The Powell Memo Turns 50

Remembering a time when Ralph Nader scared corporate America witless.

Fifty years ago today, Supreme Court Justice-To-Be Lewis Powell wrote a memo warning the U.S. Chamber of Commerce that "business and the enterprise system are in deep trouble, and the hour is late." Powell’s wasn’t the only voice in the late 1960s and early 1970s urging big business to mobilize against the forces of taxation and regulation, and Mark Schmitt has argued persuasively (here and here) that the memo’s centrality to the history of conservatism tends to be exaggerated. (Among other things, Schmitt notes, Powell was a conservative Democrat, not a movement conservative.) I myself suggested in my 2012 history of the post-1979 rise in income inequality, The Great Divergence, that the key figure who energized the business lobby during the 1970s and 1980s was not Powell but Bryce Harlow, a high-ranking aide to Presidents Dwight Eisenhower and Richard Nixon who made himself dean of the Washington business lobbyists. (Much of the material that follows is from The Great Divergence.)

But the Powell memo, which three months after it was written leaked to the columnist Jack Anderson during Powell’s Senate confirmation hearings, does capture in vivid detail the panic in the business world at that moment in history, and its golden anniversary is worth commemorating.

“No thoughtful person,” Powell wrote, “can question that the American economic system is under broad attack,” not only from “Communists, New Leftists and other revolutionaries” but also from “perfectly respectable elements of society: from the college campus, the pulpit, the media, the intellectual and literary journals, the arts and sciences, and from politicians.”

Fifty years later, you may well ask: What on earth was this man talking about? American business had prospered since the end of World War II. The 1973 Arab oil embargo, which would set off a chain of events that disrupted the U.S. economy for a decade, was still two years off. The pillars of the postwar industrial economy—General Motors, U.S. Steel, General Electric, etc.—were still very much in the saddle.

All that is true. But the business world was going through a rough patch. Corporate profits were down and capital formation was lower than in comparable industrial democracies. Inflation and unemployment were high. A week earlier, Nixon had taken the U.S. off the gold standard, creating enormous uncertainty.

Harlow, Powell and the Chamber were inclined to blame most of their troubles, if not all of them, on the post-1960 liberal ascendancy. Congress, responding to a 1962 Washington Post exposé by Morton Mintz about the sedative thalidomide, had tightened safety standards for drugs. Then, in response to Ralph Nader’s Unsafe at Any Speed, Congress started regulating auto safety. Between 1966 and 1969 Congress went on to pass laws increasing regulation of supermarket product labels, meat safety (previously regulated only when meat products crossed state lines), gas pipelines, the information that banks provided their customers, flammable fabrics, and coal-mine safety. The trend continued even after Nixon took office, with the creation of the Environmental Protection Agency in 1970 and the Occupational Safety and Health Administration in April 1971.

Powell’s memo—and, more important, Harlow’s evangelizing in speeches around the country—helped turn the business lobby, till then a pretty unorganized interest group, into a much more powerful force. By 1980 the Chamber had tripled its budget. The National Federal of Independent Businesses grew from 300 members in 1970 to 600,000 in 1979. The Grocery Manufacturers of America and the National Association of Manufacturers relocated from New York City to Washington. The number of corporations that maintained their own lobby shops in Washington, about a dozen when Harlow opened a lobby shop for Proctor & Gamble in 1961, grew to 100 by 1968 and to 500 by 1978. “My job used to be booze, broads, and golf,” one longtime business lobbyist told Business Week in 1979. “Now it is organizing coalitions and keeping information flowing.”

Looking at the Powell memo today, one is reminded of what a powerful figure Ralph Nader was perceived as being. “Perhaps the single most effective antagonist of American business,” Powell wrote, “is Ralph Nader who—thanks largely to the media—has become a legend in his own time and an idol of millions of Americans.” Powell then quoted a Fortune magazine article that said “the passion that rules in” Nader was “aimed at smashing utterly the target of his hatred, which is corporate power. He thinks, and says quite bluntly, that a great many corporate executives belong in prison.” (One change in American life since that sentence was written is that that view of corporate misbehavior is no longer especially controversial.)

Bryce Harlow died in 1987. Louis Powell died in 1998. Nader isn’t nearly as powerful today as he was in 1971, and a lot of his would-be liberal allies have never been able to forgive him for playing spoiler in the 2000 presidential election. But as I wrote in my recent New York Times review of Paul Sabin’s new book Public Citizens, Nader is still around and still trying to make government do a better job of checking corporate power. That power is much greater today than it was 50 years ago, in large part because Nader was so influential back then that he prompted an enormous counter-reaction by big business. But at 87, Nader at least has the satisfaction of knowing he’s outlived the enemies he made when he stood at the pinnacle of his power. He is a genuine American hero.