BUSINESSMEN SHOULD BE DEMOCRATS
Benton, William
BUSINESSMEN should be DEMOCRATS by William Benton JOHN J. McCLOY, the estimable chairman of Chase-Manhattan, one of the two or three most powerful banks in the United States, testified last year...
...It is true because they have tended to take a somewhat larger view of American society as a whole, and have been readier to act in terms of that view...
...Most other Americans were, too...
...For the most part, our farm leaders have successfully avoided a permanent commitment to either party...
...Our two parties proceed pragmatically—opportunistically if you will—to try to solve problems as they emerge, comprising as best they can the pressures of the many self-interest groups...
...At least 95 per cent of the top Northern business leaders I know are "staunch Republicans...
...Social security is also recognized as an important cushion under purchasing power when things go wrong, either in a depressed community or in the country at large...
...Most Americans believe in the two-party system and want two vigorous parties...
...It persists even though the monolithic commitment of business to one party is obviously bad for business, bad for the Republican Party, and bad for the Republic...
...BUSINESSMEN should be DEMOCRATS by William Benton JOHN J. McCLOY, the estimable chairman of Chase-Manhattan, one of the two or three most powerful banks in the United States, testified last year before Senator Fulbright's Banking and Currency Committe...
...the Securities Act of 1933 and the Securities Exchange Act of 1934...
...I most fervently urge those individual business men who may be attracted by the Democratic Party not to let mythology or "respectability" or fear keep them out of it...
...The Commercial and Financial Chronicle opened the assault in 1935 with the flat statement that "unemployment insurance, for example, as conceived in Washington, is an economic absurdity...
...By the time these emergency banking reforms of 1933 were to be made permanent in the act of 1935, the cautious American Bankers' Association had apparently reconciled itself to the inevitable...
...that they are shifting coalitions of mutually-conflicting interest groups, without inner consistency or intellectual structure...
...on Feb...
...The businessmen of the Thirties were surprisingly illiterate economically...
...Even after the Act was passed 58 prominent corporation lawyers issued a statement urging employers to disobey the law on the ground that it was unconstitutional...
...This presumed partnership isn't justified by enlightened self-interest...
...Benton served for a time as vice president of the University of Chicago, Assistant Secretary of State, and U.S...
...fallacious...
...Its risks and penalities should be examined and continually reexamined by the business community...
...The Commercial and Financial Chronicle for Feb...
...Herbert Hoover cried out that "the poison of politics is mixed with the bread of the helpless" and he called for a "holy crusade" for "liberty...
...and "a failure wherever it was tried...
...now the nucleus of Republican strength lies in the agricultural areas of the Midwest and West...
...Most of them have dodged direct and personal political responsibility...
...I would oppose with all my strength, in the interest of the Democratic Party itself, and of labor, and of the country, the kind of alliance between the Democrats and labor that has existed between business and the Republican Party...
...Believing in democracy, it has held with fair consistency to the conviction that our American people, when they seek what is good for our American society as a whole, are also seeking what is good for American business...
...Shall I now seek to make a case for a future alliance between business and the Democratic Party...
...Like all myths, the notion that the Democrats are hostile to business has a foot in history...
...None of the dire forecasts of the alarmists has been borne out, and no one now supposes they ever will be...
...What was the reaction to the New Deal as a whole, to the concept of a compensating economy with built-in stabilizers...
...he lost his nerve and practically balanced the 1937 budget—with disastrous results...
...S. Wells Utley of Detroit Steel Casting asserted: "I say to you in all seriousness that the burden of taxation if continued on the present basis, or the burden of social security legislation now on the statute books, or the fundamental principles underlying the Agricultural Adjustment Act, either one of them alone, without the help of the others, if allowed to continue will within a single generation destroy the liberty of the people, wreck their economic structure and reduce this nation to a condition akin to that of Russia today...
...Many cried out that unemployment compensation—"the dole"—would destroy the labor force by converting "the sturdy American working man" into an idler...
...Percy Magnus, president of the New York Board of Trade, denounced the bill most eloquently: "When the storm is raging and the ship is rolling it is no time to take the engines apart and experiment with new gears which some plausible salesman promised would work...
...Among the signers were Edgar Queeny of Monsanto Chemical, Sewell Avery of U.S...
...Few now recall what leading bankers were saying when deposit insurance was under debate...
...Most of our labor leaders, perhaps less successfully, have sought to avoid fixed party alliances...
...He contrasted today's economy with 1928-29—and he clearly preferred today's...
...Eighty-six per cent of American newspapers supported Alf Landon against Roosevelt in 1936...
...when boom and inflation threaten, the doctrine calls for cutting the federal budget, raising taxes and tightening credit— all to limit purchasing power...
...Our European friends are puzzled by our party system, and a little scornful...
...The spokesmen for business have not been politically as wise, in my opinion, as they should have been...
...Enterprising businessmen who adopted more productive machinery and better methods of management of course deserve much of the credit...
...By December 1935, with the '36 elections impending, the National Association of Manufacturers was ready for an out-and-out attack on the New Deal and all its works...
...Fortune magazine, no enemy of big business, in surveying the 1930s last year, decided that "the basic reason the depression lasted so long was, of course, the economic ignorance of the times...
...Abuses in Wall Street before the crash, combined with catastrophic losses to investors, prepared the ground for the Securities Act of 1933 and the Securities Exchange Act of 1934...
...If one were to select the New Deal measure that aroused the most vehement opposition of businessmen it would probably be the Wagner National Labor Relations Act of 1935...
...These were some of the reactions of businessmen and bankers to four specific New Deal measures...
...We may find ourselves trying to win a new war against economic disaster solely with the weapons of the old one...
...The self-reliant American would be reduced to a spineless pulp...
...Winthrop Aldrich, McCloy's predecessor as chairman of the Chase Bank, told a Congressional committee that "the fallacy of unlimited guarantee of deposits" would "put a premium on bad banking...
...Russell Leffingswell of J. P. Morgan announced that "We do not wish to be guinea pigs for laboratory experiments by freshmen students of government and political science...
...They have often adopted political attitudes from the viewpoint of their narrow business interests, such as on tariffs or taxes...
...They point out that our parties don't stand for anything...
...Only because the discoveries of twenty years ago, however sound, may not be enough to solve the problems of today and tomorrow...
...Business leaders today speak glowingly of the "built-in stabilizers" in the American economy...
...2. Labor Relations Legislation...
...This myth persists in the face of history and logic...
...When he singled out the Securities and Exchange Act of 1934 for praise, Senator Fulbright asked, "How about the Federal Deposit Insurance Corporation...
...The best descriptive phrase for the complex of laws which brought these tools into being is the "New Deal...
...Woodrow Wilson, the first Democratic president of this century, sponsored economic legislation under the slogan, "the New Freedom...
...puts a premium on bad banking...
...It was ten years after the New Deal was launched by a Democratic President and Congress that a business group— the newly-formed Committee for Economic Development, of which I had the honor to be the first vice-chairman—recognized and espoused the notion that the government has a positive opportunity and obligation to help keep the national economy stable and in forward motion...
...Such proposals, said General Counsel Emery of the National Association of Manufacturers, would foster "communism" within industry...
...This new doctrine was expressed in the momentous Thirties through a series of statutes, including the Banking Acts of 1933 and 1935...
...Isn't that enough for a staunch Republican...
...Stock Exchange called for a return to the "simple, ancient rules of economics...
...Many students of the economy feel that the United States at last appears to have acquired the tools to prevent the wilder swings of the business cycle—to offset boom or bust...
...The Journal of the American Bankers' Association summarized a coast-to-coast survey: "Estimates are divided geographically...
...The ability of the business community now to accept the new measures of twenty years ago may not be enough to stave off future economic disasters...
...appears" because the stabilizers haven't yet had a severe test...
...Because the Wall Street crash of 1929 had touched off the political powder train that led to the Democratic victory of 1932, transactions in stocks and bonds were naturally an early target of New Deal legislation...
...To most business men of Wilson's time his program looked like radicalism—yes, and like socialism...
...Our two political parties should seek to earn and deserve the support of each major group, and deserve it continuously...
...The United States can now boast not only that its people have the largest per capita income in the world but that the distribution of this income is much more widespread than it was 25 or 30 years ago...
...But these very qualities are one great source of America's political strength and stability...
...unsound...
...In 1936, after the Social Security bill had become law, Winthrop Aldrich, accepting the presidency of the New York Chamber of Commerce, declared the Act was "a grave menace to the future security of the country...
...The bankers' friends were even more vociferous...
...is the voice of American industry...
...The best way to keep our two parties competitive and healthy is to encourage each to be as inclusive as possible—to keep reaching for the other party's constituency—to try to speak for the best interests of all groups and thus for the entire country...
...Chamber of Commerce was charging that "the free flow of capital into private business" was "hampered by the rules of the SEC...
...The increase in real wages that took place during and after World War II multiplied consumer purchasing power and helped to sustain markets for goods turned out in unparalleled profusion as a result of technological progress...
...In January of 1933 Business Week complained that "the one voice that is conspicuously and strangely silent...
...He is presently chairman and owner of all the common stock of three successful business enterprises, Encyclopedia Britannica, Encyclopedia Britannica Films, and Muzak Corporation...
...Traditionally, our businessmen have avoided and even scorned close participation in political life...
...This struck many business men as antagonistic and evil...
...They have moved in aggressively only where they have seen a dollar-and-cents stake in franchises, or utility rates, or public contracts...
...said never before . . . had members been so vocal, so militant in their attitude, so determined to force a turn of the tide—in this case, a return to a national, economical, constitutional form of government...
...The Social Security Act of 1935, providing for unemployment insurance, old-age pensions, and other benefits, came along when business opponents of the New Deal were recovering their confidence and their voices...
...Old age insurance would ruin the incentive to save...
...Neither party can be opposed to business in such a system...
...They must dodge no longer...
...The ablest and brightest are now desperately needed in big-time politics, and their service to their country may well be greater today in the Democratic Party than in the Republican...
...16, it allowed that "Such a plan, if installed, would give the President of the United States the power by proxy to pass on each and every bank loan made in the country...
...In the late Nineteenth Century, the Democratic Party was dominated by the agricultural Southern and Border states...
...Apparently they even sold Roosevelt on the idea of a balanced budget when unemployment figures topped ten million...
...The rank-and-file of agrarian democracy, in their fierce determination to foster and defend their faith in private property, clashed with the new business men of New England over monetary policy and the tariff...
...they have sought to preserve their bargaining position from election to election...
...it didn't seem to be recognized...
...And it was nearly twenty years before a Republican Administration, in its annual Presidential economic report, could say, "It is well to recall that we have developed in our country a fiscal system that tends to cushion or offset a decline in private income...
...If most Republican businessmen have now been converted to policies adopted by the Democrats more than twenty years ago, why should a Democrat find fault...
...Let us examine the reactions of business leaders of 1933-36 to four of the great measures which created the "built-in security" some of their successors speak of with modest pride today: 1. The banking acts...
...Thus the greatest danger of all to our economic stability may be complacence, unbounded optimism that at last we have solved our economic problems— the kind of feeling that characterized the business and Republican political leaders of the late 1920's...
...Thus, our social security laws are now recognized as a strategic part of the businessman's defense against depression...
...the Fair Labor Standards Act and the National Labor Relations Act of 1935...
...Operating under the myth that the Republicans are better for business than the Democrats, the business community asks to be saddled with responsibility for the mistakes of the Republican Party...
...They have encouraged the development of the clear, open, and longstanding partnership between business and the Republican Party...
...A quick survey of key publications reveals the following as typical: "impracticable...
...Conversely, if the business philosophy of Mark Hanna—the arch-Republican ancestor of Secretary Humphrey as head of the M. A. Hanna Company—had prevailed in the first half of the Twentieth Century, the outlook for freedom of enterprise in the second half would be bleak indeed...
...I am pleased to report that while there were countless other statements of this character, Marion Folsom, now Secretary of Health, Education, and Welfare and then treasurer of the Eastman Kodak Co., was an exception among businessmen...
...But where were the businessmen in 1935 who would join the Democrats to argue that, far from bankrupting the economy, high and rising wages, undergirding purchasing power, could benefit business itself...
...7, 1935, announced: "We hereby unhesitatingly express our condemnation of the proposed law...
...A specially organized committee called "The National Committee for Modification of Industrial Sections of the Securities Exchange Act" wrote in 1934 that the proposed 1934 Act would subject "450,000 corporations" to "strangling regulations...
...That was long ago...
...This act, for the first time in our history, declared it to be national policy that employees should be protected in their right to engage in collective bargaining through representatives of their own choosing...
...Wifh Chester Bowles, subsequently governor of Connecticut and ambassador to India, Benton founded the Benton & Bowles advertising agency in 1929...
...William L. Gillespie, president of the New York State Bankers' Association, declared: "Guarantee of bank deposits is unsound in principle and has been a failure wherever it has been tried...
...Employers now testify before Congressional committees that social security provides protection which the worker needs, and which the private employer can never adequately provide...
...The Illinois Manufacturers Association sent its counsel to Washington to testify that "nothing could be conceived more certain to increase today's unemployment...
...I suggest no such alliance...
...Further, business violates the simplest of political rules by leading with its chin...
...Housing Act and the acts creating the Rural Electrification Administration and the Tennessee Valley Authority...
...And will they listen...
...They built it Into one of the five largest in the nation during the subsequent six depression years...
...In 1936, President Gay of the N.Y...
...They think of political parties as factions representing social or economic classes or interests, or as the action fronts for rigid political dogma...
...4. The social security program...
...As they view us, Europeans are right...
...These acts guaranteed bank deposits up to $5,000, required commercial banks to divest themselves of investment affiliates, and increased governmental control over the Federal Reserve System's control over credit...
...Since they are bright and able men, I can only conclude that they haven't had time to think about politics, and that many are victims of one of the most pervasive myths of our time—the myth that the Republicans are somehow better for business than the Democrats...
...the U.S...
...Chamber of Commerce resolved that it liked some aspects of the bank legislation but: "Proposals for the guarantee of deposits we oppose, because a guarantee would tend to promote careless banking...
...I do not claim I may not have missed a few in the small print...
...The new order of labor relations has proved compatible with one of the greatest periods of industrial expansion and productivity in history...
...Senator...
...One evidence of this ignorance, Fortune says, is that "Franklin Roosevelt was haunted by the ideal of a balanced budget, and his deficits were too small...
...I say Willuam BENTON has been enormously successful as a business man...
...The one piece of legislation that aroused business enthusiasm was the New Deal's major mistake—the National Industrial Recovery Act, with its codes of self-regulation and its "Blue Eagle...
...Business Week headlined: "The NAM Declares War," and reported that at the annual convention of the National Association of Manufacturers (which calls itself the "Congress of American Industry") "long time members of the N.A.M...
...And it was during Wilson's Administration that the long campaign for a federal income tax finally succeeded...
...Had this Act not been declared unconstitutional in the Supreme Court, it would have permanently crippled our free, competitive system...
...the Agricultural Adjustment Act...
...Would it be too unkind to them to recall how the stabilizers were built in...
...I feel the same way about an alliance with the big cities—or the immigrants or the Daughters of the American Revolution...
...The partnership tends to unite rival interest-groups in opposition to it...
...Can it be that the Democratic Party in this century has had a better view of business welfare than the business leaders themselves...
...New Jersey bankers protested to a Senate Committee against "meddling with our monetary and credit system...
...They echo President Eisenhower, and his Council of Economic Advisers, in describing how the stabilizers were invoked to check and reverse the developing recession of 1953-54...
...But Calvin Coolidge's and Herbert Hoover's America had presumed that business men were knowledgeable in economic matters because they looked like economic practitioners...
...Leaping through the record of those years, I find, I regret to report, no single instance where any of the usual spokesmen of the Republicans, any leading businessman, any business association, or any business or financial publication proposed or promoted any of this legislation...
...Chamber of Commerce, he dared to urge employers to support the law...
...Today, collective bargaining—duly upheld in the courts—is the rule rather than the exception...
...In a 1936 speech before the U.S...
...Chairman Landis of the Securities and Exchange Commission was moved to deny the allegation of a former Senator, Hamilton Kean, that "while the first drastic laws have been changed slightly . . . they are still so drastic that business is rapidly disappearing and going to London and other financial centers...
...On the contrary, I argue against it...
...A profound economic innovation of the New Deal is the doctrine that the federal government can and should serve as a business balance-wheel: when depression and unemployment impend, federal expenditures, particularly through public works, should be stepped up, taxes should be reduced and credit policies eased, all with the object of supporting purchasing power...
...Employers who have had experience with the new regime of labor relations are almost unanimous in claiming that it is better than the old...
...Yet, Eugene E. Thompson, president of the Association of Stock Exchanges, was saying of the 1933 Act: "It will seriously impair, if not destroy the value of securities markets, will reduce state and other taxes, and end the essential function of the Stock Exchange...
...I believe this to be true, but it is true not because the Democrats possess greatly superior business wisdom...
...Let me put it another way: if the Democratic Party has indeed been hostile to American business, then it has aided, abetted, buttressed, and invigorated its enemy as no antagonist has ever done in the history of human strife...
...But today not even the most intellectually antique business spokesman would seriously propose to repeal the measures of the New Freedom, or to contend that they have proved bad for the country or for business...
...Indeed the doctrine wasn't even debated...
...McCloy replied, "Yes, I would say that was beneficial...
...By April, 1936, the U.S...
...If one does loom up, the circumstances and the causes may be quite different from those which led to the collapse of the early 1930's...
...Our economy is constantly growing and changing...
...Likewise, business should be opposed to neither party nor identified with either party...
...The U.S...
...The reactions of the bankers themselves to the Emergency Banking Act of 1933 was confused in general, but clear on several points...
...The Democratic Party has not been dominated by any one group...
...As seen from Europe, our two parties are indeed very much alike in their professions and in their ideologies...
...Many students today regard the banking acts of 1933 and 1935 as the key New Deal moves toward stability...
...Because they are, we don't experience violent shifts when power changes hands—with nationalization of industry in one regime and denationalization in the next...
...Not so its more militant members and friends...
...But I do not want to see business as such, or labor, or farmers tied immutably to either party...
...I remember vividly how adversely I reacted, as the president of a fast-growing young business, to the proposition for an NRA code that would compel me to notify my competitors whenever I proposed to hire someone away from them...
...the various Social Security Acts...
...The New Freedom included the creation of the Federal Reserve System, passage of the Clayton Act, which strengthened the anti-trust laws, and the Federal Trade Commission Act, which brought the force of Federal law to bear on various forms of business piracy and fraud...
...Now we in New England worry about the competition of the industrial South...
...By contrast, listen now—twenty years later, in 1956—to G. Keith Funston, president of the New York Stock Exchange: "I think that the Act of 1934, the Securities Exchange Act of 1934, has been a great thing for the people of this country and for the securities industry...
...We may or may not have solved the problem of preventing another serious depression...
...3. The regulation of security transactions...
...Gypsum, Tom Girdler of Republic Steel, and F. A. Merrick of Westinghouse Electric...
...In all the declamations by business leaders and business associations and business publications I have come across from those exciting years, I have nowhere found support for the presently accepted doctrine of the "built-in stabilizers...
...In the matter of the insurance of deposits, and in respect to the concentration of further authority in the Federal Reserve System in that connection, there is almost complete disapproval...
...In December, after the Act had passed, T. E. Braniff of Braniff Investment Co., Oklahoma City, wrote in Nation's Business what was to become by 1936 the characteristic business reaction to the New Deal as a whole: "I am convinced that it is the most dangerous nostrum that this period has produced...
...He spoke of "all the built-in security we have...
...When one remembers that in the prosperous 1920's the smallest number of bank closings in any one year was 367, and that the number of bank suspensions reached 976 in 1926—all this before the collapse of the banks in the last year of President Hoover's Administration—it does seem that our present freedom from bank failures may hint that deposit insurance and improved public controls were indeed in the interest of the people, of bankers, and of business...
Vol. 20 • October 1956 • No. 10
