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Positive Business Responses to the New Deal: The Roots of the Committee for Economic Development, 1933–1942

Published online by Cambridge University Press:  11 June 2012

Robert M. Collins
Robert M. Collins
Affiliation:
Assistant Professor of History, North Carolina State University
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Abstract

The bitter opposition of businessmen to the New Deal in its early stages is well known. Not so well known, however, are the efforts of a few business leaders to maintain constructive communication with the President and his advisers. Professor Collins traces these efforts, from the early stages during which both groups labored in mutual distrust, through the remarkable transformation in which such strong business personalities as Beardsley Ruml, William Benton, and Paul Hoffman helped persuade a deeply conservative Franklin D. Roosevelt to adopt compensatory deficit spending as a means to recovery. Finally, he shows that World War II marked not the end but a continuation of these positive efforts by businessmen to adapt to the new philosophy, and led directly to the founding of the Committee for Economic Development.

Type
Research Article
Information
Business History Review , Volume 52 , Issue 3 , Autumn 1978 , pp. 369 - 391
Copyright
Copyright © The President and Fellows of Harvard College 1978

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References

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8 Roper to Harold C. Smith, June 1, 1934, in 94765, Commerce Files; “Memorandum In Re: Services of Business Advisory and Planning Council, August 9, 1934” in OF 3-Q, Roosevelt MSS, FDRL. The over-representation of big business in the BAC is obvious from a perusal of the membership lists provided in Roper, Fifty Years, 404–407; and the 1944 BAC Membership Booklet in Box 110, Harry Hopkins MSS, FDRL.

9 Roper, “Government Getting Closer to Business,” New York Times, February 3, 1935, IV, 10; Roper to Frank C. Walker, May 7, 1934, in 94765, Commerce Files.

10 New York Times, March 17, 1934; BAC to Roper, March 6, 1934, in 94765, Commerce Files. For complaints regarding other New Deal measures, see the Council's reports on the Wagner Act (April 10, 1935), the Banking Act of 1935 (April 29, 1935), and the administration's tax proposals (August 13, 1935), all in OF 3-Q, Roosevelt MSS.

11 New York Times, May 3, 1935; May 4, 1935; FDR's Press Conference of May 3, 1935, in Complete Presidential Press Conferences of Franklin D. Roosevelt (New York, 1972), V, 262–267.

12 The reports are in OF 3-Q, Roosevelt MSS. See also New York Times, May 12, 1935; June 29, 1935; Washington Evening Star, May 4, 1935; May 5, 1935.

13 New York Times, May 24, 1935; June 27, 1935; June 29, 1935; July 4, 1935; July 11, 1935; August 8, 1935; “Advisors' Problem,” Business Week, July 6, 1935, 29; Roper to BAC members, July 5, 1935, OF 3-Q, Roosevelt MSS.

14 Regarding general criticism, see Robert E. Wood to Marvin McIntyre, July 18, 1935, and August 8, 1935, in PPF 1365; Wood to Roper, January 3, 1938, OF 3-Q; Fred Kent to FDR, December 10, 1937, PPF 744, all in Roosevelt MSS; Wood to Hopkins, April 29, 1939, Box 100, Hopkins MSS; New York Times, January 24, 1938.

15 “Report of the Monetary Committee of the BAC, as Approved April 8, 1937.” See also W. A. Harriman to Roper, May 20, 1937; and Gerard Swope to Harriman, May 6, 1937, all in OF 3-Q, Roosevelt MSS.

16 Press statement, W. A. Harriman, January 19, 1938, Box 110, Hookins MSS. See also Harriman to Roper, November 8, 1937, Box 22, Ralph Flanders MSS, Syracuse University.

17 New York Times, December 2, 1937.

18 Walter White to Marvin McIntyre, February 26, 1938; McIntyre to White, April 5, 1938, both in OF 3-Q, Roosevelt MSS.

19 Harriman to FDR, April 20, 1938, OF 3-Q, Roosevelt MSS. See also Turner Catledge's report in the New York Times, May 8, 1938.

20 New York Times, June 2, 1938; June 3, 1938.

21 FDR to Lincoln Filene, March 11, 1936, PPF 3364, Roosevelt MSS.

22 Kent to FDR, December 10, 1937; FDR to Kent, April 19, 1938, both in PPF 744, Roosevelt MSS.

23 Folsom, Marion, “Millions of Workers Still Lack Adequate Benefits,” in Walton, Clarence, ed., Business and Social Progress: Views of Two Generations of Executives (New York, 1970), 98Google Scholar; Folsom Memoir (Social Security Project), Oral History Collection, Columbia University (hereinafter COHC); BAC, “Report of Committee on Social Legislation regarding Old Age Security Sections of Bill H.R. 7260, April 30, 1935,” OF 3-Q, Roosevelt MSS; Altmeyer, Arthur, The Formative Years of Social Security (Madison, Wis., 1966), 33Google Scholar; McKinley, Charles and Frase, Robert, Launching Social Security: A Capture-and-Record Account, 1935–1937 (Madison, Wis., 1970), 490.Google Scholar

24 Swope to FDR, August 16, 1938, PPF 2943, Roosevelt MSS. See also Swope's radio address on economic security legislation, March 21, 1935, ibid..

25 See, for example, Harriman's statement of January 19, 1938; Reports of the Committee on Industrial Relations, BAC, April 8, 1937, and January 20, 1938; and the BAC Resolution on Reciprocal Trade Agreements, February, 1938, all in OF 3-Q, Roosevelt MSS.

26 “A National Economic Council” in Program, Third General Meeting, BAC, March 5, 1934, in 94765, Commerce Files.

27 “Planning,” ibid. See also “List of Agenda Topics for Commerce Advisory Committee, Suggested at Group Meeting, June 4, 1933,” ibid.; Leeds to Dennison, June 21, 1934; and Ralph Flanders to Dennison, June 22, 1934, both in Box 25, Flanders MSS.

28 “BAC Interim Report of the Committee on Business Legislation, January 6, 1938,” Box 50, Flanders MSS. See also Hawley, Problem of Monopoly, 164–165, 396–397; New York Times, July 13, 1933; July 1, 1935; December 5, 1935; the BAC resolutions of January 17 and March 13, 1935, regarding NRA renewal; George Sloan to Roper, March 5, 1937; Roper to FDR, June 10, 1935, all in OF 3-Q, Roosevelt MSS; Fred Kent to FDR, May 2, 1938, PPF 774, Roosevelt MSS.

29 “Experience with the CED,” speech of July 21, 1948, Box 134, Flanders MSS. As Wetmore Hodges observed, “the greatest value in the Council lies in building up a continuity of daily relationships.” Hodges to Marvin McIntyre, December 10, 1935, OF 3083, Roosevelt MSS.

30 Statement to the BAC, November 29, 1936, in 94765, Commerce Files.

31 Flanders to Leeds, May 19, 1938, Box 56, Flanders MSS.

32 Flanders to Leeds, March 6, 1937, Box 32, ibid..

33 “Autobiographical Sketch” (late 1945 or early 1946), Box 129, ibid..

34 Dennison's views are found in Bakeless, John, ed., Report of the Round Tables and General Conferences at the Twelfth Session, Institute of Politics, Williams College (New Haven, 1932), 62–68, 72–74Google Scholar; and “Suggestions for a Popular Presentation of Planning,” Box 25, Flanders MSS. Flanders's outlook is found in “Autobiographical Sketch,” Box 129, ibid. See also footnotes 26 and 27 above.

35 Flanders, , “Business Looks at the N.R.A.,” Atlantic Monthly, November, 1933, 634.Google Scholar

36 For correspondence with various experts, see the Leeds file, Box 32; Leeds file, Box 56; and Dennison file, Box 25, all in Flanders MSS. Regarding Galbraith's role, see Galbraith, John Kenneth, “How Keynes Came to America,” in Economics, Peace and Laughter (Boston, 1971), 51–52Google Scholar; Flanders to Dennison, et al, June 8, 1937, Box 32; and Galbraith to Dennison, June 30, 1937, Box 27, Flanders MSS.

37 Dennison, , et al. Toward Full Employment (New York, 1938), 184–198, 287–297.Google Scholar

38 Ibid., 60–62.

39 Ibid., 18–30.

40 Ibid., 26–27, 60–62.

41 Ibid., 31–51, 61, 120–133.

42 Flanders to Will Clayton, July 27, 1937, Box 51, Flanders MSS. See also Flanders to Alf Landon, May 31, 1938, Box 55, ibid..

43 Flanders to Virgil Jordan, September 16, 1936, Box 35; Leeds to Flanders, February 7, 1938, Box 56; Leeds to Dennison and Flanders, May 16, 1938, Box 56; Flanders to Leeds, December 31, 1938, Box 56, all in Flanders MSS.

44 Frank to Leeds, May 6, 1938, Box 56; Eccles to Leeds, May 26, 1937, Box 32; Ecoles to Leeds, January 17, 1939, Box 56, all in Flanders MSS; Wallace to FDR, July 14, 1937, OF 79 (Misc.), Roosevelt MSS. See also FDR to Hopkins, August 5, 1937; and Aubrey Williams to FDR, August 10, 1937, ibid..

45 Flanders to Leeds, April 21, 1938, Box 56, Flanders MSS. See also Leeds to Flanders, April 29, 1938, ibid..

46 Leeds to Filene, November 2, 1938, ibid..

47 Leeds to Filene and Flanders, December 22, 1938, ibid..

48 Teagle to Leeds, September 1, 1937, Box 32, ibid..

49 “The First Fortune Round Table: The Effects of Government Spending upon Private Enterprise,” Fortune, March, 1939, 60, 118, 120, 123. See also J. David Stern to FDR, November 13, 1937, PPF 1039, Roosevelt MSS; and Robert Wood to FDR, May 12, 1939, Box 100, Hopkins MSS.

50 Unless otherwise noted, the sketch of Ruml that follows is based upon: Garnett, E. B., “Beardsley Ruml Has Never Worked Except with His Mind,” Kansas City Star, December 5, 1948, C, 19–20Google Scholar; Current Biography Yearbook, 1943 (New York, 1944), 647–650Google Scholar; Grattan, C. Hartley, “Beardsley Ruml and His Ideas,” Harpers, May 1952, 78–88Google Scholar; “Beardsley Ruml,” Fortune, March 1945, 135–138, 170–180; “Ruml,” Life, April 12, 1943, 35–38; Johnston, Alva, “The National Idea Man,” New Yorker, February 10, 1945, 28–35Google Scholar; February 17, 1945, 26–34; and February 24, 1945, 30–39.

51 Brownlow to C. Hartley Grattan, May 13, 1952, Series I, Box 1, Beardsley Ruml MSS, University of Chicago.

52 Karl, Barry, Charles E. Merriam and the Study of Politics (Chicago, 1974), 159.Google Scholar

53 Ruml, “The Position of the Social Sciences” (edited in 1956, apparently written at some earlier date) in Series II, Box 9, Ruml MSS; The Laura Spelman Rockefeller Memorial: Final Report, esp. 10–17; “Memorial Policy in Social Science; Extracts from Various Memoranda and Dockets”; untitled personal memorandum, dated 1929, all in Series I, Box 5, ibid.; Ruml, “Recent Trends in Social Science” (December 17, 1929), Series II, Box 1, ibid. Ruml's important role in the development of the social sciences in America is discussed in Karl, Merriam, 132–139, 228–229.

54 Karl, Barry, Executive Reorganization and Reform in the New Deal (Cambridge, Mass., 1963), 113–123.Google Scholar

55 Ruml to Teodoro Moscoso, Jr., April 3, 1950, Series I, Box 5, Ruml MSS.

56 Ruml, “Business Outlook, October 28, 1937,” Series II, Box 1, ibid..

57 Italics mine. Untitled memorandum, February 5, 1938, ibid..

58 Tugwell, Rexford, The Brains Trust (New York, 1968), 208Google Scholar; Tugwell to FDR, August 26, 1937, PPF 564; Morris Cooke to McIntyre, January 13, 1938, OF 177, both in Roosevelt MSS; Ickes, Harold, The Secret Diary of Harold L. Ickes: The inside Struggle, 1936–1939 (New York, 1954), 114–115Google Scholar; “Memorandum of E. N. Conversation with Leon Henderson for B. R. Memoirs,” Series I, Box 2, Ruml MSS.

59 Leon Henderson to Hopkins, October 12, 1937, and March 23, 1938, Box 54, Hopkins MSS; Henderson, “I Came to Know F.D.R. First …,” Memorandum, July 28, 1948, File IV-A-4, Box 6, Papers of the Roosevelt Memorial Foundation; Aubrey Williams to Hopkins, n.d. (December, 1937 or early 1938), Box 100, Hopkins MSS; Jonathan Grossman, “The Budget and the Bonus Fight” (unpublished manuscript, August 1946), Box 392, Henry Morgenthau, Jr., MSS, FDRL; Paul Appleby Memoir, COHC.

60 This account of the spending decision is based upon: “Memorandum of E. N. Conversation with Leon Henderson for B. R. Memoirs,” Series I, Box 2; Ruml to Jacob Viner, February 25, 1958, Series I, Box 4; Ruml to Arthur Burns, February 25, 1958, ibid., all in Ruml MSS; “Leon Henderson in the Lyons Den” (August 13, 1943), Box 36, Leon Henderson MSS, FDRL; Henderson to Hopkins, November 9, 1942, Box 97, Hopkins MSS; Eccles, Marriner, Beckoning Frontiers (New York, 1951), 311Google Scholar; Stein, Herbert, The Fiscal Revolution in America (Chicago, 1969), 109–114.Google Scholar

61 Ruml, “Warm Springs Memorandum, April 1, 1938,” Series II, Box 1, Ruml MSS. See also the “Miami Memorandum, April 6, 1938,” ibid..

62 Henry Wallace's observation, quoted in Morgenthau Diary, Book 118, 176, Morgenthau MSS.

63 Samuel Rosenman, comp., The Public Papers and Addresses of Franklin D. Roosevelt, (New York, 1938–1950), VII, 243–245.Google Scholar

64 Leon Henderson to Ruml, November 1, 1946, Series I, Box 3, Ruml MSS.

65 Ruml, “The Retailer's Interest in National Fiscal Policy” (1939), Box 4, Aubrey Williams MSS, FDRL; Ruml, , “The Business Man's Interest in National Fiscal Policy,” Advanced Management, IV (Fall 1939), 11–12Google Scholar; Ruml, “Compensatory Fiscal Policy” (2nd revised version, December 18, 1938), Series II, Box 1, Ruml MSS (the first draft of this memo was given to both Hopkins and Williams).

66 Hyman, Sidney, The Lives of William Benton (Chicago, 1969).Google Scholar

67 Benton to Donald David, December 24, 1957, William Benton MSS, privately held, New York (hereinafter Benton MSS, NYC).

68 Benton, “Statement of Historical Background of the CED, October 26, 1943,” Reel 32, CED Archives, Washington, D.C.

69 Benton to Ed Noble, October 24, 1939; Willard Thorp to Benton, November 16, 1939, both in 102611, Commerce Files.

70 Benton, “Statement of Historical Background of the CED, October 26, 1943,” Reel 32, CED Archives.

71 Harold Lasswell, “American Policy Commission Memo,” June 3, 1941, Marion Folsom MSS, University of Rochester. See also memo, Lasswell to Hutchins, May 12, 1941, Box 22; Benton to Hoffman, March 24, 1941, and May 7, 1941, Box 20, all in William Benton MSS, University of Chicago (hereinafter Benton MSS, Chicago).

72 Benton to Francis, October 30, 1941; Benton to Hutchins, November 17, 1941, both in Box 28; Benton to James Young, January 14, 1942, Box 32; Benton to Ruml, January 28, 1942, Box 30, all in Benton MSS (Chicago).

73 Folsom Memoir (Eisenhower Project); Folsom Memoir (Social Security Project), both in COHC; Walter White to Thomas Holden, January 27, 1941, Folsom MSS.

74 Minutes, General Council Meeting, BAC, November 15–16, 1941, Folsom MSS.

75 “Remarks of Jesse Jones and R. R. Deupree, BAC, January 30, 1942,” Folsom MSS. See also Folsom, “Postwar Economy: Pundit Club, December 2, 1941,” ibid..

76 Jones's speech, CED Meeting, April 14, 1943, Box 226; Jones to S. Clay Williams, June 25, 1942, Box 172, both in Jesse Jones MSS, Library of Congress. Jones's role as the New Deal's arch conservative is examined in Fenno, Richard Jr., “President-Cabinet Relations: A Pattern and a Case Study,” American Political Science Review, LII, (June, 1958), 388–405.CrossRefGoogle Scholar

77 Carroll Wilson, “Business Post-War Planning,” Folsom MSS.

78 George Sloan to Walter White, February 4. 1942; Walter White to Thomas Holden, February 3, 1942; Bert White to Folsom, February 4, 1942, and February 7, 1942; Walter White to Folsom, February 19, 1942, all in Folsom MSS.

79 “Report of the Committee on Economic Policy …, Approved April 9, 1942”; Folsom to Walter White, March 26, 1942, both in Folsom MSS; “Formation of the Institute of Business Enterprise,” Drawer 81 (yellow — storage), National Association of Manufacturers Papers, Eleutherian Mills Historical Library, Wilmington, Delaware.

80 Benton to Folsom, April 30, 1942, Benton MSS (NYC). See also Benton to Folsom, May 21, 1942, ibid.; and the Folsom Memoir (Eisenhower Project), COHC.

81 Benton, “Statement of Historical Background of the CED, October 26, 1943,” Reel 32, CED Archives.

82 Paul Hoffman, Address to CED Trustees, May 11, 1949, Box 102, Flanders MSS.

83 CED, Executive Committee Minutes, February 8, 1943, Folsom MSS. On Jones's selection of the trustees, see Schriftgiesser, Business Comes of Age, 24–25.

84 Eighteen trustees constituted the original board but two of these were replaced in December 1942, making a total of twenty who saw service in 1942. On the BAC-CED connection, see also Flanders to Lucien Warner, January 19, 1943, Box 50, Benton MSS (Chicago).

85 Indeed, the ideology of the CED was strikingly similar to the techno-corporatist for mulations of the National Civic Federation during the Progressive era and of Herbert Hoover and the advocates of an associative state during the 1920s. This continuity was first brought to my attention by Ellis Hawley. See, for example, his “Techno-Corporatist Formulas in the Liberal State, 1920–1960: A Neglected Aspect of America's Search for a New Order,” unpublished paper; Weinstein, James, The Corporate Ideal in the Liberal State (Boston, 1969)Google Scholar; Hawley, , “Herbert Hoover, the Commerce Secretariat, and the Vision of an Associative State,” Journal of American History, LXI, (June, 1974), 116–140CrossRefGoogle Scholar; Fusfeld, Daniel, “Rise of the Corporate State in America,” Journal of Economic Issues, VI, (March, 1972), 1–22.CrossRefGoogle Scholar

86 English socialist Harold Laski, after debating with Benton and Eric Johnston, observed that compared to these two exemplars of business liberalism, Churchill was a left-wing radical. Hyman, William Benton, 282.

87 Benton, , “The Economics of a Free Society: A Declaration of American Economic Policy,” Fortune, October 1943, 162.Google Scholar This article was in reality a declaration of principles for the CED; it was the product not so much of one man, but rather (as a result of extensive consultation and redrafting) of the CED's leadership as a whole. For similar sentiments, see also Benton to James Meil, August 2, 1943, Box 52, Benton MSS (Chicago).

88 “CED, Joint Meeting of the Research Committee and Research Advisory Board, April 7–8, 1945” Box 131, Flanders MSS. See also Benton to J. C Hormel, June 1, 1945, Box 52, Benton MSS (Chicago); Robert Calkins to Robert Brady, December 27, 1943, Box 52, ibid.; Gardner Means to Brady, January 8, 1944, Box 51, ibid..

89 For examples of this tendency, see Krooss, Herman, Executive Opinion: What Business Leaders Said and Thought on Economic Issues, 1920's–1960's (Garden City, N.Y., 1970), 257Google Scholar; and Heilbroner, Robert, “The View from the Top: Reflections on a Changing Business Ideology,” in Cheit, Earl, ed., The Business Establishment (New York, 1964), 32.Google Scholar

90 See, for example, Hawley, Problem of Monopoly; Romasco, Albert, The Poverty of Abundance (New York, 1965)Google Scholar; Karl, Executive Reorganization; Degler, Carl, “The Ordeal of Herbert Hoover,” Yale Review, LII, (Summer, 1963), 563–583Google Scholar; and Himmelberg, Robert, The Origins of the National Recovery Administration: Business, Government, and the Trade Association Issue, 1921–1933 (New York, 1976).Google Scholar