This is part two of a four part series that ties our current economic crisis to the thirty year buildup of defense spending since the Reagan Presidency. You might want to read the prologue and Part 1 first.
Life in 1950’s America was lived under the twin fears of annihilation and depression. Annihilation because the constant threat of a Soviet nuclear attack was drummed into the populace from the day you practiced your first duck and cover drill in Kindergarten. I will never forget my first grade teachers warning that we should not open our eyes until she gave the all clear signal, for we would surely be blinded by the nuclear flash. The very idea that blindness would not be our biggest problem was not something a six year old mind could wrap itself around. The second threat, unknown to a six year old, but ever present in the minds of our parents and grandparents had been the 12 year world-wide annihilation of the capitalist economy known as The Great Depression. For economists and planners the biggest shock of the thirties had been the deflationary spiral. Excessive margin borrowing for stock speculation in the late 20’s led inevitably to debt liquidation as stock prices fell sharply. This in turn led to slowing of consumer purchasing Once demand for new products dried up, prices started to fall and the Federal Reserve was unable to stimulate demand by lowering interest rates. It was “pushing on a string”.
The almost two decades of austerity ending in 1947 unleashed a good deal of pent-up demand for consumer products, but by 1954 demand growth for both automobiles and appliances (“consumer durables”) began to flatten. That year at the conference of American advertisers in Minneapolis, Studebaker Auto’s chief designer Brooks Stevens gave a talk on how to use “planned obsolescence” to prevent another fall in demand. Heretofore products had been sold on durability and quality, and even though the British economist, Bernard London had proposed in 1932 that planned obsolescence would be the way out of the depression, it wasn’t until Stevens began touting the idea that it was embraced by American companies. What was necessary he said, was “Instilling in the buyer the desire to own something a little newer, a little better, a little sooner than is necessary.” From this point on, from Chevrolet cars to Amana refrigerators to RCA televisions the annual “model change”, introduced in September with the start of the new television season became a fact of American life. Ironically, the one American TV manufacturer, Allen Dumont, that sold his more expensive sets based on a high quality “5000 hour picture tube” was forced out of business by 1958.
A much greater irony rests in the fact that at the same time Steven’s idea of disposable consumer durables (the irony) was being widely accepted in the U.S., the two defeated powers of World War II were rebuilding their industrial plant on a very different model. In Tokyo a young entrepreneur named Akio Morita was building the first transistor radio for a small start-up called Sony, based on licenses he had obtained from Bell Labs. Not far away, Eiji Toyoda, had recently returned from a visit to Ford Motor’s River Rouge plant, convinced that his small Toyota Motor company could build cars more efficiently. He put forth to his board the outrageous idea that they sell their new Toyota Crown (left) outside of Japan, targeting Brazil and the U.S. At the same time the factories in Germany of Mercedes Benz, BMW and Volkwagen were slowly beginning to turn out cars based on a principle that they could be run for at least 150,000 miles with the original engine. So as the American manufacturing culture of durability was being hollowed out by a marketing aesthetic of disposability, our former enemies were creating a culture of quality goods that would come to have lasting appeal for publics around the world. This disparity of course would come to haunt our country to an extent unrecognized at the dawn of the cultural revolution of the 60’s.
This cultural revolution affected the ability of all business to continue to market in the aspirational style that had been the hallmark of the consumer durable business. For those companies working with the Pentagon, it was even more problematic. Dow Chemical was no longer known as the producer of miracle fabrics, but rather of incendiary Napalm weapons, capable of searing the flesh off young Vietnamese children. It would not be until 1971, when soon to be Supreme Court Justice Lewis Powell wrote his notorious memorandum to the head of the U.S. Chamber of Commerce, that business fought back. The Powell Manifesto was a call for the Chamber and it’s allies to fund a counter revolution against the cultural and political forces of the 60’s and recapture the country for the political forces of big business.
In an extraordinary prefiguring of the social goals of business that would be felt over the next three decades, Powell set his main goal: Changing how individuals and society think about the corporation, the government, the law, the culture, and the individual became, and would remain, a major goal of business.
Powell’s plan of attack was for big business to fund think tanks like the American Enterprise Institute, the Heritage Foundation and others who would provide policy papers to begin the rollback of the power of unions, students, consumer and environmental groups. Of course in the intervening 25 years since America had introduced it’s planned obsolescence manufacturing system, the lure of foreign quality goods had begun to catch on. By 1975, the U.S. was running an annual merchandise trade deficit, which would never be eliminated. With the election of Ronald Reagan, a full scale war against the unions began , but at the same time new thinking at the top of many corporations began to coalesce around the idea of outsourcing manufacturing to countries with lower labor costs and little or no environmental legislation. These two factors began the wholesale deindustrialization of America.
Of course the only industries not outsourced were the defense contractors. Eisenhower’s prescient warning of “the unwarranted influence of the military industrial complex” had come true. With factories in almost every state, military contractors had remarketed their closed bid contracts as “job programs” and legislators were eager to protect some of the few manufacturing facilities left in America.
Reagan had convinced us by 1984 that he was presiding over “Morning in America” and for the conservatives that Lewis Powell had urged into battle, it certainly seemed that victory was at hand. All attempts to regulate business such as passing further auto mileage standards had been beaten back and even American car manufacturers were winning converts to their new SUV’s. But there was one part of the puzzle that was being ignored, even though Jimmy Carter had pointed it out during the oil embargo. The U.S. domestic oil supply had passed it’s peak and was declining even as low mileage SUV’s were burning gas at an unprecedented rate. As we will see in part 3, the combined forces of imported oil, skyrocketing military budgets, growing trade and current account deficits were powering Battleship America towards a sea of icebergs.