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Herbert Hoover and the Corporatist State

One of those questions that Americanist grad students in History get asked a lot is, “What was new about the New Deal?”

At first it struck me as a pretty obvious question– of course EVERYTHING was new about the New Deal. That’s definitely the story I heard growing up… But when you look at it, things get murky– Hoover wasn’t the laissez faire capitalist he’s often made out to be. In fact, he was a proponent of an interventionist federal government. FDR outspent every president before him on social welfare, but Hoover outspent every president before HIM.

So looking to resolve the question, and looking into it a bit, I’ve come up with– well, at least a theory. Hoover was a corporatist and an associationalist. He was for intervention, but not for the type of big state programs that the New Deal ushered in. And when he needed big state programs, he didn’t like to leave their management in the hands of the state alone.

In his essay “Three Facets of Hooverian Associationalism” Ellis Hawley argues that Hoover, in his time as Secretary of Commerce and President, created a new approach to federal regulation with regard to “problematic” industries, one that he sees as an outgrowth of progressive associationalism. While earlier progressive associationalism had approached the regulation of industry by the bringing together of interest groups that had a stake in the industry, from management, labor, and consumers, Hoover’s regulatory approach to troubled industries was essentially corporatist—characterized by the rationalization of troubled industries by new governmental agencies that were headed by individuals within the industry. Hawley further argues that the definition of “problem” industries included not only industries in decline, but nascent industries whose primary “difficulty” was a failure to efficiently meet their full potential.  F. Robert van der Linden’s Airlines and Air Mail and Douglas Craig’s Fireside Politics, two books that draw on Hawley’s work, both bring this particular dynamic into much closer focus, looking at the new industries of commercial aviation and radio, respectively.

Robert van der Linden draws very directly on Hawley’s work, framing his book in its introduction as an expansion of “Three Facets.” (viii) Where Hawley’s article focused primarily on the role Hoover played in regulating commercial aviation as Secretary of Commerce, van der Linden expands upon this work, looking at the arguably far greater role played by Hoover’s Postmaster General in regulating and rationalizing the industry after the Watres Act. While the Watres Act was essentially an expansion of Federal authority—giving Brown almost unchecked authority over the young airline industry, which was still dependent upon government subsidy in the form of Air Mail contracts—the way he went about implementing this authority is an excellent illustration of Hoover’s corporatist approach to regulation of industry.

In the conference of airline operators held May 19, 1930—the notorious “spoils conference”—Brown used the powers given him by the Watres Act to bring together the heads of the top companies to discuss, and resolve by means of cooperation, how to best rationalize the airline industry. This meeting, while it stunk of collusion to many contemporaries, embodied Hooverian corporatism. The nascent industry was a “problem” industry because it was failing to reach its potential—commercial airliners were failing to gain the desired numbers of air travelers, routes weren’t standardized, and there was a level of competition which, in the estimation of Brown and the heads of the top carriers, was unhealthy for the young industry. Brown brought together industry leaders to force consensus on these and other issues. The goal, more than simply the negotiation of Air Mail payment rates, was fairly explicitly to reshape the industry itself to something more in keeping with Taylorist notions of rational industrial management. The result was vertical integration of the industry, fusing several of the largest players to create a tighter oligopoly, and the exclusion of small upstart players to benefit “competition” among the remaining three behemoths.

The back-door collusion of this meeting eventually led to scandal when Hugo Black began his investigation and Roosevelt’s Postmaster General James Farley revoked the Air Mail contracts and assigned the military the task of flying the mail. However, military aviation quickly proved unable to safely and efficiently perform the task, and Air Mail contracts were re-awarded to the big three airlines. Moreover, the consolidations that Brown had overseen remained, and the three airlines created out of this conference remained as the core of the industry for half a century.

While Hawley and van der Linden see Hooverian corporatist regulation of “problem” industries as springing directly from the earlier principle of progressive associationalism, Douglas Craig interprets it as resulting from a failure of associationalism. Craig argues that the radio conferences of the 1920s reflect a more pure associationist approach, bringing together various interest groups to help steer the direction of the industry with direct Federal intervention being held back to a minimum, primarily in the maintaining of the Radio Act of 1912. Taking a stricter definition of associationalism, he argues that it is only when this sort of interest-group consensus building failed under the weight of the rapidly growing industry that Hooverian corporatist regulation came into play with the Radio Act of 1927 and the creation of the Federal Radio Commission.

Under the Radio Act of 1912, regulation of radio fell under the Department of Commerce, and thus—through most of the 1920s—under Hoover. When Hoover announced in 1926 that radio would be subject only to voluntary self-regulation until congress passed new legislation better defining the government’s rights and responsibilities in regulating radio, it could be argued that after his loss in court to the Intercity Radio Company, he decided that the young radio industry had officially reached the point of being a “problem” industry, and thus required a shift in tactics, away from traditional associationalism and toward corporatism.

The FRC was a clear example of corporatist regulation. The commissioners often were men who had worked within the industry, and often went on to executive positions within the networks after leaving the FRC. Moreover, the FRC favored commercial networks over the noncommercial independent operators, often placing a greater burden of proof upon them with regard to their commitment to public interest. While the commissioners were more overtly given the right to do so in legislation than Brown had been with the airlines, the FRC was also similar in that it helped to directly shape the industry, apportioning and taking away licenses of operators. While some of this reshaping was done in response to political pressures asserted by outspoken politicians, as with the rewarding of licenses to Southern operators to the detriment of operators in the North and East, it was always done in a spirit of cooperation with the major networks, who were also given a disproportionate number of clear channels.

As with the airline industry, the Hoover-era act that created this corporatist alignment of Federal and oligopolies’ interests was replaced by a New Deal piece of legislation that had little net effect. In the case of the radio industry, it was the creation of the FCC in 1934. Craig argues that the new, larger commission had only minor, almost negligible differences from the FRC when it came to issues of radio broadcast.

Both books further our understanding of Hawley’s initial argument. Hoover was an associationalist, but when a new industry became “problematic,” either by growing too slowly like commercial airliners, or too quickly, as in the case of radio, he felt that a greater deal of state intervention and regulation was necessary. Rather than the direct state intervention preferred by New Dealers, Hoover’s solution was to create regulating bodies that would represent the interests of both the state and the most successful companies in the industry. The result in both cases was the creation of an oligopoly—a collection of the “big three” companies that would submit to government regulation, and in exchange, were given the lion’s share of the industry and an opportunity to participate in their own regulation.

The authors don’t necessarily agree, however, on the net effect of this pattern. Robert van der Linden seems to be a fairly enthusiastic advocate of Hooverian corporatism, refusing to see collusion in Brown’s “spoils conferences,” and indeed avoiding the words “spoils” or “scandal.” He makes a point of mentioning Black’s membership in the KKK, but avoids the topic of Ford and Lindberg’s Nazi sympathies. Despite his enthusiasm for Hoover’s policies, however, one doesn’t get the impression that he lets it effect the quality of his scholarship, even if it colors his treatment of the subject. Craig, on the other hand, seems to mourn radio’s lost potential, especially the possibility that American radio could have adopted the Australian/Canadian model of public and commercial radio—something that the US didn’t achieve until the Johnson administration.

However, both authors seem to agree on the lasting impact made by Hooverian corporatist regulation. Both books end in the Roosevelt era, with that administration making little impact on the overall structure of the industries as they were engineered under Hoover. The big three networks and two of the big three airlines are still dominant. The FCC is still around. And as much as some people evoke the lasting impact of FDR’s interventionist state, we can see shadows of Hoover’s corporatist model in the way the Federal Government regulates many industries today.