Herbert Hoover
Page 18
Hoover, for his part, relied on the president’s political finesse to smooth relations with other cabinet members. During Harding’s time in office, Hoover refrained from criticizing the president, though he disapproved of the bootleg liquor and poker parties Harding enjoyed with his “Ohio Gang” in the sanctity of the Executive Mansion. A believer in working within the system, Hoover hoped that despite the chief executive’s odious companions, as commerce secretary he could add rectitude and a voice of reason to the administration. Ostensibly calm, Harding was in reality a chronic worrier. Nonetheless, “Harding encouraged me in everything I wanted to do,” Hoover said later. “I never knew him to give a promise he did not keep.” By 1923, the commerce secretary would emerge as one of the president’s most influential advisers, helping shape Harding’s political strategy for his 1924 reelection campaign.2
As secretary of commerce, Hoover took a sophisticated but humane view of the U.S. economy. As biographer Kendrick Clements notes, “Philosophically, he believed in limited government and volunteerism, but temperamentally, he inclined to government activism and strong leadership.”3 Hoover intended to balance the interests of capitalists, labor, and consumers, mitigate poverty, ease the hard edges of competition, and help raise the standard of living for all Americans. Especially concerned with the status of the working poor, he envisioned a safety net for the indigent, but one that was not wholly constructed and implemented by the government.
Taking a large view of what had been a modest office, Hoover was soon an octopus at the center of government, his tentacles probing into every nook. Every important component of the executive branch seemingly had an umbilical cord attached to the Commerce Department. He generated ideas and dispatched his assistants to every American state and to far corners of the globe to implement them. Hoover devised a well-rounded, all-inclusive program aimed at each major sector of the economy. Commerce quickly became the most efficient department in the cabinet, perhaps in the entire government. Hoover performed many duties that fell between departments or within other departments, or were outside of government entirely, chairing numerous government and quasi-government committees and commissions. Among his committees were the Colorado River Commission, which planned a dam on the river at Boulder Canyon, ultimately named the Hoover Dam. He continued to administer the American Relief Administration and planned a seaway to connect the Great Lakes with the Atlantic Ocean via the St. Lawrence River. The necessary pact with Canada was not ratified by Congress until the Eisenhower administration.4
By the end of 1921, Hoover had established himself as one of the dominant members of the administration. He was well prepared for cabinet meetings. Direct and decisive, he listened patiently but intended to have his way. He did not enjoy confrontations, yet he did not back down. While he got along with most of his fellow cabinet secretaries, he seemed destined to conflict with Andrew Mellon, who had accepted the position of secretary of the treasury. Nearly two decades older than Hoover, Mellon had less energy and spoke little, engaging in few direct conversations with his counterpart at Commerce. Both favored a small, streamlined government, yet Mellon inclined toward laissez-faire conservatism, while Hoover tilted toward Theodore Roosevelt’s dynamic progressivism. Naturally, they clashed over tax policy. Hoover favored lower income taxes to spur economic expansion and consumption, yet higher estate taxes to shrink large, unearned fortunes over several generations. Mellon, he thought, was too defensive on behalf of the wealthy. Harding often sided with Mellon.5
Yet Hoover’s disputes with the mild-mannered Mellon were sedate compared with his smoldering feud with Secretary of Agriculture Henry C. Wallace. Intelligent yet easily angered, Wallace championed farmers and believed everything concerning agriculture fell within his purview. He resented Hoover’s encroachment on what he assumed was his turf. Hoover considered it his responsibility to promote trade and marketing of all American products, including agricultural commodities, especially exports. While Wallace represented a single commodity, Hoover’s interests encompassed the well-being of the economy as a whole. Wallace was also far more liberal than Hoover, especially on tariffs, taxes, and farm legislation. The chief point of contention between the two men became the McNary-Haugen Bill, proposed by the Western Farm Bloc, an alliance of farm-state senators and representatives, which advocated that the federal government guarantee a high domestic price to farmers, purchase surpluses beyond domestic needs, and dump them abroad at a loss, with taxpayers footing the bill. Hoover considered the proposal impractical. Low farm prices were due to chronic overproduction, he charged, and the McNary-Haugen Bill would encourage infinitely greater surpluses, aggravating the problem. Moreover, he pointed out, foreign nations would not permit America to dump cheap produce on their markets, undercutting their own farmers. They would raise tariffs on U.S. imports, and trade wars would rocket. Further, the farm surplus was so great that buying the full amount would bankrupt the federal government. Hoover preferred the solution of organizing farm cooperatives with the assistance of government loans and technical aid. Farmers could buy and sell as a bloc and store nonperishable products in warehouses, releasing them gradually to prevent flooding the market at harvesttime. According to Hoover’s plan, farmers should diversify by planting specialty crops, such as fruits and vegetables, rather than depending on a handful of staples such as wheat, corn, and cotton, which saturated the market during productive years. Farmers should retire depleted lands and plant cover crops to prevent wind and water erosion. Had Hoover’s advice been fully implemented, the infamous Dust Bowl of the 1930s might have been mitigated. Hoover also championed the Capper-Volstead Act of 1922, which exempted farm cooperatives from antitrust laws, which Wallace also backed. The commerce secretary helped inspire the Agricultural Credits Act of 1923, which created twelve intermediate credit banks to loan money to farmers, who must live on credit between harvests. The only economically realistic solution, mandatory crop controls, was politically unrealistic because farmers and their representatives in Congress blocked passage of such legislation. Wallace’s death in 1924 removed Hoover’s most scathing rival from the cabinet. His successor, William M. Jardine, was a Hoover supporter and advocate of farm cooperatives.6
Hoover was the cabinet’s pivotal figure in seeking resolution of the severe economic recession of 1921–22. The downturn was partly a result of the difficulty of readjusting to a peacetime economy. American farmers kept producing at wartime levels and overproduction caused prices to fall. International trade fell during the first years of peace because European nations, winners and losers alike, were exhausted and broke. Since America’s first major panic in 1837, the federal government had avoided intervention in downturns, relying on Adam Smith’s “invisible hand” to correct recessions. Yet it was Harding’s administration, not FDR’s, that first attempted to harness federal power to solve economic slowdowns in a systematic albeit modest fashion. Hoover was instrumental in prodding the administration to take action. Tens of thousands of American citizens had declared bankruptcy, and more than 5 million were unemployed. Secretary Mellon believed that slack labor and inefficient use of capital must be purged from the sick economy to promote recovery, which was the approach followed during previous slumps. Senator George W. Norris of Nebraska, a progressive on some issues, was even more critical. “We had better let God run it as in the past and not take the power away from Him and give it to Hoover,” he carped.7 Hoover agreed that the economy must be stripped of waste and inefficiency, but he was also sensitive to the plight of jobless Americans. Borrowing from his own experience, he proposed to Harding that he appoint and undertake a President’s Conference on Unemployment to suggest methods to alleviate the issue.8 Harding asked him to recommend the appointees, and the commerce secretary drew upon one hundred leaders from business, labor, government, and academia. Hoover chaired the sessions, which met for three weeks in September and October 1921. As the commerce secretary preferred, it adopted a decentralized approach. T
he body appointed local employment committees and urged states, municipalities, and the federal government to undertake work on planned repair and public works projects immediately rather than postponing them, including construction of roads, buildings, bridges, harbors, and national forests. Private businesses, which possessed far more resources than the government, were asked to expedite work. A permanent Committee on Civic Emergency Measures, chaired by Colonel Arthur Woods, coordinated the implementation at the national level. Hoover considered the construction industry the balance wheel of the economy, and priority was given to quick start-ups. Seasonal work was expanded throughout the hard winter months to even out employment throughout the year. The government established job exchanges at the state and local levels to match the unemployed with available positions suited to their skills. Hoover also encouraged job sharing so that fewer persons would become totally unemployed. He theorized that countercyclical spending by the government could help mitigate the business cycle, accelerating the tempo during hard times and scaling back during runaway booms. He advocated the maintenance of a permanent pool of money at the federal level, but a bill for such a fund sponsored by William S. Kenyon failed. He also urged the Federal Reserve Board to adapt its rediscount rate to the state of the economy in order to avoid booms and busts. Further, Hoover’s Commerce Department revved up its activities related to compiling statistics useful in economic forecasting such as unemployment, inflation, production, surpluses in agriculture and industry, and import-export data. He commissioned studies by leading social scientists to determine where the economy seemed headed and where resources might be most productively allocated. Turning to his relief experience, he mobilized private charities to feed, clothe, and provide medicine for the needy and to raise funds for them.9
Harding also employed Hoover as chief troubleshooter for the ailing industries of the 1920s, most conspicuously coal and railroads, which teetered on the brink of failure. The businesses were interconnected: locomotives gulped coal, while railroads transported the product to market. The price of one depended on the price of the other, and a gain for one seemed to be a loss for the other. Both industries were overbuilt. Too much coal had already been mined to provide full-time employment for miners, and too many railroads engaged in cutthroat competition with one another. Virtual monopolies that had been pieced together during flush times by empire-building capitalists, coal and railroads faced a similar eventual fate: technological obsolescence. Oil would soon replace coal, while motor vehicles would supplant railroads. At best they would lose their dominant roles in the economy. Like farming, both industries had been prodded to produce at full steam during the war and were left with depressed demand afterward. Owners tried to squeeze profits out of low wages for workers, while workers threatened to strike without wage increases. Hoover’s job was to construct some agreement that would keep the national economy humming. He hoped the railroads could salvage their stability by reorganization and consolidation, but he found any specific plan opposed by some companies or vetoed by the government. The conflict peaked when rail workers struck in 1922. Attorney General Harry Daugherty, without consulting Hoover, crushed the strike by obtaining a draconian injunction, of which Hoover disapproved. Meanwhile, the coal miners simply extended their contract for a year while the U.S. Coal Commission conducted a study designed to implement reforms, postponing their day of reckoning. The mines produced and the trains rolled, but no one was entirely happy with the outcome.10
In the steel industry, Hoover spearheaded a movement to curtail working hours from a twelve-hour day and seven-day week to eight hours and five days. Men with higher morale work more efficiently, he insisted, and he wanted laborers to have additional time to spend with their families and for recreation. Steel barons argued that firing down the furnaces would be ruinous, dampening America’s competitive edge with foreign steel. The commerce secretary persuaded Harding to invite the industrialists to the White House, where he and the president attempted to persuade them to reduce hours. Instead, the steelmakers appointed a committee to study the issue and delayed for a year. Choosing to employ political and public pressure rather than seeking legislation, Hoover leaked to journalists letters he had written to the owners over Harding’s signature, and the newspapers berated the stubbornness of the steel titans. At length, the public relations campaign and the president’s prestige forced the steel mill proprietors to back down during Harding’s rail trip west in 1923. Hoover inserted a passage in Harding’s Tacoma speech publicizing the new agreement, lest the operators renege on their promise. The breakthrough was a signal accomplishment for Hoover.11
At the Commerce Department, Hoover had transformed a hodgepodge of jumbled agencies into an efficient machine. He infused his department with a sense of pride and purpose that made Commerce the most dynamic workplace in the cabinet. Finding that he lacked adequate staff, Hoover hired two secretaries and three assistants with his own money, giving them a combined salary greater than his own. He utilized his management skills to reorganize, formulating three divisions: for industry, for trade, and for transportation and communication. His mission was to help facilitate business and trade, provide vital statistics, and harness new technology utilizing a maximum of voluntary cooperation and a minimum of coercion. During his tenure, the number of Commerce employees increased from 13,005 to 15,580, and appropriations from $28 million to $37 million annually, largely due to the addition of new bureaus and tasks. At the same time, he vowed to reduce wasteful overlap and excessive expenditures.12
Hoover made the Bureau of Foreign and Domestic Commerce the centerpiece of his department, organizing it along commodity lines in order to stimulate trade. To manage the bureau he hired his friend Julius Klein, who expanded its duties and infused its employees with a clear purpose and a sense of determination. Whereas other bureaus reported to Hoover’s assistant secretary, Klein’s bureau reported directly to Hoover. Klein created an independent statistical division to gather, collate, and disseminate data helpful to businessmen and exporters. Some fifteen commodity sections were created to study trends and to advise on marketing and the purchase of raw materials. Within the Bureau of Standards, Hoover created a Division of Simplified Practice, which became the core of his system to standardize industrial parts, reducing cost and enhancing marketing. After initial studies, leading producers within a field met under the rubric of their professional associations and adopted voluntary specifications for their products. Most changes were simple, invisible, and based on common sense. Hoover pursued the process industry by industry and reduced redundancy in products as varied as aircraft, wool blankets, hardware, men’s suits, rubber boots, and automobile tires. One study found forty-nine styles and sizes of milk bottles with tops necessitating twenty-nine sizes of caps. An investigation reduced the sizes of bottles to nine and the sizes of caps to one. Standardization of concrete blocks reduced the cost by 25 percent, which produced greater profits and lower prices. Auto parts designed to last longer saved consumers $15 million per year. Commerce experts studied materials discarded as waste in the industrial process and found uses for them. A conservationist at heart, Hoover introduced a new element in conservation beginning with the raw material and ending up with the finished product. No one had thought, for example, of conserving trees by making the use of the harvested lumber go further. By the end of 1928 the standardization program was saving industry an estimated $600 million annually, which translated into higher profits and reduced prices for consumers. The program did not tamper with aesthetics, only with technical modifications, most at the micro level. The engineer’s passion for efficiency extended to the federal government itself. Hoover created a Federal Specifications Board to unify the diverse specifications of the departments scattered throughout government. This resulted in centralized purchasing, which reduced costs to the government and enabled manufacturers to satisfy management demands. Commerce helped reduce paperwork in the federal government and in private industry by sta
ndardizing forms and eliminating duplication. The department expanded its scope during every year of Hoover’s tenure. In 1925 the Bureau of Mines and the Patent Office were transferred from Interior to Commerce. In 1926 Hoover induced Congress to create an Aeronautics Division within Commerce, followed by a Radio Division in 1927.13
Hoover took a personal interest in encouraging American homeownership. Believing that single-family homes with lawns offered the most nurturing environment for raising children, Hoover sought to reduce the cost of housing, promoting the cause through publicity. He created a Housing Division within the Bureau of Foreign and Domestic Commerce and utilized the same process of simplifying and standardizing the hidden facets of home construction that he had applied to other industries. The bureau disseminated model zoning codes and plans for reasonably priced, attractive houses. The commerce secretary also believed an increase in home construction would stimulate the economy and might aid employment by eliminating seasonal labor. He devoted more energy to construction, with an emphasis on building homes, than to any other industry. In addition, he worked through the private organization Better Homes in America, which promoted homeownership, serving as president or chairman of the board from 1922 through 1934. The organization’s forty-five hundred local chapters offered tours of model homes and lobbied for cost reductions. It also helped draft building codes and issued a manual for homeowners. During the Coolidge years, the commerce secretary turned to the task of making homes more affordable to middle-class families by reducing the interest rates on mortgages and stretching them out over a longer period. Most bank loans at the time were limited to five years or fewer and covered less than half the cost of the home. Interest rates were exorbitant, ranging from 12 to 15 percent. By 1927 Hoover had implemented a program to piggyback mortgages and helped reduce the interest rate to about 6 percent.14