Authors: Kurt Andersen
The essay is a cri de coeur for cold-heartedness. Friedman had made the same basic case in his 1962 book
Capitalism and Freedom,
but like Barry Goldwater, it was a bit ahead of its time. By 1970 Friedman had concentrated and supercharged his arguments, moved to high dudgeon by what had happened in the late 1960s—“the present climate of opinion, with its widespread aversion to ‘capitalism,’ ‘profits,’ the ‘soulless corporation’ and so on.” He viciously derided the squishy-minded business executives and owners and shareholders who’d come to believe—that is,
to believe—that they had any duty to decency or virtue or anything but making money and (grudgingly) obeying the law.
He used the phrase “social responsibilities” in scare quotes a dozen times and did the same with “social conscience” and even “social.” Any hypothetical “major employer in a small community” who spent money “providing amenities to that community” was simply indulging in “hypocritical window-dressing,” tactics “approaching fraud”—and indeed, Friedman had “admiration” for miserly owners and managers “who disdain such tactics.” The “influential and prestigious businessmen,” bleeding hearts “who talk this way” about corporate responsibility—responsibility “for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers”—were indulging “a suicidal impulse” by “preaching pure and unadulterated socialism.” They were “unwitting puppets of the intellectual forces that have been undermining the basis of a free society.”
In 1970 it was stunning for such a figure—leader of the so-called Chicago School of economics,
columnist, respected if not yet quite mainstream—to deliver such a ferocious polemic at length, particularly in the
A Christmas Carol,
the businessman Scrooge is redeemed only when he abandons his narrowly profit-mad view of life—and for a century his name had been a synonym for nasty, callous miserliness. In
It’s a Wonderful Life,
the businessman Mr. Potter is the evil, irredeemable, un-American villain. Here was Milton Friedman telling businesspeople they’d been misled by the liberal elite, that Scrooge and Potter were heroes they ought to emulate proudly.
Although Friedman was reacting
the 1960s surge in support for social and economic fairness, and wanted the political economy to go back in time, he did so
in the new spirit of the 1960s
. With ultra-individualism freshly flowing in all directions,
wanted to feel free to do their own thing, including selfish businessmen angry about the intensified suspicion of business. For those readers, seeing the righteous candor and militancy of the Friedman Doctrine in
The New York
a year after Woodstock was thrilling, liberating.
Capitalists of the world, unite! You have nothing to lose but your chains—chains of “social conscience,” chains of self-loathing guilt!
I don’t mean this as a joke, or poetically. Two ascendant countercultures, the hippies and the economic libertarians, shared a brazen prime directive:
If it feels good do it, follow your bliss, find your own truth.
Of course, profits are a prime goal for any business enterprise, as well as the goal most easily measured. When push really comes to shove, business owners’ need to make profit will inevitably count for more than any duty they feel to employees, customers, or society. But in the real world, where humans operate businesses somewhere in the large range between break-even and maximum profitability, they always have leeway to be unnecessarily and uneconomically fair, trustworthy, decent, and responsible—that is, to take slightly smaller profit margins for the sake of good values and virtuous norms. Friedman, and fellow free-market purists ever since, constantly refer to Adam Smith, who came up with the “invisible hand” idea in the 1700s. But they distort him. Smith also argued in favor of sensible government intervention to improve and optimize free markets.
Within a few years of the Friedman Doctrine, elite executives-in-training internalized and felt free to espouse it. Asked in a class in the late 1970s at Harvard Business School about a hypothetical CEO who discovers his product could kill customers, young Jeff Skilling said he “would keep making and selling the product. My job as a businessman is to be a profit center and to maximize return to the shareholders. It’s the government’s job to step in if a product is dangerous.” (Two decades later as CEO of the big energy company Enron, Skilling was the main organizer of the vast financial fraud that destroyed the company and for which he served twelve years in prison.)
As for the government protecting the public from profit-mad companies, Friedman’s doctrine included a heads-I-win-tails-you-lose catch-22. Any virtuous act by businesses beyond what the government legally requires is simpering folly, yet according to him and the economic right, almost any government regulation of business for the public good is oppressive “statism,” the beginning of the end of freedom and democracy. Friedman’s was an extreme capitalism, unhindered by any human feeling or moral compunction—or by the public interventions and guardrails with which we’d improved it since the nineteenth century. His vision of a free-market system was a
reductio ad absurdum
purification of our well-tempered and actually successful one, a fundamentalist capitalism.
Just as Friedman was preparing to throw down his gauntlet in that summer of 1970, an Establishment éminence grise not prone to hysteria also began raising alarms about rampant anticapitalist sentiment. Lewis Powell was a top lawyer in Virginia, a former president of the American Bar Association who served on many corporate boards. Among his clients were Philip Morris, the largest cigarette company, as well as the main tobacco industry trade group—whose products the federal government had recently declared carcinogenic and for good measure, in the spring of 1970, had banned from being advertised any longer on television. At a big annual Southern business conference that summer, Powell delivered a keynote speech in which he warned that “revolution could engulf this country” because the U.S. political economy was “under broad and virulent attack” by “white and black radicals” whose “heroes are Fidel Castro, Che Guevara, Ho Chi-minh and Mao Tse-tung” and who behave like “Hitler and his storm troopers.”
In his speech, Powell said that because “the media and intellectual communities of our society [have] built up these extremists into national figures of prominence, power and even adulation,” made them “lionized on the campus, in the theater and arts, in the national magazines and on television,” more and more young Americans, “often from our finest homes, [are] vulnerable to radical ‘mind-blowing’ ” and now believed “the destructive criticism…that our free enterprise system is ‘rotten’ and that somehow we have become a wholly selfish, materialistic, racist and repressive society.” And concerning “this incongruous support of revolution,” he quoted none other than Milton Friedman and his warnings about the media and intellectual establishments exposing “the foundations of our free society” to “wide-ranging and powerful attack…by misguided individuals parroting one another and unwittingly serving ends they would never intentionally promote.”
But that was just to be a first draft. A year later Powell was still alarmed, still fuming, and wrote a longer, more elaborate manifesto that eventually became widely known. One of his neighbors in Richmond, a retail-chain president and local politician, was a national officer of the U.S. Chamber of Commerce, the country’s main organization of businesspeople. Powell’s friend pushed him to take the next step—to draft a national counterrevolutionary strategy and plan of action, like he’d done as a colonel in Air Force intelligence planning D-Day. For the thirty-four-page memorandum he submitted to the chamber’s leadership and staff, marked
and entitled “Attack on American Free Enterprise System,” Powell borrowed heavily from his speech the year before, which he’d called “The Attack on American Institutions.”
He reused the “system is under broad attack” meme as well as the Milton Friedman quote and added his own version of the Friedman Doctrine’s class-suicide trope. “One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in, its own destruction.” That is, why were millionaire-funded universities and rich publishers and owners of TV network news divisions (that aired “the most insidious type of criticism of the enterprise system” providing the venues for attacks on business? The enemies he’d warned about before, Che and Mao, were replaced in this memo by celebrity traitors within the American elite. Nader, “a legend in his own time and an idol of millions of Americans,” was “the single most effective antagonist of American business,” and “Yale Professor Charles Reich in his widely publicized book ‘The Greening of America’ ” had made a “frontal assault on the free enterprise system.” Throughout academia and the news media were “those who propagandize against the system, seeking insidiously and constantly to sabotage it,” along with their fellow travelers in government who have “large authority over the business system they do not believe in.” He went further than he had the year before in his speech, now suggesting that leftist government bureaucrats were intentionally pursuing anticapitalist ends.
It was the red scare of the 1940s and ’50s all over again—except this time the right’s problem was that the general public
scared at all of crypto-socialism, now galloping instead of merely creeping. Powell encouraged his readers to feel like victims—“the American business executive is truly the ‘forgotten man.’ ” But he also told them they were pathetic: “The painfully sad truth is that…the boards of directors and the top executives of corporations great and small and business organizations…have responded—if at all—by appeasement, ineptitude and ignoring the problem.”
It was an
problem, with the “survival of what we call the free enterprise system” in doubt. Polite American “businessmen have not been trained or equipped to conduct guerrilla warfare” against such subversion, but now they needed to mobilize for a massive counterinsurgency, a project requiring “long-range planning and implementation…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….This is a long road and not one for the fainthearted.”
Powell proposed waging this war on four fronts—in academia, the media, politics, and the legal system—and doing so with unheard-of budgets and ferocity. For the first two fronts, they would need to find and fund scholars and other intellectuals “who do believe in the system…who will do the thinking, the analysis, the writing and the speaking” to effect “gradual change in public opinion.” Political power needed to “be assiduously cultivated…[and] used aggressively…without embarrassment and without the reluctance which has been so characteristic of American business.” In order to tilt the game decisively in the direction of capital, capitalists needed to copy the ACLU, “labor unions, civil rights groups and now the public interest law firms”—that is, create judicial activism in reverse. “The judiciary may be the most important instrument for social, economic and political change,” Powell advised. “This is a vast area of opportunity” if “business is willing to provide the funds”—and indeed the whole war would “require far more generous financial support from American corporations than” any such effort “ever received in the past.”
Finally, the courtly and decorous Powell advised: No more Mr. Nice Guy. From now on, no businessmen should be “tolerant…of those who attack his corporation and the system.” Rather, they should “respond in kind,” engage in “confrontation politics….There should be no hesitation to attack the Naders…and others who openly seek destruction of the system” nor “to penalize politically” any and all opponents.
Three months after Powell submitted his master plan to the U.S. Chamber of Commerce, he was nominated by Nixon and quickly confirmed as a U.S. Supreme Court justice. A year later, that made his secret memo newsworthy enough to be leaked to a reporter. But it didn’t become a big story. Justice Powell had been privately intemperate before he was on the Court…so? The economic mainstream was still flowing toward the left, and libertarians were still powerless cranks. Nobody was alarmed by old man Powell’s alarmist call to arms.
But one of the effects of that leak was that the Chamber of Commerce in 1972 released the entire confidential Powell Memo to its entire membership. Which meant that people in business and on the wealthy right, who’d regarded Friedman’s
essay as a kind of motivational St. Crispin’s Day speech delivered by their Henry V, now had an actual battle plan from an experienced and distinguished general, their Duke of Richmond. According to the
journalist Jane Mayer in her important 2016 book
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.” Among the electrified were the youngish industrial heir Richard Mellon Scaife, who during the 1960s had included Powell in a conservative discussion group—okay,
—plotting to keep America from moving too far left economically. The rich young right-winger Charles Koch, who’d recently taken over his family oil company in Kansas, was also a close reader of the memo.
As I’ve said, I’m disinclined to explain history or current events in terms of conspiracies, neat just-so stories that impute too much genius and power to conspirators. If Lewis Powell had never written his memo or if it had never been widely distributed, the right’s campaign to reconstruct our political economy might have proceeded more or less as it did. Around the same time, right-wingers in Washington had started talking about the need to create more militant and effective institutions.