Herbert Hoover
Page 20
America’s prosperity during the 1920s was energized by technological marvels, some made possible by inventors such as Thomas Edison and Henry Ford, both friends and admirers of Herbert Hoover. The vibrant economy was driven by electrically lighted homes, telephones, motion pictures, and automobiles; the latter quite literally propelled the economy forward down country lanes and city avenues. Hoover was a booster of all of these innovations and facilitated the development of several of them. Together, they transformed America. While Hoover was amplifying radio during 1927, he also became the first American public official whose face, along with his wife’s, was transmitted by infant television from his office in Washington to the headquarters of the American Telephone and Telegraph Corporation in New York. Hoover considered picture broadcasting a pathbreaking achievement, although telecasting on a commercial scale did not materialize until after World War II. At Commerce, Hoover eased the task of inventors by eliminating paperwork needed to acquire patents and accelerating the process.26
Captivated by technology, Hoover envisioned a great future for aviation in America, a nation of vast distances with many people and products to transport. Once commercial flight became faster and more reliable than railroad travel, he knew, it would quickly supplant rail for long-distance passenger service. In the short run, it could speed delivery of freight and mail, while pilots who gained experience in commercial flight would become valuable military assets. Within the Department of Commerce Hoover created an Aeronautics Division, which raised standards for airline safety, including the training and licensing of pilots. America, which lagged behind Europe in aviation at the beginning of the 1920s, soared past the Old World by the end of the decade. Hoover employed the leverage of airmail contracts as an indirect inducement for rapid, reliable development. The Bureau of Standards conducted research on air transportation, and the commerce secretary obtained a $2.5 million grant from the Guggenheim Foundation for research into air travel. Hoover plotted out routes from New York to San Francisco via Chicago, and envisioned air trade with Latin America. He promoted the achievements of aviation pioneers such as General Billy Mitchell, who sought better air defenses; Admiral Richard E. Byrd, who flew over the North Pole in 1926; and Charles A. Lindbergh, who in 1927 became the first person to traverse the Atlantic while piloting solo. Hoover brought a child’s delight and a visionary’s anticipation to the future of the airways, and he was determined that America would lead the world in aviation during peace and war.27
During the 1920s, the automobile was rapidly winning the race for dominance of transportation. Yet the nation’s infrastructure was unprepared for the impact of millions of primitive cars and trucks clanking along dusty roadways. Mounting accidents and fatalities, as well as urban traffic congestion, concerned Hoover. Commencing studies of automobile and highway safety, he convened meetings of experts and public officials and encouraged them to adopt voluntary guidelines in the absence of authority to enforce laws affecting intrastate transportation. At the outset, most roads were unlabeled, with few posted speed limits and little uniformity. Hoover recommended standardized shapes for signs, speed limits, safe highway dimensions, and other measures. Most states and major cities adopted the codes following a National Conference on Street and Highway Safety convened at the Commerce Department during the spring of 1924. Hoover studied methods of reducing accidents, including zoning laws to minimize city congestion, wider streets to permit ample parking, and the location of shopping centers with spacious parking lots outside the hearts of municipalities. He suggested construction of highway arteries bypassing downtown areas, widening of avenues to ensure pedestrian safety, pedestrian isles, traffic circles, designated unloading spaces, elimination of taxicab “cruising,” and the prediction of areas of urban growth in order to anticipate density of automobile traffic. In these insights, as in other attempts to manage new technology, Herbert Hoover was on the cutting edge of his times.28
Hoover considered water America’s greatest natural resource. “Every drop of water that runs to the sea without yielding its full commercial returns to the nation is an economic waste,” the commerce secretary explained. His objective was “the coordinated long-view development of each river system to its maximum of utilization.”29 He suggested that the government cease thinking about “single power sites, single land projects, single navigation improvements, or local flood controls,” and instead construct “large interconnected systems of trunk lines from [the] seaboard with great feeders from our lateral rivers.”30 He envisioned a system of waterways linking the Great Lakes with the Gulf of Mexico, Pittsburgh with Kansas City, and Chicago with St. Paul. He wanted to connect the Great Lakes with the Atlantic Ocean and the Upper Mississippi River with the Gulf.31
Paying particular attention to waterways, Hoover initiated major advances in national planning. Water resources lay in every region of the nation, including the basins of the Columbia, the Colorado, the Missouri, the Ohio, the Tennessee, the Great Lakes, and the St. Lawrence. Of twenty-five thousand miles of possible inland waterways, only seven thousand were navigable. Hoover believed that dredging and widening rivers for commercial traffic should be funded by the federal government with aid from the states, and that the central government should contribute to flood control. With 20 million acres of potentially arable land too dry to cultivate, the government, he insisted, should also assist in irrigation programs and recover the cost by charging farmers. The situation became more complex when generation of electricity from waterpower was involved. Hoover believed the national government should build hydroelectric dams but allow private capitalists to generate and distribute electric power. Where the electricity was a natural by-product of dam construction or irrigation projects, it was acceptable for the government to generate power, which it should sell to private utilities. The money paid for the rights to the power would reimburse the government for building the dams. The commerce secretary did not want the federal government to be directly involved in selling electricity to consumers. He felt this could be done more effectively with less political favoritism by private utilities. Hoover did not believe the government should compete with private companies in selling power. It would set a dangerous precedent because firms in any business could not compete efficiently with the government. The central government could operate at a loss and bill the hidden cost to the taxpayers, while individual companies could not. Thus, some taxpayers would be benefiting at the expense of favored regions. In instances where the power could not be distributed profitably by individual companies, Hoover was willing to permit the government to do it. Hoover was the first federal administrator, while secretary of commerce, to integrate a large-scale program of planning. On his agenda, which still required approval, were a huge dam at Boulder Canyon on the Colorado River, the Grand Coulee Dam on the Columbia River, an Intracoastal Waterway, and the St. Lawrence Seaway linking the Great Lakes with the Atlantic Ocean via the St. Lawrence River. Many of Hoover’s water projects arose from his desire to help farmers find cheaper transportation to markets and to irrigate and reclaim arid land. President Coolidge was sparing in his support for appropriations, but all of the major projects initiated by Hoover during the 1920s were ultimately completed.32
Aside from the St. Lawrence Seaway, the most prolonged negotiations dragged out over Hoover’s plan to construct a mammoth dam at Boulder Canyon on the Colorado River. President Harding appointed Hoover as the federal representative on a commission representing the six states designated to apportion water from the dam’s reservoir. The water was coveted by the dry desert states, especially the largest, California, which many feared would seize the lion’s share. Secretary Wallace, Hoover’s cabinet nemesis, opposed such irrigation on grounds it might exacerbate the agricultural surplus, as did Hoover’s California archenemy, Senator Hiram Johnson. With the required unanimous agreement near, Arizona balked, followed by California. The deadlock remained unbroken until 1929, after Hoover had become president, and constr
uction stretched until after Franklin Roosevelt assumed office. At the groundbreaking, Interior Secretary Wilbur christened the structure “Hoover Dam.” In a vindictive act, FDR’s interior secretary, Harold Ickes, renamed it Boulder Dam. Agreeing that Hoover had originated the dam, the U.S. Congress, backed by new president Harry S. Truman, restored the old name, Hoover Dam, in 1947. Much progress was made on waterway and dam development during Hoover’s tenure at Commerce. He was disappointed, however, that President Coolidge declined to approve developments on the San Joaquin and Sacramento rivers on fiscal grounds and refused to proceed with development of the Columbia River.33
Hoover also became involved in a potential water development project at Muscle Shoals, Alabama, on the Tennessee River, which the government had purchased to produce nitrates for ammunition during World War I. The site also could be used to generate electricity in a backward region and to supply fertilizer for farmers. Hoover, Harding, and Coolidge preferred private development, but there was no consensus in Congress for any specific plan. Henry Ford offered to lease the site for one hundred years but encountered strong opposition and withdrew his offer. At Hoover’s suggestion, Coolidge appointed a commission, including some members proposed by the commerce secretary, to study the issue. The group reached no definitive conclusions, and the site, still undeveloped, caused a political brouhaha during the engineer’s term as president.34
As commerce secretary, Hoover waged a war on waste that was related to his commitment to frugal, farsighted use of natural resources to ensure their perpetuity. Forests, lakes, rivers, and even the oceans around us did not have to be entirely undisturbed, he believed, but they must be managed prudently. In the mid-1920s, he lamented that “two thirds of the original primeval forests of the country have been cut” and that “timber is now being cut at a rate four times faster than the replacement through new growth.” He observed that “between the cutting of the forest and the final use of the wood nearly sixty-five per cent of the total volume was previously lost.” Hoover became one of the first prominent Americans to link the harvesting and processing of natural resources through the entire industrial process to their ultimate consumption.35
As an outdoorsman, Hoover flourished in the replenishment offered by forests and mountains, lakes and streams. The most fervent political outdoorsman since Theodore Roosevelt, Hoover was elected president of the National Parks Association and proved a formidable fund-raiser for the park system. He exhorted Americans not only to preserve forests and parks for posterity, but also to enjoy them. Protecting forests and wildlife necessitated more than planting trees; it meant planting a love of nature in the hearts of those who used the nation’s parks.36
In addition to his role with the National Parks Association, Hoover served as honorary president of the Izaak Walton League, which celebrated recreational fishing. As commerce secretary he sought to preserve both sport and commercial fishing, a crusade he continued as president. He took a personal interest in the Bureau of Fisheries, previously a reservoir for deadwood bureaucrats, and installed career experts as committed to preservation of species and their proliferation as he was. Hoover used the coast guard to prevent the slaughter of seals in American waters by Japanese fishermen, and he sought legislation to prevent oil pollution in coastal areas. In Alaska, a territory where legislation was unnecessary, he helped save the salmon population from extinction and restored the declining stock of halibut. Off the Atlantic Coast, he conserved salmon and sturgeon, sorely depleted, and sought to replenish crab, lobster, oyster, and clam fisheries. He restocked freshwater game fish, growing fingerlings to the survival point in hatcheries before releasing them.37
Beginning in the early 1920s, Hoover’s Bureau of Foreign and Domestic Commerce spearheaded an effort to break attempts by foreign cartels—often colonial powers whose colonies exported a valuable raw material—to manipulate prices of resources vital to American industries. The most troublesome for Americans was the British quasi-monopoly on raw rubber produced by their colonies in the East Indies. By limiting rubber production and creating artificial scarcity, Britain increased the price of rubber, used chiefly for automobile tires, from 20 cents per pound in 1922 to $1.21 per pound by 1925, a cost to American drivers that Hoover estimated at $900 million per year. The coffee cartel, controlled primarily by the Brazilian government, raised the price of coffee beans from 13 to 30 cents per pound between 1924 and 1925. Other smaller cartels were intent on gouging their way to prosperity by commandeering commodities such as long-staple cotton, sodium nitrate, and potash. The common thread in these international cartels was that they held a virtual choke hold on scarce resources and exercised tactics that forced the selling price far beyond the cost of extraction. On practical grounds, such monopolies undermined international trade, establishing prices purely by manipulation. In the long term, Hoover feared these monopolies would inject governments into the natural law of supply and demand, bankrupting many nations by the gouging of a few, and risk inciting trade wars and, in the long term, even military wars.38
Hoover’s Bureau of Foreign and Domestic Commerce dealt with cartels by applying leverage exercised through a variety of tools. Under a law initiated by Hoover and enacted by Congress in 1922, the bureau searched for new sources for the raw materials. For example, in its quest for potential sources of rubber, Commerce sent experts to explore the interiors of Brazil, Mexico, Colombia, and East India, attempting to stimulate competition. In addition, Commerce encouraged industries to employ substitutes, reduce waste, practice conservation, and develop synthetic alternatives. Public opinion was mobilized through the press and radio. Hoover attempted to organize American importers in a solid front against foreign monopolies. Through trade associations he helped to persuade American manufacturers not to bid against one another. He advised American bankers to avoid loaning money to international monopolies, although he did not advocate direct government action to prevent it. Eventually, Hoover triumphed in his most important battle. The British Empire’s rubber price fell back to 20 cents per pound, and in April 1928 the British government announced that it would abandon its quota on rubber. Philosophically, Hoover believed that world commerce would flow healthily when prices were set by supply and demand, not by government autocracy. An internationalist in foreign affairs, he was a nationalist in domestic policy who made American consumers his foremost priority.39
After a steep yet brief decline in 1920–21, the American economy grew steadily, almost explosively, throughout the decade, fueled by consumerism, tax cuts, and Hoover’s campaign against waste, as well as a host of new inventions that lit homes, brought entertainment to mass markets, and put the nation on wheels. The annual reports Hoover delivered in the form of a statistical abstract summarizing the state of the economy at the beginning of each fiscal year bore out the nation’s economic growth. By 1926 the United States enjoyed the highest standard of living in the world, and the highest in its own history. The prosperity was attributed to President Coolidge’s hands-off approach to business and Treasury Secretary Mellon’s tax reductions. On January 1, 1928, Hoover reported that the economy appeared stable as the nation entered the new year.
Despite the nation’s unprecedented opulence, fears about the mania driving investments developed in Hoover’s mind during the decade. He did not have a specific timetable for an end to the boom, nor an idea of the scope of the inevitable downturn. Still, he took on the distasteful task of belling the economic risks epitomized by Wall Street stock speculation and the Federal Reserve System’s easy money policies. The commerce secretary issued some mild public warnings, but he worked primarily behind the scenes, aided by friends in key positions, such as Senator Irvine Lenroot of Wisconsin, chair of the banking committee, and Adolph Miller, Hoover’s closest friend on the Federal Reserve Board. Following the 1922 recovery, the boom in building became so robust that Hoover feared it would soar dangerously high, initiating a meltdown. In March 1923 he advised President Harding to
warn that construction was overexpanding. The president concurred, but he warned that a publicized statement from the chief executive would be risky. Instead, Harding signed a memo written by Hoover, which was sent out to contractors on Commerce Department stationery and reprinted in the New York Times.40 Later, in his predictions for 1926, Hoover cautioned against economic recklessness. Speculation in real estate and on the stock market ran rampant, creating inflation. Installment buying was overextended, and some sectors of agriculture performed feebly, leaving many farmers deeply in debt. Turmoil threatened labor-management relations.41 “What we need is an even keel in our financial controls,” he wrote. He began a series of steps to mold public opinion and government policy, advocating, if necessary, a small decline sooner rather than a cataclysm later. In a 1927 New York Evening Post article, Hoover wrote that an extensive study showed “that peace-time slumps in business were the direct result of booms, so that the boom and not the slump should be the object of attack.” He emphasized tools the government could use, including management of credit and currency, statistical projections, and a reserve of public works to ramp up or curtail construction in order to mitigate the business cycle.42
Privately troubled, Hoover lobbied the Federal Reserve Bank and its branches to escalate their rediscount rates, making it more expensive to borrow cheap dollars, which were fanning the wildfire of speculation. His confederate, Senator Lenroot, wrote the governor of the Federal Reserve on November 23, 1925, expressing alarm that both the central bank and the Federal Reserve Bank, located at the nexus of a buying spree, were feeding the frenzy with easy loans and had not heeded his appeals to rein in speculation. Lenroot, speaking for himself and Hoover, wrote that circumstances resembled the chaos prior to the recession of 1921, and he fulminated against lenient lending charges, concerned that the New York stock market was becoming overheated. He noted a New York Times article explaining that interest rates were being kept artificially low to facilitate a flow of gold from America to the Bank of England, which offered higher-interest returns to investors in its bonds. This was intended to help the British remain on the gold standard, but the result might be to pull the economies of both countries down together. D. R. Crissinger, the chairman of the Federal Reserve and an old Harding friend, conceded that some of Lenroot’s reasoning was correct but that the Bank of England’s security was vital to world financial stability and that the Fed’s cheap money policies did not threaten America. A rapid exchange of letters ensued, some written by Hoover for Lenroot. The governor of the powerful Federal Reserve Bank of New York, Benjamin Strong, who exerted dominant influence on Wall Street, proved as unyielding as Crissinger to the warnings of Hoover and Lenroot. The American economy survived the threat of 1925, but by 1927, market mania had developed a self-perpetuating momentum. The central bank and its New York branch, as well as most regional banks, adhered to the cheap money policies, but four regional banks heeded the appeals and raised rates. It was too late. The hemorrhaging had spread beyond Wall Street into the arteries of commerce. The market would survive another tumultuous year, but the crash Hoover had tried so strenuously to avert would strike in October 1929. By then, Hoover would be president. His worst fears had materialized. The man who had done perhaps more than any other to ward off the crash would be blamed for it both in his own time and in posterity.43