Lessons from the 1930s: “Big Business Must Be Controlled If Our Democracy Is to Survive”

The Progressive, which is currently celebrating its 100th year, is running on its web site “a series of excerpts from The Progressive magazine in the 1930s that are especially relevant today.” I think these documents from the Depression era are especially resonant for us members of the Silent Generation, because they speak the language of our childhood. But these days, of course, they also speak the language of the present moment.  

All of the selctions are worth reading, but one of them stands out for the downright eeriness with which it captures our current predicament. It recalls the government bailout of banks and corporations that took place in the early years of the New Deal, and the swiftness with which those corporations and Wall Street executives bit the hand that had fed them.

In 1937, the economy went through a renewed downturn that FDR’s critics have referred to as “the Roosevelt Recession.” Conservatives blamed the slump on the administration’s hostility to big business and its Keynesian economic policies, and argued for rollbacks of government spending and regulation. Some spending cuts were made, to no good effect, and Roosevelt became convinced that the banking industry and other corporate interests were determined to scuttle the New Deal. 

Secretary of the Interior Harold Ickes led the counterattack. The following piece by Ickes was published on January 8, 1938. Because the excerpt is so long I am not setting it off as a block quote (no one want to read that much italics), but it’s better still to follow this link and read the whole thing, since for reasons of space I had to leave out some choice insults. 

Economic power in this country does not rest in the mass of the people as it must if a democracy is to endure. Wealth is not equitably distributed nor do its owners in the main even manage and control it. On the contrary, wealth has become so great and so concentrated that as a matter of fact, it controls those who possess it.

About one-half of the wealth of this country is in corporate form, and over one-half of it is under the domination of 200 corporations, which in turn are controlled by what [has been] referred to as “America’s 60 Families.”

[Up until the 1929 crash], America’s 60 families had held in their hands…complete dominion over the economic and political life of the country. They had lulled the American people into the conviction that if the people would grant conditions in which these 60 families…[could] do as they pleased, the 60 families would put capital to work; enterprise would boom, wages would rise, stocks would soar and there would be two cars in every garage.

The people gave the 60 families this confidence; gave the 60 families this trust in their benevolent despotism—in short, gave the 60 families then what they ask for today, and what happened? Out of their divinely claimed genius as managers of private enterprise the 60 families promptly led the American people into the worst peacetime catastrophe ever known.

Then the disillusioned people changed the government [electing Roosevelt in 1932].

The new government bailed the 60 families out of the consequences of their own mesmeric miscalculations and their unintelligent leadership of the system of private enterprise of which they had pretended to be master managers. It preserved the corporate structures in which their capital was invested from going through the wringer of bankruptcy and reorganization and stock assessment.

As an inevitable by-product of preserving the capital structure…[it also] preserved the management structure from going through the wringer to squeeze out incompetence and big salaries. Then government sought to modify the way in which the business of the nation was done so that business confidence would be based upon the well-being and purchasing power of 120 million people at the bottom standing on their own feet rather than upon the license of the 60 families at the top and upon their premises, in return for that license, to permit the gravy of their benevolence to trickle down upon the exploited millions at the bottom.

Government did get the economic system back on its feet; did succeed in doing a job where the 60 families had failed.

Government had the system back on its feet so well at the time of the elections of 1936 that, as the president said…the patients—over their panic and raising their salaries—felt strong enough to throw their crutches at the doctor.

And last spring government had the business of the country turning over so well that it thought it could safely heed the pleas of private enterprise to government and abandon the economic initiative.

Pursuant to these pleas government cut down public expenditures…in order to meet the insistence of private enterprise that business confidence would be greater if government would take steps to balance the budget—assuaged the fears of the head of the biggest bank in the United States about runaway inflation—and turned over to the managers of private enterprise the responsibility they had said that they were eager and willing to assume.

And what happened?

Two things. First, the 60 families that were masterminding private enterprise proved to have learned nothing nor forgotten nothing since 1929 about the management of business under modern conditions. They made the same mistakes they had made before 1929. They ran the stock market up and helped it get started down. They did little or nothing to increase the purchasing power of labor to make up for the government withdrawals and then ran prices to the sky so that the consumer refused to spend what they graciously let him earn.

Second, the 60 families, unwilling to learn to do business upon the democratic terms of 1937, began to make demands and threats.

To Franklin D. Roosevelt…[they have made] a threat that they will refuse to do business at all unless the President and the Congress and the people will repeal all that we have gained in the last five years and regrant them the suicidal license they had enjoyed in 1929….

To the 120 million people of the United States they have made the threat that, unless they are free to speculate free of regulations to protect the people’s money; unless they are free to accumulate through legal tricks by means of corporations without paying their share of taxes; unless they are free to dominate the rest of us without restrictions on their financial or economic power; unless they are once more free to do all these things, then the United States is to have its first general sit-down strike—not of labor—not of the American people—but of the 60 families and of the capital created by the whole American people of which the 60 families have obtained control.

If the American people call this bluff, then the America that is to be will be a democratic America, a free America.

If the American people yield to this bluff, then the America that is to be will be a big-business Fascist America—an enslaved America….

Big business must be controlled if our democracy is to survive….The new America must be a land of free business, not of ruthless business—a land of free men, not of economic slaves.

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