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Reaganomics Revealed

Thursday, February 8, 2007

A new book traces the late president’s philosophy to a turbulent decade at General Electric.

Education of Ronald ReaganThe Education of Ronald Reagan: The General Electric Years and the Untold Story of His Conversion to Conservatism, by Thomas W. Evans (Columbia University Press, January, 2007).

A poor, modestly educated Midwesterner goes to Hollywood and is reasonably successful, primarily in “B” movies. Well-liked, he becomes head of an actor’s union and an avid New Dealer. His career starts to fade, and he becomes a spokesman for a major corporation. He delivers a nationally newsmaking speech in support of Barry Goldwater and is thrust onto the national scene, becoming governor of a large state and then, to the astonishment of friend and foe alike, president. Somehow, while on the national stage, the country shakes off its “malaise” and turns conservative, prosperity blossoms, and the Soviet Union implodes.

Learning more about most politicians is disappointing if not dispiriting. What you see (and hear) is often more than what you get. But Ronald Reagan seems the exception. What caused him to move from a conventional New Deal liberal to the most articulate conservative politician of the 20th century? How did he hone the remarkable political, management, and policy style that proved, generally, so successful for him? The Education of Ronald Reagan: The General Electric Years and the Untold Story of His Conversion to Conservatism by Thomas W. Evans answers these questions.

Reagan’s story at GE is, to a startling degree, the story of labor relations executive Lemuel Boulware. When Boulware hired Ronald Reagan he was a conventional, patriotic, anti-communist liberal Democrat. He was not thought to be particularly well-informed or articulate. Under Boulware’s guidance, Reagan sparred with GE’s unionized employees and received what he termed his “post-graduate education in political science” from 1954 to 1962. He became thoroughly familiar with basic economics, and came to share Boulware’s strong conviction that business performs an essential public service. He also thought about a wide range of other public policy matters stretching even to the core concept of what was to become the Strategic Defense Initiative.

The strongest part of this book is its original and meaty first half. It outlines the context of the postwar United States. Business and businessmen were in poor repute for being greedy and ruthless. Unions were newly empowered by a combination of ardent socialist and communist leaders. Strikes were frequent and damaging. GE itself suffered a major strike in 1946. Surprisingly, none of the seven GE units Boulware was supervising at that time struck. Boulware then became GE’s vice president for employee and community relations. More than simply a shrewd executive, he brought with him a masterful and comprehensive approach to his job.

Reagan’s story at GE is, to a startling degree, the story of labor relations executive Lemuel Boulware.

Boulware’s approach was to treat his workers as customers, rather than simply as strike-threatening workers who were pawns of their union leaders. Communications about the company and economics education became a permanent, intelligent, and intensive campaign, directed not only toward the employees but also to their spouses and the community leaders who might affect the corporate climate. Going “over the heads” of the union leaders was a powerful and shrewd strategy for GE, as it was for President Reagan decades later. Negotiations were not the grueling ordeal of unrealistic demands and counter-offers, but instead a first offer that was considered fair—and firm. Sometimes attacked as “take it or leave it,” the approach made employees partners, mollifying and marginalizing the typically combative union leadership.

Boulware hired Reagan in 1954 to visit every GE plant nationally, meet the workers, and speak on behalf of the company. He was also the host of the highly acclaimed and popular “General Electric Theater.” The countless talks and exchanges were superb training for a politician-to-be. Reading authors like Henry Hazlitt, Lawrence Fertig, Wilhelm Roepke and Lewis Haney and speaking (and answering questions) on a wide range of public policy matters developed in Reagan a solid core of beliefs backed by facts and arguments. In the process, Reagan widened his interests and prepared the groundwork for “The Speech” he was to give to the nation on October 27, 1964. Indeed, the author argues persuasively that Boulware himself gave a speech foreshadowing Reagan’s in a number of important respects. (Both speeches are in the appendix of the book.)

At the nit-picking level there are a few annoying errors that a copy editor should have corrected. One sentence is missing a necessary verb. One passage speaks of “Leonard” Boulware. The “International” (instead of “Intercollegiate”) Society of Individualists is referenced. The Harvard “historian” Harvey Mansfield is in fact a political theorist.

But this is a highly commendable contribution to the growing literature on Reagan. The dozens of presidential wannabees might consult it with great profit. Even more so, business leaders should gain valuable insight from it. It demonstrates how a single intelligent, thoughtful, shrewd, courageous, and effective business leader can help lead his corporation to great success, while improving the national business environment. And, just possibly, in the process, mentor someone who will go on to change the world.

Sadly, and similarly to the late 1940s, big business is now in bad odor. Enron and other scandals, congressional corruption, stock option backdating, and huge compensation packages even for failed CEOs mean that business must pursue a larger vision than simply growing quarterly profits. Boulware’s attention to five “contributor-claimant” constituencies of investor, customer, employee, supplier, and “neighboring citizen” might profitably be dusted off, updated, and put to good use. If “Big Business” were seen as relevant to employees’ concerns about health care, family education, and retirement by explaining scarcity, supply and demand, entrepreneurship, creative destruction, and investment, and the foolishness of high taxes and much government regulation, they and the rest of us would be all better off.

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