Part 3: Slouching Through the Great Depression

Chapter Five
“Slouching Through the Depression”
(1930—1940)

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“Bankers, and not the government, should determine what industries are worth saving.”

In the 1931–1932 school year, outside interests continued to draw Doriot’s attention away from Harvard. In particular, Doriot was closely monitoring the progress of his Parisian business school, which was off to a strong start. The French Department of Education had awarded the school a first-class rating, applications were up, and almost all of the first-year students “were booked for important positions, sometimes as vice presidents of corporations.”

On January 12, 1932, Doriot was invited by Major General Fox Connor to give a lecture to a large audience of regular Army, National Guard, and Reserve officers at Harvard’s Baker Memorial Library. After several years of lectures, Doriot had established quite a reputation in the military.

“There is one thing about Professor Doriot that has impressed me a great deal,” said one Colonel in his remarks introducing Doriot. “He is different from other professors in that he is intensely human and I think the affection that has been shown to him by the Harvard graduates, not only when he is here but when they are talking to me about him, is really very touching and he should be very proud of it.”

On this January day, Doriot’s subject was “Industrial Mobilization in a Major Emergency.” Although Doriot envisioned various ways of promoting peace, this lecture and others he gave over the next few years suggested Doriot believed war was always on the horizon. “We must formulate and perfect our preparedness plans in peace-time for war-time needs,” urged Doriot. “In peace-time an order for supplies is delayed in delivery or fails of execution but no one suffers seriously or dies as a result. In war-time the delay in delivery of supplies for only a week may cause the loss of countless lives.”

Doriot ended the speech by calling for the creation of a “chief of natural resources as well as a chief of manufacturing” to help manage the coordination of wartime production needs. But, as with so many other visionary speeches he had delivered over the years, Doriot’s warning and calls for action fell on deaf ears and empty government coffers.

At the end of 1931, some of the country’s leading companies began to court Doriot, including N. W. Ayer, the first advertising agency in the United States., In November, the firm offered Doriot a job. Founded in Philadelphia in 1869, N. W. Ayer coined some of the industry’s most enduring jingles, including Morton Salt’s “When it rains it pours.”

Doriot expressed hesitation about the offer to Lewis Strauss. “This does not mean I have decided to go with them,” wrote Doriot, “but I have realized that they were in very close touch with many companies that might require good banking connections, and after all, since I am still free and ‘my soul has not been sold’! it is normal that you should be the good banking connection.” In early 1932, after careful consideration, Doriot declined to take the job, but he did accept his first consulting job.

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For Doriot, the rest of 1932 did not bring much excitement. The real action was in Washington. All eyes were on the nation’s capital as it was consumed with the presidential election of 1932, pitting the incumbent Herbert Hoover against the urbane democratic governor from New York, Franklin Delano Roosevelt. It was landmark election that realigned the political landscape of America, ushering in a new era of activist government. And Doriot was eager to be involved.

After becoming a full professor at Harvard, Doriot began to take a greater interest in the nation’s public life. In his speeches before the military, and in various articles he wrote or committees that he joined, we see a man becoming increasingly interested in using his power to shape public policy. One theme emerged as a leitmotif: like many businessmen of the day, Doriot was a critic of big federal government. “American businessmen are now handicapped as a consequence of the stupid regulation which now exists,” said Doriot to one reporter in 1932.

Doriot was particularly opposed to the government provision of direct economic relief to the unemployed. In January of 1933, Doriot weighed in on the issue in a four-page article he co-wrote for New Outlook called “The Motorist Afoot.” The story focused on the emergence of two Depression-era taxes: sales and gasoline. Mississippi was the first state to adopt a sales tax, and a dozen other states were contemplating similar measures “as a way out of the general depression and the distressed conditions of state finances.”

The tax on gasoline was the next step, to help Mississippi and other states refill their coffers. Doriot favored the sales tax but in his essay he criticized legislatures that adopted gas taxes to build and maintain roads, and then diverted the funds for direct unemployment relief. “The fallacy of taking revenue that is now providing worthwhile employment of public benefit and giving it to those who are unemployed is so obviously and utterly absurd that one marvels howl egislators—supposedly representatives of the thinking citizens—can contemplate such measures and even carry them into effect.”

In March, Doriot wrote Lewis Strauss and asked him to open a bank account for him. What seems like an unusual request today was actually a shrewd maneuver. In the early 1930s, the banking industry was in the throes of a crisis. With hundreds of banks declaring insolvency, Doriot tapped Strauss for his knowledge of this troubled industry.

“Would you be willing to open an account for me in a bank which you think has a fair chance of remaining in existence for a period of months?” asked Doriot. “If the bank you pick should close two minutes after the account is opened, I shall not feel badly but shall merely come to the conclusion that it could not be helped.” The amount that Doriot deposited in the account showed the meagerness of his savings. It was only $3,500, less than a year of salary.

In June, at the height of the Depression, Doriot stepped up his attack on big government by slamming one of the key legislative proposals of the New Deal—the National Industrial Recovery Act. Passed on June 16, 1933, the law created the National Recovery Administration (NRA), an executive agency with the power to create “codes of fair competition”—codes which were intended to reduce destructive competition and to help workers by setting minimum wages and maximum weekly hours.

The NRA, symbolized by the blue eagle, included a rash of regulations that imposed pricing and production standards for all sorts of goods and services. But the codes allowed cartels to be established in many industries. And as NRA-associated firms increased their prices, sales fell, employment fell, and the recovery stalled.

Most economic historians today consider the NRA to be a resounding failure but many respectable business groups praised its passage, including the U.S. Chamber of Commerce and leading labor organizations. Not Doriot. The professor believed in the collective wisdom of the market, not government bureaucrats.

In a story published in the Boston Transcript titled “A Dissenting Voice on the Recovery Act,” reporter W. P. Black devoted the whole piece to airing the Doriot’s views, who declared the act as nothing more than a bluff, a measure designed “to scare the manufacturers and make them behave.”

To carry out its provisions, Doriot said the United States would have to go “all the way to Bolshevism, which none but an insignificant minority wants in America.” Doriot criticized many aspects of the act but the worst feature for him was that it gave the government the power to lend money to struggling businesses. “Bankers, and not the government, should determine what industries are worth saving,” argued Doriot.

This time, Doriot hit the nail on the head. The professor correctly saw that the newly elected Roosevelt—and the government—had overstepped their bounds. But Doriot did not have to wait long to be vindicated. The law was so poorly conceived that on May 27, 1935, the Supreme Court overturned the NRA in a unanimous decision, ruling that it infringed upon states’ authority and gave powers to the executive branch in violation of the Constitution.

The NRA quickly stopped operations. Doriot’s campaign against the agency marked the first of many battles he would wage against the federal government, and what he felt were its misguided intrusions into the free market economy.

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