Shultz: Thinker and Doer

By WALTER ISAACSON

Low-keyed in style, and a master of conflict resolution

Several months ago, when one of Alexander Haig's periodic eruptions appeared to signal his imminent departure from office, George Shultz ran into an old friend from Nixon Administration days on a Washington street. "I think he's going to go," said the friend, Washington Lobbyist Charls Walker. "Who do you think they'll get?" asked Shultz. "You," answered Walker, with a laugh.

An academic turned industrialist who has held three Cabinet-level portfolios, Shultz would undoubtedly have been a prime candidate for any major post that fell vacant in the Reagan Administration. "I met no one in public life for whom I developed greater respect and affection," wrote former Secretary of State Henry Kissinger in Years of Upheaval. "If I could choose one American to whom I would entrust the nation's fate in a crisis, it would be George Shultz." Soft-spoken and unassuming, Shultz provokes that kind of reaction from most of those who have worked with him. "He does his homework, he hears people out, and he is a consensus maker," says Jack Carlson, who served under Shultz at the Office of Management and Budget.

Even the best-known public criticism of Shultz somehow does him credit. Richard Nixon apparently once complained to Ronald Reagan that Shultz was not a team player. Reason: as Nixon's Treasury Secretary, Shultz refused to participate in plots to harass people on the White House enemies list. Indeed, the former President can be heard asking on one of the Watergate tapes, "What does that 'candyass' think we sent him over there for?"

Much of the praise for Shultz emphasizes the contrast between his style and that of his predecessor. "He's exactly the opposite type of personality from Alexander Haig," says an ex-official at Treasury. Adds former Defense Secretary Donald Rumsfeld: "He's an unflamboyant person. He doesn't have any sharp edges. He works in a manner that does not call attention to himself."

Shultz, whose father was a historian, was raised in the comfortable suburban town of Englewood, N.J. After graduating in 1942 from Princeton, where he was a blocking back on the football team, he served in Hawaii as a Marine Corps captain during World War II. There he met and married Army Nurse Helena O'Brien, known as "Obie." They have five children and currently live in a colonial home on the campus of Stanford University, where Shultz teaches part-time. When he is not traveling, which is seldom, Shultz tries to be in bed by 10 p.m. so that he can get "his preferred 5 a.m. jump on the day. His main forms of relaxation are swimming, golf (middle 80s) and tennis.

Shultz earned a doctorate in industrial economics at the Massachusetts Institute of Technology; he joined the faculty there in 1948. Some of his early research was in the field of "conflict resolution," which centers on devising methods that will encourage quarreling parties to resolve disputes on their own. "He can see how different people approach problems from different angles," says Professor Chauncy Harris of the University of Chicago Center for International Studies. Shultz became a professor of industrial relations at Chicago in 1957, and five years later was made dean of the business school.

Shultz's one major conflict at Chicago came when he banned the use of loudspeakers at a rally against the Viet Nam War. When Edward Levi, the university's president, overruled him, Shultz resigned. His friends on the faculty, including conservative Economist Milton Friedman, pressured him to reconsider. Levi ranks among Shultz's admirers. Says he: "George knows how to deal with people. He is an inspirational individual."

Shultz joined the Nixon Cabinet in 1969 as Secretary of Labor. He was the only Administration official trusted by AFL-CIO President George Meany, and the two became avid golfing buddies. That friendship survived Shultz's most controversial action as Labor Secretary: promulgation of the Philadelphia Plan, which forced the construction industry to hire blacks and other minorities through the use of racial quotas.

After succeeding John Connally as Treasury Secretary in 1972, he took on responsibility for coordinating the Administration's economic and domestic policy. He displayed an impressive talent for exercising authority and expanding turf without ruffling feathers or alienating colleagues. Says former Budget Director James Lynn: "He's one of the best base-touchers I've ever seen." An official who served under Shultz at Treasury explains that "he could make everyone, even those opposed to the action taken, feel an integral part of the process."

Despite Nixon's complaint about the quality of his teamwork, Shultz knew how to lose a battle gracefully. For example, he had strongly advocated a "steady-as-she-goes" economic policy and urged Nixon not to attempt any radical fixes for stagnation and inflation. In 1971 Nixon suddenly imposed a new economic program that included wage and price controls. As a monetarist disciple of Milton Friedman, Shultz was strongly opposed. Nevertheless, he dutifully supported the program and was soon given responsibility for enforcing its cost-of-living guidelines.

Shultz resigned as Treasury Secretary in 1974 to join Bechtel, one of the world's largest construction and engineering conglomerates. He became president the following year. Among its projects: the Hoover Dam, the Washington and San Francisco subway systems, 84 nuclear power plants, and the $20 billion Jubail Project, which is creating a new industrial metropolis in the sands of Saudi Arabia. Among his other duties, Shultz acts as a kind of secretary of state of the privately held, San Francisco-based company under Chairman Stephen Bechtel. His tasks as president of the group include coordinating international projects, articulating company policy and developing strategy for future markets. Half the company's revenue comes from abroad.

Shultz's business experience tends to undercut the criticism that a man with no formal diplomatic background was chosen for the top foreign policy job in an Administration already woefully lacking in international expertise. "Relative to the rest of the Administration, Shultz has had experience," says former Senator J. William Fulbright. "He brings to the office an enormous personal acquaintanceship with heads of state around the world," says New York's Citicorp Chairman Walter Wriston.

Both as a of businessman Nixon's and East-West Trade Policy Committee, Shultz has been an advocate of maintaining steady commercial relations between the U.S. and the U.S.S.R. In a 1979 article attacking President Carter's restrictions on technology transfers to the Soviet Union, Shultz wrote, "We cannot use trade as a tool designed to alter the domestic politics of other countries." The incoming Secretary also met Soviet President Leonid Brezhnev twice in 1973, to discuss ways to increase trade between the two nations.

Shultz may even match Haig's famed rapport with European leaders. Says former Commerce Secretary Peter G. Peterson: "[West German Chancellor] Helmut Schmidt considers George one of the best friends he has, and has enormous respect for him. It's hard for me to imagine any one who would be more acceptable to the Europeans." The two men have vacationed together at Bohemian Grove, a private California men's retreat to which Shultz belongs.

About 12% of Bechtel's business is done in Arab nations--a matter that will surely be raised at Shultz's Senate confirmation hearings. "He will be more pro-Arab than Haig," predicts New York Investment Banker Felix Rohatyn, a Democrat, who says of Shultz, "There are few more capable people in the country." Indeed, Shultz noted in a 1980 interview that "if I have any differences with Reagan, it's about Middle East policy." Even if Shultz does have a pro-Arab bias, which many of his colleagues deny, some question whether he will be in a position to display it. Bechtel lobbied for Senate approval of the sale of AWACS surveillance planes to Saudi Arabia, and American Jewish groups have already expressed concern that Shultz will be less supportive of Israel's security interests. Says Morton Kaplan, a professor of international affairs at Chicago: "Shultz is in a particularly weak position to put pressure on the Israelis. They'll use the Bechtel connection to put pressure on him."

The Secretary of State-designate is far less likely than his predecessor to clash with Defense Secretary Caspar Weinberger. Weinberger worked under Shultz at OMB and was Secretary of Health, Education and Welfare in Nixon's Cabinet when Shultz was at Treasury. After leaving Government in 1975, Weinberger followed Shultz to Bechtel and became general counsel and vice president of the firm. The two men are known to have worked together smoothly.

Shultz was apparently Reagan's first choice as Secretary of State. But the President's advisers pointed out the obvious difficulty of putting top executives from the same company in the two key national security posts. Reagan tapped Shultz to head his outside advisory group on economic policy. In that role, for better or worse, Shultz put together an economic policy that blended Reagan's major campaign themes--tax cut and a balanced budget--with the tight money and lower social-spending ideas favored by traditional conservatives and monetarists. In the process of melding together these views, Shultz somehow managed to ease aside, as key figures in the Reagan campaign, economic eccentrics like supply-side zealot Arthur Laffer and move ahead such mainstream figures as Wriston and Economist Alan Greenspan.

Shultz clearly belongs to the traditional Republican mainstream. As a member of the Council on Foreign Relations, he represents to some conservatives the Nixon-Ford-Kissinger establishment that Reagan has spent much of his career attacking.

This has caused a rumbling thunder on the right. "We had only two seconds to enjoy Haig's firing," says Richard Viguerie, an archconservative political organizer. In fact, after Reagan's election, when it was thought that the choice for Secretary of State had come down to Haig and Shultz, Ultra-Conservative Brewer Joseph Coors and others mobilized a campaign for Haig, who was considered to be less of a "detentist."

Says New Right Leader Paul Weyrich: "Now we've got what we helped to prevent."

As he and Obie sped back to Washington on the Concorde last weekend, George Shultz began readjusting to the role of public power. He was given the honor of being the last to board the plane, waiting until even Jamaican Prime Minister Edward Seaga had been seated. Two camera crews stumbled in the aisles as the chunky man with the healthy California tan took his place. And on the 3 1/2-hr. flight, he conducted impromptu diplomacy, listening as Seaga urged faster progress on Reagan's plan for aid to the Caribbean Basin.

But Shultz also got a taste of some new organizational constraints he may encounter. He told four American journalists, who flew across the Atlantic with him, that he would be available for a few questions when the supersonic jet landed. These arrangements were countermanded at Dulles International Airport by a White House welcoming party of Edwin Meese, James Baker and William Clark. "But Secretary Shultz wanted to make a statement," protested a reporter. "But Judge Clark does not want him to," responded an aide. And so Shultz did not.

--By Walter Isaacson. Reported by David Beckwith/Washington and Dick Thompson/San Francisco

With reporting by David Beckwith, Dick Thompson

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