America's Great Depression (47 page)

By early October, therefore, the forthcoming Hoover New Deal program for 1932 was already clear: the major measure, a new government corporation to make loans to business—a Reconstruction Finance Corporation (RFC) to replace the stopgap, largely banker-financed National Credit Corporation; the broadening of rediscount eligibility for the Federal Reserve; the creation of a Home Loan Bank System to discount mortgages; and an expansion of the Federal Farm Loan Bank System.

On October 27, a Presidential committee of business, agricultural, and labor leaders, as well as economists, endorsed the prospective Hoover program, and called also for expansion of 28Nash, “Herbert Hoover and the Origins of the RFC”; and Warren,
Herbert
Hoover and the Great Depression,
pp.140ff.

1931—“The Tragic Year”

277

credit, spreading of work, and especially public works. These included Leonard P. Ayres, Fred C. Croxton, William Green, Alvanley Johnston, and Wesley C. Mitchell. On December 21, however, a highly unusual event occurred; another Presidential Committee on Public Works condemned further public works, urged a balanced budget, and readjustment to new conditions.

This committee included Leonard P. Ayres, Jacob Hollander, Matthew Woll, and others.

THE SPREAD OF COLLECTIVIST IDEAS

IN THE BUSINESS WORLD

Meanwhile, strange collectivist plans for ending the depression were brewing in the business world. In September, Gerard Swope, head of General Electric, far surpassed the radicalism of his old public-works proposal by presenting the Swope Plan to a convention of the National Electrical Manufacturers Association. The Plan, which garnered a great deal of publicity, amounted to a call for compulsory cartellization of American business—an imitation of fascism and an anticipation of the NRA. Every industry was to be forcibly mobilized into trade associations, under Federal control, to regulate and stabilize prices and production, and to prescribe trade practices. Overall, the Federal Government, aided by a joint administration of management and employees representing the nation’s industry, would “coordinate production and consumption.”29 To its grave discredit, the U.S. Chamber of Commerce endorsed this socialistic plan in December by a large majority, as a means of employing Federal coercion to restrict production and raise prices. Leading the march for approval was the new President of the U.S. Chamber, Henry I. Harriman, of the New England Power Company. Harriman wrote, in his report of the Chamber’s Committee on the Continuity of Business and Employment, that

“We have left the period of extreme individualism. . . . Business prosperity and employment will be best maintained by an intelligently planned business structure.” With business organized through trade associations and headed by a National Economic Council, any 29See
Monthly Labor Review
33 (1931): 1049–57.

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America’s Great Depression

dissenting businessmen would be “treated like any maverick. . . .

They’ll be roped, and branded, and made to run with the herd.”30

The president of the National Association of Manufacturers wanted to go beyond the Swope Plan to forcibly include firms employing less than fifty workers.

Also supporting the Swope Plan were Swope’s friend Owen D.

Young, Chairman of the Board of General Electric, President Nicholas Murray Butler of Columbia University, who had been thinking along the same lines, Royal W. France of Rollins College, Karl T. Compton, the leftist Stuart Chase, and Charles F. Abbott of the American Institute of Steel Construction. Abbott called the Swope Plan:

a measure of public safety. . . . We cannot have in this country much longer irresponsible, ill-informed, stubborn and non-cooperating individualism. . . . The Swope Plan, seen in its ultimate simplicity, is not one whit different in principle from the traffic cop . . . an industrial traffic officer. . . ! Constitutional liberty to do as you please is “violated” by the traffic regulations—but

. . . they become binding even upon the blustering individual who claims the right to do as he pleases.31

Furthermore, former Secretary of the Treasury William G.

McAdoo proposed a Federal “Peace Industries Board” to adjust national production to consumption, and Senator LaFollette organized a subcommittee to investigate the possibility of a National Economic Council to stabilize the economy—and Swope was a leading witness. H.S. Person, managing director of the Taylor Society, displayed the naïvete of the technocrat when he said, in a puzzled way: “we expect the greatest enterprise of all, industry as a whole, to get along without a definite plan.”32 The historian Charles A. Beard denounced laissez-faire and called for a Five Year Plan of industrial cartels headed by a National Economic Council.

30Quoted in Schlesinger,
The Crisis of the Old Order, 1919–1933,
pp. 182–83.

31J. George Frederick,
Readings in Economic Planning
(New York: The Business Bourse, 1932), pp. 332ff. Frederick was a leading Swope disciple.

32Ibid
.

1931—“The Tragic Year”

279

And the popular philosopher Will Durant called for national planning by a national economic board, ruling over boards for each industry. Supreme Court Justice Louis Brandeis suggested complete state control of industry on the legal ground of public convenience and necessity.33

Other business leaders were thinking along similar lines. Benjamin A. Javits had developed a similar plan in 1930. Dean Wallace B.

Donham, of the Harvard School of Business, had the gall to cite the Soviet Union as showing the value and necessity of a “general plan for American business.”34 Paul M. Mazur, of Lehman Brothers, referred to the “tragic lack of planning” of the capitalist system.

Rudolph Spreckels, president of the Sugar Institute, urged governmental allocation to each company of its proper share of market demand. Ralph E. Flanders, of the Jones and Lamson Machine Company, called for fulfillment of the “vision” of the new stage of governmental planning of the nation’s economy. And Henry S.

Dennison, president of the Dennison Manufacturing Company, developed his own Five Year Plan for a national cartel of organized trade associations.

One of the most important supporters of the cartellization idea was Bernard M. Baruch, Wall Street financier. Baruch was influential not only in the Democratic Party, but in the Republican as well, as witness the high posts the Hoover administration accorded to Baruch’s protégés, Alexander Legge and Eugene Meyer, Jr. As early as 1925, Baruch, inspired by his stint as chief economic mobilizer in World War I, conceived of an economy of trusts, regulated and run by a Federal Commission, and in the spring of 1930, Baruch proposed to the Boston Chamber of Commerce a 33See Fusfeld
, The Economic Thought of Franklin D. Roosevelt and the Origins
of the New Deal,
pp. 311ff.; David Loth,
Swope of GE
(New York: Simon and Schuster, 1958), pp. 201ff.; Schlesinger,
The Crisis of the Old Order, 1919–1933,
p. 200.

34Wallace B. Donham,
Business Adrift
(1931), cited in ibid.
,
p. 181. Nicholas Murray Butler also considered the Soviet Union to have the “vast advantage” of

“a plan.” See Dorfman,
The Economic Mind in American Civilization,
vol. 4, pp.

631–32.

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America’s Great Depression

“Supreme Court of Industry.” McAdoo was Baruch’s oldest friend in government; and Swope’s younger brother, Herbert Bayard Swope, was Baruch’s closest confidant.35

Collectivist ideas had apparently been fermenting in parts of the business world ever since the depression began, as witness the reaction of a writer in a prominent business magazine to the White House Conferences for concerted maintenance of wage rates at the end of 1929. Hailing the conference as Hoover’s “splendid adven-ture in economic democracy,” the writer called for national economic planning through nationwide trade associations and suggested coordination of the economy by “collective reason.”36

So far had the business world gone, that a report for the left-wing National Progressive Conference of 1931, praised the Swope Plan, albeit suggesting a less “pro-business” and more egalitarian twist to the scheme of centralized planning.37 The entire collectivist movement in business was well summed up by one of Franklin D. Roosevelt’s more extreme Brain Trusters, Rexford Guy Tugwell, when he wrote of Harriman, Swope, and the rest that they

believed that more organization was needed in American industry, more planning, more attempt to estimate needs and set production goals. From this they argued 35Later, the Swope idea took form in the NRA, with Swope himself helping to write the final draft, and staying in Washington to help run it. Swope thus became perhaps the leading industrialist among the “Brain Trust.” Henry I.

Harriman, another contributor to the drafting of the NRA, also turned up as a leader in the agricultural Brain Trust of the New Deal. Another Baruch disciple, and a friend of Swope’s, General Hugh S. Johnson, was chosen head of the NRA (with old colleague George Peek as head of the AAA). When Johnson was relieved, Baruch himself was offered the post. See Margaret Coit,
Mr. Baruch
(Boston: Houghton Mifflin, 1957), pp. 220–21, 440–42; Loth,
Swope of GE,
pp. 223ff.

36Theodore M. Knappen, “Business Rallies to the Standard of Permanent Prosperity,”
The Magazine of Wall Street
(December 14, 1929): 265.

37The report, “Long-Range Planning for the Regularization of Industry,” was prepared by Professor John Maurice Clark of Columbia University, and concurred in by George Soule, Edwin S. Smith, and J. Russell Smith. See Dorfman,
The Economic Mind in American Civilization,
vol. 5, pp. 758–61.

1931—“The Tragic Year”

281

that . . . investment to secure the needed investment could be encouraged. They did not stress the reverse, that other investments ought to be prohibited, but that was inherent in the argument. All this was, so far, in accord with the thought of the collectivists in Franklin’s Brains Trust who tended to think of the economy in organic terms.38

In short, Virgil Jordan, economist for the National Industrial Conference Board, was not far from the mark when he wrote that businessmen were ready for an “economic Mussolini.” Despite all the pressure upon him, Herbert Hoover staunchly refused to endorse the Swope Plan or anything like it, and sturdily attacked the plan as fascism.39 His speeches, however, began to be peppered with such ominous terms as “cooperation” and “elimination of waste.” In the slide toward intervention, meanwhile, the Chamber of Commerce also called for public works and Federal relief, and a joint committee of the National Association of Manufacturers and the National Industrial Council urged public works and regulation of the purchasing power of the dollar.

The American Federation of Labor also adopted a radical Emergency Unemployment Program in October. As was to be expected, it hailed the Hoover policy of keeping wage rates high and cutting hours, and also advanced its own unionized version of fascism. It proposed that the government force employers to hire workers;

Industries and employers should therefore be given quotas of jobs to be furnished, according to their ability to provide work. The allocation of these quotas should be the task of a central board, representing the Government and all industrial groups.

38Rexford Guy Tugwell,
The Democratic Roosevelt
(New York: Doubleday, 1957), p. 283.

39Hoover relates that Henry I. Harriman warned him that if he persisted in opposing the Swope Plan, the business world would support Roosevelt for President, because the latter had agreed to enact the plan. He also reports that leading businessmen carried out this threat.

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This would ensure “effective organization of the labor market.” In short, the A.F. of L. wanted to have an equal share in running a Swope Plan for industry.40

A further typically union scheme was to compel restriction of the labor supply, thus raising wage rates for the remainder of the labor force. It is a curious “cure” for unemployment, however, to compel large groups of people to remain unemployed. Thus, the A.F. of L. adopted as a slogan: “Keep young persons in school to avoid their competing for jobs,” and urged employers to fire married women with working husbands; “Married women whose husbands have permanent positions which carry reasonable incomes should be discriminated against in the hiring of employees.” It is a measure of how far we have traveled in hypocrisy that unions would not today publicly advocate these policies for such frankly ruthless reasons; instead, they would undoubtedly be cloaked in pieties about the glories of education and home life.

The A.F. of L. also endorsed compulsory unemployment insurance at this convention, in contrast to William Green’s attack on the government dole at the 1930 convention as turning the worker into a “ward of the State.” The railroad union leaders bellicosely threatened Hoover with “disorder” if he did not act to provide employment and relief.

Particularly enthusiastic among union leaders for the new drive for government “planning” were John L. Lewis, of the United Mine Workers, and Sidney Hillman, of the Amalgamated Clothing Workers. Both called for a national economic council for planning to include labor and management representatives. Schlesinger is certainly correct when he says that “Lewis and Hillman, in the end, differed little from Gerard Swope and Henry I. Harriman.”41

The A.F. of L. also praised the Hoover administration for carrying out the following objectives during 1930–1931: maintaining wage rates on public buildings, reduction of hours in government employ without a reduction in pay, public works planning, raising of wages for some government employees, increased appropriation for 40
Monthly Labor Review
33 (1931): 1049–57.

41Schlesinger,
The Crisis of the Old Order, 1919–1933
, p. 186.

1931—“The Tragic Year”