Raytheon: The Tip of a Stolen Iceberg

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Raytheon: The Tip of a Stolen Iceberg

By B.P.

‘Science for the People’ Vol. 3, No. 3, July 1971, p. 14-18 & 26-27

The Raytheon Company is the biggest military producer in Massachusetts, and in 1969 was the 11th biggest in the nation. Raytheon is also the largest employer in the state. Early last year the company employed over thirty thousand in the greater Boston area alone. Raytheon does much more military work in Massachusetts than, for example, General Electric, a major gas turbine producer which holds the number two spot, and nearly four times as much as MIT.

Clearly Raytheon is a major fact of economic life of this region. At a time when unemployment, war and inflation are becoming overwhelming perturbations in most people’s lives, it is especially worthwhile to look at Raytheon and see what it shows us about America. Let’s begin with a discription of its activities in some detail.

Raytheon navigational radars guide B-52 bombers in their daily runs over the free-strike zones in Vietnam, Laos and Cambodia. Raytheon makes bomb fuses for the war as well as electronic countermeasures equipment and communications gear. But most of the war business accruing to the company is from Hawk, Sparrow and Sidewinder missles which are designed to protect ground installations from attack by hostile aircraft. 1 It is these missles  that help make the U.S. air force secure, allowing air strikes with impunity over most of S.E. Asia and thus making possible the basic U.S. strategy air war on the people.

While Vietnam is a welcome trove of extra profits, the bulk of Raytheon’s wealth comes from the Great Cold War. In 1968 only $60 million of the Company’s $620 million in sales to the government were directly attributable to the war in Vietnam.2 More than anything else it has been the Hawk surface-to-air missile that has turned Raytheon into one of the biggest 100 companies in the United States. The Hawk, the Army’s principal air defense weapon, is produced and stationed in countries all over Europe, and in Japan as well. It has been sold to Saudi Arabia and to both Jordan and Israel.3 In 1960, over 40% of the company’s profits came just from the sale of Hawk patent and propietary rights to foreign nations and companies.4 Raytheon is one of the top arms exporters to nations all over the world.5

Raytheon’s other principal military systems include the air-to-air Sparrow and Sidewinder missles, a variety of radar and sonar work, and development of the Sam-D missile, which will replace the Hawk. The biggest money, of course, is in the strategic arms race, and Raytheon’s contracts for the ABM missile site radars and for guidance and control systems for the Poseidon MIRV (multiple independently targeted re-entry vehicle) make it one of the principal beneficiaries of strategic arms spending.

As this scramble for contracts for the making of a “credible deterrent” has advanced, some disagreements have arisen in U.S. ruling circles over such questions as whether or not they need a “first strike” capability in order to sufficiently impress their chief global antagonist 6. This controversy over current U.S. strategic arms “needs” has only slightly moderated the pace of ”progress” in this area, and Raytheon is marching forward. The submarine James Madison set sail April 1, 1971, armed with 16 Poseidon missles,each one carrying 10 MIRV warheads. The multimillion dollar Poseidon guidance and control work which Raytheon is doing in Sudbury, Mass., has begun to be deployed. Similarly several ABM sites are currently under construction around the country.

Finally, bringing up the rear of Raytheon’s profit march is the B-1A, the advanced manned bomber. In 1970 Raytheon won the research and development contract for the avionics equipment of the aircraft, which includes radar, electronic countermeasures systems and other navigational apparatus. 7 When the B-70, the first attempt at the big supersonic bomber to replace the B-52, was killed in 1962, the name was changed into B-1A and another program was begun. As with the ABM and MIRV, the strategic value of the B-1A for defending U.S. “vital interests” is being debated by our rulers. B-52s, the defender of the early 1960s, cost $8 million each; the B-1A will cost up to $80 million apiece. Senator Proximire, claiming that the total cost for a B-1A fleet could go up to $25 billion, says they aren’t worth it, in view of their relative slow speed and vulnerability compared to ICBMs. But there are other factors which help keep the B-1A alive.

For one thing, like the B-52 which rose from its deathbed to become a major weapon in anti-peoples’ war in S.E. Asia, the B-1A might provide a faster, new generation of saturation bombers as part of the advancing counterinsurgency technologies. Then there is the tie-in with the SST, afavorite project of the same special interests. At a time when the pressure against the SST was mounting in 1970, the B-1A received its first sizeable appropriation of $100 million. 8

Since the airframe and the engines being developed for the B-1A and the SST are similar, the development

of either would make the other less expensive and therefore more attractive. The B-1A thus has the additional attribute of helping to keep the back door open for the SST.

Military profits: the icing on the cake

Raytheon’s profits from its military production follow the pattern of the large war producers. Profits in these firms are lower than in the average large industrial firm if measured as a percent of total sales, but are far higher than the average when measured as percent of stockholders equity or of investment by the firm. According to Murray L. Weidenbaum, a former professor of Economics at Washington University and currently assistant secretary of the Treasury, the profits of large military firms are 75% larger than average 9; Admiral Rickover, the “pioneer” of nuclear submarine propulsion, agrees that profits are higher (but not as much as 75%) 10.

Raytheon, like all major war contractors, frequently is able to use tax dollars to capitalize its operations and then keep all of the profit from that investment for itself. For example, the government built and equipped plants for Raytheon in Quincy in 1951 and in Waltham in 1952. All this was free of charge for the company. When such plants are eventually sold to the company, they are typically sold at a tremendous loss to the government 11. All this is quite in accord with government policy. These subsidies provided by the taxpayer are used to build factories, pay for and development, and supply interest-free working capital. The government then gives away all patent rights on systems developed at the public expenses 12.

Another basic feature of military production in general is the phenomenon of “cost overrun”. One of the most notorious cases of profiteering, not because it was unusual, but because it was investigated publicly, was Western Electric’s profit pyramiding up through the tiers of its subcontractors on its Nike missile program 13 in the ’50s. Western Electric is now prime contractor for the ABM, the biggest single procurement program in existence at the present time. Raytheon is one of the principal subcontractors, and the cost overruns in just the first year of the program have doubled the cost of initial deployment from $5 to $10 billion 14. The Comptroller General of the U.S. has reported several incidents in the past of totally “unjustified” Raytheon cost overruns. The General Accounting Office –Congress’ “watchdog” on spending– whose bureaucrats are from time to time unleashed against token offenders, studied Hawk production facilities and practices in 1970, and uncovered enormous ‘waste’ adding up to 30% 15. According to Charles L. Schultze, past director of the Bureau of the Budget, “the average unit cost of missiles is 3.2 times the original estimates”16.

What does all this mean? Is Raytheon a big ‘meany’? Another bull in the china shop of the American economy? Is this the military industrial complex run amuk? Is it dangerously more powerful and influential than the non-defense sector?

We think not! Not only is Raytheon comfortably situated in the mainstream of American public and private institutions, it actually represents merely one of many organizational forms by which the ruling and wealthy elite who run this country go about pursuing their well-calculated interests. Let’s look at how it works.

New Technology for Cold War Business

Ever since the 1930’s, the federal government has played a major and increasing role in defining conditions under which big business operates. But this regulation was not “government of the people” gaining control over private capital. Instead, it was the most powerful and far-sighted big businessmen recognizing their need for certain kinds of extensive, central controls over market formation and capital allocation so that profits would be guaranteed large and steady, protected from such threats as the inherent instabilities of the ‘free market’. They also grudgingly promulgated other innovations in the state apparatus–like social security and workers’ compensation–to help protect themselves from the costs of concessions that workers were winning through increasingly militant struggles. By means of taxation, inflation and other manipulations of the economy and government, the businessmen have tried with some success to transfer these costs back to the working people.

Another major development in the role of government was the expanded program for world empire that grew directly out of World War II. As the decrepit European empires finally fell apart, the U.S. moved to take their place and a world-wide posture of containing communism, and stamping out anything that looked like it. (And with good reason: revolutionary movements and secure, lucrative investments do not coexist. Already in 1945, in China and Vietnam, communist-led liberation movements had made major advances.) The U.S. ruling class, presiding over the only major industrial power whose physical plant remained intact, and clutching the “new technology” firmly in hand, seized the challenge of world empire and the promise of vast sources of cheap raw materials and human labor. The overall effect of these developments was that a permanent, large volume of government expenditure was established concentrated in two areas: (l) the new domestic functions of state that had become an essential part of the business environment, and (2) the global military and poltical [sic] apparatus, including so-called foreign aid. These expenditures, furthermore, especially in the military sector, were to have certain characteristics that were increasingly lacking in the civilian sector–big profits in a planned, constantly expanding market for fancy hardware, the prices of which would not be excessively influenced by the costs of production. Needless to say, the financing for this strategy came mainly from taxes on working people, not to mention the low wages essential for the initial acquisition of profit-hungry capital.

In carrying out its post-war stategy [sic], the U.S. government laid down a heavy dose of anti-communism, especially in the late 1940s and early 1950s. This campaign served several purposes: making the Cold War more convincing, and cleaning out dangerous ideas from all sectors of society. Furthermore, as in the anti-communist raids after WWI, the labor movements’s [sic] more progressive, class conscious elements were effectively suppressed during this period. What this meant was that the prospects after WWII for a continuation from the 1930s of the achievements of organized workers were greatly reduced. In this period the Communist Party already discredited in the eyes of many, took an even more compromising stance in the face of ruling class attacks, further contributing to a more conservative perspective among rank-and-file workers. As a result, much of the solidarity of the U.S. labor movement with the international working class prior to WWII, which could have fundamentally challenged the expansion of the U.S. empire, was lost.

The Raytheon Story

The rise of Raytheon was part of the unfolding drama of “The American Century”. In 1922, a small oufit [sic] known as the American Appliance Company was founded by an electrical engineer at MIT, Vannevar Bush, and some friends, in a typical MIT entrepreneural [sic] spin-off. 17 The subsequent histories of Bush and this company illustrate how technological and financial resources are organized to serve only the ruling class. In a relatively few years, the company became the Raytheon Manufacturing Company, incorporating some other firms as well, and in the process, helped make Bush a wealthy man. By the late 1930s Raytheon had made substantial gains, especially in the area of vacuum tube technology and related electronics.

Meanwhile, having demonstrated his mastery of science/technology management and his understanding of the frontiers of electrical systems technology, (as industrialist, professor, Engineering Dean and Vice-President of MIT, 1919-1938), Mr. Bush subsequently became the foremost science and technology advisor to the government. He was appointed by FDR to head the National Defense Research Committee (and its successor, the Office of Scientific Research and Development), as the dark clouds of WWII thundered toward America. (U.S. bosses had hoped the Nazis would limit themselves to taking care of Russia.) In this position, Bush was the key planner behind the development of the atomic bomb, radar, proximity fuses rockets and other weapons systems. He directed a massive crash program employing 30,000 scientists and engineers and unprecedented in expense and technological “achievement”.

With its experience in vacuum tubes, Raytheon was thus prepared for the big action of WWII defense production, especially that growing out of Van Bush’s radar project. Recognizing the great potential in microwave research for radar, Bush set up the Radiation Laboratory back home at MIT, and, with top level backing, he pulled together the team which would tum out the basic R&D from which invaluable defense hardware would follow. By the end of the war, a seemingly limitless potential for military capabilities and procurement profits had been uncovered. Thus MIT which formerly produced skilled manpower and advanced research, largely catering to private industry (or to the pursuit of “truth”), was enlisted in a “higher cause” and in the process a new era of government-university-industry coordination began. Raytheon, in the meantime, cashed in on the newly developed technology. By the war’s end it was the largest producer of naval radar systems and microwave tubes and was well on its way to bigness. But merely absorbing the rich output of science and engineering was never sufficient for Raytheon to perform in the new markets opening up. This is where big finance enters the picture, putting the whole matter of the “new technology”, defense markets, and empire into its proper perspective.

Enter the Bankers

Any time a “good” idea comes along, the crucial ingredient for putting it to work (making profit) is capital. Very few technical innovations ever make it alone, without outside funding from the possessors of wealth.

In Raytheon’s case, banks — the managers of capital — have been involved for some time 18. In the early days it was J.P. Morgan and the Harris Trust of Chicago. During 1938-1942 Charles Adams, an investment banker, was a director of Raytheon and after a 5 year hitch as a partner in an investment firm he returned as executive vice- president. One year later he was president, and in 1964 he became chairman of the board.

In the 1950s the First National Bank of Boston, its affiliate Old Colony Trust, the State Street Bank, John Hancock, Liberty Mutual and other finance institutions all acquired interests in Raytheon, as owners, lenders, depositories, pension fund trustees, or insurers, etc. Several of these finance companies are duly represented on Raytheon’s board of directors 19, making sure their common interests are pursued, their money well employed, and offering assistance from, and coordination with, their own business organizations. A notable example is Roger C. Damon, chairman of the board of the First National Bank of Boston and a director of Old Colony Trust and Liberty Mutual Insurance. (First National and Old Colony Trust, together, held 50% of all trust assets in Massachusetts in 1968 – $4.2 billion.)

Numerous non-finance businesses also have a real interest in Raytheon’s performance, for example, suppliers. Thus Robert W. Stoddard one of the rulers of Worcester, Massachusetts and chairman of the board of Wyman-Gordon, producer of castings and forgings and a subcontractor for Raytheon, is a Raytheon director. Charles F. Avila, board chairman of Boston Edison, is also a director of Raytheon, which is Boston Edison’s largest customer of electrical power. Similarly, Eli Goldston, president of Eastern Gas and Fuel, is also a director of Raytheon, one of his biggest customers.

In the other direction, the two top officers of Raytheon, chairman Adams and president Phillips, are respectively directors of the First National Bank of Boston, Pan American Airlines, Gillette and Liberty Mutual, and of the John Hancock Company and the National Shawmut Bank of Boston. What all these and other numerous “interlocks” reflect is the extensive coordination of profit-seeking that goes on in the board rooms of big corporations and shows that Raytheon is not an isolated cold-warrior on an otherwise largely peaceful terrain.

Another, extracurricular, activity of Raytheon’s executives and directors is overseeing the local higher education/research infrastructure which supplies their companies with specialized manpower. For example, 4 out of 11 of Raytheon’s directors are members of the corporation of Northeastern University, probably the single most important factory of business, technical and intermediate level engineering personnel and ROTC recruits in New England.

Another university from which Raytheon derives great benefit is, of course, MIT. For example Raytheon has production contracts for the missile guidance systems originally developed at MIT’s Draper Laboratory. However the allocation of high powered places like MIT is much less a matter for local Raytheon influence since it involves basic ruling class priorities. These are defmed by complex processes in the apparatus of state, where Raytheon and its business associates are only one of many accomodating [sic] blocks of power and vested wealth. Of course Raytheon does its best to plan and advance its case for bigger and better contracts and so it has people like Prof. Harvey Brooks on its board of directors to give advice on technical-governmental matters. Brooks is Dean of Engineering and Applied Physics at Harvard, served as a
Presidential Science Advisor, and is on the Naval Research Advisory Committee, the National Science Board, and the National Academy of Science/National Academy of Engineering. He is also a director of the

Putting it All Together

This analysis illustrates important features of the ruling class’s decision making processes. Some of their decisions are mainly of local concern and so are decided by individuals assembled locally (e.g. educational policy matters at Northeastern University; electrical utility policy planning in New England). Other decisions are very fundamental matters (e.g. level and make-up of “defense” spending; foreign policy objectives; inflation management) and are decided through more central channels in the top levels of private and government decision-making, sampling opinion from a wider selection of businessmen and their fronting politicians and agency chiefs.

While there is a fundamental underlying unity of interest among big businessmen, (in favor of high profits and social stability; opposed to the gains of workers against their bosses, anywhere) there are of course minor and disagreements on specific issues, especially among individuals holding narrow sectoral viewpoints. Thus a Raytheon executive might argue for a higher level of defense spending than a gentleman from the State Street Bank of Boston, whose broad experience leads him to conclude that additional business incentives in other areas (eg., environmental control, “cool-it” programs and urban redevelopment) are essential for the continued security of massed private wealth in America. Nevertheless, this banker looks forward to the nice profits that Raytheon can hustle in the current market context (State Street Bank held almost six percent of Raytheon’s stock in 1968), and of course, he greatly appreciates Raytheon’s contribution to the essential security of U.S. investors in Asia, Africa, Europe and Latin America. In fact several industries with which he is familiar in New England — especially electronics, textiles and shoes — have derived great profit from their operations in S. Korea, Taiwan and elsewhere. But this process of foreign investments leads to U. S. workers losing their jobs. Furthermore, it is happening in most industries- cars, food processing, etc.- and is probably one of the primary mechanisms whereby businessmen benefit, and working people suffer, from imperialism.

Raytheon should now be seen in proper perspective as a fully integrated part of the entire system, operating in certain more visibly repugnant areas of the market but pursuing absolutely essential aspects of the ruling class’s established priorities. Therefore, the most important feature of Raytheon is what it has in common with all business: the creation of maximum profits, not only to provide great personal benefit to those who own and control corporations but also to increase their hold over the system, and to expand their capital assets for even bigger profits in the future. All the wealth produced, of course, comes from the labor of working people both here and abroad and thus is actually stolen from its rightful owners. A political strategy for “dealing with” Raytheon, then, must be a strategy for dealing with the whole corporate system.

What we must do in general terms is clear. Recognition of the exploitation of workers at places like Raytheon and in general, as well as our own exploitation, should lead us to work to build a unified movement of all working people against the corporate class. This means overcoming the many devastating divisions that so effectively stand in the way. These divisions, based on race, sex, profession and status are, in fact, sustained or created by the ruling class to facilitate their maintenance of power. Thus we must learn and teach the importance of ideas that clarify the class question: Who are our friends and who are our enemies? We must build the organization needed to advance this process. Finally, we must recognize that any solution which does not represent the interests of the majority of working people will inevitably fail to eliminate the foundations of class exploitation. Therefore a leadership role must be played by the largest sector-the so-called ”unskilled” or “semi- skilled”-who have most thoroughly experienced the exploitation of the present order, who have the most to gain, and who will have the most to protect once the ruling class has been thrown out.

In a particular case like Raytheon, knowledge of the way this corporation works gives us the opportunity to begin to help build, with workers there, for an anti-capitalist struggle. We can contribute to such a program by relating to technical workers in their struggles against unemployment and lay-offs. (There have been 15% lay-offs at Raytheon in little more than a year.) More generally, we must expose and fight against the effects of racism, the war, welfare cuts and other destructive manifestations of the corporate economy on both the employed and the unemployed. The struggle over these and other issues should provide important experiences for technical workers building similar movements in all science-bound institutions-corporations, R&D institutes, universities and government agencies.

 

>>  Back to Vol. 3, No. 3  <<

 

Footnotes

Much of the factual information in this article on the origins of Raytheon and its current activities was taken from a preliminary draft written by Richard Krushnic, entitled The Raytheon Company: Problem Child of Massachusetts.

  1. “Raytheon Company Field Report”, Harris, Upham & Co., October, 1968, p. 5. A securities analysis recommending investment in Raytheon, a company with a future.
  2. Ibid.
  3. The War Business, George Thayer (Avon Paperback) 1969, pp. 249, 232, 234.
  4. Militarism and Industry, Victor Perlo, (International Publishers), 1963, p. 43.
  5. The War Business, p. 186.
  6. Immediately after WWII, a major tenet of U.S. policy was to discourage Soviet support for liberation movements –“communist expansion” — of the oppressed peoples of the world. Hence the clear message of the first atomic bomb detonations and the cold war that followed. More recently the Soviet state has become a traditional competitor and threat for U.S. business, especially in regions such as the Middle East and South Asia — consider India, Indonesia and now Ceylon! 
  7. “First U.S. Submarine Set Out with Multiple-Warhead Missile,” New York Times, April 2, 1971.
  8.  For a good account of the relationship between the B-1A and the SST, see The War Profiteers, Richard Kaufman (Bobbs Merrill), c. 1970, pp. 82-87. See also The Manned Bomber, by Mary McCarthy, in The Pentagon Watchers, Leonard S. Rodberg and Derek Shearer, Eds. (Doubleday Paperback), 1970.
  9. Economics of Military Procurement, hearings before the Subcommittee on Economy in Government of the Joint Economic Committee, 90th Congress, 2nd session, Part I, November 11, 1968, pp. 57-65.
  10.  Ibid., Part II, November 14, 1968, pp. 8 and 12. This testimony of Admiral Rickover is also important.
  11.  Raytheon N.Y. Stock Exchange listing A-14362, August 1, 1952.
  12. For a good summary in 30 pages of the various forms of subsidies to, the high profits of, and the wasteful practices of the large military producers, see “Economics of Military Procurement,” report of the above mentioned subcommittee, May, 1969
  13.  See Pyramiding of Profits and Costs in the Missile Procurement Program, hearings before the Permanent Subcommittee on Investigations of the Committee on Government Operations of the U.S. Senate, 87th Congress, 2nd session, 1962. There are two volumes of hearings on Western Electric’s Nike Program.
  14.  “Pentagon Accountability,” Senator William Proxmire, in National Priorities. 
  15.  The War Profiteers, Richard F. Kaufman, (Bobbs Merrill), 1970 p. 62.
  16.  “Balancing Military and Civilian Programs,” Charles L. Schultze, in National Priorities, 1969, p. 35.
  17.  “Bush, Busy at 80, Feels Pentagon Overdoes It,” New York Times, March 12, 1970. 
  18.  For a good general discussion of the dominant role of banks in establishing the ruling class’ priorities in the U.S. economy, see ”Who Really Rules America” by Richard Pelton in PL magazine, February, 1970, The information on Raytheon’s early financial history was taken from “The Raytheon-Commonwealth of Massachusetts Military-Industrial Complex,” by Richard Krushnic January, 1971. 
  19.  R. Krushnic “Raytheon: Problem Child of Massachusetts”.