Reich: The worst memo in American history came from Lewis Powell
Senator Joe Manchin has been Congress’ largest recipient of money from natural gas pipeline companies. He just reciprocated by gaining Senate support for the Mountain Valley pipeline in West Virginia and expedited approval for pipelines nationwide. Senator Kyrsten Sinema is among Congress’s largest recipients of money from the private-equity industry. She just reciprocated by preserving private-equity’s tax loophole in the Inflation Reduction Act.
We almost take for granted big corporate money in American politics. But it started with the Powell memo.
In 1971, the U.S. Chamber of Commerce asked Lewis Powell, then an attorney in Richmond, Virginia (and future Supreme Court justice) to report on the political activities of the Left.
Richard Nixon was still president, but the Chamber (along with some prominent Republicans like Powell) worried about the Left’s effects on “free enterprise.” Powell’s memo — distributed widely to Chamber members — argued that the American economic system was “under broad attack” from consumer, labor, and environmental groups. In reality, these groups were doing nothing more than enforcing the implicit social contract that had emerged at the end of World War II — ensuring that corporations were responsive to all their stakeholders, not just their shareholders but also their workers, their consumers, and the environment on which everyone depends.
But Powell and the Chamber saw it differently. Powell urged businesses to mobilize 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.”
He stressed that the critical ingredients for success were organization and funding.
“Strength lies in … the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.”
On Aug. 23, 1971, the Chamber distributed Powell’s memo to leading CEOs, large businesses, and trade associations. It had exactly the impact the Chamber sought — galvanizing corporate America into action and releasing a tidal wave of corporate money into American politics. An entire corporate-political industry was born — including tens of thousands of corporate lobbyists, lawyers, political operatives, and public relations flaks. Within a few decades, big corporations would become the largest political force in Washington and most state capitals.
Washington went from being a rather sleepy if not seedy town to the glittering center of corporate America — replete with elegant office buildings, fancy restaurants, pricy bistros, five-star hotels, conference centers, beautiful townhouses, and a booming real estate market that pushed Washington’s poor out to the margins of the district and made two of Washington’s surrounding counties among the wealthiest in the nation.
I saw it and lived it. In 1976, I began working at the Federal Trade Commission. Jimmy Carter had appointed consumer advocates to some regulatory positions (several of them influenced by Ralph Nader). My boss at the FTC was Michael Pertschuk, an energetic and charismatic chairman. Joan Claybrook chaired the National Highway Traffic Safety Commission. Other Naderites were spread throughout the Carter administration. All were ready to battle big corporations that for years had been deluding or injuring consumers.
Yet almost everything we initiated at the FTC, and just about everything undertaken by these activists elsewhere in the administration, was met by unexpectedly fierce political resistance from Congress. At one point, when the FTC began examining advertising directed at children, Congress stopped funding the FTC altogether, shutting it down for weeks. I was dumbfounded. What had happened?
In three words: the Powell memo.
The number of corporations with public affairs offices in Washington had ballooned from 100 in 1968 to more than 500 by the time I joined the FTC in 1976. In 1971, only 175 firms had registered lobbyists in the nation’s capital. By 1982, nearly 2,500 had them. The number of corporate Political Action Committees mushroomed from less than 300 in 1976 to more than 1,200 by 1980. Between 1974 and 1980, the Chamber of Commerce doubled its membership. (And remember, this was still 30 years before the Supreme Court’s infamous Citizens United decision.)
It didn’t matter whether a Democrat or Republican occupied the White House. Even after George H.W. Bush became president, the corporate-political industry continued to balloon.
By the 1990s, when I was secretary of labor, corporations employed some 61,000 people to lobby for them, including registered lobbyists and lawyers. That came to more than 100 lobbyists for each member of Congress. Corporate money also supported platoons of lawyers who represented corporations and the very rich in court, often outgunning the Justice Department and state attorneys general.
Most importantly, corporations began inundating politicians with money for their campaigns. Between the late 1970s and the late 1980s, corporate Political Action Committees increased their expenditures on congressional races nearly fivefold.
Labor union PAC spending rose only about half as fast. By the 2106 campaign cycle, corporations and Wall Street contributed $34 for every $1 donated by labor unions and all public interest organizations combined.
Wealthy individuals also accounted for a growing share. In 1980, the richest one-hundredth of 1% of Americans provided 10% of contributions to federal elections. By 2012, they provided 40%.
Although Republicans mostly benefited from a few large donors and Democrats from a much larger number of small donors (more on this to come), both political parties transformed themselves from state and local organizations that channeled the views of members upward into giant fundraising machines that sucked in money from the top.
Never in the history of American politics has one document — the Powell memo — had such nefarious consequences.
Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley and the author of “The System: Who Rigged It, How We Fix It.” Read more from Robert Reich at https://robertreich.substack.com/