THE CORPORATE IDEAL IN THE LIBERAL STATE 1900-1918

Introduction

THE TWO MAIN THESES of this book run counter to prevailing popular opinion and to the opinion of most historians. The first is that the political ideology now dominant in the United States, and the broad programmatic outlines of the liberal state (known by such names as the New Freedom, the New Deal, the New Frontier, and the Great Society) had been worked out and, in part, tried out by the end of the First World War. The second is that the ideal of a liberal corporate social order was formulated and developed under the aegis and supervision of those who then, as now, enjoyed ideological and political hegemony in the United States: the more sophisticated leaders of America's largest corporations and financial institutions.

This book is not based upon a conspiracy theory of history, but it does posit a conscious and successful effort to guide and control the economic and social policies of federal, state, and municipal governments by various business groupings in their own long-range interest as they perceived it. Businessmen were not always, or even normally, the first to advocate reforms or regulation in the common interest. The original impetus for many reforms came from those at or near the bottom of the American social structure, from those who benefited least from the rapid increase in the productivity of the industrial plant of the United States and from expansion at home and abroad. But in the current century, particularly on the federal level, few reforms were enacted without the tacit approval, if not the guidance, of the large corporate interests. And, much more important, businessmen were able to harness to their own ends the desire of intellectuals and middle class reformers to bring together "thoughtful men of all classes" in "a vanguard for the building of the good community." These ends were the stabilization, rationalization, and continued expansion of the existing political economy, and, subsumed under that, the circumscription of the Socialist movement with its ill-formed, but nevertheless dangerous ideas for an alternative form of social organization.

There are two essential aspects of the liberal state as it developed in the Progressive Era, one tightly and sometimes indistinguishably intertwined with the other, but both clearly different. The first was the need of many of the largest corporations to have the government (usually the federal government) intervene in economic matters to protect against irresponsible business conduct and to assure stability in marketing and financial affairs. Gabriel Kolko has examined this aspect in his The Triumph of Conservatism, and I will deal with it only peripherally. The second was the replacement of the ideological concepts of laissez faire, or the Darwinian survival of the fittest, by an ideal of a responsible social order in which all classes could look forward to some form of recognition and sharing in the benefits of an ever-expanding economy. Such a corporate order was, of course, to be based on what banker V. Everitt Macy called "the industrial and commercial structure which is the indispensable shelter of us all."

The key word in the new corporate vision of society was responsibility, although the word meant different things to different groups of men. To most middle class social reformers and social workers-men such as Frank P. Walsh of Kansas City, or Judge Ben B. Lindsey of Denver, or Walter Weyl of the New Republic, or Jane Addams of Hull House, responsibility meant, first of all, the responsibility of society to individual Americans or to underprivileged social classes. To the corporation executives it meant, above all, the responsibility of all classes to maintain and increase the efficiency of the existing social order. Of course some middle-class reformers, like New Republic editor Herbert Croly, understood that progressive democracy was "designed to serve as a counterpoise to the threat of working class revolution." But even for them the promotion of reform was not an act of cynicism: they simply sought a way to be immediately effective, to have real influence. Their purpose was not only to serve as defenders of the social system, but also to improve the human condition. In the most profound sense they failed, and badly; yet they were a good deal more than simply lackeys of the capitalist class.

The confusion over what liberalism means and who liberals are is deep-seated in American society. In large part this is because of the change in the nature of liberalism from the individualism of laissez faire in the nineteenth century to the social control of corporate liberalism in the twentieth. Because the new liberalism of the Progressive Era put its emphasis on cooperation and social responsibility, as opposed to unrestrained "ruthless" competition, so long associated with businessmen in the age of the Robber Baron, many believed then, and more believe now, that liberalism was in its essence anti big business. Corporation leaders have encouraged this belief. False consciousness of the nature of American liberalism has been one of the most powerful ideological weapons that American capitalism has had in maintaining its hegemony. An intellectual tradition has grown up among liberal ideologues that embodies this false consciousness. Arthur M. Schlesinger, Jr., intellectual in residence of the Kennedys, for example, writes that "Liberalism in America has been ordinarily the movement on the part of the other sections of society to restrain the power of the business community." Consistent with this assertion is the popular image of movements for regulation and social reform-the Pure Food and Drug Act, the Federal Trade Commission, workmen's compensation, social security, unemployment insurance, the poverty program as victories of "the people" over "the interests." In one sense this is true. Even so, Schlesinger's pronouncement is misleading. It is not only historically inaccurate, but serves the interests of the large corporations by masking the manner in which they have exercised control over American politics in this century.

Both in its nineteenth and twentieth century forms, liberalism has been the political ideology of the rising, and then dominant, business groups. Changes in articulated principles have been the result of changing needs of the most dynamic and rapidly growing forms of enterprise. Thus in the days of Andrew Jackson, liberalism's main thrust was against monopoly (and Arthur Schlesinger tells us this meant it was anti-business). But more recent scholarship has shown that it was the new business class, made up of individual small entrepreneurs (as well as threatened and declining farmers and artisans), that fought state chartered monopoly. Rising entrepreneurs struggled to free business enterprise of the outmoded restrictions of special incorporation and banking laws and to end what was then an overly centralized control of credit. Their laissez faire rhetoric in opposition to "unnatural" or artificial privilege was that of the common man, but their achievements-general incorporation and free banking laws, the spread of public education and popular suffrage-created the conditions for unfettered competition and rapid industrial growth. Half a century later that competition and industrial expansion had led to the development of new forms of monopoly, grown so powerful that a relative handful of merged corporations came to dominate the American political economy. Thereafter, liberalism became the movement for state intervention to supervise corporate activity, rather than a movement for the removal of state control over private enterprise.

To achieve conditions suitable for free competition during the Age of Jackson, the rising entrepreneurs and their political representatives had to believe in, and promote, ideals of equality of opportunity, class mobility, and noninterference by the government with individual initiative (although, even then, government subsidy of such necessary common services as railroads and canals was encouraged where private capital was inadequate to do the job). At the turn of the century the new trust magnates also pressed for reform in accordance with their new political, economic, and legal needs. The nature of the ideals and the needs in the two periods were different. In the first, the principles of competition and individual efficiency underlay many proposed reforms; in the second, cooperation and social efficiency were increasingly important. But in each case the rising businessmen-or, at least, many of them helped promote reforms. In both instances,' lousiness leaders sponsored institutional adjustment to their needs, and supported political ideologies that appealed to large numbers of people of different social classes in order to gain, and retain, popular support for their entrepreneurial activity.' In the Progressive Era, and ever since, corporation leaders did this by adapting to their own ends the ideals of middle class social reformers, social workers, and socialists.

My main concern in this book is not with the social reformers, men and women who might be called ordinary liberals. Instead I will focus on those business leaders (and their various political and academic ideologues) who saw liberalism as a means of securing the existing social order. They succeeded because their ideology and their political economy alone was comprehensive. Radical critics of the new centralized and manipulated system of social control were disarmed and absorbed by the corporate liberals who allowed potential opponents to participate, even if not as equals, in a process of adjustment, concession, and amelioration that seemed to promise a gradual advance toward the good society for all citizens. In a formal democracy, success lay in evolving a social vision that could be shared by most articulate people outside the business community. Corporate liberalism evolved such a vision. More than that, it appealed to leaders of different social groupings and classes by granting them status and influence as spokesmen for their constituents on the condition only that they defend the framework of the existing social order.

As it developed, the new liberalism incorporated the concepts of social engineering and social efficiency grew up alongside of industrial engineering and efficiency. The corollary was a disparagement of "irresponsible" individualism and localism. On the municipal level, as Samuel P. Hays has observed, the drama of business-led reform lay in competition between two systems of decision-making. One was based upon ward representation and traditional ideas of grass-roots involvement in the political process; the other, growing out of the rationalization of social life made possible by scientific and technological developments, required expert analysis and worked more smoothly if decisions flowed from fewer and smaller centers outward toward the rest of society. The same competition went on at the federal level, although formal changes in the political structure were more difficult to make and, therefore, less extensive. In general, however, the Progressive Era witnessed rapid strides toward centralization and a decline in importance of those institutions which were based upon local representation, most obviously in the decline of Congress and the increasing importance of the executive branch in the shaping of policy and in the initiation of legislation. As Hays concludes, this development constituted an accommodation of forces outside the business community to political trends within business and professional life.

The process of developing social reform through extra-political negotiation between various social groupings went on most consistently in the early years of the century in one organization, the National Civic Federation. It is, therefore, central to this study. The National Civic Federation was primarily an organization of big businessmen, although it established the principle of tripartite (business-labor-public) representation in public affairs. Founded in 1900, it was the leading organization of politically conscious corporation leaders at least until the United States entered the First World War. I will, in addition, look at the circumstances under which small businessmen acted like big businessmen-that is, when they played the role of class-conscious political reformers, capable, if necessary, of transcending their most immediate, or apparent, interests or traditions. And I will examine the role of leaders of the major political parties during the Progressive Era (1900 to 1920), to explore their relationship to particular business groupings, but, more important, the manner in which they assimilated and translated into legislation the social and institutional principles talked about and advocated by business leaders in the Civic Federation and other organizations. In short, this book will attempt to show that liberalism in the Progressive Era-and since-was the product, consciously created, of the leaders of the giant corporations and financial institutions that emerged astride American society in the last years of the nineteenth century and the early Years of the twentieth.

Last updated 2/3/97