Daniel Glicken traces the history of big businesses’ collusion with government

Media coverage of the Halliburton and Enron scandals and the unsettling 2000 elections offered glimpses into the conflicts of interest inherent in corporate involvement in government and the privatization of government functions—from accounting to defense and from prison management to election procedures.

While scandals confirm the belief of most Americans that politicians are beholden to special interests, they haven’t diminished the stone walls set up against meaningful inquiry by the media and Congress. Chair of the Financial Services Regulation Committee Mike Oxley took the issue to its lowest common denominator last month by telling industry’s reps that they would receive better treatment before his committee if they had only Republican lobbyists.

It appears that the people in power no longer know how to distinguish ethical from unethical. But citizens can take the lead. The first step is knowing the standard relations between business and government and the watershed changes that have brought us where we are today.

Historic Relations
A thumbnail sketch of perennial relations shows governments turning to bankers when taxpayers are tapped out, guarding sea lanes for commerce and granting patronage and charters for land and development. Whenever a license or contract is granted, a tax break or price support given, opportunities arise for a wider relationship to develop. There may be social benefits or ills in the actual exchange, but there is always greater access to government decision-makers. Underlying all this is the age-old terrain of alliances and enmities between familiy dynasties, governments, fraternal and secret societies and criminal networks.

There is also a long history of efforts to pry business and political interests apart. In modern times Adam Smith showed both the virtues and downfalls of markets. He warned against mercantilism, the form of state-capitalism of his day, and he similarly advised that free markets produce “a narrowness of vision” inherent in giving one’s total attention to profit-making. He advocated public education as a cure.

In the U.S., from time to time we’ve dealt with the incestuous relationships of business and government head on—James Madison helped frame the Constitution with checks and balances between regional economic interests and levels of government. From the struggle over the central bank to the Gilded Age and the reform era and then deregulation, the nation has repeatedly built up and knocked down the fire walls designed to keep functions of government and business from overwhelming and nullifying each other. Extreme abuses were traditionally exposed by the media or regulated by Congress. Failing that, popular movements periodically swept offenders out of office.

Some Watersheds
The Civil War raised the stakes of government-business connections to geopolitical proportions. International alliances and huge national projects of state building came with the contracts for war and reconstruction.

The age of American monopoly began in that mid-19th century period, obliterating some regional balance of industry and prompting Henry Demarest Lloyd to write in 1881 that “Rockefeller has done everything to the Pennsylvania legislature except refine it.”

This was followed by the reform era which ended the monopolies but left huge cartels and a central bank trust in their place, plus a multitude of powerful tax-exempt foundations. As cartels controlled production, markets and prices, the invisi-ble hand of the market became visible.

The oil industry continued to get the most concessions from government, the highest profits and a political power base which put them at the table in formulating foreign policy and at times even executing it throughout the century.

The Spanish American War and WWI raised the granting of contracts to ever grander heights, along with old-fashioned patronage. Colonel John Jacob Aster was enshrined in the “War Heros of the Phillippines” for “accepting the commission as Inspector-General and presenting the government with a $100,000 mountain battery.”

After WWI, some of the largest American corporations found partners with cartels and governments which were hardly American in character. In the name of anti-communism—and with Germany having the only standing industry in Europe after the war—a partnership developed. Investments poured in from the West; quotas and pricing rules came from the Reich.

During and after WWII, these same “partners” began quietly transferring assets and booty out of Germany with plans for a secret diaspora of the Reich and its businesses. A large number of their leaders were led out of prisons and into the ranks of our private and public establishment under the direction of Alan Dulles and John J. McCloy. The rationale again was anti-communism, although it was mostly accomplished without the knowledge of three presidents, Roosevelt, Truman and Eisenhower, who were shown only falsified papers.

More top Nazi emigres from Eastern Europe were welcomed to the central committee of the Republican party as part of Richard Nixon’s “ethnic outreach” program. Nazis were also imported or kept in place after the war by other nations in the Middle East, Europe, USSR, Africa and Asia. We simply got there first and took home the most, then returned some to Germany. “De-nazification” in the Adenauer government has been characterized as “don’t ask, don’t tell.”

The most sweeping realignment of government and business began with the start of the Cold War and passage of the National Security Act of 1947. No other Act in our history did as much to enhance the relationship between business and government. So much has been written about the legacy of this act from the left and the right that few people understand how it changed the whole mission of government from the center.

The U.S. went from a history of temporary war mobilization to a permanent war-time footing, headed up by a permanent Defense Department poised for the nuclear age. Under the national security regimen, three priorities came to dominate everything:

1. To be permanently ready with the latest of weapons and technical systems to support them
2. To have a favorable balance of payments to pay for these weapons and systems.
3. To secure the strategic materials and energy which are essential for making and deploying the weapons and systems.

All three goals required partnership with giant corporations. Only the largest
corporations such as General Electric and Westinghouse had the wherewithal to produce the latest nuclear weapons and systems. Only they could manufacture the kinds and quantities of products which would sell overseas and generate a favorable balance to finance the weapons. And only they reached around the world to secure the strategic resources for making and fueling the weapons.

Foreign policy became as much about helping corporations maintain and expand markets as it was about sparring with the Soviets. Whenever corporations fell short, the government was there with a blank check. This enshrined the now classic pattern of socializing costs and privatizing profits. It also gave companies unprece-dented access to power and decisions, prompting Eisenhower to deliver his famous warning about the military-industrial complex.

These national security objectives, in turn, changed domestic priorities. Hopeful post-war plans for production of housing, health, urban development, small business and care for the elderly did not produce foreign exchange, so these services were permanently put on the back-burner.

The combined change in foreign and domestic priorities affected the very mission and nature of every department of government. The Departments of Treasury, Commerce and Agriculture were originally commissioned to formulate policies to serve needs at home. Now they were tasked to support the development of products sold overseas. Because balance of payments involves more than trade, they had to come up with new economic formulae to attract or force currency and investment to the country. Old standards and mechanisms for stabilizing and recti-fying trade and currency were dropped.

A kind of economic warfare was waged between capitals all around the world, and this fight over balance of payments superseded all contexts and consequences. Even poor nations such as Egypt cut domestic food production to grow products for export. Peru spent a critical part of its tiniest per capita income on weapons.

The Department of Justice turned away from its primary mission of crime-fighting and anti-trust prosecutions to surveillance of political dissenters and anti-war protesters, as it had in the WWI days when the FBI backed the American Protective League.

The State Department, along with the Kremlin, assumed life and death power over the world, yet its functions took a back seat to intelligence in accord with the notion that covert activity avoided the nuclear trigger. The department’s corporate connections were cemented by drawing directors of intelligence from leaders of corporate finance and law. They, in turn, widely recruited throughout the private and public sectors.

Author John Loftus reports that Allen Dulles and, later, Bill Casey developed “the revolving door” between the CIA and industry, often leaving their professional staffs aghast at the flagrant abuses of financial information to enrich both themselves and their clients.
When Congress concluded the Contra-Irangate investigations by requiring intelligence to report to them on operations, a presidential waiver quietly followed, signed by President Bush, who also signed a waiver of conflict of interest for his cabinet in the Gulf War.

During the 1980s it was realized that struggles over balance of payments had not been a smashing success ever since Vietnam became very expensive. But it didn’t quite matter as long as the world was required to purchase its oil in dollars and recycle their dollars here.

After the oil embargo in 1973, we had formalized our protection of OPEC’s ownership of oil on the condition that OPEC members sold petrol in dollars and re-invested the dollars in the U.S. Every other nation had to keep a high dollar reserve to buy oil, and they too invested large portions of those “petro-dollars” here. As long as we printed the dollars, the base of industrial production and export was of less consequence.
Business was now free to creatively combine tax breaks on interest deductions with net operating losses to leverage the buyouts of companies. That began to shift American jobs and production overseas, but the U.S. still had its petro-dollars. Much of the pattern was engineered by Michael Milkin, who went to jail, and William Simon, who was made Secretary of the Treasury.

When the Cold War was over, the security state didn’t blink. For reasons which changed quickly from anti-communism to maintaining stability, to fighting a drug war, to anti-terrorism, to weapons of mass destruction, the forward deployment of troops was retained and the garrison mentality continued at home.

At the same time, free-enterprise answers to everything took over the world, most particularly, world lending and trade institutions. Under the neoliberal or “monetarist” formulae, the IMF and World Bank required the countries who accepted their loans to turn over their collective resources such as water, electricity and banking to international corporations and to open their markets and currency to surges of investment and withdrawal at the expense of their domestic needs and trade.

By the time Argentina collapsed from these mandates, economists had noticed that monetarist formulae didn’t account for the massive volatility engendered by the economic free-for-all.

Still, the financial sector enforced neoliberal “purity,” possibly because it had become the largest recipient of government bailouts, a process that began with the Texas banks, Continental Illinois, and the Savings and Loan debacle, and continues to this day.
By this time, the corporate media had mastered the economics of news gathering by covering press conferences rather than reporting on important issues. President Clinton signed the Telecommunications Act of 1996, giving corporate media the right to own up to eight radio stations in a market—a gift of such overwhelming advertising power that competitive talent disappeared from the market and much of the news was eliminated or consolidated to a couple of national sources.

With all of these perennial relations and watershed changes in place, it was little wonder that no one took notice when the top government leaders came out of the same strategic industry which also just happened to control major chunks of the privatized infrastructure of government.

The Present and Future
Additions to the Patriot Act, if enacted, would make it illegal to investigate government-business relations altogether. One section would criminalize the investigation of finances of any public official or contractor on the grounds that it conceivably could suggest information about some security service which they might be receiving from the government.

This confuses the professional ethics of scholars with those of Osama bin Laden and sets up a basis for a level of corruption not seen since 17th century China when officials were above scrutiny and pillaged the country.

Moreover, if economies are brought to a point where people are unable to get savings out of banks, a national security apparatus may be aimed at civilian populations for the purpose of control. There are no guarantees that the country will win with these methods.
Attracted by the relative strength of Europe’s GNP and frightened by the President Bush’s unilateralism and the administration’s apparent conflicts of interests, many nations have begun switching currency or parts of their currency reserves to the euro. Iraq, Iran and Korea were among the first oil producers to do so. The war in Iraq may boost Middle East oil production for a time, but the world has the power to speed up a switch to another safe harbor of currency or political alliance.

The more we understand these changes, the better we can speak toward their redress. U.S. citizens must be made aware. We must demand the correction of the underlying fundamentals with energy alternative and conservation, sane tax policies, reinvestment in manufacturing and export, enforcement of conflict of interest regulations and immediate return to diplomacy.