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William Gibbs McAdoo, the Emergency Fleet Corporation, and the Origins of the Public-Authority Model of Government Action

  • Gail Radford (a1)

American government officials experimented with a variety of tools for public administration in the early twentieth century. The regulatory commission became the best known of these new institutional forms, but another Progressive Era innovation with profound and ambiguous implications for U.S. political development was the government-sponsored corporation. Often called “public corporations,” these instrumentalities were created to carry out public purposes, but they were established as separate legal entities to function outside the standard departmental structure of government (and its organizational principles and restrictions). Today, these structures are most prolific at the state and municipal level, where they are generally termed “public authorities.” Since World War II they have been the fastest growing kind of government unit, with, at present, around ten thousand in existence. While everyone perceives these institutions as important players in local affairs, even well-informed citizens are frequently puzzled when it comes to knowing exactly what they are or what they do.

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1. Estimates vary because of definitional differences and imprecise data. The number cited here is from Axelrod, Donald, “Off-Budget Budgets: Financing Public Enterprises,” in Axelrod, A Budget Quartet: Critical Policy and Management Issues (New York, 1989), 4 . Methodological issues related to determining the exact number are discussed in Walsh, Annmarie Hauck, The Public's Business: The Politics and Practices of Government Corporations (Cambridge, Mass., 1980 [originally published 1978]), 5-6, 353-72, 373 n. 1 ; and Mitchell, Jerry, “The Policy Activities of Public Authorities,” Policy Studies Journal 18 (Summer 1990): 928–42.

2. For a relatively complete list, see U.S. Congress, House, Committee on Government Operations, Profiles of Existing Government Corporations, Study prepared by the General Accounting Office, 100th Cong., 2d sess., 1988, Committee Print . An excellent article on the issues related to the contemporary use of the corporate device in the federal bureaucracy is Froomkin, A. Michael, “Reinventing the Government Corporation,” University of Illinois Law Review 543 (1995): 543634.

3. “Federal Audits Find Rising Risks in Loan Programs,” New York Times, 23 February 1996, 1.

4. Schwarz, Jordan A., The New Dealers: Power Politics in the Age of Roosevelt (New York, 1994), xi.

5. Howard, Christopher, “The Hidden Side of the American Welfare State,” Political Science Quarterly 108 (1993): 403.

6. Axelrod, , A Budget Quartet, 3.

7. See, for example , Mansfield, Harvey C. Sr., “Special Government Corporations: A Middle Way,” in Orlans, Harold, ed., Nonprofit Organizations: A Government Management Tool (New York, 1980), 6970 ; or Moe, Ronald C., “Managing the Public's Business: Federal Government Corporations,” report for Senate Committee on Governmental Affairs, 104th Cong., 1st sess. (1995), 12.

8. For forceful statements of this critique, see Axelrod, Donald, Shadow Government: The Hidden World of Public Authorities—and How They Control Over $1 Trillion of Your Money (New York, 1992) ; Walsh, , The Public's Business ; and Seidman, Harold, “Government-sponsored Enterprise in the United States,” in Smith, Bruce L. R., ed., The New Political Economy: The Public Use of the Private Sector (New York, 1975).

Other perspectives can be found in the work of Jameson W. Doig and Susan Tenenbaum. Doig's work on the New York Port Authority highlights its successful administration of enormously complex engineering and financing tasks that conventional government structures were manifestly incapable of handling. For her part, Tenenbaum agrees with interpretations that emphasize the respect of Progressive state builders for business rationality and their desire for political insulation, but she believes that public corporations should be understood as the “institutional expression” of a sincere moral concern for the public interest on the part of their creators. She critiques the emphasis in the literature on the nondemocratic character of these institutions in the current period, arguing that these agencies should be evaluated on the basis of their contribution to the public good. See Doig, , “Joining New York City to the Greater Metropolis: The Port Authority as Visionary, Target of Opportunity, and Opportunist,” in The Landscapes of Modernity: New York City, 1900-1940, ed. Ward, David and Zunz, Olivier (Baltimore, 1997 [originally published 1992]); and Tenenbaum, , “The Progressive Legacy and the Public Corporation: Entrepreneurship and Public Virtue,” Journal of Policy History 3 (1991): 309–30, quote from 309.

9. For a characteristic statement of this perspective, see Schiesl, Martin J., The Politics of Efficiency: Municipal Administration and Reform in America, 1800-1920 (Bekeley and Los Angeles, 1977).

10. Axelrod, , A Budget Quartet, 7.

11. More positive assessments of Progressive political reform can be found in : McCormick, Richard L., “The Discovery that Business Corrupts Politics: A Reappraisal of the Origins of Progressivism,” American Historical Review 86 (April 1981): 247–74 ; Frisch, Michael, “Urban Theorists, Urban Reform, and American Political Culture in the Progressive Period,” Political Science Quarterly 97 (Summer 1982): 295315 ; Dawley, Alan, Struggles for Justice: Social Responsibility and the Liberal State (Cambridge, Mass., 1991) ; Gerstle, Gary, “The Protean Character of American Liberalism,” American Historical Review 99 (October 1994): 1043–73 . Sealander, Judith, Grand1 Plans: Business Progressivism and Social Change in Ohio's Miami Valley, 1890-1929 (Lexington, Ky., 1988) , and Brinkley, Alan, “Liberalism's Third Crisis,” American Prospect, no. 21 (Spring 1995): 2834.

12. Cited in Schwarz, , The New Dealers, 4.

13. Cited in Broesamle, John J., William Gibbs McAdoo: A Passion for Change, 1863-1917 (Port Washington, N.Y., 1973), 14.

14. Graham, Otis L. Jr “William Gibbs McAdoo,” Dictionary of American Biography, Supplement 3 (New York, 1973), 479–80 . Quote from Broesamle, William Gibbs McAdoo, 12.

15. McAdoo's Hudson Tubes are now called the Port Authority Trans-Hudson or PATH tunnels . Broesamle, , William Gibbs McAdoo, 1631 . McAdoo, William G., Crowded Years: The Reminiscences of William G. McAdoo (Boston, 1931), 71108 . For a discussion that places this episode within the context of New York transit politics, see Clifton Hood, 722 Miles : The Building of the Subways and How They Transformed New York (New York, 1993), 145–50.

16. Broesamle, , William Gibbs McAdoo, 239 n. 12 and 31-37.

17. Broesamle, , William Gibbs McAdoo, 30 . For a discussion of “welfare capitalist” perspectives, see Nelson, Daniel, Managers and Workers: Origins of the New Factory System in the United States, 1880-1920 (Madison, Wis., 1975), chap. 6.

18. McAdoo, , Crowded Years, 106.

19. Synon, Mary, McAdoo: The Man and His Times (New York, 1924), 38.

20. McAdoo, William G., “The Relations Between Public Service Corporations and the Public,” Lecture delivered before the Graduate School of Business Administration, Harvard University, 6 April 1910 , in McAdoo Papers, Library of Congress [hereafter McAdoo Papers], Box 563, quotes from 7, 37.

21. McAdoo, W. G., “A Naval Auxiliary Merchant Marine,” Speech to Indianapolis Chamber of Commerce, 13 October 1915, in McAdoo Papers, Box 563, 22.

22. Cited in McAdoo, William G., “Address to the Chamber of Commerce of the United States,” Washington, D.C., 4 February 1915 , Senate Document 950, 63d Cong., 3d sess. (1915), 10.

23. Pedraja, René De La, The Rise and Decline of U.S. Merchant Shipping in the Twentieth Century (New York, 1992), 47.

24. Cited in Broesamle, , William Gibbs McAdoo, 212.

25. Chandler, Alfred D. Jr, The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977), 189–92 ; Mergen, Bernard, “The Government as Manager: Emergency Fleet Shipbuilding, 1917-1919,” in Sharlin, Harold Issadore, ed., Business and Its Environment: Essays for Thomas C. Cochran (Westport, Conn., 1983), 5051.

26. Link, Arthur S., Wilson: The Struggle for Neutrality, 1914-1915 (Princeton, 1960), 87, 76 ; Safford, Jeffrey J., Wilsonian Maritime Diplomacy, 1913-1921 (New Brunswick, N.J., 1978), 37.

27. McAdoo, , Crowded Years, 296.

28. Quoted in Link, , Struggle for Neutrality, 87.

29. The literature on Wilson's conception of the relationship between American economic prosperity and world progress is reviewed in Safford, , Wilsonian Maritime Diplomacy, 19 , quote from 21.

30. Cited in Broesamle, , William Gibbs McAdoo, 200.

31. Link, Arthur S., Wilson: The Struggle for Neutrality, 1914-1915 (Princeton, 1960), 86.

32. Quotes from Kennedy, David M., Ofer Here: The First World War and American Society (New York, 1980), 302, 303.

33. From the text of H.R. 18666, a revised version of Alexander's original bill (H.R. 18518), submitted 4 September 1914 after the close of hearings; copy in McAdoo Papers, Box 554. Link, Struggle for Neutrality, 87.

34. Cited in Broesamle, , William Gibbs McAdoo, 222.

35. Becker, William H., The Dynamics of Business-Government Relations: Industry and Exports, 1893-1921 (Chicago, 1982), 147.

36. McAdoo, , Crowded Years, 305.

37. Cited in Link, , Struggle for Neutrality, 147.

38. Philadelphia Board of Trade to Rep. George W. Edmonds, 28 August 1914, in U.S. Congress, House, Committee on Marine, Merchant and Fisheries, , Hearings on H.R. 18518, 63d Cong., 2d sess. (1914), 34 [hereafter 1914 Shipping Bill Hearings].

39. 1914 Shipping Bill Hearings, 18.

40. 1914 Shipping Bill Hearings, 28.

41. U.S. Congress, House, Committee on Marine, Merchant and Fisheries, , Hearings on H.R. 10500, 64th Cong., 1st sess. (1916), 277 [hereafter 1916 Shipping Bill Hearings].

42. Link, , Struggle for Neutrality, 8990.

43. 1914 Shipping Bill Hearings, 25.

44. McAdoo, “Address to the Chamber of Commerce,” 11.

45. As it turned out, the bureau, which was under McAdoo's supervision in the Treasury, made a profit of about $17 million . McAdoo, , Crowded Years, 304 ; Link, , Struggle for Neutrality, 83 n. 31.

46. 1916 Shipping Bill Hearings, 266; 1914 Shipping Bill Hearings, quote from 17.

47. Link, Arthur S. et al., eds., The Papers ofWoodrow Wilson, vol. 31 (Princeton, 1979), 418.

48. 1914 Shipping Bill Hearings, 29.

49. McAdoo, , “A Naval Auxiliary Merchant Marine,” quotes from 11 . Broesamle, , William Gibbs McAdoo, 223.

50. Mergen, , “The Government as Manager,” 51 and passim; Dorn, Harold Archer Van, Government-Owned Corporations (New York, 1926), 5759.

51. McAdoo, , “A Naval Auxiliary Merchant Marine,” 10.

52. 1916 Shipping Bill Hearings, 269.

53. 1916 Hearings, 269-70 ; Dorn, Van, Government Owned Corporations, 233–42 , quotes from 238, 239-40 ; McDiarmid, John, Government Corporations and Federal Funds (Chicago, 1938), 7483.

54. Freeman, Neil B., The Politics of Power: Ontario Hydro and Its Government, 1906-1995 (Toronto, 1996), 1012 ; McCraw, Thomas K., TVA and the Power Fight, 1933-1939 (Philadelphia, 1971), 2630 , quote from 26.

55. Thurston, John, Government Proprietary Corporations in the English-Speaking Countries (Cambridge, Mass., 1937), 1821.

56. The three park districts were: the South Park Commission, the West Park Commission, and the Lincoln Park Board . Studenski, Paul, The Government of Metropolitan Areas in the United States (National Municipal League, 1930), 260 . Michael Patrick McCarthy points out that “in actual operation Chicago in the progressive era was a confederation of eight separate jurisdictions: the City, three Park Boards, the Board of Education, Public Library Board, the Sanitation District and Cook County,” in “Businessmen and Professionals in Municipal Reform: The Chicago Experience, 1887-1920,” (Ph.D. diss., Northwestern University, 1970), 44 ; Massachusetts Statutes of 1894, chap. 548, sections 23 and 37; Charles W. Cheape, Moving the Masses : Urban Public Transit in New York, Boston, and Philadelphia, 1880-1912 (Cambridge, Mass., 1980), 142 . Judith Sealander provides a fascinating account of the political struggle surrounding the creation of Conservancy District, which included a vociferous opposition movement that labeled this administrative mechanism as “undemocratic as the Stamp Act,” in Grand Plans : Business Progressivism and Social Change in Ohio's Miami Valley, 1890-1929 (Lexington, Ky, 1988) , chap. 3, quote in text from 54, quote in this note from 71. Quirk, William J. and Wein, Leon E., “A Short Constitutional History of Entities Commonly Known as Authorities,” Cornel Law Review 56 (April 1971): 562 n. 253. In the case of the bonds issued by New York's river districts, there was no guarantee that they were backed by the credit of the state. Tarr, Joel A., “The Evolution of the Urban Infrastructure in the Nineteenth and Twentieth Centuries,” in Hanson, Royce, ed., Perspectives on Urban Infrastructure (Washington, D.C., 1984), 28.

57. Kettleborough, Charles, “Special Municipal Corporations,” American Political Science Review 8 (November 1914): 614.

58. Kettleborough, Charles, “Special Municipal Corporations,” American Political Science Review 4 (November 1915): 751.

59. Abrams, Richard M., “Business and Government,” in Greene, Jack P., ed., Encyclopedia of American Political History 1 (New York, 1984) , quote from 128. Field, Oliver, “Government Corporations: A Proposal,” Harvard Law Review 48 (March 1935): 775–76 ; Ellis, Richard E., The Union at Risk: Jacksonian Democracy, States Rights, and the Nullification Crisis (New York, 1987), 1920.

60. Ellis, , The Union at Risk, 22, 3340 , Jackson quoted 19 ; Hammond, Bray, Banks and Politics in America: From the Revolution to the Civil War (Princeton, 1957) , chap. 14; Heather Richardson, Cox, The Greatest Nation of the Earth: Republican Economic Policies During the Civil War (Cambridge, Mass., 1997), chap. 6.

61. Abel, Albert S., “The Public Corporation in the United States,” in Friedmann, W. G. and Garner, J. F., eds., Government Enterprise: A Comparative Study (New York, 1970), 182 ; Pinney, Harvey Franklin, “Federal Government Corporations as Instrumentalities of Government and of Administration” (Ph.D. diss., New York University, 1937), 252–65 ; Mclntire, John A., “Government Corporations as Administrative Agencies: An Approach,” George Washington Law Review 4 (January 1936): 179–82.

62. Link, , New Freedom, 202–13 , McAdoo quoted 211. 38 Stat, chap. 6, sections 2 and 4.

63. Greider, William, Secrets of the Temple: How the Federal Reserve Runs the Country (New York, 1987), 4850.

64. Friedmann, W. G., “Government Enterprise: A Comparative Analysis,” in Friedmann, and Garner, J. F., eds., Government Enterprise: A Comparative Study (New York, 1970), 308.

65. Pinney, , “Federal Government Corporations,” 265.

66. DiMaggio, Paul J. and Powell, Walter W., “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields,” in Dimaggio and Powell, The New Institutionalism in Organisational Analysis (Chicago, 1991), 6382.

67. Webbink, Paul, “Government-Owned Corporations”, Encyclopedia of the Social Sciences 7 (1932): 106.

68. Wilson quoted in Link, , Struggle for Neutrality, 145.

69. Burdette, Franklin L., Filibustering in the Senate (Princeton, 1940), 104–6 , quotes from 106 ; Safford, , Wilsonian Maritime Diplomacy, 5165 ; McAdoo, , Crowded Years, 307–9 ; Link, , Struggle for Neutrality, 9091 , 144-60. The House passed the bill on 16 February 1915 by a vote of 214 to 122, with 7 abstentions. Congressional Record, 63d Cong., 3d sess., 3923.

70. Safford, , Wilsonian Maritime Diplomacy, 7173, 84-86.

71. Broesamle, , William Gibbs McAdoo, 230 . A copy of this bill, H.R. 10500, can be found in McAdoo Papers, Box 554.

72. McAdoo, W G., “The Progress and Prosperity of the United States Under the Present Democratic Administration,” speech to Raleigh, North Carolina, Chamber of Commerce, 31 May 1916 , in McAdoo Papers, Box 563.

73. McAdoo, , Crowded Years, 312.

74. 1916 Shipping Bill Hearings, 269 . Becker, , Dynamics of Business-Government Relations, 148.

75. Quoted in Safford, , Wilsonian Maritime Diplomacy, 89 ; Kennedy, , Over Here, 308.

76. Safford, , Wilsonian Maritime Diplomacy, 92.

77. Broesamle, , William Gibbs McAdoo, 229.

78. Safford, , Wilsonian Maritime Diplomacy, quote from 82 . The House passed the bill on 20 May 1916 on a vote of 209 to 161, with 11 abstentions. Journal of the House, 64th Cong., 1st sess., 708. The Senate passed the bill on 18 August 1916 on a vote of 38 to 21. Journal of the Senate, 64th Cong., 1st sess., 616.

79. 39 Stat., chap. 451, preamble.

80. 39 Stat., chap. 451, sec. 3.

81. 39 Stat., chap. 451, sec. 11 . Becker, , Dynamics of Business-Government Relations, 148–49.

82. Dorn, Van, Government-Owned Corporations, 47.

83. Smith, Darrell Hevenor and Betters, Paul V., The United States Shipping Board: Its History, Activities, and Organization (Washington, D.C., 1931), 37 . Kennedy, , OICT Here, 339.

84. Pedraja, De La, The Rise and Decline of U.S. Merchant Shipping, 59.

85. Mergen, , “The Government as Manager,” 73 . Colean, Miles, Housing for Defense (New York, 1940), 155.

86. Van Dorn lists and describes the activities of all these in Government-Owned Corporations, passim.

87. Dorn, Van, Government-Owned Corporations, 72.

88. Smith, and Betters, , The United States Shipping Board, 1 . Pinney, , “Federal Government Corporations,” 266–73.

89. Wolfe, Alan, America's Impasse: The Rise and Fall of the Politics of Growth (New York, 1981), 97.

90. McAdoo to Wilson, 4 September 1916, in “Presidential Papers Microfilm: Woodrow Wilson Papers,” Library of Congress, Series 2, reel 82.

91. This long struggle is recounted in Karl, Barry Dean, Executive Reorganization and Reform in the New Deal: The Genesis of Administrative Management, 1900-1939 (Cambridge, Mass., 1963).

92. Skowronek, Stephen, Building a New American State: The Expansion of National Administrative Capacities, 1877-1920 (Cambridge, 1982), 204.

93. Doig, Jameson W., “‘If I See a Murderous Fellow Sharpening a Knife Cleverly …’: The Wilsonian Dichotomy and the Public Administration Tradition,” Public Administration Review 43 (July-August 1983): 293.

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