The Businessman’s Backlash

Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan, by Kim Phillips-Fein, W.W. Norton, 2009, 368pp, $26.95

In 1978, former United Auto Workers President Douglas Fraser got to the heart of the matter.

In a well-known letter of resignation from the pseudo-corporatist Labor-Management Group, Fraser thundered against the passing of the New Deal order and the ascendancy of corporate power and free-market ideology: “I believe leaders of the business community, with few exceptions, have chosen to wage a one-sided class war today in our country – a war against working people, the unemployed, the poor, the minorities, the very young and the very old, and even many in the middle class of our society.” The grand compromise between business and labor that underpinned the New Deal and the “golden age of capitalism” that ran from the end of World War II until the early 1970s was cast aside. “The leaders of industry, commerce, and finance in the United States have broken the fragile, unwritten compact previously existing during a period of growth and progress.” We were not all Keynesians anymore. We were now the eager pupils of Ludwig von Mises, Friedrich Hayek, Milton Friedman, and Lemuel Boulware (more on him later).

The “one-sided class war” that Fraser so pointedly described was not only restricted to the shop floor or the bargaining table. It was profoundly political, in the broadest sense. The 1970s marked a new and heightened phase of political activism among corporate leaders. According to Thomas Ferguson and Joel Rogers in their book Right Turn: The Decline of the Democrats and the Future of American Politics, by the end of that decade, corporations were spending more than $1 billion annually on political advertising and grassroots lobbying among the citizenry, in addition to the already huge sums they spent on Congressional lobbying and the funding of institutes and think tanks like the Heritage Foundation and the American Enterprise Institute. On the receiving end of the class war, the labor movement was destitute by comparison. In 1982, the combined net income of all trade unions in the United States was only $324 million.

It goes without saying that these trends continue today, except for the fact that now business is even wealthier and more powerful while the labor movement celebrates when the rate of union organization stays the same from one year to the next instead of moving inexorably toward zero. To take just one example, according to the Center for Responsive Politics corporate interests are far and away the largest spenders on political lobbying. Eight of the top ten groups of spenders over the last decade represent business interests and have spent tens of billions of dollars while labor pulls in at number twelve, at approximately $359 million. That’s not chump change, but it’s a pittance compared to the approximately $3.5 billion the Finance, Insurance, and Real Estate industries alone spent on lobbying. It’s also not much of a stretch to say that the FIRE industries are currently running the national economy in the persons of hedge fund coddlers Larry Summers and Timothy Geithner, while the labor-oriented economist Jared Bernstein enjoys the dubious distinction of having the ear of Joe Biden, a man not exactly known for his listening skills.

“Follow the money” is a tired cliché, but it’s no coincidence that a political system awash in corporate cash largely does the bidding of business interests, as the current battles over healthcare reform, the Employee Free Choice Act, and financial regulation demonstrate so vividly. No matter that the putatively-pro labor Democrats control all branches of the federal government, as business is more than happy to cut checks to the Democratic National Committee which, for its part, is more than happy to cash those checks. I remember hearing someone say once that vulgar Marxism explains 90% of social reality, and on most days I’m inclined to agree with that statement. With few exceptions, usually in times of extreme social and political turmoil, he who pays the piper calls the tune. This conservative ascendancy is brought to you by American business.

However, one of the most remarkable things about American society in 2009 is that if you asked someone to give an example of a conservative, it’s likely that they would think of someone like Joe the Plumber before someone like Rich Uncle Pennybags. This is at least partially because conventional wisdom both popular and scholarly maintains that the conservative ascendancy of the last three decades drew its strength primarily from the backlash of large swaths of the white working class against burning bras, racial integration in neighborhood schools, and other primarily cultural “outrages” of the 1960s and 1970s. Thomas Frank vividly rendered the moral and political universe of these culture warriors in his 2004 book What’s the Matter With Kansas?, but as Frank made so clear, his subjects have largely lost the culture war while business racks up victory after victory in the realm of political economy. While many writers have done an exceptional job of analyzing the ways in which cultural conservatives have organized to fight the culture wars, there has been comparatively little attention paid to the earlier and largely successful organizational efforts of business and its political allies to overturn the Keynesian political economy of the New Deal and reinstate laissez-faire. The historical development and consequences of this businessman’s backlash is the subject of Kim Phillips-Fein’s valuable new book, Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan.

Announcing his intention to launch a so-called Second New Deal in Madison Square Garden in 1936, Franklin Roosevelt threw down the gauntlet to American business: “Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hatred for me – and I welcome their hatred.” Of course, during the Great Depression business was not actually unanimous in its opposition to Roosevelt and the New Deal. As Phillips-Fein notes, certain corporate executives like Gerard Swope of General Electric recognized the New Deal as capitalism’s savior and were broadly supportive of the administration’s efforts. But to others, most importantly the du Pont brothers, the Roosevelt administration was a socialistic cabal bent on enslaving businessmen to the welfare state. The du Ponts, their allies in the Liberty League (an anti-New Deal organization they founded and funded and the inspiration for all subsequent organized business conservatism), and others committed to preserving limited government and laissez-faire, saw the New Deal as

a fundamental challenge to their power and place in American society. Their antagonism toward the economic order it created never fully abated. Rather, these impassioned, committed individuals found ways to nourish their opposition, to resist liberal institutions and ideas, and to persuade others to join in fighting back, until the liberal order began to falter and they could help to bring about the slow and pervasive revolution that would culminate in Reagan’s victory in 1980.

Phillips-Fein correctly argues that the supposed postwar Keynesian “consensus” on matters of political economy was never as solid and consensual as it appeared to be, as businessmen such as Leonard Read, W.C. Mullendore, Jasper Crane, J. William Middendorf, and Roger Milliken (among many others), founded and funded a vast network of organizations and intellectual outlets devoted to undermining the liberal order and promoting the conservative alternative. They established the Foundation for Economic Education and the Mont Pelerin Society, devoted to spreading the gospel according to Austrian free-market economists Ludwig von Mises and Friedrich Hayek. They created think tanks like the American Enterprise Association (now the American Enterprise Institute) and the Heritage Foundation to brief politicians and opinion makers on the wonders of the market. They sponsored the creation of William F. Buckley’s National Review and the publication of scores of books and pamphlets to lend conservatism an intellectual gravity it heretofore lacked. They organized their fellow businessmen to battle regulation and redistribution though the U.S. Chamber of Commerce and the Business Roundtable. They contributed (often quite lavishly) to and campaigned for trailblazing conservative politicians like Barry Goldwater and Ronald Reagan. And in General Electric labor relations executive Lemuel Boulware, they had someone who was willing to confront labor and liberalism head on in the workplace.

In many ways, Boulware is the central figure in Phillips-Fein’s story. He became vice president of employee and community relations after the massive 1946 strike against GE, in which the United Electrical Workers were not only victorious in winning better wages and working conditions, but in mobilizing public opinion against the company. It’s easy to forget how profoundly different American political culture was during the 1930s and 1940s. After the war, liberalism and the labor movement enjoyed broad popular support, and a huge wave of successful strikes swept the country as workers sought to stake their claim on postwar prosperity and consolidate the position of the labor movement in the heart of the nation’s political economy. As an ardent advocate of business conservatism, Boulware would have none of this. He was no Gerard Swope. As Phillips-Fein observes, Boulware is important in that more than perhaps anyone else in the business class in the postwar period, “his frame of vision and reference extended far beyond his own company. He believed that all across the country, unions and management were engaged in a titanic struggle over the future of the United States…American management needed literally to sell its policies to the American people.” He initiated a new hard-line negotiating strategy with the union and successfully defeated the 1960 strike against the company, a major turning point in postwar labor relations. He politicized the company’s workplace culture to an extent rarely seen before, organizing GE managers to proselytize for the free market directly to rank-and-file workers.  And fatefully, he hired a washed-up actor named Ronald Reagan to serve as the company’s celebrity spokesman. It was during his time at GE that Reagan established his longstanding relationship with influential business conservatives, culminating in his election as president in 1980. And it’s where he learned to break unions and to love the market.

In addition to rescuing key historical actors like Lemuel Boulware from obscurity, Phillips-Fein does an excellent job of detailing the ways in which key business conservatives built up and funded their organizational and intellectual networks over time, and offers a persuasive account of their growing influence over the political system and their consolidation of ideological hegemony as the postwar liberal order began to break down in the early 1970s. She also deserves credit for not romanticizing the postwar liberal order as a golden age of progress and prosperity, as too many others opposed to the conservative drift of the last 30 years have done. She falters a bit, however, when forced to examine the relationship between business and cultural conservatism in the United States over the last several decades.

Today we tend to accept the marriage of business and cultural/religious conservatism as embodied in the Republican party unreflectively, as if Mammon and God (or whatever one uses as one’s moral or ethical foundation) are somehow a good couple. But capitalism, especially the kind of unbridled, free-market capitalism promulgated by the subjects of Invisible Hands, is anything but conservative. Marx still has the definitive word on this subject:

Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind.

It was always strange that a devout, traditional Catholic like William F. Buckley could somehow reconcile the motto of the magazine he founded – “it stands athwart history, yelling Stop!” – with support for a socioeconomic system that set into motion most everything that conservatives have traditionally wanted to stop.

Phillips-Fein recognizes this tension but tends to paper over it instead of investigating further. As part of a bibliographic essay at the back of the book that feels like it was included after receiving criticism on this point from early readers, she acknowledges that most of her subjects “wanted to empower business, not reinvigorate lost traditions,” and in her chapter on the relationship between business conservatism and the New Right, she acknowledges that “the leadership of the movement might speak the language of the market, but for the believers themselves there must have remained a schism.” Investigating this tension is, admittedly, not the main purpose of the book, but leaving it mostly unexplored leaves the reader wanting more. And the necessary inclusion in her narrative of conservative activists who were not primarily concerned with economic issues somewhat undermines her conceptual distinction between the business backlash and the cultural backlash, as well as her thesis that the former was always more important than the latter. Phillps-Fein is correct in locating the roots of modern American conservatism in business opposition to the New Deal and in arguing that economic conservatism has been more politically successful than cultural conservatism. But I don’t think it’s plausible to think that the businessman’s backlash could have succeeded to the extent that it did without a healthy assist from the culture warriors, who led a significant chunk of the working class out of the New Deal coalition.

That’s enough criticism of an otherwise fine book. What lessons can those of us who have tried to sustain the broad egalitarian political tradition during the onslaught of the last 30 years learn from the conservatives?

As I observed at the beginning of this review, the role of money in politics remains a crucial issue. Because we don’t own the means of production, those of us who are opposed to corporate domination will probably never have as much money as the other side, and the only institution on the broad left with large-scale resources to sustain the battle – the labor movement – may be in terminal decline. Aside from revitalizing the labor movement, we need to find ways to break the stranglehold of corporate money over politics. The leaderships of both parties are not interested in public financing of campaigns (and corporate lobbying would almost render any effort to move in this direction stillborn), so we’ll have to figure out ways to circumvent this enormous obstacle. Many have touted the Internet as a way of broadening the donor base to include ordinary citizens, but even with the increasing prevalence of small-scale online donations, most candidates at every level raise the bulk of their money from big, established interests. I certainly have no solution to this question, but it’s imperative that one be found.

Building a movement to undo the damage of the last thirty years is certainly going to require money, and quite likely lots of it. But money, however, isn’t everything. It can’t buy love and it can’t buy a movement out of thin air. If the rise of the conservatives teaches us anything, it should teach us that ideas matter, and that times of crisis are windows of opportunity. I’m sure that many of the people who helped to build business conservatism during and after the New Deal years were motivated largely by pecuniary self-interest. But many of them, such as Leonard Read and Lemuel Boulware, were honestly committed to a set of ideas that told a particular story about the way society is and how it could, and should, be. Over the course of decades, they formulated a political vision that resonated with broad sectors of the population when the liberal order broke down in the 1970s, and they developed a media apparatus to bring it to as many people as possible in print and over the airwaves. One of the biggest mistakes that the labor movement made during the high-water mark of its power and influence was its failure to formulate a broadly egalitarian social and political vision and a media apparatus to support it. Doing so likely wouldn’t have been enough to help stop the implosion of the postwar liberal order, but it could have limited some of the damage. At any rate, it’s something that would certainly come in handy right now. As we watch the conservative order built by the subjects of Invisible Hands crash down around us, we don’t have much of a counter-narrative to offer the millions of our fellow citizens who should now be more receptive to an egalitarian political agenda than they have been in decades. If someone can succeed in formulating a compelling alternative vision of how things are and should be we could have something. But right now, I can’t shake the feeling that we (and I admit to not being sure who this “we” even includes anymore) are letting a precious and potentially decisive opportunity slip through our fingers.

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