Powell manifesto addressed American economic system under attack

History often has a hidden beginning. Since the 1970s, people who are already well off have enjoyed a rising percentage of income and wealth. Meanwhile, ordinary Americans face declining social mobility, a shrinking middle class, widening income inequality and crumbling infrastructure. There is plenty to be mad about and plenty of blame to go around.

The economic struggles of the American working class since the late 1970s were not just the result of globalization and technology changes. A long series of public policy changes favored the wealthy. Some argue these changes were the result of sophisticated efforts by the corporate and financial sectors to change government policy, from tax laws to deregulation, to favor the wealthy.

In August 1971, less than two months before he was nominated to serve as an associate justice of the Supreme Court, Lewis F. Powell Jr. sent a confidential memorandum to his neighbor and friend Eugene B. Sydnor Jr., chair of the Education Committee of the U.S. Chamber of Commerce. Powell was a leading Virginia corporate lawyer, a former president of the American Bar Association and served on 11 corporate boards.

The 34-page memo was titled “Attack on American Free Enterprise System.” It presented a bold strategy for how business should counter the “broad attack” from “disquieting voices.” The memo, also known as the Powell manifesto, did not become available to the public until after he was confirmed.

He began the memo this way: “No thoughtful person can question that the American economic system is under broad attack.” He went on to write that the assault was coming from “perfectly respectable elements of society: the college campus, the pulpit, the media, the intellectual and literary journals, the arts and sciences, and from politicians.” American business believed it was facing a hostile political environment during the late 1960s and that it was under attack with the growth of government authority under the Great Society and an increase in regulations ranging from the environment to occupational safety to consumer protection.

The memo outlined a bold strategy and blueprint for corporations to take a much more aggressive and direct role in politics. Powell was following the Milton Friedman argument that it was time for big business to focus on the bottom line; it was time to fight for capitalism. Powell proposed waging the war on four fronts: academia, the media, the legal system, and politics.

The memo influenced, for example, the creation of new think tanks such as the Heritage Foundation, the Manhattan Institute, and other powerful organizations. As Jane Mayer wrote, the Powell Memo “electrified the Right, prompting a new breed of wealthy ultraconservatives to weaponize their philanthropic giving in order to fight a multifront war of influence over American political thought.”

The venerable National Association of Manufacturers moved its offices from New York City to Washington. Its CEO noted: “The relationship of business with business is no longer so important as the interrelationship of business with government.” The number of corporations with public offices in Washington grew from 100 in 1968 to over 500 in 1978. In 1971, only 175 firms had registered lobbyists in Washington; by 1982, nearly 2,500 did.

When it comes to lobbying, money is the weapon of choice. It looms over the political landscape like the Matterhorn.  The number of corporate political action committees (PACs) increased from under 300 in 1971 to over 1,400 by the middle of 1980.  The money they spread around gave lobbyists the clout they needed.  The growth of super PACs and lobbyists ensured that any piece of relevant regulation would be watered down, first in Congress and then during implementation.

The Powell memo galvanized Corporate America and enlarged the influence of big business over the political landscape.  It encouraged business to play a more active role in American politics. Corporate America and the 1 percenters got the memo.

Revisiting the tragedy of the commons

During the 1990s, the term paradigm became increasingly fashionable as an intellectually upscale replacement for the traditional and somewhat shopworn term model. But decanting this old wine into new bottles can still leave a bad taste in our mouths if we define a paradigm in too simplistic a manner.

Dictionaries define “paradigm” as a model or intellectual framework that seeks to explain some phenomenon in a clear and simple manner. A relevant example for our times is Garrett Hardin’s Tragedy of the Commons. In this paradigm there is a common pasture in which local farmers can freely graze their cattle. Needless to say, each farmer will want to graze as many cattle as they can on the common because each cow, they add will provide them with a marginal economic benefit at no additional cost. So, all the farmers continue adding more cows.

This works only so long as the total number of grazing cows remains within the carrying capacity of the commons. Once that limit is exceeded, the viability of the commons for grazing begins to break down as the grass wears out and provides less nourishment per cow.

So, each farmer finds that his or her herd of cattle is producing less milk for them to sell. Under the circumstances, their only rational response is to increase the size of the herd. Which means adding still more cows to the over utilized commons. When all the local farmers keep doing this, the result can only be an increasingly dysfunctional commons.

In Hardin’s words: “Each man is locked into a system that compels him to increase his herd without limit—in a world that is limited. Ruin is the destination towards which all men rush, each pursing his own best interest in a society that believes in the freedom of the commons.”

By way of a solution, some people may propose expanding the commons if it is no longer large enough to support existing herds and to pay for it out of tax revenues so users of the commons can continue to obtain its benefits without directly paying for them. Such people believe the purpose of the commons is to serve the community’s economy, its size should be tailored to the demands of that economy as it grows.

Others insist that the real problem is not too little grass, but too much demand. They argue that the time has come to “think green” about the future of public commons in the context of the overall environment. People should begin shifting to more sustainable ways of managing their communities so they can phase down grazing and turn the commons into public parks.

Then there are those enamored of the stained-glass verities of undergraduate microeconomic theory. They suggest that the time has come to start charging farmers user fees—so much per hour of grazing time for each cow. In this way, each user will pay for the benefits received from the public facility in accordance with how much they use it.

By using a sensible pricing system to ration the use of these scare resources, each farmer will be motivated to make the most efficient use of it. Meanwhile, the revenue from user fees can cover the cost of expanding the public commons when necessary rather than the government taxing everyone to pay for this.

Hardin’s grazing pasture paradigm appears to go a long way towards answering socio-economic questions about the inevitable tendency towards over-use of public goods when they are perceived to be “free”. It explains why this tendency leads to a condition where supply can never really catch up with demand. It describes how the widespread availability of free public goods can significantly influence the underlying economics of many private activities. And it demonstrates the ease with which an entire society can become locked into behavioral patterns that may turn out to be “anti-social” in the long run.

It’s your call. After all, Rorschach tests are not graded.