Eisenhower

by Louis Galambos

  Then, strangely, inadvertently, miraculously, it actually happened. The geniuses were many and for some years they worked far away from the media’s gaze. But the wellspring of America’s third industrial revolution had already begun to flow in 1947 when Eisenhower was the army’s Chief of Staff. Contrary to economic logic and common sense, the foundational innovation came from a giant, pervasively regulated, heavily bureaucratized corporation. The Bell System’s discovery, the transistor, had quickly acquired a national and international reputation. But the transistor was popular only among those firms, individuals, and government organizations that had something very specific to gain from a new type of electronic switching device. AT&T made the invention available through reasonable licensing contracts, and by the mid-1950s the dynamics of the third industrial revolution, the digital revolution, were taking hold in the United States. At Fairchild Semiconductor and a few other firms, the transistor evolved into the integrated circuit and laid the technological base for what would shortly become California’s Silicon Valley—America’s digital heartland.34 This was more “genius for individual initiative” than even Ike could have wished for in early 1953.35

  The Eisenhower administration’s role in this stunning economic transition remained unchanged until the Soviet Union sent Sputnik into orbit in 1957. Congress, the media, the public, and America’s allies were shocked by the Soviet accomplishment.36 The United States had long been protected by the Atlantic and Pacific Oceans, but now those natural barriers seemed less formidable and isolation a dwindling option. Eisenhower remained calm. He was confident that the Soviet satellite was not a threat to America’s national security. But he decided that his administration had to take a more positive and visible position on scientific and technical change and had to do that quickly.37

  Changes came tumbling out of the White House.38 Ike spoke to the nation on “science in national security” and announced that he had appointed a new advisor, Dr. James R. Killian Jr., of the Massachusetts Institute of Technology, as his special assistant on science and technology. New appropriations followed. One created the Advanced Research Projects Agency (ARPA, later the Defense Advanced Research Projects Agency, DARPA) in 1958, a defense organization whose mission included the promotion of public-private innovations that would strengthen America’s leadership in high technology.39 The administration was, in effect, laying the foundation for the public science-and-technology infrastructure that would in a few years develop the Internet and support other innovations in digital technology.40 It would be some years before the innovations in electronics would begin to have a major impact on the national economy, but by 1960 it was already evident that America’s private sector was not about to become stagnant.

  What, then, was Eisenhower’s record on economic growth? The aggregates are impressive without being overwhelming. The average annual growth rate of real gross domestic product (GDP) over the eight years that he was president was about 2.5 percent. The economy was keeping ahead of an expanding population. GDP per capita increased, as did the workforce, which grew from 63 million workers to almost 70 million. Women had been joining the workforce in increasing numbers since World War II, and that important trend continued. The number of female workers went up by 3.8 million during Ike’s eight years in office. Private investment was up by 39 percent, and all this took place while the inflation rate was held to an average of about 1.4 percent. There was no appreciable change in income distribution, so the major gains in equality that Americans had realized during World War II were sustained.

  We do not have figures on the rate of increase in start-up firms, but we do know that a series of successful and important new businesses got going during these years. Most impressive was Fairchild Semiconductor, in part because it was the training ground for the executives who went on to found Intel in 1968. Other firms organized during the Eisenhower administrations included Thermo Electron (today Thermo Fisher Scientific), Semtech, and Tyco International.41 By the end of the 1950s, America had a set of private and public institutions that would enable it to lead the world into the next phase of the digital revolution. Ike’s confidence in the “people’s genius” was amply rewarded.

  Along the way to this conclusion, not all of the economic news was favorable. Capitalism is a restless system, and Eisenhower had to contend with the three recessions mentioned earlier. The cyclical downturns in 1953–1954, 1957–1958, and 1960–1961 all inspired intense fear that the economy might be sagging back into a major depression. The memory of the 1930s had not yet been erased from the minds of most Americans of working age, including President Eisenhower.42 Two of the recessions were, however, relatively mild: the unemployment rate peaked at slightly over 6 percent in 1954 and 6.8 percent in 1960. More serious was the 1957–1958 recession, which pushed unemployment to a peak of 7.6 percent. In all three cases, the combination of Federal Reserve monetary policy, automatic stabilizers, and the administration’s fiscal policy worked to cut off potential downward spirals.43 On average, unemployment hovered around 5 percent for the entire eight years of the administration. It was a thoroughly “middle way” style of capitalism.

  Less successful was Eisenhower’s encounter with foreign trade. Here he hoped to maintain liberal trade policies that were consistent with his concept of the creative role competition played in fostering economic progress. Paradoxically, however, problems arose because of the success the United States was achieving in stabilizing the free-world economy and encouraging economic recovery following World War II. Japan was enjoying a surge of economic development supported by the United States. President Eisenhower continued that support through both of his administrations. For reasons linked to Cold War national security, Ike saw Japan as the United States’ bulwark in the Pacific, just as Germany was an essential ally in Europe. When, however, Japanese exports to the United States shot up, he found it necessary to negotiate a series of “voluntary export restraints” with Japan. These agreements temporarily relieved the pressure on particular American firms. But they were not a solution to America’s encounter with fierce global competition and were inconsistent with Eisenhower’s emphasis on the long perspective in economic policy.44 He left that problem in the lap of the next president.

  Realities of Economic Security and Equity

  To Eisenhower, there was no serious conflict between policies that supported economic growth, innovation, and efficiency and those that provided Americans with greater security and an enhanced sense of equity. He was not concerned about the high taxes paid by upper-income groups even though they were a core element in the Republican Party. Controlling inflation was more important to him than reducing the taxes paid by wealthy individuals and large corporations. “It would be most unfair,” he explained in 1953, “to grant tax relief to one group when we cannot yet afford to grant it to all.”45 Insofar as the Eisenhower and Federal Reserve blend of fiscal and monetary policies held down inflation, they provided a greater measure of security to all those citizens with fixed incomes.

  Many Americans were attempting to live on their monthly social security payments, and Eisenhower understood how difficult that could be. His brother Ed, however, was far to the right of the middle way. Ed resented entitlements and attacked the entire social welfare system as a government giveaway that should be curtailed. Still attempting to be the dominant older brother, Ed was full of suggestions about everything from defending the Constitution to making Supreme Court appointments. Ike—certain that he and not Ed had been elected president—was at first patient with his obstreperous older brother.46 But in November 1954 Ike finally exploded. “The Federal government cannot avoid or escape responsibilities,” he wrote to Ed, “which the mass of the people firmly believe should be undertaken by it. The political processes of our country are such that if a rule of reason is not applied in this effort, we will lose everything—even to a possible and drastic change in the Constitution. This is what I mean by my constant insistence upon ‘moderation’ in government. Sh
ould any politician attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history.”47 As if to add a final, forceful period to that verbal blast, the president supported another expansion of the social security system and was able to sign the measure in August 1956.48

  Throughout his two administrations, Eisenhower backed a variety of new programs where he could see a real need for federal action. That continued to be more important to him than an abstract principle about getting the federal government out of activities that should be left to the states. He worked hard to reduce federal involvement where he thought it was unwarranted, but he added to the government’s responsibilities when he was certain it would serve the national interest. Fending off the right wing of the Republican Party and suppressing his own constitutional misgivings, he promoted increased federal involvement in education and the construction of a massive federal road system. Ever mindful of the right wing of the Republican Party, he downplayed the liberalism by stressing the national security aspects of the road system.49 Eisenhower also made no effort to change the congressional policy of using the surplus in social security to fund other programs.

  Eisenhower gave substantial consideration to providing Americans with equality of opportunity. He never mistook that for equality of outcomes. He was too experienced in the ways of the world to seek the sort of absolute equality communist leaders frequently touted as an advantage of the socialist system. But where opportunity was concerned, he moved quickly and forcefully to establish his position. Convinced that education played a powerful role in opening the way to jobs and promotions for Americans, Ike was willing to use the federal government’s resources to promote school construction in kindergarten through twelfth-grade education.50

  Ike understood that African Americans were blocked from the education they deserved and the job opportunities they needed. In 1954, the Supreme Court overturned the state laws that had kept African American and white children in separate and distinctly unequal schools.51 That, for Eisenhower, was now the law of the land. While privately he would have preferred a more moderate step forward, he did not question his responsibility for enforcing the law. He tried to establish racial equality where he had the authority to act. In matters of civil rights, Ike was something of a convert. During his long career in the military from 1915 through D-Day, he had never officially or informally complained about policies on racial segregation in the army. In the latter stages of the war in Europe, however, he had insisted that African American soldiers should be allowed to volunteer for combat duty.52 In this limited case, he had been successful in changing the policy.

  In 1953, however, he moved quickly and forcefully to open opportunities for African Americans. He eliminated segregation in Washington, DC, and pushed forward with the desegregation of the military—a policy that President Truman had begun in 1948.53 Seeking a more decisive change, he worked closely with Democratic leader Lyndon Johnson to push through Congress the first civil rights act of the twentieth century. Fierce Dixiecrat opposition prevented the passage of a truly formidable measure. So the Civil Rights Act of 1957 fell short of what was needed to protect African American voting rights and opportunities for education and employment. But it broke ground for later, more powerful measures and was a step toward federal support for the development of a society that eventually might not discriminate against people of color.54

  In 1957, when Governor Orval Faubus of Arkansas challenged federal authority by employing the state’s National Guard to block court-ordered integration of the high school in Little Rock, Eisenhower moved decisively to defend federal authority. He tried first to avoid a confrontation that he knew Faubus could not win. But when discussion failed, the president ordered a stop to the obstruction of justice, federalized the state’s National Guard, and sent troops from the 101st Airborne Division to enforce the court order. For Eisenhower, this struggle had at least three major dimensions: he was concerned about the damage it did to America’s reputation abroad; he was incensed by the direct, senseless challenge to a federal court; and he was now and would remain deeply concerned about equality of opportunity through education.55

  Eisenhower’s Style of Prosperity

  When Eisenhower turned over the White House to President John Fitzgerald Kennedy in January 1961, he gave the new Democratic administration an American economy that was in better shape than the one Ike had received from Truman in 1953. The economy was well attuned to the “middle way” philosophy of government. The budget had been balanced in 1960, and the recession of 1960–1961 was relatively mild. With recovery, the economy would be positioned for another surge of growth and more advances in the new digital technology. That would not satisfy President Kennedy, Vice President Johnson, or their economic advisors, who would seek to close the gap they saw between the economy’s potential and its performance.

  Eisenhower and his team, however, would leave office satisfied that they had achieved most of their long-term goals in the realm of political economy. In his last economic report to the Congress, on January 20, 1960, President Eisenhower described an economy that had achieved record-breaking levels of production, income, and employment. By avoiding “speculative excesses and actions,” he thought, the United States would be able to maintain a low rate of inflation and still have “the basis for a high, continuing rate of growth.”56

  Above all, Ike and his team had given the nation an economy that was suited to a Cold War that was likely to last longer than any of them would be alive. He had recognized from the beginning of his first administration that America’s economic strength would be crucial to an ultimate victory in the struggle against communism. Over his eight years in office, he had never lost sight of that goal. In 1956, Soviet premier Nikita Khrushchev had threatened to bury the United States and its allies as the communist economies surged ahead. By 1961, Eisenhower had shown the Soviets just how difficult that would be.

  Eleven

  President Eisenhower with Soviet premier Nikita Khrushchev during a tense period in US-USSR relations.

  Pursuing Peace

  No American president comes into power with a clean slate, the tabula rasa of academic discourses and philosophical meanderings. In the twentieth century, all came into power faced by a bewildering complex of organizations (both private and public, national and international), individuals, deeply planted cultures, and expectations about the new leader. For President Eisenhower this complex included a war that had not been going well, a series of dangerous enemies, a rapidly shifting military technology, and a loosely jointed empire of client states, overseas possessions, a base system, and the military services—that he had been struggling to bring under control through the entire postwar era.

  In office, Eisenhower quickly set out to develop a grand strategy that would, if successful, guide this complex array of institutions and individuals and achieve America’s primary goals. As he understood those goals, they were above all the peace and stability that would enable the US economy and democratic society to thrive. Along the way, he had to deal with residual resistance to internationalism and to beat back one attempt to limit his authority in foreign affairs. But he was successful in handling both of those problems and in maintaining his strong leadership role at home and abroad.1

  As Ike knew, the United States would benefit little from major changes in the world. It would be nice if the United Nations, the World Bank, and the International Monetary Fund were able to put all of the underdeveloped nations on the path to economic growth. It also would be nice if various authoritarian governments would become democratic. But Eisenhower understood that the “free” world probably would never be entirely free of autocrats, and he was experienced enough to recognize that some of them could actually help him achieve his primary goals. It sufficed if they remained reliable allies or truly neutral bystanders in the great struggle at the heart of international relations in the 1950s.2

/>   The Cold War with the Soviet Union, its empire, and the new Chinese communist government threatened to destabilize the world’s political economy through stealth or internal revolutions if possible and through force if necessary. Unlike the United States, the communist nations had much to gain through change. Their ideology and national interests fed the desires of the revolutionaries seeking to overturn colonial powers throughout the world. As the empires of America’s allies gave way to socialist-nationalist regimes in Africa and Asia, the United States was forced to deal with a world increasingly hostile to its democratic capitalist creed.

  Eisenhower remained convinced that “only in collective security was there any real future in the free world.”3 To Ike, it was self-evident that America’s national security could not be successfully defended without a collective system of alliances, anchored in western Europe and the United States. His quest was for unity: greater military and economic unity in Europe, political and military unity in Asia, and unity within the government in the United States.4 This goal kept slipping away from him. But in leading at home and abroad, he sought it all the more vigorously. “Clearly,” he told a friend, “there are different ways to try to be a leader. In my view, a fair, decent, and reasonable dealing with men, a reasonable recognition that views may diverge, a constant seeking for a high and strong ground on which to work together, is the best way to lead our country in the difficult times ahead of us.”5 These were not just talking points. He relentlessly applied that formula at home and abroad, with his own party and with the Democratic opposition.