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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  and
Kim McQuaid
Edward Berkowitz
Affiliation:
University of Massachusetts
Kim McQuaid
Affiliation:
Lake Erie College
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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
Information
The Journal of Economic History , Volume 38 , Issue 1 , March 1978 , pp. 120 - 142
Copyright
Copyright © The Economic History Association 1978

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References

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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.

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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

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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

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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.

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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