The Business-Government Alliance

Email Print

published in Inquiry,
January 1983.

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

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

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

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

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

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

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

For his major
problem is excessive caution and moderation. McQuaid's revisionism
is wishy-washy, and his treatment of such corporate liberal businessmen
as Gerard Swope and Averell Harriman is highly ambivalent. He
can't seem to make up his mind whether these big businessmen were
New Dealers for economic gain or out of "intelligence"
and "realism." Too often McQuaid is seduced by the latter
solution. But falling back on their alleged intelligence and realism
prevents him from penetrating surface appearances and investigating
their economic and financial ties to the corporate welfare-warfare
state they collaborated in creating.

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

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

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

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

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


  1. 3
    vols., Holmes and Meier, 1980. The huge Burch work, sorely neglected
    by historians and studded with footnotes as long as the text,
    serves as a fascinating reference work, rather than a book
    that can be read through.

N. Rothbard
(1926–1995) was the author of Man,
Economy, and State
, Conceived
in Liberty
, What
Has Government Done to Our Money
, For
a New Liberty
, The
Case Against the Fed
, and many
other books and articles
. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report

Rothbard Archives

Email Print