Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt (70 page)

Further complicating the passage of Roosevelt’s bill were competing ideas percolating through Congress. The members of the pertinent committees in the Senate and House were barraged with opinions, advice, promises, and threats from lobbyists and principals of the securities industry. Moreover, after all the new authority Congress had given the president thus far, many senior members of the legislature felt they had to draw the line somewhere. Moley, who tried to push the administration’s bill forward, described the experience as “a tortuous dance on the eggs of congressional prerogative.”

The dancing took two months, and it ended only when Roosevelt and the congressional leaders decided to leave a large part of securities reform until later. But enough of Roosevelt’s original design informed the Securities Act of 1933 that the president was able to say, on signing: “This measure at last translates some elementary standards of right and wrong into law.” The new act required the registration of securities issues with the Federal Trade Commission—a responsibility later shifted to the Securities Exchange Commission—and the filing of basic information about the issuing corporation. Roosevelt acknowledged that the act alone wouldn’t guarantee a revival of the stock market, let alone the larger economy. But a continued absence of the standards the act established would preclude a revival. “Without such an ethical foundation, economic well-being cannot be achieved.”

T
HE CREATION OF
the Tennessee Valley Authority was, in its own way, just as opportunistic as the passage of the Securities Act, and it took its inspiration from a progressive as old and battle-hardened as Samuel Untermyer. Republican George Norris of Nebraska had applauded Theodore Roosevelt’s smiting of the trusts and especially his conservation of natural resources, but he refused to follow TR out of the party in 1912. He liked Woodrow Wilson domestically but resisted American intervention in the World War and couldn’t abide the League of Nations. As a Republican, Norris benefited from the GOP hegemony of the 1920s, but as a progressive he chafed at the direction the leadership was taking the party. He backed Al Smith in 1928 and Franklin Roosevelt in 1932. Meanwhile he campaigned quixotically for the abolition of the electoral college and more successfully for the conversion of Nebraska’s bicameral legislature to a single-house model (a transformation that would come to pass in 1934).

Norris might never have adopted the Tennessee Valley as a cause had Henry Ford not tried to build an empire there in the 1920s. Amid the same rush to privatize wartime plants and facilities that yielded the Teapot Dome scandal, the Harding administration advertised to sell a federal munitions factory and hydropower plant at Muscle Shoals, Alabama. The raw material for the explosives was nitrates, which might as readily be made into fertilizer; the power plant could be used to encourage additional industrial development. Ford offered to take control of the Muscle Shoals facility on a lease lasting till the end of the twentieth century.

Norris distrusted Ford and disliked the idea of handing over to private enterprise what had been built at public expense. As chairman of the Senate agriculture committee he launched an investigation that concluded, in Norris’s sarcastic words, that Ford’s bid for Muscle Shoals would be “the most wonderful real estate speculation since Adam and Eve lost title to the Garden of Eden.” He visited Muscle Shoals and, like Roosevelt in rural Georgia, came to know and respect the poor folks of the Tennessee Valley. He envisioned what the Tennessee Valley could become under the sympathetic guidance of a progressive presidential administration.

When that administration arrived, Norris didn’t have to be asked twice to put together a program. His vision for what would be called the Tennessee Valley Authority encompassed flood prevention, erosion control, irrigation, reforestation, hydroelectric generation, the retirement of marginal agricultural lands, the encouragement of industry, and the diversification of employment. Nothing so ambitious had ever been undertaken by the federal government, and no one knew just which constitutional principles should guide the drafting of the TVA charter. Norris asked Roosevelt, over a working White House dinner, “What are you going to say when they ask you the political philosophy behind the TVA?” Roosevelt responded with a laugh: “I’ll tell them it’s neither fish nor fowl, but whatever it is, it will taste awfully good to the people of the Tennessee Valley.”

The president monitored the drafting closely, and when differing versions passed by the House and Senate went to conference, he guided the hands of the reconcilers, indicating point by point which parts of each version he preferred. The private power companies that felt threatened by the public competition of the TVA labored mightily to handicap the authority by one restriction and then another; they fought especially to keep the TVA out of the business of transmitting electrical power. The authority might build dams and install generators, the companies’ directors conceded grudgingly, but it should sell the electricity to the private sector at the powerhouse door. Only by this means would the public benefit from the competition of the capitalist marketplace. Norris led the struggle against the restrictions on TVA transmission, and Roosevelt backed him, reasoning that private control of transmission would negate whatever efficiencies the government achieved in generation. “It was a glorious fight right up the end,” Norris’s secretary reported after Norris and Roosevelt won, and the president signed the TVA into existence on May 18.

26.

R
AY
M
OLEY HELPED
R
OOSEVELT WRITE HIS SECOND
F
IRESIDE
C
HAT.
Eight weeks into the new administration, the president wished to give the American people a sense of what had been accomplished and an idea of what remained to be done. As they reviewed the text before Roosevelt went on the air, Moley flagged certain passages to ensure that they conveyed what Roosevelt intended. A sentence about a partnership between government and the private sector particularly caught his eye, as it indicated what seemed to be a striking departure in government policy. Moley knew about the dual strains of progressive thinking on the relationship between government and business—about Theodore Roosevelt’s tolerance of bigness in business so long as it was matched by bigness in government, and Woodrow Wilson’s insistence that smaller was better, in both government and business. The radio text, Moley noted, appeared to place Roosevelt on the side of his uncle. “You realize…,” Moley told the president, “that you’re taking an enormous step away from the philosophy of equalitarianism and laissez-faire.” Moley remembered the reaction: “FDR looked graver than he had been at any moment since the night before his inauguration. And then, when he had been silent a few minutes, he said, ‘If that philosophy hadn’t proved to be bankrupt, Herbert Hoover would be sitting here right now. I never felt surer of anything in my life than I do of the soundness of this passage.’”

The New Deal was criticized, then and later, for philosophical incoherence, among other shortcomings. The charge wasn’t entirely unjustified; much about Roosevelt’s program was extemporaneous and experimental. But at its heart the New Deal embodied a well-defined philosophy of American political economy—a concept of the proper relationship between American democracy and American capitalism that was radically at odds with inherited wisdom on the subject. Roosevelt had begun sharing his philosophy with the American people during the 1932 campaign; he continued the exposition with his May 1933 Fireside Chat.

Roosevelt reminded his listeners of the grave problems America had faced at the time of his inauguration. “The country was dying by inches,” he said. Prices had plummeted; jobs had disappeared; commerce had shriveled; banks were collapsing; mortgages were being foreclosed; lives were being ruined. The administration had faced two alternatives. The first was to let things work themselves out—to let prices find a new level on their own, to let the strongest banks survive and the rest go under, to let foreclosures proceed and the ousted homeowners scramble for other lodging or make do on the street. This was the course recommended by orthodox economic theory, Roosevelt said. But it was not the one he had chosen. “Such a policy was too much to ask the American people to bear. It involved not only a further loss of homes, farms, savings, and wages, but also a loss of spiritual values”—in particular the values of decency and fair play that made democracy possible.

He had chosen a different path. The fundamental problem of the depression, he explained, was an excess of capacity. “The people of this country have been erroneously encouraged to believe that they could keep on increasing the output of farm and factory indefinitely and that some magician would find ways and means for that increased output to be consumed with reasonable profit to the producer.” But there was no magician, and output couldn’t continue to grow unchecked. The old days of devil-take-the-hindmost competition must end. Planning—by government officials working closely with representatives of agriculture and industry—was essential.

Roosevelt had heard the criticism of planning, and he anticipated more. Most of it, he said, was foolishly or willfully ignorant. Charges that planning amounted to government control of industry were “wholly wrong.” Planning was a form of partnership between government and the private sector in which the government helped businesses do what they ought to do, and even wanted to do, but couldn’t do on their own. Roosevelt cited an example from the cotton textile industry. Most textile makers—perhaps 90 percent—were good corporate citizens, willing to put the interests of the community above their own narrow concerns. Among such companies agreements not to slash wages or engage in cutthroat competition were possible. “But what good is such an agreement,” Roosevelt asked, “if the other ten percent of cotton manufacturers pay starvation wages, require long hours, employ children in their mills, and turn out burdensome surpluses?” This was where the government could step in. “Government ought to have the right, after surveying and planning for an industry, to prevent, with the assistance of the overwhelming majority of that industry, unfair practices and to enforce this agreement.” Enforcement might require a modification or suspension of current antitrust laws and so ought to be handled carefully. “But these laws were never intended to encourage the kind of unfair competition that results in long hours, starvation wages, and overproduction.” Preventing such outcomes was simply prudent policy—and it was the essence of the philosophy of the New Deal.

R
OOSEVELT’S VISION
of a planned economy inspired the boldest initiative of the early New Deal. What became the National Recovery Administration began with an effort to aid railroads. This was fitting, in that railroads had been responsible for the rise of industry in America, and railroads had been the first sector of the economy to attract the regulative oversight of government. For decades the states and then the federal government had tried to keep the railroads healthy, but not too healthy. The railroads were the nation’s largest employers, having millions of workers on their payrolls. They were the nation’s largest income-producing investment, furnishing dividends to individuals and families, directly and via investment trusts, all across the country. They were the nation’s most important means of transportation, tying communities large and small into a single net. And they were the nation’s most chronically troubled industrial sector, suffering bouts of bankruptcies every decade or so. The states and the federal government had subsidized railroad construction during the nineteenth century; the federal government, especially, had regulated railroad operations during the twentieth century. Only rarely had the government bailed out failing railroads. The roads didn’t garner much sympathy among the general public, on account of their great size and their history of flouting the public interest. “The public be damned!” railroad magnate William Vanderbilt had said, and the public was often happy to return the favor. After the onset of the depression, Hoover’s Reconstruction Finance Corporation had floated loans to the railroads—an effort that secured the future of neither the roads nor Hoover.