The Development of Democratic Pluralism

excerpted from the book

The Paradox of American Democracy

by John B. Judis

Routledge Press, 2001, paper

p33
In 1831, when Alexis de Tocqueville set sail for America, four of five free Americans who worked owned property. Americans saw politics and political democracy as a means of protecting that rough equality through preventing the rise of state-sponsored monopolies. They viewed the state not as a protective institution, but as an instrument of monopoly. The "true strength" of government, Jackson declared in his 1832 veto of the charter of the Bank of the United States, "consists in leaving individuals and state as much as possible to themselves."'

That vision of democracy was undermined by the rise of the large corporation. As America industrialized in the late nineteenth century, the joint-stock corporation eclipsed the individual proprietorship. Through being able to raise capital without threat of liability for losses, it made possible businesses on a scale that dwarfed those in Tocqueville's day. An initial wave of mergers in the 1870s consolidated the railroads. Another wave at the century's end dealt a final blow to Tocqueville's America. In 1893, there were twelve great companies with capitalization of less than half a billion dollars. By 1904, there were 318 giant companies, and U.S. Steel alone was capitalized for $1.4 billion. The top 4 percent of companies produced 57 percent of the total industrial output.

The growth of the corporation led to a small group of managers overseeing thousands of workers, many of whom were immigrants. It created a rigid class system of a kind that Tocqueville had foreseen, but had discounted:

I am of the opinion, on the whole, that the American manufacturing aristocracy which is growing up under our eyes, is one of the harshest which ever existed in the world, but at the same time, it is l one of the most confined and least dangerous. Nevertheless the | friends of democracy should keep their eyes anxiously fixed in this | direction; for if ever a permanent inequality of conditions and aristocracy again penetrate into the world, it may be predicted that this is the channel by which they will enter.

By I900, the channel had become a raging torrent. There were more workers in manufacturing, transportation, communications, and public utilities than in agriculture, and America, like Europe, appeared headed toward a two-class society divided between a small bourgeoisie and a large, unruly proletariat.

Tocqueville, and the Jacksonians, viewed political equality as an outgrowth of economic equality, but by the late nineteenth century, growing economic inequality was undermining political equality. Political equality had become merely an abstraction. In fact, who was elected and what elected officials did were increasingly dictated by the industrialists and bankers who financed and sometimes bribed the politicians. (Civil service reform in 1883, which prohibited federal workers from contributing money and time to campaigns, had the perverse effect of making politicians more dependent on business for cash and campaign workers.) By controlling politicians and also judges, business was able to bend laws and regulations to its own purposes. Economic inequality had spawned political inequality.

Corporate leaders and sympathetic economists insisted that the new economic institutions were merely fulfilling the promise of the market and warned that the imposition of state regulation could undermine prosperity and freedom. Beginning in the 1870s, farmers, small businessmen, workers, and intellectuals fought back against the new corporate system. Grangers, Knights of Labor, members of the Greenback Party, and Populists campaigned to regulate or even break up the new corporations. These movements didn't see the federal government as an instrument of monopoly and tyranny, but as a means of curbing private monopolies. They saw the corporations as the enemy. Senator John Sherman, the sponsor but not the author of the Sherman Anti-Trust Act in 1890, quipped, "They had monopolies and mortmains of old, but never before such giants as in our day."

The movements of the late nineteenth century demanded a host of reforms from government, including the setting of railroad rates, the establishment of an eight-hour work day, the abolition of child labor and of night work for children and women, the setting of a minimum wage, the supervision of collective bargaining, and the provision of cheap credit. In some Midwestern and Western states, they actually got some of what they wanted, but business was able to stop them in the courts. The courts adopted a principle of "corporate individualism," according to which it defined corporations as "persons" and exempted them from regulations. Nationally, Populists and other reformers were totally stymied by business's control of the Senate (dubbed the "millionaires' club" in the late nineteenth century), the Supreme Court, and the White House. The stage was set, however, for a series of reform battles- extending over the first four decades of the twentieth century-that would attempt to resolve the looming contradiction between corporate capitalism and America's democratic ideals. The Progressive Era would etch in the outlines of a solution, which business and the Republicans would then attempt to erase during the 19205, only to have the outline redrawn and filled in during the New Deal of the 19305. The result would be a new vision of democracy that depended on the power of organized workers and consumers, working often through the government, to contest the new power of the corporations and their managers. This new vision would be democratic pluralism.

The Progressive Era

The two great reform eras of the early twentieth century would both be precipitated by severe economic depressions that unsettled the existing configuration of political power and gave rise to new political movements. The Progressive Era dates from the depression of the I8905 and the political reaction to it. This depression saw the emergence of nationally organized interest groups and elite policy organizations and the predominance of what was called the "labor question" in American politics.

Like most severe economic downturns, it was unexpected. On the eve of leaving office in early 1893, President Benjamin Harrison told Congress, "There has never been a time in our history when work was so abundant, or when wages were as high, whether measured by the currency in which they are paid, or by their power to supply the necessities and comforts of life." But that May, a financial panic occurred, and by the end of the year 500 banks and over 16,000 businesses had gone under and unemployment was about 20 percent. The economy picked up in 1895, but then plunged again the next year. It did not fully recover until I901.

Before the depression, there had already been serious signs of political unrest. In the 1892 presidential race, the Populist Party, formed out of Southern and Western Farmers' Alliances, polled over a million votes- about 9 percent of the total-and won twenty-two electoral votes, more than any third party since 1860. The American Federation of Labor was organized in 1886 and by 1893 had increased its membership from 140,000 to 275,000 workers. In 1892, AFL unions went on strike against Carnegie Steel at Homestead near Pittsburgh. The depression brought still greater unrest. In 1894 alone, about 750,000 workers were out on strike. The most important strikes were by railroad workers. In 1893, Eugene V. Debs organized the American Railway Union out of the feuding craft unions. Within a year, it had 150,000 members and had struck successfully against James J. Hill's Great Northern Railway. Debs then led a strike against the Pullman Company, a strike that was finally broken with a government injunction.

In the 1894 Congressional elections, the Populists garnered a million and a half votes, or 11.2 percent of the total. Populist Congressmen introduced reform bills in the House of Representatives. In Ohio, Populist Party supporter Jacob S. Coxey, a small businessman from Ohio, organized a march on Washington to demand federal relief for the unemployed. While Coxey's Army ended up with only 500 marchers by the time it arrived in the capital, it was greeted by 15,000 cheering onlookers.

By the end of the depression, the Populists had been absorbed into William Jennings Bryan's Democratic Party, and Debs's American Railway Union had been destroyed by its defeat at Pullman, but labor and the left drew conclusions about the need for organization and national political action out of the experience. Debs helped found the American Socialist Party in I901. It grew from ... to 118,000 members by 19l2, when it elected l,200 public officials and published over 300 magazines and newspapers. In 19l2, Debs got 6 percent of the vote for the presidency even though Theodore Roosevelt ran that year as the candidate of the Progressive Party. In 1905, dissident trade unionists including Debs and Big Bill Haywood founded the International Workers of the World (IWW). The IWW's largest single group was the Western Federation of Miners. By 1906, the AFL, prodded and embarrassed by its city and state labor councils, had begun to take positions on national politics and to support candidates and lobby for national legislation.

Business was equally active in the years following the 1893 depression. It undertook massive consolidation at the beginning of the century with the hope of stabilizing production and preventing overcapacity. Businesses also worked closely with Congress and the White House to pass banking, tariff, and trust legislation that, they hoped, would make panics less likely. At the same time, business leaders organized politically in response to the depression and the growth of labor and the Populist, and later, socialist left. They feared that as capitalism suffered deeper crises, workers would become more organized. The parties would be divided by classes, and the country would be engulfed by class war. Socialists themselves, imbued with Marx's prophecies, did nothing to allay these fears. Wrote socialist Upton Sinclair in an open letter to multimillionaire Vincent Astor, "I tell you that this country is moving today with the speed of an avalanche into one of the most terrific cataclysms in the history of mankind."

Businesses organized lobbies that would unequivocally stand up for their interests against labor. The National Association of Manufacturers (NAM) was founded in 1895 at a meeting in Cleveland at which William McKinley, then the governor of Ohio, was present. It was initially intended as a lobby for trade protection, but in 1903, its leaders were ousted by three Midwestern manufacturers, David M. Parry, John Kirby, Jr., and James W. Van Cleave, who focused on combating the spread of unions. In 1906, the organization's leaders accused the National Civic Federation of being "part and parcel" of the AFL and an exponent of "the most virulent form of socialism, closed shop unionism." The NAM got deeply involved in Republican politics, backing Taft in 19l2 when Roosevelt bolted the party.

The NAM was soon joined by other business organizations. At the urging of President Taft and his Secretary of Commerce and Labor, the U.S. Chamber of Commerce was formed in 1912 out of local chambers of commerce. By 19l3, according to the Department of Commerce and Labor, there were 240 regional and national trade associations. The Chamber itself was more politically diverse and its Washington office more inclined to seek a modus vivendi with the administration in power than the NAM, but in 19l4, the Chamber lined up with the NAM and other business organizations to oppose an AFL proposal to exempt labor unions from monopoly injunctions under the Sherman Anti-Trust Act - the kind of injunction that had destroyed Debs's American Railway Union.

Business enjoyed considerable influence in these years. Standard Oil kept Ohio Senator Joseph Foraker on a retainer. Senators Nelson Aldrich of Rhode Island and Orville Platt of Connecticut allowed bankers from the Morgan and Co. and Kuhn, Loeb and Co. to draft their bills. U.S. Steel received regular intelligence from Pennsylvania Senators Donald Cameron and Matthew Quay. Taft and his cabinet solicited the NAM's advice on appointments. But the major legislation passed during the Roosevelt, Taft, and Wilson administrations represented a compromise between these business groups and labor and the left. That reflected the relative power of the competing groups, but it was also the result of intervention by an entirely different kind of organization: the elite policy group.

Some business leaders like Ohio industrialist Mark Hanna, Boston department store magnate Edward Filene, and Morgan and Co. partner George Perkins found common cause with the progressives who sought to craft what Woodrow Wilson called a "middle ground" between socialism and corporate individualism. They opposed both the intransigence of the NAM and the revolutionary objectives of the Socialists and the IWW. They sought to eliminate or transcend class differences by accommodating what was most reasonable in the demands of the opposing classes. Theodore Roosevelt and Wilson, both of whom were intellectuals as well as politicians, exemplified two sides of the movement-Roosevelt was far less wary than Wilson of using governmental power-but they shared these objectives. Roosevelt told journalist Jacob Riis in 1904:

"I am for labor," or "I am for capital," substitutes something else for the immutable laws of righteousness. The one and the other would let the class man in, and letting him in is the one thing that will most quickly eat out the heart of the Republic.

And Wilson declared in 1916:

What I have tried to do is to get rid of any class division in the country, not only, but of any class consciousness and feeling. The worst thing that could happen to America would be that she should be divided into groups and camps in which there were men and women who thought that they were at odds with one another.

What united the progressive economists, politicians like Roosevelt and Wilson, businessmen like Hanna and Perkins, social reformers like Jane Addams, and social gospel theologians like Rauschenbush was a belief in the power of government-whether as an expression of expert knowledge or popular will-to overcome the inequity and irrationality that was endemic to a pure market capitalism. They saw democracy as a social system in which the government itself would attempt to mitigate economic inequality. Wilson and Roosevelt-or Roosevelt and Debs-disagreed about the extent to which government could or should intervene in the market, but they shared this conception of positive government.

The clearest statements of the progressive faith were Herbert Croly's book The Promise of American Life and Roosevelt's speeches for the Progressive Party, which Croly helped to write. Croly argued that the older Jeffersonian and Jacksonian view of democracy and government, which had been meant to sustain an egalitarian society, had unwittingly encouraged the growth of trusts and robber barons. Unfettered competition had spawned industrial concentration and consolidation. In this way, the older faith "in individual freedom has resulted in a morally and socially undesirable distribution of wealth," he wrote. To keep the promise of American life, "the national government must step in and discriminate; not on behalf of liberty and the special individual, but on behalf of equality and the average man."

The progressive movement found important allies in elite organizations. These included national policy groups such as the National Civic Federation and the American Alliance for Labor and Democracy, local and regional groups such as Edward Filene's Cooperative League, and foundations such as Russell Sage, Rockefeller, and Carnegie. And they included many local and state organizations, often founded by upperclass women, such as the Child Labor Committees, Consumers' Leagues, Charities Aid Societies, and church organizations. In the end, this larger progressive movement won out. It stood between the specter of European revolutionary socialism and the social Darwinism of the selfish rich.

Wilson's career demonstrates the triumph of progressivism. Before he became governor of New Jersey and president of the United States, Wilson's views on democracy and government sometimes sounded closer to those of the NAM than to the progressives. In a 1907 essay in the Atlantic Monthly, Wilson condemned any kind of government regulation of the economy as "socialistic." He was also hostile to labor unions and supported the use of injunctions against strikes. But faced with political pressure from below and the arguments of progressives in Congress, Wilson established a record as president that put him clearly in the progressive camp. He compromised on the Clayton Anti-Trust Act, forbidding the use of labor injunctions except when "necessary to prevent irreparable injury to property." He signed bills-uniformly opposed by the NAM-providing workers' compensation for federal employees, making child labor illegal, and establishing an eight-hour day for railway workers. During World War I, he put into practice the Civic Federation's tripartite model of government, establishing government boards that included business, labor, and academic representatives to oversee the war effort.

The Progressive Era came close to what the pluralists called "balanced government." In the battle among interest groups, business held the upper hand, but its power was checked by elites and their organizations and by progressive, socialist, and populist political movements. The result affirmed a spirit of accommodation and class cooperation. As World War I came to a close, Herbert Croly and other progressives believed that these pluralist principles, which Wilson put into practice during the war, would govern America's future. But the end of the war brought instead the beginning of a very different era-one that repudiated the underlying tenets of the Progressive Era and changed the political balance of power in the country.

The Age of Mellon

The 1920s were one of the most inventive and interesting periods in American history. They saw the rapid growth of industry and manufacturing, highlighted by Henry Ford's Model T, the birth of consumer capitalism and the installment plan, and the growth of a national market for popular entertainment. But it was a much less positive time for American politics and democracy. The popular movements and elite organizations of the Progressive Era receded, as business leaders and organizations reclaimed control of the political system. Politics sustained economic growth, but in its blind subservience also hampered it, and contributed to its destruction in the Depression.

The conclusion of the Progressive Era was precipitated by business's sharp reaction to the specter of class war and the looming threat of revolution. While the IWW was destroyed by wartime repression, the AFL grew dramatically during the war, thanks to government-supervised bargaining agreements. In two years, its membership doubled from two million to four million. The Socialist Party, which opposed the war and had its mails confiscated, its rallies disrupted, and its leader jailed, still held its own in the 1918 elections, electing 32 state legislators, compared to 20 in 1912 and 33 in I914. The Russian Revolution, which had climaxed with the Bolshevik takeover in October 1917, also roused revolutionary hopes. The Soviet leadership had organized the Communist Third International in March 19l9 to spread the revolution. Karl Radek, its executive secretary, declared that the money the Comintern sent to Germany was "as nothing compared to the funds transmitted to New York for the purpose of spreading bolshevism in the United States." William F. Dunne, a Socialist Party member who was elected to the Montana state legislature in 1918, contended that revolution was on the horizon. "Unemployment will increase, there'll be starvation, and some day the banks will fail and the people will come pouring out on the streets and the revolution will start."

Most of the AFL leaders were opposed to the Russian Revolution, but some of them were impressed by the British Labor Party, which after the war drafted an ambitious plan to nationalize industry. In 19l9, railway unions adopted a program, called the Plumb Plan, to nationalize the railroads, which the AFL endorsed. That year, too, workers went on strike in the textiles, clothing, food, transportation, steel, and coal industries. In January, after 35,000 Seattle dockworkers went out on strike for higher wages and a shorter workweek, the Central Labor Council declared a general strike on their behalf. In September, Boston policemen went out on strike after nineteen policemen had been fired for belonging to a union. Two days later, steelworkers, who were working twelve-hour days and seven-day weeks for an average of $28, struck. Soon afterward, 394,000 miners went out on strike.

Businesses responded to these strikes by standing firm. They won the support of city, state, and national officials, including Wilson's Attorney General A. Mitchell Palmer, who linked the strikes to the Russian Revolution. Seattle's general strike lasted five days until the mayor, charging a Communist plot, crushed it. When Massachusetts Governor Calvin Coolidge urged intransigence against the police strikers, Boston's mayor successfully replaced the entire police force. In October 19l9, with the war over and 365,000 steelworkers out on strike, Wilson called for a National Industrial Conference to enshrine the collaborative principles of collective bargaining that had been practiced during the war. He appointed seventeen representatives of employers, including Elbert H. Gary, chairman of U.S. Steel, and nineteen representatives of unions. But when the labor representatives asked for the government to arbitrate the strike, Gary balked. When the labor representatives called for collective bargaining to become the peacetime norm between unions and management, the employers also balked. The conference broke up without reaching any agreement. With Palmer branding the strikers as reds, the steel owners held out for two months until the strikers returned to work without gaining any of their demands.

Business's reaction to the strike wave in 19l9 established a precedent for the next decade. The NAM's strategy of attempting to block and destroy unions became widely accepted. Businesses organized local and national groups to back what they called the "American Plan." They branded collective bargaining as "un-American" and sought to establish company unions and to force workers to sign "yellow dog" contracts agreeing not to join a union. Hundreds of American Plan groups sprouted up in the early 19205-forty-six in Illinois alone. The companies used force and subterfuge, when necessary, to prevent unionization. They blacklisted potential union organizers, they sent spies into shops and factories-according to one estimate there were 200,000 spies employed by 1928 - and hired firms that specialized in busting picket lines. One organization, the National Metal Trades Association, was set up after the war expressly to break strikes.

During the Progressive Era, business and businessmen had sometimes been looked upon with disfavor. To win public acclaim, corporations began employing public relations specialists. The first American "PR" agent was Ivy Lee, a former journalist who convinced the anthracite coal operators in 1906, after they had lost a strike, that they needed his services. Lee was subsequently hired to burnish the reputations of the Rockefellers after soldiers killed wives and children of striking miners during the 1914 Ludlow massacre. But it was the experience of World War I that convinced many business leaders that public relations could work. Former journalist George Creel, whom Wilson hired to run the government's Committee on Public Information during World War I, succeeded brilliantly in turning the public against the "Hun." Afterward, every company had to hire a PR man. Said businessman Roger Babson in 1921, "The war taught us the power of propaganda. Now when we have anything to sell to the American people, we know how to sell it. We have the school, the pulpit and the press."

Every large bank and corporation hired a PR man to put out company newsletters and manage press relations. Companies began using polling techniques to test public opinion; businesses bought radio stations, endowed university chairs, and pressured schools to fire teachers they deemed subversive. The guru of the new public relations men was Edward Bernays, a nephew of Freud, who worked for Creel during the war. Wrote Bernays in Propaganda, "As civilization has become more complex, the technical means have been invented and developed by which opinion may be regimented."

... Under pressure from business, Harding appointed Pittsburgh banker and industrialist Andrew Mellon, one of the richest men in America and a major contributor to the Republican Party in Pennsylvania, as Secretary of the Treasury. The prim and dour Treasury Secretary became the leading member of the Harding, Coolidge, and Hoover administrations. Much more than Hoover, a former progressive who still retained the older commitment to a society that accommodated labor, Mellon was a representative of his class and narrow business interest. He single-mindedly went about reducing the tax burden on business and the wealthy, which he claimed was imperiling investment. His efforts initially encountered sharp resistance from progressives in Congress when he tried to undo Wilson's progressive tax code, but in 1926 he finally succeeded in revamping it. He drastically reduced tax rates for the wealthy, cut the estate tax in half, eliminated the gift tax, and reduced taxes on corporations. In 1928, he got Congress to cut corporate taxes again. After the crash of 1929, Democrats discovered that Mellon had been secretly granting tax credits and subsidies to many of the largest corporations, including those in which he and his family had significant holdings. He had even gotten the commissioner of Internal Revenue to provide him with a memo about how he could legally evade taxes. He then hired the author of the memo to advise himself and his family. Heeding Mellon, the government also curbed spending on health and welfare and public works, while services to business, shipping subsidies, and law enforcement rose. "The government is just a business and should be run on business principles," he declared.

Business also won the battle for public opinion. One of the best-selling books of the 1920s was advertising man Bruce Barton's The Man Nobody Knows, a portrayal of Jesus as a businessman and the apostles as his salesmen. "He picked twelve men from the bottom ranks of business and forged them into an organization that conquered the world," Barton wrote. He described Jesus's parables as "the most powerful advertisements of all time." Political scientists adjusted their view of business and its representatives. While they had earlier described lobbyists as representatives of "the interests"-a term carrying the same thrust as "the syndicate" or "the mob"-they now called them "legislative agents."

In winning over the public, business succeeded in redefining democracy. Business and its Republican allies envisioned the captain of industry as a "rugged individualist" and government as the enemy of prosperity and equality. Corporate capitalism, if left to its own devices, would eliminate class differences. "We are reaching the position," Calvin Coolidge declared, "where the property class and the employed class are not one but identical." Harding, Coolidge, and Hoover rejected the progressive view of the state. "It does not at all follow because abuses exist," Coolidge said, "it is the concern of the federal government to attempt their reform." Government intervention, Hoover warned, "would increase rather than decrease abuse and corruption. It would stifle initiative and invention. It would undermine the development of leadership. It would cramp and cripple the mental and spiritual energies of our people."

Business was so successful in pressing its case partly because it was far more united than it had been during the Progressive Era. The threat of Bolshevism and the strike wave of 19l9 had united large and small employers. The NAM and the National Civic Federation no longer were at r odds. During the 19205, Civic Federation director Ralph Easley became obsessed with the menace of Bolshevism to the exclusion of all other interests. The federation's most active committee was its Department on the Study of Revolutionary Movements, which championed legislation to prevent Communist infiltration. Much of the old progressive movement became transmuted into civic boosterism. The child labor and good government associations of the 1910s were replaced by business service clubs, which cheered the new individualism. The Rotary Club, founded in 1905, had 150,000 members by 1930. The Kiwanis Clubs grew from 205 in 1920 to 1,800 in 1929. The Lion's Club was founded in 1917; by 1930, there were 1,200 chapters.

Business also benefited from having deceptively weak opponents. By 1920, the American socialist left had virtually disintegrated. It blamed its fall on the Palmer raids, which resulted in the deportation of several hundred foreign-born Soviet sympathizers, but the real culprit was the mindless revolutionary fervor created by the Russian Revolution. In 19l9, about half the Socialists quit the old party, which they denounced as "right-wing," to form two new pro-Bolshevik Communist parties, a Communist Party dominated by recent immigrants, many of whom did not speak English, and a smaller Communist Labor Party led by John Reed and other native-born leftists. The Communists called for immediate insurrection. When Palmer initiated his "red scare," both parties went underground in imitation of the Bolsheviks. At the beginning of 19l9, the Socialist Party had boasted 106,000 members. By the year's end, the three parties-Communist, Communist Labor, and Socialist-had only 36,000 among them. The socialist left would never fully recover from this disastrous split. What was politically viable (and not merely revolutionary fantasy) in the socialist movement would become part of the old progressive movement, which would attempt unsuccessfully to stage a comeback in 1924 when Robert M. La Follette ran for president on a third-party ticket. The progressive movement would not revive until the 1930s.

The labor movement fared almost as poorly as the socialist left. Union membership peaked at 5,047,800 in I920. It fell to 3,622,000 in I923 and to 3,442,600 in I930-from I9.4 percent of the nonagricultural workforce in I920 to only I0.2 percent in I930. Business intransigence took its toll, but so did the inability and unwillingness of the AFL's leadership to adapt to an economy and workforce different from that of the late nineteenth century, when the AFL began. Except for the miners, the AFL was organized primarily along craft lines-such as cigar makers (from whom Samuel Gompers came), carpenters, horseshoers, and plumbers (from whom later AFL-CIO leader George Meany came). Even though modern industries had eliminated many crafts, replacing the craftsman's tool with a machine and the craft worker with the assembly line worker, the AFL was unwilling to organize by industry. (When the AFL tried to organize the steelworkers in 1919, they had to appoint an unwieldy committee to oversee the twenty-four craft unions that claimed members in the steel factories.) As a result, during the 1920s, the federation held its own in construction and the remaining crafts, but lost the few members it had gained during the war in the great auto, steel, rubber, electrical utility, and chemical industries.

Business also benefited from the peculiar economy of the 1920s. After an initial panic and recession in 1920, the economy enjoyed rapid gains in output and productivity. National income rose 21 percent between 1923 and 1929. The gains were sufficiently dramatic to defuse protest and anger against employers, but they were not dramatic nor secure enough to sustain the kind of confidence that buoyed protest militancy in the 1960s. Wages never kept pace with salaries and dividends. The highest percent of income recipients increased their share of national income 19 percent from 1923 to 1929. According to a Brookings study, unemployment was surprisingly high, due in part to automation on farms and in factories-up to 13 percent in 1924, 1925, and 1928. As a result, there were pockets of progressive, socialist, and populist resistance to the reign of business, but for the most part, workers simply ignored politics. In all, the Age of Mellon represented a triumph of business over labor and over politics itself.

Voter turnout dropped precipitously - from 61.8 percent in 1916 to 48.9 percent in 1924, due only in part to woman suffrage. There was a prevailing cynicism about politics and about government. In lectures given in l929, Felix Frankfurter reflected, "Perhaps the dominant feeling about government today is distrust." Americans believed that "ineptitude and inadequacy are the chief characteristics of government." Where the electorate was mobilized, it was at the margins over social issues. Wrote Walter Lippmann in 1927:

There are no parties, there are no leaders, there are no issues.... The questions which really engage the emotion of the masses of the people are of a quite different order. They manifest themselves in the controversies over prohibition, the Ku Klux Klan, Romanism, Fundamentalism, immigration. These, rather than the tariff, taxation, credit and corporate control, are the issues which divide the American people.

The elite organizations fared as poorly as labor and the left. During the Progressive Era, they had served as respected intermediaries between the classes, but business groups made clear from the beginning that their services were not required. John D. Rockefeller, Jr., humbled by the calumny heaped upon his name after the Ludlow massacre, established an Industrial Relations Department at the Rockefeller Foundation, headed by former Canadian Labor Minister Mackenzie King. But when Rockefeller urged U.S. Steel's Henry Clay Frick and Judge Elbert Gary to consider collective bargaining or employee representation during the 19l9 steel strike, he found them "utterly opposed" to "representation of any kind." Herbert Hoover was rebuked when he called a meeting with industrialists at New York's Metropolitan Club to urge them to "establish liaison" with Gompers and the AFL.

Elite organizations by no means disappeared, but these groups had little effect on the policy during the Age of Mellon. The pursuit of the national interest became reduced to the enactment of business's American Plan. In The New Republic, Herbert Croly lamented that "Americanism itself [has] finally [become] popularly confused with a combination of optimism, fatalism, and conservatism." During the 19205, the ideal of the disinterested public servant was displaced by the image of the businessman as savior. Croly's former colleague Walter Lippmann looked upon this new governing class with scorn:

Our rulers today consist of random collections of successful men and their wives.... They give orders. They have to be consulted. They can more or less effectively speak for, and lead some part of, the population. But none of them is seated on a certain throne, and all of them are forever concerned as to how they may keep from being toppled off. They do not know how they happen to be where they are, although they often explain what are the secrets of success. They have been educated to achieve success; few of them have been educated to exercise power. Nor do they count with any confidence upon retaining their power, nor in handing it on to their sons. They live, therefore from day to day, and they govern by ear.

America, of course, paid a large price for the unwillingness of its leaders to see beyond their balance sheets. Mellon's economic policies favored profits and dividends over wages and encouraged both the industrial overcapacity and the speculative frenzy that led up to the stock market crash of 1929. American foreign policy during the 19205 also contributed to, or at least did little to stem, the gathering storm in Europe.

The New Deal

The stock market crashed in October 1929. By 1932, unemployment had climbed to 24.1 percent. There were 660,000 unemployed in Chicago and a million in New York City. In Cleveland, 50 percent were out of work, in Akron and Toledo 80 percent. Manufacturing output was 54 percent of what it had been before the crash. Treasury Secretary Andrew Mellon declared the crash a blessing. "It will purge the rottenness out of the systems. People will work harder, live a more moral life," the tribune of the rich declared. But the initial victims of the purge were Mellon and his allies.

The crash and the Depression destroyed in one stroke the edifice of wisdom and invincibility that businessmen had erected for themselves. Wrote Gerald Johnson in 1932, "It will be many a long day before Americans of the middle class will listen with anything approaching the reverence they felt in 1928 whenever a magnate of business speaks." Many Americans took a harsher view. At Congressional hearings, Senator Burton Wheeler told Charles Mitchell of the National City Bank "The best way to restore confidence in the banks would be to take these crooked presidents out of the banks and treat them the same way as w treated Al Capone when he failed to pay his income tax."

The crash itself was the immediate result of the speculative frenzy of the late 1920s, which took place amid a national and world economy that was already beginning to slow. But there were deeper factors at work that turned the crash into a full-fledged depression. The boom of the 19205 had been based on rapid increases in productivity that had occurred because of the replacement of steam by electricity and the introduction of scientific management. This created the danger of more goods being produced than workers had the income to purchase-what John Maynard Keynes would call a problem of effective demand. The danger was realized by the late 19205 as a growing proportion of income went to profits rather than to wages and to purchasing stocks and real estate rather than consumer goods.

In this sense, the Depression gave the lie to the widespread assumption that the success of capitalism depended on the sacrifice and even misery of the working class. It suggested that policies that improved workers' ability to purchase goods-and their standard of living-could also improve the overall economy. Stuart Chase, a journalist and not a professional economist, was a prophet of the new order. Writing in 1932, Chase argued the Depression was caused by a malfunction in the distribution, not the production, of goods. The only answer to depressions, Chase maintained, was "a dependable supply of purchasing power." Such an argument-which would be made in more sophisticated form by Keynes and become widely accepted by economists and business leaders-would have been ridiculed in the Age of Mellon.

The onset of the Depression also fueled a heated rejection of Hoover and business's rugged individualism. Historian Charles Beard wrote in 193l, "The cold truth is that the individualist creed of everybody for himself and the devil take the hindmost is principally responsible for the distress in which Western civilization finds itself." In an article in The Nation, economist Ernest Gruening, later a senator from Alaska, reaffirmed what Croly and Theodore Roosevelt had argued about the government and the corporation. Gruening wrote that in order to create a "self-governing democracy, the people will proceed from control of the political state, and by means of it, to control also of the now uncontrollable economic super-power, a conquest essential if we would make 'life, liberty, and the pursuit of happiness' other than a travesty." After he was reelected in 1936, Roosevelt made a similar argument. "The power of a few to manage the economic life of the Nation must be diffused among the many or be transferred to the public and its democratically responsible government."

The rejection of business and their Republican backers registered at the polls. In the 1930 election, Democrats picked up 49 House seats and 8 Senate seats. In 1932, a coalition of progressive Democrats and Republicans passed the Norris-La Guardia Act forbidding the use of the injunction against strikes and outlawing the yellow dog contract. That year, veterans also staged a "Bonus Army" march in Washington, but political activism was slow to take hold, as the Depression's initial impact was shock and despair. The transformation of politics only began in earnest after Franklin Roosevelt's landslide victory for the presidency in November 1932.

The 1932 elections and even more so the 1934 Congressional elections- gave a coalition of progressive Democrats and Republicans major influence over Congress. These legislators-Republicans like Hiram Johnson, Robert La Follette, Jr., and George Norris, and Democrats like Robert Wagner, Sam Rayburn, and Hugo Black-included both the heirs to pre-World War I progressivism and a large number of urban progressives elected from districts created by Congressional reapportionment in 1930. These politicians became closely linked to the growing industrial labor movement. In 1934 and 1935, a number of populist and socialist movements also threatened to challenge the Roosevelt administration from the left. In 1934, Louisiana Senator Huey Long founded an organization called "Share Our Wealth." By February 1935, Long claimed more than 27,000 clubs and a mailing list of 7.5 million. A poll by the Democratic National Committee showed that if he ran for president on a third-party ticket in 1936, he would win between three and four million votes.

In 1934, the labor movement, inspired by the National Recovery Act, which called on employers to establish unions (without stipulating whether or not they would be company unions), awoke from its decade-long slumber. There were 1,856 strikes involving l,470,000 workers. Strikes engulfed Toledo, Minneapolis, and San Francisco. Garment workers, coal miners, truck drivers, and West Coast longshoremen scored significant gains, but other workers in steel, textiles, and rubber were defeated, partly because of the indifference of the AFL leadership, which rejected pleas to organize on industrial rather than craft lines.

The Depression also revived the elite networks and organizations that had flourished in the Progressive Era but floundered in the 1920s. The Russell Sage Foundation, the American Association for Labor Legislation, the Taylor Society, founded by industrial engineer Frederick Taylor, and the Twentieth Century Fund, established by Edward Filene and manufacturer Henry Dennison, encouraged social scientists to meet with businessmen and with labor leaders to develop programs that would arrest the Depression, partly through improving the workers' lot. Much of the major legislation in Roosevelt's first term-from the National Industrial Recovery Act to the Social Security Act-came out of studies from these groups. Many of the intellectuals who assumed key policy positions had worked closely with these groups.

Another important elite network was organized around Harvard Law professor Felix Frankfurter. After graduating first in his class at Harvard Law School in 1906, Frankfurter had joined a prestigious Wall Street law firm. Bored by corporate law, he had gone to work under U.S. attorney Henry Stimson, even at a considerable loss in salary. Frankfurter followed Stimson to Washington when Taft made him Secretary of War. In Washington, he made the acquaintance of Brandeis, who helped get him an appointment at Harvard Law School. Like Brandeis, he was a progressive deeply interested in the "labor question." He was close not merely to Brandeis and Oliver Wendell Holmes, Jr., but also to Croly and the editors of The New Republic. When he served during World War I as chairman of the War Labor Policies Board, he became friendly with Assistant Secretary of the Navy Franklin Roosevelt.

At Harvard, Frankfurter encouraged his students to take on social causes and enter public service. He disdained the lawyer as businessman, and championed the cause of public administration. "The difficulties of our social-economic problems will not abate with time," Frankfurter wrote just after the stock market crash. "One may be confident that they will become more complicated. They will make increasing demands upon training intelligence. If government is to be equal to its responsibilities, it must draw more and more on men of skill and wisdom for public administration."

Once Roosevelt became president, Frankfurter operated as a kind of personnel agent for the New Deal, acting not merely to advance his own standing and pet causes, but also to further the ideal of disinterestedness.

"He has a passion for good, disinterested, inconspicuous work in government," the columnist Joseph Alsop observed. Many of the Roosevelt administration's key bills were written by Frankfurter's students and protégés, whom he helped get jobs with the administration. These included Benjamin Cohen and Thomas Corcoran, who wrote the laws creating the Securities and Exchange Commission and regulating utility holding companies and who became key White House advisors; James Landis, who became SEC commissioner; State Department official Dean Acheson; White House official James Rowe; Tennessee Valley Authority director David Lilienthal; Labor Department counsel Charles Wyzanski; and State Department official Herbert Feis. These men didn't necessarily agree about every administration policy, but they shared Frankfurter's ideal of public service and his opinion of the failure of business rule during the I9205. One administration critic described Frankfurter's recruits as "boys with their hair ablaze," but Frankfurter defended them as "public servants of higher grade."

Business organizations were divided over how to respond to the New Deal. The NAM was one of the few to maintain its old stance. NAM president John Edgerton blamed the Depression squarely on the workers. If workers "do not practice the habits of thrift and conservation . . . is our economic system . . . to blame?" he asked in I930. The NAM opposed Social Security as the "ultimate socialistic control of life and industry." A few businessmen like Filene and Dennison worked with the elite organizations and with the Business Advisory Council, which the Roosevelt administration established in June 1933 to provide advice from, but also to marshal support among sympathetic business leaders. The council included GE's Gerard Swope; Walter Teagle of Standard Oil; Pierre S. Du Pont, board chairman of E. I. Du Pont de Nemours & Co.; and Alfred P. Sloan, chairman of General Motors. It backed the administration's early efforts, but many of the members resigned during the "second hundred days" of 1935 to join the NAM and Du Pont's Liberty League in unequivocal opposition.

By 1935, there was a unique political situation: business and businessmen lacked decisive influence, even a veto, over policy; and an assortment of labor leaders, socialists, populists (led by Long and his movement), and progressive politicians and social scientists (with a smattering of businessmen) were demanding dramatic change. That was the basis for Roosevelt's climactic "second hundred days" in 1935. Roosevelt's legislation that year established a high-water mark of progressivism. It included the Social Security Act, which eventually became the centerpiece of a new welfare capitalism; the Wagner Act, which granted workers the right to join unions without obstruction from employers; a wealth tax that increased estate, gift, and capital gains taxes and levied an excess profits tax; a Public Utility Holding Company Act that ended the utility empires of the 1920s; and major new spending programs, including the Rural Electrification Administration and the Public Works Administration.

The New Deal initiatives furthered the integration of government and economy that had begun during the Progressive Era. The reforms made the government, and not merely the courts or militia, a witting party to the relations between business and labor. The Wagner Act was based on the central contention of the new economics: that whatever prevented workers from improving their standard of living contributed to the Depression itself. "The inequality of bargaining power," the act stated, "substantially burdens and affects the flow of commerce and tends to aggravate recurrent business depressions." But it was also based on an explicitly pluralist view of democracy. By making it more difficult for employers to impede workers' organization, the Wagner Act sought to redress the "inequality of bargaining power between employees who do not possess full freedom of association . . . and employers who are organized in the corporate or other forces of association."

Jefferson and Jackson had seen government itself as a threat to liberty and equally. Citizens could meet that threat through their participation in politics. But the rise of corporate capitalism had undermined the power of the individual citizen to affect history. The ordinary worker, forced to sell his labor power to a large company, was no match for the managers and financiers of the new capitalism. The Wagner Act was the first piece of legislation to acknowledge that economic and political equality depended upon workers organizing to counter the power of the corporations and their managers. Democracy depended on the countervailing power of groups, without which democracy would be a sham.

But the Wagner Act did more than acknowledge the power of groups in politics. It made government responsible for ensuring that the power of business would be challenged, or perhaps even matched, by that of labor. The pluralist theory of government-as spelled out by Bentley and his disciples-was a theory of might is right. The democratic pluralism of the New Deal was entirely different: its premise was that a society in which the power of business overwhelmed that of labor was wrong and that it was the responsibility of government to counter the power of business with that of labor-and by extension, the ordinary American.

The legislation of the second hundred days also expanded the scope of government and the meaning of democracy. It implicated the national government in the broader welfare of American workers. It became responsible, along with employers, for Americans' standard of living. In its initial form, Social Security was a carefully wrought insurance scheme that merely transferred income from workers to retirees, but by replacing private with government insurance, the Roosevelt administration opened up the question of government's greater responsibilities. Equally, the New Deal's initial relief programs were targeted at the emergency created by the Depression, but they, too, created a presumption that the government would now seek to prevent large-scale unemployment. In this way, the second hundred days didn't merely shift the balance of power between business and labor; they also broadened the terrain on which the two sides would contest for power, income, and benefits.

The immediate political effects of legislation were dramatic. The Wagner Act speeded changes already taking place in the labor movement. In November I935, John L. Lewis, the leader of the United Mine Workers, led a walkout of the fledgling industrial unions from the AFL, establishing the Congress of Industrial Organizations as a rival federation. The CIO formed Labor's Non Partisan League to mobilize union members behind Roosevelt's reelection. In spite of almost united business opposition, Roosevelt won by another landslide, and Democrats and progressive Republicans increased their margins in both the Senate and the House of Representatives. Union organizers from both the CIO and the AFL unleashed another strike wave. From September I936 to May I937, 484,711 workers were involved in sit-down strikes, where workers would take over the factories. Roosevelt and Democratic governors like Michigan's Frank Murphy refused to heed the companies' requests for troops to reclaim their factories. In February I937, General Motors, the biggest prize of all, fell to the United Auto Workers. At the height of the New Deal, progressive politics and a revived labor movement proved a match for business and set the agenda for the elite organizations.

The legislation of the second hundred days created a long-term constituency for Democrats, progressives, and liberals. Programs like Social Security and rural electrification became symbols of progressive and liberal commitment to Americans' well-being. Even during the backlash to the New Deal in the late I9305 and to the welfare state in the I980s, politicians who attempted to overturn these programs risked almost certain defeat in the polls. As a result of the New Deal, American politics shifted decisively away from the underlying assumptions about the limits of government that prevailed during the Age of Mellon. It would be another four decades before these new assumptions would be effectively challenged.

Paradox of American Democracy

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