Authors: Ira Katznelson
Seeking to reduce paralyzing national fear to more manageable risk, this array of programs shaped by this activist sensibility guided industrial decisions, regulated the economy’s commanding heights, organized countervailing powers for working people, and provided security for persons who fell outside labor markets for reasons of age, infirmity, or unemployment. Donald Richberg, the general counsel of the National Recovery Administration, and later Hugh Johnson’s successor, declared that the central goal of these initiatives was “to promote a more stable and more evenly distributed prosperity, and to prevent the inevitable breakdown of an undisciplined, uncoordinated control of the business enterprises upon which our security and freedom depend.”
23
By so doing, these programs did more than repudiate unfettered market capitalism. They showed that economic purposes in the public interest could be galvanized within a constitutional democracy under great stress, thus rejecting the claim by the dictatorships that democratic legislatures could not confront the toughest problems of the day.
24
“The great adventure of the Recovery Act,” Richberg testified, “lies in this effort to find a democratic and a truly American solution of the problem that has produced dictatorships in at least three great nations since the World War.”
25
It is important to comprehend how these sweeping ambitions were distinguished from totalitarian programs and policies, how they could have happened in a country where markets, individualism, property, and a modest national state had been watchwords, and why, in turn, such extensive efforts to guide the economy did not last. The New Deal’s policy intellectuals and political leaders were keenly aware that the ideas they were importing possessed features less benign than earlier policy borrowings from Europe.
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They also understood that, however justified, the policy initiatives they supported would have to garner congressional majorities that, despite big Democratic Party margins in the House and Senate, were not always certain. Given the novelty of these programs, moreover, it was understood that their legitimacy would depend on gaining considerable support in the House and Senate.
During the New Deal’s first phase, most southern members of Congress rallied to distinguish democratic from dictatorial planning and corporatism. Even as some of the region’s representatives believed that the administration’s legislative program was not radical enough and others, fewer in number, thought it went too far, all the New Deal’s early flagship efforts to reorganize capitalism and reshape the economic role of government were propelled by the region’s politicians.
The moment did not last. Though there was more than one cause, the ultimate failure of these New Deal initiatives resulted from the diminution of southern support for its economic affairs programs, which accelerated as the decade played out. Facing an emerging set of challenges to their racial order, southern Democrats became increasingly reluctant to empower efforts like the NRA that enhanced national economic power and reduced regional autonomy. Once southern politicians grew more anxious, such projects were foreclosed, and a new reality collided with the New Deal’s loftier aspirations. That shift marked the moment when domestic policies began to turn away from efforts to articulate a substantive public interest in favor of a less ambitious and more procedural orientation to the role of government.
I.
S
PEAKING AT
his 1933 inaugural, Roosevelt broke through the carpace of a political culture aptly described by Richard Hofstadter as “fiercely individualistic and capitalistic.”
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No other American leader had comparably chastised “the rulers of the exchange of mankind’s goods” for “having failed through their own stubbornness, and their own incompetence.” None had talked of the “unscrupulous money changers [who] stand indicted in the court of public opinion, rejected by the hearts and minds of men,” or had identified the “generation of self-seekers” who pursued “the mad chase of evanescent profits.” No other had called for “unifying relief activities” that “can be helped by national planning” and for a federal role so assertive that the country’s national government would be called on to supervise “all forms of transportation and of communications and other utilities which have a definitely public character.”
It was not just the collapse of capitalism that precipitated this search for new means to grapple with the economy but also the failure of what had been mainstream policy on the eve of the Great Depression. That repertoire had been three-pronged—a commitment to free markets that limited the role of government to the protection and enforcement of contracts; antitrust laws that sought to maintain efficient market competition; and guidelines for what President Hoover had called “associationalism,” a policy that used the federal government to collect and disseminate information to firms and economic leaders in order to confront the worry that insufficient information could lead to market failure.
28
Facing crumpled market policies, New Deal leaders searched elsewhere for economic designs. They had no wish to build a socialism in which the national state would supplant private firms to become the central economic actor, and they certainly did not want to discard private property in accordance with the Soviet model. During this initial phase, expansive fiscal policies also were ruled out. Three years before the 1936 publication of John Maynard Keynes’s
General Theory of Employment, Interest, and Money,
the New Deal remained committed to fiscal conservatism, the one orthodox economic idea still standing.
29
Most university and think-tank economists who advised the Roosevelt administration worried that large federal deficits would undercut the dollar’s value, reduce national savings, and raise consumer prices unduly. Together, the president of the Chamber of Commerce, Henry Harriman, and the AFL’s William Green implored the incoming president in late February 1933 to reduce federal spending sharply.
30
Within weeks, Roosevelt was urging Congress to pass the Economy Act to cut federal expenditures by $500 million, and permit him to reduce federal salaries and cut payments to veterans, stating that “too often in recent history liberal governments have been wrecked on the rocks of loose fiscal policy. We must avoid this danger.”
31
The government’s economic policy repertoire thus came to focus on two principal options. First was economic planning, a capacious orientation to economic affairs in which the government, as an economic actor, sets terms for the movement of capital and labor, and intervenes directly in various sectors of the economy. Second was corporatism, an arrangement in which government participates in discussions, negotiations, and decisions with business and labor in order to reduce class conflict and produce a policy consensus. American versions of these two features of public intervention, Tugwell explained, aimed “to repair disaster, imminent, pressing,” by providing “coordinated administration and negotiation” that could create “a control to conserve and maintain our economic existence” by acting “to eliminate the anarchy of the competitive system.”
32
Planning, of course, was closely identified with the Soviet Union and its encompassing Five-Year Plans, and corporatism with Italian Fascism. This certainly was how Herbert Hoover interpreted New Deal policies shortly after the NIRA’s first anniversary. In “The Challenge to Liberty,” his article in
The Saturday Evening Post,
the former president bemoaned how the United States had joined a process in which “peoples and governments are blindly wounding, even destroying, those fundamental human liberties which have been the foundation and the inspiration of Progress since the Middle Ages.” Lamenting the “vast centralization of power in the executive,” he cited the New Deal for its “economic regimentation” and what he viewed as its coercive “code restrictions on business.” All told, he concluded, New Deal activism, characterized as “the daily dictation by Government, in every town and village every day in the week, of how men are to conduct their daily lives,” represented “the most stupendous invasion of the whole spirit of liberty that the nation has witnessed since the days of Colonial America.”
33
To its congressional opponents, the 1933 creation of the NRA also seemed uncomfortably close to the antiliberal policies of the dictatorships. “The power that is conferred upon the President in this bill . . . makes the distinguished dictator, Mussolini, look like an Egyptian mummy,” Frank Crowther, a New York Republican, told the House.
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The bill “Russianizes the business of America,” Pennsylvania Republican Harry Ransley pronounced.”
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It is “imitating Moscow,” fellow Pennsylvania Republican James Beck declared.
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It makes “a powerful appeal to Herr Hitler and Comrade Stalin,” New York Republican John Taber asserted.
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In all, Henry Watson, the Pennsylvania Republican, insisted, in Washington as in Europe, “dictators seem to be the political fashion of the hour.”
38
President Roosevelt, however, took care to distinguish his program from corresponding policies in Berlin, Moscow, and Rome. During his second fireside chat, on May 7, 1933, just as he was about to send the NRA code scheme to Congress, he underscored the law’s voluntary character and how it preserved the vitality of civil society. “It is wholly wrong,” he insisted, “to call the measures that we have taken Government control of farming, industry, and transportation. It is rather a partnership between Government and farming and industry and transportation, not a partnership in profits, for the profits still go to the citizens, but rather a partnership in planning, and a partnership to see that the plans are carried out.”
39
In all, as North Carolina Democrat Robert Lee Doughton put the point during the debate in the House, the New Deal was “walking a tightrope.”
40
The Soviet, Italian, and German models were well known to the administration’s policy planners, including Tugwell and other key Brains Trust members, especially Adolph Berle and Raymond Moley, and served as sources of ideas and possibilities. But “none of them gave the slightest indication of an affinity of anti-democratic solutions,” as Alonzo Hamby has observed.
41
Set alongside “national planning in the communist Soviet Union, fascist Italy, Nazi Germany, or a militarized Japan,” New Deal planning, Patrick Reagan similarly writes, “was not based on the traditional model of command and control planning led by the state to formulate blueprints intended to create a new kind of economy, society, and polity.”
42
Throughout the brief life span of the NRA, its leaders could be seen walking that line. During his very first week in office, Hugh Johnson urged manufacturers, especially the leading industries, to move swiftly to implement the law. He offered a double-sided message to business leaders. He told them that they were the key actors who would restore prosperity, while calling attention to the penalties that awaited should they not cooperate with the new law.
43
In early July of 1933, Donald Richberg reassured the Merchants Association that the NRA is “not trying to establish public management of private business,” but, like his boss, he also warned that if industry failed to play its part, “the advance of political control over private industry is inevitable.”
44
The administration’s community of policy experts was well aware that support by elites and the public at large required convincing accounts of why New Deal planning and corporatism were different, and truly American. Richberg often stressed how, in “seeking to bring about a purposeful, planned organization of trades and industries, so integrated and coordinated that the continuous production and exchange of necessary goods and services may be assured,” the NRA was being administered “not in the exertion of a political control over business, but by encouraging and sanctioning measures of self-discipline that will provide a genuine self-government of industry.” As such, he declared, New Deal planning is “essentially democratic and individualistic.” Its voluntarism sets it apart both from Italian corporatism and from the “regimentation [that is] the product of the socialist doctrines of Karl Marx.”
45
Far from “a presidential dictatorship over industry,” the country’s relationship among business, labor, and government depended on “genuine cooperation between property men and labor men in developing a common program for their common benefit.” This form of economic governance, Richberg asserted, was located in “a half-way house—a house of democratic cooperation and self-discipline—which lies between the anarchy of irresponsible individualism and the tyranny of state socialism.”
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Much was at stake. “If the half-way house cannot be established,” he cautioned, “we may find soon that we have reached the end of democratic government.”
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Likewise, the Brookings Institution economist Lewis Lorwin warned that democratic planning policies are “the only alternative to dictatorial government.”
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In defining national economic planning as “a collective procedure that treats all individual and separate plants, enterprises, and industries of a country as coordinated units of one single system for the purpose of achieving the maximum satisfaction of the needs of the people within a given interval of time,” Lorwin conceded that “there is as yet very little of it outside Soviet Russia,” and, to a lesser degree, in Italy and Germany. But planning, he insisted, was not of one type. While it might include “absolute socialist planning” on the Soviet model, or Fascist planning, in which the state stood above society and forced a resolution of class conflict into national cooperation, U.S. “social progressive planning” was proceeding within the framework of the country’s democratic state.