Ruling Elites Move to the Right

from the book


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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