America's Great Depression (35 page)

The next public works stabilization bill before Congress was the Zihlman Bill in the House. This was promoted by the National Unemployment League, formed in 1922 for that purpose. Hearings were held in the House Labor Committee in February, 1923.

Hoover backed the proposal, but it failed of adoption.

Finally, Hoover presented the report on Business Cycles and Unemployment to the Congress, and strongly urged a public works program in depressions. Later, in 1929, Hoover’s Committee on Recent Economic Changes would also support a public works program.

In 1924, the AALL continued its agitation. It participated in a national conference proposing public works planning. The conference was called by the Federated American Engineering Societies in January. In 1923, Wisconsin and Massachusetts were persuaded to adopt a stabilizing public works program. Massachusetts was directly swayed by testimony from the ubiquitous Andrews and 23Wesley C. Mitchell, “Unemployment and Business Fluctuations,”
American
Labor Legislation Review
(March, 1923): 15–22.

Prelude to Depression: Mr. Hoover and Laissez-Faire
197

Mallery. These state programs were never translated into effective action, but they did indicate the developing climate. In January, 1925, Hoover had the satisfaction of seeing President Coolidge adopt his position. Addressing the Associated General Contractors of America (a group that stood to gain by a government building program), Coolidge called for public works planning to stabilize depressions. Senators George H. Pepper and James Couzens tried to pass public works planning legislation in 1925 and 1926, but they failed, along with later attempts by Senator Wesley Jones, who submitted bills that had been drafted in Hoover’s Department of Commerce. The Republican Senate was the most recalcitrant, and one Pepper Bill was filibustered to death there. Even favorable reports by its Commerce Committee could not sway the Senate. By this time, not only Hoover and Coolidge, but also Secretary Mellon, the Democratic Party in 1924, and later Governor Alfred E. Smith of New York, had endorsed the public works program. In May, 1928, Senator Robert F. Wagner (D., N.Y.) introduced three bills for comprehensive public works planning, including the creation of an employment stabilization board, but the plan was not considered by Congress.24

After Hoover was elected President, he became more circum-spect in presenting his views, but he carried on the fight with renewed vigor. His technique was to “leak” the “Hoover Plan” to trusted associates, who would obviously be presenting Hoover’s views. He chose as his vehicle Governor Ralph Owen Brewster of Maine. Brewster presented a public works plan to the Conference of Governors in late 1928, and waxed eloquent about the plan as 24The following economists, businessmen, and other leaders had by now served as officers of the American Association for Labor Legislation, in addition to those named above: Ray Stannard Baker, Bernard M. Baruch, Mrs. Mary Beard, Joseph P. Chamberlain, Morris Llewellyn Cooke, Fred C. Croxton, Paul H. Douglas, Morris L. Ernst, Herbert Feis, S. Fels, Walton H. Hamilton, William Hard, Ernest M. Hopkins, Royal W. Meeker, Broadus Mitchell, William F. Ogburn, Thomas I. Parkinson, Mrs. George D. Pratt, Roscoe Pound, Mrs. Raymond Robins, Julius Rosenwald, John A. Ryan, Nahum I. Stone, Gerard Swope, Mrs. Frank A. Vanderlip, Joseph H. Willits, and John G. Winant.

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America’s Great Depression

designed to “prevent depressions.”25 His use of the term “Road to Plenty” was hardly a coincidence, for Hoover had adopted the plan of Messrs. Foster and Catchings, which had recently been outlined in their famous book,
The Road to Plenty
(1928). The authors had submitted the plan to Brewster, and, after Hoover’s endorsement, Brewster brought Professor William T. Foster along to the Governors’ Conference as his technical advisor. Foster and Catchings, bellwethers of inflation and the bull market and leading underconsumptionists, had been closely involved in the public works agitation. Foster was director of the Pollak Foundation for Economic Research, founded by investment banker Waddill Catchings. The pair had published a series of very popular books during the 1920s, agitating for such panaceas as public works and monetary inflation.26

Although seven or eight governors were enthusiastic about the Hoover–Foster–Catchings Plan, the Conference tabled the idea. A large part of the press hailed the plan in extravagant terms, as

“prosperity insurance,” a “prosperity reserve,” or as a “pact to outlaw depression”; while more conservative organs properly ridiculed it as a chimerical and socialistic effort to outlaw the law of supply and demand. It was not surprising that William Green of the A.F of L. hailed the plan as the most important announcement on wages and employment in a decade, or that the A.F. of L.’s John P.

Frey announced that Hoover had now accepted the old A.F. of L.

theory that depressions are caused by underconsumption and low 25Ralph Owen Brewster, “Footprints on the Road to Plenty—A Three Billion Dollar Fund to Stabilize Business,”
Commercial and Financial Chronicle
(November 28, 1928): 2527.

26The Foster–Catchings Plan called for an organized public works program of $3 billion to iron out the business cycle and stabilize the price level. Individual initiative, the authors decided, may be well and good, but in a situation of this sort

“we must have collective leadership.” William T. Foster and Waddill Catchings,
The Road to Plenty
(Boston: Houghton Mifflin, 1928), p. 187. For a brilliant critique of the underconsumptionist theories of Foster and Catchings, see F.A.

Hayek, “The ‘Paradox’ of Savings,” in
Profit, Interest, and Investment
(London: Routledge and Kegan Paul, 1939), pp. 199–263.

Prelude to Depression: Mr. Hoover and Laissez-Faire
199

wages.27 The press reported that “labor is jubilant, because leaders believe that the next President has found . . . a remedy for unemployment which, at least in its philosophy and its groundwork, is identical with that of labor.”28

The closeness of Foster and Catchings to Hoover is again demonstrated by the detailed account of their own Plan that they published in April, 1929. In an article entitled “Mr. Hoover’s Plan: What It Is and What It Is Not—A New Attack on Poverty,” they wrote authoritatively that Hoover should wield a stabilization public works reserve, not of $150 million, as had often been mentioned in previous years, but of the gigantic sum of $3 billion. This Plan would iron out prices and the business cycle, and stabilize business.

At last, scientific economics was to be wielded as a weapon by an American President: “The Plan . . . is business guided by measure-ments instead of hunches. It is economics for an age of science—

economics worthy of the new President.”29

THE DEVELOPMENT OF HOOVER’S

INTERVENTIONISM: LABOR RELATIONS

We cannot fully understand Hoover’s disastrous interference in the labor market during the depression without tracing the development of his views and actions on the labor front during the 1920s. We have seen that his Reconstruction Program and his Economic Conference of 1920 praised collective bargaining and unionism. In 1920, Hoover arranged a meeting of leading industrialists with “advanced views” on labor relations to try (unsuccessfully) 27See Dorfman,
The Economic Mind in American Civilization,
vol. 4, pp.

349–50.

28“Hoover’s Plan to Keep the Dinner-Pail Full,”
Literary Digest
(December 8, 1928): 5–7.

29William T. Foster and Waddill Catchings, “Mr. Hoover’s Plan—What It Is and What It Is Not—The New Attack on Poverty,”
Review of Reviews
(April, 1929): 77–78. For a laudatory survey of Hoover’s pro-public works views in the 1920s, by an official of the AALL, see George H. Trafton, “Hoover and Unemployment,”
American Labor Legislation Review
(September, 1929): 267ff.; and idem, “Hoover’s Unemployment Policy,”
American Labor Legislation Review
(December, 1929): 373ff.

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to persuade them to “establish liaison” with the American Federation of Labor.30 From 1919 through 1923, Hoover tried to persuade private corporations to insure the uninsurable by adopting unemployment insurance, and in 1925 he praised the American Federation of Labor as having “exercised a powerful influence in stabilizing industry.” He also favored the compulsory unemployment of a child labor amendment, which would have lowered the national product, and raised labor costs as well as the wages of competing adult workers. Most important of Hoover’s activities in the labor field was his successful war against United States Steel and its chairman, Judge Elbert H. Gary, a war conducted as a

“skillful publicity campaign” (in the words of a Hoover admirer) against “barbaric” hours of work in the steel industry.31 The success of this battle made it much easier later on to persuade business men to go along with his labor policies during the 1929 depression. Hoover had decided that the twelve-hour day in the steel industry must be eradicated and replaced by the eight-hour day.

He persuaded Harding, lapsing from his usual laissez-faire instincts, to hold a conference of steel manufacturers in May, 1922, at which Harding and Hoover called on the magnates to eliminate the 12-hour day. An admiring biographer notes with satisfaction that Hoover made the steel leaders “squirm.”32 It was of course easy for Harding and Hoover, far removed from the necessity of meeting a payroll or organizing production, to tell other people how long and under what conditions they should work. Hoover was supported by such “enlightened” steelmen as Alexander Legge and Charles R. Hook, but bitterly opposed by other leaders like Charles M. Schwab, and of course by Judge Gary, chairman of the board of U.S. Steel and President of the American Iron and Steel Institute. The war was on.

30Irving Bernstein,
The Lean Years: A History of the American Worker,
1920–1933
(Boston: Houghton Mifflin, 1960), p. 147. As early as 1909, Hoover had called unions “proper antidotes for unlimited capitalistic organizations,” ibid., p. 250.

31Warren,
Herbert Hoover and the Great Depression,
p. 28.

32Lyons,
Our Unknown Ex-President,
p. 231.

Prelude to Depression: Mr. Hoover and Laissez-Faire
201

The steel agitation, it should be pointed out, had not been begun by Hoover. It originated back in September, 1919, when Gary refused to engage in collective bargaining with a workers’

union. The workers struck on that issue, and the strike was led by Communist leader William Z. Foster. By the time the strike had failed, in January, 1920, public opinion, properly regarding the strike as Bolshevik-inspired, was squarely on the side of U.S. Steel.

By this time, however, the Interchurch World Movement had appointed a Commission of Inquiry into the strike; the Commission issued a report favorable to the strikers in July, 1920, and thereby initiated the eight-hour day agitation.33 The report started a propaganda war, with the nation’s leftists attempting to change the whole temper of public opinion. The Reverend A.J. Muste, the
Socialist New York Call
,
Labor
, and
The Nation
backed the report, while business associations strongly attacked the inquiry. The latter included the National Association of Manufacturers, the National Civic Federation, the
Wall Street Journal
, and others.

Many religious papers, however, were persuaded by the prestige of the committee (a prestige in religion that somehow carried over to secular matters) to change their previous views and to line up on the anti-steel side.

It was at this critical point in the battle that Hoover entered the fray and persuaded President Harding to join him. Hoover “deliberately broke the story” of the unsuccessful private meeting with Gary, Schwab, and the others to the press. He told the press that President Harding was “attempting to persuade industry to adopt a reasonable working day.”34 Thus did the government mobilize public opinion on the side of the union. Hoover managed to have the national Engineering Societies—effectively dominated by Hoover—issue a report (again outside of their competence) endorsing the eight-hour day in November, 1922. Hoover eulogized the report, wrote the introduction, and persuaded Harding to sign it.

33See Marshall Olds,
Analysis of the Interchurch World Movement Report on the
Steel Strike
(New York: G.P. Putnam and Sons, 1922), pp. 417ff.

34Lyons,
Our Unknown Ex-President,
p. 231.

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Under the Presidential pressure, Judge Gary appointed a committee of the steel industry, headed by himself, to study the question. The committee reported on May 25, 1923, unanimously rejecting the eight-hour day demands. U.S. Steel also issued a reply to the
Interchurch Report
, written by Mr. Marshall Olds, and endorsed by the prominent economist, Professor Jeremiah W.

Jenks. Abuse rained down on the steel industry from all sides. Forgotten were the arguments used by U.S. Steel, e.g., that the steel workers preferred the longer twelve-hour day because of the increased income, and that production would suffer under an eight-hour schedule.35

This and other arguments were swept away by the wave of emotionalism whipped up over the issue. The forces of the Social Gospel hurled anathemas. “Social Justice” and “Social Action” committees of Protestant, Catholic, and Jewish organizations set up a clamor on issues about which they knew virtually nothing.

Attaching a quantitative codicil to the qualitative moral codes of the Bible, they did not hesitate to declare that the twelve-hour day was “morally indefensible.” They did not elaborate whether it had
suddenly
become “morally indefensible” or whether it, and even longer work days, had also been morally wicked throughout earlier centuries. If the latter, it was certainly strange that countless preceding generations of churchmen had overlooked the alleged sin; if the former, then a curious historical relativism was now being mingled with the presumably eternal truths of the Bible.