Dr. Carson has written and taught extensively, specializing in American intellectual history. He is the author of several books and a frequent contributor to The Freeman and other scholarly journals.
Relics of the New Deal are still very much a part of the political machinery under which we live. The bent to inflation, which is still in the process of destroying our money, was firmly established during the New Deal. The notion that it is the business of government to support and look after a goodly portion of the population was articulated in particular programs, many of which are still in operation. The practice of government attempting to manage the economy is a relic of New Deal efforts to institute a planned economy. The preference for the collective over the individual is around in hundreds of government prescriptions to this day. They are relics of enthusiasms of a bygone era. For none of them is this more clearly the case than for collective planning.
At this remove in time from the early days of the New Deal, it is difficult to recapture, even in imagination, the heady enthusiasm among a goodly number of intellectuals for a governmentally planned economy. So far as can now be told, they believed that a bright new day was dawning, that national planning would result in an organically integrated economy in which everyone would joyfully work for the common good, and that American society would be freed at last from those antagonisms arising, as General Hugh Johnson put it, from “the murderous doctrine of savage and wolfish individualism, looking to dog-eat-dog and devil take the hindmost.”[1] That economic planning would arouse its own antagonisms, that it would have to be imposed by government, and that its tendency was toward totalitarianism was something that either these intellectuals did not know or would not accept.
An Exciting Experiment
A part of this enthusiasm for collective planning can be accounted for by the fact that it had not yet been discredited by recent experience. Fascist Italy was still in the formative years in its experiments with syndicalism when the New Deal was being shaped. The Soviet Union was just finishing its first five-year plan, and Stalin applying the brakes by proclaiming that those imposing it were “dizzy with success.” The failure of “democratic socialism” in England was still fifteen years in the future.
But to look at it that way is to back into an explanation of New Deal enthusiasm for a planned economy. National planning was in the wind at the time. More broadly, it constituted much of the intellectual weather for most radical and reformist intellectuals. The main sources of this enthusiasm were in Europe. As I have pointed out in an earlier article, Theodore Roosevelt’s New Nationalism and mobilization of the economy during World War I provided some of the impetus toward the planned economy. But Italian Fascism and Soviet Communism were the models which excited the imagination of many intellectuals as the 1920s gave way to the 1930s. In this, Americans were following the lead of European intellectuals. One historian goes so far as to say “that many of the best minds of the West saw fascism and communism as the only real alternatives of their times.”[2] Those who took their orientation from Moscow were taught, of course, that those countries which persisted in clinging to capitalism would inevitably become fascist.
There is not much direct evidence, not much known to me, anyway, that any considerable number of Americans were enamored with Italian Fascism. An intellectual historian of Europe has said that “Mussolini was widely admired even in the democracies. Had he not produced an order in his nation which the democracies were apparently incapable of producing? From Churchill (who expressed his admiration as late as 1938) to those who praised the Duce for making trains run on time, the wave of admiration accepted fascism as an alternative to ideologies which proclaimed a more thorough social and economic revolution.”[3] If that was the case in the United States, the admirers were mostly of the closet variety. An exception that tends to prove the rule was Lincoln Steffens who had, by the 1930s, grown old in the socialist cause and could openly praise Mussolini in his Autobiography.[4]
Even so, there were overtones of Italian Fascism in the early New Deal, especially in the National Recovery Administration, the Agricultural Adjustment Administration, and the semi-military Civilian Conservation Corps. There were the appeals to national unity, the national planning motif, the military displays, on “NRA Days,” the parades, the organization of farmers, workers, and industries into groups, and so on. Some of the New Dealers, at least, were aware of parallels but tried to avoid calling attention to the fact. For example, Rexford G. Tug-well notes that Roosevelt did not want mention made of the parallel between Mussolini’s youth army working on rural projects when he set up the Civilian Conservation Corps.[5] When General Hugh Johnson reviewed the day long “NRA Day” parade in New York City, he says that he took care not to raise his arm lest it be interpreted as a Fascist salute. That did not keep a photograph from being published, however, which apparently had caught him in the stance. Johnson surmised that it must have been someone else’s arm.[6]
But it was Soviet Communism which kindled the enthusiasm for many American intellectuals for collective planning. One historian who has explored some of these relationships in a book has a chapter entitled, “Soviet Russia: Lodestone of the American Liberal.”[7] Another says that “The whole conception of a ‘social experiment,’ the whole notion of planned human intervention into social processes to raise the welfare of the people, had become linked in the minds of America’s intellectual and social leaders with the practice of the Soviet Union.” This was accomplished mainly, he says, by articles and books written by some of the “several hundreds of travelers to the Soviet Union” in the 1920s.[8] Eugene Lyons said, “The fact is that American liberals were hopelessly dazzled by the idea of ‘planning’ . . . . Nearly every college professor, poet, social worker, engineer or schoolboy who returned from Russia brought the stereotyped formulas and statistical patterns to swell the shiny mountain of self-deception. The more articulate wrote books. Almost as many books on the ‘Soviet experiment’ were published in 1931 as in the preceding thirteen years.”[9]
The Russian Model
Among these travelers to the Soviet Union during this period were John Dewey, Rexford G. Tugwell, Paul Douglas, Stuart Chase, Jane Addams, Robert M. LaFollette, Maxwell S. Stewart, George Soule, Edmund Wilson, and many, many others. Among the abundant literature favoring economic planning, much of it written by people who had traveled to the Soviet Union, here is a sampling of titles from the period: John Dewey, Impressions of Soviet Russia (1929), Sherwood Eddy, The Challenge of Russia (1931), George S, Counts, The Soviet Challenge to America (1931), Bruce Bliven, “Russia Marches Up a Mountain,” New Republic (1931), Charles A. Beard, “The Rationality of Planned’ Economy,” in America Faces the Future (1932), Rexford G. Tugwell, “The Principle of Planning and the Institution of Laissez-Faire,” American Economic Review (1932), Stuart Chase, A New Deal (1932), Chester Davis, “Toward Planned Harvests,” Review of Reviews (1933), and Maxwell S. Stewart, “Where Everyone Has a Job,” Survey Graphic (1931).
The impact of Soviet planning on American thinkers, many of whom influenced the New Deal, may come out even clearer from a few quotations. The New York Times declared that Stalin’s first Five-Year Plan was the “most extraordinary enterprise in the economic history of the world.”[10] Stuart Chase proclaimed that it was “exciting, stimulating, challenging.”[11] John Dewey said of the Soviet undertaking, “In some respects, it is already a searching spiritual challenge as it is an economic challenge to coordinate and plan.”[12] “Why,” cried Stuart Chase, “should Russians have all the fun in remaking a world.”[13] George Soule said, “We could not assimilate the hard dogmas and terminology of Marxism . . . . but we were irresistibly attracted by the idea of planned use of modern industrial technique.”
Advisers to Roosevelt
The New Deal was well equipped with enthusiasts for collective planning from the outset. Rexford G. Tugwell spent much time during 1932 with Roosevelt, and, whenever he could make an opportunity to do so, worked to convince him of the necessity for planning. After Roosevelt’s nomination, Tugwell sent him a memorandum in which he admonished the future President to pursue planning, saying, in part: “It is not proposed to have the government run industry; it is proposed to have government furnish the requisite leadership; protect our resources; arrange for national balance; secure its citizens’ access to goods, employment and security; and rise to the challenge of planning that concert of interests of which I have spoken before.”[14]
By the time he was inaugurated, Roosevelt had managed to attract a goodly number of people to the government, to join others already there, who were eager to initiate planning. Henry A. Wallace, Secretary of Agriculture, expressed his desire for a new era in mystic terms to Roosevelt. “I feel for a short time yet,” he said, “that we must deal with the . . . ‘flameless ones’ who with one last dying gasp will strive to re-animate their dying giant ‘Capitalism.’ Mr. President, you can be the ‘flaming one,’ the one with an ever upward-surging spirit to lead us into the time when the children of men can sing again.”[15]
Much more prosaically, Senator Robert Wagner of New York said, while urging the passage of the National Industrial Recovery Act: “I do not think we will ever have industry in order until we have nationally planned economy.”[16] Donald Rich-berg, who eventually replaced General Hugh Johnson as head of NRA, told a Senate committee that “A nationally planned economy is the only salvation of our present situation and the only hope for the future.”[17] Raymond Moley, a speech writer for Roosevelt, declared that what was needed was “a policy of cooperative business-government planning.”[18] Jerome Frank, general counsel in the Agriculture Department, held that “Just as America took an important step forward when it rejected political anarchy and integrated this continent into one nation, so it needs now to press forward to a deliberate economic integration.”[19]
The NRA and the AAA
The two most direct and extensive New Deal experiments in collective planning were those made under the National Industrial Recovery Act and the Agricultural Adjustment Act. Both were passed during the Hundred Days of the emergency session of Congress which met on March 9, 1933 and adjourned on June 16. Before discussing these, however, there was another act passed during this session which may make clearer the animus behind national planning, why it was considered necessary, and what view of economics sustained it. It was the act creating the Tennessee Valley Authority, an act authorizing the creation of a whole series of dams and locks on the Tennessee River.
There are two things that are especially strange about TVA. The first is that the act should have been passed in the midst of a special session of Congress called to deal with an emergency. Even if it be granted that TVA might eventually bring benefits to a region, it is difficult to see its relevance to dealing with an emergency. The building of dams and locks on a mighty river is not something done in weeks or months but in years. Nor is it at all clear that the most obvious products visualized, electricity, water transport, and fertilizers would be of such great benefit, even when they came. Fertilizer could be bought less expensively elsewhere; the capacity to produce more electricity than was being sold already existed, according to private power companies; and river transport had been largely displaced. The second strange thing is that government ownership of TVA became sacrosanct, as those few national politicians who have expressed themselves in favor of divestment discovered, to their sorrow usually. Indeed, no New Deal pro gramhas ever been so secure from political criticism, unless Social Security might possibly be.
The TVA Idea
TVA represents something other than what it is as an engineering feat or its economic value. It is a symbol. Therein lies the main explanation for its having been undertaken so expeditiously as well as for its treatment as a sacred object. It is a symbol of government planning. Arthur E. Morgan, the first chairman of the board set up to govern TVA, expressed the symbolic purpose forthrightly. He said, “The TVA is not primarily a dam-building job, a fertilizer job or power-transmission job.” It is an example of man’s “efforts to bring order out of chaos.” Or, as Arthur Schlesinger summarized his belief, TVA “was an experiment in social reconstruction . . . .”[20] Whether any New Dealer ever formulated the ways in which TVA symbolized government planning, I do not know, but what follows covers some of the ways it must.
In the first place, the Tennessee River, as it was in 1933, is an apt symbol of the way New Dealers thought of a free economy. The sources of the Tennessee are in the mountains of Tennessee, North Carolina and Virginia. It is formed by the joining of the Holston and Clinch rivers at Knoxville. From there it flows south to Chattanooga, thence southwestward to Guntersville, Alabama, then northwestward through Alabama into Mississippi, then northward back through Tennessee, through the tip of Kentucky to Paducah, where it empties into the Ohio. It is approximately 650 miles long. In that whole length, there was only one dam, of consequence, in 1933, the one at Muscle Shoals, Alabama. It was, so to speak, largely in a “state of nature,” wild, and untamed. For much of its length it was unnavigable. When the snows melted in the mountains and the spring rains came, it rampaged through cities, flooded the low lands, and washed minerals and topsoil away. In the summer and fall it dwindled so that it would not be deep enough in places for navigation. Most of the vast force of its waters was wasted, and its navigational uses undeveloped.
That is much the way New Dealers thought of a free economy. It tended to get out of balance perpetually, much as a river does in wet and dry seasons. As the river floods, so there is over- production in a free economy. Demand does not keep pace with supply. There are booms and busts. There is the waste of unemployment. Goods go unsold while some people are in need.
In the second place, TVA symbolized the New Deal solution to the problem. The solution was to use the power of government to control the river, to build dams, locks, and lakes,. to stop the flooding by filling the lakes in the wet season and keeping a portion of the waters in dry season so that the level would be higher. The force of the river would be harnessed for electricity. Channels would be deepened and locks would be used to raise boats so that they could go up or downstream on waters that were level. Just so, the New Dealers expected to even out and balance the economy by planning.
In the third place, the results of planning in the TVA were visible and concrete, by contrast with much of industrial planning, for example. So far as TVA was a symbol of government planning, it was a symbol that could be looked at, touched, and heard. The locks and dams can be seen and touched. The water rushing down the spillways can be heard. The lakes are great bodies of water that can be seen from highways or bridges, or traveled on by boat.
The Analogy Breaks Down
The analogy by which the TVA might be a symbol of collective planning generally does not stand up under critical examination, of course. Men are not drops of water whose activities may be stopped by government dams and whose energies may be impounded for later use. They are animate, sensate, and rational beings with minds and wills of their own. The employment of their energies is self-directed and guided by their own desires and purposes. Nor is an economy analogous to a flowing stream, except in the loosest and most imprecise sense. Economy is that which results from the decisions of people in producing, buying, selling, and consuming. Unless force intervene to prevent it, an economy will tend always toward balance through the continual adjustments that go on.
The New Dealers did not accept this view of the matter. They professed to believe that the economy was out of balance and that this could only be corrected by planning and the application of force. Neither the National Recovery Administration (NRA) nor the Agricultural Adjustment Administration (AAA) may have considered men as if they were drops of water, though they did contain their energies as if by dam, and minorities in elective decisions were often given short shrift.
The most immediate purpose of the NRA and AAA was to raise prices, especially of farm products, and wages of industrial workers. The main device for doing this was the reduction of production, though monetary inflation was supposed to provide the means for it to occur. The NRA operated through industrial codes. Ideally, these codes were supposed to be drawn up by representatives of companies and workers. Thus, there would be a cotton textile code, a steel code, a shoemakers code, a farm equipment code, and so on. But the matter was not left entirely to these representatives. The President of the United States was authorized to alter the codes, if he saw fit, or to provide codes if those within an industry failed to do so.
To Restrain Competition
These NRA codes were typically concerned with restricting competition within an industry, reducing hours of labor, and raising prices and wages. Employers were usually forbidden to employ children under 16 years old. A minimum wage throughout the industry and a work week of 40 hours were ordinarily specified. Further, the Cotton Textile Code, for example, forbade em ployers to use “productive machinery in the cotton textile industry for more than two shifts of 40 hours per week.”[21] Planning was supposed to be accomplished by the companies and workers acting in concert with government. Nor was it simply major industries that were governed by codes initially; any and every sort of undertaking was included. Thus, “Code 450 regulated the Dog Food Industry, Code 427 the Curled Hair Manufacturing Industry and Horse Hair Dressing Industry, and Code 262 the Shoulder Pad Manufacturing Industry. In New York, I. ‘Izzy’ Herk, executive secretary of Code 348, brought order to the Burlesque Theatrical Industry by insisting that no production could feature more than four strips.”[22] Apparently, they did not restrict the number of garments to be removed.
The AAA was expected to do for agriculture much the same sort of thing that NRA would for industry, only more. Farmers were reckoned to be in much worse condition than manufacturers and industrial workers. The first task with them, according to the planners, was to bring farm income up to a parity (as it was called) with industrial income. The years 1909-1914 were chosen as a base for most farm staple products, and the aim was to raise farm prices to a level that would give them an income equivalent to the ratio between farm and industry that prevailed in the base period. The main device for accomplishing this was reduction of production of staples. So dramatic was the need for reduction, New Dealers thought, that a considerable portion of the 1933 cotton crop was plowed up and many small pigs put to death. Thereafter, farmers were induced to plant less by government subsidies for those who “cooperated.” Under the first AAA (1933-1936), the money to pay for the various benefits paid to farmers came from a tax on processors. Many farmers had long believed, of course, that the middlemen got the profits from their endeavors. The New Deal gave this spurious notion legal standing by levying the tax.
Collective Performance of Producers and Government
The “collective” aspect of this planning had two facets. One was the participation of farmers, industrialists, and workers in the programs. Farmers voted on such matters as crop controls, and there were local committees to oversee participation in the programs. Industrialists and workers, as already noted, had representatives in drawing codes under the NRA. The other facet was in government participation. Here, New Dealers emphasized the democratic character of the government and, through a kind of collectivized democracy concept, even the activity of government could be conceived as collective. Most of this was window dressing. Government agencies bought compliances where they could and otherwise forced it upon many of those who would not otherwise have participated. Herbert Hoover observed rather testily, in 1934, that those in power had assumed the authority “To enforce most of these powers where they affect the individual by fine and imprisonment through prosecution in the courts, with a further reserved authority in many trades through license to deprive men of their business and livelihood without any appeal to the courts.”[23]
That the NRA was a failure in collective planning is generally conceded. It could be argued that it never had a sufficient trial. After all, the NRA only got under way in mid-1933, and the Supreme Court declared its central authorizing provisions unconstitutional in 1935. Chief Justice Hughes, speaking for most of the court, declared that “We think that the code-making authority thus conferred is an unconstitutional delegation of legislative power.”[24] But within the administration the usefulness of the code-making approach was being sharply questioned before the Supreme Court decision.[25] The hassle of getting the codes made and enforcing them was exceedingly troublesome from beginning to end. The NRA was in retreat before the court decision, and no effort was ever made to revive collective planning by the industries themselves.
Actually, the AAA, too, was declared unconstitutional, or at least crucial provisions of the act bringing it into being were. The challenge of the processing tax came before the Supreme Court in 1936. The court affirmed the judgment of an appeals court that the government could not collect the tax. Many books have treated the decision as if it merely nullified the tax. But the court opinion made clear that it was not the tax itself but the end for which it was used that was contrary to the Constitution. Justice Roberts, speaking for the majority of the court, declared that “powers not granted are prohibited. None to regulate agricultural production is given, and therefore legislation by Congress for that purpose is forbidden.” Further, he pointed out that “appropriations and expenditures under contracts for proper governmental purposes cannot justify contracts which are not within federal power. And contracts for the reduction of acreage and the control of production are outside the range of that power.”[26] The President and Congress were undaunted, however, and major provisions of the act were reenacted in 1936, and the AAA itself was born again in 1938. This last followed upon a counterattack on the court in 1937.
Their constitutionality and demise or continuation aside, however, both the NRA and AAA failed in their missions. They made no significant contributions—none at all but brief and temporary ones—to ending the depression. Indeed, they only helped to prolong it (see "What Caused the Great Depression?"). Not only did they try to reduce production but also to freeze it in its recent pattern. New enterprises in old industries were discouraged. There were attempts to make employers keep the same number of employees and farm landlords to keep the same number of tenants. The Agricultural Adjustment Act of 1933 provided that farmers who made proper reductions in cotton acreage should not increase “commercial fertilization per acre.” It also declared that cotton producers should not “use the land taken out of cotton production for the production for sale . . . of any other nationally produced agricultural commodity . . . ”[27]
Counterproductive Measures
The thrust of these programs was in the opposite direction from what was needed. If people have material needs, are unemployed or underemployed, the solution for them is either to produce for themselves what they need or produce for sale in the market enough of what is wanted to be able to buy what they need. These things require more, not less, production and changes in production activities, not the freezing of them into patterns of the past. That is not to say that government would have had greater success in planning increased production. Some things were already being produced in greater quantities than could be profitably produced for the market. Any general effort to solve the problem was doomed to failure, for the problem was one of individuals, families, and other producing units. Only they could solve it.
Although the NRA was abandoned and the AAA was modified (and many particular programs reduced or abandoned over the years), they left most important residues which are still very much with us. The most important relic is the idea that government is responsible for the functioning of the economy. This undergirds the notion, which has surfaced in hundreds of ways since the 1930s, that government can take action and plan so as to make the economy work well. It surfaced in the idea that government can manipulate the currency to prevent depressions and insure prosperity, in the Employment Act of 1946 in which the government assumed the re sponsibility for following policies to assure full employment, in the Council of Economic Advisers which Presidents have, in controls over wages and prices, in attempts to maintain or increase purchasing power, in land use programs, in government empowerment of labor unions, in the still existent crop subsidy programs, and so on and on. The idea of collective planning is present in the government mandated hearings which must be held before communities make changes or institute programs. Government participation in collective planning is a major ingredient in the environmental protection rules and regulations. Indeed, it would be an encyclopedic effort to explore all the ways that government is today involved in economic planning for Americans.
A Discredited Relic
Government economic planning is a relic. It is a relic of the New Deal. It is a relic of enthusiasms which go back to the 1920s, to World War I, to Italian Fascism, to Soviet Communism, and to World War II economic controls. It is a relic of fascism which was on its way to being discredited and was already in ill repute before the New Deal programs were enacted. It is a relic of national socialism, which failed in Britain and led to massive oppression in the desperate effort to make it work in the Soviet Union. It has been discredited in theory and practice. []
Next: New Deal Welfarism.
1. Quoted in Arthur M. Schlesinger, Jr., The Coming of the New Deal (Boston: Houghton Mifflin, 1959), p. 88.
2. George L. Mosse, The Culture of Western Europe (Chicago: Rand McNally, 1961), p. 378.
4. See Schlesinger, op. cit., pp. 142, 208.
5. Rexford G. Tugwell, The Brains Trust (New York: Viking, 1968), p. 71.
6. Hugh S. Johnson, “NRA Ballyhoo” in William E. Leuchtenburg, ed., The New Deal (Columbia: University of South Carolina Press, 1968), p. 47.
7. Frank A. Warren, III, Liberals and Communism (Bloomington: Indiana University Press, 1966), ch. 4.
8. Lewis S. Feuer, “American Travelers to the Soviet Union,” American Quarterly (Summer, 1962).
9. Eugene Lyons, The Red Decade (New Rochelle, N. Y.: Arlington House, 1970, originally pub. 1941), pp. 103-04.
10. Quoted in Warren, op. cit., p. 70.
12. Quoted in Lyons, op, cit., p. 107.
13. Quoted in Warren, op. cit., p. 59.
14. Tugweli, op. cit., p. 527.
15. Quoted in Schlesinger, op. cit., pp. 32-33.
16. William E, Leuchtenburg, Franklin D. Roosevelt and the New Deal (New York: Harper & Row, 1963), p. 58.
17. Quoted in Schlesinger, op. cit., p. 93.
21. Henry S. Commager, ed., Documents of American History (New York: Appleton-Cen-tury- Crofts, 1962), vol. II, p. 277.
22. Leuchtenburg, Franklin D. Roosevelt and the New Deal, p. 69.
23. Herbert Hoover, The Challenge to Liberty (Rockford, Ill.: The Herbert Hoover Presidential Library Association, 1971, originally pub. 1934), p. 78.
24. Commager, op. cit., p. 281.
25. See Schlesinger, op. cit., pp. 161-62.
26. Commager, op. cit., pp. 250-51.
“Planning” vs. the Free Market
Henry Hazlitt
Planning always involves compulsion. This may be disguised in various ways. The government Planners will, of course, try to persuade people that the Master Plan has been drawn up for their own good, and that the only persons who are going to be coerced are those whose plans are “not in the public interest.”
The Planners will say, in the newly fashionable phraseology, that their plans are not “imperative,” but merely “indicative.” They will make a great parade of “democracy,” freedom, cooperation, and noncompulsion by “consulting all groups”—“Labor,” “Industry,” the Government, even “Consumers Representatives”—in drawing up the Master Plan and the specific “goals” or “targets.” Of course, if they could really succeed in giving everybody his proportionate weight and voice and freedom of choice, if everybody were allowed to pursue the plan of production or consumption of specific goods and services that he had intended to pursue or would have pursued anyway, then the whole Plan would be useless and pointless, a complete waste of energy and time.
Clarence Carson
Clarence Carson (1926-2003) was a historian who taught at Eaton College, Grove City College, and Hillsdale College. His primary publication venue was the Foundation for Economic Education. Among his many works is the six-volume A Basic History of the United States.