives, the Kissinger
study group included two former appointees in the upper echelons
of the Defense Department, two former chairpersons of the Atomic
Energy Commission and representatives from just below the top
level at the State Department, the CIA and all three armed forces.
Study groups at the Council on Foreign Relations have been
at the heart of many foreign policy initiatives. The post-World
War II planning which led to the formation of the International
Monetary Fund, World Bank and United Nations was a council project,
as will be demonstrated in detail later in the chapter. A series
of study groups in the 1940's and 1950's helped to establish the
consensus wisdom that it was necessary to "defend" Vietnam
at any cost. A $1-million grant from the Ford and Rockefeller
foundations in the early 1960's led to study groups which reconsidered
U.S. policy toward China, finally concluding that the policy must
be changed to one of recognition and eventual trade relations.
Many council members are directly involved in the making of
foreign policy in Washington. "Over a third of the Council's
1500 members have been called on by the government during the
last 20 years to undertake official responsibilities," reports
a council publication. "Whenever we needed a man," explained
one of the lawyers who ran the Department of War in World War
II, "we thumbed through a roll of Council members and put
through a call to New York." Twelve of the fourteen "wise
men" who were President Lyndon B. Johnson's secret Senior
Advisory Group on Vietnam were members of the council. And all
but one or two of the major appointments to the State Department
by President Jimmy Carter in 1977 were members of the council.
The Committee for Economic Development
The Committee for Economic Development (CED) was founded in
the early 1940's to help plan for the postwar world. The corporate
leaders who were the driving force in CED had two major concerns
at that time: 1) there might be another major depression after
the war; 2) if businesspeople did not present plans for the postwar
era, other sectors of society might present plans that were not
acceptable to businesspeople. The CED expressly was trying to
avoid any identification with special interest pleading:
The Committee would avoid "promoting the special interests
of business itself as such" and would likewise refrain from
speaking for any other special interests.... The CED was to be
a businessman's organization that would speak in the national
The CED consisted of 200 corporate leaders in its early years.
Later it was to include a handful of university presidents among
its members. In addition, leading economists have served as research
advisors to the CED; many have gone on to serve in advisory roles
in both Republican and Democratic administrations, and particularly
on the Council of Economic Advisers. Although there is an overlap
in membership with the Council on Foreign Relations, the committee
has a different mix of members. Unlike the council, it has few
bankers, and no corporate lawyers, journalists and academic experts.
This gives the organization a more conventional and less liberal
Like the council, the CED works through study groups which
are aided by academic experts. The study groups have considered
every conceivable general issue from farm policy to government
reorganization to the social responsibility of corporations, but
the greater emphasis is on economic issues of both a domestic
and international nature. The most ambitious of committee projects
usually have been financed by the Ford Foundation.
Unlike the larger CFR, which would find it cumbersome to reach
an "official" position on any given issue, the results
of committee study groups are released as official policy statements
of the organization. The statements are published in pamphlet
form and disseminated widely in business, government and media
circles. There is reason to believe that many of these reports
have had considerable influence, for there is a striking similarity
between CED statements and policies that were enacted shortly
The fact that committee trustees are tapped for government
service also lends credence to the idea that the organization
has a policy impact. Of the 150 men who were CED trustees between
1942 and 1957, 38 served in government posts in both Republican
and Democratic administrations. In 1971 five committee trustees
were in the Nixon administration. In the Carter administration,
CED trustees served as Secretary of the Treasury and Secretary
of the Navy, and the former chairperson of the CED Research Advisory
Board was the head of the Council of Economic Advisers.
The Conference Board
The Conference Board, founded in 1916 as the National Industrial
Conference Board, is the oldest of the existing policy discussion
groups. It was originally a more narrowly focused organization
with a primary interest within the business community itself.
During the 1930's and 1940's it drifted to an extreme right-wing
stance under the influence of its executive director, who often
denounced other policy groups for their alleged desertion of the
free-enterprise system. Only with the retirement of this director
in 1948 did the board move back into the mainstream and begin
to assume its current role as a major voice of big business. Further
change in the 1960's was symbolized by the shortening of its name
to Conference Board and the election of a CED trustee as its president.
By 1977, when its president was selected by President Carter to
chair the Federal Reserve Board, it was one of the most central
and important of the policy groups.
The Conference Board has been innovative in developing international
linkages. In 1961, in conjunction with the Stanford Research Institute,
the board sponsored a week-long International Industrial Conference
in San Francisco. This international gathering brought together
500 leaders in industry and finance from 60 countries to hear
research reports and discuss common problems. The International
Industrial Conference has met every four years since that time.
Along with the "sister" committees which the CED has
encouraged in numerous nations, the International Industrial Conference
is one of the major institutions in the international policy discussion
network that has been growing slowly since the 1950's.
The Business Council
Grant McConnell had only one hesitation in suggesting that
the politics of business were conducted in narrow interest groups.
That was the existence of the Business Council. Calling it "one
of the more remarkable groups ever associated with the government,"
McConnell based his account on the small amount of information
on its advisory functions that investigators had been able to
obtain from the tight-lipped Department of Commerce up until the
McConnell noted that in the 1940's and 1950's the Council
included a cross-section of the major business leaders in the
nation. It held six meetings a year, some in Washington, some
in resort settings like Sea Island, Georgia and Hot Springs, Virginia.
Major government officials were in attendance at the meetings,
which were strictly confidential. The council also prepared reports
on a wide variety of general issues to give to government leaders.
The expenses for meetings and reports were paid by private contributions.
The Business Council, which was created in 1933 as an adjunct
to the Department of Commerce, made a unilateral withdrawal from
its quasi-governmental status in 1962 because of a small flap
with the Kennedy administration. North Carolina businessman Luther
H. Hodges, serving as Kennedy's Secretary of Commerce, asked the
council to include more small-business representatives and to
allow reporters to cover its meetings. He was responding in part
to congressional and journalistic criticisms of the council's
exclusive relationship with government, and in part to the fact
that its chairperson at the time, Ralph Cordiner of General Electric,
was in the limelight because of a gigantic price fixing scandal
in the electrical equipment industry. Rather than totally accept
Hodges' suggestions, the Business Advisory Council, as it was
then called, quietly told the government that it was changing
its name to the Business Council and becoming an independent organization
which would offer its advice to all agencies of the government.
Despite the fact that the Business Council was no longer an
official advisory group to the Department of Commerce, it continued
the prominent role it had developed during the Eisenhower administration,
supplying businesspeople for government positions and meeting
regularly in Hot Springs with government officials. It was especially
close to the Johnson administration.
McConnell considers the possibility that the Business Council
might be "a directorate of big business effectually controlling
the economic policy of the nation," but dismisses the idea
on the following grounds:
Certainly, if a search were to be made for a top executive
committee of corporate business, no more likely body could be
found than the Business Council. Nevertheless, such an interpretation
would probably be mistaken. The Council included a number of disparate
elements. Not only were some representatives of small business
actually members, but some of the representatives of big business
had interests in conflict with each other. Moreover, the recommendations
of the Council have not always been put into effect.
In the end, McConnell sees the Business Council as a more
ideological group, and also as a social group which confers prestige
on its members. It is thus less important to its big business
members than industry advisory committees: ". . . membership
on the National Petroleum Council has probably been more important
than membership on the Business Advisory Council to Mr. Eugene
Holman, Chairman of the Board of Standard Oil of New Jersey [Exxon];
much the same thing could probably be said of other figures of
high stature in business."
McConnell's perceptions of the Business Council are symptomatic,
for they show the failure to distinguish between narrow interest-group
advisory committees and general policy groups. It is in this inclusion
of both types of organizations in a single analytical category
that the policy process is lost from view. In singling out the
Business Council for further discussion, McConnell rightfully
put his finger OD an organization that has a significant place
in the policy-planning process, but did not explore adequately
its unique role.
The council does not conduct as many study groups or hold
as many meetings as do most policy-discussion organizations. Indeed,
it was because the Business Council had only limited research
capabilities that the Committee for Economic Development was formed.
Nonetheless, the Business Council is centrally situated in the
policy-planning network. It is a collecting and consensus-seeking
point for much of the work of the other organizations. Moreover,
it is one of the few organizations that has regular and formal
meetings with government officials. It is, then, a major connection
between big business and government. In a way, its centrality
among the policy groups makes it the unofficial board of directors
within the power elite.
Many Washington observers have made this claim about the centrality
of the Business Council from impressionistic information, but
the point also can be made more systematically. In one study,
membership overlaps among thirty-one social clubs and policy groups
were analyzed mathematically to determine the centrality score
for each organization. The Business Council emerged as the most
central organization, rivaled only by the Committee for Economic
In a second study based on the overlapping members in thirty-six
clubs and policy groups, another mathematical technique was used
to determine the pattern of relationships among the groups. This
study uncovered two cliques that were primarily rooted in organizations
on the East and West Coasts, respectively, and a third clique
whose members were linked to both the East and West Coast cliques.
The Business Council was a member of this integrating clique,
along with the Committee for Economic Development, the Conference
Board and several social clubs.
Because it cultivates what a congressional committee called
"an aura of secrecy," there is very little systematic
evidence on the functioning of the Council. However, one of my
former research assistants undertook a careful observational study
for me of its May 1972 meeting. The four-day gathering was held
in the lavish Homestead Hotel in Hot Springs, Virginia, a town
of less than 2,500 people, 50 miles from Washington. Council members
heard speeches by government officials, conducted panels on problems
of general concern, received reports from hired staff and talked
informally with each other and the government officials in attendance.
The meetings were held in a relaxed and friendly atmosphere
that reinforced the feeling of camaraderie between the business
and government participants. Discussion sessions were alternated
with social events, including golf tournaments, tennis matches
and banquet-style dinners for members, guests and wives. The guest
list included the chairman of the Federal Reserve System, the
Secretary of the Army, the Director of the CIA, the Secretary
of State, the Secretary of Commerce, the Chairman of the Council
of Economic Advisers and a Special Assistant to the President.
Very little is known about the role the council has played
in urging the government to adopt any specific policies, mainly
because it will not make its files available for research. However,
a careful historical study of the council's history is highly
persuasive in arguing that it had little impact on government
policy during its early years, when it was little more than an
adjunct to the Department of Commerce. Its only real domestic
success throughout the New Deal was its supportive involvement
in the Social Security Act. It was not until the Eisenhower administration
that it began to assume its present role. Since that time it has
been a major contact point between the corporate community and
the executive branch, providing government officials with direct
presentations of the policy perspectives developed in the rest
of the network, and serving as a stepping stone to government
service for its members.
Satellites and Think Tanks
The Council on Foreign Relations, Committee for Economic Development,
Conference Board and Business Council are the Big Four of the
policy network, but they do not function in isolation. They are
surrounded by a variety of satellites and think tanks which operate
in specialized areas or provide research information and expert
advisors for the Big Four.
The National Planning Association, for example, is a small
policy-discussion group which took its present form in 1942 as
part of the concern with postwar planning. It has a more liberal
outlook than the CED, but has been very close to it. In the mid-1950's
the two organizations considered a merger, but decided against
it because the NPA has a distinctive role to play in that both
its leadership and study groups include representatives from labor
and agriculture: "NPA did not want to lose the frankness
and open interchange it achieved through labor participation,
and CED felt it had acquired a reputation for objectivity and
did not wish to dilute this good will toward an avowedly business
organization by bringing in other groups."
Similarly, a policy-discussion group started in the early
1950's, the American Assembly, has many links to the CED, and
once considered merger with it. Once again, the merger idea was
dropped because the American Assembly has a unique function. Its
twice-a-year meetings on a variety of general issues include labor
and farm leaders as well as businesspeople and academics. Moreover,
the assembly has a greater outreach program to uppermiddle-income
groups and- students through books, pamphlets and a series of
regional and local "Little Assemblies" based on the
same topics discussed at the semi-annual national meetings in
The deepest and most critical thinking within the policy network
does not take place in the policy-discussion groups, as many academicians
who have taken part in them are quick to point out. While this
claim may be in part self-serving by professors who like to assume
they are smarter than businesspeople and bankers, there is no
question but that many new initiatives are created in various
think tanks before they are brought to the discussion groups for
modification and assimilation by the corporate leaders. There
are dozens of these think tanks, some highly specialized to one
or two topics. Among the most important are the RAND Corporation,
the Stanford Research Institute, the Urban Institute, the National
Bureau of Economic Research, Resources for the Future and the
Center for International Studies at MIT. The institutes and centers
connected to universities receive much of their funding from foundations,
while the large and less specialized independent think tanks are
more likely to undertake contract research for businesses or government
Some organizations are hybrids that incorporate both think
tank and policy-discussion functions. They do not fit neatly into
one category or the other. Such is the case with one of the most
important institutions in the policy network, The Brookings Institution.
This large organization is directed by big businesspeople, but
it is not a membership organization. It conducts study groups
for businesspeople and government officials, but it is even more
important as a kind of postgraduate school for expert advisors.
Employing a very large number of social scientists, it functions
as a source of new ideas and sophisticated consultants for policy
groups and government leaders. In particular, its economists have
served both Republican and Democratic administrations since its
founding in 1927. It has been especially close to the CED since
the 1950's, but it also has strong ties to the Council on Foreign
Relations and the American Assembly.
Several hybrids function in specialized areas. The Population
Council was established in 1952 to fund research and develop policy
on population control. Relying on large personal donations from
John D. Rockefeller III and several foundations, it helped to
create population research institutes at major universities, held
conferences and publicized its findings. Case studies reveal that
it has done very well indeed in getting its message across. Resources
for the Future was founded about the same time as the Population
Council, with funds from the Ford Foundation. It has become one
of the power elite's major sources of information and policy on
environmental issues, although it has to share this role with
the Conservation Foundation, the American Conservation Association
and three or four other closely related organizations. In the
issue-area of education, and in particular higher education, the
Carnegie Corporation has played a central role through a series
of special commissions. There are also corporate-financed groups
in the areas of farm policy, municipal government and even the
arts, for the arts are considered by some executives to be important
in maintaining the morale of inner-city residents.
All of these more specialized groups are linked by funding
and common directors to the biggest foundations, major policy
discussion groups and largest banks and corporations. Council
on Foreign Relations members and trustees tend to dominate in
the population establishment, and CED trustees are more evident
in farm groups, but these differences are nuances within a general
picture of cohesion. Sometimes the specialized groups lend their
services to the discussion groups of the larger organizations.
They often are listed as advisors on specialized CED policy statements.
The Business Roundtable
The most recent and atypical organization to join the policy
network is the Business Roundtable, founded in early 1973 by the
chairpersons of several dozen of the largest corporations in the
nation. The Business Roundtable is in many ways the lobbying counterpart
of the Business Council, with which it has numerous common members.
In 1976, 33 of the 45 leaders of the Business Roundtable also
were members of the Business Council. While the Business Council
prefers to remain in the background and focus on the Executive
branch, the Business Roundtable is unique among general policy
groups in that it has an activist profile and personally lobbies
members of Congress as readily as it meets privately with the
President and cabinet leaders. In 1976 Business Week called it
"business' most powerful lobby in Washington."
The Roundtable was created through the merger of three ad
hoc business committees-the Construction Users Anti-Inflation
Roundtable, which was originally organized to fight inflation
in the construction industry; the Labor Law Study Committee, which
worked for changes in labor laws; and the March Group, which was
created to tell "business' story" via the mass media.
The new group was formed because it was felt that corporate executives
were relying too heavily on specific trade associations to do
their lobbying. It was hoped that direct lobbying contact by the
chief executives with legislators would have even more impact.
The 150 member companies pay from $10,000 to $35,000 per year
in dues, depending on their size. This provided a budget of $2.4
million in 1976. Membership in the organization is open, but it
is not solicited. Decisions on where the Roundtable will direct
its money and prestige are ultimately determined by a forty-person
policy committee which meets every two months to discuss current
public issues, create task forces to study selected issues and
review position papers prepared by task forces. In developing
its positions and strategies, the policy committee relies on task
forces. Each is headed by the chief executive of a major company.
Task forces avoid problems within a given industry. They concentrate
on issues "that have a broad impact on business."
With a staff of only nine people, including clerical help,
the Roundtable does not have much capability for developing its
own information. However, this presents no problem because task
force members "often draw on the research capabilities of
their own companies or the companies of other task force members."
In addition, the Business Roundtable, like the Business Council,
is the beneficiary of the work of other organizations in the policy
network, for most of the members of the policy committee are in
one or more of these organizations.
So far the Roundtable has played a defensive role in Washington,
stopping legislation rather than passing its own. It helped kill
the proposed Consumer Protection Agency during the Ford administration,
and then did the same during the Carter administration, even while
working very closely with Carter on other issues. The Roundtable
also is credited with watering down federal antitrust legislation,
including the deletion of an amendment which would have given
the attorneys general of all fifty states the authority to sue
antitrust violators on behalf of the citizens of their states
and collect money damages. However, it failed in 1974 in its attempt
to make it illegal for striking workers to collect food stamps.
It is too soon to tell if the Business Roundtable will play
a permanent role within the policy network. The fact that it focuses
on Congress and fights against legislation disliked by big business
does give it a somewhat special niche within the larger network.
On the other hand, organizations that lobby and become embroiled
in conflict often outlive their usefulness after a few years.
They get a bad name, and new organizations have to be created.
Whatever the long-run fate of the Business Roundtable, it is useful
to be reminded that new organizations are possible within a network
that has been stable for many years.
Ultraconservative Policy Groups
The policy network is not totally homogeneous. There are differences
of opinion within it. Most of these conflicts are worked out within
the privacy of the discussion groups. However, this is not always
the case. Furthermore, there is an ultraconservative clique within
the policy network that has consistent and long-standing disagreements
with the organizations discussed so far. While the differences
between the two factions seem to have decreased since the early
1960's, some of the more hysterical leaders among the ultraconservatives
seem to believe that many moderate conservatives at the Council
on Foreign Relations and the Committee for Economic Development
are Communist-influenced "collectivists" who are destroying
the economic system. They have held this belief about moderate
conservatives since the Progressive Era, despite considerable
evidence to the contrary.
It is these ultraconservative organizations-the most prominent
of which are the National Association of Manufacturers, the Chamber
of Commerce of the United States, the American Enterprise Institute
and the American Security Council-that are identified with "big
business" in the eyes of most social scientists and the general
public. The fact that they are generally naysayers and often lose
on highly visible issues is one of the major reasons for the belief
that the ruling class is not as powerful as class-hegemony theorists
have portrayed it. What is not understood is that those setbacks
are usually at the hands of their more moderate and soft-spoken
brethren within the policy network and the corporate community.
The moderate conservatives and ultraconservatives have differed
on foreign policy and welfare legislation, and in their attitudes
toward organized labor. The moderates tend to be internationalist
in foreign policy; the ultraconservatives tend to be isolationist.
The moderates have created and supported many welfare-state measures;
the ultraconservatives have opposed such measures. However, differences
in these two areas have decreased somewhat in the last decade.
The ultraconservatives have moderated their views on foreign policy;
the moderates have hardened some of their views on welfare legislation.
As is evident from the discussion of specific policy groups,
members and organizations of the policy-formation network have
no trouble in getting their views heard by government. However,
there is one connection to government that is an institution in
itself. This is the practice of appointing a presidential commission.
Presidential commissions are specially appointed temporary
committees made up primarily, if not totally, of private citizens.
They gather information, deliberate and report to the President
on the topic assigned to them. Their use is not without precedent
in the nineteenth century, but they really came into their own
in the turn-of-the-century administration of Theodore Roosevelt.
Since that time there has been a fairly steady growth in their
employment by chief executives, especially since World War II.
Commissions can serve several functions. Some are meant to
cool out public opinion on an issue that has caused a sense of
urgency in the general public-such was the role of various commissions
which investigated ghetto uprisings in the 1960's, as well as
the commission President Gerald Ford appointed to look at embarrassing
new revelations about the misdoings of the CIA. Other commissions
seem to have little other purpose than to throw the President's
political opposition off-guard-such was one of the purposes of
President Lyndon Johnson's Commission on Urban Problems, headed
by liberal Paul H. Douglas. However, contrary to the frequent
critics of the commissions, the overwhelming majority are meant
to suggest new policy initiatives or to build support for programs
the President wishes to pursue. This point has been established
in a thorough study by political scientist Thomas Wolanin of all
commissions appointed between 1945 and 1972, but it is evident
from earlier and less
A detailed study of the relationship between policy groups and
all types of presidential commissions remains as one of the many
pieces of unfinished business awaiting students of power in the
United States. For now, the evidence is clear that the most important
and policy-oriented of these commissions are closely related in
personnel and ideas to the CFR, the CED and other policy groups.
Commissions are an important link in the policy network which
have been overlooked by most social scientists.
Shaping a New World Economy
Several of the most important features of the international
order after World War II-including the International Monetary
Fund, the World Bank and the United Nations-were conceived by
a small group of planners at the Council on Foreign Relations
between the years 1939 and 1942. Working under the auspices of
the War and Peace Studies Project, the council developed close
ties with the State Department and infused the government with
its view of the "national interest" for the postwar
era. It was a conception of the national interest which envisioned
an integrated world economy with the United States at its center.
... the Council on Foreign Relations is just about everybody's
favorite example of an important policy planning group. However,
until a detailed historical study by Laurence H. Shoup and William
Minter pieced together the story of the War and Peace Studies
Project by searching through a wide variety of private and government
documents, there had been no systematic documentation of the council's
influence within the government. Their detective work on the War
and Peace study groups more than fills this gap, for the council's
project provided the framework for thinking on foreign policy
for the next thirty years. It was not until America's defeat in
Southeast Asia created major economic and political problems for
the power elite that its leaders within the area of foreign policy
convened new study committees and formed fresh discussion organizations
in an effort to rethink the basic assumptions provided by the
earlier work of the council.
Immediately after World War II broke out in Europe in September,
1939, leaders within the Council on Foreign Relations began to
think about what United States war aims should be. They also were
concerned to develop plans for the shape of the postwar world.
... The work of the War and Peace study groups was to involve
about a hundred men over the next five years. They included the
top bankers, lawyers, businesspeople, economists and military
experts of the era. A central steering committee guided the work
of five study groups labeled Economic and Financial, Political,
Armaments, Territorial and Peace Aims. These groups were to "engage
in a continuous study of the course of the war, to ascertain how
the hostilities affect the United States and to elaborate I concrete
proposals designed to safeguard American interests in the settlement
which will be undertaken once hostilities cease.
... In the summer and fall of 1940, the Economic and Financial
group conducted a series of studies on trade balances and surpluses
which concluded that the American economy must be linked with
the British Empire, Asia and South America if it was to grow and
prosper. Anything less would create trade imbalances, insufficient
outlets for manufactured goods, and a shortage of raw materials,
it was claimed. The result would be a stagnating economy that
would need government intervention and a greater degree of planning
than was acceptable to the great majority of the participants
in the study groups.
Having defined the national interest in terms of the improved
functioning of a free-enterprise economy that had been rescued
from a lengthy depression only by rearmament programs, the War
and Peace study groups then turned their attention to developing
the policies that would ensure United States hegemony in what
the council called the "Grand Area." The result was
Memorandum E-B19 in October, 1940. Prepared for the President
and the Department of State, it was intended "to set forth
the political, military, territorial and economic requirements
of the United States in its potential leadership of the non-German
world area including the United Kingdom itself as well as the
Western Hemisphere and Far East." The proposal called for
a fast pace of American rearmament, opposition to Japanese expansionism
and development of the international economic and political institutions
necessary to integrate and protect the Grand Area.
The council returned to the needs of the Grand Area in 1941
wit-h Memorandum E-B34. It reemphasized the need to defend the
entire area so that the American economy could function
properly. It stressed that the area could serve as an organized
nucleus in building a postwar economy. It called for further study
of the mechanisms for integrating the Grand Area:
At the end of recommendation E-B34, the Economic and Financial
Group outlined the key topics for future study on integrating
the Grand Area. Leading the list were financial measures-the creation
of international financial institutions to stabilize currencies,
and of international banking institutions to aid in investment
and development of backward areas. They had thus identified at
a very early date the need for the International Monetary Fund
and the World Bank, which they were to specifically suggest in
When the United States became involved in the war in December,
1941, leaders within the State Department and the council immediately
decided to create a special committee on postwar planning within
the department. The proposal for this Advisory Committee on Postwar
Foreign Policy was drafted by department planner Pasvolsky in
consultation with the council president. Its subcommittees-Armament,
Political-Territorial and Trade-Financial-corresponded with the
structure of the War and Peace study project. Drafting of committee
reports would be by government agencies and by "such non-governmental
agencies as the Council on Foreign Relations."
By 1942, then, the study groups set up by the council in 1939
had been in effect merged into the State Department as its postwar
planning apparatus. Council members sat on the department's postwar
planning steering committee, headed two of the committee's three
subcommittees, and served as part-time consultants to the subcommittees.
The line between the allegedly independent state bureaucracy and
the private policy-planning groups had become very hazy indeed.
The recommendations of the subcommittee closely paralleled
the earlier proposals of the council study groups. The first report
of the economic subcommittee emphasized the danger of another
world depression and stressed the need for the United States to
involve itself in the internal affairs of the most important industrial
and raw-material-producing nations. Subsequent recommendations
called for the creation of the International Monetary Fund and
the World Bank, the specific plans for which were worked out by
the Treasury Department and adopted at the Bretton Woods Conference
in Bretton Woods, New Hampshire, in 1944.
The subcommittees also urged the creation of the United Nations
as an important mechanism for political domination of the international
economy. Isaiah Bowman, the council director who headed the department's
territorial subcommittee, explained the need quite clearly:
At the Council meeting in May, 1942, he stated that the United
States had to exercise the strength needed to assure "security"
and at the same time "avoid conventional forms of imperialism."
The way to do this, he argued, was to make the exercise of that
power international in character through a United Nations body."
There are numerous other aspects of the postwar world-including
the Marshall Plan, the hard-line attitude toward the Soviet Union,
and the Vietnam War-which grew out of the basic assumptions that
the council planners made into conventional wisdom between 1940
and 1945. However, enough detail has been presented to demonstrate
that the council defined the national interest in terms of economic
expansion, and then formulated the policies which the government
later implemented to realize that vision. If the quintessence
of class domination is the ability to translate class interest
into the national purpose, then the role of the Council on Foreign
Relations in shaping the postwar world reveals class domination
in week-by-week detail. It is a domination that was intellectual
and political as well as economic. Building on corporate wealth,
the council outresearched, outplanned and outworked any of *s
potential class or governmental rivals. As Shoup and Minter conclude:
The council's power was unrivaled. It had more information,
representation, and decision-making power on postwar questions
than Congress, any executive bureaucracy except the Department
of State, or any private groups.
Mainstream social scientists like to remind us that there
is something unique about the issue-area of foreign policy. Since
it is different from the others, perhaps the merger of state and
ruling class is more complete in this area than in any other.
This should not be taken as a criticism of the ruling-class view,
however. It is actually support for it, for in a modern nation-state
it is foreign policy above all else that provides the context
within which other issues and state functions are discussed.
Significant planning within the government had been consigned
to the dustbins of history. However, this did not mean that no
economic planning whatsoever would take place within the United
States. It only meant that what planning there was would take
place outside government in organizations directly controlled
by the corporations. This fact is made clear in the final version
of the Employment Act by the inclusion of an express mandate for
the Council of Economic Advisers and the Joint Committee on the
Economic Report to utilize the work of "private research
agencies.'' The work of the Committee for Economic Development,
The Brookings Institution and similar organizations had been legitimated
by an act which began its career as a liberal attempt to build
more economic power into the government.
Countries in postwar Europe developed significant policy and
research capabilities within the government, but such was not
to be the case in laissez-faire America, which had little or no
pressure from a socialist movement within the working class and
no statist tradition to draw upon. Thus, the meager planning resources
deemed necessary by the power elite were developed outside the
government, technically speaking. However, the private policy-planning
and research groups are so intertwined with government that it
is in reality difficult to tell where "government" ends
and "private" begins. Only in terms of the potential
for democratic control is there no doubt as to what is private
and what is public. The policy groups are strictly private in
terms of citizen access, and thus highly insulated from popular
control. The great hostility to government on the part of American
businesspeople, in part based upon a fear that popular forces
t will surge up to take control of the government, has led to
a policy-planning network outside of government. This network
may be unique in the Western world, but we must await systematic
comparative studies to be sure.
The leanings of the moderate conservatives usually determine `,the
outcome of any policy struggle. If the CFR-CED wing of the power
elite decides to go in the direction of change, it develops a
plan, or modifies a plan already developed by the liberals and
labor, and then enlists the support of liberals, organized labor
and minority group organizations. If the CFR-CED wing decides
there is no need for any policy changes, which means it is in
agreement with the ultraconservative wing and the power elite
is united, then it sits by silently while the ultraconservatives
destroy within Congress any suggestions put forth by liberals
or labor. In short, the liberal-labor coalition is rarely successful
without at least the tacit support of the moderate conservatives
within the power elite. The ultraconservatives, on the other hand,
are not helpless without the moderates. Due to their strength
in Congress, they are often able to delay or alter the proposals
put forth by the moderates.
... the power elite and especially the moderate core based in
the largest banks, corporations, foundations and policy groups-dominates
policy making. If it does not depict a united power elite that
always gets exactly what it wants, it does describe a power elite
that has been able to defend the privileges of the ruling class
in the face of every insurgency it has faced. Pluralists like
to point out that social r security, health-care legislation and
other measures signify an important improvement in living conditions
for a great many people. While this is true to some extent, the
proof of the pudding in terms of power is the ability to maintain
the class system that sustains ruling-class privileges and prerogatives.
On this score, the ruling class has done very well within the
general policy arena.
All of these functions are important ones. Taken together, they
add up to the fact that the ruling class has the institutional
capability to develop policies on the major issues facing the
social system. That is, the power elite is organized "politically"
in the deepest meaning of that term, even though its political
organizations are called "apolitical," "bipartisan"
and "nonpartisan," in a nation where politics only means
the electoral antics of one or another political party.
It is because the power elite, through the mass media and other
means ... make it difficult to convince the electorate that alternative
policies are feasible. Thus, Dye's concern with ideological domination
provides a more dynamic explanation for what Prewitt and Stone
and many Marxists as well-see as a "perceived mutuality of
interest" between the power elite and those government leaders
who are not part of it.
... most narrow government policies are dominated by specific
industries and trade associations within the special-interest
process, and that broad gauge policies are determined by the power
elite as a whole through a complex maze of foundations, think
tanks and policy planning organizations.
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