Corporate Elites' 40-Year Plan to Rule the U.S.

1971 Memo is Class War's Smoking Gun

Written for FedUpNewYorkers.org

“I believe leaders of the business community, with few exceptions, have chosen to wage 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. …I cannot sit there seeking unity with the leaders of American industry, while they try to destroy us and ruin the lives of the people I represent.”

— Douglas A. Fraser, president of the United Auto Workers, on resigning from President Jimmy Carter’s Labor-Management Group in July 1978

Three decades before the 2008 economic collapse, the legendary union leader was reacting to one of the early stages of a systematic campaign against the U.S. working and middle classes. That campaign’s objective is to transform the U.S. economy for the benefit of the corporations and the rich, through systematic manipulation of the political and judicial systems and the terms of public discourse. So far, it has been wildly successful.

In 2011, Occupy Wall Street brought the truth of the class war that Fraser identified home again. Despite the relentless Republican messaging that Occupy was a failure, the brave young people who occupied Zuccotti Park, and who were arrested, pepper-sprayed and otherwise abused by Michael Bloomberg’s police department, came up with the concept of the 1 percent versus the 99 percent. It was an indispensable, consciousness-raising step.

But what happens next? Before we can answer that question, we have to know how this class war, which former Wisconsin Congressman David Obey, chair of the House Appropriations Committee, called “the biggest rip-off of the middle class in the history of the universe,” came about. Lest anyone doubt that it exists, a telling memorandum written in 1971 spelled out what the goals and strategies of the campaign against the working and middle classes was to be. Four decades later, it is exactly what we’ve seen.

Lewis_Powell_1976.jpg

LEWIS POWELL
Tobacco lawyer who argued that corporations possess First Amendment rights and who, as a Supreme Court judge, shaped the radical legal doctrine of corporate "personhood".

The Smoking Gun: The Powell Memorandum

The historic shift from share-the-wealth to winner-take-all capitalism can be traced to a 1971 memorandum written by Lewis Powell. At the time of writing, he was a corporate lawyer, and shortly thereafter, a Nixon appointee to the U.S. Supreme Court. The U.S. Chamber of Commerce distributed the Powell Memorandum to a group of wealthy individuals and corporate executives. It was labeled “Confidential: Attack on American Free Enterprise System.”

The enemies Powell identified were not only “Communists, New Leftists and other revolutionaries,” but also misguided intellectuals, political scientists, historians, sociologists, politicians, members of the press, textbook writers, lawyers, activist judges and many, many others who would ostensibly destroy the entire system.

Capitalism would be destroyed unless corporate America played the long game across virtually every institution in American life. With targets that included textbooks and television (“the national television networks should be monitored in the same way that textbooks should be kept under constant surveillance”), scholarly journals and magazines (“there should be a fairly steady flow of scholarly articles presented to a broad spectrum of magazines and periodicals”) and mass-market paperbacks (“the newsstands — at airports, drugstores and elsewhere — are filled with paperbacks and pamphlets advocating everything from revolution to erotic free love”), Powell called for a massive corporate commitment to reshape American society, its culture and institutions.

He singled out control of the courts for special attention. “The judiciary may be the most important instrument for social, economic and political change. This is a vast area of opportunity for the Chamber, if it is willing to undertake the role of spokesman for American business and if, in turn, business is willing to provide the funds,” he wrote. “The greatest care should be exercised in selecting the cases in which to participate, or the suits to institute. But the opportunity merits the necessary effort.”

The Right Wing Goes to War

A network of wealthy right-wing businessmen answered the call. They established and lavishly financed academic programs on university campuses and research institutes and think tanks such as the Heritage Foundation, the American Enterprise Institute, the Cato Institute and scores of others. These entities churn out studies, reports and publications to support what they call “our free enterprise system” and have become a key part of the infrastructure and intellectual underpinning of American capitalism.

Among those who originally bought in were the Koch brothers, the late Richard Mellon Scaife, Wisconsin’s Bradley family, the Smith Richardsons, the Coors and other extreme right-wing ideologues, some with deep roots in the John Birch Society.

Along with moving the country to the right, Powell urged business to ramp up its involvement in government and politics. “There should not be the slightest hesitation to press vigorously in all political arenas for support of the enterprise system. Nor should there be reluctance to penalize politically those who oppose it,” he wrote. The iron fist would come out of the velvet glove, and people in public office and other critics would knuckle under or lose their jobs and reputations.

The Powell Memorandum is a 6,000-word capitalist manifesto, a call to arms and a declaration of class war. It is a historic document and should be better known than it is, for it represents the origins of a radically new social contract.

The Casualties

That new social contract has upended the U.S. economy and wreaked havoc for the average worker. The super-rich and the corporations they control have grown wealthier, and most working Americans have gotten poorer while working harder and putting in longer hours than workers in any other industrialized country.

For decades following the end of World War II, inflation-adjusted hourly compensation, including employer-provided benefits and wages, for the vast majority of U.S. workers rose in line with increases in productivity. From 1948 to 1973, CEOs and anyone else who had a say in how productivity growth was distributed shared the profits with workers in the form of higher wages and benefits. The CEOs didn’t do badly for themselves either. In the 1970s, the CEOs of 102 major corporations averaged $1.2 million in annual income, about 40 times that of the average worker.

Since 1973, hourly compensation has almost stopped rising. Net productivity grew 72.2 percent between 1973 and 2014. Yet inflation-adjusted hourly compensation for the median worker rose just 8.7 percent, or 0.2 percent annually, over this same period, with essentially all of the growth occurring between 1995 and 2002. Real hourly compensation of production, another measure of the pay of typical, nonsupervisory workers — who make up 80 percent of the workforce — also shows pay stagnation for most of the period since 1973. It rose just 9.2 percent between 1973 and 2014. Again, the lion’s share of this growth occurred between 1995 and 2002. The $4.03 per hour wage for the average worker in 1973, meanwhile, has the same purchasing power as $22.41 today.

In 2013, the CEOs of companies in the Standard & Poor’s 500-stock index made an average $11.7 million, or 331 times the average worker and 774 times the minimum wage worker.

America’s current disparities in wealth and income are the greatest in our history and far more extreme than in any of the top 20 developed countries. Princeton economist Alan Krueger has called the wealth gap “mind-boggling.”

The richest 1 percent now own more wealth than the bottom 90 percent. The top hundredth of 1 percent of U.S. taxpayers — 16,000 people — have a combined net worth of $6 trillion.

Moreover, expenditures for basic needs such as health care, housing, child care and education — the costs of maintaining a middle-class life — have skyrocketed. A quarter of American families report they have no savings to cover an emergency.

Many other developed countries, which the corporate media and conservative politicians like to call “welfare states,” have better public education systems, better health outcomes, stronger pension guarantees, better housing, paid maternity leave, paid vacations, more social mobility and score higher on whatever happiness or satisfaction indices one cares to look at.

For decades, Americans have been told that technology and globalization have caused inevitable “dislocations,” but that deregulation, lower taxes and free trade would generate investment capital, which in turn would translate into greater productivity and shared prosperity. The economic pie would get bigger and everyone would get a bigger slice. Greater productivity? Yes. A bigger pie? Yes. Shared prosperity? Bullshit.

Look At Us Now

For years, Republicans have been appealing to poisonous racial prejudice and whatever other dark impulses of the soul can be exploited to divert attention from the class war that Fraser sought to call attention to. But they seem to have painted themselves into a corner. Too many years of waving the red cape in front of the bull — which keeps charging the cape without results — have taken their toll.

“Hard-working taxpayers” — otherwise known as angry white working-class voters — clamor for blunter talk and harsher action. They know they’ve been had. And that’s why the Republican Party is sounding so shrill. GOP politicians and operatives are well past a “thousand points of light” and “compassionate conservatism,” and even deriding a black president by calling his foreign policy “leading from behind” and his domestic program as that of a “dictator” aren’t likely to bring them back into the White House. So bring in the clowns: Illegal immigrants are stealing your jobs, rapists and muggers are pouring across our borders, the barbarians are at the gates, build the walls higher, arm the citizenry.

The angry, hardcore Republican base may follow Donald Trump, the most colorful of the clowns, for a while. But his payoffs to New York politicians are well documented, and when the details of those transactions are better known and understood, he isn’t likely to get a pass from even the angriest Obama-haters. Trump is the embodiment of the corrupt relationship between wealthy businessmen and the politicians they pay for favorable government action.

Shortly after Powell’s memo was distributed, the CEOs of the country’s largest corporations formed the Business Roundtable, which quickly became the country’s most powerful business lobbying group. The U.S. Chamber of Commerce grew enormously in membership, financing and political clout, and many of today’s business and trade associations were established.

Today, corporate lobbyists flood Washington and state capitals with vast sums of corporate and private wealth laundered through the campaign finance system. The stench of corruption made legal by those who receive the bribes is so rank that even John McCain, no stranger to the collection plate, complained that it is “nothing less than an elaborate influence-peddling scheme in which both parties conspire to stay in office by selling the country to the highest bidder.”

An estimated $12.5 million per member of Congress is spent on lobbying activity each year. In a particularly blatant episode, in June 1995, when former House Speaker John Boehner was the House Republican Conference chairman, he handed out tobacco lobby checks right on the House floor. And, of course, in addition to financing their campaigns or threatening to finance their opponents, the corporate lobbyists hold out the prospect of hiring the lawmakers at very large pay increases.

Candidates are selected — or self-select — on the basis of how rich they are or how much money they can raise. According to a report by the Center for Responsive Politics, in 2010 the average net worth of a member of the House Tea Party Caucus was $1.8 million. The self-proclaimed grassroots rebels against government are doing very well, thank you.

Democrat or Republican, all must contribute substantial sums to their party’s congressional campaign operations. If they don’t, they don’t get leadership positions. Freshman legislators are told that if their filings with the Federal Election Commission, due only weeks after taking office, don’t show substantial sums of money in the bank, they will be targeted not only by the other party but in their own primaries. They hit the fundraising circuit immediately and they never stop. So Big Money not only dominates elections and policy-making, but also the selection of candidates and the filling of leadership positions.

It seems we’ve gradually come to accept as normal the revolting sight of would-be presidents crawling across broken glass to kiss the rings of the likes of the Koch brothers, Sheldon Adelson and other right-wing billionaires.

Lewis Powell and his colleagues may not have foreseen the extent of the political and social revolution they would unleash, but unlike so many citizens, they understood that politics matters.


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