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 consciousness.

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 interest.

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 cast.

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 thereafter.

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 mid 1960's.

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 Development.

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 New York.

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 agencies.

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.

Presidential Commissions

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 February 1942.

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.

The Powers That Be

Index of Website

Home Page