American Empire

by Joshua Freeman

  Wal-Mart’s success rested on a never-ceasing campaign to drive down prices. The company used its growing size to pressure suppliers to lower their wholesale prices, passing on the savings to shoppers. To further cut prices, it increasingly turned to low-wage overseas suppliers to stock its stores. Though the manufacturers were nominally independent, Wal-Mart, with its enormous purchasing power and marketing expertise, often controlled the production process.

  Keeping its own labor costs down also was critical to Wal-Mart’s low-price strategy. Wal-Mart offered very low wages and meager benefits, understaffed stores, and frequently violated laws regulating worker hours and wages. In an effort to maintain the loyalty and morale of its workers in spite of these practices, Walton and other company executives crafted an internal company culture that portrayed Wal-Mart as a giant family steeped in patriotic, Christian values. To sustain this ethos, the company recruited store managers from small, often religiously affiliated colleges in the South. High employee turnover purged the firm of discontented workers and potential troublemakers. When a threat of unionization did arise, the company sent out a specially trained team of executives from its headquarters to counter the effort, in virtually every case succeeding in blocking organized labor.

  While old-fashioned in its low-wage, paternalist labor policies—common in the South when Walton began his chain—Wal-Mart came to be cutting-edge in deploying technology to facilitate expansion and keep down costs. Using its own trucking fleet and taking advantage of transportation and inventory innovations, including cargo containers and bar coding, Wal-Mart developed a remarkably efficient system of logistics for moving and tracking goods, including the growing flood of items it imported from Asia. It also developed state-of-the-art information technology. Unlike the developers of personal computers, who envisioned the decentralization of information and power through the application of advanced technology, Wal-Mart used computers to centralize information and authority. With data gathered from every cash register in each Wal-Mart store, relayed back to the company headquarters in Bentonville, Arkansas, through a private satellite system, executives could monitor in real time sales trends, inventory needs, and worker deployment. Eventually headquarters-based managers could adjust thermostats and control cash registers in stores thousands of miles away. Wal-Mart also used its satellite system, along with a fleet of corporate planes, to maintain cultural control over its increasingly far-flung empire. Walton and other executives made frequent trips to inspect stores and via satellite gave pep talks to “associates,” as employees were dubbed, assembled in stores across the country.

  Wal-Mart and other discounters changed the face of retailing. Lower prices for groceries, clothes, and household goods partially compensated for the wage stagnation that workers experienced during the 1980s and beyond. The wide range of goods that Wal-Mart and its competitors offered gave customers outside metropolitan regions greater in-store choices than ever before, providing the modern equivalent of the service once provided by Sears and Roebuck and other mail-order firms. The discount chains generally located their stores on the outskirts of towns and small cities, where they could find cheap land and offer plentiful parking. Their success in driving many small, locally owned sellers out of business sped the demise of old downtowns, as stores shuttered and shoppers saw no reason to visit. At the same time, Wal-Mart helped push down wages for workers nationally, not only through its own low wage scale but by putting pressure on better-paying rivals, especially in the grocery business where unionization had been common, and by pressing suppliers to keep cutting their prices.

  Like the new-model meatpacking firms, Wal-Mart found financial success through innovative business practices, relentless cost-cutting, and low-wage labor. By 1985, Sam Walton was the richest person in the United States (to be succeeded, after his death in 1992, by Bill Gates). Combining parsimonious labor practices, high technology, and an aura of down-home paternalism, Wal-Mart found a formula superbly suited to the political, economic, and cultural moment of the 1980s. If GM and U.S. Steel once epitomized the power of corporate America and a social system that accounted for the country’s post–World War II success, by the end of the 1980s Iowa Beef, Microsoft, and Wal-Mart had displaced them as models for corporate America, using formulas quite different from the unionized, urban-centered, New Deal system of social relations. Together these firms pointed toward a set of productive and employment arrangements that represented the new face of American business.

  CHAPTER 15

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  The Reagan Revolution

  Ronald Reagan was an improbable leader of the political revolution to which his name became affixed. The onetime actor lacked many of the traits that had come to be expected of national leaders. Kennedy, Johnson, Nixon, Ford, and Carter all spent long hours reading memoranda and documents, discussing policy, and overseeing the complex operations of a huge government establishment. Reagan made little effort to disguise his lack of interest in the nuts and bolts of government and most areas of public policy. He did not like to work long hours nor think it necessary. Often he skipped reading briefing books to watch movies. Officials who worked with him were startled by how little he knew about crucial issues before him.

  Though the most successful conservative politician of the twentieth century, Reagan rejected many of the ideological beliefs and behavioral expectations of the movement he headed. Many conservatives accepted the inherent faults and fallibility of mankind. For the Christians among them, the notion of original sin sobered their sense of the politically possible, oriented them toward using state power to restrain individual behavior, and added a tragic dimension to their view of the world, giving a decidedly antiutopian cast to their thinking.

  Reagan accepted almost none of this. Though he occasionally used the language of evil—most famously in his description of the Soviet Union as an “evil empire”—he had an essentially sunny view of mankind that matched his own upbeat temperament. In his view, the “people” were never the problem, only government, which stood independent from its creators and constituents. The child of a Catholic father and Protestant mother, Reagan as a twelve-year-old chose to be baptized in the Christian Church (Disciples of Christ) and later attended Eureka College, run by the denomination. Throughout his life he described himself as a Christian, believing that God had a plan for each individual. But as an adult he rarely attended church—an irony, given the importance of evangelical Protestants to his political success—and seemed to have not a trace of the tragic, Niebuhrian Protestantism that was so influential in post–World War II political thought. Reagan believed that a more perfect society could be built here and now, and built by Americans, whom he saw as particularly blessed by God. He spurned the conservative Burkean belief in the value of precedent, tradition, and incremental change, embracing instead Edmund Burke’s great critic, the transatlantic revolutionary Tom Paine, whose cry, “We have it in our power to begin the world over again,” he quoted in his 1980 acceptance of the Republican presidential nomination.

  Reagan’s belief in the ability to shed the past extended to his personal life. As a candidate and as president, he welcomed support from promoters of what came to be called “family values,” who opposed “abortion, pornography, the drug epidemic, the breakdown of the traditional family, the establishment of homosexuality as an accepted alternative life-style, and other moral cancers that are causing our society to rot from within,” as Jerry Falwell, a Baptist minister and cofounder of the Moral Majority, put it. Yet Reagan himself had been divorced and remarried (the first divorcé to reach the White House), had a distant relationship with his adult children, opposed the California ballot initiative that would have banned gays and lesbians from teaching in public schools, and, as California governor, signed a law easing restrictions on abortion.

  In his acting days, Reagan had been a strong supporter of the New Deal and briefly on the fringe of the Popular Front. But in the early 1
950s he began drifting toward the right. Lemuel Boulware, a vice president of General Electric and architect of its highly effective antiunion strategy, helped shepherd Reagan into the conservative camp. In 1954, GE hired Reagan to host its television series, General Electric Theater, and visit company factories as part of an effort to build employee loyalty. Reagan’s factory speeches, drawing on material from Boulware, promoted free-market ideas and criticized union political initiatives. Boulware soon had him speaking to civic groups in towns with GE facilities. By the time Reagan left GE in 1962, he had perfected a highly effective stump speech that attacked excessive government and promoted free enterprise.

  Yet Reagan never completely embraced the antiunion, anti–New Deal politics that animated the business right. He liked to point out that he was the only union president to serve in the White House, having headed the Screen Actors Guild for two stints, including during a five-week strike in 1960. As president, he undermined organized labor but never completely shunned it. He had just finished addressing construction union leaders when, sixty-nine days into his presidency, a deranged would-be assassin shot him outside a Washington hotel. Many conservatives viewed Franklin Roosevelt as a class or even national traitor, but Reagan continued to admire him throughout his life.

  The Conservative Ascendency

  Conservatives triumphed in the 1980s by weaving together several different political strands into a national electoral coalition based in the Republican Party. Reagan abandoned his declining acting career for full-time politics in 1965, when a group of conservative California businessmen drafted him to run for governor. His ambition and doggedness led him into a prolonged quest for the presidency, which he ultimately achieved by gaining the support of the conservative movement and helping to expand it. Reagan’s eclecticism and political skills allowed him to paper over significant differences within the movement, while his expansive, optimistic demeanor attracted millions of voters for whom the pinched, backward-looking, repressive aspects of conservatism and its ties to the wealthy had little appeal.

  One strand of support for the conservative movement came out of white opposition to civil rights. By the 1970s, many white southerners, particularly upwardly mobile suburbanites, had come to oppose racial integration using the language of property rights—the freedom to decide whom to sell their property to and whom to live next door to, free from government interference—rather than that of racial superiority. This helped link anti-integrationists to business critics of the New Deal state, who also prioritized the rights of property over government regulation. Reagan proved adept at deploying the language and symbols of rights-based anti-integrationism. While running for governor he opposed a state bar on racial discrimination in selling or renting homes. During the 1980 presidential campaign, he criticized “the forced busing of school children to achieve arbitrary racial quotas” and defended states’ rights in Philadelphia, Mississippi, the town where three civil rights workers had been murdered in 1964.

  The backlash against racial integration indirectly provided another boost to Reagan and conservatism by politicizing evangelical Protestants. While some evangelical leaders became politically active as a result of the Supreme Court decisions banning prayer in schools and legalizing abortion, the issue with the greatest mobilizing effect was the denial of tax-exempt status to religious schools that practiced racial discrimination. In 1975, the Internal Revenue Service revoked the tax-exempt status of Bob Jones University, a Christian college in South Carolina that banned interracial dating by its students. Three years later, the agency began requiring private schools, including so-called Christian academies, which had been founded when public schools desegregated and had few minority students, to prove that they did not engage in discrimination in order to maintain their tax-exempt status. In response, southern evangelical leaders launched a wave of protests and organizational efforts aimed at exerting the power of church followers in the political realm. Coming at a time of increasing conservative dominance of evangelical groups, including the Southern Baptist Convention, this politicization provided an enormous boost to the right.

  Conservative political operatives like Richard Viguerie (a former leader of Young Americans for Freedom and fund-raiser for George Wallace), Howard Phillips (another former YAF leader), and Paul Weyrich (a founder of the Heritage Foundation) worked closely with ministers and televangelists in setting up conservative religious political groups like the Moral Majority and tightening the ties between conservative churches, politicians, and the anti-ERA, antiabortion, and anti–gay rights movements. Some evangelical ministers supported the political right for its economic as well as its social positions. As entrepreneurial leaders of churches, schools, seminaries, and radio and television stations, they shared the free-market ideology of business conservatives. Reagan reaped the benefits of this alliance in 1980, using symbolic gestures like a speech at Bob Jones University, in which he called for a “spiritual revival” and denounced the IRS guidelines for private schools for establishing “racial quotas,” to erase any doubts that as a non-churchgoing divorcé he better represented the interests of the evangelical movement than the pious, born-again incumbent, Jimmy Carter.

  Conservative strategists recognized that to win national power they needed to complement their traditional upper-class base and growing southern base with inroads among northern working-class and middle-class voters who supported the Democratic Party and had liberal economic views. The traditional Republican stress on balanced budgets, lower taxes for business and high earners, and opposition to welfare-state programs had little appeal to this constituency. What came to be called supply-side economics had greater potential.

  In the late 1970s, a small group of conservative writers and ideologists, including Wall Street Journal editorial writer Jude Wanniski, free-market fundamentalist George Gilder, and economist Arthur Laffer, began arguing that instead of the Keynesian focus on managing demand, national prosperity could best be assured by promoting the increased production of goods and services through supply-side policies. Easing or eliminating the restraints and distortions that the government imposed on the market, they argued, including high taxes, regulatory programs, and preferential treatment for particular industries, would boost investment, create a burst of economic growth, lower inflation, and increase savings. Laffer and some others went so far as to claim that the growth that would result from a steep cut in federal tax rates would be so great that government revenues would not diminish. The supply-siders won an important convert in Robert L. Bartley, chief of the Wall Street Journal’s editorial page, who gave them a national platform and legitimized them in the business community.

  A few congressmen, including New York Republican Jack Kemp, Texas Democrat Phil Gramm, and Michigan Republican David Stockman, picked up the supply-side banner. In 1977, Kemp and Delaware senator William Roth proposed an across-the-board 30 percent cut in federal income taxes. The Kemp-Roth bill provided a political vehicle for conservatives to take advantage of the antitax, antigovernment sentiment revealed by Proposition 13 and other state tax-cutting measures.

  Reagan made Kemp-Roth a centerpiece of his economic program during the 1980 campaign. Adopting Laffer’s theory that lower taxes would not reduce federal revenue—George H. W. Bush, Reagan’s main rival for the Republican nomination and then his vice presidential running mate, called it “voodoo economics”—allowed Reagan to present tax-cutting as a populist program that would unleash economic growth and provide new opportunities for all Americans, “especially the minorities,” without requiring the elimination of popular federal programs. While some business leaders had doubts about Reagan and supply-side economics, once the Californian emerged as the likely Republican nominee, support from business, large and small, flowed heavily to him, as well as to Republican congressional candidates, a departure from the mid-1970s, when business groups generally split their contributions between the two parties.

  Demo
cratic weaknesses combined with Republican strengths in the outcome of the 1980 election. Poorer Americans, who had been a mainstay of the New Deal–Great Society electoral bloc, registered their alienation from politics and the Democratic Party by voting in diminishing numbers. The decline in their voter participation rate, which exceeded the general decline, hurt the Democratic Party, as did Senator Edward Kennedy’s unsuccessful primary challenge against Carter. The hostages in Iran dominated the news during the 1980 campaign, a nightly illustration of Reagan’s argument that under Carter the United States had lost its toughness, confidence, and mastery of world events. But the most important factor in the election was the poor state of the economy. Reagan took what Carter had dubbed during the 1976 campaign the “misery index”—the sum of the inflation and unemployment rates—and turned it against him, pointing out that it had risen to over 20 during his term in office. Reagan asked voters, “Are you better off now than you were four years ago?” For most, the answer was no.

  Reagan did not win a massive public endorsement in 1980, receiving a bare majority of less than 51 percent of the popular vote. Carter got 41 percent, with nearly 7 percent going to independent John Anderson. Reagan won a majority of the votes cast by men, while women divided their votes almost equally between Reagan and Carter, an electoral “gender gap” that would continue for years to come.

  Though shallow, Reagan’s victory was unusually broad. He carried forty-four states and made significant inroads among working-class and lower-middle-class voters, winning close to half the votes from union households. Of all the major components of the old New Deal coalition, only African Americans remained massively loyal to the Democratic Party. In addition to capturing the White House, the Republicans picked up an extraordinary twelve seats in the Senate, giving them control for the first time in twenty-six years. In the House, they added nearly three dozen seats, considerably narrowing the Democratic majority. If not necessarily a ringing endorsement of conservatism, the 1980 election represented a broad rejection of the Democratic Party and a mandate for change, which Reagan and his advisers eagerly seized.