The Great A&P and the Struggle for Small Business in America (22 page)

Huntington Hartford, his sister, and his mother were never involved in running the Great Atlantic & Pacific Tea Company. Years later, Jo and Huntington’s constant need for cash would help speed the company’s decline. But for now, their goings-on provided a ready source of ammunition for the company’s critics. John A. Hartford, whose own marital travails had landed in the press a few years earlier and whose entertainments and travels with Pauline were regularly released to the society pages, may not have been bothered by the lifestyles of his late brother’s widow and children. The opinion of George L. Hartford, a man who avoided flaunting his wealth and who did all he could to keep his name out of the newspaper, was not recorded.

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Even amid the general prosperity of the 1920s, the growth of chain retailing discomfited many Americans. For all its mighty cities, the United States was mainly a rural country: 44 percent of the population lived in places of 2,500 people or fewer in 1930. Many more resided in small towns; the hundredth-largest city in the country, Rockford, Illinois, had only 85,864 inhabitants. Locally owned businesses were the lifeblood of these small communities. Chain stores were often seen as intruders, destroying not only the small retailer but also the local jobber that supplied it, the local stationer that printed its circulars, and the local bank that held its receipts. While there were anti-chain forces in the cities as well, young urban men at least could aspire to the many factory or office jobs being created in a growing economy. In more rural areas, where the agricultural economy was moribund through the 1920s due to falling crop prices, young men without prospects on the farm saw their aspirations to enter business blocked by the giant chains. Their best opportunity, it seemed, was to become a clerk for a company such as A&P, trading dreams of independence and upward mobility for a steady if none-too-generous weekly paycheck from a chain retailer that, it was frequently alleged, paid lower wages than independent grocers.
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As the Great Depression deepened, these resentments only mounted. Lack of alternatives drove even more people to try the grocery trade. Although severe food-price deflation decimated sales, cutting receipts at food stores from $10.9 billion in 1929 to $8.4 billion in 1935, the number of grocery stores rose 15 percent. Between 1930 and 1937, perhaps a quarter million independently owned grocery stores opened their doors. As A&P increased its share of the country’s grocery-store sales from 14.4 percent in 1929 to 16.4 percent in 1933, at the expense of independent grocers, more people than ever before had cause to fear it.
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Public attack on the chains focused on their heavy use of “loss leaders”—products sold at a price that, even if not leading to actual loss, was too low to provide a normal profit. The research director of the Chain Store Research Bureau estimated that the leading chains of all sorts were selling 15 percent of their merchandise without profit in the late 1920s, and the Federal Trade Commission found that “an important aspect of chain-store price policy is the frequent use of ‘leaders’ consisting of specially low selling prices on particular items.” Food chains used loss leaders extensively, but so did the independently owned supermarkets, whose entire strategy depended upon heavy promotion of a few very cheap items. For big stores, offering special sale items at prices that left little or no profit made great sense, as they drew customers who would then buy high-margin merchandise as well. From the viewpoint of mom-and-pop grocers, on the other hand, loss leaders, whether offered by food chains or by supermarkets, were simply unfair, a form of “destructive competition.” The small grocers and their wholesale suppliers had been fighting “below-cost sales” for decades. In 1933, they finally had an opportunity to stamp out the plague.
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FRANKLIN ROOSEVELT

In March 1933, Franklin Roosevelt took office as president of the United States. Chain stores were the least of his worries. America was in its fourth year of the deepest depression in four decades. One worker in four was without a job, the banking system was on the verge of collapse, the farm sector was a disaster. Roosevelt had won election the previous November as the candidate of hope. His defeated Republican predecessor, Herbert Hoover, had offered one program after another to ease the country’s distress, but nothing had brought improvement. With Democratic majorities in both houses of Congress and broad support among a desperate populace, Roosevelt had a commanding political position that freed him to try almost any policy he thought might extricate the country from depression and despair.

His ability to make a connection with average Americans was part of Roosevelt’s genius. The journalist Jonathan Alter put his finger on the matter: “While FDR knew how to say ‘My friends’ in several different languages and appear to mean it in every tongue, Hoover could seem as if he were addressing strangers even in a roomful of friends.” Hoover, one of the most accomplished men ever to occupy the presidency, had spent much of his life running large organizations in and out of government. He knew how to manage bureaucracies, but he had little feel for connecting with people, creating confidence, restoring a sense of possibility. Nor did he fathom how radio, just starting to become an important source of information, was changing the way in which people came to know their leaders. Roosevelt, an aristocratic New Yorker, was far more skilled at communicating with the common man. He understood radio and used it to powerful effect. When he spoke, whether in a formal address to Congress or in one of the series of “fireside chats” that began eight days after his inauguration, average people from Maine to California felt his empathy with their problems and their worries.
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Some of those average people ran grocery stores. Even before Roosevelt took office, they were begging his help to save the small retailer. “I remember in times past when your boy or mine if he could not get a job we could start him in business for a small capital and he could get along fine and be contented, but now under these chain store methods it is different,” wrote Thomas Seamans of Jackson, Michigan. George Rund, owner of Universal Market in Princeton, Indiana, suggested a tax of at least $2,000 on each store over fifty owned by a single chain. F. H. McKay of Greenville, Michigan, wrote approvingly that “Germany locked up its Chain Stores because they considered them a bad thing for the economy.” Mrs. Jennie Applegate, a grocer’s wife from Bound Brook, New Jersey, sent the president a poem in her careful script:

The old home town has changed a lot since I was just a lad.

For in those days the home owned stores were all we ever had.

I remember how the boss could come and meet us at the door.

And he always made us feel at home when we were in his store.
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At the same time, Roosevelt heard from every corner about the struggles of consumers. Before the world war, consumers had rarely identified themselves as such. The consumer movement arose from the long campaign for woman suffrage, which in 1920 won ratification of a constitutional amendment giving women the right to vote. The first books promoting consumers’ interests came in the mid-1920s and the formation of the first national consumer organization, Consumers’ Research, in 1929. Consumer consciousness was in full flower by the time of Roosevelt’s election. Prominent consumer advocates joined his administration, and federal agencies created consumer advisory councils to make sure the interests of the “citizen consumer” were represented. Roosevelt’s appointees never forgot to emphasize the consumer’s importance. The central role of consumer concerns, one New Deal economist asserted, was “a new development in American economic policy—a development which offers tremendous opportunities for social well-being.”
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There is no doubt that consumers were in need of help, for the Depression was devastating living standards. Between 1929, when the stock market crashed, and 1933, Roosevelt’s first year in office, total consumer spending fell by an astonishing 40 percent. Even allowing for a 32 percent drop in the consumer price index, many households’ living conditions deteriorated sharply. Millions lost their homes to foreclosure or turned to charity to survive. Although workers lucky enough to hold on to their jobs saw their buying power surge because wages fell much less than prices, they were nonetheless fearful of the future. Travel fell sharply. Sales of clothing, cars, and radio sets collapsed. People worried first and foremost about keeping food on the table.
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One prominent version of New Deal history depicts the Roosevelt administration as the first pro-consumer government. Many decades after the fact, that depiction served a variety of political purposes, countering claims that the New Deal was too conservative and turning socialist and communist groups, women’s groups, immigrant organizations, and activists of myriad other flavors into important historical actors. The consumerist story is not entirely without foundation: the 1930s saw consumers standing up for themselves as never before. Housewives organized boycotts to force down meat prices in a dozen cities, including a “meat strike” against forty-five hundred butcher shops in New York. Neighborhood committees checked poultry weights and measured the contents of food cans. Women’s clubs and labor unions demanded that government take consumer interests into account in writing laws and regulations. Many of those grassroots activists drew strength from what they imagined to be the strong support of Franklin Roosevelt. “Never has there been such a wave of enthusiasm to do something for the consumer,” insisted
The Nation
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Yet the claim that the New Deal was a pro-consumer program is too simple by half. An important part of Roosevelt’s constituency had a very deep distrust of big business. Groups such as the Farmer-Labor Party in Minnesota, Father Charles Coughlin’s National Union for Social Justice, and Huey Long’s Share Our Wealth campaign were the heirs to the Populist movement of the 1890s. Their members, mainly working-class people and farmers, distrusted the chain stores as their grandfathers had distrusted the railroads, and no talk about efficiency would change their minds. The administration’s own economic experts had no time for these neo-Populists; for all of their kind words about consumers, it was producers who had their attention. They overwhelmingly diagnosed the Depression as the result of excessive competition that was forcing down prices, decimating profits, and causing employers to lay off workers. Stopping deflation became one of the administration’s first economic objectives. Holding up prices is as anticonsumer an activity as one can imagine, but when it came to choosing between aiding business and aiding consumers, there was no contest.
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The scholarly literature on the consumer and the New Deal scarcely makes mention of the Great Atlantic & Pacific. It is a curious omission, for during the presidencies of Franklin Roosevelt and his successor, Harry Truman, the world’s largest retailer was under almost constant government attack. Both administrations, many members of Congress, and Roosevelt supporters in state and local governments all found it opportune to wage war on the Hartfords and their company, regardless of the cost to the consumer.

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The day he took office, Roosevelt shut the nation’s banks. Depositors in those days had no insurance to protect against bank failure, and as they panicked, pulling out deposits and demanding gold in exchange for their currency, they made the banks even weaker. Roosevelt’s “bank holiday” was intended to stop the panic by halting withdrawals until Congress could enact a new banking law. The bank holiday quickly starved the economy of cash. Some employers gave workers scrip in lieu of paychecks. Others issued paychecks that, at least for the moment, no bank could cash. Most retailers muddled through, extending credit so their customers could buy the necessities of life. A&P did not. Hewing to established policy, A&P stores did business in cash only. They offered no credit and refused to accept scrip or to cash checks. Financially, it was a sound decision for the company. Politically, it was a poor way to start a relationship with the new administration in Washington.
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Truth be told, the Hartfords sought no relationship with the new administration in Washington. This was not as remarkable as it sounds. Until the 1930s, most businesses had no involvement with the federal government. The government’s main role in economic regulation concerned transportation, so companies had little reason to spend time and money influencing Washington unless they were seeking higher import tariffs or lower freight rates. In any event, the Hartfords had little interest in politics. John, like most of his friends who sat on the boards of major corporations, was a Republican, but hardly an ardent one. In 1932 he donated $1,000 to William J. Donovan’s unsuccessful campaign for governor of New York, in which Donovan, a Republican, was crushed beneath a Democratic landslide. That same year, Pauline Hartford donated $1,000 to help cover expenses remaining from Hoover’s reelection campaign. John had no known relationships with Calvin Coolidge or Hoover, and he did not seek ties to Franklin Roosevelt. George, following his natural inclinations, avoided all contact with politicians. He would have opposed A&P’s involvement in political affairs even if John had grasped that the relationship between business and government was about to change in a fundamental way.
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That change was codified in two laws enacted in the spring of 1933, during the congressional marathon that became known as Roosevelt’s “Hundred Days.” The Agricultural Adjustment Act was meant to prop up farm commodity prices by paying farmers to take land out of production and to slaughter hogs and cattle. It also required handlers of agricultural commodities to obtain government licenses, making them subject to regulations designed to “eliminate unfair practices” and to speed “restoration of normal economic conditions.” That broad language gave the new Agricultural Adjustment Administration (AAA) enormous power not only over farmers and grain handlers but also over retailers such as A&P that dealt in large volumes of milk, butter, and wheat. A similar new law, the National Industrial Recovery Act, called for “codes of fair competition” governing individual industries. Such codes were to be written by industry groups supervised by the new National Recovery Administration (NRA). The codes were required to address work hours, minimum pay rates, and workers’ right to union representation, and could also regulate other aspects of competition. Once accepted by the government, a code would apply to every company in the industry with the force of federal law. If a company failed to adhere to what was in effect a privately written statute, the U.S. district courts could levy a fine of up to $500 per violation per day and, in some cases, even impose prison terms.
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