The Deep State (7 page)

Did “Hope and Change” Really Change Anything?

Some political observers assert that Barack Obama is measurably different from his predecessor. If that assertion is true, it would undercut the Deep State thesis that fundamental policy continuity exists regardless of which party controls the levers of government. Obama, they say, took over from the bungling and reckless Bush and saved an economy in free fall from collapsing. If one looks at superficial economic indices like the
more than doubling of the Dow Jones average since early 2009, steady if tepid GDP growth, and a marked if hardly spectacular reduction in unemployment, their assertion appears correct.

A broader picture of the economy, however, paints a less favorable picture: national economic inequality is still increasing, GDP growth is outrunning wage growth, and an unreformed Wall Street is still creating highly leveraged markets that are as vulnerable to breakdown as the mortgage market of the 2000s. Even the stock market recovery has been deceptive: individual stock ownership has fallen to its lowest level since the 1990s,
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much of the gain in equities is from cash-rich corporations engaging in the economically useless practice of buying back their own stock, and most of the trading volume comes from high-frequency traders front-running the market and skimming profits from all the hapless remaining investors.

Median pay for the top one hundred highest-paid CEOs at publicly traded companies in the United States reached $13.9 million in 2013, a 9 percent increase over the previous year, according to a new Equilar pay study for the
New York Times
.
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Meanwhile, median household income has been stagnant or declining.
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From that perspective, the Obama administration did not so much save the economy as stabilize the status quo by reforming a few of the worst aspects of the system it inherited while adopting a strategic change in tone. Obama kept the key features of the Deep State intact.

The same picture emerges from an examination of the Obama administration's national security policy. Analysts like those at the Democratic-leaning Center for American Progress lauded Obama's withdrawal of U.S. troops from the Iraq War he opposed as a senator. Later, when the security situation there sharply deteriorated, Republicans excoriated Obama for “losing” Iraq. Yet he merely executed the identical withdrawal on the same timetable that had been agreed to by his predecessor. Obama's military budget continued to increase during the first three years of his administration—he was actually spending more than the Bush administration had budgeted in its out-year planning documents. The
administration's policies on drones, surveillance, and detention, accompanied by rhetorical flourishes about ending or cutting back on the prevailing practices, did little more than set in cement the most egregious practices of his predecessor.

What are we to make of this? That Obama was a more articulate Bush with better speechwriters? That the quadrennial circus called the presidential election campaign has a tendency to yield disappointing results? That all politicians are rogues and rascals? An alternative explanation lies at hand, even if it leads away from the political horse race, the tendency of politicians to disappoint us, and partisan enthusiasms and frustrations. This explanation focuses on institutions and their capacity to shape the behavior of the human agents who are tasked to lead them—even (or perhaps especially) self-anointed agents of change.

The American government, together with the corporations that make up its satellite and parasite organizations of contractors, campaign contributors, and influence peddlers, constitutes the largest and most complex institution the world has known. This institution has evolved into what sociologist Max Weber called an “iron cage.” The cage is a metaphor representing the bureaucratization of society and its relentless pressure on individual actors to conform to the ingrained expectations of the organizations they work for.

Weber recognized that while bureaucracies are supposed to be based on rational decision making, actors within them end up behaving in an irrational manner. Modern societies create administrative structures such as law enforcement and courts to safeguard the lives and civil liberties of the law-abiding, but institutional logic impels those agencies to violate those same liberties because, officials insist, they must do whatever it takes to “keep us safe.” It is equally true that the formal rules of a bureaucracy bar nepotism, bribery, or insider trading—so the institution evolves ever more subtle practices to allow legalized corruption, such as the creation of political action committees and quasi-charitable organizations.

At bottom, societies create bureaucratic structures to solve problems.
During the last dozen years, the Deep State has done a horrible job of averting or overcoming severe crises in the defense of the country and in ensuring a functioning national economy that serves the material needs of the great majority of citizens, not to mention preserving their liberties. But the shadow government has easily mastered the task of creating a fog of soothing propaganda to ensure its own perpetuation and aggrandizement while protecting the reputations and incomes of its senior players. More than that, it has kept virtually every single one of them out of jail. No one above the enlisted ranks ever served prison time for torture, atrocities, or the other crimes associated with an unprovoked and unjustified war, just as no senior Wall Street executive ever landed behind bars for the mortgage and securities frauds associated with the 2008 financial collapse.

How and why these circumstances arose, and where our system of unaccountable government is heading, is the subject of the following chapters.

Today we are engaged in a final, all-out battle between communistic atheism and Christianity. The modern champions of communism have selected this as the time, and ladies and gentlemen, the chips are down—they are truly down.

—Senator Joseph McCarthy, speech in Wheeling, West Virginia, February 9, 1950

Look, if you think any American official is going to tell you the truth then you're stupid. Did you hear that? Stupid.

—Arthur Sylvester, assistant secretary of defense for public affairs, speaking to U.S. correspondents in Saigon in 1965, as quoted by CBS News correspondent Morley Safer

World War II, the Atomic Bomb, and the Dawn of the Deep State

On the eve of World War II, the American state had great potential for world power. It was, after all, already by a significant margin the biggest economy in the world. But that potential was as yet unrealized. Our army was far from the most powerful ground force on the globe: it ranked seventeenth in the world, smaller than the armies of Romania or Sweden. Its equipment was woefully inadequate, and some senior officers still resisted converting their cavalry regiments from horses to tanks. There was no separate air force, and the Air Corps (which was subordinate to the Army) was inferior to the air forces of several other countries. The Navy was in somewhat better shape, managing a rough parity in capital ships with the United Kingdom, although many of its weapons and tactics were out of date.

Over the course of the war, the United States, through pluck, grit, and improvisation, built a military-industrial machine such as the world had never conceived possible. It constructed pipelines in Burma, airfields in the Arctic, swarms of aircraft, and a vast naval fleet a single temporary task force of which was larger than the entire British navy. German survivors of D-Day remarked in awe that the whole English Channel was so full of Allied ships that one could almost have walked dry-shod from one vessel to the other.

The crowning achievement of this new military colossus was the development, at breakneck speed, of the ultimate war-winning weapon and inverted guardian angel of the cold war: the atomic bomb. The attainment of workable nuclear weapons was almost certainly the Deep State's moment of conception. No other governmental project had been so large, and no other large project had ever been shrouded in so much secrecy.
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Whole secret cities, like Oak Ridge in Tennessee, Hanford in Washington State, and Los Alamos in New Mexico, sprung up from nowhere in a matter of months. If the Deep State is an evolved structure, nuclear weapons were the genetic mutation that gave it the key characteristics it possesses today: a penchant for secrecy, extravagant cost, and a lack of democratic accountability.

By 1945, what
Time
magazine publisher Henry Luce called the American Century was at hand. The American people and their leaders had reason to be proud of their collective accomplishments. But that pride transmuted into a hubris that gave us the mistaken belief that we could remake the world in our own image. The history of the next two generations is replete with examples of where this hubris would lead: Korea, Vietnam, Central America, and our more recent series of misadventures in the Middle East. In a more subtle fashion, the tremendous victory in the
Second World War and the responsibilities of world leadership that came with it intellectually corrupted the American political class.

The first indication came in 1947, when President Harry S. Truman struggled with how to sell Congress on the idea of committing large sums of financial assistance to Greece and Turkey, then perceived to be under threat of takeover by Soviet-backed insurgencies. Arthur Vandenberg, the Republican chairman of the Senate Foreign Relations Committee, told Truman that if he wanted Congress to support his policy, the president would have to “scare the hell out of the American people.”
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Thus did the seed of one of the Deep State's prime tactics germinate: fear became the tool of choice for America's postwar political class, as exemplified by the president's salesmanship of what became known as the Truman Doctrine. In line with Senator Vandenberg's advice, Truman darkly described the “totalitarian regimes” that threatened to extinguish freedom all over the globe. He got the money he asked for: $400 million, equal to at least $4 billion in today's prices.

The concept of a permanent, peacetime national security apparatus became gradually institutionalized with the National Security Act of 1947, which established the Department of Defense, the CIA, and the president's National Security Council. NSC-68, a 1950 White House policy document, sketched out a grand strategy for containing communism by means of a permanent peacetime military buildup. The year 1952 saw the statutory creation of the National Security Agency. These policy measures represented the congealing of an idea unprecedented in American history: that the United States should, and would, maintain a large, capable military and a comprehensive intelligence establishment regardless of whether it was in a formal state of war.

Relations with the Soviet Union over the next four decades varied between tolerable and awful, but there were at least no major direct armed conflicts between the two powers, regardless of the involvement of one or both countries in proxy wars in the third world, as well as numerous small incidents between U.S. and Soviet forces. Nevertheless, the universal use of the term “cold war” implied that the United States and the USSR were
at war in all senses save for shots being fired; this way of thinking fed periodic national panics such as the McCarthyite hysteria over internal subversion and the frenzy over
Sputnik
. Present-day Democrats who are tired of being perpetually accused by Republicans of being weak on defense would do well to remember that the shoe was sometimes on the other foot during the 1950s. Some Democrats charged the Eisenhower administration with allowing a “bomber gap” with the Soviet Union, and in 1960, presidential candidate John F. Kennedy accused Eisenhower of presiding over a “missile gap.”
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Both gaps were wholly imaginary, since the United States was well ahead both in numbers and quality of both types of weapons. It is one of those conveniently disremembered ironies of American history that Kennedy, the darling of American liberalism, should have accused the chief organizer of American victory in Europe during World War II of being weak on defense.

President Eisenhower already recognized the danger of the permanent war mentality, and in his January 1961 farewell address he presciently warned about the “disastrous rise of misplaced power” of a new “military-industrial complex” on American soil. By the middle of the 1960s, the twin neuroses of paranoia and hubris that exemplified the mentality of the national security state led us into the mud of Vietnam. The Deep State, with the military-industrial complex at its core, was well on its way to crystallization by the 1960s, but Vietnam and the attendant domestic tumult showed that such an outcome was neither inevitable nor irreversible. Popular protests compelled even hawks like Richard Nixon to campaign on the pretext that they could end the war, forced an end to the draft, exposed and limited the extensive domestic spying on U.S. citizens opposed to the war (code-named COINTELPRO), and fueled the
revelation (in the Pentagon Papers) of the heretofore secret and mysterious world of national security policy. Nixon's criminal overreaction to the leak of the Pentagon Papers led inexorably to the first-ever resignation of an American president.

The political changes of the 1970s—reform of the CIA as a result of the Church Committee hearings, reining in the FBI after J. Edgar Hoover's four decades of autocratic directorship, and the Foreign Intelligence Surveillance Act (FISA) placing domestic national security surveillance under supervision of a court—appeared to blunt the advance of the national security state and in some cases to reverse it. In retrospect, however, the 1970s were a temporary detour from the upward trajectory of the Deep State. The same social currents that caused massive popular rejection of the Vietnam War also led to the rise of a far more powerful and longer-lasting domestic countermovement.

This countermovement considered itself the bedrock of American patriotism and American values—the core of what Sarah Palin took to calling “real America.” It perceived itself to be under siege by the same groups of suspect Americans who attacked the Vietnam War and the national security state: dissidents, malcontents, flag-burners, antipatriots. This countermovement, which composed much of corporate America that had nothing to do with the military, had been contained and tamed since the New Deal. It was now feeling beleaguered by the wave of health, safety, environmental, and proconsumer legislation that was a legacy of the 1960s and early 1970s. It is worth recalling that Richard Nixon, the arch-ogre of Watergate, was behind the creation of the Environmental Protection Agency and other domestic initiatives that would be unthinkable for a Republican president of today.

This business-led countermovement was something of a departure from the prevailing postwar corporate consensus. During the 1930s and 1940s, democratic parliamentarianism narrowly overcame a profound global crisis that had in part been brought on by the failure or refusal of democratic countries to rein in the worst excesses of their capitalist economies. These unreformed excesses led directly to the greatest economic
collapse in modern history and a mortal challenge from the totalitarian systems that exploited the crisis. The democratic systems that emerged after a cataclysmic war claiming 60 million lives dedicated themselves to broader and deeper citizen participation in government and the creation of social remedies that would buffer against the threat of mass destitution. The National Health Service in Britain, Medicare in the United States, codetermination (worker participation in management) in Germany, and lifetime employment in Japan were all examples of postwar social policy in democratic governments. These innovations helped achieve unprecedented levels of broadly shared prosperity and drove economic growth throughout the industrialized world at a rapid pace.

Corporate America was largely on board with the prevailing postwar consensus. After all, the terrors of the Crash of 1929 had been banished, profits were rising, and a high-wage policy meant that workers were avid consumers of industry's output. But the twin shocks of persistent inflation beginning in the late 1960s and the oil shock of 1973 undermined business confidence just at the time neoliberal economic theories were arising out of academic obscurity to challenge that consensus. That said, this shift in attitude was only partly about concern over business conditions or the regulatory regime in Washington. The tenor of the times—the antiwar Left, the beginning of the Weather Underground's bombing campaign, the atmosphere of cultural permissiveness—got the attention of business leaders because it suggested an anticapitalist climate taking hold in the country.

The Powell Memo and the Laissez-Faire Philosophers

In 1971, a corporate lawyer representing the tobacco lobby wrote a memo titled “Attack on the American Free Enterprise System.”
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This memo advocated aggressive action by the business community against a perceived left-wing assault on business. The author advocated “constant surveillance” of textbook and television content, as well as a “purge” of left-wing elements in important institutions like universities, the press, and
churches. He also proposed institution building among business interests in the furtherance of influencing government policy. Nixon would soon appoint the memo's author, Lewis Powell, to the Supreme Court, where he served until 1987.

The Powell Memorandum became the manifesto and battle plan for a rollback of the New Deal and the enthronement of corporations as persons. Powell, like the probusiness conservatives he wrote for, considered himself a practical, pragmatic problem solver in contrast to the woolly-headed theorizers of contemporary liberalism. Jude Wanniski, another savant of the probusiness movement, published a book in 1978, and its title,
The Way the World Works,
emphasized the purportedly commonsensical and practical nature of the economic ideas he was peddling. But as Keynes famously said, “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.” Just as twentieth-century socialism rested on German thought from the nineteenth century, the theoretical structure of Powell's business conservatism rested on a German intellectual foundation.

Friedrich Hayek, Ludwig von Mises, and Wilhelm Röpke are generally considered to be the founders of the radical free-market doctrine that is now confusingly called neoliberal economics.
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Hayek, the most famous of the three, described himself as a radical pragmatist and empiricist, but, as is usual in the German philosophical tradition, his followers systematized and dogmatized his theory to the point where it became a materialist religion, a mirror image of Marxism. According to the current neoliberal catechism that is Hayek's legacy, the market is a deity which must be worshiped with elaborate rituals, while the government is Satan; Wall Street is heaven, and Washington is hell. These days, Hayek's ghost is the reigning Supreme Being of the
Wall Street Journal
's editorial page, and there is a Ludwig von Mises Institute in Alabama, of all places.

Throughout America's history, corporate and military interests have hardly been strangers, but the American historical tradition—at least until the permanent mobilization of the cold war—of rapid and complete military demobilization after the wars meant that boom would quickly turn to bust. Apart from inconsistent profitability, there were manufacturers, mostly in the Midwest, who on pacifist or other principles wanted to avoid military contracts. In 1940, British plans to have Ford Motor Company manufacture under license the Rolls-Royce Merlin engine for the Spitfire fighter aircraft went awry when the isolationist Henry Ford, Sr., personally vetoed the project.
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