Baruch had his doubts. “I think he’s a good number-three man, maybe a number-two man, but he’s not a number-one man,” he told Frances Perkins. “He’s dangerous and unstable. He gets nervous and sometimes goes away for days without notice. . . . [D]o tell the President to be careful.” Johnson confirmed Baruch’s assessment when, learning at the last moment that he would not have control of the Public Works Administration, he blurted out, “I’m ruined, I’m ruined,” and threatened to reject the appointment. Roosevelt, with no fallback available, told Perkins, “Keep him sweet. Don’t let him explode.” She took the general on an hours-long drive all over the District of Columbia and persuaded him to accept.15
On the surface, Johnson was a military cliché: a hard-riding, hard-drinking, chain-smoking, womanizing, profane old cavalryman. His tough exterior, however, hid a mass of insecurities. From the beginning it was an open question whether the bull within him would gore special interests that needed taking down or wander into a china shop.
The War Industries Board had left him with an extensive knowledge of the industrial economy. Just weeks short of his fifty-second birthday, he radiated energy and a sense of mission. But he was no irresistible force. He doubtless understood that Baruch’s accomplishments as the head of the WIB had been fragile, enabled by a sense of crisis and a talent for mediation. Beginning with a keen awareness of the slenderness of his authority and the paucity of resources at his disposal, he increasingly attempted to achieve his agency’s mandate by hard work and self-assertion.
State organization of the economy, heavy-handed by American standards, existed to one degree or another in most European countries, whether democratic or authoritarian. Johnson, like many Americans in the early 1930s, particularly admired Benito Mussolini’s Italian “corporate state,” which in its idealized form amounted to government planning of the national economy for the benefit of all. Mussolini, who had been in power for a decade by 1933, promoted this guiding vision with imposing public works and strong dictatorial leadership. The parallels to Roosevelt and his New Deal were oft-cited during the 1930s. Perceptive journalist John Franklin Carter described the NRA regime as akin to fascism but lacking “its political aggressiveness and accidental intolerance.” Actually, the differences between Italy’s thuggish police state and America’s sometimes unruly democracy overrode the similarities.16
Drawing on the example of the War Industries Board, Johnson used its appeals to patriotism and duty. He adopted as the NRA’s symbol a blue eagle against a white background, wings spread, holding lightning bolts in one talon and an industrial cog in the other. Ubiquitous posters displayed the blue eagle and added in big red letters the agency’s slogan: “We do our part.” The creative red-white-and-blue graphic, identifying patriotism with government guidance, was not in itself fascist; still, it possibly stirred a certain envy in the hearts of Mussolini and his recent German counterpart, Adolf Hitler.
Far from a foreign import or a Johnson hobby, national planning, carried out by disinterested experts in pursuit of the public interest, had deep roots in early-twentieth-century American progressivism. “The breakdown of the old economy has forced us to consider as never before the responsibility of the government,” declared Secretary of the Interior Ickes. “We know now that we must build a new social order.” As much an expression of Jeffersonian Democracy as of European fascism, the NRA embraced regionalism and localism as primary virtues and even touted voluntarism. In the spirit of many New Deal initiatives, it reflected Roosevelt’s instinctive quest to reconcile a strong national government with the historical ideology of the Democratic Party, to bring together Theodore Roosevelt and Thomas Jefferson. (Uncle Ted, who had considered Jefferson a weak and ineffective president, never entertained the illusion that this was possible.)17
Representative bodies from within each industry would draw up short and simple “codes of fair competition.” When approved by the president, they would have the force of law, but the government would rely on voluntary compliance. Most of the codes would provide for regional differences in standards of production, work hours, and wages. All had to specify basic rights for labor, including the right to organize and bargain collectively. They might also establish prices, production quotas, and marketing territories.
The NRA’s launch on a wave of optimism that it could manage the world’s largest and most diverse economy said much about the desperation of the Depression and the allure of government management in the 1930s. Johnson’s energetic propaganda asserted that the agency could establish prosperity and justice for all. With characteristic overpromise, he asserted that he would put 5 million men back to work by the end of the summer of 1933.18
The NRA staged rallies and parades all over the country. The biggest occurred that September in New York City, where Johnson spoke to a large crowd at Madison Square Garden. The next day, the city administration, businesses, and labor unions mobilized 250,000 marchers, who paraded from Washington Square up Fifth Avenue to Seventy-Second Street. Halfway along the route, they passed a reviewing stand on which stood Eleanor Roosevelt, Johnson, the mayor of New York, and the governors of New York, Connecticut, and New Jersey. The event started at 1:30 p.m. The last marchers reached the termination point around ten hours later. The participants, the reviewers, and the estimated 1.5 million people who lined the way felt they had witnessed the wave of the future passing before them.19
As it turned out, it became clear that efforts to organize a continental industrial economy had a chance of succeeding only if backed by authoritarian methods. The initial steps—defining an “industry,” reconciling the interests of large and small enterprises, and establishing rules for wages, prices, and marketing areas—were difficult enough.
Enforcement was extremely problematic. For example, three large companies—General Motors, Ford, and Chrysler—and several smaller outliers dominated the auto industry. Although the NRA could deal with an auto industry trade association already in place, negotiating development of an industry code nonetheless took three months. Henry Ford agreed verbally to abide by the new rules but refused to sign the code. Johnson responded by threatening a consumer boycott; Ford ignored him with impunity.20
Yet, for a time in the late summer and fall of 1933, the code regime expanded rapidly on a wave of mass enthusiasm. One by one, large core industries—oil, coal, steel, shipbuilding, lumber, apparel, and textiles among them—signed on. If the agency had limited its focus to manufacturing behemoths, it might have enjoyed a measure of success. Instead, small, family-run enterprises got caught up in the wave: micro-manufacturers who employed only a few dozen operatives, operated out of small buildings, subsisted on tiny margins, used out-of-date equipment, and could offer their employees only meager pay; retail grocers or dry cleaners with a clientele that in a large city might only span a few square blocks and a workforce that routinely included family members. Such enterprises often proudly displayed the blue eagle, only to get caught up in a maze of regulations beyond their ability to cope. A few states established “little NRAs” of their own, easily confused with their federal counterpart, that frequently practiced ham-fisted enforcement policies. Among the real-life unfortunates were a dry battery manufacturer who employed a dozen or so men in a converted garage behind his house and a befuddled immigrant tailor who ran afoul of the New Jersey NRA and did brief jail time for charging a nickel below the minimum price for pressing a pair of pants. Johnson and NRA enforcers saw such types as “chiselers.” Many others viewed them as little guys trying to survive. Their cases, not those precipitated by large corporations, would decide the fate of the NRA.21
The corporate world did rather well under the NRA regime. Trade associations controlled by the big operators drew up the industrial codes, invariably meeting the general specifications stipulated in the law but often inserting details that froze out small competitors. Provisions that set prices and divided up marketing territories effectively nullified the a
ntitrust laws. From Roosevelt down, the New Dealers fixated on stopping a deflationary price spiral, only to discover that raising prices, which the NRA did in many lines of business, created not economic recovery but more hardship for the consumer.
By early 1934, the NRA had become a large, unwieldy bureaucracy administering hundreds of codes, setting prices, establishing marketing regions for items ranging from cigars to petroleum, and becoming mired in a multitude of controversies. Johnson, whose forte was not delegation, seemed in perpetual motion, as cheerleader for the cause, adjudicator, and chief responder to complaints. At the end of February, he held hearings in Washington that provided a field day for the agency’s critics. (One of them was Eleanor Roosevelt, who requested more consideration for the problems of small bookshops.) A hostile speaker asserted, “It will not be many years before the big monopolies will control the entire business of the United States and we will all be working for them.”22
In early 1934, Roosevelt, pressured by Congress, appointed a National Recovery Review Board and named as its chair old progressive and renowned defense attorney Clarence Darrow. An ideological socialist and visceral foe of big business, Darrow issued a series of scathing reports. He and his staff seemed uncertain whether they wanted to restore capitalistic competition or institute Soviet-style state socialism. Nevertheless, their fusillade exposed serious shortcomings.23
A determined organizing drive by major labor unions added to the emerging sense of industrial chaos. Nonunionized businesses countered the NRA endorsement of collective bargaining by claiming that their “employee representation plans” were the equivalent of independent unions. In 1934, labor actions created spasmodic turmoil around the country. San Francisco endured a four-day general strike; Minneapolis experienced a bloody confrontation between the Teamsters union and local law enforcement; Toledo endured an ugly and unsuccessful attempt to organize the Autolite sparkplug company; the East Coast from New England to Georgia witnessed an effort, put down hard by local authorities, to unionize the textile industry.
Whether closet Communists like Harry Bridges of the West Coast longshoreman’s union or registered Republicans like John L. Lewis of the United Mine Workers, labor leaders employed the slogan “President Roosevelt wants you to join the union.” Lewis, whose union already had a strong presence in its industry, achieved some success. But more often than not, organizing efforts failed miserably in the face of opposition from local political establishments and law enforcement, as well as many workers’ clear doubt that unions would do much more than tap their meager paychecks for dues.
By the fall of 1934, the NRA administered more than five hundred codes that attempted to dictate production, marketing, and pricing decisions in about every major line of business. Their rigidity brought at least one large industry, lumber, to a standstill. Other codes regulated items ranging from Atlantic mackerel to celluloid buckles. The task was too complex for any administrative bureaucracy and more likely to tie the economy in knots than to stimulate a recovery.24
For a year and a half, Johnson attempted to exercise control as if he were a battlefield commander, working himself to physical and emotional exhaustion, using bluster and braggadocio to compel dispute settlements, disappearing from time to time just as Baruch had predicted, and finding solace either in whiskey or in the arms of his attractive administrative secretary. He claimed that the NRA had put 4 million men to work, but joblessness had barely improved from the 20 to 23 percent range of two years earlier, when Roosevelt was campaigning against Herbert Hoover. In less than two years, the NRA had become an object of denunciation among progressives and conservatives alike.25
Johnson was confused, fatigued, incapable of rational discussion, and reflexively dictatorial in attitude. His personal peccadilloes verged on becoming public scandal. Roosevelt tried to ease him out as deftly as possible. On August 20, 1934, Johnson met at the White House with the president and several “witnesses”: Frances Perkins, Harold Ickes, and Deputy NRA Administrator Donald Richberg. Roosevelt was uncharacteristically formal and stern. After Johnson turned down reassignment to a commission to evaluate European economic recovery, the president bluntly told him he had become a problem and must resign immediately.
Roosevelt, Perkins later reflected, liked to consider himself an astute handler of people, but he had humiliated Johnson by firing him in front of his peers. Johnson sent over a bitter letter of resignation, to which, he later wrote, Roosevelt responded with a letter “so affectionate, kind, considerate, understanding, and long-suffering, that I felt lower and more ashamed of myself than ever.” As things turned out, he stayed on as administrator for a month, with Richberg actually running the NRA. On October 1, Johnson finally departed with an emotional speech to NRA employees, ending tearfully with the final words of his favorite opera character, Madame Butterfly.26
Roosevelt replaced him with a collective board mainly concerned with scaling the agency’s activities back to manageable proportions. Richberg became its executive director and, briefly, the administration’s presumptive strongman. The president still believed in the concept of an economy organized by a powerful executive for the benefit of all and hoped to preserve the agency in some fashion. By then, however, the NRA had resorted to the courts for enforcement, and its constitutionality was in wide doubt. In the spring of 1935, the Supreme Court heard arguments in the matter of code violations by the Schechter Poultry Corporation. The fate of an immense federal program suddenly hinged on a kosher butcher’s sale of an allegedly sick chicken.
The First New Deal had become an economic failure of major proportions. It succeeded only in bringing the economy back from the utter collapse of March 1933 to about where it had been on Election Day, 1932—from perhaps 28 percent unemployment to about 23 percent. Its relief efforts nonetheless brought tangible benefits to millions of people, winning their allegiance despite the persistence of hard times. They would support the president and a drive for fundamental reforms in American society that was about to enter a new phase.
Chapter 15
Presidential Government
The Politics of Maximum Leadership, 1933–1934
Whatever the New Deal’s policy consequences, Franklin Roosevelt’s overpowering personality was a hard fact, fully as important as the benefits he distributed. Speaking directly to the nation, communicating empathy in a way no other president had, he established a presence that eclipsed his programs. He was the New Deal. Exploiting the personal presidency to its limits, he enjoyed the adulation of a large public. He was leading a political revolution, but the economic recovery he promised remained tantalizingly over the horizon. It was uncertain whether he could deliver or how long the people were willing to wait.
The American Depression was an acute manifestation of a global phenomenon. Yet Roosevelt had indicated his lack of interest in a cooperative international economic policy by wrecking the World Economic Conference in 1933. The United States was the planet’s largest creditor and greatest industrial power, but the president nonetheless seems to have shared with most Americans a belief that the debtor European powers remained financial and industrial giants and far more devious than the innocent and virtuous United States. The British Empire still seemed in the eyes of Americans—and Roosevelt—the superpower that had existed at the high noon of Queen Victoria’s reign rather than a beaten-down island nation with an obsolescing industrial plant and a shaky currency.
The United States, as Hoover, for all his failings, had understood, had a special responsibility and a unique capability to provide economic leadership. But perhaps it was inevitable that as long as the nation-state was the basic unit of world politics, each country would move against the economic crisis in its own way. The New Deal chose to treat the global Depression as a zero-sum game in which players jockeyed for advantage in the areas of tariff policy and currency valuation. Such policies preserved the nation’s (and the president’s) freedom of action but di
d nothing to alleviate its economic malaise.
In the wake of the London fiasco, the dollar attracted the most attention. Here Roosevelt resorted to a common stratagem of the 1930s, the competitive devaluation, and ironically found himself following along the same path for which he and his parents had once scorned William Jennings Bryan. From the beginning of his administration, he had faced pressure from rural progressives to increase farm commodity prices by resorting to the old populist panaceas of greenbacks or free coinage of silver. During the first hundred days, he had suspended gold backing of the dollar, which fell sharply in value against gold-backed currencies and the British pound.
By the late summer of 1933, an initial mood of optimism was giving way to the hard reality of a continuing economic slump. Agriculture seemed at the brink of a violent explosion, with the prices of major commodities still falling. A push for more inflation via continued manipulation of the dollar could seem a reasonable response, as well as a politically expedient one.
Roosevelt had no obvious adviser on monetary policy. Raymond Moley and Rexford Tugwell handled the structure of the economy, not the currency. Secretary of the Treasury William Woodin, able and highly esteemed, developed grave health problems just months after taking office; returning to New York for medical treatment, he had no effective input into monetary issues. Instead, an outsider, Professor Charles Warren of Cornell University, influenced the president most heavily.
Warren’s entrée to the administration rested in part on his deserved eminence in the field of monetary economics and in part on his identity as a former teacher of Farm Credit administrator Henry Morgenthau Jr. A further devaluation of the dollar, Warren believed, would increase price levels markedly and thereby fuel a recovery. The simplest way to do this would be for the government, acting through a special corporation funded by the Reconstruction Finance Corporation (RFC), to undertake a program of buying large quantities of gold at prices considerably higher than the still legally prescribed $20.67. The theory was controversial but plausible; it had Morgenthau’s backing and appealed to Roosevelt’s penchant for dramatic action. In September 1933, the president decided to move ahead. To his consternation he found himself at loggerheads with Acting Secretary of the Treasury Dean Acheson.
Man of Destiny: FDR and the Making of the American Century Page 28