American Experiment (248 page)

The desperate jobless, blighted women, intimidated blacks—these and millions of other fearful, poverty-stricken Americans might have formed a
mighty army of the wretched, a coalition of the deprived. But misery did not seem to like company. The depression exacerbated tensions among the wretched of the earth as blacks and whites fought for jobs, women lost jobs because their husbands had them, and jobless workers competed to be first in line at the employment office.

In his textbook for Soviet schoolchildren M. Ilin had described how, in a country “boasting millions of machines, storerooms are bursting with goods; corn is burned in place of coal; milk is poured into the river.” Ilin had quoted stories from the 1920–21 recession. Already, as he wrote, he was hearing reports of a new depression, new spilling of milk.

“What does this mean?” he asked. “Who profits by it?

“It is profitable to the Foxes and the Boxes. Mr. Fox burns a few trainloads of grain in order to raise the price of corn. Mr. Box gives orders to spill tens of thousands of bottles of milk into the river in order that milk may not be sold too cheaply. And in the mean time school physicians in New York report that one out of every four children in the city is undernourished.” The fact that farmers, not capitalists, were destroying grain and milk might not have daunted Mr. Ilin; these were kulaks, and kulaks too were capitalists.

Americans entered the decade of the thirties with their economy half paralyzed, their family and individual lives impoverished, their hopes and expectations blighted. With the poet Carl Sandburg they might ask, “Where to? What next?” Their only hope lay in thinking their way out of the crisis, and acting on the basis of that thought. But this was an intellectual capacity that leaders of established wisdom found utterly lacking in the people as a whole. The Enlightenment idea, Lippmann had written in
Public Opinion
ten years before, that assumed humankind had direct experience and understanding of the complex world around it, was false for a mass society. People were governed by stereotypes, prejudice, propaganda. A few years later, in
The Phantom Public,
Lippmann had taken an even stronger position. “The public will arrive in the middle of the third act and will leave before the last curtain, having stayed just long enough perhaps to decide who is the hero and who the villain of the piece.”

The best hope, Lippmann believed, lay with the experts, armed with the latest inside information—experts who could rise above narrowness and bias. Who in times of crisis could better assume that role than the experienced insiders who had actually run American industry and finance, who could now tell what was wrong and put the economy back on track?
Innovators and enterprisers, they would not be mired in the failed ideas of the past.

Surely the big industrialists in particular would be a fount of fresh wisdom during the crisis—and their potent propaganda and political arm, the National Association of Manufacturers, providentially happened to be in annual session assembled when Wall Street was experiencing one of its first panics in the fall of 1929. Confronting this “financial” crisis caused by upstart speculators, the NAM stuck to its ancient wisdom about economics and politics. The test would come as the depression deepened and it became clear that the nation was caught in a general industrial and business crisis and not merely a Wall Street dip.

But the citadel of NAM conservatism remained unpenetrated. A few weeks after the market crash, the NAM president, John E. Edgerton, congratulated Hoover on his conference of business leaders and assured the President that “complete confidence will very soon be restored, if, as you advised, everybody goes to work and quits talking about the securities of our economic future, and, if there are no attempts made among the people to capitalize for personal or group advantage a situation which lends itself so readily to publicity.” Evidently the NAM shared Lippmann’s doubts about the competence of the people, though perhaps for different reasons.

A year later, in the face of sharply mounting unemployment, Edgerton was holding his ideological fort. The most important cause of poverty, he said, lay in the failings of the unemployed themselves. Poverty “results not alone from involuntary unemployment, but more often from voluntary unemployment, thriftlessness, sin in various forms, disease, and other misfortunes.” Fred W. Sargent, railroad president and director of the Chamber of Commerce, gave his answer: “We should go back to the policies that have thus far made us great; to stop petitions for public improvement far beyond our means to afford; to realize that we cannot solve our problems of governmental finance by easy expedients, and to admit that nothing can take the place of collective thrift, self-denial and intelligent citizen participation in government.”

Citizen participation in government? Were the leaders of industry urging the mass public to go into politics to protect its own interests? Only if it was
intelligent
participation—that is, not harmful to property and social stability. Noting that “there are already formulated and in process a variety of legislative proposals on public unemployment insurance, old age pensions, and similar measures for the consideration of the Legislatures which are to meet in 1931,” Edgerton warned that all such proposals were intended “in the name of expediency and social progress to shift individual responsibility to the already overburdened shoulders of government and
industry and thereby take us a long step further towards the Socialistic goal, the abolition of private property.”

Was there no role, then, for government in the crisis? Yes, there was a role—to fight crime. This was government’s greatest responsibility; there was no need, Edgerton said, “for it to become more concerned with or to look for other tasks.” Indeed, a sincere and successful attack on crime would promptly end the depression itself! “Driving crime from its appalling entrenchments in this land of boasted civilization” would itself “mean food to the hungry, clothes for the naked, jobs for the unemployed, peace in industry, and security to all.”

At this point—when industry leaders were proposing to solve the great depression through crime-fighting—this leadership was clearly losing touch with economic reality. But the NAM did not speak for all or even most of industry—there were enlightened business leaders, and the most powerful and convinced of these was sitting in the White House—the “Great Engineer,” former Secretary of Commerce, now President, Herbert Hoover.

Hoover saw his presidency as an exercise in moderate, rational government. “Our program,” he said later, “was one of deliberate purpose to do everything possible to uphold general confidence which lies at the root of maintained initiative and enterprise; to check monetary, security, and commodity panics in our exchanges; ... to accelerate construction work so as to absorb as many employees as possible from industries hit by decreased demand; to hold up the level of wages by voluntary agreement and thus maintain the living standards of the vast majority who remain in employment; to avoid accelerating the depression by the hardship and disarrangement of strikes and lockouts; and by upholding consuming power of the wage earners to in turn support agriculture.”

To the extent that he could deal with problems in an orderly, temperate manner, Hoover was reasonably successful with some of these policies. His troubles arose whenever the compelling needs of the time required him to move toward, or away from, ideas on which he was inflexible. Thus he had an overpowering faith in voluntary cooperation, local initiative, efforts by the Red Cross and charities, and if necessary governmental action by the states and localities—a faith he simply would not give up many months after it was clear that voluntarism of these sorts could not possibly break the grip of the depression. He maintained a zealous opposition to direct federal relief to the poor and the jobless because, he said, it would rob them of their character and initiative, and he stuck to this position long after no alternative to the “dole,” as Hoover preferred to call it, seemed feasible.

If Hoover had shared Andrew Mellon’s conservative ideology, he might have stuck to orthodox finance, rigorous economy, and pro-business policies until the economy, purged of its waste and inefficiency, could return to rigorous capitalistic rules and norms. That was Mellon’s strategy; the Treasury Secretary, Hoover would remember, “had only one formula: ‘Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate …. purge the rottenness out of the system.’ ” But Hoover was too much the moderate, the liberal Republican, the critic of big finance to do this, and hence he was unable to embrace the kind of forthright alternative that a stronger leader might have followed in similar circumstances.

Hoover, as an engineer, had very definite views on specific policies. He had strong moral beliefs about such things as wastefulness, indolence, governmental paternalism. But he possessed no general philosophy—no moral code—that linked broad principles to operating strategies, and these in turn to social and economic programs and specific policies. Hence he often seemed lost, even bewildered, desperate over the failure of his policies to turn the tide, yet too frozen in his pieties to be able to execute a major shift in strategy. Hence, too, he kept searching for the origins or causes of the depression—a search economists would be conducting for another half century at least—and changing his mind as to whether the main source was irresponsible financial policies at home, or faulty economic actions in Europe, or big business, or some failure in the American people.

Nothing tested Herbert Hoover’s policy consistency and economic principle more sharply than the tariff issue, and here he simply failed. Having pledged in the 1928 campaign that he would aid farmers by seeking higher duties on agricultural imports, he called a special session of Congress a few weeks after his Inaugural for the “selective” revision of the tariff. He might have predicted that he could not control a Congress that opened the Pandora’s box of tariff revision, and, sure enough, he lost his legislative leadership as senators and representatives went in for an orgy of tariff-raising. The resulting Smoot-Hawley bill was the highest tariff rise in history.

Would the President sign it? He had long preached economic internationalism. He was angered by some of the high schedules in the measure. Internationalist business and political leaders in both parties urged him to veto it. More than 1,000 economists denounced the bill. Hoover signed it because he liked some of its provisions, because it was politically expedient, because other nations were adopting nationalistic policies. In doing so, Herbert Hoover aligned himself with the Republican Old Guard more clearly and controversially than by any other act of his Administration.

As he reached his midterm, the President did begin to change some of his positions. In particular, he concluded that a greater federal recovery effort was necessary. In December 1930 he asked Congress for an additional $100 to $150 million for public works. In January 1932 he obtained from Congress a bill to establish the Reconstruction Finance Corporation, empowered to provide emergency financing to banks, railroads, life insurance companies, and other institutions, to the maximum extent of $2 billion. But Hoover’s position on the tariff, along with his opposition to direct federal relief to
persons,
sharpened the popular image of a rigid, doctrinaire President.

Hoover and the Republican leadership had a powerful political and moral argument for sticking to their convictions—they had won a mandate in 1928, they were carrying out that mandate, and they needed four years to make it work. They could boast, moreover, that they had won a renewed vote of confidence in the 1930 midterm election, gaining over 54 percent of the popular major-party vote for House seats—down only 3.3 percent from that of 1928—and retaining control of the Senate, if only by a paper-thin majority. It was not, after all, the job of the party in power to attack its own program. Let the opposition do that.

But where was the opposition? The most striking political fact of the depression era was not the failure of the Republican government—the GOP was simply going down in the face of the economic storm, its doctrinal pennant still waving bravely—but the feebleness, the cowardice, indeed the near-invisibility of the opposition.

Labor was the main case in point. The days of the militant Knights of Labor and IWW appeared to be over. The dominant national organization of trade unionists, the American Federation of Labor, entered the depression clinging strongly to its old doctrine of “voluntarism”—the concept of organized labor as a private enterprise to be promoted through bread-and-butter unionism, limited government, and opportunistic political tactics of “aiding labor’s friends and opposing labor’s enemies.” With the depression, though, “massive unemployment, declining wage rates, falling membership, and hopeless strikes demonstrated that history had outsped Gompers,” in Irving Bernstein’s summary. How long could the AFL stick to Gompersism? The answer came in a series of annual AFL conventions as the delegates discussed the issue of unemployment insurance, which was becoming the litmus test for voluntarism.

Gompers had denounced unemployment insurance as “socialism.” To craft unions with their own insurance programs, the proposal did seem like
unfair competition from government. Voluntarism won overwhelmingly at the 1930 AFL convention. Opponents of unemployment insurance called it a “dole.” Should workers’ liberty be sacrificed, demanded one delegate, to afford workers a little “unemployment relief under government supervision and control”? The next year, in the face of rising joblessness, the convention again debated the issue. More individual unions were sending delegates to the national convention endorsing unemployment insurance, but voluntarism still won the voice vote. The time had not yet arrived for it, said AFL president William Green. Finally, in the 1932 session—a few weeks
after
the presidential election—the AFL came out for insurance, both state and federal.