A Commonwealth of Hope: The New Deal Response to Crisis

A Commonwealth of Hope

the american moment Stanley I. Kutler, Series Editor

A Commonwealth of Hope The New Deal Response to Crisis

alan lawson

The Johns Hopkins University Press Baltimore

© 2006 The Johns Hopkins University Press All rights reserved. Published 2006 Printed in the United States of America on acid-free paper 2 4 6 8 9 7 5 3 1 The Johns Hopkins University Press 2715 North Charles Street Baltimore, Maryland 21218-4363 www.press.jhu.edu Library of Congress Cataloging-in-Publication Data Lawson, R. Alan, 1934– A commonwealth of hope : the New Deal response to crisis / Alan Lawson. p. cm. — (The American moment) Includes bibliographical references and index. isbn 0-8018-8406-3 (hardcover : alk. paper) — isbn 0-8018-8407-1 (pbk. : alk. paper) 1. New Deal, 1933–1939. 2. United States—Economic policy— 1933–1945. 3. United States—Economic conditions—1918–1945. 4. United States—Social conditions—1933–1945. I. Title. II. Series. e806.l365 2006 973.917—dc22 2005029020 A catalog record for this book is available from the British Library.

For Mary Beth Who gives life to hope

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Contents

Series Editor’s Foreword Preface

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Introduction

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1 Prelude: The Fall of the American System 2 The Shaping of Franklin Roosevelt 3 Landslide

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4 The Struggle for Financial Stability 5 The Recovery of Industry 6 Saving the Farms

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77 102

7 Launching the Welfare State 8 Revival of the Spirit

115 133

9 Renewing the New Deal Lease 10 The Judicial Revolution

148 164

11 The Rendezvous with Destiny

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12 The Common Man at the End of the Decade 13 The International Climax Epilogue: Another Cycle? Essay on Sources Index

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253

222 235

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Series Editor’s Foreword

Today’s memories of Franklin Roosevelt and the New Deal belong to a dwindling remnant of Americans. Their children and descendants, indirect heirs of the governmental efforts at the time, now, amid unprecedented material comfort, view the past through a prism of mixed images and ambivalence. The very term welfare state is charged language, reflecting concern about higher taxes, cheats, irresponsibility, illegal immigrants, and troublesome minorities. Those under thirty or forty, confident of their immortality, seem readily amenable to proposals to drastically alter present-day guarantees of the Social Security system. But those same cynics certainly insist that banks belong to the Federal Deposit Insurance Corporation, and they would be dismayed at the sizeable monetary losses their ancestors suffered resulting from bankers’ culpability. Ambivalence indeed. As the Great Depression hardened and deepened by the time of FDR’s inaugural in 1933, one of every three American workers was unemployed; manufacturing and foreign trade had plummeted; personal debt soared while savings were lost in the multitude of bank failures. Only Abraham Lincoln assumed powers under such dire conditions. Roosevelt offered a clarion call to action—a “New Deal”—and the American people responded. They heartily welcomed an activist government, one that would eventually be an employer of last resort. This was no moment for blind religious faith; this was not the time for diversionary “cultural” issues; it was the idea and role of government, not fear, that inspired people and forged another historical link in the American character. Alan Lawson’s A Commonwealth of Hope thoughtfully provides a broad, extended historical context for the new political, social, and economic developments of the 1930s. The crisis of the American capitalistic system was no momentary event—stock market crash, unemployment, and depression—but rather reflected deep-seated, longstanding malfunctions of the economic order.

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series editor’s foreword

Further, Lawson demonstrates that the Franklin D. Roosevelt administration’s response to the crisis was not mere improvisation but had roots in earlier notions of a progressive, cooperative commonwealth—ones that provided a wide array of reform measures to better peoples’ lives and ameliorate the ravages and excesses of industrialization. The vision included reform and regulation of large, vital, and unbridled national business practices. All this served as a foundation for government’s activist, interventionist, and compassionate role that emerged in the 1930s, dovetailing with the nation’s keen desire for economic recovery and security. Seventy years later, President George W. Bush, unlike his Republican predecessors who followed the New Deal, has systematically sought its virtual repeal, favoring an unbridled, unregulated “free market” economy and the reinstitution of trickle-down economic policies. Following his re-election, Bush dedicated his “political capital” to the transformation of the Social Security system. But the burden of the Iraq war eroded much of his capital and prevented the fulfillment of his fondest hopes. Ironically, that would have been his contribution to “revolutionary” policies to advance “liberty”—in other words, his “New Deal” in new garb. The New Deal doubtless established a fresh framework and vastly more important role for government. Can anyone doubt that if the United States again found itself so devastated by comparable economic disaster, the government would assume enormous responsibility for providing relief and mitigating its effects? And once again, the American people would resume their familiar historical role of distrusting government, yet when convenient demanding vigorous governmental efforts to mitigate such a disaster. Stanley I. Kutler Madison, Wisconsin University of Wisconsin

Preface

This book takes its title from the tremendous ferment that took place during the last years of the nineteenth and the first years of the twentieth centuries—the time when the leaders of the New Deal were forming their ideas and forging their careers. “Commonwealth” was the o;cial designation of several colonies from their beginning, including the most important crucibles of American republican polity, Massachusetts Bay and Virginia. In the late nineteenth century it became a favored term to describe the ideal American society by those with a hopeful vision of America’s governing prospects. These “men of good hope,” as Daniel Aaron’s portrait of the leading reformers of the late nineteenth century called them, took that view because they saw great possibility in the way the nation’s activities and institutions were consolidating into ever larger interdependent units. Industries, agriculture, the professions, social organizations, and, in a more laggard way, politics gained power and wealth as they expanded within webs of interconnection. Utopians witnessing the transformation dreamed of a perfected society of shared abundance and harmony, while the more moderately sanguine praised cooperation as the way to replace poverty with shared abundance, if not to perfect human nature itself. Against that hopeful vision of commonwealth an array of strivers took the tradition of American individualism as a warrant to seek their own fortunes with little regard for others except as competitors. From the scramble for advantage amid America’s growth into the world’s most productive industrial and agricultural nation emerged a cluster of transcendently rich entrepreneurs, trailed by a new class of large landowners and industrialists who formed an American aristocracy of wealth. Although they shaped vast interdependent enterprises that expressed the consolidating tendency of the time, these plutocratic leaders fostered a myth of self-reliance to cover their uneasiness over the necessity of relying on an increasingly complex network of brains, muscle, professional expertise, and government support. For them the prospect of a commonwealth of shared abun-

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dance was far from reassuring—indeed, it was decidedly ominous, a threat to their power and possessions. And, so, the lines were drawn—Wealth against Commonwealth, as the title of Henry Demarest Lloyd’s key reform tract put it in 1894. Fifteen years earlier, Lloyd’s predecessor, Henry George, also spoke to the unhappy polarity in American life in the title of his influential call for the redistribution of wealth and opportunity, Progress and Poverty (1879). The phrase that best captured the optimistic ideal was coined by the Danish immigrant and Marxist Laurence Gronlund in his utopian novel, The Cooperative Commonwealth (1884). His utopia would rely on the new technological advances that were dazzling so many observers at the time. Within that clocklike society, individuals would be utterly subordinated to the overall design. America’s most famous labor leader, Eugene Debs, adopted Gronlund’s cooperative commonwealth theme as the key to building an American Socialist party, but Gronlund’s regimented version of a cooperative commonwealth had limited appeal to most of his reformist contemporaries. Edward Bellamy’s utopian novel, Looking Backward (1889)—which Gronlund graciously acknowledged was the superior and vastly more popular book—also touted technology as the key to generating wealth and improving surroundings, but the novel stressed the personal freedom it would provide rather than the interdependency underpinning that freedom. In turn, America’s leading philosopher, John Dewey, who admired Bellamy’s shrewd analysis of how a system of wealth for the few and misery for the rest could be converted into a communal order of shared prosperity, took the lead in arguing the necessity of social interaction to guide that evolution intelligently and shape the individuals within it . These critiques developed within the drama of large-scale confrontations. Seeking a fair return on their labors, farmers pressed the cooperative commonwealth principle forward in the form of alliances that eventually produced the Populist Party in 1892. Although Populist fervor failed to gain much political power, the party’s 1892 presidential campaign platform, which declared that “the conditions which surround us best justify our co-operation,” set a standard for future reform by advocating a commonwealth that would promote the welfare of farmers and workers through federal ownership of the railroads, establishment of a uniform national currency, enforcement of an eight-hour workday, and reservation of public land for homestead settlers. Neither Populists nor utopians were able to overcome the resistance of business and financial forces to create a new cooperative order. Nor could they remove the barriers between workers and farmers, between ethnic groups, between so-

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cial classes, and between races. Yet the logic of a consolidating society pressed an irresistible case for interdependency of some sort. The leaders of the American Federation of Labor, for example, kept its membership independent of government and focused on immediate workplace issues. Yet the AFL also became a shining example of the cooperative ethos of the time in creating the largest and most successful union by drawing independent craft unions into alliance. So, too, did the burgeoning social welfare organizations adopt the ethos. Middleclass idealists who flocked to settlement houses in slum areas at the turn of the century accepted a duty to share their lives directly with the poor and disadvantaged. Study centers such as the National Bureau of Economic Research, the Municipal League, and the Brookings Institution were formed in the belief that experts could accomplish more within a group setting than on their own. The Civil Service Reform League sought a similarly ramified influence by drawing reformers together within a cooperative structure dedicated to virtuous and rational governance. Even fiercely competitive corporate leaders saw merit in forming trusts and pools that tried to convert individual advantage into mutual advantage. In light of the consolidating trend, a wave of conceptual thinkers, often within the rapidly growing universities and professional associations that were key indicators of the trend, explored ways of making society more rationally cooperative. Sometimes these heralds of a newly enlightened age rhapsodized about the project’s prospects. Charles Horton Cooley, a leader in the new field of sociology, in Social Organization and Human Nature and the Social Order (1902) envisioned that “our democracy might be a work of art, joyous whole, rich in form and color, free but chastened, tumultuously harmonious, unfolding strange beauty year by year.” Other progressive thinkers agreed, if less ecstatically, that there were strong grounds for optimism. Simon Nelson Patten at the University of Pennsylvania insisted that the new technical prowess and modes of production meant that the economists’ dismal idea that scarcity was the general rule could be overcome through intelligent planning by universal abundance. In search of evidence to prove this providential case, a coalition of civic leaders and university professors created the National Bureau of Economic Research. Under the leadership of statistician Wesley Clair Mitchell, the Bureau compiled economic data relating to business and government on the conviction that they would prove useful for progressive reform. The principle of cooperation between university experts and government was most fully advanced at the University of Wisconsin, which was just down the street from the state capitol building. Charles Van Hise, president of the university, made an influential appeal in his major work Concentration and Control (1912) to replace much of the competitive distance between business cor-

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porations with cooperation, which would be regulated by government commissions in order to protect the public from unfair monopoly practices. Within Van Hise’s university, fellow economist John Commons commanded an army of university researchers in the project of supplying state government with precisely the pertinent information needed for such control, aimed especially at creating social insurance that would protect workers against disability and unemployment and provide them with decent pensions when their work was done. On the edge of professorial thought, Thorstein Veblen—university trained but estranged from the establishment because of his scandalous disregard for polite conventions—made the most sensational impression. The entire business-centered society, Veblen insisted in mockingly incisive terms, was a fraud, its opulence and pretensions of virtue merely a wasteful cover for the barbarian aggression that really undergirded the competitive capitalist system. Veblen was a cynic; yet he also shared the cooperative ideal and so argued for a transformed society in which the engineers who devise modes of production and the workers who carry them out would determine policy for a society of shared abundance. Widespread advocacy of a cooperative commonwealth ideal inspired a range of specific reform initiatives, centering on the hardships inflicted by industrialization. Decent working conditions, abolition of child labor, unemployment and disability insurance, food and drug standards, access to public schooling, and regulation of public utilities were in the forefront. The term, progressive, first used to describe the cooperative reformers of 1890s London, came to be the most common label that such advocates of cooperation in the United States applied to themselves. When Herbert Croly, the leading apostle of progressive reform on a national scale, wrote his influential book The Promise of American Life (1909), the promise he had in mind was of a nation shaped into a true commonwealth by cooperative design. It was within this atmosphere of hopeful thought and action that most New Dealers came of age. When it was their turn to run the country in the 1930s, they repeatedly drew upon the concepts of interdependency to devise remedies for the woes of average Americans. Rather than simply react to the crisis of the Depression by inventing strategies on the spot, New Dealers mobilized the progressive ideas they had imbibed in their youth and had hailed in World War I for their value in preparing the nation—only to see them selfishly and irresponsibly cast aside during the 1920s. In the depth of the Depression of the 1930s, these latterday progressives allowed themselves to hope that the crisis would give them the chance to revive cooperative commonwealth formulations in order to realize the

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promise of American life. The laws and policies that resulted—and the various storms weathered along the way—is the story told here. My intellectual and personal debts are greater than my ability to acknowledge them all. From the outset several of my students found illuminating items that helped steer me in the right direction. These researchers and shrewd interpreters include Joe Cugini, Michael Dungar, Marc Ferrara, George Harding, Jeff Malanson, Judy Maas, Joe Mitchell, Carol Obertubessing, Jennifer Pish, Bill Scaring, Peter Spellman, and Brad Thompson. Several generous colleagues have subsequently read drafts and o=ered critical suggestions that frequently saved me from myself, while lending encouragement to continue. I am glad for this chance to express gratitude to Alexander Bloom, John P. Diggins, Lancelot Farrar, John Heineman, James Kloppenberg, Krister Knapp, and John Saltmarsh. I wish to express my deep gratitude to the readers for the Johns Hopkins University Press, Patrick Reagan and Robert Zieger, for their crucially insightful commentaries. My admiring thanks go also to the Boston College librarians, especially Michelle Baildon, Adeane Bregman, and Robert Bruns for their expert guidance in using the many data collections that have been brought together in the library system. Similarly invaluable assistance and good will have been forthcoming from the sta=s at the Columbia University Oral History Collection, the Library of Congress Manuscript Collection, and the Franklin D. Roosevelt Library. At the Johns Hopkins University Press, Henry Tom and Stanley Kutler have shown admirable forbearance through my various detours and uncertainties; toward the end Claire McCabe, Martin Schneider, and Carol Zimmerman steered the work across the finish line surehandedly. My family did the rest, maintaining a balance of support, healthy diversions, and accomplishments that set just the right examples. Thanks beyond measure, then, are due to Mary Beth, Nell, and Richard. I hope they find this book some small recompense.

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A Commonwealth of Hope

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Introduction

The New Deal stands as the most comprehensive moment of national reform in American history, the culmination of the American progressive tradition. For its inspiration the New Deal looked back to the struggle at the outset of the republic against attempts to establish a moneyed aristocracy, to the antislavery crusade, to the extension of civil rights during the Reconstruction period that followed the Civil War, and finally to campaigns of Progressives and Populists championing the welfare of farmers, workers, and other victims of the Industrial Revolution at the turn of the twentieth century, when most New Dealers were coming into social awareness. Hence, in creating the New Deal mystique President Franklin Roosevelt was able to identify with progressive heroes of both major parties—Republicans Abraham Lincoln and Theodore Roosevelt and Democrats Thomas Je=erson, Andrew Jackson, and Woodrow Wilson. Yet, despite the practical and symbolic lessons the New Deal drew from the history of prior reform, it was fated to be distinctive. Because it took shape within a unique moment of crisis, it tested in new ways the basic proposition that America could somehow reconcile individual liberty with communal order—that free enterprise and welfare state could coexist, that local traditions could be respected while federal limits on discriminatory practices were imposed, and that free expression could be left unhindered by state-sponsored cultural and artistic programs. What mainly determined the uniqueness of the moment was the unusual tenacity of the economic crisis of the 1930s. The ba