Confessions of an Economic Hit Man

The oil crisis could not have come at a worse time for the United States. It was a confused nation, full of fear and self-doubt, reeling from a humiliating war in Vietnam and a president who was about to resign. Nixon’s problems were not limited to Southeast Asia and Watergate. He had stepped up to the plate during an era that, in retrospect, would be understood as the threshold of a new epoch in world politics and economics. In those days, it seemed that the “little guys,” including the OPEC countries, were getting the upper hand.

I was fascinated by world events. My bread was buttered by the corporatocracy, yet some secret side of me enjoyed watching my masters being put in their places. I suppose it assuaged my guilt a bit. I saw the shadow of Thomas Paine standing on the sidelines, cheering OPEC on.

None of us could have been aware of the full impact of the embargo at the time it was happening. We certainly had our theories, but we could not understand what has since become clear. In hindsight, we know that economic growth rates after the oil crisis were about half those prevailing in the 1950s and 1960s, and that they have taken place against much greater inflationary pressure. The growth that did occur was structurally different and did not create nearly as many jobs, so unemployment soared. To top it all off, the international monetary system took a blow; the network of fixed exchange rates, which had prevailed since the end of World War II, essentially collapsed.

During that time, I frequently got together with friends to discuss these matters over lunch or over beers after work. Some of these people worked for me—my staff included very smart men and women, mostly young, who for the most part were freethinkers, at least by conventional standards. Others were executives at Boston think tanks or professors at local colleges, and one was an assistant to a state congressman. These were informal meetings, sometimes attended by as few as two of us, while others might include a dozen participants. The sessions were always lively and raucous.

When I look back at those discussions, I am embarrassed by the sense of superiority I often felt. I knew things I could not share. My friends sometimes flaunted their credentials—connections on Beacon Hill or in Washington, professorships and PhDs—and I would answer this in my role as chief economist of a major consulting firm, who traveled around the world first class. Yet, I could not discuss my private meetings with men like Torrijos, or the things I knew about the ways we were manipulating countries on every continent. It was both a source of inner arrogance and a frustration.

When we talked about the power of the little guys, I had to exercise a great deal of restraint. I knew what none of them could possibly know, that the corporatocracy, its band of EHMs, and the jackals waiting in the background would never allow the little guys to gain control. I only had to draw upon the examples of Arbenz and Mossadegh—and more recently, upon the 1973 CIA overthrow of Chile’s democratically elected president, Salvador Allende. In fact, I understood that the stranglehold of global empire was growing stronger, despite OPEC—or, as I suspected at the time but did not confirm until later, with OPEC’s help.

Our conversations often focused on the similarities between the early 1970s and the 1930s. The latter represented a major watershed in the international economy and in the way it was studied, analyzed, and perceived. That decade opened the door to Keynesian economics and to the idea that government should play a major role in managing markets and providing services such as health, unemployment compensation, and other forms of welfare. We were moving away from old assumptions that markets were self-regulating and that the state’s intervention should be minimal.

The Depression resulted in the New Deal and in policies that promoted economic regulation, governmental financial manipulation, and the extensive application of fiscal policy. In addition, both the Depression and World War II led to the creation of organizations like the World Bank, the IMF, and the General Agreement on Tariffs and Trade (GATT). The 1960s was a pivotal decade in this period and in the shift from neoclassic to Keynesian economics. It happened under the Kennedy and Johnson administrations, and perhaps the most important single influence was one man, Robert McNamara.

McNamara was a frequent visitor to our discussion groups—in absentia, of course. We all knew about his meteoric rise to fame, from manager of planning and financial analysis at Ford Motor Company in 1949 to Ford’s president in 1960, the first company head selected from outside the Ford family. Shortly after that, Kennedy appointed him secretary of defense.