The Rewards of Enterprise

by Tom Bethell | July 9, 1977

Now the Republicans are doing the same thing. And in style, too. The Democrats' seminar-attenders and program devisers in most cases at least had the decency to work out of dusty little cubby holes in elderly buildings in the Dupont Circle area of Washington. But the AEI, as the Washington Post noted, has "well appointed offices" which are "spread over four floors of a modern building." Corporate-style, the Post might have added. AEI’s brochure and booklets, tending to advocate such positions as the defanging of government regulators, are widely distributed to journalists and opinion makers in Washington. AEI also has been known to lay on a steak dinner or two for doubting Washington liberals.

AEI was founded 1943 by Lewis H. Brown, the president of the Johns Manville Corporation, the intent being to promote in Congress the businessman's point of view, its annual budget in the early years was about $80,000 and, as one AEI official admits, "the output in those days was largely indistinguishable from that of the Chamber of Commerce or the National Association of Manufacturers. It was really just a trade association."

The man who runs AEI today is William J Baroody, Sr. He was a Chamber of Commerce economist who was appointed executive vice president of AEI in 1954 and president in 1962. Baroody was astute enough to recognize three of the fundamental tenets of intellectual life in Washington. The first is that opinion, to be acceptable and respectable, must not stray too far to the left or right, but remain close to the middle of the road. The second point Baroody appreciated was that the opinions and studies issued by an enterprise like AEI or Brookings acquire (for reasons that are not entirely clear) a far greater appearance of legitimacy if the money spent to produce them has been "aged" for a decade or two within the intricate machinery of a foundation, rather than being funneled directly out of the parent corporation. And the third point was that if conservative opinions were to be expressed, they always sounded a great deal more persuasive if uttered by academics rather than corporate executives.

Accordingly, Baroody moved the institute from a right-wing to a center-right position. He switched over from corporation to foundation support. (Today 75 percent of AEl's annual budget of $5.5 million comes from foundations; the remainder from about 150 corporations and individuals, whose average donation is $10,000.) And he took on board conservative academics such as Milton Friedman and Paul McCracken.

In addition to these rearrangements, there has been a good deal of conscious image-building, exemplified by locally televised debates on public policy issues, which always feature an array of speakers who are carefully balanced ideologically. These fairly calculated moves by Baroody have been notably successful. AEI's budget has nearly tripled since 1971, and it is likely that within a year or two the institute's budget will rival the seven million dollars that Brookings spends each year. {Brookings, however, is largely supported by a $35 million endowment, which confers upon it a degree of security and permanence not enjoyed by AEI.) Former President Gerald Ford signed up as a Distinguished Fellow at AEI shortly after leaving the White House. In general it is probably true to say that AEI now gets as much attention as did Brookings during the Nixon years.


A further point to bear in mind is the perilous tax-exempt status of institutions like AEI, To maintain this advantage requires that they be "non-partisan," which seemed an implausible characterization of AEI when Baroody took a brief "leave of absence" to advise Barry Goldwater in his 1964 presidential campaign. After that election the IRS undertook a minute scrutiny of AEI, which lasted for two years. "They looked at every scrap of paper," an AEI staffer recalled, but eventually they concluded that the institute was properly classified as tax-exempt.

Not surprisingly, then, Baroody today does not particularly like to hear AEI described as "conservative," and particularly not "Republican." Not only could it get the tax people after him again, it also departs too conspicuously from Washington's tried-and-true Middle Ground. (In the same way, Brookings these days does not encourage the "liberal" label, which is beginning to acquire a pejorative air.) B

Baroody, the son of a Lebanese immigrant stonecutter, is a man of considerable charm and persuasiveness, who manages to develop conservative arguments in conversation while at the same time disowning the label. What does he think of stalwart Republicans lounging about in think tanks rather than getting on with the job? Baroody smiles and responds with a comment (not entirely unjustified in a city noted for the uniformity of its opinion) about the need for "competition of ideas." Then he will tell you about Austin Ranney, currently a resident scholar, a former president of the American Political Science Association and a certified liberal, whose name comes up so often in discussions of ideological direction at AEI, as exemplifying the lack of conservative bias, that he must be worth his weight in gold.

 Baroody will also tell you about AEI's new project on "mediating structures," which is being supervised by Peter Berger and Richard Neuhaus. It's not a good title, Baroody admits, and he will welcome any better suggestions, but the idea is to see if we can't get the family, the church, the neighborhoods, the ethnic subgroups, the voluntary organizations, back into the business of solving problems rather than leaving it all to the government. This is AEI's principal theme today. "Public policy is not solely the prerogative of government," Baroody says. "The argument has been, should it be centralized government, or decentralized government? But still government. What we're exploring is the society that might exist if you can unleash, or enlist the forces in the family, the churches and so on." Baroody believes that there is a "ferment in the land today on the issue of government saying: 'We know better how to run your lives."' And he adds that "Carter made much of this resentment. By any standard, government regulation is the fastest growing industry in the US. The Federal Register first saw the light of day in 1936, with 2400 pages. By 1970 it was up to 20,000 pages, and by 1975 more than 60,000 pages. . . ."

 This, of course, is the purest conservatism, even if not so labelled. Irving Kristol, co-editor of The Public Interest and perhaps AEI's best known resident scholar at the moment, states the case in stronger terms, as befits a man who has been described as the Oliver Cromwell of the neo-conservatives. Kristol has an office at AEI, from which vantage point he ponders the problems of capitalism. "A lot of reading, not much writing," he admits. He is trying to formulate the "moral basis of capitalism." His goal, if only he could get inside people's heads and change the way they perceived the world, would be to get them to see that government is not so much the solution as the problem.

"I have been persuaded by Milton Friedman," he says, "that it is always useful to begin with the question: how has government contributed to this problem? For instance, I saw a TV program the other day on the cost of housing. It wasn't a bad program. The first 15 minutes showed young couples who wanted to buy houses they couldn't afford, and so on. All very sad. Then at the end the interviewer asks: what can government do to solve this problem. The program failed to consider how government had contributed to the problem—inflation pushing up interest rates, for example."

Kristol feels that liberal ideas "are no longer intellectually interesting. It is a political philosophy that had its successes but is now exhausted. Some on the left, such as Bob Heilbroner or Galbraith are interesting, but only because they have moved further to the left." Those who have moved to the right, on the other hand, such as Kristol himself, "are in the same position as the Fabians in 1911"—seeking a degree of intellectual and public support for their position which they have not yet found, but, Kristol's comparison suggests, they may soon find.

As for the charge that Republicans, in staying on in Washington, have adopted the vices of Democrats, Kristol says that government has now become so complex that a Republican administration, just as much as a Democratic one, must employ academic technicians in such realms as economics and statistics, and these are the people who are glad of an opportunity to find board and lodging only a few blocks away when they leave the White House. As for the bankers, they still do go back to Kansas City.

There are now so many regulators, complexifiers, guideline writers and entanglers of all sorts, that there is plenty of justification for a place like AEI to hire a few deregulators and disentanglers and hope that they can straighten the mess out. If they ever succeed, they will also have succeeded in working themselves out of their jobs, much as market economists delight in asserting that they are talking their way out of a job. But the more likely prospect is—given the apparently endless growth of government and its satellites in Washington—that those who don't really believe in government will be dining out around town on that belief for a long time to come.


This article originally ran in the July 9, 1977 issue of the magazine

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