THE MISTAKES AND missteps of the Ford administration drew brickbats from the Democratic Congress, White House correspondents, newspaper columnists and magazine commentators, and Republicans on the far right. In contrast, Scowcroft’s quiet effectiveness as national security advisor received scarcely any attention.
Scowcroft played a critical role, in typically unpublicized fashion, in rescuing the British pound in the fall of 1976. It is no exaggeration to characterize Britain in the mid-1970s as a battlefield of class warfare being waged between the trade unions, which were seeking higher wages, and the leading businesses, which were resisting any concessions at a time when the British industrial economy was struggling. In response to the big budget deficits and large trade deficits Britain had run in 1974 and 1975 under the governments of Harold Wilson and James Callaghan, in 1976 the Treasury and the Bank of England made the decision to use a secret policy of controlled devaluation, embarking on limited periodic sales of the pound in the international markets, together with more public measures, such as restricting wage increases and reducing government expenditures to bring down the inflation rate.
The gambit succeeded at decreasing inflation, which fell from a 25 percent annual rate in mid-1975 to an 11.5 percent annual rate in June 1976. The expectation was that Britain would be able to regain the competitiveness for its exports which it had lost through rapid inflation without the use of the chosen alternative strategy: import controls. So far, so good—but in late 1976, things got worse. Trade Union Council (TUC) officials were upset about the new wage restrictions and cuts in public spending. They met with the Labour prime minister, Callaghan, to request that he reconsider government policies and switch to import controls as a means to boost the economy. Their demands carried weight, since the TUC had helped put Callaghan’s government into office. A further run on the pound in the last quarter of 1976 increased the pressure on Callaghan to act—but he didn’t want to yield to the TUC.461
Callaghan therefore began to talk with other heads of government about the prospect of putting together an IMF loan in the event that the falling pound sterling reduced British financial reserves to unstable levels. Any such loan would require International Monetary Fund approval, however, and since the United States played a dominant role in the IMF, Callaghan first had to secure the cooperation of the Ford administration.
Things got worse when news of the proposed rescue was leaked, possibly by union officials or their allies in the Labour government.462 There were rumors of indiscreet hints by Callaghan’s ministers, and the London managers of the volatile oil funds, who kept their balances in sterling, began to move them out, led by the Nigerians. The pound proceeded to plummet through the $2.00 level. But when the Bank of England continued to sell sterling, it was into a market that was already shedding the pound. With the run on the sterling and untenable budget deficits, Callaghan had no choice but to approach the United States.463
President Ford was strongly committed to helping Callaghan; in fact, Callaghan was his “biggest buddy” among all foreign leaders, as Robert Hormats, an economic adviser to Kissinger, later noted in an interview. But opinion in Washington was by no means unanimous. Many US officials, economists, and financial experts were highly critical of British policies and wanted to see the Labour government make much larger cuts in public spending and impose greater restrictions on wage increases before qualifying Britain for a loan. Treasury Secretary William Simon, Under Secretary Edwin Yeo, Federal Reserve chairman Arthur Burns, and Chairman Alan Greenspan of the Council of Economic Advisers were mostly unsympathetic to Britain’s predicament. Furthermore, the financial markets had to perceive the British government’s actions as both substantive and convincing if the rescue package was going to work. President Ford “knew that the British had to help themselves,” and he said as much.464
A good solution had to be both economically plausible and politically viable, since a collapse of the Labour government would only trigger a further crisis of confidence.465 So the question then turned on the conditions that the IMF would impose before approving a loan. How severely would the Labour government have to change its domestic programs?
This is where Scowcroft came in. The United States would have to coordinate any funding program with the other principal IMF member states. If the United States and the IMF pushed too hard, the Callaghan government would be in trouble and there could be “a very severe negative reaction,” according to Hormats. But if Britain didn’t respond to its plummeting currency and domestic situation, it could suffer an even bigger crisis.
So the United States and Britain began to engage in delicate international negotiations, along with the other leading IMF countries, Germany and France in particular. And with Kissinger at State and Simon over at Treasury at loggerheads, Scowcroft effectively took over.466 Scowcroft was no banker, economist, or international finance specialist, but he was competent in economics and understood the ramifications of the falling pound. More important, he was able to collaborate with other members of the Ford administration and with the foreign ministers and other representatives of foreign nations. He also had help from his staff, especially Hormats, who was temporarily in the NSC, seconded from the Treasury Department, and who would later become a vice chairman at Goldman Sachs.
Scowcroft was committed to helping Britain. He regarded Britain as a bulwark of democracy at a time when communists and socialists were threatening to take power elsewhere in Europe, and as a stalwart ally of the United States with respect to NATO and the defense of Europe. As AFL-CIO president George Meany wrote President Ford in late September, “The collapse of the exchange value of the pound underscores and reflects the continuing economic and financial crisis faced by America’s oldest and most steadfast friend in the world, Great Britain, and her people.” For Meany, just as for Scowcroft, the United States’ and Britain’s fate were “irrevocably linked,” and that the United States had to place its “‘full faith and credit’ behind the British people.”467
So Scowcroft was greatly concerned about the larger geostrategic implications of a destabilized, crisis-stricken Britain and was worried that the whole situation could “come apart in quite a serious way.” He said he spent more time on the sterling crisis “during those weeks than anything else. It was considered by us to be the greatest single threat to the Western world.”468 It is likely that for all these reasons he helped persuade President Ford early in the crisis to agree to help the Callaghan government.
However, Scowcroft had to proceed in such a way in order to prevent news leaks from those opposed to the president’s efforts to help Britain. If the media and the financial markets discovered that the United States and the IMF were intervening to support the British pound, there would be even more currency speculation and the British pound’s slide would accelerate. Scowcroft thus had to act very discreetly.469
Scowcroft set up an interagency process for handling the crisis, one that allowed Treasury officials to communicate their positions to the White House and coordinated US policy across the government. At the same time, Scowcroft and his staff had to convince Simon to remain quiet, prevent negative leaks, and, ultimately, agree to a favorable vote in the IMF. So, for instance, in late February 1976, when Alan Greenspan sought to comment publicly on British economic policy, Scowcroft advised him to couch his comments in a “positive framework” and suggested that he “avoid criticism of the British Government’s past or present economic policies . . . Any such criticisms would most certainly be misunderstood and would have an adverse impact on US-British relations.”470
Scowcroft also had to handle the delicate relationship with the British, and he was able to get the Treasury officials to listen to the British—and vice versa. Chancellor of the Exchequer Denis Healey visited the United States several times to plead his country’s case and to clarify what his government could and could not do. Harold Lever, whose formal title was chancellor of the Duchy of Lancaster but who was essentially a minister without portfolio, also came to the United States. His visits were helpful, since Simon, Yeo, and others in the Treasury Department considered Healey a left-leaning big spender but regarded Lever, a former businessman, as more fiscally responsible.471
Throughout the process, Scowcroft, with the help of Hormats and Greenspan, proceeded quickly and quietly. Within a week he was able to orchestrate a favorable IMF vote for a $4 billion loan to the British government (more than $16 billion in 2012 dollars) and get the Callaghan government to agree to further fiscal restrictions as a condition, including cutting public spending drastically, being willing to transfer funds to investment, and accepting higher levels of unemployment. The British had to draft a seven-page “letter of intent” to be included as part of the paperwork for the IMF loan—the first time such a document had been required of an advanced industrialized nation. The “humiliating” letter (as one observer characterized it) expressed the Labour government’s intention to pursue stable economic policies, such as spending less on roads, ending wage increases, raising taxes on lower-income wage earners, and setting aside more money for industrial investment—all bitter pills for Callaghan’s Labour government to swallow. Sweetening the deal for Britain was a separate agreement by the United States to extend a $4 billion line of credit that would shore up the pound for a few years, up until the North Sea oil began producing significant revenue (in 1980).
With the British and US governments on board with this complicated compromise, Scowcroft was able to get other key IMF members, especially Germany, to agree to the proposed settlement. As a result, the pound stabilized and slowly regained some of its lost ground, and the crisis abated. But as Robert Hormats, Bud McFarlane, and others acknowledged, it was “a close-run thing.”472
After the fact, some critics claimed that Callaghan and Lever had played Ford and Scowcroft by hinting at so-called end-of-democracy scenarios—such as the United Kingdom having to cut back its NATO forces on the Rhine and, by implication, therefore no longer being able to serve as the United States’ reliable, constant partner in the Cold War.473 The Treasury’s Edwin Yeo, a conservative Pittsburgh banker by way of background, said that the British ambassador to the United States, Sir Peter Ramsbotham, presented the British side “with consummate skill” and “used to have Scowcroft practically in tears,” Kathleen Burk and Alec Cairncross report in their book Goodbye, Great Britain.474
This is surely possible, if likely overstated. The British may well have presented the Ford administration with some worst-case scenarios, and such scenarios would have doubtless seized the full attention of Scowcroft, Kissinger, and the president. But the fact is that the financial situation in Britain was very real and very grave. Without the intervention of the United States and the IMF, there’s no telling where it might have led.
“When the pound collapsed in the summer of 1976 and Callahan was forced to turn to the IMF for help, grimly swallowing £3bn in spending cuts in the next few years, he showed guts and leadership,” the British historian Dominic Sandbrook writes. “It was one of the great unsung turning points of modern British history: the point at which the people at the top realized that only the strongest medicine would cure the nation’s ills.” For the British to have to go hat in hand to the United States and the IMF for a loan to shore up the pound was a huge loss in prestige for a country that had long been the world’s supreme financial power. The collapse of the British pound and “the IMF crisis of 1976 was a turning point in another sense, too,” Sandbrook observes. “It was the moment when the parochial, introspective assumptions of British politics were shattered for good.” Britain could no longer remain an “economic island,” and “Callaghan and Healey realised . . . that Britain was now inextricably locked into a vast global system.”475
Although the crisis of the British pound may appear as a minor episode in the history of US foreign relations, it was no small thing for Britain, for the Ford administration, and, potentially, for European politics and economics during the Cold War. And Scowcroft was in the midst of it all. He served as a diplomat in managing US relations with Britain and other key IMF member states, as a geostrategist who had to consider the political and military repercussions of a failed Britain on Europe and on East-West relations, and as a banker concerned about the safety and security of taxpayers’ and investors’ funds. He was able to pull all the pieces together, get a divided Ford administration to agree on a single plan of action, win the cooperation of the United States’ European allies and fellow IMF members, and broker an agreement that the Labour government, the US Treasury, and the IMF could all accept. All of this, too, without the media being alerted—suggestive of the trust that all the participants had in him and the process he put in place to handle the crisis.
MAKING THE INTERNATIONAL cooperation on the rescue of the British pound possible was the increased communication and diplomacy among the leading world economies, induced by the economic summits that began during the Ford presidency. While Scowcroft did not play a direct role in these summits, the NSC produced the advance briefing books for President Ford and had to help create a unified American policy on issues of East-West trade and investment, international finance, and other topics for the president to advocate and defend. Scowcroft attended the conferences along with a handful of other advisers and kept watch on developments.
It was French president Valéry Giscard d’Estaing who first proposed, in 1975, that the United States, Britain, Germany, and Japan meet to discuss global economic issues. Ford then asked that this Group of Five be increased to a Group of Six—the G-6—with the inclusion of Italy. The meeting was held at Rambouillet, an old castle thirty-five miles from Paris, the French equivalent of the country estate, Chequers, for the British prime minister. The results of the Rambouillet summit included a “controlled float” for international currency values (a compromise between the position advocated by the United States and that taken by France) and a deal limiting the use of trade quotas by the G-6 and other advanced industrial countries to protect their respective home industries.
In mid-April 1976, Ford approached German chancellor Helmut Schmidt about convening a follow-up economic summit to be held in San Juan, Puerto Rico.476 Schmidt and then Giscard agreed, and Ford insisted that Canada be allowed to join, thereby creating the G-7. The heads of these seven economic powers duly met in Puerto Rico on June 27 and 28, when they discussed synchronizing their economies to mitigate the risk of inflation, talked about the energy crisis, and proposed areas where they could accept more free trade.477
We now take economic summits among the leaders of the world’s largest economies for granted, but the Rambouillet and San Juan meetings were themselves extraordinary events, despite their paucity of concrete results. They brought together social democrats and conservatives alike. They got those who were opposed to the United States in Vietnam and uncertain about NATO policies (if not NATO itself) to talk to the American president and his advisers and to other leaders closely allied with the United States. And they enabled the several heads of government, many of them barely acquainted or even complete strangers, to get to know one another. What’s more, the economic summits took place immediately following the oil shocks, a time when the Western leaders did “not fully understand the nature of the new types of problems they confront[ed],” as Hormats wrote to Kissinger. In addition, as Secretary Simon commented after the Puerto Rican summit, the informality of the meeting encouraged frank and honest dialogue. As significantly for the Ford administration, the president “was impressive and clearly gave others confidence in him as a leader of the Western World.”478
The objective of the economic summits was to “achieve a better understanding” of common problems and to lead to “an improvement in public confidence”—and they largely succeeded on both fronts.479 President Jimmy Carter continued the practice, participating in dozens of additional economic summits with the leaders of the other major advanced industrialized countries. Dozens more have been held over the decades since.
SCOWCROFT WAS MORE consistently and directly involved with respect to the Angola crisis. Once the crown jewel of Portugal’s African possessions (in the words of President Ford), Angola won its independence in 1975.480 Rich in oil reserves and mineral deposits, Angola had a transitional tripartite coalition government composed of the Popular Movement for the Liberation of Angola (MPLA), supported by the Soviet Union; the National Front for the Liberation of Angola (FNLA), supported by China and Zaire (and whose leader was on CIA retainer as an informant); and the National Union for the Total Independence of Angola (UNITA), supported by the United States. In January 1975, the 40 Committee and the Ford administration approved a grant of $300,000 for the FNLA. The FNLA quickly attacked the MPLA, and the Cubans and Soviets responded with arms and soldiers in support of the MPLA.481 Angola was embroiled in a civil war.
President Ford, Kissinger, Scowcroft, and other advisers believed that the United States had no choice but to act, in light of the fact that the Soviet Union was providing equipment and Cuba was sending fifteen thousand troops. Meanwhile, South Africa was assisting the FNLA and UNITA. Neither Ford nor Kissinger nor Scowcroft wanted another country to fall to communism on their watch. Angola thus became the site of a proxy war between the superpowers, with Ford and his foreign policy team again eager to demonstrate the ability of the United States to influence international developments.
In July, the administration approved $14 million in additional support for the FNLA and UNITA, to be supplemented by another $10.7 million in early September. Scowcroft followed this up with a request for a further $7 million, which Ford approved in November 1975. But the MPLA seized control of the capital city, Luanda, on November 11 and declared Angola independent.482 That same day, Kissinger called for “a 40 Committee meeting on Angola to assess the situation.” Scowcroft pointed out that the Soviets were sending in MiGs. But Kissinger optimistically told the president, “With a few arms and mercenaries, either side could win. We have done well with the weapons we sent. But it may turn with the new Soviet weapons going in.”483
As national security advisor, Scowcroft was in charge of covert operations such as the Angola mission. Two weeks later, he unveiled four options the administration could take on Angola and scheduled a 40 Committee meeting on how they should proceed.484 Scowcroft and the administration decided to inject another $25 million (on top of the $32 million they’d already spent) in support of the FNLA and UNITA.
All that spending couldn’t remain secret—the CIA was running ads for mercenaries in Soldier of Fortune magazine, for instance—and the US Congress, extremely wary of CIA covert operations at this point, assigned oversight of the CIA to six different committees (later increased to eight). On December 20, 1975, it cracked down further, passing the Tunney Amendment, which cut off any additional covert aid to Angola.
Scowcroft thought Congress had behaved inexcusably. He charged that Congress, through its “explicit refusal to provide any assistance whatever to the ‘pro-Western’ forces” in Angola, had “clearly demonstrated [the United States’] general lack of interest in the political evolution of Africa. It is hardly surprising that this attitude was interpreted, rightly or wrongly, by the Soviet Union and its Cuban proxy as granting them virtually a free hand to serve as the sanctifiers of boundaries and of governments, at least in Africa.”485 And Scowcroft told representatives of the South African military that Congress was being “insane” on the issue of US military aid to southern Africa. “Even a loan is a problem,” he complained.486
Ford agreed, saying in a newspaper interview that “Congress has done some things that interfered with the day-to-day execution of foreign policy. . . . In the case of Angola, I personally believe that if we had been able to put in the extra funds—no US military personnel—that UNITA and the FNLA would have been able to force a political settlement instead of having the MPLA take over and control Angola.” The president continued, “Until Congress said ‘No’ the military situation was very fluid in Angola, but the minute Congress said ‘No,’ the Cuban intervention was doubled or tripled.” And when “we couldn’t provide our allies with what they needed,” Ford said in another interview, “then the Soviet Union and Cuba won. It is just that simple.”487
What also bothered Ford and his advisers during the prolonged Angolan crisis was the near-silence of conservatives in the House and Senate—those same members of Congress who vigorously denounced any sign that the administration was relenting in its waging of the Cold War. The presidential historian John Robert Greene has suggested that the passage of the Tunney Amendment may even have been the proximate cause for President Ford to issue his February 1976 executive order to overhaul the structure of the US intelligence community.488
On December 13, 1975, following Congress’s ban on further assistance for Angola, Scowcroft called upon the secretary of state, the secretary of defense, the chairman of the Joint Chiefs of Staff, and the DCI to establish an ad hoc committee to review the situation in Angola and to present the president with options—due in three weeks’ time. The administration’s concern, according to Secretary of Defense Rumsfeld, was “to the extent that the Soviet Union improves its basing and airfields throughout the continent of Africa it [would be] able to project power to a considerably greater extent in that part of the world than previously.”489
But Ford and Scowcroft refused to do in Angola what Kissinger wanted the president to do, what Nixon had done, and what Reagan and director of central intelligence William J. Casey would later do: to maneuver around Congress and find another way to secure US objectives. Instead, they allowed the MPLA to dominate in the Angolan civil war, and the Soviets and Cubans effectively prevailed. But as many Cold War hawks consequently asked themselves, what, then, was the use of détente?490
Scowcroft remained concerned about southern Africa, given the changes following the independence of Angola and Mozambique and the challenges possibly waiting in Rhodesia and Namibia. In April 1976 he therefore directed the State and Defense Departments and the DCI to review US policy in sub-Saharan Africa.491
In the years to come, resistance to the MPLA government in Angola would smolder, and the Reagan administration renewed US covert actions in support of UNITA and its leader, Jonas Savimbi, providing $15 million worth of antiaircraft and antitank missiles in 1986 and transferring another $15 million worth of Stingers and other weapons in 1987.492
Angola was just one of the foreign policy problems that Scowcroft was unable to fix. Another was a shift in the climate of American national politics toward a more morally driven and idealistic US foreign policy. Scowcroft joined Kissinger and Nelson Rockefeller in being outraged at Ronald Reagan’s insistence on including a “morality in foreign policy” plank in the Republican Party’s 1976 platform. The plank called for a foreign policy “in which secret agreements, hidden from our people, will have no part”; it praised Aleksandr Solzhenitsyn for his “human courage and bravery”; and it described the Helsinki agreement as “taking from those who do not have freedom the hope of one day getting it.”
Scowcroft therefore wanted Ford to fight the Reagan plank, but Cheney, Ron Nessen, and campaign aide Stuart Spencer ultimately persuaded Ford that to do so would be to fall into a trap. The Reagan supporters wanted Ford to challenge them on this issue, they argued, and hoped to be able to bring it to a vote—one that Ford might then lose. So the president swallowed his pride and went along with the plank.493
Also beyond Scowcroft’s control was the legacy of détente and its impact on the image of the United States. Scowcroft was convinced that for the United States to be able to play an effective role in the world, the “key element, again, is a perception of American strength and steadfastness,” he wrote in the Naval War College Review. “On this point there is concern—beginning with Vietnam, the refusal to act in Angola, and on through the cumulative effects of a number of recent events. Confidence is a very fragile commodity in international politics,” and “once erosion sets in, it is inordinately difficult to reverse.”494 He believed that among American and international audiences—especially the Soviets—the United States was no longer perceived as strong.
Scowcroft spoke of the “impressive growth of Soviet military power.” And Scowcroft could
not recall a historical period when an unfavorable balance of power was not sooner or later translated into political advantage. . . . Equally important from a political standpoint is the impression of Soviet superiority. Should such an impression, accurately or inaccurately, gain currency, it can have a profound effect on the behavior not only of the Soviet Union but on our allies, the Third World, and even ourselves—an effect greatly to the detriment of the West. Such a perception could alter world political alignments, increase Soviet propensity toward adventurism and risk-taking, and add greatly to our burden of exerting effective leadership. Our first and essential priority, then, must be to do whatever is necessary to prevent the reality, and the perception, of Soviet superiority.
In 1978, Scowcroft would further note that, given that “the United States and the Soviet Union hold fundamentally antithetical views of world order, the organization of society, and man’s place in it . . . [w]e must therefore gear ourselves to a long-term, steady, unremitting opposition to Soviet aggrandizement.495
In making these observations, Scowcroft was not so far away from Reagan’s wisecrack that détente was what a farmer had with his turkey before Thanksgiving, or from the comment by British prime minister Margaret Thatcher after the Soviet invasion of Afghanistan that she had “long understood that détente had been ruthlessly used by the Soviets to exploit western weakness and disarray.”496 And in half a dozen years, the new Reagan administration would ask Scowcroft for his advice on how to base the MX missile and what kind of nuclear force structure the United States should have, on how to reform the NSC process in the aftermath of the Iran-Contra scandal, and on other issues—signs that Scowcroft’s worldview and that of the Reagan administration were largely compatible.
Until then, Scowcroft had to find a new role for himself. Not only had he lost his job when Gerald Ford lost his 1976 bid to be elected US president in his own right, he was out of a career since he had retired from the Air Force upon accepting his appointment as national security advisor.
Ford’s defeat may not have been surprising in view of the enormous difficulties Ford and his presidency had had to overcome. But he and his team were convinced they could have beaten Jimmy Carter.