Forty years old in 1933 and inexperienced in finance, Acheson nonetheless possessed formidable credentials for his unexpected role. Son of a prominent Episcopal cleric and born to moderate wealth, he had attended Groton (where he was a perpetual discipline problem), Yale, and Harvard Law School. His favorite law professor (and informal Roosevelt adviser), Felix Frankfurter, had secured him a clerkship with Supreme Court Justice Louis Brandeis. An association with the influential Washington law firm Covington, Burling & Rublee followed.1
A tall man of imposing demeanor, sporting a prominent black mustache and favoring tailored English-cut suits, Acheson was a rising star in the Washington community. Politically, he had defined himself as a Democrat. Frankfurter recommended him to Roosevelt for solicitor general; that post being unavailable, he was appointed undersecretary of the Treasury. A man of firm opinions and invincible confidence, coming roughly from the same class as Roosevelt, he seemed to be a rising star in the New Deal.
Put in charge of negotiating payment of British war debts, Acheson raised hackles by displaying sympathy for Britain’s financial problems. Inside the administration, he balked at the gold-buying program, arguing that the law did not allow it. He doubtless also thought the policy unsound and realized that it would reduce the value of government securities already outstanding. Morgenthau produced an opinion from Farm Credit Administration counsel Herman Oliphant asserting that it would be legal. Attorney General Homer Cummings agreed orally but stalled on delivering a written opinion. RFC chair Jesse Jones suppressed private doubts. Roosevelt, fearing disorder in the countryside, presided over one last heated argument, then ordered Acheson to move ahead. The undersecretary, accompanied by Morgenthau, proceeded to a meeting of the RFC board to announce, red-faced and visibly angry, “I have just come from the President. You know that I am opposed to our buying gold. The President has ordered me to do it. I will carry out his orders.”2
On October 22, Roosevelt concluded his fourth radio fireside chat with the declaration that the government would “take firmly in its own hands the control of the gold value of our dollar” through a policy of buying newly mined gold in the United States and buying or selling gold on the world market. “Government credit will be maintained and a sound currency will accompany a rise in the American commodity price level.”3
Three days later, he began the first of a series of daily meetings with Morgenthau at which they determined the twenty-four-hour price of gold, changing it a bit every day in order to fool money speculators. The initial price, $31.36, would trend upward until the president felt the revalued dollar had reached an optimum point. The process left loyal and stolid Morgenthau a bit queasy. He confided to his diary, “If anybody ever knew how we really set the gold price through a combination of lucky numbers, etc., I think they would really be frightened.”4
Wrongly suspecting Acheson of leaking his opposition to the press, Roosevelt wanted to fire him outright. At the insistence of Secretary Woodin, appallingly frail and back in Washington to arrange his own departure from the administration, the president agreed to accept a resignation. Acheson wrote the letter promptly, thanking the president for the opportunity to serve him, and went to the White House the next day to attend the swearing-in of his successor, Morgenthau. Roosevelt beckoned him to his side: “I have been awfully angry with you, but you are a real sportsman. You will get a good letter from me in answer to yours.”5
The letter never came. Roosevelt’s suspicions of Acheson returned when someone gave internal documents to the press. More than two decades later, Acheson recalled the counsel of his father, who quoted St. Paul: “Think not on those things which are past, but on those which lie before us.” He returned to his law practice. Morgenthau would be appointed secretary of the Treasury upon Woodin’s resignation at the beginning of 1934.6
The episode said much about Roosevelt, who deprived himself of the frank and honest advice of a talented naysayer and surely discouraged persistent dissent from other aides. Something deeper was at work also. Acheson, not unreasonably, considered himself the president’s social equal. He also conceived of governance as an occupation that required mutual respect and dignity among its participants. Roosevelt habitually addressed others by their first name and devised comic sobriquets for them, such as “Henry the Morgue” for Morgenthau. The president deserved deference and respect; his lieutenants merited the same. “It is not gratifying,” Acheson recalled, “to receive the easy greeting which milord might give a promising stable boy and pull one’s forelock in return.”7
Perhaps, however, Roosevelt learned something. At the beginning of 1941, with the world in crisis, he would bring Acheson back into the administration as an assistant secretary of state.8
Gold buying and dollar devaluation put more dollars into circulation, but not enough to ignite an economic resurgence. Commodity prices remained stubbornly low. General price levels were unaffected. John Maynard Keynes would call the tactic akin to a thin man trying to get fat by buying a bigger belt. “The chief result of the policy,” Rexford Tugwell later wrote, “was to import quantities of gold at a high price in dollars.” The policy thereby subsidized the foreign speculators it attempted to discourage.9
By mid-January 1934, what had begun as an exuberant and hopeful exercise was clearly a dud. With administration encouragement, Congress passed the Gold Reserve Act, which restated the gold policy of the president’s April 1933 executive order making it illegal for American citizens to own or trade in gold bullion, gold coins, or gold certificates. It gave the president authorization to fix the value of the dollar in gold within a range of $20.67 per ounce to $41.34 per ounce. The following day, Roosevelt issued a proclamation pricing gold at $35 per ounce, a substantial devaluation that reduced the currency to 59.06 percent of its old gold value.
The administration had held off the advocates of free coinage of silver. The precious metal, however, had great appeal throughout the old Bryan strongholds in the South and West. The influential “radio priest” Father Charles Coughlin joined the crusade. Silver mining interests, most strongly represented by Nevada senator Key Pittman, threw their resources behind the cause. The Treasury was already purchasing practically the entire national output of silver and issuing $1 bills as “silver certificates.” In the spring of 1934, the White House agreed to accept a bill, the Silver Purchase Act, which effectively committed the government to buying huge amounts of the metal at prices well above market value. The financial cost of this enormously expensive subsidy to an industry that employed about 5,000 people was more than that of the agricultural program.10
With that, the monetary revolution was over. Debasing the currency would not bring prosperity internally; nor would it make much of a dent in the price deflation that obsessed the administration. Would it restart world trade?
No member of the administration was more dedicated to that mission than Secretary of State Cordell Hull. Sixty-two years old in the fall of 1933, six feet tall, white haired with piercing eyes, distinguished in appearance, and esteemed throughout the Democratic Party, Hull embodied all one might expect a secretary of state to be. Throughout the 1920s, he and Roosevelt had enjoyed a warm and friendly correspondence.
Hull had expected to be an activist manager of American foreign relations, but he soon discovered that Roosevelt intended to take charge of the big issues, often bypassing him to work directly with personally selected assistant secretaries. Hull, all the same, valued his position, saw it as a possible launching pad for a post-FDR presidential bid, and stayed with it. He knew that, given his prestige within the Democratic Party, firing him would be almost impossible. If a Roosevelt man within the department made a slip, Hull would push him out with no remorse, as he had Raymond Moley in the wake of the 1933 World Economic Conference fiasco.
The secretary pursued his one passion, free trade, with ardor, although it was incompatible with the administration’s pursuit of national planning and di
fficult to achieve at a time when most countries had turned to economic nationalism. The World Economic Conference had demonstrated the impossibility of a general lowering of tariffs or an international currency-stabilization agreement. Trade agreements with individual countries on a basis that could be sold to Congress and the public as a good bargain all around, however, did seem possible. There was little reason to believe that a new trade policy would have a transformative impact. But Roosevelt had no problem with the idea and probably saw it as a political sop to the powerful bloc of southern Democrats.
In 1934, Congress passed the Reciprocal Trade Act, permitting the president to enter into agreements with specific nations without the need for treaty approval by two-thirds of the senate. Over the next six years, the State Department negotiated twenty-two such pacts, usually relatively narrow in scope, but at times opening the way to greatly expanded trade. The signatories pledged to levy on each other’s goods only those rates they charged “most-favored nations.” A 1936 agreement with Canada was an important first step in linking the fortunes of the British Commonwealth with those of the United States. Other agreements solidified relations with Latin American countries.11
These results trickled in over the remainder of the decade, were modest at best, and fell far short of restarting the world trading system. Smoot-Hawley remained the nation’s basic trade law. In the end, the United States did not behave much differently than most other large nations, which looked inward, managed their trade carefully, sometimes sought autarkic self-sufficiency, and generally avoided the risks of open trade and fixed currencies. The overall volume of US foreign trade would not rise above that of 1929 until 1940.
One galling issue complicated relations with the major economic powers. By 1934, almost every nation that owed the United States debts from World War I had defaulted. The Depression, along with Nazi Germany’s renunciation of reparations payments to the European Allies, made this development inevitable, but it still met with outrage in the United States. In the spring of 1934 Congress passed the Johnson Debt Default Act, forbidding both public and private loans to defaulting nations. The legislation expressed the widespread American opinion that the Europeans had cynically renounced their obligations to an innocent and well-meaning nation. Roosevelt was not ready to defy public opinion on the issue. The war debts grievance became in many ways the keystone in a wall of economic isolationism that the administration found itself constructing.
By November 1934, the nation had been through twenty months of precedent-breaking legislation and government programs. The New Deal to many people seemed so at variance with the American past as to be positively disorienting. Washington was paying farmers not to produce and effectively taking over management of the agricultural economy. The federal government, through its manifold work-relief projects, was the nation’s largest employer and a presence in about every county in the United States. Business and labor functioned under a blue eagle regime that was either the salvation of capitalism or the beginning of fascism.
Roosevelt was at the center of it all, larger than life. In less than two years, he had presided over dozens of press conferences, delivered six radio fireside chats, and established himself as a frequent presence in movie newsreels that gave Americans the illusion that they were getting a firsthand look at their leaders. Acting from an expansive definition of presidential power, he had summarily fired an obstructionist Republican member of the quasi-independent Federal Trade Commission, William E. Humphrey. His carefully choreographed film and photo events, along with his authoritative radio voice, conveyed assurance, strength, and command.12
Roosevelt conducted even his vacations on a grand scale. After staying close to Washington in the first year of his presidency, he took several weeks in the summer of 1934 for a voyage on the navy cruiser USS Houston, sailing to the Caribbean, through the Panama Canal (where he received the president of Panama), to Pearl Harbor, Hawaii, and then to the West Coast, where he transferred to a train and visited the huge Public Works Administration hydroelectric projects at Grand Coulee and Bonneville. The trip reminded the American people that their leader presided over a great power that exercised a benign hegemony in the Western Hemisphere and extended its reach far into the Pacific while developing mighty public projects at home.
FDR’s penchant for imperial display notwithstanding, no president had been so much loved and so adept at the common touch. Somehow he had achieved a blend of patrician authority and egalitarian appeal. Journalist Martha Gellhorn, reporting to Harry Hopkins on the mood of the country, declared that beaten-down southern mill workers revered the president almost as if he were a god who knew, understood, and cared about them. The sentiment was common across the country and surely had something to do with Roosevelt’s earnest attempts, over many years, to learn about the lives of ordinary people.13
In public, he was a jovial quipster, exuding a happy optimism, whether as the first president to participate in a skit at the Gridiron Club or as he carved the Thanksgiving turkey for the polios at Warm Springs. Yet he understood Machiavelli’s axiom that it is better for a prince to be feared than loved. He left even his most devoted aides uncertain about where they stood with him and was adept at engineering the exits of those who had outlived their usefulness. What other president had, within the space of a year and a half, jettisoned his chief policy adviser (Raymond Moley) and seen off the top operating officers of his agricultural and industrial programs (George Peek and Hugh Johnson) without a disastrous collapse of his own support? In that respect, he was as cold as a professional assassin. He joked about having appointed as a US marshal a convicted killer in a vain attempt to appease South Carolina senator Ellison D. (“Cotton Ed”) Smith. He would not hesitate to authorize prosecutions of political enemies such as former secretary of the Treasury Andrew Mellon or of supporters whose excesses negated their usefulness, such as Kansas City boss Tom Pendergast.14
Roosevelt’s popular support was broad, deep, and fervent and the ultimate source of enormous political power that he exploited with cool calculation. Democratic members of Congress, normally independent and district minded, realized that he usually elicited more reverence than they in their home precincts. They voted accordingly and frequently found themselves in a love-hate relationship with him.
Yet objective measures of the economy yielded an inescapable conclusion of failure. The Depression had scarcely abated. Unemployment clearly remained about as bad as it had been at its worst. But at least a quarter, perhaps even half, of those out of work were receiving, or had received, some degree of relief from the government, in the form of either direct payments or temporary work.
During his first year Roosevelt had advanced a program of unparalleled change, and he had become even more radical in his specific agenda and in the tone of his rhetoric, whether speaking publicly or in private. The persistence of the Depression goaded him to look for culprits. As early as October 1933, he told the cabinet that bankers were engaged in a conspiracy to block recovery by refusing to lend. Just why they would forego profitable opportunities he did not say, but the instinct to personalize policy differences was clear.15
The president’s annual message to Congress in January 1934 underscored objectives that went well beyond recovery to far-reaching reform. The value of the National Recovery Administration (NRA) lay not just in the economic improvement it had husbanded, he declared, but in its abolition of child labor and setting of national standards for wages and hours. It had initiated a governmental industrial policy that would steer the nation between the extremes of “ruinous rivalries” and monopoly. Agriculture, conservation, flood control, electric power development, and land use, he believed, all required national planning.
During its second session, from January to June 1934, the Seventy-Third Congress passed nearly two dozen pieces of legislation elaborating on and extending the framework of federal relief and regulation enacted during the first hundred days of earl
y 1933. These included the establishment of the Securities and Exchange Commission and the Federal Communications Administration. The Railroad Retirement Act, establishing a contributory retirement system for railway workers, exemplified New Deal efforts at both a systematic transportation policy and a comprehensive old-age assistance program.
Yet the New Deal was more slogan than coherent plan. Conflicts within the Agricultural Adjustment Administration and the NRA mirrored complex social divisions—labor versus management, small business versus big business, commodity farming versus subsistence farming, social reformers versus political opportunists—that could not be suppressed in a democracy. Roosevelt, for all his authority, could do little more than stand above these struggles and hope for good outcomes. Inevitably, conflict and unclear objectives were the by-products of major structural reform. “The objectives were experimental and not clearly stated,” Henry Wallace recalled years later. “Therefore, there was certain to be, from the White House down, a certain amount of what seemed to be intrigue. I did not think that this situation would be remedied until the president abandoned to a considerable extent his experimental and somewhat concealed approach.”16
Man of Destiny: FDR and the Making of the American Century Page 29