Chapter 3

The Jim Crow Welfare State and the Corporate Revolution

Postwar American Capitalism

The laws or so-called laws of economics probably last only as long as the desires and realities of the period they reflect or interpret more or less faithfully. A new age brings its own “laws.”

—Fernand Braudel, Civilization and Capitalism, 15th–18th Century, Volume II: The Wheels of Commerce (1979)

The world of finance is now completely different from that of 1970. Money and flows of currency, commercial paper, bonds, and equities between the countries of the world now tie us all together in a manner that would have been impossible to foresee even 20 years ago. In this sense the economic system of the years since 1973 is quite different from that of the 1960s. Yet the seeds of the global financial system were sown in the 1950s and 1960s.

—Michael J. Webber and David L. Rigby, The Golden Age Illusion (1996)

Over a hundred-year stretch, from the 1860s through the 1970s, corporations learned the art of stability, assuring the longevity of businesses and increasing the number of employed. The free market did not effect this stabilizing change; rather, the way businesses were internally organized played a more significant role.

—Richard Sennett, The Culture of the New Capitalism (2006)

A considerable ingredient paving the road to neoliberalism was public disillusionment with large obtrusive institutions such as government, labor, and corporations in the 1970s.¹ As the austerity of recession and deindustrialization set in, expanding transnational corporate entities became targets of populist rage against a globalizing world and a withering American dream. In Hollywood, populist contempt toward government and big business found expression in movies such as Jaws (1975) and Nashville (1975).² In the film Network (1976), the infamous television newscast character, Howard Beale, epitomized this burst of frustration, as he condemned the general decay of the United States in the 1970s: “I’m mad as hell, and I’m not going to take this anymore!”³ However, a more telling speech later in the film articulated animosity toward the ever-growing power of multinational corporations/conglomerates and a globalized economy no longer benefiting the working and middle classes. On his nightly show, The Mad Prophet of the Airwaves, Beale turned his anger toward globalization, taking aim at multinational conglomerates (specifically the fictional company in Network, CCA—the Communications Corporation of America) and the fears of “foreign” ownership of American business:

We all know that the Arabs control $16 billion of this country. They own a chunk of Fifth Avenue, 20 downtown pieces of Boston, a part of the Port of New Orleans, an industrial park in Salt Lake City, they own big hunks of the Atlanta Hilton, the Arizona Land and Cattle Company, part of a bank of California, the bank of the Commonwealth in Detroit, they control Aramco, so, that puts them into Exxon, Texaco, and Mobil oil. They’re all over New Jersey, Louisville, St. Louis, Missouri. And that’s only what we know about. There’s a hell of a lot more we don’t know about. Because all of those Arab petrodollars are washed through Switzerland and Canada and the biggest banks in this country. For example, what we don’t know about is this CCA deal and all the other CCA deals. Right now, the Arabs have screwed us out of enough American dollars to come right back and with our own money to buy General Motors, IBM, ITT, AT&T, DuPont, US Steel, and 20 other American companies.⁴

The economic populism glimpsed in Network highlighted the growing omnipresence of multinational conglomerates and finance leading up to the 1970s—as they lit the path to the neoliberal era.

The history of neoliberalism is more than just an exploration of the ideological rhetoric and financial circuits of neoliberal thinkers. A conducive cultural-business environment needed to materialize for neoliberal ideas and policies to be taken seriously and implemented. In short, supply and demand: a moment of conjuncture needed to arise, when a vacuum of ideas could be filled by neoliberals, whose program could be implemented into policies and displace the previously dominant economic system. Two vital players helping to foster this vacuum included multinational corporations (MNCs) and the trend toward conglomeration, as well as the reawakening of finance after the Great Depression. These organizations emerged as the two defining capitalist institutions dominating the neoliberal era after the 1970s.

The economic dislocations of the Vietnam War, increased competition with Japan and Europe, and the oil crisis and recessions of the 1970s opened the space of conjuncture where the practices of MNCs and finance intersected with the ideas of the decades-old project of neoliberalism, pressing together the economic-political theory of Milton Friedman and Friedrich August von Hayek with the material needs of transnational capitalism. Developing through the welfare state (and its European extension via the Marshall Plan), Geoffrey Jones notes, MNCs and finance began to structure “a new global economy” in the decades after World War II, but their efforts only “came to fruition during the 1980s and 1990s.”⁵ Building on the various techniques and strategies multinationals and finance developed in the postwar years to navigate the welfare state, by the 1970s the resistance against regulations—deemed federal intrusion into the rights of business—coincided with the conservative culture war rippling through American society after the 1960s. This conjuncture of institutional, economic, and cultural processes laid the groundwork for the rise of neoliberalism.

In the longue durée of economic change, this conjuncture represented an end to a cycle of accumulation driven by the rise and expansion of American capitalism—what Julian Go suggests was a similar feature of decline matched by Britain a century before.⁶ Giovanni Arrighi asserts that since the 1400s, there have been four cycles of accumulation in the history of capitalism. The first cycle of accumulation arose through the combination of the Italian city-state of Genoa and the Iberian Peninsula. Barcelona’s primary banks collapsed in the early 1380s, opening up opportunity for Genoese merchant bankers to step in and “become the most important financiers in the Iberian region.”⁷ The blending of the feudal aristocracy with the Genoese bourgeoisie (“which specialized in the buying and selling of commodities and in the pursuit of profit”) initiated the birth of capitalism.⁸ As the Spanish Empire struggled against its Dutch rebels to the north, the center of capital slowly shifted to Antwerp, as Genoese finance turned New World silver from Spain into “gold and other ‘good money’ delivered in Antwerp near the theater of operations.”⁹ Although beneficial to the Genoese, it also led to their eclipse by the Dutch. This second cycle of capital accumulation in the Netherlands led to the rise of mercantile capitalism (including joint-stock companies) in the 1600s and the beginning of modern capitalism.¹⁰ The third cycle of accumulation unfolded as capital moved from its center in the Netherlands (between the 1600s and 1700s) over to the British—with London becoming the new center of capital. In all these cases, the rising cycle was characterized by production and trade while the descending phase switched to an emphasis on finance as investments in production failed to secure acceptable profits. As the fourth cycle of accumulation arose in the United States, investment capital found a critical outlet in production and consumption, as internal markets were soaked in productive output.¹¹ This dynamic in the United States—something the British and Dutch cycles could not achieve—existed because of the territorial expansion related to settler colonial policies, the fantastic wealth accumulated through the institution of slavery and cotton, and the massive amount of immigration into the United States that both provided labor to develop the bountiful resources of North America and acted as an outlet for the consumption of manufactured products. Robert J. Gordon describes this takeoff as an “economic revolution,” leading to an ever-increasing standard of living that began slowing by the end of the 1960s.¹² Beginning with businesses related to railroads, oil, and steel, the modern corporation proved to be the most efficient form for the organization of capital. As Arrighi notes, “The integration of the processes of mass production with those of mass distribution within a single organization gave rise to a new kind of capitalist enterprise. Having internalized a whole sequence of subprocesses of production and exchange from the procurement of primary inputs to the disposal of final outputs, this new kind of capitalist enterprise was in a position to subject the costs, risks, and uncertainties involved in moving goods through that sequence to the economizing logic of administrative action and long-term corporate planning.”¹³ The U.S. cycle of accumulation eventually evolved from its nineteenth- and twentieth-century production phase into a financial phase after the 1960s, setting the stage for the conjuncture of MNCs, finance, the New Right, the culture war, and neoliberal economists to usher in the era of neoliberalism.

To help guide us through the postwar history of the business environment, this chapter leans on the voice of Business Week magazine (while also setting up a more focused exploration of the weekly journal in chapter 4). Business Week’s sets of commentaries and observations offer a glimpse of postwar economics and culture across decades: the evolution of business practices, the negotiation of government regulations, and the shifting language of business leaders. In defense of its immediate constituencies’ political and economic prerogatives—and swimming within a similar field of argument as Fortune, Forbes, and The Economist—Business Week offered a central forum for the discussion of capitalism. Sociologist Herbert J. Gans describes the political economy of weekly news journals: “News is about the economic, political, social, and cultural hierarchies we call nation and society. For the most part, the news reports on those at or near the top of the hierarchies and on those, particularly at the bottom, who threaten them, to an audience, most of whom are located in the vast middle range between top and bottom.”¹⁴ Business Week’s value as a significant prism lies in its ability to give “voice” to the workings of capital on a week-by-week basis. The writers of Business Week—sometimes anonymous, sometimes with bylines—operated within the logic of American business, interpreting data and trends through an inherited set of common sense related to business, economics, and most often unacknowledged, their racial-gendered position in society. After the 1960s, Business Week helped foster the post-Keynesian consensus to establish a new path out of the cultural and economic issues of the 1970s.

First published in 1929 by McGraw-Hill, Business Week was explicitly created to interpret the events affecting the business world.¹⁵ For decades, the pages of Business Week acted as a bellwether for the shift in economic patterns and ideas and as an exemplary site for business culture to manifest. In a 1974 survey of what U.S. leaders read, Carol H. Weiss discovered that along with Fortune magazine, Business Week was “read by almost all the economic managers and by at least half of the members of every other sector” (sectors included industrial executives, owners of large wealth, labor union presidents, government representatives, civil servants, political party officials, and mass media executives and professionals).¹⁶ Matching the demographic of its subject matter, the magazine’s perspective was an exceedingly white male reading space, seen in both its features and advertisements.¹⁷

Trade journals are important sources for outlining the intricacies of culture because of their detailed and specialized breakdowns—from representations to economic data—as well as interpretations of variously tracked commodities and trends. In short, they are sources of knowledge creation tied to economics. According to Glenn C. Altschuler and David I. Grossvogel, in reference to their work on the role of TV Guide in U.S. life, journals act as cultural mediators helping to shape and “define the possibilities and limitations” of their particular subject.¹⁸ In terms of authorship, journals offer a spectrum of opinion determined by the editorship. Because of their intimacy with the wider outlines of capitalism, including downturns and adjustments, journals like Business Week also perform the service of fostering the dialectical processes connecting capitalism to culture, and culture to capitalism. Business Week made sense of their readers’ world, tying familiar sentiments to contemporary events, while explaining emergent ideas as new circumstances arose in the business world. Business Week is an important site for understanding how economics evolved across the twentieth century, as the magazine’s engagement with these social changes reshaped and regenerated deep cultural worldviews.

Fresh off the production stimulus of World War II, business in the postwar years discovered the value of the interventionist welfare state as it created a stable foundation to rebuild the United States after the Great Depression. As business ventured abroad, capital found ways to adapt to the constraints of the welfare state, essentially constructing an alternative transnational business world through adept negotiations of the rules of the welfare state’s mixed economy. However, with economic growth slowing in the 1970s, business organized in a similar manner as the civil rights movement, using the language of “rights” to free business from postwar regulations. In this conjuncture, the needs of business, the forty-year-old project of neoliberalism, and the escalating culture war converged. The ferocity of the 1970s recession helped to shape the perfect storm needed by neoliberals to transition the United States away from the Jim Crow welfare state and reform the economic common sense of the nation.

Although more visible in the 1970s, American business had long negotiated its way through the boundaries and barricades of national and global capitalism. In a century filled with Marxist revolutions and anti-colonial liberationist movements, some saw the successes of transnational corporations to be more revolutionary. Adolf A. Berle presciently noted this underappreciated nature of American MNCs:

The fact appears to be that from and after World War I the entire world was in revolution, and the base of that revolution was technical far more than it was social. Changes in human life and habits, modification of human institutions, and expansion of human horizons occurred everywhere. The philosophical and scientific discoveries of the nineteenth century were put to work in the twentieth, and whole civilizations changed as a result. The Russian revolution was nominally based on Communist dogma; but its significant struggle was to find some instrument by which a vast backward country could be mauled into industrialization. The capitalist revolution in which the United States was the leader found apter, more efficient and more flexible means through collectivizing capital in corporations.… Elsewhere the Marxist state seemed a brutal, blunt, and fumbling instrument; capitalism was evolving its own instruments, and accomplishing the twentieth-century revolution with infinitely more humanity and efficiency. The fundamental change was technical: the application to the everyday life of hundreds of millions of people of newly developed methods of production. Economics necessarily developed with that change; politics was modified by the economics; the social theory has yet to be written.… In this aspect, it is justifiable to consider the American corporation not as a business device but as a social institution in the context of a revolutionary century.¹⁹

Written in 1954, Berle’s conception of the capitalist revolution and its influence on politics strikes an earnest chord for an optimistic future. An important driving force for this revolution was the Democratic Party’s “final abandonment of the party’s dominant anti-monopoly tradition”—monopolies would be regulated, not eliminated.²⁰ As a core member of Franklin D. Roosevelt’s “brain trust,” Berle epitomized the liberal consensus tying together business, labor, and government in the New Deal–derived Jim Crow welfare state—including coauthoring of The Modern Corporation and Private Property (1932).²¹ Berle’s reflections, however, also hint at a broader potential for MNCs. From the perspective of the twenty-first century, we might ask of Berle: what happens when the revolution outpaces the consensus, when labor and government move from economic partners to economic obstacles—or enemies?

At the conclusion of World War II, Americans feared sinking back into economic depression, continued to distrust big business, and supported unions.²² A tentative consensus forged during the war balanced the needs of business with the needs of the American people who, after fighting for almost four years, continued to vote for legislators supporting the Keynesian-inspired welfare state constructed through the experience of the New Deal and World War II. Wartime nationalism helped justify the welfare state, with many in the business community supporting its premise of a mixed economy where government regulation offered the promise of stability.²³ Luckily for business, the Red Scare environment of the Cold War policed the more radical regulatory and redistributionist aspects of the welfare state.²⁴ The unprecedented wave of strikes across the nation in the year after August 1945 appeared to justify the Red Scare paranoia—workers were angry over “wartime sacrifices,” “reverses in wages and working conditions,” and “pursued policies designed to increase their control over production and to combat the centralized power of the corporate-liberal alliance.”²⁵ Accusations of “communism,” “socialism,” and “collectivism” further disciplined the expansion of the welfare state, while helping to eradicate the left-wing elements of the labor movement, government, Hollywood, and other influential sectors of society.²⁶ The Taft-Hartley Act (1947) would severely weaken the power of labor, damaging “union solidarity by banning secondary picketing and reinforcing state right-to-work laws,” as well as outlawing “members of the Communist Party” from union activities.²⁷ The mold was cast for a moderate mixed economy, reformed for both business and labor.

American business entered a golden age as they took advantage of the regulated markets shaping the 1950s economic boom. Put into place during the crisis of the 1930s, the logic of “controlled” capitalism, writes Harold James, resulted in a postwar consensus view “that the large short-term capital flows of the 1920s and 1930s as mediated through the financial system had led to disaster.”²⁸ For the mixed economy, capital movements were channeled through “the official sector, rather than with banks and bond finance, and then the flows became increasingly privatized.”²⁹ This regulation sought to control and direct, rather than succumb to unstable speculation. Writing in the early 1960s, Harold G. Vatter described this Keynesian feature of the postwar world as follows:

The guarantee of growth, which was evolving as a corollary policy of the Federal government during the 1950’s, implied the conversion of mere intervention into participation. The commitment to guarantee both stability and growth in an economy in which private, profit-oriented business firms made the basic production decisions meant that the profitability of private business, in the aggregate, had to be guaranteed—not just agricultural business, but large corporate business in general. This was not clearly understood in 1946, and indeed it is by no means fully appreciated even today. However, the economy was more thoroughly “mixed” by 1960 than was envisioned when the Employment Act was passed.³⁰

At the time of Vatter’s writing in 1963, he noted the public’s democratic desire for wealth redistribution: “a wide dispersion in the control of the nation’s tangible wealth is a requisite for the maintenance of a healthy private enterprise economy.”³¹ For the working- and middle-class beneficiaries of the welfare state, the ideas of neoliberalism developing concurrently across the postwar years appeared to be antithetical to their vision of the American dream—a throwback to the instability of the teens and twenties which led to the Depression. A shaky consensus existed, nonetheless, balancing the needs of an anxious, Cold War–disciplined middle class against an empowered labor movement caught in a paradox where the very language of class conflict—a crucial source of unity for unions—led to accusations of “communism,” political marginalization, and sometimes criminalization.³² In addition, the specter of social equality slowly rose from the margins in the form of the civil rights movement.

Postwar wealth trickled-down to the white working and middle classes through the demand-side Keynesian Jim Crow welfare state, particularly through the Serviceman’s Readjustment Act of 1944, or the GI Bill. A vital element contributing to the support of the welfare state by postwar Americans included the dramatic growth of “real disposable income per American.”³³ While the 1950s saw about a 13 percent rise in real disposable income (“after subtracting for inflation and most taxes”), between 1965 and 1972 this number increased, “on an average, about 3 percent per year, or 24 percent over the seven years.”³⁴ Consumerism formed the glue holding together the consensus—labor shelved its language of class, corporations negotiated and accepted government regulations, and many white Americans started down the path of regulated-redistributive prosperity. MNCs proved to be the most adept organizations for navigating this new American-led global system unfolding after the war, as they enjoyed a stable economic and political environment conducive to expansion overseas.

The era of New Deal–federal intervention proved ephemeral, however, for the newly emerging prosperity for working- and middle-class Americans. It was, asserts Jefferson Cowie and Nick Salvatore, the “long exception” in U.S. history, ending amid the uncertainty of the 1970s economic crisis.³⁵ The success of the postwar welfare state among white Americans and MNCs and finance ironically helped pave the road to the dismantling of the mixed economy and the ascension of neoliberalism. As the economic crisis of the 1970s deepened, neoliberals and conservatives proposed privatization rather than government intervention, deregulation rather than government regulation of often unstable markets. Significantly, the anti–welfare state language emphasized an active masculine response to the crisis, rather than an inactive reworking of a mixed economy increasingly characterized through the language of effeminate dependency: the socioeconomic life of the rugged individual was imagined through market competitiveness, rather than the collective New Deal–era ideas linked to notions of fairness and justness.³⁶ Although politicians and economists receive the lion’s share of credit in tilting the nation away from the welfare state and toward neoliberalism, an unsung champion of this shift was private enterprise itself, or more accurately, the MNCs, conglomerates, and the financial industry that had been steadily growing in potency and reach throughout the postwar era. Their adaptation to the regulations of the postwar United States, Europe, Japan, and other nations encouraged transnational business to develop innovative ways to navigate American-led global capitalism. These innovations eventually found kinship with the ideas of neoliberalism in the 1960s and 1970s.³⁷

The Corporation

Though precedents date back at least as early as the seventeenth- and eighteenth-century golden age of joint-stock companies, the modern corporation came of age in the mid-nineteenth century.³⁸ With the expansion of the federal government during the Civil War, many of the soon-to-be giants of big business earned large sums through wartime government contracts—an early hint at the profitability of Keynesian military spending. The modern corporation, moreover, arose within the production phase of the fourth cycle of accumulation as the United States edged its way to global economic dominance.³⁹ After the 1870s, an era of deregulated industrial capitalism operating through state and federal cooperation—the very era Friedman called “the closest to free enterprise”—led to the rise of the concentration of economic power in corporations, mergers, trusts, and Wall Street finance.⁴⁰ Violent battles between capital and labor movements characterized this era of economic expansion, spurring the rise of the populist movement as the imperial ambitions of the United States shifted from westward expansion to obtaining possessions in the Pacific Ocean in the late nineteenth and twentieth centuries.⁴¹

The revolution in management practices significantly influenced the development of the modern corporation, a practice first implemented by the far-reaching activities of railroads.⁴² Along with railroads, other corporations who were involved in “capital-intensive operations” increasingly depended on both the evolving partnership with investment stocks via Wall Street and the legal framework of “limited liability,” which protected the agents of the corporation from being “responsible for debts that exceeded the amount of their original investment.”⁴³ Due to the increased scale of industrial capitalism, this divorcing of ownership from management helped reshape the social responsibilities of corporations: business became an abstract concept, with the needs of shareholders becoming the only legal responsibility of the manager (regardless of social cost).⁴⁴ Late-nineteenth-century industrial capitalism set the frame of debate for the cultural and economic world of the twentieth century, including the struggle between the imperatives of freedom and democracy on the one hand and the rapid growth and power of industrial capitalism, big business, and concentrated wealth on the other hand.⁴⁵ Of course, the most important partner for the modern corporation was the nation-state, as the Hamiltonian federalism of the post–Civil War era enabled the financing of large infrastructure projects such as the transcontinental railroad, as well as later technological advancements through defense spending and freeway expansion (at the expense of public transportation) in the twentieth century.⁴⁶

Alongside their innovations in managing widespread activities, the railroad industry helped pioneer relationships between corporations and government, particularly the techniques for securing political power. Railroads operated at both the state level (“against agrarian politicians who believed that elected officials had not only the right but also the obligation to intervene in the workings of the economy”) and the federal level, where intervention in the economy leaned toward the interests of big business.⁴⁷ With the rise of oil, these relationships evolved even further, including new ways of organizing corporate structures transnationally and integrating the needs of American foreign policy into the oil industry.⁴⁸ These connections between corporations, Wall Street, and the legal mechanisms of the nation-state would define the dynamics of American capitalism operating within and across national boundaries through the twentieth century.⁴⁹

The multinational corporation, a term coined by New Dealer–turned–multinational corporate executive David E. Lilienthal, embodied the economic and bureaucratic bridge tying together the global economy with the domestic, deftly navigating “business-government relations” and various “regional associations.”⁵⁰ Lilienthal theorized the MNC’s mission as an extension of the nation-state diplomat: “another facet of internationalization,” though ostensibly without the coercive baggage of nineteenth-century imperialism.⁵¹ Alfred Chandler and Bruce Mazlish define multinationals as (1) “firms that control income-generating assets in more than one country at a time”; (2) have “productive facilities in several countries on at least two continents with employees stationed worldwide and financial investments scattered across the globe”; and (3) MNCs “are not mere economic entities but part of a complex interplay of factors.”⁵² In short, multinationals shaped capital networks spanning politics and culture through their global economic ventures.

The business strategy of conglomeration complemented the multinationals’ overseas investment. Business Week noted the emergence of conglomerates in the mid-1950s, at first calling them polyglots. An article from 1956 describes a new “kind of corporation … is sprouting up with the postwar boom. Essentially they consist of a host of smaller companies tucked under one corporate umbrella. They muster a wide diversity of product lines, with no apparent logic or relation between them—and they have appeared so suddenly that businessmen still have no name for them. For want of a better name, call them polyglots.”⁵³ According to Business Week, polyglots/conglomerates arose through the large amount of cash circulating in the early postwar years, especially as a result of federal defense spending, a slightly less-regulated finance industry, and the “development of management controls and techniques for handling decentralized operations.”⁵⁴ Finally, conglomerates found it easier to negotiate around the “strict antimonopoly laws of the period”—it was legally easier to merge with an unrelated industry than to buy directly competing companies.⁵⁵

These organizations operated through a variety of industries rather than the traditional Rockefeller-inspired monopoly that created concentrated and controlled markets. This new, diversified approach aimed toward escaping “from business-cycle profit squeezes, and the development of regular income.”⁵⁶ Characterized as “a portfolio of investments rather than a unified operation,” this buying of businesses outside their immediate specialty allowed multinationals a greater economic flexibility in a rapidly changing global economy.⁵⁷ The growth of mergers and acquisitions rested on “financial practices” pioneered by conglomerates in the 1960s, anticipating the “era of financial daring” of the 1980s, and the victory of neoliberalism through Reaganomics.⁵⁸ The first wave of mergers occurred between 1949 and 1955, while by the end of the second wave, 1964 to 1968, “four fifths of all mergers were conglomerate in nature.”⁵⁹

Global markets, according to Business Week in 1963, now distinguished the normative scope for U.S. business.⁶⁰ More than this, the overseas-domestic aspect of the multinational created an internal economy for the companies. As Ray R. Eppert of Burroughs Corp. asserted, “The net result of our investing abroad is that we have grown at both ends.… That’s because our overseas subsidiaries serve as captive markets for the parent corporation.”⁶¹ “More than 80% of the U.S. parent’s $25-million in exports,” added Business Week, “goes to its own subsidiaries, mostly as parts for fabrication but also as finished machinery. Internal sales as well as total exports have nearly doubled since 1956.”⁶² Reporting on the National Industrial Conference Board’s antitrust conference in New York City in 1965, Business Week observed that mergers continued to be seen “as a technique for growth,” noting the “record 1,700 corporate consolidations last year,” which were expected to “pick up speed, if company earnings keep up their present pace.”⁶³ Market shares expanded with mergers: “100 largest manufacturing companies had grown from 23% in 1947 to 32% in 1962.”⁶⁴ Rather than the traditional monopoly, conglomerates embodied the concept of concentrations Walter Lippmann warned of in his Good Society (1938). They would also become the archetype enterprise for the neoliberal era.

Throughout this evolution of multinationals and finance, an American public increasingly became a part of this expanding world of MNCs or within the employment sectors related to their growth. This new class of managers, technicians, academics, and journalists working in large corporate organizations also raised families in spacious, newly constructed, federally subsidized white suburbs.⁶⁵ Consequently, the new middle class, particularly in the West or Sun Belt or the “gun belt” shared “a technocratic culture, an acceptance of Cold War ideology, [and] a relatively conservative politics.”⁶⁶ In the context of settler colonialism, the Sun Belt represented a new postwar ideological divide between a stagnant East and a rejuvenated West. Michael Ryan and Douglas Kellner characterized this geographic identity as “a place outside civility or urban civilization, a site associated with the male subject conceived as a private entity, the bearer of rights of property and propriety whose boundaries must be protected with violence. The exaltation of the male individual in conservative thought is always linked to nature for this reason. Nature is unconstrained.…The more ‘natural’ Sunbelt is thus a metaphor for the conservative ideal of individual freedom, the exaltation of individual rights over collective responsibility.”⁶⁷ It would take until the passage of social equality legislation, however, for the Sun Belt to begin truly championing individualism over the collective nature of the welfare state.

Exemplary of the consensus politics at the time, “conservative politics” mostly policed social boundaries related to race, gender, and sexuality—safely secured by pre-1960s federal housing policies—rather than a retreat from federal intervention. Taking advantage of the welfare state, many Americans found prosperity and opportunity through the various housing programs, infrastructure developments (e.g., the interstate freeway system), educational investments, and defense spending—all of which aided the success of big business.⁶⁸ Shaping the institutions of federal intervention, of course, was the ongoing institutional racism of de jure and de facto Jim Crow discrimination.⁶⁹ The South, the champion of free trade and states’ rights ideology, fed lustfully at the trough of defense-spending capitalism, so much so that in 1956, William Faulkner noted, “Our economy is no longer agricultural.… Our economy is the Federal Government.”⁷⁰ As the space race took hold, “southern leaders saw the space program as a conduit to a new ‘New South’ of science and technology-based enterprise,” including a flood of money toward “scientific research in universities across the South.”⁷¹ As the civil rights movement targeted postwar discriminatory policies, a shift in political allegiances occurred and destabilized the consensus supporting the regulatory state. Meanwhile, corporations successfully operating through the welfare state increasingly bristled at regulations, finding common cause with the New Right and neoliberal economists.

Postwar America: “The Long Exception”

The reconversion of the nation from wartime status to “peacetime” was largely a matter of scale, as a permanent Cold War setting helped solidify the balance between retaining the “business-government cooperation” while “strengthening the demand side of the economy” in order to increase American purchasing power.⁷² The bipartisan Employment Act of 1946 brought the long-desired concern of economic stability to the economy, realizing the dream of Rockefeller in the late 1800s—although a year later, Taft-Hartley put the brakes on further labor empowerment.⁷³ Built off the 1920s development of mass consumption, the logic of full employment included the construction of suburbs and the new industries related to this expansion. Moreover, in the age of jets, missiles, and television, technology developed exponentially. The computer both revolutionized how companies and, later, society operated, with the computer-based knowledge industry—born of federally subsidized “technological innovations”—emerging as the quintessential business of the neoliberal service economy.⁷⁴ Computers quickened the pace of change in capitalism, helping to generate what Alvin Toffler termed information overload in 1970, a concept that erupted after the big bang of the internet, the rise of big data, and what Shoshana Zuboff calls surveillance capitalism.⁷⁵

We see the success of the welfare state’s golden age through the development of corporations and the growth in wages related to the rise of productivity tied to the technological updating of machinery: increased wages equated to increased purchasing power, and a higher standard of living.⁷⁶ A crucial multiplier effect for this economic expansion came through the federal subsidization of newly constructed suburbs, resulting in “economic expansion throughout the whole economy,” including public services, infrastructure, power, sewage, water systems, education, housing, and transportation.⁷⁷ In an early retort against the postwar alarmist neoliberal rhetoric from “Professor Hayek at the University of Chicago,” Berle underlined the pervasive nature of this consensus in 1954, writing:

Few of the major segments in a community really want a regime of unlimited competition in the modern community—neither the great corporations, nor their labor, nor their suppliers. Fundamentally, they all want, not a perpetual struggle, but a steady job—the job of producing goods at a roughly predictable cost under roughly predictable conditions, so that goods can be sold in the market at a roughly predictable price. Their reasoning has a solid basis behind it. Competition between thousands of people from time to time eliminating marginal groups of inefficient producers likewise produces only marginal hardship. A struggle between giants may wreck hundreds of thousands of lives and whole communities.⁷⁸

Berle asserted that the mixed economy was “not the result of any creeping socialism,” again, taking a jab at Hayek’s “road to serfdom” warnings; “rather,” Berle writes, “it is a direct consequence of galloping capitalism.”⁷⁹

Corporations benefited immensely from this system in the 1950s, as “corporate business accounted for 57.8 per cent of all income originating in business in 1929 and had grown to 62.5 per cent in 1950 (it rose again by 1957, to 65.6).”⁸⁰ Increasingly giant corporations—what Berle (and Lippmann) called concentrates—controlled “half of all American industry.”⁸¹ By the end of the decade, the leading corporate industries were chemicals, aircraft, motor vehicles, steel, and electronics—with those industries connected to federally funded research and development making the greatest gains (80 percent of aircraft sales were bought by the federal government).⁸² Residential construction accounted for “one fifth to one fourth of aggregate gross private investment,” as the white suburbs expanded, along with jobs increasingly leaving the city.⁸³ As a part of the mixed economy, real wage growth continued to expand with productivity without impinging on profits.⁸⁴ David Harvey notes the significance of this economic system, what many have since called Fordism (named after its originator, Henry Ford): “What was special about Ford (and what ultimately separates Fordism from Taylorism), was his vision, his explicit recognition that mass production meant mass consumption, a new system of the reproduction of labour power, a new politics of labour control and management, a new aesthetics and psychology, in short, a new kind of rationalized, modernist, and populist democratic society.”⁸⁵ A dramatic rise in real disposable income defined the “age of compression,” as the share of wealth spread across the middle and working class, including an expansion of benefits: holidays, paid vacations, health insurance, and pensions.⁸⁶ This welfare state arrangement continued to be balanced on a tentative relationship between domestic labor and business at the federal level: corporations could invest abroad while promising to create and sustain the standard of living for workers at home.⁸⁷

Corporate expansion abroad relied on Pax Americana defining the post–World War II era. An anchor guiding this American-led capitalism was the Bretton Woods Agreement of July 1944, an arrangement holding the international financial system together through the creation of a gold standard tied to the U.S. dollar. Seventy percent of the world’s gold reserves were in the United States in 1947, leading to foreign businesses and governments seeking American dollars, resulting in “US control over world liquidity.”⁸⁸ As Michael J. Webber and David L. Rigby suggest, “Linking the dollar and gold was a boon to trade and the emerging postwar international financial system. Dollars could be produced more easily than gold, and thus international liquidity accelerated more rapidly than under a pure gold standard. Furthermore, unlike gold, dollar reserves could be invested to earn interest.”⁸⁹ Finally, the arrangements supporting the Bretton Woods agreements included the “social democratic welfare state [as] an integral part.”⁹⁰ While tying together the capitalist countries of the world, a new form of interdependence—a notion popularized by Richard Cooper in 1968—arose, whereas Keynesian policies in one country provoked “international ramifications.”⁹¹

Alongside Bretton Woods, investment abroad found growth particularly through the Marshall Plan, a policy directed toward rebuilding Europe and acting as an offset to the drastic cuts in U.S. military spending after the war.⁹² In helping to institutionalize U.S. capitalism abroad, these socialized investments operated like a New Deal “Works Progress Administration” for multinationals overseas.⁹³ Hardly critical of this brand of federal intervention on a global scale, businessmen and government eagerly capitalized on these Keynesian policies. Writes Kim McQuaid:

The cold war, like the Depression and World War II, was a situation not considered in traditional American economic or political ideology. Many government and business leaders came to see the Marshall Plan as simple necessity, a down payment on the American century. They created a de facto Keynesian pump-priming program, which paid for 25 percent of all Western European imports between 1947 and 1950. They reduced destabilizing dollar shortages in world trade. They helped begin the thirteen-fold increase between 1950 and 1990 in inflation-adjusted trade in global goods and services.⁹⁴

A part of this socializing included significant tax provisions for corporate write-offs of losses from federal spending due to cutbacks in military spending after World War II.⁹⁵ The Marshall Plan positioned American business to gain a foothold in Europe, presenting, as Victoria de Grazia notes, an opportunity to globalize America’s consumer market, exporting the mores of the “premier consumer society” to the Old World.⁹⁶ Building off the Marshall Plan, foreign investment in the 1950s included Latin America ($361 million), Canada ($742 million), and Europe ($440 million), eventually leading to nearly 70 percent of American corporate expansion money going abroad by the end of 1960.⁹⁷

Despite foreign investment, U.S. economic growth continued to rely on the prosperity of working- and middle-class Americans. For white Americans, the prosperity induced by the welfare state economy included the race-based entitlement of Jim Crow legislation and institutional segregation in the North and West. As a white male dominated framework, its economics centered on the concept of the male–wage earning “family wage.”⁹⁸ In a stunning reversal of the 1920s era of GOP-led economics, the Jim Crow welfare state shaped what has been called the “Great Compression,” an era characterized by the share of wealth of the top 1 percent shrinking after the 1940s and producing a “wage structure more equal than that experienced since.”⁹⁹ The guiding white “middle-class ethos”—whose democratic practices politically supported both the liberal consensus guiding the welfare state and discriminatory Jim Crow practices—anchored the New Deal–Keynesian model so securely that the Republican president Dwight D. Eisenhower left the top income tax rate at 91 percent throughout his two terms.¹⁰⁰ Against this political consensus, the “extreme right wing”—what Richard Hofstadter described at the time as pseudo-conservatives—and their American business allies engaged in a nationwide campaign to restore the pre–New Deal American language of individualism, free enterprise, competition, and the overall prerogatives of business over the encroachment of the more democratic-led mechanisms of the welfare state.¹⁰¹ This was the fertile ground for neoliberal economists, of course, who would find common cause with this right wing in the 1950s, including Friedman’s economic advice to the political fortunes of Barry Goldwater.¹⁰² Despite the burden of the mixed economy, the wealthy found ways around their enormous income tax, investing in municipal bonds, utilizing expense accounts, or benefiting from the lower-taxed capital gains (which did not count as income).¹⁰³ At the same time, moderate business leaders who worked in or with government during World War II understood the profitable benefits unlocked by the partnership between government, the military, and industry during the war years.¹⁰⁴

The Cold War’s anti-communist rhetoric helped immensely to downplay the reality of the redistributionist nature of the welfare state. The political rhetoric of individualism, liberty, and free enterprise provided the language and identity characterizing the U.S. struggle against the Soviet threat. In doing so, it fostered a cognitive dissonance obscuring the level of federal interventionist collectivism circulating through the American economy. In short, the redistributionist aspect of welfare state policies toward the white working and middle classes, such as the GI Bill, federal infrastructure projects, and other direct-indirect subsidies toward industry, disappeared from the equation that fostered American prosperity. Just as defense spending built Southern California and the Sun Belt while fostering an anti-welfare state conservative ideology, the dynamic of federal housing policies operated in a similar fashion.¹⁰⁵ David M. P. Freund notes that subsidized housing policies hid behind both the white supremacy policies constructing white neighborhoods as well as the popularization of “the idea that government interventions were not providing considerable benefits to white people. Public officials, their private-sector allies, and even federal appraisal guidelines assured whites that state interventions neither made suburban growth possible nor helped segregate the fast-growing metropolis by race. They promoted a story that urban and suburban outcomes resulted solely from impersonal market forces.”¹⁰⁶ The private and public conjoining of the economy appeared natural after almost two decades of Depression and global war mobilization.¹⁰⁷ More than this, however, it reinforced the normality of white Americans seeing their access to the welfare state as an entitlement of citizenship and liberty. Just as government intervention was made invisible, whiteness, too, remained a policy submerged within “impersonal market forces,” inevitably leading to anger toward both African Americans and the federal government as social equality legislation opened access to the benefits of the welfare state by people of color.

Appearing as an unfair intrusion into white space, this discord established a starting point for the conservative culture war and the shifting allegiance away from the welfare state. At the same time, a cognitive dissonance crept into the culture war: the post-1960s nostalgia for the 1950s and the absence of the economic reality of the welfare state contributing to the conditions for the “happy days” of the fifties.¹⁰⁸ Silence toward this intervention often includes an uncritical assessment of this golden age’s thriving white supremacy, including the male-only prospects further narrowing competition for political and economic opportunities between white men (although this remembered experience, too, contributes to the embers of nostalgia’s warmth). Against the backdrop of federal intervention into white America’s centuries-old rights to discriminate against people of color, the attacks against the welfare state by the emerging New Right and neoliberals made more sense. Perhaps Hayek was correct when he insisted that the “collectivist” logic of the welfare state would inevitably lead liberal democracies down “the road to serfdom” and authoritarian communism? In the context of social equality legislation and the neoliberal critique of the welfare state, the charges of communism leveled at the civil rights movement by Southern segregationists suddenly became relevant to Northern and Western white suburbia.¹⁰⁹

After years of popular disparagement during the Great Depression, corporate America came out of World War II with a rebuilt image capitalizing on the Cold War. In many ways, American business became an important defining symbol of capitalism, taking credit for building a mass culture responsible for the domestic revival of the “American way of life” (again, federal intervention was downplayed in the name of fighting communist “collectivism”).¹¹⁰ Many championed the modern corporation under the shadow of the mixed economy, concurring with Berle’s suggestion that these institutions were “the outstanding achievement of our generation.”¹¹¹ Of course, postwar U.S. hegemony abroad tied to the welfare state provided the ideal situation for American corporations: while domestically protecting the economy from the instability of economic depression, internationally, the U.S. nation-state sought to further open areas of the world for trade and investment as diplomacy targeted protective tariffs, tax laws, subsidies, and other barriers in the name of creating a “universal free trade” world.¹¹² In short, a contradictory quest for an international laissez-faire market organized by Pax Americana on behalf of a national regulatory mixed economy.

Odd Arne Westad describes the Pax Americana projection of power as lying in America’s “symbols and images—the free market, anti-Communism, fear of state power, faith in technology.”¹¹³ Out of this “way of life,” the United States sought to remake the world in its own liberal democratic image to counter the antagonistic forces of communism, and “bind all states to a new rule of law in the international economy.”¹¹⁴ Building off pre–World War II precedents, the postwar United States embraced a foreign policy where the government brokered foreign investment within “unstable” states through contracts between U.S. businesses and foreign nations. These practices ostensibly replaced old imperialism with “the use of loans to leverage fiscal supervision.”¹¹⁵ For internationalist liberals guiding Pax Americana, modernization theory brought up to date the ideas of progress inherent in Western civilization, with the imperial and technical experience of U.S. intervention in the early twentieth century translating into newly independent nations imagined as spaces for the exportation of American values—or, as Michael Latham notes, the blending of “national security and economic needs.”¹¹⁶ Thus, the dynamics of the Cold War created overseas business climates suitable for investment, including support for right-wing dictatorships and the undermining of labor movements (often through state-directed purges of left-wing activists).¹¹⁷ These postcolonial authoritarian environments also offered few regulatory controls on the environment and capital flows, which fell in line with the 1947 General Agreement on Tariffs and Trade (GATT). Anticipating the neoliberal logic of structural adjustment programs (SAPs) in the 1980s and 1990s, the United States sought the “liberalization of the world economy—not only free trade, but also the free movement of both long- and short-term capital—regardless of its effect on the displacement of labor as manufacturing moved to cheap labor and relaxed regulations in formerly colonized nations.”¹¹⁸

A looming crisis began unfolding in the 1960s as President Lyndon B. Johnson extended the New Deal via the Great Society. As an increasingly anxious white population grew weary of the civil rights movement challenging de facto or institutional racism, this renewal of social spending collided with the growing costs associated with the Vietnam War, a creeping stagnancy of the economy, and the rhetorical momentum of the New Right conservative movement.¹¹⁹ The convergence of global competition between the United States, Japan, and West Germany led to overproduction and overcapacity. Moreover, the United States faced fixed costs of production (plant and equipment) as well as a regulated economy linking productivity with wage levels “that could not quickly be squeezed downward,” whereas Japan and West Germany enjoyed cheaper labor.¹²⁰ As Business Week pointed out, 13 percent of U.S. equipment was obsolete by the end of 1968, leaving industry operating at more than 10 percent below the operating rate of up-to-date factories.¹²¹ The profit rate for U.S. manufacturing capital stock fell 43.5 percent between 1965 and 1973.¹²² With trade imbalances and the amount of dollars—Eurodollars—held abroad rising, the combination of the costs and “inflationary effects” of the Vietnam War and Great Society helped propel the U.S. economy into crisis.¹²³ To weather these changes, corporations utilized their two decades of experience negotiating the regulatory state and the international marketplace after World War II, and turned to the postwar merger trend for solutions.

Finance and the Growth of Multinational Conglomerates

With the global economy becoming more competitive, flexibility in business practices displaced the tentative alliance with labor characterizing the 1950s and 1960s “consensus.” The intricacies of this new model took shape through the financial innovations of a rejuvenated Wall Street, including policies that increasingly found kinship with the neoliberal rhetoric of free markets and economic liberty against the regulatory welfare state as the 1970s dawned. Although the ties between finance, corporations, and the American state stretch back to the nineteenth century, this entwined relationship grew expansively in the postwar years.¹²⁴ Through postwar finance, mergers became a useful way to stay competitive in the world economy.¹²⁵ With the stable environment of American-led postwar capitalism, growth rates hovered around 5 percent annually up through the early 1970s (with slight downturns in 1954, 1957, 1967, and 1970).¹²⁶ The development of U.S. multinationals abroad operated through this system, moving capital investment, profits, and goods across vast networks spanning the American-led world economy. “An old tradition of U.S. business has been broken,” asserted Business Week in 1959: since 1950 business had turned away from the nation and ventured overseas for markets, as U.S. companies poured a “huge dollar investment … into production facilities abroad.”¹²⁷ The magazine went on to note that 99 out of 100 of the largest corporations in the United States were “involved today in one or another kind of overseas operation.”¹²⁸ A headline a year later asserted, “Capital Spending: Flat at Home, Up Abroad.”¹²⁹ Foreign direct investment grew rapidly from 1960 on:

Table 3.1  Stock of accumulated foreign direct investment. From Michael J. Webber and David L. Rigby, The Golden Age Illusion: Rethinking Postwar Capitalism (New York: Guilford, 1996), 33.
1938		$26 billion
1960		$70 billion
1971		$172 billion
1978		$400 billion

An important factor guiding postwar finance evolved drastically in the 1960s. Throughout the decade, a series of problems increasingly exerted strain on the Bretton Woods system as trade imbalances and an outflow of dollars—especially to Europe—from the United States weakened the economy. In an attempt to drive down the deficit in the 1960s, Johnson put a $1 billion curb on multinational overseas capital investment in 1968, leading MNCs to fear that they would lose “their competitive edge in world markets.”¹³⁰ Compounding the problem, inflation surfaced as a critical issue, a long-term consequence of the perpetual expansion of Keynesian economics on top of the growing costs of the Vietnam War.¹³¹ Speculators scrambled to buy gold as the outflow of U.S. dollars persisted as a result of the imbalance of payments.¹³² The changing global economy made the regulatory state’s controls over capital obsolete—at least in the minds of finance. Arrighi cites 1968 as the beginning of this shift, “when the growth of liquid funds held in the London-centered Eurodollar market experienced a sudden and explosive acceleration.”¹³³

Eurodollars entered Europe through the Marshall Plan, with the market exploding in the late 1950s as they became an important source of capital invested around the world from its trading center in London.¹³⁴ An example of this transaction includes a scenario where a German bank might have a surplus of dollars and deposits them in London, with London turning around and lending them to a Japanese company needing “payment in dollars.”¹³⁵ Although the Federal Reserve regulated interest rates in the United States, overseas the situation was different. Business Week described the procedure: “Europeans—or even U.S. international oil companies—who find themselves holding dollar balances have an incentive to lend where rates are highest.… Thus, the Eurodollar market—and the satellite markets in Eurosterling and other Euromonies—reflect the evolution of a truly international money market. Eurodollars offer an avenue of escape from conventional methods of credit control, blurring the lines between national monetary systems and creating new problems of financial control.”¹³⁶ U.S. banks jumped on the opportunity to trade in Eurodollars, setting up “numerous branches in London to participate.”¹³⁷ This adaption by transnational economic organizations forged a patched-together standard for the freer flow of capital eventually enacted by neoliberal policies in the 1980s.¹³⁸

In a February 1969 issue of Business Week, a special report on the Bretton Woods agreement argued for reforms and a more flexible system: “Unless the United States can halt inflation and enlarge last year’s minuscule trade surplus, the dollar could come under attack. In the end, what happens to the dollar determines what happens to the system.”¹³⁹ At the close of the nation’s economy’s successful run (the U.S. poverty line declined to 10 percent in 1973 from a high of one-third in 1950), Business Week noted one policy of note for the United States and Britain: the balance between “full employment” and “domestic deflation.”¹⁴⁰ Becoming “ ‘flexible’ on the gold price question” was one answer, letting the free market set the price while nations’ currencies would adjust accordingly.¹⁴¹ Once the United States “shut the gold window” in 1971, rising prices would work to define the decade.¹⁴²

Richard Nixon’s dismantling of the Bretton Woods agreement in August 1971 provided a jolt to a system increasingly stifling U.S. economic expansion. The era of trade deficits had arrived. As the United States “posted its first postwar trade deficit in 1971,” write Webber and Rigby, “it was clear that the international financial system was pegged to an overvalued dollar.”¹⁴³ With the collapse of Bretton Woods, floating exchange rates replaced the convertibility of dollars to gold. With dollars held by foreign nations depreciated, a turning point had been reached: “Henceforth, the relatively high level of international economic cooperation that had been achieved against the background of the great post-war economic expansion would increasingly give way to intensifying international politico-economic conflict in the face of a much slower growing world economic pie, especially over the rules of the game for international investment, trade, and money.”¹⁴⁴ As Business Week observed, “With the dollar floating—that is to say, exchanging for other currencies at fluctuating rates—there no longer is a system, rather a jumble of day-to-day exchange-rate quotations.”¹⁴⁵ In terms of finance, a weakness of the welfare state regulatory system was the inability to predict and adjust to the “great surges of capital across national borders.”¹⁴⁶ Spurred by technological advances in communication, the regulatory system could not keep up with the pace of change engaged in by multinationals and finance, resulting in a situation where the trading of dollars ventured into uncontrolled environments outside the United States (e.g., Eurodollars).¹⁴⁷ More than this, the unleashing of capital outside the regulatory restraints of the postwar Bretton Woods monetary system led to an even greater internationalization of capital as the “banking business transformed itself to cope with this cornucopia,” including providing the capital for corporations to diversify through “mergers and acquisitions”; as Richard Sennett suggests, “The hostile takeover became a form of art, as money looked for ever new ways to install itself.”¹⁴⁸

The sort of global deregulation of capital flows characterizing national policy after the 1960s found root in these experiences of MNCs operating across multiple nations and currencies in the postwar years. The limitations of the welfare state arose as the regulatory networks failed to keep pace with the needs of expanding multinationals.¹⁴⁹ In 1971, Business Week noted how this strategy protected the capital of multinationals around the world “from currency losses,” stating, “In doing so they can build up or relieve pressure on the exchange rates that relate the dollar to pounds, yen and deutschemarks.”¹⁵⁰ These were the practices undermining the regulatory frameworks of nation-states. Business Week outlined this complicated process: “They play a complex game of money management, ‘leading’ and ‘lagging’ payments between far-flung affiliates for products that they sell each other and constantly hedging their operating funds in many currencies against parity changes.… There is no doubt that the massive corporate movements of short-term funds at high speed have helped to magnify recent monetary crises.… Such networks, extending into dozens of countries, give corporate financial officers great flexibility in designing protection against currency losses.”¹⁵¹ According to Business Week, the MNCs’ greatest fear was the further growth of capital movement restrictions aimed toward regulating these innovations. As multinationals outgrew the regulatory welfare state, these contradictions pressed together the interests of MNCs and the anti-regulatory neoliberals: while the United States intervened in the economy in the name of middle-class economic stability via democratic passions, its very regulatory features increasingly interfered with the prerogatives of multinationals. The age of currency flexibility found expression through currency speculation, as MNCs benefited from the dismantling of Bretton Woods, reversing some trends away from foreign investment for U.S. corporations.¹⁵² As currencies realigned, and the federal government began penalizing imports, some overseas companies expressed interest in reinvesting in the United States.¹⁵³

In the summer of 1974, Business Week ran a special report titled “The World Economy.”¹⁵⁴ With the collapse of the Bretton Woods agreement and the inability of governments to successfully grapple with the problems of inflation, unemployment, and the huge rise in the price of petroleum, the authors noted that central bankers in nations around the world were left to squeeze credit, resulting in slow growth. Mirroring the domestic situation, MNCs in foreign nations increasingly discovered that they were not necessarily welcomed but “reluctantly tolerated.”¹⁵⁵ One point of contention for multinationals included the more frequent conflicts with “their host governments”: from oil companies in the Middle East to aluminum companies in Jamaica.¹⁵⁶ Customs unions and monetary cooperation, the older mechanisms smoothing out overseas operations, were quickly “breaking down.”¹⁵⁷ The paths for doing business abroad needed to be rethought to sustain the high profits from before 1973, especially as newly decolonized nations began asserting their sovereign rights (which often removed the favorable climate multinationals enjoyed during the colonial era). A delicate balance remained, as most of the companies operating overseas were “often major factors in key sectors of the economy.”¹⁵⁸ Problems with profits created another stumbling block, especially for local government partners taking exception to MNCs pulling “out large dividends because it believed the local currency was about to be devalued.”¹⁵⁹ Erratic capital flows quickly became an ongoing reality for poor nations in desperate need of stable, long-term investment capital.

This scenario, of course, personified the mission of neoliberals as the world decolonized. The expansion of democracy after imperial autocratic rule, let alone the popularly elected U.S. and European welfare state governments, trampled across the rights of private capital.¹⁶⁰ Contrary to Friedman’s assertation that capitalism equated to freedom, the neoliberal mission sought to make the democratic voice of nations subservient to the needs of capital. As Quinn Slobodian notes, “Democracy might have to be restricted for certain peoples in order to preserve stability and prosperity. Restricting political freedom, as commonly understood, was necessary under some circumstances to preserve economic freedom.”¹⁶¹ Although this might be achievable through U.S.-led coups supported by MNCs (such as United Fruit in Guatemala or ITT in Chile) operating in newly decolonized nations or Latin American countries, for nations with a history of democratic participation, the stumbling block included fostering a new consensus away from the welfare state and toward a vision where the needs of finance and multinationals would find protection over the passions of democracy.

An important stimulus pressing the consensus away from the welfare state and toward the economic disciplining of neoliberalism was the 1974–75 recession and the deep waters of inflation.¹⁶² Although U.S. industry suffered from overproduction before the oil crisis in 1973, the Organization of Petroleum Exporting Countries’ (OPEC’s) rise in oil prices influenced an already increasing inflation as it drastically raised the price of energy.¹⁶³ Amid the recession, the spike in oil prices spurred the trade in petrodollars out of the profits of OPEC. The Treasury department under Nixon and Ford sought to strategically secure “interdependence” through petrodollars passing between the U.S. and oil producing nations.¹⁶⁴ The Treasury’s “free market ideology and disdain for New Deal or Great Society-esque programs,” adds David M. Wight, set the federal government’s policy toward petrodollars within the evolving framework of neoliberalism in the 1970s.¹⁶⁵ Prophetically, Treasury undersecretary, Paul Volcker, who was instrumental in these policies, would later become head of the Federal Reserve in 1979—and help steer the national economy toward the neoliberal era in the 1980s. Consequently, a small handful of multinational U.S. banks gained control of petrodollars seeking investment by OPEC nations in the wake of the 1973 oil crisis, channeling investment capital through Wall Street rather than through the International Monetary Fund as many U.S. allies sought. As exporting oil nations invested their earnings in Western banks, their petrodollars were recycled through these institutions, providing more capital to invest overseas as well as paying for the risings costs of the very source of their loans—oil.¹⁶⁶ The added capital for finance via petrodollars provided a key outlet for corporate restructuring as the Bretton Woods agreement collapsed and profits from manufacturing declined in the 1970s.¹⁶⁷ In addition, petrodollars helped to offset the indebtedness of the U.S. government as well.¹⁶⁸ With OPEC money routed through Wall Street and into investments in developing nations, banks pushed to open U.S. markets to exports from developing nations receiving petrodollar loans—and needing to repay banks.¹⁶⁹ “The new lending policies,” writes Judith Stein, “created new conflicts between American finance and American manufacturing.”¹⁷⁰ For those outside Wall Street, these years proved more painful as inflation diminished earnings, and unemployment eroded the gains of the blue-collar prosperity enjoyed during the height of the welfare state.¹⁷¹

Other financial innovations provided breathing space and flexibility for MNCs to reorganize their activities at home and abroad. The computer and telecommunication revolution created faster and cheaper avenues in which international financial trading took place, “so currency trading exploded in the early 1970s, destabilizing money markets.”¹⁷² The profits of this money market trading caught the attention of private investors, international banks, and MNCs, further destabilizing the dollar standard.¹⁷³ Tensions surrounding these innovations in the 1960s eventually culminated with transnational corporations and finance straining “against the compartmentalization laid down in the Glass-Steagall Act [1933]”—a measure enacted during the New Deal to separate commercial from investment banking.¹⁷⁴ The finance industry helped undermine capital regulation even more as government agencies were unable to access the “statistical information … because of bank resistance.”¹⁷⁵ The corporate-finance embrace of utilizing computers to navigate Toffler’s information overload led to one of the most important revolutions related to the business world’s growing relationship with technology. The critical change took place when the 1960s “applications approach”—a model “characterized by the programming of individual computer applications that satisfied a specific output requirement”—was displaced by the database management system of the 1970s, where rather than relying on a “pre-defined information need,” computer systems would capture as much data as possible to create a more flexible model: “through a data model, data collection and storage could be approached completely independently from the output, the information product, and the ultimate use of such information for satisfying a managerial decision-making need.”¹⁷⁶ The age of big data—and the increasing value of information as private property—had begun.¹⁷⁷ Significantly, innovation outpaced the tendrils of government regulation. These pressures found their release through the incremental deregulation of capital flows in the 1970s, helping to establish the political environment shaping the financial boom of the 1980s. Webber and Rigby write, “In the USA restrictions on capital flows were abolished in 1974, all restrictions on interest rates had been dropped by 1986, banking regulations were steadily relaxed through the 1970s, and in 1981 banks were permitted to offer international banking facilities within the USA.”¹⁷⁸

The quickened movement of data fostered by computers combined with the dismantling of Bretton Woods, opening the door to currency speculation. For example, “between 1971 and 1980 the US dollar depreciated 25% against a trade-weighted index of foreign currencies, whereas between 1980 and 1985 the US dollar rose by 67% against a share-weighted average of other OECD [Organisation for Economic Co-operation and Development] countries.”¹⁷⁹ For developing nations borrowing capital through the flood of petrodollars, this had the expected effect: at the height of borrowing, the cheapening dollar made loans especially attractive; once interest rates linked to dollars rose, nations suddenly fell into debt far beyond the ability to repay. This instability of currencies and ensuing debt crisis opened the door for neoliberal-directed SAPs in the 1980s and 1990s.¹⁸⁰ A big winner in these systemic shifts was finance, though even the U.S. government felt the effects of this restructuring as it emerged in 1983 as the “largest debtor nation in the world.”¹⁸¹

With the infrastructure in place providing the foundation for freer trade and capital flows after the 1970s, and the acceleration of financial deregulation near the end of Jimmy Carter’s presidency, finance not only helped reenergize multinationals, they also influenced trade relations and the economic policies of other governments on a scale not seen since before the Great Depression.¹⁸² Indeed, the rejuvenated finance industry helped tremendously in providing capital for MNCs to merge or acquire small companies during the 1970s economic downturn. “Creative financing,” writes Benjamin C. Waterhouse, facilitated the rise of conglomerates: “Rather than save up accumulated profits from the past to finance expansion, as they had traditionally, postwar executives borrowed and raised money more aggressively through private capital markets, bonds, or stock sales, all underwritten by investment banks.”¹⁸³

Characteristic of the quickening pace of economic change, conglomerates embodied what some observers began labeling the era of postmodernity.¹⁸⁴ The chroniclers of this often-ambiguous label offer some useful insights with regard to the cultural context of the rise of conglomerates. For example, Fredric Jameson notes postmodernity—or what he calls late capitalism—as materially manifesting itself through the dominance of “multinational capitalism,” the “new international division of labor, a vertiginous new dynamic in international banking and stock exchanges …, new forms of media interrelationship …, computers and automation, [and] the flight of production to advanced Third World areas.”¹⁸⁵ David Harvey’s assessment also foregrounds the economic changes circulating through postwar capitalism, including the new system of “flexible accumulation” from the 1960s that embraced “[a] flexibility with respect to labour processes, labour markets, products, and patterns of consumption. It is characterized by the emergence of entirely new sectors of production, new ways of providing financial services, new markets, and, above all, greatly intensified rates of commercial, technological, and organizational innovation.”¹⁸⁶ Of course, this flexibility depended upon the perpetual innovation of computer communication systems, allowing for a lean and diverse corporation to access finance capital in order to negotiate the buying and selling of businesses (acquisitions) as investments. In this framework, government regulations became anathema to an economy increasingly pressing toward free capital flows. In some ways, postmodernism embodied the Depression-era dreams of Hayek.

A key to the ongoing success of these large, transnational organizations lay in their ability to unify the “processes of mass production with those of mass distribution” under a single capitalist organization.¹⁸⁷ This centralization of all the dynamics of global trade achieved greater efficiency while reducing costs. Both size and strategic separation of duties created a flexible environment for MNCs operating across nation-states. Business Week, in a special report in 1970, underlined the role of these multinationals in creating the new global economy at the dawn of the 1970s—and the roadblocks presented by nation-states: “But as multinational companies reshape the patterns of production and marketing, they are also clashing with traditional interests of the world’s basic political institution, the nation state. At home and abroad, their impact on established businesses, labor markets, and even cultural patterns is creating social strains. For businessmen and statesmen, a major challenge of the 1970s is to reconcile these conflicts.”¹⁸⁸ Much of this tension between the U.S. government and the growing power of conglomerates centered on the uneasiness of acquisitions and mergers, pitting government regulation against an industry whose needs increasingly aligned with the neoliberal vision of deregulation and the disavowal of the dangers of capital concentration. In 1967, Business Week described the accelerating drive toward growth and the flood of new developments that accompanied the drive to diversify through conglomeration: “The same trends that brought the conglomerate into being have been running in the other big companies, too. They also are becoming more diverse, more oriented toward high technology, and more flexible. They are developing staffs of specialists relying more and more on professional management.… There’s so much impetus—so steady a pattern of growth, so rapid an evolution in sophistication—that the corporation can only go ahead. It’s changing the world rapidly now—and almost certainly will change it far more in the next 20 years.”¹⁸⁹

Much like the era of monopoly almost 100 years before, controversy shrouded the merger movement in the late 1960s. Conglomerates operated in an environment where they could not control the pricing of markets as monopolies could. However, they exerted a wide range of power as “concentrates,” straddling various industries from mining to insurance to department stores to military contracts to Hollywood studios (e.g., Paramount: A Gulf + Western Company). The identity of American business began to blur as they “lost any industry identification,” while treating newly acquired businesses as often short-term investments.¹⁹⁰ With earnings slipping along with the overall economy in the late 1960s, both Wall Street and the Johnson administration looked warily at the growth of conglomerates.¹⁹¹ With neither institution truly checking the growth of multinationals, this period was an important turning point for MNCs and the construction of global financial networks characterizing neoliberalism and the finance phase of the fourth accumulation cycle. Sprawling, flexible, and diverse, these institutions would not only weather the economic crisis of the 1970s, but they also came to define post-1970s capitalism.

The most alarming feature of these corporate organizations was their size, with investors questioning the control over such a wide array of divisions. The public, too, began “to conjure up images of ruthless capitalists practicing their black arts of high finance to their own ends.”¹⁹² Challenges to the conglomerate also came from the Securities and Exchange Commission’s push to “eliminate some of the accounting and financial reporting loopholes that have been the conglomerators’ stock in trade.”¹⁹³ In defense of conglomerates and echoing the neoliberal defense of monopolies and large companies, Business Week offered a different take that aligned more with Friedman’s nostalgic possession of history for the late-nineteenth-century brand of unregulated capitalism:

All of this scrutiny tends to focus on the corporate octopus image of the conglomerates, but there’s another aspect. At its best, the conglomerate style harkens back to the entrepreneurial spirit and daring that typified the early days of U.S. capitalism.… Creators rather than curators, the conglomerates often revive competition in settled industries by picking up marginal producers and energizing them with new capital, uninhibited ideas, and fresh expertise.… Shrewd, aggressive, and often charismatic, they excite and sometimes inspire the men around them. Their energy is contagious. And to many people, energetic business is healthy business.¹⁹⁴

The price-earnings multiple was one of the keys to the success of conglomerates: “The higher a conglomerate’s stock price relative to its earnings per share, the less it spends to buy another company.”¹⁹⁵ With investors looking more toward future growth in profits, “growth expectations” form the perennial stock and trade for conglomerates as low-growth acquisitions shift into “high growth expectations” after purchase and renovation by the multinational.¹⁹⁶ From this logic, Business Week offered a solution to the highly regulated airlines industry in 1971: “Only mergers can bail out the airlines.”¹⁹⁷ Consequently, the deregulation of the airline industry “became, almost overnight, the general model.”¹⁹⁸ Trucking soon followed via the Motor Carrier Act of 1980.¹⁹⁹

Although the growth of conglomerates slowed in the late 1960s—with most activity aimed at small and medium-size firms—a new model for weathering the uncertainties of the world economy had been established.²⁰⁰ Unconsciously anticipating the new frontier of neoliberalism, Business Week imagined conglomerates as regenerating socioeconomic mechanisms ostensibly connected to late 1800s American settler colonialism. Culturally, these large corporations found protection against antitrust actions through Cold War celebrations of private enterprise and the welfare state’s embrace of big business, as well as the ascending logic of the neoliberal view of big business and monopolies: “price and efficiency—rather than firm size or market share”—determined whether a corporation should be a target of antitrust suits.²⁰¹ So-called price-grounded antitrust doctrine would become the common sense in business legislation by the 1980s.

Business Week’s special report on MNCs in 1970 outlined the threshold leading to the new culture of neoliberal globalization. Their strategy, noted the authors, was to be “in every single country there is.”²⁰² With competition from Japanese and European companies, multinationals leaned on their flexibility and diversity to gain entrance into nations, creating affiliates, joint ventures, and coproduction arrangements with foreign governments. Defending large transnational companies, Business Week asserted that these MNCs were “unleashing new productive capacities around the world as they escape the confines of national markets”; in short, they “have in fact found the means of applying the Ricardian principle of comparative advantage more efficiently than ever before. The result is rising production of goods and services all over the world. The United States, which has contributed more than any other country to the creation of the multinational corporation, has a just claim to a share in the new wealth.”²⁰³

Winter in America: Ending the Great Compression

By the 1970s, capital unwaveringly leaned toward larger companies whose increasingly diverse holdings lay far outside the original corporation’s industry. Diversification offered greater stability navigating the fast-paced, unstable post-1973 global economy. The transition of the American economy from factories (production) to finance—to paraphrase Judith Stein—accelerated, reflecting the fourth phase of Arrighi’s longue durée “cycles of accumulation.”²⁰⁴ Banking institutions and the evolution of finance combined with the new networks of multinational conglomerates, leading to what has been described as the postindustrial era of globalization, or what we may simply call the neoliberal era.²⁰⁵

Just as corporations conglomerated through acquisitions and mergers, banking also took similar steps in the late 1960s. Following the example of First National City Bank in 1968, banks increasingly became holding companies where, Business Week notes, the “world’s financial assets are being concentrated in fewer and fewer hands, and this process of concentration is far from over.”²⁰⁶ Overseas assets for the largest U.S. banks accounted for 25–50 percent of their overall income. An important step toward this drive came from the Bank Holding Company Act of 1970, which “allowed holding companies to own more than one bank—and also to be in any business that the Federal Reserve Board deems to be ‘closely related’ to banking.”²⁰⁷ The latter included the leasing of equipment, finance companies, insurance, travel services, and data processing (which anticipated the big data revolution in the twenty-first century).²⁰⁸ This momentum toward transnational diversification demanded the deregulation of increasingly obsolete welfare state regulations. A growing consensus at the Fed and among bankers targeted one critical measure curtailing the ascension of finance: the full repeal of the Glass-Steagall Act.²⁰⁹ Although it would take until the 1990s to completely dismantle the Glass-Steagall Act, the law would be a primary target for the finance industry throughout the next few decades. Banking expansion did, however, help solve the problems of capital as U.S. banks, alongside access to petrodollars, used Eurodollars to finance MNCs abroad while shipping Eurodollars “home in quantity whenever the Fed tightened the domestic money supply.”²¹⁰ After years of lobbying against regulations, the money market mutual fund was created and, after approval in 1972 by the federal government, increasingly became an alternative to regular bank savings accounts.²¹¹

A third round of mergers accompanied these changes in banking in the early 1970s.²¹² In a June 1975 issue, Business Week noted Wall Street’s new enthusiasm for conglomerates who had weathered the recession thus far through “both solid management and the sort of successful diversification that resists economic cycles.”²¹³ Drawn to these large entities, capital found a new stable site for accumulation. Moreover, by the spring of 1976, foreign investors increasingly eyed the United States for investment, with Business Week noting the “depreciation of the dollar and depressed stock prices in the past year have made U.S. corporations a good buy for foreigners looking for acquisitions.”²¹⁴

An example of corporate conglomeration includes the Mobil Oil Corporation, a company that moved to diversify its capital holdings through the purchase of the chain department store, Montgomery Ward, rather than investing its post-1973 oil crisis profits into domestic oil production.²¹⁵ Exxon soon followed the trend as well, buying Compania Minera Disputada in Chile, in the Cold War market-friendly post-coup (U.S.-led) environment headed up by the dictatorship of General Augusto Pinochet.²¹⁶ Even steel companies transferred their profits away from capital stock and toward “the acquisition of chemical firms, shopping malls, and other activities; so much so that, by 1979, forty-six cents of every new dollar of U.S. Steel capital investment was going into the corporation’s non-steel ventures.”²¹⁷ Amid stagnation, mergers seemed to be the surest bet on surviving the economic turbulence of the 1970s. According to Business Week, by 1980 more capital was spent on acquisitions than research and development.²¹⁸ As Harvey documents, the dollars spent on mergers went from $22 billion in 1977, to $82 billion in 1981, to $180 billion in 1985.²¹⁹ Instead of creating new factories, two-thirds of “new” plants purchased were older ones. Falling victim to the process of “milking,” profitable factories would often be bought by conglomerates, drained of its cash reserves, and then discarded, shut down, or sold again—in short, a “strategy of planned disinvestment in its recent acquisition.”²²⁰ As Barry Bluestone and Bennett Harrison note, throughout the 1970s these Fortune 500 companies “physically expanded only one in seven of the plants they owned at the start of the decade.”²²¹

To bolster profits, multinationals often sold exports to foreign affiliates in which they had a majority stake. This trade between different but financially connected corporations allowed for a manipulation of pricing—called transfer pricing—outside the so-called market price.²²² Significantly, “intra-firm transactions” grew from “20–30 per cent in the 1960s to something in the order of 40–50 per cent in the late 1980s and early 1990s.”²²³ Techniques such as these aided transnational business in negotiating various nation-state regulations as products and capital flowed across borders, including price controls, tax rates on profits, fluctuating exchange rates, and import duties.²²⁴ The ratio between U.S. manufacturing exports and that of U.S. multinationals’ foreign sales looked like the following across the 1960s:

Table 3.2  U.S. manufacturing exports/foreign sales of U.S. multinationals. From Andre Gunder Frank, “The Post-war Boom: Boon for the West, Bust for the South,” Millennium 7 (1978): 156.

U.S. manufacturing exports

1961 $15 billion

1970 $35 billion

Foreign sales of U.S. multinationals

1961 $25 billion

1970 $90 billion

In total, U.S. direct foreign investment increased sixteenfold between 1950 and 1980, “from about $12 billion to $192 billion.”²²⁵ Three-quarters of the sales of MNCs were aimed toward the markets in which they operated, whereas the remainder was exported abroad (often to the United States). Indeed, in 1976 alone 29 percent of imports into the United States were from the overseas plants of American multinationals or their subsidiaries.²²⁶ These trends marked both less-developed countries and industrialized Western nations: “fully 40% of ‘Latin American’ manufacturing exports in 1968 were in fact exported by U.S.-owned subsidiaries in Latin America; and U.S. multinationals also account for an appreciable share of ‘British’ and other countries’ exports.”²²⁷ As the 1980s unfolded, the profits from overseas expansion reached “a third or more of the overall profits of the hundred largest multinational producers and banks in the United States.”²²⁸ In relation to domestic employment, some estimates suggest that 26,500 jobs were eliminated for every $1 billion of foreign investment by U.S. MNCs.²²⁹

As a result of overseas expansion and diversification, modernization of existing domestic factories suffered. Short-term diversification measures were embraced to weather the changing dynamics of global capitalism, replacing the long-term structural planning of the past. In their efforts to reduce costs through the disinvestment of capital stock domestically (such as machine tools and factories), by 1979 factories failed to keep pace in efficiency (they had an average age of 7.1 years).²³⁰ Business Week pointed this out as early as 1972, criticizing the technological gap between the United States and its primary competitors, Japan and Europe.²³¹ The authors suggested that the root of the problem was management—an assessment Business Week would rearticulate through the neoliberal worldview by the end of the 1970s: government regulation costs accounted for inefficiencies.²³² In the early 1970s, however, Business Week noted that although companies in the 1950s and 1960s outpaced their competition, MNCs complicated this process as their “management, marketing, production, and development knowhow [had] spread rapidly outside the boundaries of the United States. At the same time, U.S. companies [became] less innovative, less willing to gamble on new products, and less adept at translating a scientific development into a commercial product.”²³³ Growth for U.S. companies rested more on acquisitions and overseas expansion rather than national reinvestment or channeling profits into innovations.²³⁴ For the U.S. worker unable to access this fast-changing economic environment, the warm and prosperous 1960s summer of love quickly changed into a bitter winter of downsizing and outsourcing in the 1970s and 1980s.

Examples of outsourcing throughout the 1970s outline this trend. General Electric, for instance, expanded its capital stock overseas rather than in the United States, leading to 25,000 domestic jobs being replaced by 30,000 foreign jobs.²³⁵ Ford and General Motors followed similar trends, divesting their obsolete plants and workforces domestically and expanding internationally.²³⁶ In some extravagant cases, companies would invest in their overseas competition while simultaneously protesting foreign competition. In the case of U.S. Steel Corporation in the 1970s, it held shares in South African mining and mineral companies that worked closely with the state-owned South African Iron and Steel Corporation. Investment was further insulated as the South African company received loans from U.S. banks (Chase and Citicorp), which were also “among those banks … refusing to provide investment capital to upgrade the domestic U.S. steel industry.”²³⁷

This strategy of deindustrialization was macro in nature, as Arrighi’s financial phase unfolded. With production in the United States failing to produce sufficient profits, capital moved to where it could find better returns. Through the moral prism of neoliberalism market logic, the social costs for American society became irrelevant to business decisions. A cultural precept of neoliberalism helped justify this cold turn away from the postwar idea of fairness and justness characterizing the redistributionist logic of the Jim Crow welfare state to the neoliberal logic of market efficiency and quantitative analysis.²³⁸ Trends initiated in this era included the reformed regulatory framework of neoliberalism reemphasizing “the rise of ‘shareholder value’ as the legitimate goal of corporate governance during the 1980s and 1990s.”²³⁹ As managers lost the ability to organize their corporations in the long term, the new environment of “sophisticated shareholder power” pressed the concerns of big business toward “short-term rather than long-term results”: “share price rather than corporate dividends was their measure of results.”²⁴⁰ Corporations moved away from the postwar regulatory logic of stability at the dawn of the neoliberal era: “stability seemed a sign of weakness,” notes Richard Sennett, “suggesting to the market that the firm could not innovate or find new opportunities or otherwise manage change.”²⁴¹ Technology (as noted above) signaled the avenues this new culture of capitalism would follow, with information and database management systems becoming vital in their ability to generate instantaneous and accurate assessments while leading toward a future where “data-centered concepts … provided a conceptual grounding for the materialisation and growth of ideological beliefs concerning data’s objectivity, truthfulness, and transparency.”²⁴² In short, decisions based on the morality of quantitative analysis. The early fears of job displacement through technological advancement further eroded “the social element of social capitalism.”²⁴³ This reconfigured relationship between capital and labor shredded the remnants of the postwar consensus, provoking a return to the social Darwinist laissez-faire capitalism of the classical liberal era before the New Deal: the mere threat of factory relocation would discipline the demands of labor. The corporate responsibility era of “awareness” between 1953–67, “in which there became more recognition of the overall responsibility of business and its involvement in community affairs,” dissolved amid economic restructuring and the ascension of neoliberal economics.²⁴⁴ As Sennett suggests, “social capitalism” became “a nostalgic memory.”²⁴⁵ The shedding of the consensus era’s social responsibility removed the moral constraints in reversing the wealth distribution of the postwar years: labor productivity continued to rise in this restructured environment, although wages began falling or stagnated across the 1970s and up through the twenty-first century.²⁴⁶ This conjuncture of economic restructuring became the foundation of neoliberalism and one of the pillars of the Reagan revolution. As conservative author Kevin Phillips observed in 1990, “From 1981 on, workers barely kept up with inflation and homeowners on average could stay only a bit ahead.… Corporate executives and investors were the prime 1980s beneficiaries. Their gains roared ahead of the consumer price index like a sonic boom.”²⁴⁷

With the redistribution of wealth away from the middle and working classes came the effect of stripping political power away from organized labor—an important goal of big business since the 1930s.²⁴⁸ The high watermark of postwar capitalism, from the vantage point of the Reagan era, undoubtedly was the mid-1960s, as Keynesianism secured unprecedented low unemployment while unions became ever larger and bureaucratized like their corporate brethren. However, the decline of unions coincided with the onset of the culture war as strikes increased after the mid-1960s. For Business Week, unions became the source for growing inflation.²⁴⁹ The wave of labor unrest affected American domestic productivity, with strikes and absenteeism reducing the “average growth of production per worker between 1967 and 1970.”²⁵⁰ In 1970, Business Week bluntly stated on its cover, “The U.S. can’t afford what labor wants.”²⁵¹ Companies such as RCA, who had already followed a well-worn path of relocating across the Northeast to the Midwest as labor consolidated gains, began in earnest to move outside the United States.²⁵²

Along with the increased labor discontent and attacks from the business press, three additional changes further widened the crisis for labor in the 1970s: (1) the rise of unemployment as industry relocated from older areas of production, (2) the entry of people of color and women workers into areas previously reserved for white males, and (3) the rise of contingent, part-time work, rather than full-time positions with benefits.²⁵³ Augmented with the fair employment provision of the Civil Rights Act of 1964, existing tensions between Black and white workers were exacerbated amid the panic over deindustrialization. For the most part, white skilled unions long practiced a masculine white supremacist exclusion of people of color and women.²⁵⁴ In 1972, Business Week explained why unemployment would grow, asserting, “Since the first quarter of 1971, employment has climbed by 2-million jobs, but the labor force has grown just as fast.”²⁵⁵ Included in this expansion of the labor market, Business Week continued, were women, teenagers, and “discouraged workers” outside the job market.²⁵⁶ The authors cite the Labor Department’s assertion that “the labor force appears to have grown more elastic.”²⁵⁷ John E. Schwarz characterized this conjuncture as a “crushing avalanche of American workers entering the labor market,” growing “40 percent” between 1965 and 1980.²⁵⁸ The normalization of underemployed or contingent labor set in, establishing a baseline for the arrival of the twenty-first-century gig economy.²⁵⁹

For finance and MNCs, this political momentum would unlock the regulatory world set in place by the New Deal and unleash the greatest expansion of wealth inequality in the nation’s history. In his three-volume history of capitalism published in 1979, Fernand Braudel noted the rising influence of large MNCs and their transformation of global capitalism: “The laws of the market no longer apply to huge firms which can influence demand by their very effective advertising, and which can fix prices arbitrarily.”²⁶⁰ More importantly, the structural relationship of multinationals and finance to nation-states adopting elements of neoliberalism facilitated the desired space for the corporate world to flourish. And the political actors of this era, too, found success as taxes on the wealthy dropped precipitously in the 1980s, based on the argument of trickle-down economics: if the wealthy and big business were given tax relief, the abundance of wealth would overflow their coffers and trickle down to the lower 90 percent. This promise sealed the new weather patterns, as winter in America firmly set in, establishing a norm of extended periods of a windy, cold draught.

Conjuncture: Capitalism and the Culture War

The conjuncture of neoliberal ideas, the New Right, and the evolution of MNCs and finance ultimately depended on key demographic voting shifts related to the evolution of American capitalism after World War II. A reorganization of the economy arose simultaneously with the movement of white people and capital from cities to suburbs just as postwar American foreign policy helped to further erode the geographical boundaries of business, pressing more and more corporations to be multinational.²⁶¹ As business relocated to the new American, Jim Crowed suburbs, production jobs increasingly moved overseas. Compounding this trend was the competition arising from a rebuilt Western Europe and Japan—just as the global economy began to slow in the 1960s. For white Americans able to access the benefits of the Jim Crow welfare state—including an education geared toward the new technology-knowledge industry or, in the case of the Sun Belt, a massive influx of federal spending—their hard work and embrace of the rhetoric of rugged individualism disavowed the role of federal intervention from, as James Baldwin and William F. Buckley Jr. debated, their access to the American dream.

The creation of white suburbs normalized the “right” of living in all-white spaces, with the dominant rhetoric imagining that it was a mere choice and not a result of federal policy wedded to the culture of white supremacy. In the age of the Jim Crow welfare state, new ways arose for white people to reimagine race. Before World War II, white supremacy expressed itself through the idea of racial superiority, a subset of the biological superiority of Anglo-Saxons driving the progress of Western civilization.²⁶² After the war, notes Freund, “most northern whites justified racial exclusion by invoking what they viewed as nonracial variables: protecting the housing market, their rights as property owners and, linked to both, their rights as citizens. Whites still actively kept blacks out of their neighborhoods, yet insisted, and many apparently believed, that they were merely exercising what they described as the prerogatives of ‘homeowners,’ ‘property owners,’ and ‘law abiding citizens.’ ”²⁶³ Thus, the federal government’s subsidizing of white America helped secure a new market vision of race while simultaneously instilling the market logic neoliberals and conservatives championed in the wake of legislated social equality in the 1960s. Rather than institutional racism, the idea of “impersonal market forces” arose as a narrative explaining racial inequality.²⁶⁴ As Black people posed a threat to the property values of white homeowners, the exclusion of Blacks merely represented sound investment advice. It was not about fairness; it was about quantitative analysis and the growing belief of the market as information processor, with data existing as objective, truthful, and transparent.

Supported by the real estate industry, residential builders, and politicians with an unflinching attachment to white supremacy, policies developed for the Jim Crow welfare state offered social safety nets to areas of employment dominated by white Americans. In this sense, as Ira Katznelson points out, Jim Crow welfare state policies in the postwar world created “affirmative action for whites,” as federal programs constructed a “massive transfer of quite specific privileges to white Americans.”²⁶⁵ For example, while unemployment insurance covered most jobs, domestic and farmworkers—occupations dominated by people of color—were excluded. Only a small percentage of African Americans could access the benefits of the GI Bill, as the administration of the bill rested with the states. Thus, even though the bill was color-blind, its application through the states was racially based, working to the advantage of white veterans:²⁶⁶ “In this aspect of affirmative action for whites, the path to job placement, loans, unemployment benefits, and schooling was tied to local VA centers, almost entirely staffed by white employees, or through local banks and both public and private education institutions.”²⁶⁷ As a result, housing and its regeneration of whiteness via suburbanization found kinship with the ideas of Friedman, whose Capitalism and Freedom denounced civil rights legislation and characterized it as a direct threat to the “freedom of individuals to enter into voluntary contracts with one another.”²⁶⁸ Freedom and liberty now demanded the white right—their historic entitlement—to both “choose their neighbors and to be free from government interventions that might interfere with the market mechanisms that had allowed them to prosper.”²⁶⁹ Rather than simple biological inferiority, the white imagination suggested that African Americans “were unable or unwilling to play by the rules of the marketplace. The debate over integration, whites insisted, no longer turned on questions about race, ideology, or personal preference. What counted was a person’s relationship to places and to property, and a person’s ability to function properly in what was assumed to be a free market for both.”²⁷⁰ In short, Buckley’s statistical and racist argument over the inability of African Americans to pull themselves up by their bootstraps—like Irish or Jewish Americans—was warmly received by white Americans no longer comfortable with the overtly racist language of their youth.

Reality upset this postwar white innocence, as the urban uprisings after 1964 expressed a systemic Black reaction to white intransigence to extending the social equality ideals of the constitution to the descendants of the founding fathers’ enslaved property. The corporate media framed the burning of cities and civil unrest on television as sensationalized events, including news documentaries deploying images of Daniel Patrick Moynihan’s “broken family” thesis while underlining the prevalence of welfare programs.²⁷¹ Ignoring the findings of the Kerner Commission (including the revelatory claim “that white society is deeply implicated in the ghetto. White institutions created it, white institutions maintain it, and white society condones it”), the possession of history held firm: old ideas woven through the legacy of the American racial dictatorship recycled assertions assigning blame to African Americans.²⁷² Indeed, a lack of respect for property, community, and the “law” became a mantra for explaining away Black unrest for the post–civil rights era, justifying what became the post-1968 civil rights policy of “benign neglect” toward the Black community, as suggested to Nixon by Moynihan (setting the seeds for mass incarceration and the war on drugs in the 1980s).²⁷³

Business Week also ventured into the space of explaining the struggles of African Americans amid its discussions of multinationals and finance. For example, Business Week described the Kerner Commission as a “compelling” document in understanding the “details it provides of the riots and in its sweeping portrayal of the historical and social context in which the country’s racial problem must be understood,” supporting the liberal conclusion that “in any democratic society integration must be the final goal.”²⁷⁴ A month earlier, Business Week had outlined the need for business to take the lead in ending segregation, through jobs, housing, and education—asserting market solutions over government action (an attitude a few large corporations adopted in the 1940s and 1950s).²⁷⁵ The effort toward desegregation in American business was daunting, as a poll in 1944 supported ongoing racial segregation (even as the nation fought against white supremacy in Europe).²⁷⁶

Setting a pattern at the dawn of social equality, the magazine was silent in mentioning the decades-long, federally subsidized housing discrimination—among other features of the Jim Crow welfare state—enjoyed by the primary demographic reading Business Week. Going back to the mid-1950s, innocence shrouded this distribution of racial wealth inequality through Business Week’s benevolent assessment of the North’s attitude toward Negroes: “Though [the North] doesn’t think of the Negro as a social equal, neither has it formally defined a place for him [as the Jim Crow South has]. And with a more liberal political tradition, it has at least paid lip service to the idea of equal opportunity, though it often amounts to little more.”²⁷⁷ A discussion of federal intervention in white suburban housing was beyond the boundaries of debate, let alone the targeting of federal intervention toward white people through programs such as defense, space, or infrastructure. Moreover, the magazine paternalistically described the situation facing African Americans in 1954, noting: “While it is true that the Negro in the United States is, to a great extent, what the white man made him, it is also true that the white man as a whole is ignorant of his creation. The facts about the Negro are still obscured by a cloud of mythology.”²⁷⁸ As W. E. B. Du Bois discussed the white historiography of slavery in the 1930s, “in the end nobody seems to have done wrong and everybody was right. Slavery”—or in this case, institutional racism—“appears to have been thrust upon unwilling helpless America.”²⁷⁹ Unlike the conclusion of the Kerner Commission, Business Week felt white America was innocent in its history of race relations.

By the early 1960s, Business Week took a more aggressive tone toward the civil rights movement. Writing defensively about the civil rights movement’s criticism toward institutional racism such as housing in 1963, the magazine used older language denoting white fear of Black people constructed through decades of criminalizing Blackness, asserting, “Still there’s trouble. Despite such concessions, trouble lies ahead. Part of the menace comes from Negro impatience.”²⁸⁰ The magazine offered a warning to its predominantly white readership, embodying an early justification for white backlash against the quest for social equality: “North and South, Negroes are stepping up the pace of their marches, picketing, and sit-ins, provoking mass arrests and sometimes violence on both sides. Negro willingness to risk violence shows up in a city such as Gainesville, Fla., where Negroes retaliated against a white attack by dragging a white man from his car and beating him.… Says Paul Anthony, field director of the moderate Southern Regional Council: ‘You get a sense of real militancy and an anti-white feeling that we haven’t experienced before.’ ”²⁸¹ Inverting the deep history of white rage and terrorism toward Black America, and obscuring the rank hypocrisy of condemning oppressed Americans who struggle for the rights taken for granted by white Americans, Business Week’s possession of history entered familiar avenues of anti-Blackness, trafficking well-worn representations and familiar images circulating through mass media. When African Americans marched assertively, often in directions well outside the boundaries of white acceptability, old fears of Blackness surfaced. Business Week highlighted that the confrontational tactics for achieving social equality went too far, as moderates who prayed and exhibited patience appeared to ease the concerns of whites—who grew up consuming the acceptable image of the Sambo caricature (content, dimwitted, loyal, and lazy) in literature and film.²⁸² The old threat of the slave rebellion surfaced when African American activists condemned the “all deliberate speed” of racial progress, which, of course, was the primary barricade for white resistance making its last stand against social equality one hundred years after the Emancipation Proclamation. For Business Week, the insistent Black demand for constitutional rights was at fault, not white intransigence:

On the other side of the coin, Negro aggressiveness crystallizes white resistance. Even in cities with a reputation for moderation, some whites have lost sympathy with Negro tactics. After nine days of Negro mass demonstrations in Greensboro, N.C., Mayor David Schenck noted: “As a result of the large demonstrations, our group of moderates is shrinking”.… Chamber of Commerce Pres. John Harden adds: “A few weeks ago, the directors of the Chamber of Commerce and the Merchants Assn. independently passed resolutions urging equal treatment of all people. Today I am sure the Chamber directors wouldn’t pass such a resolution.”²⁸³

By the end of the 1960s, a series of Gallop polls in May 1968 suggested that white people overwhelmingly denied there was ill-treatment of “Negroes” in “this community” (including discrimination by businesses) and that they disagreed with the Kerner Commission—58 percent of whites polled asserted that African Americans were “to blame for the present conditions in which Negroes find themselves.”²⁸⁴ Meanwhile, the “black-white income gap” remained faithfully unequal, more so in the South than in the North.²⁸⁵ Centuries-old instincts found new life as white resentment in the post–civil rights era.

“What price will whites pay?” asked Business Week, addressing the most pressing cultural and economic question for white people about to experience their first decade of legislated social equality: “Money and emotions are inextricably mixed; fear of economic loss feeds the fear of Negroes.… Most white Americans limit their acceptance of Negroes in their neighborhood to those few Negro families with similar educational and economic backgrounds—those who can afford homes made accessible by the new federal open-housing law.”²⁸⁶ The authors, of course, shoveled more dirt on the grave of the Jim Crow welfare state, further obscuring the federal price associated with creating the white suburbs between the 1930s and early 1960s: $120 billion, with less than 2 percent going to people of color.²⁸⁷ Desperate, the age of legislated social equality could only begin by burying the evidence of the racial dictatorship in order to foster the role of victim for a white America no longer protected by racist legislature. Through its invisibility, whiteness and its possession of history could disavow any set of past or present practices supporting white male supremacy. Baldwin spoke of this dilemma in The Fire Next Time (1963): “There is simply no possibility of a real change in the Negro’s situation without the most radical and far-reaching changes in the American political and social structure. And it is clear [in 1963] that white Americans are not simply unwilling to effect these changes; they are, in the main, so slothful have they become, unable even to envision them.”²⁸⁸ The conspiracy of silence sheltering white innocence continued to tighten the Gordian knot.