This story plays itself out again and again during the Progressive Era. The infamous steel industry — heirs to the nineteenth-century robber barons — embraced government intervention on a massive scale. The familiar fairy tale is that the government stepped in to control predatory monopolies. The truth is almost exactly the opposite. The big steel firms were terrified that free competition would undermine their predatory monopolies, so they asked the government to intervene and the government happily obliged. U.S. Steel, which was the product of 138 merged steel firms, was stunned to see its profits decline in the face of stiff competition. In response, the chairman of U.S. Steel, Judge Elbert Gary, convened a meeting of leading steel companies at the Waldorf-Astoria in 1907 with the aim of forming a "gentlemen's agreement" to fix prices. Representatives of Teddy Roosevelt's Justice Department attended the meetings. Nonetheless, the agreements didn't work, as some firms couldn't be trusted not to undersell others. "Having failed in the realm of economics," Kolko observes, "the efforts of the United States Steel group were to be shifted to politics." By 1909 the steel tycoon Andrew Carnegie was writing in the New York Times in favor of "Government control" of the steel industry. In June 1911 Judge Gary told Congress, "I believe we must come to enforced publicity [socialization] and government control...even as to prices." The Democrats — still clinging to classical liberal notions — rejected the proposal as "semi-socialistic."11
One need only look at Herbert Croly's Promise of American Life to see how fundamentally fascistic progressive economics were. Croly was contemptuous of competition. Trust-busting was a fool's errand. If a corporation got so big that it became a monopoly, Croly didn't believe it should be broken up; rather, it should be nationalized. Big business "contributed enormously to American economic efficiency," he explained. "Cooperation" was Croly's watchword: "It should be the effort of all civilized societies to substitute cooperation for competitive methods."12 As a philosophical and practical matter, Croly opposed the very conception of the neutral rule of law for business. Since all legislation was ultimately aimed at discriminating against one interest or another (a view revived by critical legal theorists more than a century later), the state should abandon the charade of neutrality and instead embrace a "national" program that put the good of the collective ahead of the individual.
As we've seen, World War I offered a golden opportunity for Croly's agenda. Big business and the Wilson administration formed the Council of National Defense, or CND, according to Wilson, for the purpose of redesigning "the whole industrial mechanism...in the most effective way." "It is our hope," Hudson Motor Car Company's Howard Coffin explained in a letter to the Du Ponts, "that we may lay the foundation for that closely knit structure, industrial, civil, and military, which every thinking American has come to realize is vital to the future life of this country, in peace and in commerce, no less than in possible war."13
When the war broke out, the CND was largely folded into the War Industries Board, or WIB. Run by "dollar-a-year men" from the world of finance and business, the WIB set prices, trade quotas, wages, and, of course, profits. Trade associations were formed along vaguely syndicalist lines. "Business willed its own domination, forged its bonds, and policed its own subjection," wrote Grosvenor Clarkson, a WIBer and historian of the effort. The aim was for the "concentration of commerce, industry and all the powers of government." "Historians have generally concluded," writes Robert Higgs, "that these businessmen-turned-bureaucrats used their positions to establish and enforce what amounted to cartel arrangements for the various industries."14
Many industrialists wanted to keep the War Industries Board going after World War I, and politicians, including Herbert Hoover, tried to grant their wish. The war, horrible as it was, had proved that national planning worked. Stuart Chase, who coined the phrase "New Deal," explicitly cited two models for what America needed to do, the Soviet Gosplan and the war socialism of World War I. Rexford Tugwell gushed that laissez-faire had "melted away in the fierce new heat of nationalistic vision."15
The propaganda of the New Deal — "malefactors of great wealth" and all that — to the contrary, FDR simply endeavored to re-create the corporatism of the last war. The New Dealers invited one industry after another to write the codes under which they would be regulated (as they had been begging to do in many cases). The National Recovery Administration, or NRA, was even more aggressive in forcing industries to fix prices and in other ways collude with one another. The NRA approved 557 basic and 189 supplementary codes, covering roughly 95 percent of all industrial workers.
It was not only inevitable but intended for big business to get bigger and the little guy to get screwed. For example, the owners of the big chain movie houses wrote the codes in such a way that independents were nearly run out of business, even though 13,571 of the 18,321 movie theaters in America were independently owned. In business after business, the little guy was crushed or at least severely disadvantaged in the name of "efficiency" and "progress." The codes for industries dealing in cotton, wool, carpet, and sugar were — "down to the last comma" — simply the trade association agreements from the Hoover administration. And in almost every case big business came out the winner. In "virtually all the codes we have examined," reported Clarence Darrow in his final report investigating Hugh Johnson's NRA, "one condition has been persistent...In Industry after Industry, the larger units, sometimes through the agency of...[a trade association], sometimes by other means, have for their own advantage written the codes, and then, in effect and for their own advantage, assumed the administration of the code they have framed." We may believe that FDR fashioned the New Deal out of concern for the "forgotten man." But as one historian put it, "The principle...seemed to be: to him that hath it shall be given."16
Indeed, FDR's pragmatism and experimentalism, so cherished by liberals then and now, were of a deeply ideological sort: social planners should be given a free rein to do what they like until they get it right. Thurman Arnold, the theorist behind the new "religion of government" and director of FDR's antitrust division, abandoned the standard liberal antipathy for cartels, monopolies, and trusts and instead emphasized consumption.
All this was done with the acquiescence of the liberal establishment, later called the "new class" of managers, experts, and technocrats. The idea was that the smartest people should be immune to the rules of chaotic capitalism and vulgar politics. The "best practices" of business and engineering should be applied to politics. These schemes went by any number of labels — syndicalism, Fordism, Taylorism, technocracy — but the underlying impulse was the same. Businessmen were part of this new conventional wisdom. Gerard Swope, the president of GE, provides a perfect illustration of the business elite's economic worldview. A year before FDR took office, he published his modestly titled The Swope Plan. His idea was that the government would agree to suspend antitrust laws so that industries could collude in order to adjust "production to consumption." Industry would "no longer operate in independent units, but as a whole, according to rules laid out by a trade association...the whole supervised by some federal agency like the Federal Trade Commission." Under Swopism, as many in and out of government called it, the state would remove the uncertainty for the big-business man so that he could "go forward decisively instead of fearsomely."17