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The Myth of the New Deal


A New History of Leviathan: Essays on the Rise of the American Corporate State, E.P Dutton, 1972

Great Depression, labor unrest, massive unemployment, growing consciousness among the working classes, bitter hostility toward the multimillion-dollar corporations, failure of the reigning Republican Administration to quiet the brewing explosion—and then the New Deal. The social revolution, which many expected and others feared, failed to materialize. Why? Was it because the New Deal, in its own special way, was indeed a third American Revolution? From the perspective of the 1970s, with the stark realization that the United States had failed to deal with the race question, or to eradicate poverty, or even to begin to deal with the urban crisis, or to handle the general malaise and cultural poverty, or to adapt itself to the growing realization that revolutions abroad would have to be accepted and dealt with on their own terms, all of these events of the past ten years seemingly provided living evidence that a revolution had not occurred.


The new generation of New Left historians have asserted cogently that the New Deal instituted changes that only buttressed the corporate-capitalist order; that the vaunted Welfare State reforms hardly addressed themselves to the existing social needs of the 1930s, not to speak of working to end poverty, racism, and war. Historians Howard Zinn and Barton J. Bernstein have already written critical essays seeking to evaluate the New Deal from a radical perspective,1 and this essay shall not seek to repeat the critique advanced therein. The essence of their critical view has been best expressed by Bernstein:


The liberal reforms of the New Deal did not transform the American system; they conserved and protected American corporate capitalism, occasionally by absorbing parts of threatening programs. There was no significant redistribution of power in American society, only limited recognition of other organized groups. . . . The New Deal failed to solve the problem of depression, it failed to raise the impoverished, it failed to redistribute income, it failed to extend equality and generally countenanced racial discrimination and segregation.2


Once having presented this argument, however, the radical critic has in effect merely chastised the New Deal for what it failed to achieve. This does not work to answer the counterargument that Franklin D. Roosevelt and the New Dealers wanted more, but were stopped short because of the power of the congressional conservative bloc and other impenetrable obstacles.


It is undeniable that to many of the over-forty generation, Franklin D. Roosevelt was and remains the unassailable hero—the man who used all the powers at his command to ease the plight of the dispossessed, and who introduced dramatic reforms that would soon be accepted by the most staunch Old Guard Republican. That generation remembers the animosity with which many in the business community greeted Roosevelt, and the way in which Roosevelt condemned the forces of organized wealth that were out to destroy him. They did not have the tools of historical perspective to evaluate F.D.R.'s actual performance, or to understand what historian Paul Conkin has noted: that the New Deal policies actually functioned in a probusiness manner. Conkin wrote:


The enemies of the New Deal were wrong. They should have been friends. Security was a prime concern of the insecure thirties. It cut across all classes. Businessmen, by their policies, desperately sought it in lowered corporate debts and tried to get the government to practice the same austerity. Even when ragged and ill-housed, workers opened saving accounts. The New Deal . . . underwrote a vast apparatus of security. But the meager benefits of Social Security were insignificant in comparison to the building system of security for large, established businesses. But like stingy laborers, the frightened businessmen did not use and enjoy this security and thus increase it. The New Deal tried to frame institutions to protect capitalism from major business cycles and began in an unclear sort of way to underwrite continuous economic growth and sustained profits. Although some tax bills were aimed at high profits, there was no attack on fair profits or even on large profits . . . there was no significant leveling by taxes. The proportionate distribution of wealth remained. Because of tax policies, even relief expenditures were disguised subsidies to corporations, since they were in large part paid by future taxes on individual salaries or on consumer goods. Thus, instead of higher wages creating a market, at the short-term expense of profits, the government subsidized the businessman, without taking the cost out of his hide as he expected and feared.3


What Conkin was suggesting is that the anger of some businessmen was misdirected; another example of how members of the governing class can be so shortsighted that they will oppose their own best long-range interests. The confusion of the businessmen had its mirror image in the high regard in which so many members of the underclass held F.D.R. and the New Deal. Roosevelt was able, for a while, to build and maintain the famous New Deal coalition that swept him into office in 1936. White workers from the North, blacks from the urban ghettos, and farmers from the Midwest all responded to the New Deal and claimed it as their own. Explaining this success as a result of the "powers of rhetoric," as did Bernstein, evades the real question. How could rhetoric alone convince so many that their lives had changed, if indeed, life was the same as it had always been? Perhaps reality did change just enough so that the failure of the New Deal to make substantive structural changes remained hidden.


Before we can begin to deal with these questions, it may be wise to start by citing the answer presented to the New Left historians by the dean of American corporate liberalism, Arthur M. Schlesinger, Jr., author in 1948 of the theory of a crucial "vital center" in American politics. Schlesinger has carefully presented his generation's answer to the New Left, and has defended the traditional view that the New Deal was a major watershed in American history.


A young radical told him, Schlesinger wrote, that all F.D.R. did was


"abort the revolution by incremental gestures." At the same time, he dangerously cultivated a mood for charismatic mass policies, dangerously strengthened the Presidency, dangerously concentrated power in the national government. In foreign affairs, he was an imperialist who went to war against Germany and Japan because they were invading markets required by American capitalism.


Claiming that Roosevelt "will survive this assault from the left as he has survived the earlier assault from the right," Schlesinger ended with his own brief estimate of F.D.R.'s policies and times. Roosevelt


led our nation through a crisis of confidence by convincing the American people that they had unsuspected reserves of decency, steadfastness and concern. He defeated the grand ideologists of his age by showing how experiment could overcome dogma, in peace and in war.4


Schlesinger's writings help us to understand how those who only mildly benefited from the New Deal praised it, defended it, and allowed their experience during the 1930s to shape their social and political attitudes for more than a decade. Undoubtedly, many Americans have the same analysis of Social Security as does Schlesinger.


No government bureau ever directly touched the lives of so many millions of Americans—the old, the jobless, the sick, the needy, the blind, the mothers, the children—with so little confusion or complaint. . . . For all the defects of the Act, it still meant a tremendous break with the inhibitions of the past. The federal government was at last charged with the obligation to provide its citizens a measure of protection from the hazards and vicissitudes of life. . . . With the Social Security Act, the constitutional dedication of federal power to the general welfare began a new phase of national history.5


The assumptions behind Schlesinger's evaluation of Social Security are those he revealed years earlier. Writing in his classic The Age of Jackson, Schlesinger noted that "Liberalism in America has been ordinarily the movement of the part of the other sections of society to restrain the power of the business community."6 This statement assumes that a popular movement, opposed by business, continually arises in America to challenge the one-sided power of large corporate business. But new historical research by a generation of revisionists has all but wiped out this assumption. William Appleman Williams, Gabriel Kolko, James Weinstein, and Murray N. Rothbard have argued that liberalism has actually been the ideology of dominant business groups, and that they have in reality favored state intervention to supervise corporate activity. Liberalism changed from the individualism of laissez-faire to the social control of twentieth-century corporate liberalism. Unrestrained ruthless competition from the age of primitive capital accumulation became an anachronism, and the new social and political regulatory measures emanating from the Progressive Era were not so much victories for the people over the interests, as examples of movement for state intervention to supervise corporate activity on behalf of the large corporate interests themselves.7


Just as all historians used to look at the accomplishments of the Progressive Era as antibusiness, equating state regulation with regulation over business, and with the assumption that corporate business opposed the new regulatory acts, so do many historians of the New Deal view the achievements of F.D.R.'s first two terms as a continuation of the Progressive tradition. The New Deal thus becomes the culmination of a "progressive" process that began with the age of Jackson. Once again, it is assumed that the "money changers" whom Roosevelt supposedly drove out of the temple were the New Deal's major opposition, and that government programs were per se progressive and part of a new phase of our history.


This analysis was stated most strongly by Carl N. Degler, when he referred to the New Deal as the "Third American Revolution." Seeing in the various New Deal measures "a new conception of the good society," Degler claimed pathbreaking significance once the "nation at large accepted the government as a permanent influence in the economy." Is such an influence sufficient to describe the New Deal as revolutionary?


To Degler it was. Like Schlesinger, historian Degler saw the Social Security Act as revolutionary because "it brought government into the lives of people as nothing had since the draft and the income tax." Yet another proof of revolutionary effect, even more important, was the "alteration in the position and power of labor." Noting that the decline in union growth had come to an end, and that the new spurt in unionism was that of the industrial unionism of the CIO, Degler argued that it was Robert F. Wagner's National Labor Relations Act that "threw the enormous prestige and power of the government behind the drive for organizing workers." The "placing of the government ot the side of unionization," Degler wrote, "was of central importance in the success of many an organizational drive of the CIO, notably those against Ford and Little Steel."


In summation, the Wagner Act was depicted as revolutionary because, prior to the Act, no federal law prevented employers from discharging workers for exercising their rights or from refusing to bargain with a labor union, whereas after the Act was passed, workers had new rights against their employers. The result, according to Degler, was a truly pluralistic structure to American society. "Big Labor now took its place beside Big Business and Government to complete a triumvirate of economic power." The Wagner Act particularly revealed that:


the government served notice that it would actively participate in securing the unionization of the American workers; the state was no longer to be an impartial policeman merely keeping order; it now declared for the side of labor.


Although the New Deal used traditional rhetoric, Degler asserted, "in actuality it was a revolutionary response to a revolutionary situation."8


This estimate was upheld by even such a critical historian as William E. Leuchtenburg. Although he modified Degler's analysis a degree, by noting that the Wagner Act was partially motivated by a desire to "contain 'unbalanced and radical' labor groups," Leuchtenburg agreed that the New Deal was a "radically new departure." But to Leuchtenburg, the New Deal had major shortcomings. It failed to demonstrate "that it could achieve prosperity in peacetime," perhaps its greatest failure. The fact that the unemployed disappeared only with war production meant to Leuchtenburg that the New Deal was only "a halfway revolution; it swelled the ranks of the bourgeoisie but left many Americans—sharecroppers, slum dwellers, most Negroes—outside of the new equilibrium." But, argued Leuchtenburg, it was a revolution anyway. Here, we might raise the question of what type of "revolution" is it that fails to deal with the most basic problems produced by the old order, especially when an end to unemployment was the key task confronting the first New Deal, and while there were still by Leuchtenburg's count six million unemployed "as late as 1941."9


The myth of a New Deal revolution, or a new departure, or a basic watershed, call it what you will, dies hard. New Left critics have correctly emphasized the New Deal's failures to destroy some part of the myth. But their critique, valuable as it has been, has failed to take up a more essential question. How does one confront the truth that the New Deal obviously did move in new directions, in some ways quite dramatically, and still keep the old order intact? And how is it that, although the old order remained basically untouched and even preserved, Roosevelt and the New Dealers were able to win the everlasting gratitude of the dispossessed and the white working class?


Rather than discuss all of the policies of the New Deal, we can begin to cope with this question by a more thorough look at a few key areas, particularly the National Recovery Administration (NRA), the birth of the Congress of Industrial Organizations (CIO) and the origins of the Wagner or National Labor Relations Act, and the passage of the Social Security Act. These three areas have been pointed to as evidence for the pathbreaking if not revolutionary character of the New Deal. Close attention to them should therefore prove most helpful in arriving at a more historically accurate assessment of what the New Deal wrought.


Most historians have discussed the Social Security Act in terms of what it offered American citizens for the first time, not in terms of how and why it was passed. Fortunately, sociologist G. William Domhoff has enabled us to take a new look at what lay behind some of the major New Deal reforms.10 Domhoff, following the lead supplied by the New Left revisionist historians, put his emphasis on the sponsorship of major reforms by leading moderate big businessmen and liberal-minded lawyers from large corporate enterprises. Working through reform bodies such as the American Association for Labor Legislation (AALL) and the Fraternal Order of Eagles, model bills for social insurance had been proposed and discussed in the United States as early as 1910-15.


These proposals had come to naught. But when the Great Depression hit, the need for reform was clear to all. The first unemployment bill in the United States passed the Wisconsin State Legislature in 1932, and it had evolved from a bill drafted by John R. Commons for the AALL in 1921. In the discussions in Washington, which eventually led to the Social Security Act, AALL members taking part included Paul A. Raushenbush and his wife Elizabeth Brandeis, Henry Dennison, and three New Dealers trained in corporate law, Charles W. Wyzanski, Jr., Thomas H. Eliot, and Thomas G. Corcoran. Wyzanski was graduated from Harvard and Exeter and was with the Boston law firm Ropes, Grey, Boyden and Perkins. Eliot was graduated from Brown, Nichols preparatory school, and Harvard College, and was a grandson of a former president of Harvard. Corcoran was graduated from Harvard Law School and was with the New York corporate law firm Cotton and Franklin.


In June, 1934, Roosevelt appointed a Committee on Economic Security, headed by Secretary of Labor Frances Perkins. It included Treasury Secretary Henry Morgenthau, Jr., Secretary of Agriculture Henry A. Wallace, Attorney General Homer Cummings, and F.D.R.'s chief aide, Harry Hopkins. They met for the purpose of working on a comprehensive social security and old-age pensions bill. Like any other committee, they depended on advisors, and among their chief aides were men identified closely with the work of the AALL. But the basic outlines of the plan were put forth by F.D.R. himself in his June 6, 1934, message to Congress. The President called for federal-state cooperation, a contributory plan rather than a government subsidy through a tax increase, and he stressed the need for employment stabilization.


The Committee on Economic Security got to work after F.D.R.'s speech, and met eleven times. On January 15, 1935 they presented the President with their report. Two days later, Roosevelt sent his own report to Congress. Roosevelt's proposal was essentially the one prepared by corporate lawyers like Thomas Eliot, who played the major role in drafting the "bill to carry out the committee's recommendations."11 Yet large-scale opposition to the proposed bill came immediately from other business circles, especially from the National Association of Manufacturers. What is important is that liberal historians have traditionally '"equated" the NAM and small-business opposition to social reform legislation as business-community opposition.' They have depicted an all-out fight between the forces of big business versus the people; the former opposing and the latter supporting reform. In his book Schlesinger wrote as follows:


While the friends of social security were arguing out the details of the program, other Americans were regarding the whole idea with consternation, if not with horror. Organized business had long warned against such pernicious notions. "Unemployment insurance cannot be placed on a sound financial basis," said the National Industrial Conference Board; it will facilitate "ultimate socialist control of life and industry," said the National Association of Manufacturers. . . . One after another, business leaders appeared before House and Senate Committees to invest such dismal prophecies with what remained of their authority.


Republicans in the House faithfully reflected the business position.12


Of significance are Schlesinger's last words, "the business position." This telling phrase reveals the ideological mask on reality that helps to hide the manner in which the corporate state maintains its hegemony over the country. Schlesinger not only overstated big-business opposition; he did not account for the support given Social Security by moderate yet powerful representatives of the large-corporation community. Particularly important is the backing given the Act by the Business Advisory Council, which formed a committee on Social Security headed by Gerard Swope, president of General Electric, Walter Teagle of Standard Oil, Morris Leeds of the AALL and Robert Elbert. These men were major corporate leaders, or as Domhoff put it, "some of the most powerful bankers and industrialists in the country."


These business leaders not only supported the proposed Social Security Act, they visited F.D.R. at the White House to counter the attack on Social Security coming from the NAM and the Chamber of Commerce. The BAC group visiting Roosevelt included:


Henry I. Harriman, retiring president of the United States Chamber of Commerce

H. P. Kendall, Massachusetts business leader

Winthrop W. Aldrich, Chase National Bank

James Rand, president, Remington Rand

W. A. Harriman, Brown Brothers, Harriman

E. T. Stannard, Kennecott Copper Corporation

F. B. Dabis, U.S. Rubber Company

Delancy Kountze, Devote and Reynolds

Charles A. Cannon, Cannon Towels Co.

R. R. Deupree, Procter & Gamble

Gano Dunn, Grace National Bank

Lincoln Filene, William Filene's Sons

Lew Hahn, National Retail Dry Goods

William Julian, Queen City Trust Company

Morris Leeds, Leeds and Northrup

Robert Lund, Lambert Pharmical Company

A. P. Greensfelder, contractor

George H. Mead, Mead Corporation

Sidney Weinberg, Goldman, Sachs

H. H. Heimann, credit association13


Despite the support given the Act by these key corporate figures, the original bill was to be watered down by the Congress. This was because many congressmen and senators reflected their local constituencies, which included local antilabor and small-town mentality NAM business-types. Congress, in other words, did not have the political sophistication of the corporate liberals. Once the bill got to Congress, the setting of minimum state standards in old-age assistance was discarded, as was the concept that states had to select administering personnel on a merit basis. Workers were to contribute half of the old-age pension funds, while employers paid unemployment compensation. But the large corporations would still be able to pass the costs of their contribution to the consumer. Finally, the rich were not to be taxed to help pay for the program.


As Domhoff showed, the Social Security Act was the measured response of the moderate members of the power elite to the discontent of the thirties. These moderates took their program, based on models introduced by various corporate policy-making bodies during the previous twenty years, to the Congress. Congress, however, listened more to the NAM-type businessmen. The result was a legislative compromise between the original moderate and conservative position on the Act. Radicals among labor who wanted a comprehensive social-insurance program remained unsatisfied. It was their pressure, however, that induced the moderates to present their plan to Congress. The demands of the poor and the working class provided the steam that finally brought the modified Act to fruition.


The result, as Domhoff wrote:


from the point of view of the power elite was a re-stabilization of the system. It put a floor under consumer demand, raised people's expectations for the future and directed political energies back into conventional channels. The difference between what could be and what is remained very, very large for the poor, the sick, and the aged. The wealth distribution did not change, decision-making power remained in the hands of upper-class leaders, and the basic principles that encased the conflict were set forth by moderate members of the power elite.


Social Security may have been a symbolic measure of the new Welfare State. But, to the corporate liberals in the governing class, it served as the type of legislation that eased tension, created stability, and prevented or broke any movements for radical structural change. Hence, it served an essentially conservative purpose because it helped maintain the existing system of production and distribution.


The pattern of corporate support to New Deal programs is even more vivid when we consider the first great program initiated by the New Deal to produce recovery, the National Recovery Administration. NRA arose from a background of collectivist plans such as the one proposed in 1931 by Gerard Swope, president of General Electric. Presented to a conference of the National Electrical Manufacturers Association, the plan, as Murray N. Rothbard has described it, "amounted to a call for compulsory cartelization of American business—an imitation of fascism and an anticipation of the NRA."14

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