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Businessman and Bureaucrat: The Evolution of the American Social Welfare System, 1900–1940

Published online by Cambridge University Press:  11 May 2010

Edward Berkowitz
Affiliation:
University of Massachusetts
Kim McQuaid
Affiliation:
Lake Erie College

Extract

Between 1900 and 1940, organized industry and the federal government, acting in conjunction with the states, created an American social welfare system. The two major participants in this process evolved along similar lines during this period. Both began as simple organizations and developed into complex, functional bureaucracies. At the beginning of the twentieth century, the federal government did not exist as a social welfare entity. Private corporations, the first to face the administrative and economic problems posed by the development of national markets, created social welfare systems for their employees long before the New Deal. Until the depression, these efforts enjoyed clear supremacy. By the end of the 1930s, however, a distinctly “public” social welfare bureaucracy and program had been developed on the federal level. Corporations and the state underwent similar changes but at different times, and the difference in timing influenced their relations. This essay describes the growth of these public and private bureaucracies and identifies their similarities and differences during the early twentieth century.

Type
Papers Presented at the Thirty-Seventh Annual Meeting of the Economic History Association
Copyright
Copyright © The Economic History Association 1978

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References

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8 For an example of corporate hesitancy regarding the systematization of welfare procedures, see Ozanne, Robert, A Century of Labor-Management Relations at McCormick and International Harvester (Madison, 1967), pp. 3136Google Scholar; Weinstein, James, The Corporate Ideal in the Liberal State, 1900–1918 (Boston, 1971), p. 38Google Scholar; Jensen, Gordon M., “The National Civic Federation: American Business in an Age of Social Change and Social Reform, 1900–1910,” (Ph.D. thesis, Princeton, 1956), pp. 108, 143Google Scholar; Zercan, Paul, “Understanding the Anti-Radicalism of the National Civic Federation,” International Review of Social History, 19, pt. 2 (1974), pp. 194210Google Scholar; Green, Marguerite, The National Civic Federation and the American Labor Movement, 1900–1925 (Washington, D.C., 1956), pp. 267–70Google Scholar; Croly, Herbert, Marcus Alonzo Hanna: His Life and Work (New York, 1912), pp. 406–10.Google Scholar

9 Jensen, “National Civic Federation,” pp. 155, 159; Green, The N.C.F. and the American Labor Movement, pp. 269–74; National Civic Federation, Welfare Department,“Conference on Welfare Work held at the Waldorf Astoria,New York City,March 16, 1904” (New York, 1904), pp. xvii-xxiii.Google Scholar

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11 Bernstein, Irving, The Lean Years: A History of the American Worker, 1920–1933 (Boston, 1960), pp. 157–69Google Scholar; McGregor, F. A., The Fall and Rise of Mackenzie King (Toronto, 1962), pp. 207, 230–78Google Scholar; Rockefeller, J. D. Jr., The Personal Relation in Industry (New York, 1923).Google Scholar

12 Cuff, Robert D., The War Industries Board: Business-Government Relations During World War I (Baltimore, 1973), pp. 9, 11.Google Scholar

13 Federal Bureau of Labor Statistics studies which attempted to disseminate information regarding welfare capitalist innovations include Emmet, Boris, “Profit Sharing in the United States,” B.L.S. Bulletin No. 208 (Washington, 1917)Google Scholar; Chaney, L. W. and Hanna, H. S., “The Safety Movement in the Iron and Steel Industry, 1907–1917,” B.L.S. Bulletin No. 234 (Washington, 1918)Google Scholar; Hanger, G. W., “Housing of the Working People in the United States by Employers,” U. S. Dept. of Labor Bulletin No. 54 (Washington, 1904)Google Scholar; “Welfare Work for Employees in Industrial Establishments,” B.L.S. Bulletin No. 250 (Washington, 1919)Google Scholar; Otey, Elizabeth L., “Employers' Welfare Work,” B.L.S. Bulletin No. 123 (Washington, 1913).Google Scholar

14 Pringle, Henry F., The Life and Times of William Howard Taft, vol. 2 (New York, 1939), pp. 915–25Google Scholar; Soule, George, Prosperity Decade: From War to Depression, 1917–1929 (New York, 1968), 6871Google Scholar; Commons et al., History of Labor, pp. 341–48.

15 Himmelberg, Robert F., “Business, Antitrust Policy, and the Industrial Board of the Department of Commerce, 1919,” Business History Review, 42 (Spring, 1968), 123CrossRefGoogle Scholar. The best source for the post-war National Industrial Conferences is Hurvitz, Haggai, “The Meaning of Industrial Conflict in Some Ideologies of the Early 1920's: the A.F.L., Organized Employers, and Herbert Hoover,” (Ph.D. thesis, Columbia University, 1971)Google Scholar. Baker, Ray Stannard, The New Industrial Unrest: Reasons and Remedies (Garden City, N.Y., 1920)Google Scholar and Tarbell, Ida M., New Ideals in Business (New York, 1916)Google Scholar provide examples of the widespread reform belief that enlightened businessmen must take the lead in post-war welfare advances.

16 Commons et al., History of Labor, pp. 323–50; Dunn, Robert W., The Americanization of Labor (New York, 1927), pp. 129Google Scholar; Brandes, Stuart D., American Welfare Capitalism, 1880–1940 (Chicago, 1976), pp. 83119Google Scholar; Baritz, Loren, The Servants of Power: A History of the Use of Social Science in American Industry (Middletown, Ct., 1960), pp. 119–20CrossRefGoogle Scholar; Brody, David, “The Rise and Decline of Welfare Capitalism,” in Braeman, John et al. , eds., Change and Continuity in 20th Century America: The Twenties (Columbus, 1968), pp. 161 ff.Google Scholar; Hicks, Clarence J., My Life in Industrial Relations (New York, 1941), pp. 4152Google Scholar; Hurvitz, “The Meaning of Industrial Conflict,” pp. 245 ff.; Ozanne, McCormick and International Harvester, 156 ff.; U.S. Congress, Senate, Committee on Education and Labor, “Violations of Free Speech and Rights of Labor,” Part 45: The Special Conference Committee (Washington, 1939), pp. 16777 ffGoogle Scholar; DuBois, Philip H., A History of Psychological Testing (Boston, 1970), pp. 29 ff., 60–66Google Scholar; Krooss, Herman, Executive Opinion: What Business Leaders Said and Thought on Public Issues, 1920's–1960's (Garden City, N.Y., 1971)Google Scholar; Bendix, Reinhard, Work and Authority in Industry: Ideologies of Management in the Course of Industrialization (New York, 1963), pp. 287 ff.Google Scholar

17 Krooss, Executive Opinion and Derber, Milton, The American Idea of Industrial Democracy, 1865–1965 (Urbana, Illinois, 1970)Google Scholar are good published sources. McQuaid, , “Henry S. Dennison …” and “An American Owenite: Edward A. Filene and the Parameters of Industrial Reform, 1890–1937,” American Journal of Economics and Sociology, 35 (Jan. 1976), 77ffCrossRefGoogle Scholar. are also useful.

18 Wisconsin was the first state in the Union to establish an unemployment insurance program (in 1931). Precedent supplied by business-initiated programs was very influential, particularly the aspect whereby firms which did the most successful job of stabilizing employment and avoiding lay-offs paid lower insurance premiums than firms unable or unwilling to do the same. This differential-rates approach received steady support from welfare capitalists such as Swope, Dennison, and Edward A. Filene. See Nelson, Daniel, Unemployment Insurance: The American Experience, 1915–1935 (Madison, 1969), pp. 28 ffGoogle Scholar. for specifics regarding the employer-initiated plans and the State of Wisconsin programs. Dennison, H. S., “The Battle to Survive,” Boston Herald, 9 June 1929Google Scholar, clipping in Dennison Collection, Harvard Graduate School of Business Archives, Boston, Massachusetts.

19 Marion B. Folsom, Colombia Oral History Project Memoir (bound typescript), “Social Security” volume, pp. 1–4, Columbia University Archives, New York; Swope, Gerard, “What Big Business Owes the Public,” Worlds Work, 53 (March, 1927), 558Google Scholar; Swope, Gerard, “Management Cooperation with Workers for Economic Welfare,” Annals of the American Academy, 154 (March, 1931), 136–37.CrossRefGoogle Scholar

20 Nelson, Unemployment Insurance, pp. 45–46; U.S., Congress, Senate, Select Committee on Unemployment Insurance, Hearingson S. R. 483, 72nd Cong., 1st sess. (testimony of Gerard Swope), (Washington, 1932), pp. 29–30.

21 Edward Berkowitz, “Historical Perspectives on Governmental Responses to Disability: An Overview Paper,” U.S. Department of Health, Education, and Welfare research report (July, 1976), pp. 7–8; Federal Board for Vocational Education, “Vocational Rehabilitation in the United States: The Evolution, Scope, Organization, and Administration of the Program of Vocational Rehabilitation of Disabled Persons,” Bulletin No. 120 (Washington, 1927)Google Scholar; U.S. Children's Bureau, “The Promotion of Welfare and Hygiene of Maternity and Infancy,” Bureau Publication 13 (Washington, 1924).Google Scholar

22 Hawley, Ellis W., “Herbert Hoover, The Commerce Secretariat, and the Vision of an ‘Associative State,’ 1921–1928”; Journal of American History, 61 (June, 1974), 116 ff.CrossRefGoogle Scholar; Himmelberg, Robert F., The Origins of the National Recovery Administration: Business, Government, and the Trade Association Issue, 1921–1933 (New York, 1976), pp. 569Google Scholar; Karl, Barry D., “Presidential Planning and Social Science Research: Mr. Hoover's Experts,” Perspectives in American History, vol. 3 (1969), pp. 347 ff.Google Scholar

23 Romasco, Albert U., The Poverty of Abundance (New York, 1965)Google Scholar; Warren, Herbert G., Herbert Hoover and the Great Depression (New York, 1959)Google Scholar; Woody, Caroll H., The Growth of the Federal Government, 1915–1932 (New York, 1934)Google Scholar. Herbert Hoover endorsed federal funds for unemployment relief only very reluctantly.

24 For the effect of the depression on the vocational rehabilitation program, see Witte, Edwin E., The Development of the Social Security Act (Madison, 1962), pp. 189–90.Google Scholar

25 Leuchtenburg, William E., Franklin D. Roosevelt and the New Deal, 1932–1940 (NewYork, 1963), pp. 121–25.Google Scholar

26 Bellush, Bernard, The Failure of the NRA (New York, 1975).Google Scholar

27 McQuaid, Kim, “The Business Advisory Council of the Department of Commerce, 1933–1961: A Study in Corporate/Government Relations,” in Uselding, Paul, ed., Research in Economic History: An Annual Compilation of Research, 1 (Greenwich, Connecticut, 1976), 171–77.Google Scholar

28 Kim McQuaid, “Corporate Liberalism in the American Business Community, 1920–1940: An Analysis and Appraisal,” Business History Review (forthcoming). The classic description of the free rider effect is contained in Douglass North and Thomas, Robert Paul, Institutional Change and American Economic Growth (Cambridge, England, 1971).Google Scholar

29 NRA began with a staff of 190 people pondering more than 200 proposed national industrial codes. See “History of Code Making” (typescript), Records of the National Recovery Administration, Record Group 9, Miscellaneous Reports and Documents Series, Box 8784, National Archives, Washington, D.C.

30 “Suggestions for Advisory Council” (undated typescript), Arthur Altmeyer Papers, CES File 2, Box 1, Wisconsin State Historical Society, Madison, Wisconsin; Witte, Development.

31 Schlesinger, Arthur M. Jr., The Coming of the New Deal (Boston, 1959), pp. 302–3Google Scholar; Leuchtenburg, Roosevelt, pp. 130–33; Altmeyer, Arthur M., The Formative Years of the Social Security Act (Madison, 1968), p. 3.Google Scholar

32 Brown, J. Douglas, An American Philosophy of Social Security: Evolution and Issues (Princeton, 1972), pp. 1012Google Scholar; Eveline Burns Memoir, Columbia Oral History Project Collections, Columbia University Libraries, p. 52; “Contributory Old Age Pension Plan: Receipts and Payments,” Altmeyer Papers, CES File 1, Box 1.

33 Business Advisory Council, “Report on Unemployment Insurance” (mimeo), April 10, 1935, Altmeyer Papers, CES File 3, Box 1; Schlesinger, Coming of the New Deal, p. 306.

34 McKinley, Charles and Fraser, Robert W., Launching Social Security: A Capture and Record Account, 1935–1937 (Madison, 1970), pp. 346–56.Google Scholar

35 Ibid., pp. 12–13.

36 I. S. Falk Memoir, Columbia Oral History Project Collections, Columbia University Libraries, pp. 221–24.

37 Leuchtenburg, Roosevelt, pp. 90–91; Hughes, Jonathan R. T., The Vital Few (New York, 1973), pp. 344 ffGoogle Scholar; Swope's disenchantment with Roosevelt on the eve of the 1940 elections is covered in McQuaid, “Competition, Cartellization, and the Competitive Ethic: The General Electric Company during the New Deal Era, 1933–1940,” American Journal of Economics and Sociology (forthcoming).

38 I. S. Falk and Edgar Sydenstricker created the disability insurance program. Falk Columbia Oral History Project memoir, pp. 75–78; Sydenstricker, Edgar, “Study of Illness in a General Population Group,” Public Health Reports, 41 (1926), 2069CrossRefGoogle Scholar; Witte, Development, p. 174; I. S. Falk and E. Sydenstricker, “Public Provisions Against the Economic Risks Arising Out of Ill Health” (typescript), Records of the Social Security Administration, Record Group 47, Accession 56A533, Washington National Records Center, Suitland, Maryland.

39 One proposal called for an annual benefit computed as follows: 40% of the first $600 of average annual wages, 20% of the next $600, 10% of the next $600, 5% of the next $1200, plus an increment of 1% for employment over 5 years and half benefits for wives and children. See “Specifications for Plan AC-13” and other material in Record Group 47, Records of the Executive Director of the Social Security Board, 0–25, Box 138, National Archives. I. S. Falk, M. Sakman, B. S. Sanders, and L. S. Reed, “Permanent Total Disability (Invalidity) Insurance: A Memorandum Prepared for the Consideration of the Advisory Council on Social Security, December 9, 1938,” Department of Health, Education, and Welfare Archives, H.E.W. Library, Washington, D.C.

40 Falk, Sakman, Sanders, and Reed, “Permanent Total Disability,” pp. 5–8, 9, 22, 25; “Plan AC-14,” typescript dated 15 December 1938, Record Group 47, Records of the Director of the Social Security Board, 0–25, Box 138, National Archives.

41 R. K. McNickle, “Editorial Research Report, 1949,” and “Experience Under Ordinary life Insurance” (lecture notes prepared by E. A. Lew, Assistant Actuary, Metropolitan Life Insurance Company), both in Altmeyer Papers, Box 7; W. R. Williamson to Wilbur J. Cohen, 9 November 1938, Record Group 47, Office of the Commissioner, Chairman's File, 1935–1942, 0–56.11–056.12, National Archives.

42 Arthur Altmeyer to F.D.R., 11 September 1937, Altmeyer Papers, Box 2.

43 Arthur Altmeyer was Commissioner of Social Security. He also worked as an advisor to the NRA and as director of the Wisconsin Industrial Commission; Altmeyer, Formative Years, pp. vii-x.

44 On Linton see Gerald Morgan to F.D.R., 25 February 1941, Altmeyer Papers, Box 3.

45 This discussion and all quotations come from “Minutes of Advisory Council Meetings,” Record Group 47, Records of the Executive Director of the Social Security Board, 0–25, Box 138, National Archives.

46 Advisory Council on Social Security, Final Report, Senate Document 4, 76th Cong., 1st sess. (Washington, 1939), pp. 5, 19–21.

47 National Health Conference, “Program, July 18–20, 1938,” p. 71, Altmeyer Papers, Box 3; Benjamin B. Kendrick, “Overexpanding Social Security: The Fork in the Road,” quoted in McNickle, “Editorial Research Report, 1949.”

48 For this rehabilitation emphasis in the 1940s and 1950s, see Berkowitz, Edward, “Rehabilitation: The Federal Government's Response to Disability, 1935–1954,” (Ph.D. dissertation, Northwestern, 1976).Google Scholar

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