The Chamber of Commerce and the President of GE Have a Plan to Restore Business Confidence and Create Jobs, 1931 Edition.

I should write something about President Obama’s recent talk to the Chamber of Commerce about how to get jobs started again. I find it funny that it’s only been a few days and already Cato people like Dan Ikenson are writing non-ironic headlines like “Obama Hasn’t Given Enough Ground Yet To Business To Spark Growth.” We do understand that businesses don’t want growth, right? They want to consolidate, handicap their rivals, rent-seek and guarantee profit streams. Remember that right now fewer businesses are opening, and they are more likely to fail when they do. This is a great deal for incumbent businesses.

The Swope Plan

But let’s look at this from a different angle. What would the Chamber want ideally? Let’s set the stage. The United States is struggling. High unemployment, financial sector panics, decreased consumer spending. There are calls for balancing the budget and for the Federal Reserve to tighten money. The President and elites are uncertain about what can be done, both in theory and in practice, to get the economy running again.

In a moment born of this desperation, our elites look to the leader of General Electric as well as the Chamber of Commerce, and ask them what does the government need to do for them to start creating jobs and get growth going? What grounds need to be given, what rules do they need implemented or cut, in order for the economy to work again? And sure enough, the leader of General Electric and the Chamber of Commerce have a plan ready to go.

Sounds like today, right? It’s actually 1931. The President of General Electric at the time was a man named Gerard Swope. During those desperate times in 1931 he stepped forward with his Swope Plan that would finally restore business confidence by removing burdensome regulation and replacing them with new business friendly regulations.  The Chamber of Commerce shortly afterwards released a very similar plan.

What did this look like? Because the internet is awesome, I can link to this Sep. 28, 1931 Time Magazine description (my bold):

In times of economic stress—particularly if they verge on a national election— the fancy of thoughtful tycoons and ambitious politicians alike gravely turns to philosophizing about the relationship of Government to Big Business…President Gerard Swope of General Electric Co. has evidently done a great deal of this sort of thinking. Last week…he outlined an ambitious industrial plan for the U. S.  [The Swope Plan] proposed a national organization of modified cartels in which competition would be limited, overproduction governed, workers and investors vigorously protected….”Legislation will be required to make such a plan possible, including the probable modification of some existing laws,” notably the Sherman anti-trust law.

The Plan:

1)  “All industrial and commercial companies (including subsidiaries) with 50 or more employes, and doing an interstate business, may form a trade association. . . . These trade associations may outline trade practices, business ethics, methods of standard accounting and cost practice, standard forms of balance sheet and earnings statement, etc., and may collect and distribute information … on simplification and standardization of products, stabilization of prices….

“For the protection of employes the following plans shall be adopted by all of these companies: a) A workmen’s compensation act . . . modeled after the best features of the laws which have been enacted by the several States, b) All employes . . . may, after two years of service . . . and before the expiration of five years of service, be covered by life and disability insurance.” Cost of the policy would be shared equally by the employe and the company or companies for which he worked, even if he changed industries. The employer would not share the premium of a policy over $5,000. c) Old age pensions, to be effective when the worker reaches 70, would be worked out along the same lines, with the companies putting by a fund dollar-for-dollar with the employe as long as the company’s share would not exceed $50 a year, d) A similar provision would be provided for unemployment insurance….

Comment on the plan was guarded and not plentiful. Many a businessman and educator was for it: President Silas Hardy Strawn of the U. S. Chamber of Commerce, who said the Chamber would have a similar scheme to announce this week; President William Wallace Atterbury of Pennsylvania R. R.; President Robert Isham Randolph of the Chicago Association of Commerce; President Nicholas Murray Butler of Columbia University; President Karl Taylor Compton of M. I. T. (of which President Swope is a graduate and trustee). An exception was Samuel Matthew Vauclain, board chairman of Baldwin Locomotive Works. “I don’t care to comment on it,” said he, “because I don’t believe in it.” In official circles the Swope Plan was viewed “with caution.”

His Swope Plan is considered one of the main documents for the idea of an associationalist economy, or what we would now call a corporatist economy.   Let businesses collude and form price-fixing organizations, and in response they’ll hire more workers and even provide a social safety net for those workers.  The government will need to suspend all anti-trust laws first, obviously, before all the sweet growth and jobs show up.  Many socialists at the time realized that this was asking for trouble for obvious reasons of rent-seeking and businesses not following through and fighting any type of regulatory oversight. Elements of this approach eventually found its way to the National Recovery Act, a poorly chosen endeavor that many New Dealers thought was a failure by the time the Supreme Court struck it down.

Aside:  perhaps anticipating the Enron worker who had his life savings in Enron stock, liberalism thought better about the idea of attaching the welfare state and social safety net to individual corporate benefactors and instead relied on the national government they created.   The one area where they didn’t, health care, has been the bane of the welfare state ever since.

Demand is not a wall ornament.

Luckily there was another approach being developed, one focused on demand and not supply. Though it was still being developed in journals, papers and books at the time the core of it had popular appeal. Here’s a 1930 cartoon I found that I want to share:

(Source.) I could not agree more: Demand is not a wall ornament!   It’s a shame we are forgetting what it took so long time to find out in the first place.

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13 Responses to The Chamber of Commerce and the President of GE Have a Plan to Restore Business Confidence and Create Jobs, 1931 Edition.

  1. Petey says:

    I suspect the LIHEAP cuts Obama just announced will take care of the demand problem.

    The poor can sell some of their organs, and use the money to buy warmer clothing so they and their children can ride out the winter. That alone should pump up demand.

    Now, all we need is for GE to set up a thermal underwear factory in China, and we should be all set.

    • rootless_e says:

      Obama did not announce any LIHEAP cuts. However fauxgressives have once again proven themselves to be more than eager to repeat any lines fed to them by the MSM and denounce Obama on cue.

      • Petey says:

        “Obama did not announce any LIHEAP cuts.”

        The Associated Press disagrees:

        President Barack Obama wants to cut $2.5 billion from a $5 billion home heating aid program for the poor, two people familiar with his 2012 budget proposal said Wednesday, halving the popular fund as he looks for places to rein in federal spending.

        That MSM must be fooling me again. They must have just made that up.

      • Petey says:

        It’s about time those Lucky Duckies got hit so we can pay for the Bush/Obama tax cuts for the rich, no?

        Those Lucky Duckies have been getting away with murder by warming themselves by the public fire for too long. Millionaires have to pay their own heating bills. Why should the poor not freeze if they’re so lazy?

      • rootless_e says:

        “two people familiar with his 2012 budget proposal said Wednesday,”

        Just as he was going to propose cuts in SS. Two anonymous sources is not an announcement. Try to stop being a chump.

      • Petey says:

        “Two anonymous sources is not an announcement”

        If you are familiar with the relevant news reporting conventions, those sources are from inside the administration.

        The proposal may be a trial balloon, or the proposal may be set in stone. But either way, the idea of cutting LIHEAP in half come from inside the administration. Those Luckies Duckies must be made to pay for the Bush/Obama tax cuts for the rich.

      • Petey says:

        “Obama did not announce any LIHEAP cuts … Two anonymous sources is not an announcement.”

        Now it’s officially announced.

        Parsing the journalistic reporting conventions really ain’t that difficult, y’know. I’ll just keep being correct, rootles_e, and we’ll see if you ever notice.

  2. There appears to be a significant different between the current situation and the Swope plan as described in the post.

    The Swope plan was pretty clearly and overtly strong government intervention in the economy on behalf of business. Today, certain very large politically connected businesses are using militant anti-government, free market rhetoric and ideology to agitate for massive government intervention in the economy on their behalf.

    They are using public wariness and fear of the “government” to attack specific government programs and regulations, typically administered by federal civil servants rather than government “contractors” like JP Morgan Chase and Goldman Sachs, such as Social Security (the big example), while, in fact, supporting massive government support for their businesses through the Federal Reserve, the TARP program, and assorted “market-based” policies, indeed as in the skeptical quote by Lew Rockwell in the previous Kochtopus post.

    This free market, anti-government rhetorical smokescreen is effective and confuses many middle class Americans, small business people, and many others who most assuredly do not benefit from these pro “Big Business” policies. The attempts to blame the Federal Reserve (selectively defined and selectively criticized), Fannie Mae and Freddie Mac, and the Community Reinvestment Act (CRA) for the housing bubble and associated economic downturn/financial crash are part and parcel of this rhetorical campaign.

    Opponents must effectively confront and expose these pseudo “free market, anti-government” rhetorical tactics in a way that reaches most Americans — speaks to their concerns and interests.



  3. Adam Sharp says:

    More Depression-era cartoons. I compiled a bunch, while back.

  4. rootless_e says:

    The plan outlined is essentially the plan FDR attempted in the first 100 days. However, things have changed over the last 80 years – it might be worth considering what the CEO of GE in this era has already supported.

  5. ZeroInMyOnes says:

    Now, we know: The ‘free market’ wasn’t free.

  6. Pingback: Links 2/11/11 « naked capitalism

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