Forgotten Man, The (2 page)

Other new institutions, such as the National Recovery Administration, did damage. The NRA’s mandate mistook macroeconomic problems for micro problems—it sought to solve the monetary challenge through price setting. NRA rules were so stringent they perversely hurt businesses. They frightened away capital, and they discouraged employers from hiring workers. Another problem was that laws like that which created the NRA—and Roosevelt signed a number of them—were so broad that no one knew how they would be interpreted. The resulting hesitation in itself arrested growth.

Where the private sector could help to bring the economy back—in the arena of utilities, for example—Roosevelt and his New Dealers often suppressed it. The creation of the Tennessee Valley Authority snuffed out a growing—and potentially successful—effort to light up the South. The company that would have delivered that electricity was Willkie’s company, Commonwealth and Southern. The
New Yorker
magazine’s cartoons of the plump, terrified Wall Streeter were accurate; business was terrified of the president. But the cartoons did not depict the consequences of that intimidation: that businesses decided to wait Roosevelt out, hold on to their cash, and invest in future years. Yet Roosevelt retaliated by introducing a tax—the undistributed profits tax—to press the money out of them.

Such forays prevented recovery and took the country into the depression within the Depression of 1937 and 1938, the one in which William Troeller died and Willkie worried. One of the most famous Roosevelt phrases in history, almost as famous as “fear itself,” was Roosevelt’s boast that he would promulgate “bold, persistent experimentation.” But Roosevelt’s commitment to experimentation itself created fear. And many Americans knew this at the time. In autumn 1937, the
New York Times
delivered its analysis of the economy’s downturn: “The cause is attributed by some to taxation and alleged federal curbs on industry; by others, to the demoralization of production caused by strikes.” Both the taxes and the strikes were the result of Roosevelt policy; the strikes had been made possible by the Wagner Act the year before. As scholars have long noted, the high wages generated by New Deal legislation helped those workers who earned them. But the inflexibility of those wages also prevented companies from hiring additional workers. Hence the persistent shortage of jobs in the latter part of the 1930s. New Deal laws themselves contributed to the sense of lost opportunity. This sense is what led to the famous description of the period that we have all heard—“the Depression was not so bad if you had a job.” John Steinbeck described the same sense of futility more poetically in 1945 in
The Red Pony
: “No place to go, Jody. Every place is taken. But that’s not the worst—no, not the worst. Westering had died out of the people. Westering isn’t a hunger any more. It’s all done.” The trouble, however, was not merely the new policies that were implemented but also the threat of additional, unknown, policies. Fear froze the economy, but that uncertainty itself might have a cost was something the young experimenters simply did not consider.

The big question about the American depression is not whether war with Germany and Japan ended it. It is why the Depression lasted until that war. From 1929 to 1940, from Hoover to Roosevelt, government intervention helped to make the Depression Great. The period was not one of a moral battle between a force for good—the Roosevelt presidency—and forces for evil, those who opposed Roosevelt. It was a period of a power struggle between two sectors of the
economy, both containing a mix of evil and virtue. The public sector and the private sector competed relentlessly for advantage. At the beginning, in the 1920s, the private sector ruled. By the end, when World War II began, it was the public sector that was dominant.

The contest was a brutal one, fought across the land, through famines and floods, and in a Washington that knew neither air-conditioning nor angiograms. Roosevelt was clear about it. As he put in his second inaugural address, he sought “unimagined power.” He, his advisers, and his congressional allies instinctively targeted monetary control, utilities, and taxation because they were the three sources of revenue whose control would enlarge the public sector the most. Since the private sector—even during the Great Depression—was the key to sustained recovery, such bids did enormous damage. Today we even have an economic theory, public choice economics, that sheds light on this. Public choice economics says that government is not higher than the private sector but rather a coequal combatant. Public choice theory tells us as much about the New Deal as the traditional economics Americans have been taught.

This particular school postdates the Depression, but the notion that something destructive was going on was evident, even to Roosevelt’s allies. A number of them tried to articulate the problem. Ray Moley and Tugwell, two of Roosevelt’s original brain trusters, dedicated years to grappling with the hypocrisy and damage of Roosevelt’s actions. Wendell Willkie, at first a Democrat and enthusiastic reformer, would demonstrate that the contest between the TVA and his Commonwealth and Southern was not merely about electric power but also about control of the American future.

There remains a question. If so much of the New Deal hurt the economy, why did Roosevelt win reelection three times? Why, especially, the landslide of 1936? In the case of the third and fourth Roosevelt terms the answer is clear: the threat of war, and war itself. Roosevelt, unlike his narrow-minded Republican opponents, understood the dangers that Nazi Germany represented. In 1936, however, the reason for victory was different.

That year Roosevelt won because he created a new kind of interest-
group politics. The idea that Americans might form a political group that demanded something from government was well known and thoroughly reported a century earlier by Alexis de Tocqueville. The idea that such groups might find mainstream parties to support them was not novel either: Republicans, including the Harding and Coolidge administrations, had long practiced interest-group politics on behalf of big business. But Roosevelt systematized interest-group politics more generally to include many constituencies—labor, senior citizens, farmers, union workers. The president made groups where only individual citizens or isolated cranks had stood before, ministered to those groups, and was rewarded with votes. It is no coincidence that the first peacetime year in American history in which federal spending outpaced the total spending of the states and towns was that election year of 1936. It can even be argued that one year—1936—created the modern entitlement challenge that so bedevils both parties only.

Roosevelt’s move was so profound that it changed the English language. Before the 1930s, the word “liberal” stood for the individual; afterward, the phrase increasingly stood for groups. Roosevelt also changed economics forever. Roosevelt happened on an economic theory that validated his politics and his moral sense: what we now call Keynesianism. Keynesianism, named after John Maynard Keynes, emphasized consumers, who were also voters. The theory gave license for perpetual experimentation—at least as Roosevelt and his administration applied it.

Keynesianism also emphasized government spending. Yet focusing on consumers meant that Washington neglected the producer. Focusing on the fun of experiments neglected the question of whether unceasing experimentation might frighten business into terrified inaction. Admiring the short-term action of spending drew attention away from its longer-term limits—economies often go into recession when the spending disappears. Supplying generous capital to government made government into a competitor that the private sector could not match. Keynesianism provided the intellectual justification and the creation of constituencies.

Too much attention has been paid to what political polls said
about the New Deal. Too little has been paid to two other measures, both also polls, in their way. One was the unemployment rate, which did not return to precrash levels until the war. The other was the stock market. It told a heartbreaking story. Uncertainty about what to expect from international events and Washington made the Dow Jones Industrial Average gyrate, both daily and over longer periods, in a fashion not repeated through the rest of the century: seven out of the ten biggest “up” days of the twentieth century took place in the 1930s. The uncertainty made Americans doubt themselves as investors. The Dow did not return to 1929 levels until nearly a decade after Roosevelt’s death. The goodwill of the New Dealers, and there was enormous goodwill, could not excuse such consequences.

About half a century before the Depression, a Yale philosopher named William Graham Sumner penned a lecture against the progressives of his own day and in defense of classical liberalism. The lecture eventually become an essay, titled “The Forgotten Man.” Applying his own elegant algebra of politics, Sumner warned that well-intentioned social progressives often coerced unwitting average citizens into funding dubious social projects. Sumner wrote:

“As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine…what A, B, and C shall do for X.” But what about C? There was nothing wrong with A and B helping X. What was wrong was the law, and the indenturing of C to the cause. C was the forgotten man, the man who paid, “the man who never is thought of.”

In 1932, a member of Roosevelt’s brain trust, Ray Moley, recalled the phrase, although not its provenance. He inserted it into the candidate’s first great speech. If elected, Roosevelt promised, he would act in the name of “the forgotten man at the bottom of the economic pyramid.” Whereas C had been Sumner’s forgotten man, the New Deal made X the forgotten man—the poor man, the old man, labor, or any other recipient of government help.

Roosevelt’s work on behalf of his version of the forgotten man
generated a new tradition. To justify giving to one forgotten man, the administration found, it had to make a scapegoat of another. Businessmen and businesses were the targets. Roosevelt’s old mentor, the Democrat Al Smith, was furious. Even Keynes was concerned. In 1938 he wrote to Roosevelt advising him to nationalize utilities or leave them alone—but in any case cease his periodic and politicized attacks on them. Keynes saw no point “in chasing utilities around the lot every other week.” Roosevelt and his staff were becoming habitual bullies, pitting Americans against one another. The polarization made the Depression feel worse. Franklin Roosevelt’s forgotten man, the constituent X, perpetually tangled with Sumner’s original forgotten man, C.

This book is the story of A, the progressive of the 1920s and ’30s whose good intentions inspired the country. But it is even more the story of C, the American who was not thought of. He was the Depression-era man who was not part of any political constituency and therefore lived the negatives of the period. He was the man who paid for the big projects, who got make-work instead of real work. He was the man who waited for economic growth that did not come. As an editorialist in Indiana wrote in 1936, “Who is the ‘forgotten man’ in Muncie? I know him as intimately as I know my own undershirt. He is the fellow that is trying to get along without public relief and has been attempting the same thing since the depression that cracked down on him.”

Among the people whom the New Deal forgot and hurt were great and small names. The great casualties included the Alan Green-span figure of the era, Andrew Mellon, treasury secretary for the Harding, Coolidge, and Hoover administrations—a figure so towering it was said that “three presidents served under him.” Another was Samuel Insull, a utilities magnate and innovator to whom the New Dealers assigned the blame for the crash. Yet another was James Warburg, a Roosevelt adviser who became so angry with the president that he penned book after book to express his rage. George Sutherland and James McReynolds, two of the four justices on the Supreme Court who fought back against Roosevelt, were also important. It was
Willkie who spoke out most explicitly for the forgotten man on the national stage.

Others were of humbler background: those farmers who found themselves forced to kill off their piglets in a time of hunger because FDR’s Agricultural Adjustment Administration ordained they must; a family of kosher butchers named Schechter who believed in Roosevelt but fought the New Deal all the way to the Supreme Court; a black cult leader named Father Divine; Bill W., the founder of Alcoholics Anonymous, who taught Americans that the solution to their troubles lay not with a federal program but within a new sort of entity—the self-help community.

Of course the Hoover and Roosevelt administrations may have had no choice but to pursue the policies that they did. They may indeed have spared the country something worse—an American version of Stalin’s communism, or Mussolini’s fascism. That is the position that author Sinclair Lewis was taking when, in 1935, he published
It Can’t Happen Here,
a fantasy version of the United States under fascist leaders remarkably similar to Roosevelt’s opponents. The argument that democracy would have failed in the United States without the New Deal stood for seven decades, and has been made anew, by scholars of considerable quality, quite recently. But it is not right that we permit that argument—even if it is correct—to obscure some of the consequences of the two presidents’ policies. Nor is it right that we overlook the failures of their philosophies. Glorifying the New Deal gets in the way of getting to know all the Cs, the bystanders, the third parties. They spoke frequently of the forgotten man at the time—the phrase “forgotten man” recurred throughout the decade—but eventually became forgotten men themselves. Going back to the Depression is worthwhile, if only to retrieve their lost story.

January 1927
Average unemployment (year): 3.3 percent
Dow Jones Industrial Average: 155

FLOODS CHANGE THE COURSE OF HISTORY,
and the Flood of 1927 was no exception. When the waters of the Mississippi broke through banks and levees that spring, the disaster was enormous. A wall of water pushed down the river, covering the area where nearly a million lived. Commerce Secretary Herbert Hoover raced to Memphis and took command. Hoover talked railroads into transporting the displaced for free and carrying freight at a discount. He commandeered private outboard motors and built motorboats of plywood. He urged the people who were not yet flooded out, such as the population around the Bayou des Glaises levee, to evacuate early, then rescued with the trains those tens of thousands who had ignored his warning. He helped the Red Cross launch a fund drive; within a month the charity had already collected promises of more than $8 million, an enormous figure for the time.

Several hundred thousand ended up in new refugee camps, many planned, right down to the latrines, by Hoover and his team. Hoover
asked governors of each state to name a dictator of resources—he used the word “dictator”—and the governors complied. The dictators then managed the dysentery and the hunts for the missing along the floodwaters in their states hour by hour. He and the Red Cross sent the refugees to concentration camps—a phrase not so freighted then as it is today—at Vicksburg, Delta, and Natchez. One hundred thousand blankets from army warehouses were shipped to warm the refugees.

Things felt calmer on Hoover’s watch. By mid-May, though the flooding was far from over, the anecdotes began to compete in the news with the reports of tragedy. Northerners read in
Time
magazine that a town called Waterproof, Louisiana, had not proven waterproof, and that its switchboard operators were still working—albeit from new posts, high up above the waters, on scaffolding. Not far from Memphis, Tennessee, bootleggers had also set up shop on high, in treetops. New babies were receiving flood names—Highwater Jones, Overflow Johnson. Now from Memphis, now from Little Rock, now from the Sugar Bowl, the itinerant flood manager, Hoover, wired or broadcast his analyses of the meaning of the disaster. Such flooding, he said, “is a national problem and must be solved nationally and vigorously.” But the commerce secretary also spent a lot of time reassuring. The waters might hide the land, the crops might be lost, but the mood was now hopeful. More than any single figure, Hoover was succeeding in making Americans feel that the South would be all right again.

Hoover was already so famous that his name was a verb—to Hooverize, after the efforts in food rationing that he had led from a post as Washington’s food administrator at the end of World War I. Americans recalled that he had led the humanitarian drive to feed occupied Belgium during the war. Now Hoover had outdone himself—and on a home territory whose geographic area covered more than Belgium’s. What the public liked about Hoover was their sense of him as guardian, that he would protect them and what they had. If Hoover could win the presidential election the following year, then he might hold back whatever waters of adversity threatened. He was a Republican, like the sitting president, Calvin Coolidge. He would pick up where Coolidge left off—though he might update
things, for everyone knew that Hoover, a mining engineer, could do amazing things with technology. One of Hoover’s neatest feats—and he pulled it off right around the time of the flood—was to acquaint the public with an early version of television. “Herbert Hoover made a speech in Washington yesterday afternoon. An audience in New York heard and saw him,” the
New York Times
wrote in awe, adding that Hoover had “annihilated” geographic distance and commenting in a headline: “Like a Photo Come to Life.” It was not yet modern television but wired images and the telephone combined. Still, the idea took hold in the minds of the reporters. Under Hoover, it was easy to believe that the 1920s were merely the American beginning.

The idea of philosophical continuity from Coolidge to Hoover seemed ironic to one man: Calvin Coolidge himself. The two were party allies. Hoover had loyally campaigned for Coolidge in 1924—indeed, had helped to defeat a Coolidge opponent in 1924 in California to clear the Republican presidential nomination for Coolidge. But Coolidge did not especially like Hoover. In the very period when the Mississippi waters were rushing, in fact, Coolidge’s press spokesman had taken an explicit shot at Hoover, telling reporters that the commerce secretary would not be considered for the job opening if the secretary of state happened to retire.

The differences between the men had started with small things. Hoover was a fly fisherman. Coolidge fished with worms. Hoover liked the microphone. Coolidge shied away from it. After a landslide presidential victory in 1924 Coolidge had sent a clerk to read aloud his State of the Union address. Hoover ignored politics for the first thirty-five years of his life. Coolidge held his first office, that of city council member in Northampton, Massachusetts, at the age of twenty-eight, and had rarely been out of government since. Hoover was a mining engineer; Coolidge was a country lawyer. Hoover was a worldly American, a blend of regions and cities, the most successful in his field of his generation. He believed in the Anglo-American gold standard, not only because it had made him rich but because he had seen firsthand how it kept the world running, like a grandfather clock. Coolidge was a pure New Englander who seemed to re-create
New England wherever he went. The very concept of “overseas” was a bit vague to Coolidge. The typical Republican of his day, he supported tariffs in the belief that they strengthened the United States. His failure to recognize the consequences of his policies, both abroad and for his country, was his greatest shortcoming.

Hoover believed that government might help business do better, functioning as a sort of beneficent hand. Coolidge liked Adam Smith’s old invisible hand. The men were different breeds of Republican. Hoover believed that action was necessary to make the country live up to its potential. Coolidge had long ago determined that the world would do better if he involved himself less. Finally, there was a difference in temperament. Hoover strewed around phrases about individuality, but he could not control his own sense of agency. He was by personality an intervener; he liked to jump in, and find a moral justification for doing so later. People like Frederick Winslow Taylor, the great efficiency expert, and Herbert Hoover, the great engineer, had done so well in the private sector. Bringing some of them into government might allow some of that knowledge to rub off.

Coolidge by contrast believed that the work of life lay in holding back and shutting out. He conducted his official life according to his own version of the doctor’s Hippocratic Oath—first, do no harm. It sounded easy, and many mocked Coolidge as being lazy in office—the same people who made fun of him by calling him Silent Cal. But Coolidge was not silent; he later estimated that each year as president he wrote or spoke 75,000 words, a share of those involving laying out his explanation for vetoing legislation. And Coolidge’s “no harm” rule came out of strength of character. By holding back, Coolidge believed, he sustained stability, so that citizens knew what to expect from their government. If things were going well, he adhered to a stricter version of his rule: change less.

That, in fact, was how Hoover had come to be Coolidge’s man at Commerce in the first place. When President Harding died suddenly one night in August 1923, Coolidge, then vice president, looked around and decided that stability was the most important factor in the Harding-Coolidge transition—important to the people, and impor
tant to the economy. Harding’s last months had been clouded by scandal, and Coolidge wanted no more disruption. So he had kept on Harding’s cabinet, including those he liked—Andy Mellon, at Treasury—as well as others, like Hoover. Coolidge’s transition plan had been a success, at least insofar as the most precise measure of such things, the stock market, was concerned. The Dow Jones Industrial Average had stood at just below 88 the Friday before Harding died, and it was just below 89 a week later.

As a new president, Coolidge had been especially confident because the country had just seen a demonstration of his philosophy at work. During the Harding administration, recession had hit, and the downturn had been hard: one in ten men lost his job. But struggling firms had cut costs by reducing wages, and the country bounced back fast. By 1923, it was hard to find an unemployed man. Left alone, the majority’s impression was, the economy would usually bounce back. That same year, a few months before Harding’s death, Justice George Sutherland had led the Supreme Court in a sweeping rejection of the minimum wage in the District of Columbia. In his opinion—the case was called
Adkins
—Sutherland said that the minimum wage infringed on the individual’s liberty to contract with his employer. The Sutherland opinion fit in with Coolidge’s own general attitude, that the individual should have primacy—“All liberty is individual,” he had said in a speech in 1924.

Coolidge’s personal wager about the 1920s was that the private sector would and should take the lead, and that then the possibilities for progress would be boundless. His reserve did not mean that he was not interested in modern technology. He followed Charles Lindbergh’s flights avidly, and the daughter of one of his closest friends, Dwight Morrow of Wall Street, would eventually marry Lindbergh. Citizens had proven their willingness to test Coolidge’s propositions again by voting overwhelmingly for the refrainer in 1924, despite the fact that he had been vice president to Warren Harding, whose short time in office had been clouded by scandal.

At first, the differences between Coolidge and Hoover were nearly indistinguishable to the public eye. Both men, after all, deeply
respected the Constitution and the gold standard. Both respected the independence of the Supreme Court—like Woodrow Wilson before them. Wilson had said that while it was within the power of government to overwhelm the Court on an issue, by, say, “increasing the number of justices and refusing to confirm any appointments,” presidents recognized that this violated the spirit of the Constitution, and that the public would make “such outrages upon constitutional morality impossible by standing ready to curse them.” Both believed in enterprise. In 1925 Coolidge summed up his philosophy, telling the American Society of Newspaper Editors that “the chief ideal of the American people is idealism.” But he also offered a counterpart to that: “The chief business of the American people is business.” It was the latter line that was remembered, and proved too moderate for some. They shortly altered it to the now better-known phrase “the business of America is business.”

Finally, both men were humble about the position of the federal government relative to business. Compared to the private sector, after all, the federal government was a pygmy. Its size was less than 2 percent of the national economy, smaller even than that of state and city governments. Lawmakers of their generation constantly feared that the fast-growing private sector might further diminish their already questionable relevance. Back in 1910, word of the rise of the skyscraper in New York had panicked congressmen, who promptly zoned height limits for buildings in the District of Columbia, so that no private building could ever overshadow the Capitol.

Both men, too, shared an understanding of traditional economics, with its emphasis on the producer. “Supply creates its own demand,” the classical economist Jean-Baptiste Say had written in France a century earlier, and in the case of many new industries, that seemed to be proving true again. Why focus on Coolidge, or Hoover? had been the attitude of the mid-1920s. The business leaders were the ones who would pull the country forward, and were therefore the ones worth watching.

Most dramatic was Henry Ford, who, the week after Harding’s death, reported he was selling automobiles under a new trade agree
ment to Russia. Twenty years before, Ford had started with just a few employees and $27,000. By constructing the modern assembly line, he was creating modern Detroit and conquering the rest of the country, buying up its own coal and iron mines. Part of his success was due to his religiously plowing back profit into the business, forgoing dividends. In fact, as Benjamin Anderson, the chief economist at Chase Bank, would write later, the first quarter century had offered “case after case of Fords,” all “showing the history of small businesses which, employing three or four laborers, had in relatively short periods of time (fifteen or twenty years) grown into very substantial businesses.” In 1923, Ford plants were already producing 6,000 cars a day, a record.

During the war the government had begun work on a dam and power operation at Muscle Shoals, Alabama—the point being to make ammunition. The war ended before the plant was running, and recently Henry Ford, who had his own political ambitions, had put in a bid to take over Muscle Shoals. Only the private sector, some believed, had the wherewithal to develop America’s most important new industry, and the key to its growth: electric power. Muscle Shoals could be “the Detroit of the South.” Ford had tried to write a contract with the government to run Wilson Dam as a nitrate plant—indeed, Hoover hoped to broker the deal. But Congress had rejected it. Lawmakers like George Norris believed the government should control power.

Another hero on the horizon throughout the decade was Thomas Edison, the man who started the electrification boom. Across the country, people revered him; from time to time Edison would mount a contest to find young men of “all around ability” at his East Orange labs, and hundreds signed up. A young Vermonter named Bill Wilson who sat for and won one contest later recalled that seeing Edison in his lab coat, with the faint scars from a chemical explosion on his cheek, was to see the personification of American genius. In the summer of 1928, Congress would ask Mellon at the Treasury to strike a medal in Edison’s honor. Mellon traveled to Llewellyn Park in New Jersey to give Edison the medal. From the base of a “small and illus
trious company,” Mellon told the crowd in his whispery voice, Edison had delivered what a businessman ought to. Edison had “not only changed the conditions under which men live” but also “helped to bring about a new social order.”