Rogue Foreign Policy 809management were eliminated. Millions of “organi-
zation men” (about one-third of whom now were
women) were laid off as the organizations them-
selves “downsized,” the corporate euphemism for
wholesale firings.
Many of the jobs went abroad, where labor costs
were lower and unions nonexistent. In 1980 Xerox of
America, realizing that it could no longer compete
with its more efficient Japanese subsidiary, transferred
contracts to Japan and laid off tens of thousands of
American workers. In 1984 Nike moved sewing oper-
ations to Indonesia, where it could hire female work-
ers for fourteen cents an hour. In 1986 the chassis for
the Mustang, long a symbol of American automotive
style, was built by Mazda in Hiroshima, Japan.
Towering mountains of private corporate debt
nearly were overshadowed by the Everest of public
debt held by the federal government itself.
Reagan’s insistence on a sharp cut in personal taxes
and a substantial increase in military expenditures
produced huge—and growing—annual federal
deficits. When Reagan took office, the total federal
debt was $900 million; eight years later, it
exceeded $2.5 trillion. “No one imagined how bad
the outcome would be,” explained David
Stockman, Reagan’s budget director. “It got away
from us.”
Corporate Restructuring
Although few perceived it at the time, the economy
was undergoing a transformation of historic dimen-
sions. Much as the depression after 1893 had
strengthened the nation’s economy by wiping out
thousands of inefficient steel and machinery firms, the
seismic economic upheavals after 1973 toppled many
inefficient manufacturers but created the foundations
for more efficient global conglomerates. As weeds
grew in the parking lots of the factories of the “Rust
Belt” of the Midwest, new technology industries
sprouted in the “Silicon Valley” of California, along
Route 128 outside of Boston, and in booming cities
such as Seattle, Washington, and Austin, Texas.
By the end of the Reagan era, the economy con-
sisted of two separate and increasingly unequal compo-
nents: a battered sector of traditional heavy industry,
characterized by declining wages and diminishing job
opportunities; and an advancing high-tech and service
sector dominated by aggressive, innovative, and indi-
vidualistic entrepreneurs. (See American Lives, “Bill
Gates,” pp. 810–811) The older corporations that sur-
vived the shakeout of the 1980s were leaner and better
equipped to compete in expanding global markets.
Yet American society was becoming as fractured as
the “bipolar” economy from which it drew sustenance.
The Reagan tax cuts had disproportionately benefited
the wealthy, as had the extraordinary rise of the stock
market. Conversely, the economic transformation struck
low- or semiskilled wage earners hardest; at the same
time, the Reagan administration’s shifting of much of
the burden of social welfare onto state and local govern-
ments reduced benefits to those who lost jobs or could
not find work in the strange new economy dominated
by information services and bewildering new technolo-
gies. At the end of Reagan’s second term the standard
of living of the poorest fifth of the population (40 mil-
lion people) was 9 percent lower than it had been in
1979, while that of the wealthiest fifth had risen about
20 percent.Rogue Foreign Policy
Especially during his second term as president,
Reagan paid little attention to the details of adminis-
tration. Thus two major initiatives unfolded of which
Reagan himself claimed little knowledge.
The first concerned Nicaragua. In 1979 leftist
rebels had overthrown the dictatorial regime ofA worker studies a lighted diagram of an integrated circuit at a
California computer factory.