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By the time he went solo, Hoover was less an engineer than what we might recognize today as the head of a private equity firm.11 He had a few stakes in genuinely productive mines, and new techniques for processing mine tailings for their base metals led to novel Westralia revenue, but finance ruled the world now. He found that rationalization and efficiency were good ways to attract capital, but the ultimate results didn’t always correlate with his gains. Hoover didn’t have to invest a ton of money or reorganize production in order to prosper on a new project. He just had to convince other financiers that something previously uninvestable was now a good bet; then he could sell them his stake at a profit and do it again. Instead of South Africa and Westralia, his five offices were in San Francisco, New York, London, Paris, and Petrograd. In the years following settlement of the Russo-Japanese War he advised both the Russian czar and Japanese capital on carving up the Siberia-Korea-Manchuria nexus, but he spent most of his time in the world’s Paper Belt, traveling between his five offices and Belgium, where a spike in rubber prices combined with the Crown’s superexploitation of African slave labor on the Congo plantations enriched King Leopold II and his affiliated financiers.
The Chief’s primary stated goal was to lower the price of wheat in the face of intense global demand, which he did by setting the price lower, enraging farmers. The processors, however, had nothing to complain about. For them Hoover used a “cost-plus” formula, paying contractors an agreed-upon percentage above their costs rather than setting a price.iii He earned the ire of staple-farmer populists, the loyalty of the processing industries, and the admiration of anyone who believed what was printed in the corporate press. America won the war, and the boys came home with an appreciation for canned food and candy. Rather than scale down mass production when soldiers went back to their local food systems, the processors plowed their wartime profits into advertising designed to convince the country that processed foods from national companies were better and safer.
Even when the associative state triumphs, there are always malcontents complaining about the relationship between capital and government. Once Hoover was gone, Congress took a closer look at the airmail contracts and the flurry of corporate activity surrounding them. Pop Hanshue told the legislators exactly how Western became so successful. Why had the company been confident it was going to get the mail contract? He testified that the company’s friends Robinson (“the banks”) and Chandler (“the newspapers”) had friends in the Hoover administration.19 He laid it out plainly, in a way that has convinced many historians that the whole mess was a corrupt blunder corrected by Roosevelt. But Hoover never hid his intentions. That was the way it was supposed to work. The government facilitated leading men, who in turn facilitated the government’s facilitation. It wasn’t corruption that enabled Herbert Hoover Jr., after being the first person to take a class in radio engineering at Stanford, to study aeronautical economics at Harvard on a Guggenheim grant and then get hired to run radio development at the Chandler-and-Robinson-financed federal-Guggenheim contractor Western Air Express. It was coordination, the way royal families arrange marriages. There weren’t any planes and then there were a lot of planes—that was the important part, not who got rich. After all, somebody had to. The tangle of names and firms, partnerships and stock offerings and board positions, starts to sound less like the tense strings of a conspiracy network and more like the dull thrum of business as usual.
World War I ended with the collapse of Europe’s global empires, and with them went the colonial model of the California engineer. As new countries formed, some repudiated the debts and concessions imposed on them by previous unelected governments. But if populations held some sort of fundamental right to cancel these contracts unilaterally under a principle we might call “economic democracy,” then how could anyone make investments in the first place? And it wasn’t just Europe and Russia; in Mexico, where a lot of California capital lived, the 1917 constitution declared that “the Nation shall at all times have the right to impose on private property such limitations as the public interest may demand, as well as the right to regulate the utilization of natural resources which are susceptible of appropriation, in order to conserve them and to insure a more equitable distribution of public wealth.”27 This began a two-decade process of expropriation as the Mexican state dispossessed American owners such as Hearst and Chandler. What was next—America’s new Panama Canal?
It’s an understatement to say that much of the world was devastated by its second war, but the United States got off relatively easy. As one of the two superpowers left standing, America was responsible for rebuilding its half (or third, depending on whom you asked) of the world, and that meant getting money to flow through the global financial system again. The Marshall Plan to rebuild Europe and develop occupied Japan moved some cash, but the execution wasn’t big or fast enough. In a memo titled “NSC 68,” the secretary of state, Dean Acheson, and the chief of Truman’s Policy Planning Staff, Paul Nitze, suggested a way to spend novel amounts of government money without appearing to crowd out private industry: rearmament. By paying for peacetime arsenals in America and western Europe (and “on behalf of” Japan), they could prepare for war with the communists as Shockley theorized it and boost global demand without driving down prices, kick-starting what we now think of as capitalism’s twentieth-century golden age. This plan also rescued military contractors in the ACE sectors who were looking at peacetime layoffs. Acheson and Nitze wanted Truman to triple the Pentagon’s budget ask for 1950.15 Of all the smart-stupid state-capitalist plans, military Keynesianism, which called for the state to finance the expansion of the global economy by building machines designed to blow up the world, was one of the smartest-stupidest. And, of course, it worked.
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The postwar compact between labor and capital was that a privileged segment of workers shared in the profits from rocketing productivity. In exchange, the labor elite agreed to spend a lot and stay away from communists. And build the best bombs in the world. But freed from the wartime no-strike pledges, other workers—for whom suburban military Keynesianism looked to be a Worse Deal—tried to pick up where they left off in the 1930s. The postwar American economy was a site of high-stakes conflict: In 1946, the country set new records for corporate profits and number of labor strikes.33 Both sides sought to consolidate wartime gains and claim larger shares of expanding output, while workers struggled to keep up with rapidly increasing consumer prices newly liberated from wartime controls. In Oakland, a conflict that began with 1,000 striking department store workers escalated to a citywide general strike of 100,000.34 But the evenhandedness that characterized the Roosevelt administration’s mediation (at its best) was gone.
One of Santa Clara County’s virtues for firms looking to relocate or expand there was the lack of a strong industrial union presence—not an uncommon rationale for selecting a rural factory site. Like railroad engineers, salaried engineers at firms such as HP and IBM remained tough to organize, but some hourly production workers armed themselves with the National Labor Relations Act and bargained collectively. At military contractor Westinghouse’s Sunnyvale plant, the left-wing United Electrical Workers won an election to represent hundreds of workers, beating out more conservative unions. The UE entered the postwar period as the third-largest member union in the CIO with 700,000 workers, including around 300,000 women.35 But the UE had a strong communist current, and in 1947 when the Republican congress passed the Taft-Hartley Act, which required union leaders working with the National Labor Relations Board to affirm that they were not communists, the UE refused to comply. Soon they split entirely with the CIO, preparing it to merge with the tamer and less radical AFL. Marginalized by the increasingly anticommunist mainstream labor movement and shackled by Taft-Hartley, with its ban on sympathy strikes, the UE withered. In 1956 it lost its Westinghouse reelection, and by the end of the ’50s it was redbaited out of burgeoning Silicon Valley. This hit women on the production lines particularly hard. Historian Glenna Matthews writes that “[w]hen the UE lost its vital presence in the Valley, women workers lost their best chance of having labor commit resources to organize them.”36 Uncoincidentally, Silicon Valley firms used immigrant women to fill nonunion low-wage assembly jobs in the coming decades. Warned by example and freed from internal competition by Taft-Hartley, Santa Clara County union leaders stayed friendly with management.37
Manufacturers increased prices to offset the high wages that constituted their side of the compact, which made life hard for Americans whose pay wasn’t tied to industrial revenues. As economist John Kenneth Galbraith wrote of the dynamic, “A passenger in even a very fast automobile is reasonably certain of keeping up with it. A man running alongside is not so well situated.”38 Suburban military Keynesianism was a speedy car, and not everyone was along for the ride. The program left workers behind in new ways. For example, the unionized fruit industry, with its relatively high pay, had been open to undocumented immigrants, but only U.S. citizens were generally eligible for defense work. Still, Northern California’s Mexican population boomed as workers came from every direction toward the new center of prosperity, many solicited by regional labor contractors looking to fill jobs in the fields. In 1948, the Supreme Court struck down restrictive real estate covenants, allowing documented Mexican workers to live anywhere they wanted, but the Supreme Court couldn’t make high-technology firms hire them, even for nondefense work. Meanwhile, mechanization changed food production in California: The state’s agricultural workforce declined (in absolute terms) by over 20 percent between 1949 and 1969, though workers harvested virtually the same amount of acreage.viii Braceros, Mexican-Americans, and undocumented Mexican immigrants, cordoned away and together on the segregated labor market, all vied for the same shrinking set of jobs.
“[T]he solution to the economic crisis of the end of the war turned out to be simply not letting the war end,” writes historian Walter Johnson.51 The Cold War was a real, long war, and millions of people died. To speak of the American “postwar” economy or state into the 1950s is not to talk about a country at peace, but a country finished with peace altogether, a nation that has embraced a permanent conflict. [...]
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Baran was a professional peer and (at least) an intellectual equal of the leading liberal economists. During the war, he worked alongside Galbraith, who called him “one of the most brilliant, and by a wide margin, the most interesting economist I have ever known.”56 But whereas others were eager to ride bombs Strangelove-style into the prosperous American half of the century, Baran loathed military Keynesianism. In fact, he thought its development discredited Keynesianism in a broader sense. Along with his Harvard friend Paul Sweezy, Baran became the strategy’s most incisive critic within mainstream economics. In his 1957 book, The Political Economy of Growth, he argued that it did matter where demand was coming from, that stockpiling weapons of mass destruction for the spending stimulus was “very much akin to the counsel to burn the house in order to roast the pig.”57 The oligopolies running the American economy followed the government down absurd R & D paths, failing to produce anything useful for the people. And on their own, corporate leaders only pursued investment that reduced their costs, avoiding plans to expand output, which (as we’ve seen) ignited price competition and lessened profits. For workers, living didn’t get increasingly easy, as the Keynesians predicted. Under capitalism, people couldn’t direct the nation’s societal surplus to useful ends. Rather, the people’s inability to control those resources in the face of oligopolistic control defined capitalism.
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