Ruling Elites Move to the Right
from the book
ROLLBACK
Right-wing Power in U.S. Foreign Policy
by Thomas Bodenheimer and Robert Gould
published by South End Press, 1989
*****
The Ruling Elites from 1980 to 1986
Ronald Reagan was originally supported by right-wing entrepreneurs
in California and elsewhere, including some protectionist textile
industrialists, independent oil-men, arms producers, and small
business owners. In his quest to unseat Gerald Ford from the presidency
in 1976, Reagan failed to gain the blessing of other top business
figures mainly because of his protectionist views. But by 1980,
two developments had taken place: as we have seen, business had
become more conservative in the areas of taxes, military spending,
labor, and the environment; and Reagan himself, in order to gain
conservative multinational business support, made some concessions.
He backed away from defense of Taiwan toward the Trilateral China
policy, he stopped his attacks on the Trilateral Commission, and
he became a free trader. These adjustments in Reagan's positions
opened the way for virtually all of U.S. business to support him.
As a sign of this unified sup
port, the media gave Reagan a positive image, ignoring the
unreality and illogic of his program, which promised to cut taxes,
increase military spending, preserve essential social spending,
and balance the budget all at the same time.
Reagan succeeded in bridging the polarization between right-wing
and traditional conservative business by emphasizing what for
the elites were less "contentious" domestic policies
during his first year. The Trilats had always called for a limitation
of economic aspirations of the population, higher unemployment,
and less social spending; on these issues, Reaganism fit the Trilats
fine. While it is difficult to unify protectionists and free traders,
it is easy to gain agreement from business on corporate tax cuts
and social spending reductions. Indeed, business made billions
from the 1981 tax bill. Potentially divisive foreign policy and
trade initiatives were placed lower on the agenda at the start
of the Reagan administration. However, not all foreign policy
issues were divisive; the great majority of ruling elites believed
that a more aggressive international posture was needed to reverse
the perceived Soviet advantage. Pro-detente business forces had
been decisively beaten with the coalition of the CPD and the conservative
Trilats; there was little elite opposition to Reaganism. The enormous
increase in military spending found few dissenters.
In less than two years, the Reagan consensus cracked. The
two main currents of Reagan's business support had ultimately
incompatible goals. In the late 1970s, the Business Roundtable
(including virtually all sectors of big business) conducted a
major lobby for lower corporate taxes; at the same time the CPD
mobilized for unprecedented peacetime military budget increases.
The only way to reconcile these currents would be a large reduction
in social spending, including the universally popular Social Security,
which even Republicans could not touch for fear of losing public
support. The result was that Reagan implemented the programs of
both the Business Roundtable and the CPD, creating an unheard-of
federal budget deficit...
The budget deficit combined with the scary escalation of anti-Soviet
rhetoric and behavior-including the administration's goal of winnable
nuclear war, uncovered by the press in 1982-began to sour some
multinational business leaders on the Reagan program. While business
supported Reagan's attempt to ensure U.S. domination in East-West
matters, such domination had to stop short of destabilizing the
Cold War into a great power-shooting match. An excess of military
zeal on the part of the Reaganites might strengthen more hawkish
elements in the USSR, resulting in an uncontrollable escalation
of East-West hostility. Thus the attempt to re-establish dominance
over the U.S.-Soviet competition had to be approached with some
caution.
By 1982, the perceived lack of such caution on Reagan's part
recreated dissension within the ruling elite. Averill Harriman,
Thomas Watson of IBM, and others sharply attacked Reagan for neglect
of arms control and downplaying relations with U.S. allies. The
elite Arms Control Association (including Robert McNamara and
many business leaders) reemerged as a strong and vocal critic
of Reagan's arms control policies. The Rockefeller Foundation,
Ford and Carnegie became actively involved in the arms control
field, and there was a spectacular rise in foundation funding
for arms control issues, including the nuclear freeze movement.
Sol Linowitz of Xerox initiated meetings between the elites of
the United States and Latin America. Financed by Ford, Rockefeller,
and IBM, this Inter-American Dialogue was critical of Reagan's
Central America policy. The Council on Foreign Relations, in its
annual report for 1982-83, distanced itself from Reagan in Central
America. These critiques had the purpose not only of moderating
foreign policy but of slowing down the military-generated rise
in the budget deficit. In May 1984, an open letter to Reagan appeared
in the New York Times warning him that the federal deficit must
be controlled, in part by reducing military spending increases.
It was signed by five former Treasury Secretaries, both Democrat
and Republican, and many corporate executives with the notable
absence of military contractors. In order to win a second term,
Reagan did moderate his foreign policy and military spending to
a slight degree, thereby retaining most of his business support
in the 1984 election.
However, the mid-'80s moderation of Reagan's militarist foreign
policy had its limits. The limits were set by the growing power
of the military-industrial complex.
The Military-Industrial Complex
While significant elements of the conservative elite have
questioned the trillion-dollar Reagan military budget increase,
a growing number of corporations rely on the continuation of that
same budget. Those corporations plus the Pentagon (which together
make up the military-industrial complex) became stronger than
ever as a result of the Reagan military buildup. Increasing numbers
of companies and
communities throughout the country are dependent on the military
sector, giving the military-industrial complex a major voice in
formulation of foreign policy. Although the military budget has
long-term adverse consequences on the economy, in the short run
significant reductions in military spending have harmful effects
on the employment picture. Since the Cold War is needed to justify
a giant military budget, strong economic pressures exist in support
of an aggressive foreign policy.
During the past three decades the military has been the largest
single source of demand in the economy. One job out of every ten
depends directly or indirectly on the military. In 1983 alone,
the increase in military procurement expenditures created 420,000
new jobs. In 1981, the Defense Department directly employed more
than three million people, with two million more employed by military
contractors. Through indirect employment near weapons factories
and military bases, military spending benefits at least 12 million
people and probably many more.
Arms sales to foreign countries create close to one million
jobs. Arms sales are an important tool for improving the deteriorating
U.S. trade balance; these sales also stabilize employment in the
military sector of the economy, cushioning the up and down fortunes
of military contractors' employees as Pentagon contracts ebb and
flow.
The military buildup was a key factor in the 1983-84 economic
recovery; for example in March 1984, U.S. factory orders rose
by the largest amount in six months; 99 percent of that gain was
from military orders. In the 1985-86 period, it was military spending
that bolstered the GNP and prevented an economic contraction.
The more the economy is geared to military spending, the greater
are the dislocations if that spending is reduced.
The military boom also revived the industrial core of U.S.
industry, which was dying in the late 1970s. Chrysler received
a $19-billion tank contract to revive its flagging fortunes. The
declining metal manufacturing sector (autos, steel, aluminum,
and machine tools) received a major boost from the Reagan program
of constructing a 600-ship navy. General Motors had $1.6 billion
in prime military contracts in 1985, Ford Motor Co. boasted more
than $1 billion, and Goodyear Tire and Rubber over $500 million.
Just as military spending helped out the old "rustbelt"
industries in the 1970s, so a new generation of military weapons
is designed to revive the high-tech boom battered by the Japanese
computer industry in the 1980s. The prototype of this new weapons
generation is Star Wars. While most of the SDI and anti-satellite
contracts in 1983 and 1984 went to the usual military-industrial
corporations, "these giants subcontract much work to the
minnows of the trade, and to computer and electronics companies,
some of whom hope to grow into whales. . .An investors newsletter
called SDI 'money from Heaven,' and another commentator likened
the excitement among high-tech operators to 'a fish-feeding frenzy.'
The entire concept of an arms sector of the U.S. economy is
a great oversimplification. Though the top ten contractors contain
the familiar names of General Dynamics, Boeing, and Lockheed,
fully two-thirds of military contract funds go to corporations
outside these big ten, many of which are not primarily military
oriented. In 1985, General Electric, best known as a domestic
producer, was the fourth largest Pentagon contractor. Several
oil companies are on the list of the Pentagon's top 100 contractors,
among them Atlantic Richfield, Chevron, Exxon Mobil, and Texaco.
Other well-known names in the top 100 are AT&T, DuPont, Eastman
Kodak, IBM, ITT, Motorola, Pan American World Airways, Penn Central,
RCA, and Westinghouse. The profitability of military contracts
makes many companies seek military work to help underwrite losses
or lower profits in domestic production. According to a 1984 study,
military contracts yielded a 25 percent return on equity, double
the profit for manufacturing corporations in general. Thus a large
military budget is extremely desirable not just for the military
sector, but for any corporation that can get a piece of that budget.
The firms specializing in military output also have close
links with the non-military economy. Directors of banking, oil'
communications, electric power, steel, and chemical companies
can be found on the boards of the military industry. This practice
of having the same people sit on different corporate boards is
called "interlocking." All the largest banks lend to
military contractors and therefore have a stake in a high military
budget.
The universities are another important source of support for
the military; at least 30 percent of all research and development
performed in universities and university-administered research
facilities is military related. University faculty and students
are thus attracted to research on military problems, thereby increasing
influential civilian support for the military. Some corporate
directors of military contractors have also served as university
officials; for example, those at Grumman have been involved with
Harvard, Lockheed with University of Southern California, McDonnell
Douglas with both University of California at Berkeley and Washington
University in St. Louis. Johns Hopkins University and the Massachusetts
Institute of Technology are on the 1985 listing of 100 largest
Pentagon contractors."
To further spread their web of influence, military contractors
have corporate board interlocks with the press and the publishing
industry including Time, Inc., the Tribune Co., American Broadcasting
Corp., and Doubleday. In addition, numerous board members of military
firms sit on such policymaking bodies as the Trilateral Commission,
Council on Foreign Relations, Brookings Institution, and the Business
Council.
Pentagon contracts are purposely distributed to many states
and Congressional districts in order to discourage senators and
representatives from voting against military expenditures. In
1981, the Pentagon planned for the many components of the B-1
bomber to be produced in 48 of the SO states, thereby ensuring
the votes of such liberals as Sens. Alan Cranston (California)
and Howard Metzenbaum (Ohio). Employees are a major political
asset for military contractors, often organized to lobby in support
of new contracts for their firms. In its major campaign to land
the B-1 bomber contract, Rockwell-through its employees-generated
80,000 letters to Congress. This practice of "grassroots"
lobbying has become standard fare in the military business.
Military contractors have enormous influence over Congress,
not simply by virtue of the employment they create in many Congressional
districts, which translates into votes at election time, but also
through their heavy doses of campaign contributions. They are
among the largest corporate campaign donors through Political
Action Committees (PACs); General Dynamics alone raised $300,000
in 1981-82. Defense industry PACs tend to concentrate their contributions
in the Armed Services and Defense Appropriations committees of
the House and Senate. PAC contributions from military contractors
doubled between 1980 and 1984.5°
The particular types of military expenditures in the Reagan
period make it inevitable that military spending will continue
at high levels for years to come. The uncontrollable share of
Pentagon outlays (money firmly tied to already existing weapons
contracts) increased from 27 percent of the military budget in
1980 to 38 percent in 1986. Because the Reagan budget tended to
invest in expensive weapons systems rather than personnel or maintenance
functions, and since weapons systems take years to develop, many
billions of Pentagon dollars are virtually impossible to cut without
scrapping major weapons investments. Historically, once a weapons
system is underway, it is almost never canceled. The events following
Carter's cancellation of the B-1 bomber are recounted by Jerome
Weisner, president emeritus of the Massachusetts Institute of
Technology and advisor to Presidents Eisenhower and Kennedy:
After the project was shut off by the Carter Administration,
funds from the space shuttle and other government projects were
fraudulently diverted to keep the B-1 alive...the manufacturer
then scattered contracts so widely that almost every state and
hamlet in the country had a stake in the B-1's future. Even though
it is generally agreed that the B-1 is unnecessary, the campaign
succeeded...labor unions and chambers of commerce lobbied vigorously
for this marginally useful aircraft at a time when budget deficits
were destroying the U.S. economy and the infrastructure of American
society.... It is no longer a question of controlling a military-industrial
complex, but rather, of keeping the United States from becoming
a totally military culture.
High levels of military spending will continue to have a major
impact on the economy and thus upon U.S. politics for years to
come. The larger the military budget, the greater the impact of
its economic stimulus, and the greater the voice of its beneficiaries.
What does the size and power of the military-industrial complex
have to do with foreign policy? Clearly, world tensions provide
the political environment in which military contractors thrive.
Widespread support for a continued military buildup cannot exist
in a peaceful international environment; the expenditures have
no purpose and can be more easily reduced by those sectors of
the economy less dependent on the military. In addition, military
contractors welcome shooting wars as a way to test their new equipment;
defense stocks shot up immediately after the 1986 bombing of Libya
when high-tech weapons systems were given their first trial by
fire. In contrast, when Reagan began his November 1985 Geneva
summit, the defense industry became anxious; one weapons consultant
worried that an arms control agreement could soften public perceptions
of the Soviet threat and squeeze defense spending. "Detente
is bad for defense budgets," said the consultant.
Because of its anti-detente preoccupation, there is a natural
alliance between the military-industrial complex and the right
wing in the United States. Mainly located in the South and West,
high tech military industries supply large sums for right-wing
political forces in the United States. Through such organizations
as the Committee on the Present Danger, American Security Council,
and the Coalition for Peace Through Strength, the military contractors
have mobilized many politicians behind right-wing foreign policy
cause: In the late 1970s, members of the Trilateral Commission
with ties to the military sector had no trouble agreeing with
the CPD on the need to raise the military budget...
The military-industrial complex-both the Pentagon and the
contractors-plays a major role in fueling the periodic rises in
anti-Soviet sentiment in the United States. Three times since
World War II a heightened perception of the Soviet threat has
been generated by elites in government and industry. These peaks
in anti-Soviet rhetoric and actions, as analyzed by Alan Wolfe
in The Rise and Fall of the Soviet Threat, include the late 1940s,
the early 1960s, and the late 1970s-early 1980s periods. In each
case, the rise in perception of the Soviet threat was not a response
to increased Soviet aggressiveness, but rather was generated to
justify more interventionist foreign policy actions and increased
military budgets in the United States. Also in each case, key
documents produced by ruling elites supported the proposed foreign
policy changes in light of the resurrected Soviet threat: NSC-68
in 1950, the Gaither Commission in 1957, and the Team B report
of 1976.
The military-industrial complex played no small role in the
preparation of these three Cold War reports. NSC-68 was written
by Paul Nitze, an investment banker with business ties to' military
contractors. The Gaither Commission, whose findings formed the
basis for the great increase in military expenditures and foreign
interventionism of the Kennedy-Johnson years, was dominated by
the Rand Corp., an air force-funded think tank. Rowan Gaither
was chairman of Rand's board, and Rand weapons analysts provided
much of the committee's staff work. Team B, authorized by President
Ford under pressure from air force Gens. George Keegan and Daniel
Graham, among others, painted a frightening picture of Soviet
military superiority; their report kicked off the campaign of
the Committee on the Present Danger leading to the massive military
budget growth of the 1980s. Team B was heavily loaded with air
force and Rand representatives, and the campaign to publicize
its report was strongly supported by the military industry.
All three of the crisis-creating reports came after economic
recessions and post-recession moves to stimulate economic growth
through government ... spending. In this way, the military sector
of the economy has traditionally used the exaggeration of the
Soviet threat to increase its profits through growing military
budgets.
*****
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