The Powell Memo: A Call-to-Arms for Corporations
September 14, 2012
In this excerpt from Winner-Take-All Politics: How Washington Made the Rich Richer — and Turned Its Back on the Middle Class, authors Jacob S. Hacker and Paul Pierson explain the significance of the Powell Memorandum, a call-to-arms for American corporations written by Virginia lawyer (and future U.S. Supreme Court justice) Lewis Powell to a neighbor working with the U.S. Chamber of Commerce.
In the fall of 1972, the venerable National Association of Manufacturers (NAM) made a surprising announcement: It planned to move its main offices from New York to Washington, D.C. As its chief, Burt Raynes, observed:
We have been in New York since before the turn of the century, because we regarded this city as the center of business and industry. But the thing that affects business most today is government. The interrelationship of business with business is no longer so important as the interrelationship of business with government. In the last several years, that has become very apparent to us.
To be more precise, what had become very apparent to the business community was that it was getting its clock cleaned. Used to having broad sway, employers faced a series of surprising defeats in the 1960s and early 1970s. As we have seen, these defeats continued unabated when Richard Nixon won the White House. Despite electoral setbacks, the liberalism of the Great Society had surprising political momentum. “From 1969 to 1972,” as the political scientist David Vogel summarizes in one of the best books on the political role of business, “virtually the entire American business community experienced a series of political setbacks without parallel in the postwar period.” In particular, Washington undertook a vast expansion of its regulatory power, introducing tough and extensive restrictions and requirements on business in areas from the environment to occupational safety to consumer protection.
In corporate circles, this pronounced and sustained shift was met with disbelief and then alarm. By 1971, future Supreme Court justice Lewis Powell felt compelled to assert, in a memo that was to help galvanize business circles, that the “American economic system is under broad attack.” This attack, Powell maintained, required mobilization for political combat: “Business must learn the lesson . . . that political power is necessary; that such power must be assiduously cultivated; and that when necessary, it must be used aggressively and with determination—without embarrassment and without the reluctance which has been so characteristic of American business.” Moreover, Powell stressed, the critical ingredient for success would be organization: “Strength lies in organization, in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.”
Powell was just one of many who pushed to reinvigorate the political clout of employers. Before the policy winds shifted in the ’60s, business had seen little need to mobilize anything more than a network of trade associations. It relied mostly on personal contacts, and the main role of lobbyists in Washington was to troll for government contracts and tax breaks. The explosion of policy activism, and rise of public interest groups like those affiliated with Ralph Nader, created a fundamental challenge. And as the 1970s progressed, the problems seemed to be getting worse. Powell wrote in 1971, but even after Nixon swept to a landslide reelection the following year, the legislative tide continued to come in. With Watergate leading to Nixon’s humiliating resignation and a spectacular Democratic victory in 1974, the situation grew even more dire. “The danger had suddenly escalated,” Bryce Harlow, senior Washington representative for Procter & Gamble and one of the engineers of the corporate political revival was to say later. “We had to prevent business from being rolled up and put in the trash can by that Congress.”
Powell, Harlow, and others sought to replace the old boys’ club with a more modern, sophisticated, and diversified apparatus — one capable of advancing employers’ interests even under the most difficult political circumstances. They recognized that business had hardly begun to tap its potential for wielding political power. Not only were the financial resources at the disposal of business leaders unrivaled. The hierarchical structures of corporations made it possible for a handful of decision-makers to deploy those resources and combine them with the massive but underutilized capacities of their far-flung organizations. These were the preconditions for an organizational revolution that was to remake Washington in less than a decade — and, in the process, lay the critical groundwork for winner-take-all politics.
Businessmen of the World, Unite!
The organizational counterattack of business in the 1970s was swift and sweeping — a domestic version of Shock and Awe. The number of corporations with public affairs offices in Washington grew from 100 in 1968 to over 500 in 1978. In 1971, only 175 firms had registered lobbyists in Washington, but by 1982, nearly 2,500 did. The number of corporate PACs increased from under 300 in 1976 to over 1,200 by the middle of 1980. On every dimension of corporate political activity, the numbers reveal a dramatic, rapid mobilization of business resources in the mid-1970s.
What the numbers alone cannot show is something of potentially even greater significance: Employers learned how to work together to achieve shared political goals. As members of coalitions, firms could mobilize more proactively and on a much broader front. Corporate leaders became advocates not just for the narrow interests of their firms but also for the shared interests of business as a whole.
Ironically, this new capacity was in part an unexpected gift of Great Society liberalism. One of the distinctive features of the big expansion of government authority in the ’60s and early ’70s was that it created new forms of regulation that simultaneously affected many industries. Previously, the airlines might have lobbied the Civil Aeronautics Board, the steel companies might have focused on restricting foreign competitors, the energy producers might have gained special tax breaks from a favorite congressman. Now companies across a wide range of sectors faced a common threat: increasingly powerful regulatory agencies overseeing their treatment of the environment, workers, and consumers. Individual firms had little chance of fending off such broad initiatives on their own; to craft an appropriately broad political defense, they needed organization.
Business was galvanized by more than perceived government overreach. It was also responding to the growing economic challenges it faced. Organization-building began even before the economy soured in the early 1970s, but the tumultuous economy of that decade — battered by two major oil shocks, which pushed up inflation and dragged down growth — created panic in corporate sectors as well as growing dissatisfaction among voters. The 1970s was not the economic wasteland that retrospective accounts often suggest. The economy actually grew more quickly overall (after adjusting for inflation) during the 1970s than during the 1980s. But against the backdrop of the roaring 1960s, the economic turbulence was a rude jolt that strengthened the case of business leaders that a new governing approach was needed.