The Business-Government Alliance by Murray N. = Rothbard

The = Business-Government=20 Alliance

by Murray=20 N. Rothbard
by Murray = N.=20 Rothbard

First=20 published in Inquiry, January=20 1983.

Up = until the=20 1960s, the morality play purporting to explain the enormous = rise of=20 state power in twentieth-century America was a simple one. = Liberals=20 and leftists hailed the growth of government intervention as = the=20 result of a drive by workers, farmers, and altruistic = intellectuals=20 overriding opposition by selfish big-business interests.=20 Conservatives portrayed the mirror image of this saga: = unions,=20 egalitarians, leftists and other lumpen rising up to = cripple=20 big business. As Ayn Rand put it in one of her more = egregious=20 pronunciamientos: Big business was "America=92s = persecuted=20 minority" par excellence.

There were=20 always grave anomalies in this picture. For what does one do = with=20 the legion of pro-New Deal, -Fair Deal, -Great Society big=20 businessmen: the Paul Hoffmans, the Averell Harrimans, the=20 Rockefeller brothers? Neither the liberal explanation that = these=20 were unusually "enlightened" or "intelligent" sports, nor = the=20 conservative psycho-smear that they were brainwashed into = feeling=20 guilty about their wealth by liberal prep-school teachers, = was=20 particularly compelling. Especially when everyone knew that = such=20 government intervention as tariffs or import quotas on = steel, for=20 instance, were lobbied for, neither by altruists nor by the=20 brainwashed guilt-ridden, but by steel manufacturers anxious = to=20 secure their profits from more efficient foreign = competition. But if=20 that was the motive for business enthusiasm for this = particular kind=20 of government intervention, why not for others?

The = faulty=20 conventional paradigm was successfully broken in the 1960s, = when New=20 Left historians, joined in an unusual historiographical = coalition by=20 free-market economists and historians, turned the picture = around.=20 They showed that various big-business groups had become, as = early as=20 the turn of the twentieth century, "corporatists" or = "corporate=20 liberals," anxious to replace quasi-laissez-faire capitalism = by a=20 cartelized corporatist system, directed or even planned by = Big=20 Government in intimate partnership with Big Business, and = creating=20 Big Unions to participate as junior partners in this new = "mixed"=20 economy. The push for the new corporate state was generated = by an=20 alliance between corporatist big-business groups and = technocratic=20 intellectuals, eager to help run and to apologize for the = new=20 system, which promised them a far plusher niche than did a = freely=20 competitive economy.

Much of this=20 historiographical battle has now been won. The Progressive = Era is=20 now generally seen as a period dominated by just such a = coalition,=20 engineered by big-business groups like the National Civic=20 Federation; the "war collectivism" of World War I is now = seen as the=20 culmination of the Progressive dream instead of its = destruction, as=20 previously believed; and Herbert Hoover is now widely and = correctly=20 perceived as one of the first corporatist New Dealers = instead of the=20 last champion of laissez-faire.

But = less has=20 been done on the New Deal and later eras, and G. William = Domhoff=92s=20 excellent and path-breaking work, The=20 Higher Circles (1970), is one of the few from this=20 "revisionist" perspective. Chapter Six in that work still = provides=20 an unrivaled study of the big-business support behind the = Social=20 Security Act and the pro-union Wagner Act of the = 1930s.

Professor Kim=20 McQuaid is an able young "New Left" historian and his book = attempts=20 to tell the story of big-business influence on federal = politics=20 since the 1930s. It is certainly an ambitious attempt, and = the book=20 provides much useful information to students of the=20 business-government alliance. But it is in the end a = disappointing=20 work, falling far short of constituting the definitive study = of this=20 crucial question.

In = his preface,=20 McQuaid gives generous acknowledgment to Professor Domhoff, = but=20 unfortunately fails to cite The Higher Circles in his = footnotes or bibliography. McQuaid would have benefited = greatly from=20 Domhoff=92s keen and acidulous insights.

For = his major=20 problem is excessive caution and moderation. McQuaid=92s = revisionism=20 is wishy-washy, and his treatment of such corporate liberal=20 businessmen as Gerard Swope and Averell Harriman is highly=20 ambivalent. He can=92t seem to make up his mind whether = these big=20 businessmen were New Dealers for economic gain or out of=20 "intelligence" and "realism." Too often McQuaid is seduced = by the=20 latter solution. But falling back on their alleged = intelligence and=20 realism prevents him from penetrating surface appearances = and=20 investigating their economic and financial ties to the = corporate=20 welfare-warfare state they collaborated in = creating.

McQuaid=92s=20 unfortunate moderation leads him into the conventional = historical=20 trap of treating every one of his big-business figures as an = isolated individual, who sounds off on or advances his own=20 particular views from time to time. A reading of Domhoff or = of the=20 sparkling, encyclopedic work of Philip H. Burch, Jr., Elites=20 in American History^{1,=20
would have reminded him that these businessmen were often =
part of=20
clear-cut financial groupings, each with its own interest =
and=20
ideology. Gerard Swope of General Electric was not a =
maverick=20
corporatist in the 1920s and 1930s; he shared his =
perspective with=20
numerous other business leaders in the J. P. Morgan=20
ambit.}

Take, as=20 another example, McQuaid=92s discussion of the candidacy of = Wendell=20 Willkie in 1940, All he says is that Willkie was a = big-businessman,=20 a utilities magnate in Tennessee and a friend of Gerard = Swope. What=20 he omits is the crucial information that Willkie had long = been=20 associated with the House of Morgan, that he sat on the = board of the=20 Morgan-dominated First National Bank of New York, and that = the two=20 young men who did the most to promote the remarkable and=20 unprecedented Willkie candidacy were both Morgan-oriented=20 Republicans: Oren Root, Jr., of the Morgan-associated Wall = Street=20 law firm of Davis, Polk, Wardwell; and Charlton MacVeagh, of = J.P.=20 Morgan & Co.

McQuaid=92s=20 blindness to the role of direct economic interest in these = matters=20 is demonstrated by his discussion of the crucial role of = business=20 leaders in drafting and pushing through the Marshall Plan in = 1948.=20 There is no mention of the fact that most of the Marshall = Plan=92s=20 strongest business supporters were export manufacturers or = their=20 bankers, who would of course become the principal = beneficiaries of=20 foreign aid. Moreover, in his discussion of the role of the = powerful=20 William L. Clayton, undersecretary of state and principal = architect=20 of the Marshall Plan, McQuaid confines himself to = Clayton=92s=20 anticommunism, his conservatism, and to the fact that he was = personally liked by John Kenneth Galbraith. Totally omitted = is the=20 surely pertinent fact that, after Clayton succeeded in = pushing the=20 Marshall Plan through a Republican Congress, his own firm of = Anderson, Clayton & Co., one of the world=92s largest = cotton=20 brokers, received a huge contract from Marshall Plan funds. = Whether=20 out of ignorance or excessive decorum, McQuaid has = systematically=20 omitted crucial strands of the business-government = partnership he=20 tries to explain.

Finally,=20 McQuaid unduly narrows the picture by restricting his study = to the=20 members of the Business Council of the Department of = Commerce. This=20 is a highly important and largely neglected body, and = McQuaid=20 performs a useful service in telling the story from its = inception in=20 the early days of the New Deal. But a comprehensive picture = of=20 business-government collaboration would have to include = other major=20 groups and figures. There is, for example, not a single = mention in=20 the book of John Foster Dulles, the powerful secretary of = state=20 under Eisenhower. The fact that Dulles was, for most of his = life, a=20 Standard Oil-Rockefeller lawyer, and that his wife was a = first=20 cousin of John D. Rockefeller, Jr., might, after all, have = played a=20 role in Dulles=92s political and economic foreign = policies.

Unfortunately, McQuaid=92s studied moderation, = and his=20 refusal to venture beyond the very narrow bounds he has set = himself,=20 or to ask the deeper questions, not only limit the value of = his work=20 but in the end make this a boring book as well. Like too = many=20 academic historians, Professor McQuaid has succeeded in = taking an=20 inherently fascinating subject and made reading about it = something=20 of a chore.

Note

3 vols., Holmes and Meier, 1980. The huge = Burch=20 work, sorely neglected by historians and studded with = footnotes as=20 long as the text, serves as a fascinating reference work, = rather=20 than a book that can be read = through.

Murray N.=20 Rothbard (1926=961995) was the author of Man,=20 Economy, and State, C= onceived=20 in Liberty, What=20 Has Government Done to Our Money, For a = New=20 Liberty, The=20 Case Against the Fed, and many other books = and=20 articles. He was also = the editor=20 =96 with Lew Rockwell =96 of The=20 Rothbard-Rockwell Report.

Murray=20 Rothbard Archives=20 =