The Powell Memo - Understanding Modern American Capitalism & Politics

An accurate understanding of the mechanics behind modern American capitalism and politics is not possible without an understanding of the memorandum written in 1971 by the American attorney (and future U.S. Supreme Court Justice) Lewis F. Powell, Jr., titled Attack on American Free Enterprise System ("Powell Memo" and "Memo").

Even the most basic, accurate understanding of what drives modern American capitalism and politics requires at least an introduction to the Powell Memo. Not only is the Powell Memo critical to understanding how American capitalism and politics currently operate, it is useful in understanding countries that have imported and emulated America's leadership styles since the Memo was written and began being implemented.

Dated August 23, 1971, this month marks fifty-five years since the Powell Memo was written. It's not complicated or difficult document to read; all the more reason we should all read it. Nevertheless, I considered how best to efficiently introduce it, whether for that "most basic, accurate understanding" or for a deeper dive. I opted for replicating two excerpts: 1) Powell's argument for business leaders to influence politics, and 2) Powell's argument for business leaders to influence the courts.

Justice Powell - Image Credit: Washington & Lee

Background and Context

By way of background and context at the time, Lewis Powell completed his memo by August 23, 1971. Two months later in October 1971, President Nixon nominated Powell as a Justice for the U.S. Supreme Court. Two months later in December 1971, he was confirmed by the U.S. Senate. The next month, January 1972, Lewis Powell was sworn in as Justice Powell, where he served for fifteen years. Talk about a fast track for rewarding and implementing an ideology!

One of the goals of the Powell Memo was to galvanize the business world for a counterattack against a litany of enemies, real or perceived (e.g., communists, Labor, consumerism, environment, etc.). As reported by David Vogel in Chapter 8 of his book, Fluctuating Fortunes: The Political Power of Business in America (New York: Basic Books, 1989), the numbers indicate the Powell Memo achieved that goal. Between 1968 and 1978, the number of corporations with public affairs offices in D.C. expanded from 100 to over 500. Between 1971 and 1982, firms with registered lobbyists in D.C. exploded from 175 to nearly 2,500; and between 1976 and 1980, the number of corporate PACs had ballooned from under 300 to over 1,200.

It's fair to recognize the Powell Memo as the marriage vows between American capitalism and American politics.

First page of Powell Memo

With your 21st Century advantage of being able to look back over the past fifty-five years, give the two excerpts below from the Memo a read (replicated in full and the full Memo is available here). As you read these excerpts, it'll be helpful to remember two axioms. The first: "A page of history is worth a thousand pages of explanation." The other: "A strength taken too far becomes a weakness."

The Powell Memo itself is our page of history. An interesting question is whether American business-political strengths developed since the Powell Memo have been taken too far and turned into weaknesses. I wonder how you'd answer that question after reading these excerpts, and the rest of the Memo when you can.

The Neglected Political Arena

In final analysis, the payoff – short of revolution – is what government does. Business has been the favorite whipping boy of many politicians for many years. But the measure of how far this has gone is perhaps best found in the anti-business views now being expressed by several leading candidates for President of the United States.

It is still Marxist doctrine that the "capitalist" countries are controlled by big business. This doctrine, consistently a part of leftist propaganda all over the world, has a wide public following among Americans.

Yet, as every business executive knows, few elements of American society today have as little influence in government as the American businessman, the corporation, or even the millions of corporate stockholders. If one doubts this, let him undertake the role of "lobbyist" for the business point of view before Congressional Committees. The same situation obtains in the legislative halls of most states and major cities. One does not exaggerate to say that, in terms of political influence with respect to the course of legislation and government action, the American business executive is truly the "forgotten man".

Current examples of the impotency of business, and of the near-contempt with which businessmen's views are held, are the stampedes by politicians to support almost any legislation related to "consumerism" or to the "environment".

Politicians reflect what they believe to be majority views of their constituents. It is thus evident that most politicians are making the judgment that the public has little sympathy for the businessman or his viewpoint.

The educational programs suggested above would be designed to enlighten public thinking – not so much about the businessman and his individual role as about the system which he administers, and which provides the goods, services and jobs on which our country depends.

But one should not postpone more direct political action, while awaiting the gradual change in public opinion to be effected through education and information. Business must learn the lesson, long ago learned by Labor and other self-interest groups. This is the lesson that political power is necessary; that such power must be assidously [sic] cultivated; and that when necessary, it must be used aggressively and with determination – without embarrassment and without the reluctance which has been so characteristic of American business.

As unwelcome as it may be to the Chamber, it should consider assuming a broader and more vigorous role in the political arena.

Neglected Opportunity in the Courts

American business and the enterprise system have been affected as much by the courts as by the executive and legislative branches of government. Under our constitutional system, especially with an activist-minded Supreme Court, the judiciary may be the most important instrument for social, economic and political change.

Other organizations and groups, recognizing this, have been far more astute in exploiting judicial action than American business. Perhaps the most active exploiters of the judicial system have been groups ranging in political orientation from "liberal" to the far left.

The American Civil Liberties Union is one example. It initiates or intervenes in scores of cases each year, and it files briefs amicus curiae in the Supreme Court in a number of cases during each term of that court. Labor unions, civil rights groups and now the public interest law firms are extremely active in the judicial arena. Their success, often at business' expense, has not been inconsequential.

This is a vast area of opportunity for the Chamber, if it is willing to undertake the role of spokesman for American business and if, in turn, business is willing to provide the funds.

As with respect to scholars and speakers, the Chamber would need a highly competent staff of lawyers. In special situations it should be authorized to engage, to appear as counsel amicus in the Supreme Court, lawyers of national standing and reputation. The greatest care should be exercised in selecting the cases in which to participate, or the suits to institute. But the opportunity merits the necessary effort. (Powell Memo, pgs. 24-27).

With these excerpts in mind, take a few minutes to think about what you've seen, learned, or experienced regarding American capitalism and American politics over the past fifty-five years. Do you think any of America's current business-political perspectives or relationships or operations, developed since the Powell Memo was implemented, have been taken too far and turned into weaknesses? If so, why? If not, why?

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