Authors: Ira Katznelson
Southern politicians’ support for the TVA, a federal program with such obvious benefits for their region, may not be surprising, but their central participation in other early initiatives also was critical. Two long-serving congressional southerners—each a strong supporter of racial segregation—led the rescue of the banking system. Senator Carter Glass of Virginia and Representative Henry Steagall of Alabama ushered the Banking Act through their committees and guided debate in each chamber. By restoring trust in the banks, this law provided the basis for all the economic policies that followed; without a solvent system, capitalism could not have functioned. Unlike most highly partisan votes on key bills in this era, this legislation garnered strong cross-party support, including that of southern members, who ranged from loyal New Dealers like Steagall
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to conservatives like Glass, who wrote shortly, in August 1933, to Walter Lippmann to complain that the New Deal was “an utterly dangerous effort of the federal government to transplant Hitlerism to every corner of the nation.”
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Speaking to calm southern progressives who were concerned about legislation that would prop up banks and bankers, John Rankin argued that restoring confidence by insuring deposits was necessary to address the “terrible nightmare” caused by “the greatest economic catastrophe in history.”
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The Steagall bill passed the House by an overwhelming 262–19 vote (without a roll call), the Glass bill in the Senate by a voice vote. With differences ironed out, the Senate again approved the legislation by voice, and the House by a 191–6 margin (without a roll call).
A distinctive regional twang could be heard. In the House, Mississippi’s William Colmer and Texas’s William McFarlane and Wright Patman took up an old populist cause. Bemoaning how bankers were overpaid, they unsuccessfully offered amendments to restrict Federal Reserve salaries to no more than fifteen thousand dollars.
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Southern members were particularly vehement in voicing concern about the durability of banks chartered by the states, rather than by the federal government. They also worried about the future of the Postal Savings System, which served primarily small depositors. Patman was concerned that the bill would “use the Government’s money to protect deposits in national banks aggregating $16,000,000,000, but you will exclude from protection of any kind whatsoever deposits in State banks amounting to $25,541,000,000.”
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Arkansas’s Glover likewise expressed concern for state banks that would not fall under the protection of the Federal Reserve, but he was promised they would now come under its protective umbrella. With these apprehensions addressed, the southern wing of the Democratic party joined the overwhelming consensus.
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In a characteristic statement, Senator Tom Connally of Texas told the Senate that he was not voting to support the banks, “but the people the banks serve,” because the law will “furnish a reservoir of credit and money with which the people of this country can transact their normal business.”
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Perhaps most interesting is how even the region’s most archsegregationists, people such as Rankin, betrayed no concern about the growth of federal regulatory power. With race clearly off the agenda, what they wanted was a guarantee that their region’s state-level banks, which operated entirely on segregated principles, would emerge with enhanced security.
Well past the Hundred Days, as the New Deal filled the agenda of its radical moment, southern support rolled on, premised on this exchange of assurances about racial continuity. The Securities Exchange Act of 1934 was brought to the floor of the House by the Interstate and Foreign Commerce Committee, chaired by Sam Rayburn of Texas, and to the Senate by the Senate Banking and Currency Committee, led by Duncan Fletcher of Florida. Every southern senator but Thomas Gore and every southern representative but Missouri’s James Claiborne, who wanted a more business-friendly bill, supported passage of this law that aimed to provide an honest market in securities and prevent a recurrence of the crash of 1929. The bill passed Congress with partisan divisions of 281–84 in the House and 62–13 in the Senate,
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then by voice votes in each chamber to adopt the conference report. The final product was written by a conference in which two of the three House participants (Rayburn and George Huddleston of Alabama) and each of the Senate conferees (Alben Barkley of Kentucky, James Byrnes of South Carolina, Duncan Fletcher of Florida, and Phillips Goldsborough of Maryland) were southern.
There was disagreement within the region’s voting bloc about whether regulatory responsibilities should be assigned to the existing Federal Trade Commission (FTC) or placed, as they were, in the hands of a new Securities and Exchange Commission (SEC). There remained, though, broad southern agreement on the thrust of the bill, which, from the region’s perspective, would harness Yankee finance capital that had helped impoverish their region ever since the Civil War. At issue, Rayburn explained, was how to oppose the “people who operate the exchanges” by lodging “authority, power, and directions” in the federal government “in the public interest.”
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Here, again, the dominant tone of southern contributions tilted toward populist strains like those spoken during the debate in the House by Virgil Chapman of Kentucky, who announced that “Wall Street and its minions are here full panoplied for battle.”
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It was to be hoped, Georgia’s Edward Cox (later, a key southern reactionary) added, that the measure will “prevent the concentration of money in the great centers where the exchanges operate,” and, as Oklahoma’s Charles Truax colorfully expressed in terms that evoked anti-Jewish imagery, that it would control “the Wall Street bandits” by providing a “new declaration of independence from the strangling clutch of those long, bony talons of Morgan, Kuhn & Loeb, and the rest of the Wall Street racketeers, who have literally robbed this country of billions and billions of dollars.”
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Though Morgan was not Jewish, the reference to Kuhn and Loeb made the inference all too clear.
Domestic policy to reshape capitalism during the New Deal’s radical period took further giant steps. Just six weeks after the Supreme Court struck down the NRA as unconstitutional, the National Labor Relations Act (NLRA), or Wagner Act, which empowered efforts to organize unions, was signed into law on July 5, 1935. Union insurgency, which had begun to develop under the umbrella of the NRA, found itself without a permissive legal framework until the passage of this legislation.
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Reaffirming rights to organize and bargain collectively, the law specified detailed election procedures to ensure that employees could freely select their union representatives under the principle of majority rule. Crucially, this bill aimed, as it stated, “to promote equality of bargaining between employers and employees” and disallowed as “unfair labor practices” a variety of tactics commonly deployed by employers to subvert unionization. These included interference with striking and picketing; employer surveillance of union activities; discrimination against employees for union membership or activism; and offers by employers of benefits to employees who agreed to cease union activities.
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The NLRA also barred employers from providing financial assistance to, or attempting to control, labor organizations,
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thus striking at the heart of company-dominated unions. Administratively, the act created the National Labor Relations Board (NLRB), a quasi-judicial expert board, appointed by the president, to investigate and adjudicate most labor disputes arising under the act. Independent from the Department of Labor, the NLRB was empowered to issue cease and desist orders, and its findings of fact were to be regarded as conclusive by federal courts.
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With this law, the federal government offered organized labor a broad legal umbrella under which to shelter.
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Almost immediately, unions began to expand at a rapid rate. Both the AFL and the breakaway CIO quickly thrived. In 1929, labor unions had possessed fewer than four million members. A decade later, despite continuing mass unemployment (more than nine million Americans still were out of work in 1939), the new CIO alone matched that level of membership, while the AFL grew to more than four million members, and more than a million workers joined independent unions. Even before the wave of union expansion spurred by tight labor markets during World War II, this spectacular growth was altering the balance of power between labor and management.
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Between 1930 and 1940, the proportion of manufacturing workers in unions rose from 9 percent to 34 percent and that of mining workers from 21 percent to 72 percent.
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On August 14, 1935, the president signed the historic Social Security Act. By establishing federally managed old-age pensions and unemployment insurance, it considerably altered the contours of America’s labor markets by making it possible for the elderly to leave the workforce and by promising to cushion future economic downturns by keeping at least some purchasing power in the hands of those who lost their jobs with the provision of half pay, up to fifteen dollars each week, usually for sixteen weeks.
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Most notably, at a time when just about half of all Americans over sixty-five were receiving relief payments,
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the law created a system of social insurance that offered workers meaningful pensions when they retired. It also addressed issues of poverty by fashioning a program of social welfare that included cash assistance to the indigent elderly and the blind, including those who did not qualify for a pension, because they lacked a life history of employment, and aid to impoverished and dependent children, a program of welfare transfers whose costs were to be shared between the states and the federal government, with levels established by each state. Like the NLRA, this was an enactment that profoundly altered lives and, along with this, the character of American society.
On the face of things, neither the Wagner Act nor the Social Security Act, like the Banking Act, required southern votes. After all, the labor bill swept into law on a 63–12 margin in the Senate and a voice vote in the House; and Social Security was approved nearly without opposition by crushing bipartisan votes of 77–6 in the Senate and 372–33 in the House. That conclusion, however, would be premature. As these laws wended their way through the legislative process, southern support at critical junctures sustained their basic character in the face of serious challenges. In the case of the Wagner Act, it was only the high solidarity of the South’s Democrats in the Senate with other Democrats
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that made it impossible for a bloc to emerge sufficient in strength either to pass a crippling amendment offered by Maryland’s Tydings or to mount a filibuster to block the bill without it.
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Tydings’s amendment would have added the language “free from coercion or intimidation from any source” at the end of the key paragraph offering employees the right to join unions and bargain collectively. He explained that without the additional wording, coercion would shift from business to labor.
Had this clause been adopted, union power would have been curbed, for it would have made opposition to a company union in an election to determine representation the equivalent of an employer’s threat to fire a worker who wished to unionize. It also would have opened labor activity to the scrutiny of courts at a time when, as Senator Wagner observed, “the courts have said that a threat to strike is coercion.”
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Furthermore, the amendment had the potential to call into question the very core of the law, the closed shop that made it mandatory for workers to join a union after it had been recognized as the choice by the majority. By a vote of 21–50, the amendment failed. In addition to Tydings and his Maryland colleague George Radcliffe, it won the support of just five other southern Democrats. Had they been joined by the seventeen who voted no, the amendment would have carried by a 38–33 margin (another eight did not vote in this division).
Neither should the South’s role in moving Social Security into law be underestimated. A crucial vote to recommit the bill to the House Committee on Ways and Means attracted all but one Republican. The amendment failed, 149–253, because southern Democrats stuck with the party position, voting at a high level with fellow Democrats.
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Had the 141 Democrats in the chamber from the seventeen southern states resisted the legislation, it well might not have passed.
This is not a far-fetched alternative. It is likely that the southern wing of the party would have bolted if the legislation had taken the form initially proposed by the White House. On the basis of recommendations by the President’s Committee on Economic Security, Social Security would have included farmworkers and maids. The committee explicitly opposed leaving these workers out, having noted their high degree of need: “In these groups are many who are at the very bottom of the economic scale.”
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Still, they were left out, extruded during the deliberations of the Senate Finance Committee and House Ways and Means Committee, each with strong southern representation (nine of fifteen Democrats in the Senate, including the chair, Harrison of Mississippi, and eight of eighteen in the House, including the chair, Doughton of North Carolina). The legislation also left it to the states to set levels of support both for unemployment insurance and for the welfare program of Aid to Dependent Children, programs that involved federal government matching funds for what the states decided to offer. As a consequence, southerners could vote for the bill that brought much needed funding to their poverty-stricken region while protecting the character of its racial arrangements.
Southern legislators similarly imposed occupational bars on the Wagner Act. The original bill that Senator Wagner introduced contained no language excluding any category of worker. But the version reported by the Senate Finance Committee explicitly stated that “the term employee . . . shall not include any individual employed as an agricultural laborer.” Addressing what it called “propaganda over the country in relation to this bill,” the committee report affirmed that the bill it drafted “does not relate to employment as a domestic servant or as an agricultural laborer.”
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No effort was made on the floor of the Senate or the House to remove this condition. So assured, southern support became almost indistinguishable from that of other Democrats.
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The Oregon Republican James Mott took notice. Remarking on Democratic solidarity during the debate on Social Security, he lamented how a party “machine so well oiled” had defeated every one of the forty-four amendments the House considered, “every one of them shouted down regardless of their merit by practically solid Democratic votes.”
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