7—“Years of the Locust” and the Call for a Mussolini

THE WORST PHASE of the Great Depression between the Wall Street crash of 1929 and the beginning of Franklin Roosevelt’s presidency in March 1933 cast doubt about the future of the American economy and the ability of the federal government to end the crisis. Mass unemployment and deprivation fueled tremendous anger at Roosevelt’s predecessor, Herbert Hoover, who had refused to commit the federal government to intervene directly to end the three-year crisis. It had proven so costly to man and nature that the writer Gilbert Seldes chose The Years of the Locust as the title of his 1933 book. Seldes was unsparing in his criticism of business leaders who had insisted throughout the crisis that there was nothing fundamentally wrong with the economy. Nor did he care much for their cheerleaders in the press who used every opportunity to declare the long-awaited turnaround whenever the slightest uptick appeared. Seldes reserved most of his contempt for Hoover himself. The man Americans knew as the Great Engineer and had personified the spirit of rugged individualism now stood truly alone. Scorned by the masses who felt betrayed, his Big Business supporters watched him dangle in the wind of public opinion. Here was a man whose substantial personal fortune, after all, had been made in stocks. Less than a year after he became president, the stock market collapsed.

As the crisis deepened, Hoover remained adamant that any deviation from core American values of self-sufficiency and resiliency even in such harsh times would be disastrous to the nation’s future. By the end of 1932, his insensitivity to the plight of those who sought his understanding and compassion had become legend. For Seldes, there were no limits to Hoover’s bungling. He refused to meet with bedraggled Great War veterans who made up the Bonus Expeditionary Forces (BEF)—also known as the Bonus Army—who had found their way to the capital, many with their worn-out wives and hungry children behind them, hoping their president would help them receive the bonus pay promised to them more than a decade earlier. It was so desperately needed by many of these men, who only a few years earlier had been gainfully employed in a range of middle-class enterprises, or who had been well-paid workers. Instead, Hoover ordered his sabre-rattling Army Chief of Staff, Douglas MacArthur, to break up the billets and encampments in parts of the city where the veterans and their families had assembled. Once they were cleared out, Hoover lost no time and spared no effort to justify the action as the necessary removal of communists or those duped by them. Yet Hoover was always quick to invite celebrities to the White House. On one occasion, the popular crooner Rudy Vallee was invited to sing a song Hoover had asked ValleE to write about life being “a bowl of Cherries” and why not to take it “serious” because it’s “too mysterious.” This was all Seldes needed to call Hoover a “psychologically stupid” man “who stood still and met every shock, lacking the mental agility to dodge.”1

More than a decade had passed since Warren Harding had entered the White House in 1920 as the middle-class backslapper who immediately became the facilitator-in-chief for capitalist modernization on behalf of the ruling class. Now it was Hoover’s turn to be the stolid standard bearer of economic recovery. Hoover felt secure, believing that the force field of bourgeois ideology he had helped to create during the prosperous 1920s could withstand the anger of the masses. Another keen observer at the time, Jonathan Norton Leonard, characterized the smug security of the oligarchs who “except for the financial screw-balls whose ‘empires’ were cracking under their feet,” were not all that worried:

Money might be scarce—scarce enough to make them lay up the yacht and shutter a couple of country places—but nothing alarming. The rich understood depressions. They believed correctly that they were among the inevitable consequences of “free enterprise” running at large in an industrial country. They did not welcome them wholly for they knew how hard they were on the poor, who had a regrettable tendency to fight back, but they realized that they offered fine chances for a level-headed man with a good lump of capital. All he had to do was sit tight. If hard times lasted long enough, he would be able to pick up all sorts of tidbits dropped by lesser men whose personal requirements had eaten up their reserves.2

Even the lowest point of the Great Depression “was no mere rich man’s panic.” Instead,

theirs was the complacent panic of prairie dogs skittering down their safe deep holes ahead of a tornado. They knew the storm was coming, but they knew what to do and had the means to do it. Buy bonds. Get rid of half the servants. Whistle the wife and girls back from Palm Beach. Comb out the pay roll and pull your neck in. Such measures will bring you out richer at the other end. It doesn’t do any harm, of course, to make a noise as if you were being hurt. It makes those who are really being hurt feel better.³

The writer Edmund Wilson observed this mindset in the renegade big-time banker Dwight Morrow who was running for the senate in New Jersey. Wilson’s account of Morrow was among many revealing stories about people from all walks of life from October of 1930 to October 1931 that made up the content of his 1933 book The American Jitters. Wilson recalled Morrow’s speech at his campaign kickoff rally in Newark. Morrow praised Hoover for continuing to talk about the 1920s as “a period of almost unparalleled prosperity” and how it had raised “the standard of living of the great majority of our people in all parts of the country.” Morrow admitted that the country was in the throes of a deep economic crisis, but this would end, repeating Hoover’s standard litany of calling on the people to remain confident and firm about the bright prospects that lay not far ahead. That’s what would “pull them through.” He was sure that “every employer who has faith is doing something to end the Depression” and called on workers to do their part. Morrow shared another point uttered by many capitalists: “There is something about too much prosperity that ruins the fibre of the people.” Remember, he said, “men and women that built this country … were reared in adversity.” He advised political leaders in Trenton, the state capital, to follow their predecessors and hold the line themselves. Don’t ask the federal government to relieve you of your own difficulties. Recovery and renewed prosperity could only be achieved by those who have “the courage of the men who built the city and by its industrial leaders who maintain their organizations until the turn comes.”4

By the end of 1932, all talk about confidence, sacrifice, and resilience had run its course. Unemployment had soared to almost a quarter of the working population, and, given the lack of hard data, this was no doubt an underestimate. Banks were failing at record numbers. Farmers heavily in debt who faced foreclosure often put their shotguns in the face of the local sheriff who showed up with eviction papers. Much of the nation was in economic distress to varying degrees. But the middle classes, old and new—the small merchant and businessman, banker, manufacturer, salaried employee—had lost more than anyone since the Wall Street crash. Among them were souls who just could not take it anymore. Edmund Wilson described the plight of three people on the day of March 25, 1931, all immigrants, in the chapter titled “A Bad Day in Brooklyn.” All three had done what they could to stay afloat, then lost hope and tried suicide—and failed to the one. But many others succeeded. According to journalist and author Edward Robb Ellis, one who did see it through dramatically was Gan Kolski, an unemployed artist in New York City. Before leaping to his death from the George Washington Bridge, Kolski wrote a few parting words to those he left behind: “To All: If you cannot hear the cry of starving millions, listen to the dead, brothers. Your economic system is dead.”5

But was it? And if so, was a revolution at hand?

A REVOLUTIONARY MOMENT?

Recent historians have played down suggestions that the worst years of the Depression presented a moment of revolution in America. One of the most prominent, David Kennedy, has written that the “cries of impending revolution were largely empty rhetorical posturings.”⁶ Contemporary accounts suggest a more complex condition.

In a compelling book later published as a personal memoir, Matthew Josephson described the “waves of panic” and “panorama of unrest” in the winter and spring of 1932, especially in small towns and rural areas where thousands of banks had closed and low crop prices were ruining farmers. Sifting through his collection of newspaper clippings and notes, Josephson later recalled the stories of rural violence often downplayed or simply ignored by the larger metropolitan papers. Here, he noted, was the unreported or underreported history of the period. Farmers in the Pacific Northwest and upper Mississippi Valley, who once prided themselves as Republican voters and now “thought nothing of breaking the law,” picked up their shotguns, barricaded roads, overturned delivery trucks, and often mobbed police officers trying to protect agents of banks and insurance companies from foreclosing on properties. Tax collectors went about their work in constant fear of being beaten or worse. In some midwestern states, governors were forced to call out militias to keep order. Farmers and smalltown folk talked of revolution, not the socialist kind for sure, but an action in defense of their land and their homes. For many rural Americans, revolution meant taking up their small arms and putting them to use against the big “eastern bankers” who had saddled them with mountainous debt.7

Similar conditions and fears existed in the cities. A widespread sense that the government was doing little to relieve the suffering of the unemployed and underemployed only served to promote a feeling of imminent upheaval. David Kennedy cites the example of Chicago’s mayor, Anton Cermak, who told a congressional committee that the federal government had a choice: send relief or troops to his city.⁸ Another historian of the Depression, Robert McElvaine, recalls that organized labor feared the same. He cites Edward F. McGrady, vice president of the American Federation of Labor, who declared that a revolution was clearly on the horizon “if nothing is done at once to create work for the unemployed or to meet their needs in some other way.”⁹

There was plenty of despair and anger throughout much of society. In the defense of powerful interests in the cities, police treated any protest or rally by the hungry and the homeless as the work of communists. Jonathan Norton Leonard described this reaction in Chicago during the summer of 1931 when unemployment climbed dramatically, especially in the Negro section where half of the men were unemployed and home evictions spiked. Agents sent by landlords started showing up to evict families, but only after they determined the men were not at home. Once the men got wise to this tactic, “a marvelously effective method was discovered.” The whole neighborhood gathered to meet the agents the next time they appeared at someone’s doorstep. The agents were powerless as police sympathetic to the neighbors stood by. “There was very little disorder,” Leonard recalled, “but the Negroes would stay packed tight for hours, sometimes singing hymns, sometimes with African cheerfulness making a gay party of the occasion.” Meanwhile the bankers who held the mortgages on such homes were furious and cried that “it threatened all sorts of sacred American institutions.” It didn’t take long for the Chicago Tribune to blame it on “Communist devils” because it was “long believed that Moscow was about to take Chicago over” and now the paper was “sure of it.”10

Radicalism was surely in the political wind though most of the radicals were anything but communists. Seldes saw this in 1933. “The spearhead of an American revolution may be a compact and disciplined Communist Party,” he wrote, “but the spirit of revolution in the conservative farmer and the loyal citizen is more important.”¹¹ Seldes noted that throughout the worst three years of the Depression, only one of five “mass movements,” as he called them, was communist inspired, and that one began peacefully and with police permission as 3,000 unemployed workers marched from downtown Detroit to the Ford Motor Company plant in nearby Dearborn. The march turned into a riot when the chief of Ford’s private police force drove his car into the marchers and fired on them. The peaceful and legal march devolved into a full-scale riot when police and Ford’s private cops fired again, this time using a machine gun. When the crowd broke and ran, four were dead in the street and many others wounded. The other four movements consisted of food riots and industrial disputes in Arkansas, Oklahoma, Pennsylvania, and North Carolina, all the “work of respectable and even reactionary citizens, farmers, veterans and the dispossessed of the middle class.”¹²

Nevertheless, Seldes was not sure if the crisis had generated conditions sufficient for a systemic revolutionary upheaval in 1932. This was hotly debated by writers who had turned to communism or were influenced by it. Edmund Wilson suggested that what Karl Marx had deemed essential for any revolution against capitalism was the necessity of the subjective factor, namely, class consciousness. “We have not even after two years of depression,” Wilson wrote, “seen the general cleavage of society into a conscious bourgeoisie and a conscious proletariat” nor “a general conflict between these two classes.”13 As for the middle class, Wilson asserted that what made Marx a master economist was his “psychological insight” into the “instinctive workings of human acquisitiveness, selfishness, and self-deception,” all of which were present in “liberal-minded bourgeois” such as himself “who at first sight seem to have no real stake in the present order, who in fact would seem to have many reasons for wishing to see it superseded, yet cling to it with such tenacity, remain so obstinately oblivious of what is happening.”¹⁴ Examining his own consciousness, Wilson was as unsparing in his self-criticism as he was in his critique of Dwight Morrow:

For one thing, of course, they are simply lazy, they simply don’t want to be disturbed. But for another they depend more than they realize on an assurance of superiority to other people. A bourgeois is brought up with the conviction that he is better than a workingman and though he may be as sensitive and intelligent and liberal-minded as possible, that conviction means a good deal to him. It means much more than people usually admit: we have been told so much about American democracy that we hate to believe this is true. But imagine some of the most amiable bourgeois of your acquaintance in a society which did not allow them special privileges, which did not lend itself to their illusion of superiority. Their self-confidence and self-respect would wilt—some would grow peevish and disagreeable, others would get discouraged and die. And that is one reason, I take it, for the present attitude of many of the American liberals. Why otherwise, in spite of their liberalism, do they fight so—as their extreme skittishness about Russia shows they do—against the idea of a classless society?¹⁵

In a remarkable self-assessment as a troubled petty-bourgeois intellectual whose combination of family means and modest inheritances enabled him to enjoy classical studies and good liquor and engage in generally irresponsible behavior, Wilson summed up a most enigmatic moment in the middle-class mindset:

What we have then at the present time is an economic crisis due to capitalist contradictions and beginning to produce actual class conflicts; a general collapse of morale due to the deflation of capitalist ideals; but at the same time a general persistence of what the Communists would call the bourgeois “ideology” which makes people value bourgeois social position.16

If America was indeed at the point of revolution as many thought or feared, the Communist Party of the United States of America (CPUSA) had little part in it. Unquestionably, the Party tried hard to play a leading role in unmasking the plight of the millions of unemployed and the underemployed. It created unemployment councils across the country and successfully organized a series of nationwide protests in March 1930. It vigorously supported efforts in Congress to pass a federal comprehensive unemployment insurance bill, which helped pave the way for the Social Security Act in 1935. Party cadre waged relentless struggles against discrimination and succeeded in creating an interracial organization in the North. In the South, it fought tremendous odds to create a mostly black Sharecroppers Union in 1931. And it won widespread support for its role in the Scottsboro Case, helping to save the lives of nine young black men charged with the rape of two white women, which went all the way to the Supreme Court’s declaration of a mistrial in November 1932. It was also one of the first organizations to warn Americans about the threat of fascism, internally and abroad, and the global war it would bring.

For all its hard work and courage, the Party failed to turn mass misery into a mass revolutionary movement. Top Party leaders could not devise a program of strategy and tactics that might transform the unemployment councils into a unified organization. Despite a profound crisis that revolutionary theory indicated was ripe for a mass movement, the Party did not grow and the revolution never happened. Much of the blame was due to the Party itself. Party leaders had instructed cadre to build revolutionary fervor among poorly educated workers through internationalism with slogans that called for the “Defense of Chinese Socialists” or the need to wage constant combat against liberals and socialists, who were nothing but “social-fascists.”17 All this flowed from the Party’s political line that adhered strictly to political positionS of the Communist International in 1928. All leftist forces to the right of the communists, liberals and socialists alike, had compromised with capitalism and were therefore in a permanent state of decline and decay. For the communists it was either real socialism and progress or fascism and barbarism. For the capitalists, the latter was its last resort. Meetings typically involved long and fruitless discussions on how best to apply the Party’s line to existing conditions rather than examine them and then struggle over whether the line furthered or impeded the objectives. At the same time, organizers on the ground often ignored such directives from top leadership, which they considered irrelevant or even antagonistic to the immediate needs of the people they were attempting to organize, and which drove them as communists to press for immediate and sensible demands.

Edmund Wilson grasped the main problem of the Communist Party’s inability to connect with the American people when he observed its leader, William Z. Foster. Summoned to a congressional committee investigating the communist movement in the United States, Foster used the occasion as a pretext for “propagandist speeches.” This was typical of Party comrades who were first and foremost expected to advance the Party’s position on a range of issues. What especially troubled Wilson, who had been drawn to Marxism and its method of engaging society on the ground floor, was Foster’s language. Simply put, it was “quite alien to anything which has hitherto been characteristic of even the militant American workman—it is the idiom of Russian Communism.” Foster dealt in ideologies rather than ideas. Even more annoying was his talk about “liquidating” things, which communists considered the proper term to simply mean getting rid of something. Wilson wrote:

In Russia, they liquidated the kulaks [rich peasant farmers], they liquidated the Church—and the Soviet prosecutor has recently demanded that the traitorous engineers be liquidated—in other words, shot. The House Committee may well have been puzzled by Foster’s continual talk of liquidation applied to everything from the collapse of capitalism to the dispersal of a recent Communist demonstration by the Capitol police.18

Despite its many failures and shortcomings, the Party kept trade unionism alive in the early 1930s by abandoning attempts to build its own unions. It learned to do a better job of developing sensible and familiar revolutionary slogans to be used against reaction and the threat of fascism within the existing structure of American bourgeois democracy. At mid-decade it would help lay the foundation for a popular front by correcting the broadly—and poorly—defined line of the Communist International that drew no distinction between fascist and democratic forms of government.

THE ECONOMIC NOSEDIVE AND MASS SUFFERING

Little effort had been made by financiers or government officials to cool down the speculative fever on Wall Street in the months leading up to the 1929 crash, which actually occurred over a span of several days. The Federal Reserve had raised the discount rate in August 1929 in an attempt to increase the cost of call money borrowed to buy stocks on margin. But nothing could halt the mad rush to quick profits. The bull market peaked at the beginning of September and then became increasingly unstable. The plunge began on October 24, Black Thursday, with complete devastation the following Monday and Tuesday when rampant selling erased 21 to 23 percent of the value of all stocks. So began the long and painful slide to the bottom in July 1932, as stock values on average fell 89 percent below the September 1929 peak.19 Investors who had gorged themselves in the feeding frenzy tried to arrange more loans to cover their losses. But borrowing became more difficult and many went bust. This made matters worse for lenders whose loans went bad.²⁰

The result was an unprecedented economic collapse, the worst in the five-hundred-year history of capitalism. During the last quarter of 1930, U.S. industrial production dropped 26 percent below the 1929 average, compared to 13 percent abroad; a year later it dropped by 40 percent at home, 21 percent abroad. By August 1932, the figures were 51 percent and 31 percent respectively.²¹ It was indeed a nosedive. From the pinnacle of prosperity in 1929 to the abyss in 1933, GNP fell 29 percent, consumption expenditures 18 percent, construction 78 percent, and investment 98 percent. Construction, which had peaked in 1925, fell 26 percent in 1930, 29 percent in 1931, and 47 percent in 1932.²² The number of automobiles coming off assembly lines dropped from 440,000 in August 1929 to 92,500 in December. Across the board, corporations cut production to reduce inventories. Sales of durables and other consumer goods fell precipitously as declining demand caused prices to drop.²³ Farm prices fell more than any other category of commodities. As a result, more farmers went into greater debt. By 1931 nearly 40 percent of all farms in America were mortgaged, up from 30.8 percent in 1925.²⁴

The deflationary trajectory of the U.S. economy extended to foreign trade, which declined from $9.6 billion in 1929 to $2.9 billion in 1932, or nearly 70 percent.²⁵ Enormous surplus in exported goods, as well as dollars, piled up with no outlets to absorb them. Foreign issues on the New York Stock Exchange fell from a billion in 1928 to 229 million in 1931, and then to zero in 1932.²⁶ Charles Kindleberger, one of the foremost economic analysts of the Great Depression, succinctly summed up the impact of the stock market’s rise and fall on U.S. foreign trade: “On the rise, the stock market cut off capital movements to the developing countries; in decline, it produced a liquidity crisis that led to rapid reduction in these countries’ exports. The process fed back to the United States. By the turn of the year, U.S. exports had turned sharply downward.”27

Failure by U.S. lenders and policymakers to shoulder the responsibility of the United States as the world’s leading creditor nation had resulted in haphazard foreign lending and direct investment. As labor historian Broadus Mitchell pointed out in the late 1940s, loans to Europe and Latin America during the 1920s were “lavish and reckless,” while at the same time setting up their borrowers to develop respective national economies on the basis of consumption levels that required a continuing volume of foreign trade. Consequently, if U.S. lenders suddenly changed priorities, the impact on these economies, especially in Latin America and other parts of the developing world, would unleash great instability and only make U.S. interests in those countries more insecure. This is precisely what happened in mid-1928 when U.S. lenders decided to cash in on the quick profits to be made in stocks rather than to continue lending abroad—the immediate trigger for Germany’s plunge into fascism a few years later. New issues for foreign accounts, which had amounted to a little over $1 billion in 1928, fell to $415 million in 1929. With the exception of a brief reversal in 1930, the total of new loans made abroad dwindled to a mere $51 million in 1932. The amount of dollars supplied abroad also fell precipitously, from $7.4 billion in 1929 to $2.4 billion in 1932. As the Depression deepened, U.S. imports declined from roughly $4.4 billion in 1929, to a little over $3 billion in 1930, a little over $2 billion in 1931, and then to $1.3 billion in 1932. As a result of all these developments, national income in the United States fell to its lowest point in 1932, and did not recover until the coming of the Second World War.²⁸

As economic conditions worsened, unemployment rose from 3.2 percent in 1929 to 24.9 percent in 1933.²⁹ Counting the number of unemployed Americans was highly problematic due to scant government reporting on unemployment. Consequently, officials had to rely on estimates provided by a half-dozen agencies, public and private. Analysts first arrived at an estimate of the total labor force and then another for those who were employed. Unemployment was then determined roughly by subtracting the second number from the first. In the midst of the worst economic depression in history, arguably the most modern government in the world still could not provide hard-and-fast numbers on employment. While the White House reported 3.1 million out of work in April 1930, the Commerce Department put the figure significantly higher at 4.5 million.30

From the existing evidence, certain patterns and trends in employment were evident. Unemployment rates were especially high among workers engaged in the production of durable goods—cars and appliances the most important—and in construction. Generally, unskilled workers were hit hard because production cuts downgraded many skilled workers into their ranks. Much of America’s unemployed lived in its most populous cities, but as Broadus Mitchell keenly pointed out, the evidence showed that “the percentage of employable persons unemployed appears to have been largest in small towns and villages.” Mitchell also said that no group felt the cruelties of unemployment more than young people.³¹ By 1932 two million vagrants, many of them young people, were roaming the country. Two-thirds of Detroit’s population was out of work or underemployed, the latter statistic only a rough estimate since the city lacked any precise way of determining it.³²

Throughout much of the nation, living standards deteriorated steadily, creating a paradox of capitalist crisis—hunger amid abundance. While Americans starved or lacked adequate daily sustenance, farmers and ranchers destroyed their own capital because they saw no profit in it. Untold acres of wheat across Montana were left to rot in the fields, as were apples and peaches in the orchards of California and Oregon and cotton in Texas and Oklahoma. Ranchers killed their cattle and sheep because they could not afford to feed them. To stay warm, farmers in Kansas burned their wheat crops. Nearly thirty states had established barter systems so people could exchange products they needed to survive.³³ Broadus Mitchell reported on the horrific conditions in West Virginia where coal mines were no longer working in the summer of 1932:

The miners occupied the mine shacks, had coal enough, walked miles to Morgantown for Red Cross flour when issued, started gardens from charity seed, lived to a large extent on blackberries. Some had almost no furniture, and slept on straw ticks on the floor. In one camp with several hundred people, including many babies, there was no soap, the women making a sort of suds from soap weed. The one cow in the settlement was half starved herself, and gave blue milk.34

In his 1933 book Seeds of Revolt, Mauritz Hallgren estimated that “perhaps as many as ten to eleven million of the sixteen million persons reported unemployed in the spring of 1933 belonged to the lower middle class.”³⁵ But this was merely the result of a long process of dispossession over decades of the advance of monopoly that greatly accelerated during the 1920s. He wrote:

Not a few of the petit-bourgeois victims of the panic—or rather of modern capitalism—had struggled through the best years of their lives to follow, as they thought, that upward path of individualism which Mr. Hoover, though he did not practice it himself, considered the only truly American way of social and economic progress. They had bought homes, automobiles, radios, furniture, had amassed something in the way of savings, were carrying reasonably large insurance policies, and were by other means they deemed wise and economical spending their earnings present and potential. In the lower reaches of this class, making up the bulk of the petit bourgeoisie, the white-collar workers and skilled artisans, though perhaps on a less extensive scale and certainly with greater dependence on the instalment-buying system, had been similarly inflating their standard of living. Indeed, considering the incomes of most of these people, they had to inflate their standard of living in order to consume the vast quantities of bathtubs, radios, and automobiles that were being turned out for their special benefit. This trick of making it appear that an entire class was managing to lift itself by its bootstraps was called prosperity.36

HOOVER’S RELUCTANT RESPONSE AND THE COMING OF STATE CAPITALISM

From the onset of the crisis, Hoover and the Republicans remained united in their defense of laissez-faire capitalist doctrine while insisting that the economy was fundamentally sound and turning around. Recovering from the Wall Street debacle only required time and patience. But cracks began to appear in 1931 as the crisis deepened. While all remained united in principle to the defense of laissez-faire, it became evident to Hoover that his administration needed to push corporate leaders and big bankers to take bolder steps and put a halt to the economic nosedive. This took the form of limited state intervention, mainly by using public money to extend greater credit to private banks and corporations, as well as providing funds to state and local governments instead of implementing direct federal financing of public works projects and relief for those who could not work. In fortifying the ruling class, Hoover led the way toward state monopoly capitalism. But when his limited measures failed and the crisis deepened, Big Business resisted, some of its stalwarts even calling for an American Mussolini to defend their interests.

Hoover had taken the lead in dampening the panic of the Wall Street collapse but steadily became a man at odds with himself. As early as May 1930 he declared that the country had weathered the worst of the storm and simply urged Americans to work more and harder. For much of that year, rather than describing in real terms the deepening economic and social crisis, Hoover told the American people not to panic, assuring them that conditions would improve substantially in the coming year. Meanwhile, Americans in distress must help themselves and when necessary rely on private charities or local government to provide immediate relief. As a moral justification, Hoover insisted that government intervention would sap the spirit of self-sufficiency and individual freedom. By the fall, he was convinced that his new instrument of social policy, voluntary social behavior, was working. Prosperity was just around the corner.

And Hoover claimed he had the proof. Investment expenditures of railroads and public utilities in the first eight months of 1930 had increased from $4 billion to $4.5 billion from a year earlier. Public works expenditures had also increased at all levels of government, rising from $2.5 billion in 1929 to $2.9 billion in 1930. Federal spending did increase, by a third, from $155 million to $209 million. But the gains were offset by the $5 billion to $4 billion decline in private non-residential construction and $4 billion to $2.3 billion decline in residential construction. From this and other negative developments, the administration decided that it was necessary to increase public works expenditures for the rest of the fiscal year 1931 (January to June). Accordingly, Hoover asked for emergency public works expenditures of $150 million.37 All the while, however, things just got worse. Factories and businesses were shutting down. Wages, prices, and industrial output were falling. Banks were crashing. Unemployment climbed dramatically. Yet Hoover remained anchored to his fundamental reliance on voluntarism and the goodwill of business, spurred on by his coterie of loyal administrators and capitalist cronies. As conditions worsened in 1931, Hoover continued to defend the shibboleths of laissez-faire capitalism—the private enterprise system, voluntarism, business self-regulation, and balanced budgets.³⁸

At the same time, the president began to part ways with some in his administration whose uncompromising laissez-faire views were more hard-line than his. Among them was Andrew Mellon, his wealthy Treasury secretary who insisted that the federal government should sit idly by while the deflationary spiral liquidated inflated values of commodities and stocks. As their ringleader of sorts, capitalists listened to Mellon when he claimed that the Depression was a good thing because it would rid the economy and society of rottenness and dead wood, encouraging moral virtues like thrift and ensure the survival of the fittest. True to the teachings of Adam Smith, one of the first great economists and advocate of free market capitalism, government should let nature take its course since no federal agency could solve the problem. This spurred Hoover to pursue an independent course. As economist Herbert Stein has written, Hoover understood early in his political career that the era of laissez-faire had passed. The economy could not be left to industrial self-management. Instead, government needed to promote the social application of economic theory in order to maintain constant flows of expenditures and income, which Hoover considered the best preventative to rising unemployment.39 Convinced that the ongoing commitment of business leaders to free trade and competitive self-interest had culminated in the wholesale financial speculation that brought on the crash and the Depression, Hoover tirelessly promoted the need for a basic adjustment in their thinking and called for voluntary associations among industrial and business leaders to determine how to establish equilibrium between supply and demand. This was the best way to restore purchasing power to the American people and end the Depression. The federal government would play a catalytic role to spark greater voluntarism in the private sector. To his credit, Hoover engaged in ongoing struggles with business leaders and members of his own administration who either believed there was no fundamental structural problem with the American economy or worse, those like Henry Ford, who trumped Andrew Mellon when he said the Depression was a “wholesome thing in general.”⁴⁰

Nevertheless, two of Hoover’s most notable attempts at relief on a voluntary basis, the Federal Farm Board and the National Credit Corporation, were spectacular failures. The Farm Board, which had been established months before the Wall Street crash in the summer of 1929, had sought to encourage farmers to organize cooperative marketing organizations that would establish self-regulating mechanisms aimed at keeping down surpluses. There would be no fees or taxes imposed on farmers and the government would not become involved in the buying and selling of farm products or attempt to fix prices.41 It lent money to many of these cooperatives in order to underwrite loans that had been made to individual farmers by local banks, or to purchase surpluses which were taken off the market. To this end, the Farm Board took a hands-off approach to the buying and selling of commodities while insisting that no federal agency had the right to undermine the freedom of the American farmer. The results were disastrous. Spurred on by loans, farmers did exactly what they thought necessary given the steep drop in farm prices, which was to expand crop production to make up for lost profits. This only added to the surplus, which did not stop the slide in commodity prices. By 1931, the Farm Board wound up owning a third of the national wheat supply.⁴²

Hoover’s last attempt at relief through voluntarism, the National Credit Corporation (NCC), fared no better than the Farm Board. More than 1,300 banks had failed in 1930, and the number kept rising. This prompted Hoover to convene a secret meeting of bankers and insurance company leaders, at which he urged them to form a voluntary association that would restore confidence to the banking system. And so the NCC was created in October 1931 with $500 million of entrepreneurial funds from the country’s leading banks. In theory, the strongest banks committed to keeping their weaker counterparts afloat. Instead, the leading bankers generally balked at making loans to those they could easily swallow. Later estimates determined that only around $10 million was actually loaned out. Thus the association did nothing to stem the tide of defaults as American banking continued its nosedive. Depositors lost more confidence as credit became more difficult to secure. As a result, nearly 2,300 more banks failed in the course of 1931.⁴³

With farming and banking sliding deeper into the crisis, Congress finally realized that only an unprecedented, peacetime intervention of state power into the private sector could stave off complete collapse. With Hoover’s reluctant approval, the Reconstruction Finance Corporation (RFC) was created in January 1932 and chartered by Congress to lend funds to banks, railroads, building and loan associations, and similar institutions. According to Herbert Stein, the RFC provided $500 million of taxpayers’ money from the start. Congress authorized the RFC to borrow up to $3.3 billion from the Treasury or elsewhere for emergency loans to troubled institutions. The corporation borrowed almost $1.6 billion from the Treasury in fiscal years 1932 and 1933, though only the initial $500 million appeared as a budgetary expense.44

However, the main thrust of the RFC, which was to make credit available to banks and financial institutions in order to loosen credit and move the country toward recovery, failed to achieve its objective. As Robert McElvaine rightly points out, “The fundamental mistake was to think that the credit problem was one of supply. Given the paucity of purchasing power, businesses were not interested in obtaining loans. Expansion was the last thing on the minds of most businessmen in 1932.”⁴⁵ Nevertheless, the winds were changing, as business leaders, government officials, and economists were coming to recognize amid the deepening economic crisis in 1932. While the old paradigm of laissez-faire prevailed, the RFC represented the seeds of a new political economy based on the necessity of state intervention and deficit spending. Voluntarism, self-help, and altruistic appeals to big business had run their course. Still light-years away from the fiscal revolution that would come in the spring and summer of 1938, the RFC clearly marked a pivotal turn in that direction.

Meanwhile, Hoover continued to blame international events for the Depression and especially singled out Europe as “the great center of the storm” that eventually “burst into a financial hurricane” in 1931.⁴⁶ Yet he was only attributing to others what had begun in the epicenter of world capitalism, first as a protracted crisis rooted in the agricultural and then industrial sectors of the U.S. economy, and then ultimately leading to a speculative bubble on Wall Street and the crash. The global crisis that became acute by the end of 1932 was in fact a by-product of a crisis that began in the United States as the world’s leading manufacturer and creditor. Blaming Europeans for their demands for remission of reparations and debts of the postwar settlements, as well as Great Britain’s abandonment of the gold standard, only gave Hoover another excuse to reject anything more than a limited role by the U.S. government to intervene in the domestic economy. Unfortunately, limited intervention in the name of non-intervention only made things worse. For example, his pledge to farmers to protect their goods from cheap imports caused him to remain wedded to high tariffs. This led to the Hawley-Smoot Tariff Act, the last will and testament of the New Era’s claim that individualism was the key to economic success and prosperity, which Hoover signed into law in spring 1930. In response, twenty-five nations raised their tariffs, thus widening the gap between American exports and imports.47 Hoover’s focus on international causes and consequences served as his primary justification for shying away from domestic problems and their own much-needed solutions, the most important of which would require substantial federal intervention. At the same time, his refusal to follow Britain and remove the dollar from the gold standard only reinforced the deflationary spiral of the U.S. domestic economy by negating a major countervailing force that would cause prices to rise.

A rising chorus from some economists and academics called for the federal government to turn away from efforts to balance the budget by raising taxes and instead embark on a deliberate path of deficit spending. All efforts, private and public, to reverse the deflationary spiral had failed. Steadily, Hoover came to see this but then reversed himself after Great Britain departed from the gold standard in 1931, which brought even greater instability to U.S. banks due to renewed runs on their coffers. Asking for a sizable tax increase in the Revenue Act of 1932, Hoover was still left with a federal budget that featured a deficit of $2.7 billion—almost 60 percent of federal expenditures—the largest peacetime deficit in U.S. history. As David Kennedy points out: “No New Deal deficit would be proportionately larger. Ironically enough, Franklin D. Roosevelt was soon to make the federal budget deficit a centerpiece of his attack on Hoover in the presidential election campaign of 1932.”48

The gradual but steady shift from voluntarism to direct government intervention marked a pivotal moment in the development of state monopoly capitalism in response to a deepening structural crisis. Herbert Stein has argued that Hoover believed the economy needed some increase in the level of federal expenditures. But he refused to commit to more spending beyond mid-1931. Hoover thought that recovery would be well underway by that point. In his defense, Stein insists that Hoover was constrained by realities, chiefly that the federal budget itself was not large enough to facilitate a vast expansion of public works. Still, Stein concludes, the expanded public works programs of 1931 probably pushed Hoover to lay the groundwork for the New Deal. At the same time, his decision to raise taxes at the end of 1931 to balance the budget reveals the other pole of Hoover’s mindset. Hoover was now challenged by activists clamoring for vast public works projects in 1932. That required more spending. The crucial steps toward full state monopoly-capitalist development had been taken.⁴⁹

THE ENDGAME: THE BATTLE OF WASHINGTON, CALLS FOR DICTATORSHIP, AND THE FASCIST TURN

Hoover’s last year in office was the worst of the Great Depression and his presidency. Millions of Americans were barely hanging on as American capitalism staggered to a near halt. In the summer of 1932 something happened in Washington that epitomized the deepening crisis and growing authoritarianism of the ruling class—if not the intensifying class struggle—that led to calls for dictatorship as the only solution.

In June, nearly 20,000 veterans and their families from various parts of the country converged on the nation’s capital to demand immediate payment of the bonus that had been promised to them as veterans of the Great War. Calling themselves the Bonus Expeditionary Force (BEF), veterans arrived wearing parts of their old uniforms. According to the vivid and detailed account of their March on Washington provided by the writer Jonathan Norton Leonard a few years later, the veterans arrived “ragged and penniless” but conducted themselves like the soldiers they once were during the war. They even created their own military police to ensure that no one begged, made radical speeches, or carried deadly weapons. Communists were shunned and kept from their ranks. In fact, Leonard wrote, “the trouble with the B.E.F. was its irreproachable political background.” It was

not “red”—not even by the most extended meaning of that elastic word. Its members were overwhelmingly white and of native stock. Most of them were married or had been married before the Depression broke up their homes. They were all voters and all in the prime of life. They had all fought for their country a few years ago and had papers to prove it. The songs they sang were the songs of high school picnics and lodge meetings the country over. The words they spoke were familiar. Their faces were familiar.50

When the veterans and their families arrived, they became the responsibility of the Superintendent of the Metropolitan Police, General Pelham D. Glassford, who treated them respectfully and earned their devotion in return. Glassford found himself immediately at odds with the White House. While Glassford did all he could to make the veterans feel safe and secure and win their cooperation in return, Hoover and his circle showed nothing but contempt for the vets. When the vets made their way to the Capitol, they did so peacefully and with dignity as they met with political leaders, never intimidating or threatening anyone. As a result of their meetings, the House passed the Bonus Bill. However, the Senate balked. Now, everyone waited for the veterans to turn violent. But they did not, which made the public more sympathetic to their cause. This only enraged Hoover and his truculent advisers, who now realized they had a major public relations nightmare on their hands. Hoover tried to stem the protest by recommending that Congress appropriate $100,000 to pay for the veterans to return home. Many of them accepted and left. But more than 8,000 remained and took up permanent residence in tents and makeshift dwellings on the swampy flats across the Anacostia River from Washington. When about sixty of them marched up Pennsylvania Avenue toward the White House hoping to see Hoover, they were met with closed iron gates and behind them fifty White House police armed with deadly weapons.51

People could not fathom why Hoover decided on such a show of force. This was especially true of government workers who observed the whole episode and became more supportive and sympathetic to the plight of the veterans and their families. This forced Hoover to his last resort—label them Red. Relying on the familiar trope of the Red Menace, the administration decided to use the whole affair as a fixture in the coming presidential campaign. “Hoover vs. the Reds.” At a White House meeting on July 27 that included cabinet officials and General MacArthur, Hoover decided to take action. Once Glassford was informed that the veterans would be asked to leave voluntarily, he began the orderly evacuation with the greatest care but not without some conflict, which resulted in the shooting deaths of two veterans and the wounding of a third and a bystander. Glassford was not quick enough for MacArthur, who assembled four troops of cavalry, a mounted machine-gun squadron, four companies of infantry, and six tanks on Pennsylvania Avenue. At first, the veterans cheered the soldiers as loyal brothers-in arms when they saw them coming. But then the cavalry began to charge with drawn sabers into packs of veterans and bystanders alike, wreaking havoc, injury, and death upon whomever got in their way. No two accounts could agree on the details because no one was in a position to see the whole thing unfold. Nevertheless, from the various reports, Leonard wrote:

Horsemen dashed back and forth forcing pedestrians to climb on parked automobiles to escape the hoofs and sabers. A great cloud of tear-gas drifted across the entire “affected district.” A company of masked infantry charged a dense crowd of civilians, tossing bombs ahead of them. Children fell on the sidewalks in choking convulsions. A legless veteran dragged himself out of one of the buildings almost unconscious from gas. The wives and children of the veterans fled this way and that, while the soldiers set fire to their tents and shanties, refusing to let bedding or clothing be rescued from the flames.

There was little resistance from the veterans. Later that night the final assault was made on the encampment. Those who had lived there peacefully and with the protection of city police gathered whatever they could and stumbled into the night to escape the bayonets and tear-gas. As Leonard wrote, “The Battle of Washington was over.”52

But it did not end there. The Hoover administration had to prove that communists were behind the whole thing, forcing the arrest of thirty-six of the marchers and claiming they were nothing but hobos and criminals. The press refused to buy Hoover’s story, while the Veterans Bureau determined that almost all of those arrested had genuine war records and two-thirds had fought overseas. For Leonard, the great significance of Hoover’s anti-communist response was that it doomed his own bid for reelection. Charges of communists responsible for the run on banks fell on deaf ears. So did the statements of retired generals who “were tuning up, getting red in the face,” or the fears of “rich old ladies” with flashlights looking for communists under their beds. The “Red-hunt phase” of Hoover’s campaign might have worked, Leonard wrote, until Hoover bungled the whole thing by ordering MacArthur to put down what he declared had been “a challenge to the authority of the United States.” As Leonard concluded, no one believed that the vets were Reds or that they had launched an assault on the government, and even if that were the case, it did not warrant the deployment of troops, tanks, gas, and machine guns. “The attempt to dramatize Hoover as a bulwark against Revolution had been such a complete political failure that all similar sham-battles with the Reds were doomed to failure in advance.”53

Hoover’s refusal to acknowledge the need for a change in course by the government only further paralyzed the economic system. As the general election neared, so did the fear among ruling-class elites and politicians who served them that all could be lost unless Congress considered suspending the Constitution and creating some form of extraordinary executive committee. In their 1938 study of American fascism, A. B. Magill and Henry Stevens cited numerous examples of these elites who called for some form of dictatorship as the only solution to the crisis. Many were leading businessmen who, since the mid-1920s, had praised Mussolini and Italian fascism for demonstrating how to end a crisis, restore order to society, and create political stability on a new and firmer basis. As early as October 1931, Alfred E. Smith, who had lost the presidential election to Herbert Hoover in 1928 and would soon lose his party’s nomination to Franklin Delano Roosevelt, had called for “a mild form of dictatorship, honestly operated, honestly intentioned” in order to bring relief to the unemployed. Others jumped on board. A member of a large New York Stock Exchange firm, C. T. Revere, suggested that any European country confronted by the crisis then facing the American people would lead to “a demand for a dictator.” Demarest Lloyd, a wealthy businessman who a few years later would take a leading role in the creation of the American Liberty League, a Big Business spearhead against what it feared was a socialist New Deal, wrote that Congress, “like a long line of unfit rulers in the past, should abdicate” and “delegate its powers and functions to a small group, not over a hundred of the most well-informed, intelligent and patriotic men in the country.” In a speech to the Chamber of Commerce, Henry I. Harriman called on Congress to give the president the right “to suspend the operation of existing laws and to provide for emergency measures required by the public welfare.”⁵⁴

In September 1932, The New York Times Current History magazine reported that “certain powerful elements” meeting in New York and Chicago “have been toying with the idea that the way out of our troubles lies through the establishment of some form of economic and political dictatorship.” Even an editorial in the Times a month before Roosevelt’s inauguration suggested the need for some form of dictatorship: “Few Americans,” the Times stated, “are ready to give up their existing form of government … but many are saying, or sighing, that it ought to be supplemented or reinvigorated and directed by some great personality … either the President should be given more power to govern by decree or else that some sort of Council of State should have the right and duty to act when Congress fell short.” Some members of Congress had gone further. Senator David Reed, a Pennsylvania Republican known for his intimate ties to banker-industrialist and former Treasury secretary Andrew Mellon, declared on the Senate floor that the country “needed a Mussolini.”55

At this acute point of the crisis of American capitalism, Mauritz Hallgren detected the genesis of fascism in the existing political order. Hallgren was keenly aware of the particular American form it was taking, specifically in the breach between the two main classes in capitalist society. Constrained as anyone by his or her own place in history, Hallgren believed the lower middle class in America was in permanent decline. He quoted Marx and Engels in the Communist Manifesto, who defined the lower middle class (or the petty bourgeoisie) as a class in “decay … in the face of modern industry” and, therefore, “reactionary” because it tried “to roll back the wheel of history.” For Hallgren the lower middle class was the spearhead of reaction during the boom and bust in America during the 1920s and early 1930s. The small capitalist was now an anachronism in the era of monopoly-finance capital. And now the system was locked in an irreversible and permanent crisis. “If the economic crisis of 1929–33 accomplished nothing else,” Hallgren wrote, “it measurably advanced the decay and final disappearance of the lower middle class.” No other group had suffered as much since the Wall Street crash, “and in no other class did there develop so many signs of spontaneous rebellion.”56 But there was nothing revolutionary about its worldview and politics now that the final crisis of American capitalism was at hand. The oligarchy that drove capitalist modernization now openly considered some form of dictatorship as a solution to the crisis. In response, the lower middle class looked to the fantasy of democratic government that would save it from utter ruin. For Hallgren, the lower middle class would look to Roosevelt as its savior.

Always the good journalist, Hallgren had the statistics that revealed the plight of the lower middle class in simplest terms. Every welfare list in the country contained the names of hundreds, in some cases thousands, of lower-middle-class applicants for relief. “It used to be the wage-earner alone who was on the welfare lists,” said the mayor of Detroit in January 1932. “Now it is the skilled artisan and the cultured citizen.” The available evidence—and it was scant—showed that between 10 to 11 million of the 16 million persons reported as unemployed in the spring of 1933 were from the ranks of the lower middle class; the other 5.5 million or so Hallgren called the “pre-Depression proletarian class.” When all their dependents were added, the total number of people impacted by unemployment could have amounted to as much as 40 million people. The final number had to be far greater, but this was still a conservative estimate. Also to be counted were the more than a million members of the pauper class, as well as sharecroppers and tenant farmers, who were not listed among the unemployed. There were also the millions of suffering small farmers and skilled mechanics who were working on a part-time basis, some whose incomes were cut by more than half. Then, too, Hallgren pointed to the “professional workers who were their own bosses and therefore not grouped with the unemployed, though their incomes had been reduced virtually to nothing.” This only made it more difficult to arrive at a definitive number of the total number of unemployed who were once ranked as lower middle class.⁵⁷

Hallgren had his finger on the pulse of a lower middle class now in deep distress as victims of modern capitalism. Its members had struggled through their prime to follow the “upward path of individualism” that Hoover and his ilk had told them was theirs as Americans. Instead, they had been tricked into believing that their inflated lifestyles based on installment buying and other credit schemes had actually put them on the road to lasting prosperity and progress. Yet technological innovation during the 1920s had already reduced the need for skilled mechanics and white-collar workers, shifting those who remained employed to less-skilled jobs and lower wages. The ballyhoo of prosperity had tended to obscure all of this. The extremely wealthy grumbled about their paper losses, knowing, however, that it would not cause them to reduce their comfortable and lavish living standards. But the same could not be said for the lower middle class which “felt the full impact of the Depression.”58

Though the middle class as a whole had been deceived and undermined by the Republicans throughout the 1920s, it had remained loyal to them until the crash and the onset of the Depression. Some had drifted toward the Progressives, “who clamored loudest for a third party, [and] defeated their own ends by clinging to their high moral perch when they ought to have been down working in the political gutters.” Hallgren was ruthless in his criticism of these reformers, who “shuddered at the very thought of getting into politics themselves.” They were good at fighting “the good fight at dinner conferences in New York City or by addressing endless formal demands to Mr. Hoover, though the real fight was out among the people, in the factories, on the farms, on the streets.” All the while, this class and its self-proclaimed representatives appeared to be moving to the left toward revolution when in fact they were still trying to roll back the wheel of history to an earlier time when they had been the driving force of capitalism. Having nowhere else to go, they would turn en masse to the Democratic nominee, Franklin D. Roosevelt, in November 1932, failing to recognize or accept that “the platforms and programs of the two major parties had grown more and more to resemble one another” and that the resemblance “was due to the fact that the ownership and management of both organizations had passed into the hands of big business and high finance.”59

Hallgren saw in the crisis the political bankruptcy of the lower middle class and its lack of a viable independent program. Its reform-minded representatives took aim at high-profile bankers, industrialists, and politicians but defended the government in principle and the capitalist order it served. For Hallgren the lower middle class was at odds with itself. “They were in rebellion against the capitalist-entrepreneur class and its political servants,” he wrote, but understood they could not “halt the advance of monopolization and imperialism.” Thus the lower middle class looked to their last line of defense and “surviving symbol of security” and that was the state:

The State would acquire control of the economic system, would act as the administrator of the major economic functions of the nation, and thus the balance between the classes would be restored and the iniquities in the national economy which had produced the crisis would be eliminated. But the intervention of the State should not go beyond that point; it should not in any way compromise the fundamental principles and purposes of a capitalist society.⁶⁰

As Hallgren saw the moment, this was the “mission that Roosevelt was charged with by the rebellious lower middle class in the election of 1932.”⁶¹ But it also revealed something far deeper about the crisis of liberal capitalist democracy:

The governing class pulled in one direction, the petit bourgeoisie in another. The former wished to preserve the principle of laissez faire by defending it against further modification in the form of increased social control; the latter, instinctively perhaps, rather than consciously, understood that only by such modification could they be helped. The political representatives of the “people” were thrown into a quandary. They hardly dared to rebel openly against the owners and managers of the two major parties, and yet they could not ignore the rising protest of their constituents, for liberal democracy had armed their constituents with the power to vote them out of office.62

The capitalists were also held in check by their own limitations and doubts. Knowing that the American people still stood firmly for democracy, whatever its shortcomings, the governing class was neither willing nor prepared to challenge the democratic process. While it was imperative to prevent the lower middle class from pressing for a solution to the economic crisis on the basis of democratic principles and practices, business leaders and their political servants in both the Republican and Democratic parties knew they could not deprive the people of the vote. Outright dictatorship was out of the question. But, as Hallgren determined from his reporting of the events between 1930 and 1933, holding on to power by those at the top—the monopolists—could be achieved by “forming a political coalition subservient to the governing class, thereby nullifying the will of the electorate, or by undermining the confidence of the people in their own political representatives.”⁶³ Indeed, this was the form of ruling-class power that defined most of Hoover’s presidency. With this power, capitalist elites and their political representatives in both parties used all of their influence to discredit Congress, fearing that pressure from the majority of its constituents would amount to the enactment of legislation necessary for the relief of the lower middle class, and by extension those below, and result in higher taxes on the capitalists. As all efforts failed to restore prosperity, the breach between the two capitalist classes only widened.

At precisely the moment when the lower middle class looked toward Roosevelt to help it turn back the wheels of history, the capitalist oligarchy looked beyond liberal capitalist democracy toward dictatorship and the fascist alternative. If the oddity of a coming American fascism lay in a reactionary middle class—especially its lower strata—clothed in republicanism, it was even more odd that the modernizing oligarchy should seek to destroy the Republic to preserve its rule over the rest of society.