Liberalism at Large

by Alexander Zevin

  The Economist refrained from criticizing US interventions even on the rare occasions when these violated its low bar for the respect of democratic niceties. In 1965, Johnson sent 42,000 marines to the Dominican Republic, in what the paper called a ‘reflexive move’, but then excused as a pardonable misunderstanding from ‘the most internationally responsible country in the world’. Most rebel officers in Santo Domingo were not Castroite communists, it admitted, but supporters of the ‘democratic leftist’ Juan Bosch, chafing under a corrupt military junta that had removed him from the presidency two years earlier.23 In Greece, it deplored the ‘colonels’ coup’ as a ‘tragic stupidity’ before elections slated for April 1967, but denied the CIA had any hand in plotting it – even as Foreign Report wrote quite candidly on its aims in doing so: to keep the Papandreou-led Centre Union from winning the elections by installing General Papadopoulos, a former Nazi collaborator and current CIA agent, and associated generals, instead.24 That May, in a different register, the paper cheered a ‘glittering victory’ for Israel over Egypt in the Six-Day War – finally ‘teaching a lesson’ to Nasser, a ‘would-be Bismarck’ with dreams of uniting the Arabs, and Russians, behind him.25 By the time Egypt launched a counter-attack in 1973 – a huge last-minute airlift of US tanks and aircraft turning the tide for Israel – the Economist line on the Middle East was more or less fixed. Peace would come when Arabs and Jews desired it, not from outside interference, ensuring that Israel – as the largest single recipient of just such external help from Washington – has seen little need to compromise with its neighbours, let alone the Palestinians under its thumb.26

  Perhaps the most significant breach of democratic practice and journalistic ethics in the line of imperial duty came with the coup in Chile in 1973. Beedham delegated this dossier to Robert Moss, who was not content merely to criticize the leftwing physician Salvador Allende – elected president of Chile in 1970 promising a ‘peaceful road to socialism’ – but worked actively to prepare opinion for his forcible removal. Nixon had personally ordered the CIA to foment a coup before Allende even took the oath of office, with instructions to spare no expense and ‘make the economy scream’.27 Crozier, for whom Moss was already writing ISC Conflict Studies while travelling across Latin America for the Economist, tipped his protégé to help carry out this mission.28 ‘The next move from my CIA friends was to suggest the need for a book on Chile. The author I proposed to commission was Robert Moss, whose qualifications were ideal.’29

  ‘In the Chilean summer, it is hard to imagine civil war’, began a special Economist report from 1972, signed by Moss. ‘Yachts bob out in the Pacific at Algarrobo, beautiful girls sip pisco sours in the Grand Hotel at Zapallar.’30 To show how vulnerable this society really was – or at least the part of it drinking cocktails at hotel bars – the paper ran negative stories on Allende almost every week: his warm embrace of ‘Cuban terrorists’; economic shortages caused by his land reforms and nationalizations, so that Chinese restaurants in Santiago now served ‘sweet-and-sour turkey’; or dismissing revelations that the US was funding his opponents in the media, the political parties and the trade unions through an International Telephone and Telegraph subsidiary.31 Filing these stories still left Moss enough time to lecture and write for the Institute of General Studies (IGS), a CIA think tank that met inside the US Embassy in Santiago, aiming to connect military officers with free-market economists; and to write for SEPA, a magazine for the same officer cohort, which splashed an article of his on its cover six months before the coup: ‘An English Recipe for Chile – Military Control’.32 At the same time, Moss readied his book, which instead of fertilizing the ground for the coup, had to be revised as a post-hoc justification of it, when Chile’s generals launched an all-out assault on Allende’s government at the start of September in 1973.

  Chile’s Marxist Experiment was distinguished by two compulsions, the first of which was bragging, so that Moss could not help crediting smooth coordination among top brass during the coup to ‘reports prepared by a group of independent and opposition economists who had been meeting on a weekly basis since January’ – that is, to himself and the IGS.33 The other was sniggering: the ‘irony’ that Allende used a gun Fidel Castro gave him to commit suicide as tanks and jets pounded the presidential palace, which, as he refused ‘four separate offers for safe conduct’ was nothing but vain heroics – ‘maybe he felt that death was preferable to a retirement divided between a villa in Havana and speech-making over fashionable dinner-tables.’34 Citing sloppily fabricated ‘evidence’ of an imminent communist ‘night of the long knives’, Moss maintained that the army had acted in self-defence: ‘Chile’s generals reached the conclusion that democracy does not have the right to commit suicide.’35 As a token of appreciation, the generals bought 9,750 copies, distributed through Chilean embassies; a member of the IGS, now running the state publishing house, printed another 15,000 in Spanish.36

  When news of Allende’s death reached him in London, Moss danced down the corridors of the Economist chanting, ‘My enemy is dead!’ He returned in haste to finish his book while officially on assignment for the Economist, producing a special report for it on the coup in October. In it, he praised the new junta for holding public trials of suspected leftists, and for allowing foreign journalists and the Red Cross to visit the 5,000 or so people being held at the national football stadium in Santiago – where Moss somehow missed gruesome scenes of torture and summary executions, along with the disappearances that came to mark the Pinochet regime. He ended with a simple endorsement: ‘The events of September 11 were not a typical Latin American coup but the culmination of a long (and broad-based) public campaign against a minority government that was suspected, probably rightly, of preparing to perpetuate itself as a dictatorship.’37 Bagehot, writing in 1851, had worked harder than this to justify the coup in France. The larger point is that Moss operated openly, and for seven more years after this dance of death, during which time his profile did not get any lower. Brazenly overlapping with studies for Crozier’s ISC, his Economist articles spread the alarm about supposed communist threats in Spain, Portugal, Northern Ireland, Iran, South Africa and Nicaragua.38 In all this, he showed that, in the free world, it was possible to do well by doing good: free trips from the Shah; quid-pro-quos for a cheery gloss on apartheid South Africa’s invasion of Angola; a £20,000 salary to edit VISION, a magazine owned by the Nicaraguan dictator Anastasio Somoza.39 Moss left the Economist in 1980, using contacts he had made there to publish his first novel, The Spike. Here the hero is journalist Robert Hockney, ex-Berkeley radical turned anti-communist crusader, whose erotic adventures are rendered in as much graphic detail as his quest to expose media outlets and think tanks as thinly disguised KGB fronts.40

  Macrae-economics: Considering Japan and West Germany

  Norman Macrae was the mirror image of Beedham and Moss, complementing their geopolitical engagements with his own take on global capitalism.41 His manner was quite different, however. Macrae dressed in a standard-issue suit and tie, looking like he had slept in them for weeks, while correcting copy at his desk. At meetings he stammered out his points and burst into giggles at inappropriate moments, his large boxy frame heaving up and down. No one could read his handwriting, or his corrections, except a devoted secretary, who was said to enter a trance to decipher it (this before computers, which he touted but never used). Though admired as a brilliant, original mind, he too was passed over for the editorship, three times. As a former section editor put it: ‘the chap cut his own hair’, and ‘even then the editor had to be vaguely representable in public, you know, for visitors, on TV’. Andrew Knight would call him ‘warm-hearted and good and very eccentric’. Rupert Pennant-Rea remembered that ‘many of his spoken sentences began with the words “the thing is” and then rather tailed away’; ‘let him write about the subject, however, and words flowed beautifully, without a single “the thing is”.’

  Separated by bearing, united by worldview – Beedha
m and Macrae agreed the greatest threat to it lay due east, in the Soviet Union. Macrae was born in Konigsberg in 1923, his father a high-ranking diplomat, who ended up as British Consul to Moscow at the height of Stalin’s purges from 1935 to 1938. Joining his family for school holidays as a teenager, Macrae said he could never forget the maids who seemed to vanish suddenly from the corridors of the embassy. (Later, he took his own children on summer trips, not to the beach or museum, but to Eastern Europe, ‘to teach them the difference between freedom and tyranny’.42) But, as with Beedham, it was disappointment with the weakness and hypocrisy of his side that came as the true call to action. A bomber navigator for the RAF (‘a public sector job with public sector productivity’) during the Second World War, he descended to earth in Germany in 1945, ‘just as the Russians were coming in from the other side’:

  All the politicians, including Churchill and Roosevelt, told us these were fine liberating democrats. And of course I knew from those school summer holidays so briefly before that those were astonishing lies. That has given me one advantage in my 40 years as a newspaperman. I have never since then believed a word either politicians or public-relations officers have said.43

  After demobilization, he went to Cambridge, of which he was not fond: ‘More intellectual, my left foot.’ ‘Sub-polytechnic Marxism’ was more like it: some students actually thought it a good idea to give ‘the secret of how to make an atom bomb to Marshall Stalin, who was clinically insane’. Macrae nevertheless found his home at a paper populated by graduates from the same social milieu, if not the same politics, becoming the driving force on economics at the Economist. Statistically dense, stylistically buoyant, many of his surveys turned into books and pamphlets – on capital markets, housing, industrial, trade and monetary policy, inventors, inventions and the near and not-so-near future.44 Writing from a comparative perspective, he set the post-war performance of British capitalism against the more miraculous experiences of its rivals, in special reports on Germany, France, America and Japan – this last the subject of ground-breaking work, with ‘Consider Japan’ in 1962, ‘The Risen Sun’ in 1967 and ‘The Pacific Century’ in 1975, all published in Japanese translation. His obituary called him an ‘unacknowledged giant of postwar Britain’, one of the few journalists to rank with Milton Friedman, Daniel Bell and Peter Drucker. But Macrae was not exactly unknown. In 1988 Emperor Hirohito recognized him with the Order of the Rising Sun. Like many whose star first rose in the West, he was simply big in Japan.45

  If the nineteenth century the Economist had looked for investment outlets in the East, by the mid-twentieth it went in search of lessons. The parallels between Britain and Japan, two island nations ‘with very similar import structures and a tendency to run into import deficit at one stage of the internal trade cycle’, captivated Macrae. He was aghast that some Japanese policymakers he met in the 1960s thought it ‘time to learn respectable economics from the British and slow down their rate of growth’. One reason for coming to Japan, he told his hosts, was on the contrary to find an escape route for Britain, whose post-war economy seemed caught in a cycle of ‘stop-go’ – periods of expansion in which imports quickly raced ahead of exports, precipitating a balance of payments crisis, at which point government intervened to restrain demand, deflating the economy. The result? British industrial production had grown by 28 per cent, exports by 44 per cent, from 1953 to 1961; over this period, Japan increased its respective totals by 217 and 237 per cent. In 1955 Japan’s GDP was £8.2 billion against Britain’s £17 billion. By 1967 it was expected to be £40 billion, 18 per cent larger than Britain’s at about £34 billion.

  In trying to explain the divergence, Macrae rejected explanations based on race or culture. Japanese ‘were not nowadays naturally servile to authority, or so silly as to actively enjoy hard work’, and ‘the inbred collectivism of the Japanese people’ was not unlike ‘the atmosphere in the heartier English public schools’. Macrae paid attention to government policies instead, which turned out to be inimical to standard practice in Britain and the US. American businessmen landed in Tokyo expecting ‘the great new successful free enterprise community of our time, created in America’s own image’. He prepared them for disappointment: ‘Japan, even more than France, is the land of indicative economic planning à outrance.’ Five years on, he was even more emphatic: ‘Ultimate responsibility for industrial planning, for deciding in which new directions Japan’s burgeoning industrial effort should try to go, and for fostering and protecting business, lies with the government.’46

  On his first trip to Japan, Macrae emphasized the way that planning worked for budgets and banks. The former were relentlessly expansionary, combining fiscal stimulus and tax cuts, year after year. The latter were even more peculiar: virtually insolvent, with a deposit-to-loan ratio of less than 3 per cent, banks relied on the central bank for liquidity and responded to its instructions on when to tighten credit and investment. If fiscal policy acted as accelerator, monetary policy was the brake. When Britain overheated, by contrast, the Treasury simply depressed demand across the economy, hurting growing firms far more than old and inefficient ones. For this reason its top three exports to Japan in 1961 were liquor, sweets and textiles. ‘The vision of the average Japanese is that Britain today is a non-developing country; filled no doubt with whisky stills, children’s bonbons, skilled at making up material from old sheep; but not a dynamic country capable of producing anything expansive and new.’47 On his next visit, corporate culture caught his eye. The Japanese miracle perplexed Americans and Europeans, who demanded it ‘liberalise its rules about capital inflow’ and permit foreigners to buy up its businesses. Macrae was sceptical of their chances. On returning to his Tokyo hotel at night, he encountered ‘American businessmen reviving themselves in the bar with moans and martinis’. ‘The society’s rotten with fornication and your English Scotch [sic]’, one drawled at him. ‘OK, so I’m no puritan myself … But I don’t buy me a prostitute every night with my shareholders’ money, and I don’t suppose the London Economist buys you one either, huh?’48

  Capitalism worked differently in Japan. Employees enjoyed lifetime job security, top income tax rates on executive pay were more than 10 per cent greater than in Britain, and if corporate income as a percentage of GDP was higher than in the West, gross capital profit rates were lower. Far from condemning its methods as unorthodox, Macrae was enamoured by them. Beneath the boom of his bar mates, he was forced to mutter, ‘economic miracle … remarkable planning techniques … record of growth’. To help explain these achievements he returned to the financial system, which now carried an implicit criticism of Wall Street and the City of London. Banks’ control over investment funds in Japan, instead of the stock market, ‘had overcome one of the weaknesses of the normal western free enterprise system – which is that the total of investment that seems profitable to individual profit-seeking firms is unfortunately almost invariably smaller than a dynamic economy should require’. Capital investment between 1956 and 1963 averaged 34 per cent in Japan as compared to 17 per cent in the US and Britain. Average annual growth was 10.1 per cent in the former, just 2.6 to 2.8 per cent in the latter. In 1975 he was still optimistic about Japan as it began to export its development model to its neighbours.49

  West Germany was another reason to reassess the so-called English disease. In 1966 its record of growth was second only to Japan, averaging upwards of 6 per cent for over a decade; while its share of industrial exports had doubled since 1950, largely at the expense of Britain, whose share had fallen from 21 to 13 per cent. Again, Macrae was more impressed with economic policies than ‘nonsense about national temperaments’. German trade unions and management structures could easily be emulated in Britain. The former were fewer (16), more democratic (‘secret ballots’), richer (‘regular dues’), more professional (‘trained left-of-centre economists’). They were also less likely to strike or walk out based on the introduction of new equipment, since they shared in management decisions,
and, though paid slightly lower wages, had seen these rise by 130 per cent (against 80 per cent in Britain) since 1955. Managers, on the other hand, could enrich themselves as well as their companies – with a lower top income tax, higher capital taxes geared to investment and activist banks, which kept track of business efficiency.50

  The City and the EEC: In Search of a British Miracle

  How did Britain compare to these countries? Macrae raised that question in every foreign report, even as his answer changed in response to events at home. In 1964, Harold Wilson had promised to replicate the German and Japanese miracles, with a state-led modernization of the economy that harnessed science, technology and efficient management. But that project failed. Once in power, Wilson deflated the economy, sidelining the Department of Economic Affairs and abandoning his National Plan, in order to protect sterling, for yet more Treasury- and City-inspired stop-go. In 1970, his successor, Edward Heath, came to office pledging a dose of free-market rigour – no more subsidies for ‘lame duck’ industries – and legislation to bring the trade unions to heel. But this too had come to naught. Heath backtracked as soon as unemployment hit 1 million, before miners brought down his government. By then, a world crisis had overtaken the national one that Macrae had hoped to solve in his studies abroad.