Destructive Creation. Mark R. Wilson
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million. This meant that at the end of the 1930s, just as World War II broke out in Europe, the TVA had established itself not only as a big hydropower producer but also as a major distributor of electricity.72 (During World War II, the TVA would provide about 10 percent of all the power consumed by the nation’s war effort. This included most of the electricity consumed by the uranium enrichment complex in Oak Ridge, Tennessee, which fed the atomic bomb program, as well as a large fraction of the power used to create the aluminum for tens of thousands of military aircraft.)73
Although the TVA represented a significant threat, the bigger issue, for many American business leaders, was whether it might represent the beginning of an all-out nationalization of one of the country’s biggest industries. Although Roosevelt did not end up pursuing this extreme solution, his suggestion in November 1934 that the TVA model should be replicated in other regions was regarded by the private utilities as most unwelcome. So, too, was the Wheeler-Rayburn bill, which occupied Congress for much of 1935. Designed to break up the large holding companies, Wheeler-Rayburn included a “death sentence” provision, which required the dissolution within five years of any such entity that failed to prove that its large size was an economic necessity.74 The private utilities responded to this bill with one of the most expensive and aggressive public-relations efforts in American history up to that time. “Government in business has been a failure for 100 years,” they declared in paid advertisements placed in newspapers across the country; if enacted, the bill would push the country “into the morasses of state Socialism and Communism.”75 This effort failed to sway the Democrat-controlled Congress, which, after passing a modified version of the bill, allowed Senator Hugo Black (D-AL) to pursue a major investigation of the sometimes sordid details of the utilities’ lobbying campaign.76
As the controversy over the Wheeler-Rayburn bill suggested, the Muscle Shoals fight had become part of a massive national political struggle over public enterprise. In the 1930s, a decade and a half after the end of Great War, progressive Democrats in Washington—now under the banner of the New Deal—were again making major intrusions into private industry. There were all sorts of public works and construction projects, built by several of the new “alphabet soup” of agencies. The largest of these, including the Civil Works Administration (CWA), the Public Works Administration (PWA), and the Works Progress Administration (WPA), each spent several billion dollars on construction. The PWA, which mostly paid private contractors to do the work, financed many big projects, including giant hydroelectric dams on the Columbia River in the Pacific Northwest. These operations were not entirely offensive, from the point of view of some businessmen, because they relied on private contractors. But the New Deal building agencies, like TVA, could also act as threatening rivals. The PWA actually worked hand in hand with the public power movement, by funding municipally owned electric utilities, some of which would buy electricity from the TVA or other public authorities.77 Even worse, from the point of view of private construction firms, was the use of “force account” projects, in which the government served as contractor and employer. This was the method often used by the CWA, and later by its successor, the WPA, which directly employed more than two million people at once. Both agencies were the subject of complaints about government competition, especially from private firms in the construction industry.78
The TVA, PWA, WPA, and other public enterprises were among the most powerful manifestations of the larger New Deal, which transformed the economic role of the national state. By the end of the 1930s, national government spending amounted to nearly 10 percent of GDP, almost triple what it had been in 1929. There were now one million civilian federal employees (leaving aside those employed temporarily by WPA), nearly double the number in 1930.79 The crisis of the Great Depression had helped usher in a more powerful, and more entrepreneurial, national state.
For conservatives, the New Deal—and the rise of public enterprise, more specifically—qualified as an abomination. Among the first to recognize this were conservative Republican politicians. Congressman James M. Beck (R-PA), who had been criticizing the growth of federal “bureaucracy” even before Roosevelt entered the White House, was against the New Deal from the first. “We are marching toward Moscow,” Beck said in 1933.80 Additional early warnings were provided by ex-president Hoover. Before the end of 1934, Hoover had published a book-length critique, The Challenge to Liberty, which devoted chapters and sections to the problems of “National Regimentation” and “Government in Competitive Business.” The early New Deal programs such as TVA, Hoover wrote, amounted to “blows pounding in the wedge of Socialism as part of regimenting the people into a bureaucracy.”81 In the community of conservative politicians, this rhetoric spread. Senator Arthur H. Vandenberg (R-MI), a leading figure in the Republican Party, complained in February 1934 that Americans were “living under political dictatorship”; two years later, he warned of “a vampire of bureaucracy in Washington.”82 Some conservative Democrats, including Albert C. Ritchie, governor of Maryland, agreed. In 1935, Ritchie claimed that American freedoms were being degraded “by a counter spirit of bureaucratic centralization and by a regimented and nationalized economy.”83
Many American business leaders shared this reaction to the New Deal. Naturally, this generalization does not apply universally. A few executives, including Owen D. Young of General Electric and the department-store magnate Edward A. Filene, maintained positive relations with the New Dealers, as did some leaders of firms whose fortunes most benefited from the new regime, such as construction contractor Henry J. Kaiser. But these individuals were uncommon.84 For the majority of business leaders, the honeymoon with Roosevelt, to the extent that there was any, lasted only about a year. In 1933–34, some executives had held out hope that the National Recovery Administration (NRA) might offer a business-friendly version of price and wage regulation, which might help the country out of its economic death spiral. Even some of the more politically conservative executives, such as Pierre du Pont, worked at least briefly on NRA committees. But by 1934–35, most of them had given up. They did so not just because the NRA was proving to be an unpopular mess but because of how the rest of the New Deal developed.
The business community’s rapid alienation from the New Deal was evident in the experiences of the Du Pont brothers. After the Great War, Pierre, Irénée, and Lammot du Pont, who led the long-standing family business that had become the nation’s leading chemical company, were all multimillionaires. They were also politically active men who gave generously to business associations and conservative political groups, as well as to charitable causes.85 Pierre and his brothers became disturbed by the New Deal’s enthusiasm for public enterprise, which was already being practiced by agencies such as the PWA and TVA. In May 1934, Irénée complained to Pierre of the recent explosion of “governmental capitalism.”86
Three months later, the Du Pont brothers helped to found the American Liberty League. This anti–New Deal group was financed by many of the nation’s most prominent business leaders. Among them were several executives from Du Pont and GM, including John J. Raskob, Alfred D. Sloan, Jr., and William S. Knudsen. Other leading Liberty Leaguers included J. Howard Pew (president of the Sun Oil Company), Raoul E. Desvernine (Crucible Steel Company), and Sewell L. Avery (American Gypsum and Montgomery Ward). A year after its founding in August 1934, the American Liberty League had ten thousand contributing members. In a little over two years, the organization distributed 51 million pamphlets, which pointed out the many dangers of New Deal policies. The league itself spent half a million dollars on the 1936 presidential campaign, in what would turn out to be a totally unsuccessful attempt to unseat Roosevelt. Individual members of the league made major contributions to the GOP that went well beyond this, including more than $1 million donated by the Du Pont and Pew families alone.87
The Liberty League’s hostility toward the New Deal may have been especially pointed, but it was shared by many other organizations of American business leaders. By December 1934, when the NAM and the Chamber of Commerce of the United States held a joint meeting, most of their members had decided that they could not support Roosevelt and the New Deal. This alienation only deepened in 1935, when the Roosevelt administration worked with Congress to roll out a second wave of major reforms and programs. This “second New Deal” included the WPA, as well as the Wagner Act, which provided far more government support for unions. During