Chapter 03
Roosevelt’s Election: A Blessing in Disguise

II. President Hoover Made History

Meanwhile, President Hoover achieved considerable success in implementing industrial cartelization in other areas. In May 1931, Hoover ordered a halt to new federal forest leases intended for logging. He also converted more than 2 million acres of forest land from production use into “national forests,” thereby increasing the size of the national park system by 40%.

In April 1930, Hoover pushed through the McNary-Watres Act, a law intended to support and regulate commercial aviation routes through the use of airmail postal contracts, effectively placing them under federal organization and control. A biographer admiring Hoover wrote that thanks to this legislation, “the routes were consolidated into a carefully planned national system of commercial airways… saving the country from the chaotic web of routes that had previously plagued the development of the railroad industry.”

Hoover also urged Congress to pass the first federal regulatory law for electric utility companies. His original proposal was to authorize the Federal Power Commission to work jointly with state utility commissions to set electric rates within each state. However, Congress rejected this proposal. While the Federal Power Commission’s authority was expanded, it remained limited to regulating hydroelectric power generated from rivers.

In the coal industry, Hoover cooperated with the Appalachian Coal Combine, which controlled three-quarters of the sales of Appalachian bituminous coal, in an effort to raise coal prices and allocate production quotas among mines. Hoover called for an end to the “destructive competition” that plagued the coal sector.

Hoover also took more concrete steps to promote cartelization in the oil industry. Alongside Secretary of the Interior Ray Lyman Wilbur, Hoover encouraged states such as Texas and Oklahoma to pass oil production quota laws under the guise of “conservation.” These laws were designed to reduce crude oil output, raise prices, and promote interstate compacts for coordinated quota production.

To help enforce these laws, Hoover suspended the issuance of new oil drilling leases on public lands and pressured oil producers operating near federal lands to reduce their output.

Especially in supporting and promoting production quota laws, Hoover aligned himself with the major oil companies. His and Secretary Wilbur’s proposal to halt oil production on Sundays was well received by the large corporations, but it failed due to opposition from small producers. Smaller firms strongly demanded protective tariffs on imported crude oil and petroleum products, and Hoover agreed to this in 1932. These tariffs helped domestic cartelization and production quotas function more effectively. Since tariffs are intended to restrict imports, this also revealed that the motivation behind quota legislation was not merely to conserve domestic oil reserves, but rather to reduce the overall supply of oil in the domestic market.

Despite all these efforts, the oil industry remained unsatisfied. It wanted more — specifically, federal legislation to directly support production limits and price hikes. As a result, Hoover began to lose his leadership position in the rapidly developing corporate cartel movement within American industry.

In the cotton textile industry, the Cotton Textile Institute, which had long maintained close ties with Hoover, cunningly promoted monopolistic production cuts under the guise of “humanitarianism.” Their strategy was to call for the abolition of nighttime work for women and children — a cleverly designed move that both aligned with Hoover’s (and the industry’s) pro-cartel philosophy and appealed to his humanitarian rhetoric. In 1930 and 1931, the Institute pressured mills to end night work for women and children. The campaign received strong backing from Hoover and his Commerce Department, who actively helped pressure non-compliant businesses into falling in line. Hoover publicly voiced his firm support, and Commerce Secretary Lamont sent private letters to textile operators urging them to comply with industry-wide decisions.

In 1931 and 1932, the government continued to exert significant pressure. Lamont convened a special meeting with major bankers, and with Hoover’s support, applied coordinated pressure on resistant businesses to force them into compliance.

However, this corporate cartelization plan also failed, because the price of cotton textiles continued to fall. The production-cutting agreements collapsed, just like those in agriculture. The reason for failure was similar to that of the Federal Farm Board’s efforts: despite intense pressure from the government, production cuts were still voluntary. As long as the government did not directly enforce quotas on textile firms, prices would not rise.

By 1932, even the cotton textile industry lost patience with its old ally Hoover. The industry began to push for government intervention with compulsory enforcement to make corporate cartelization work.

Between 1931 and 1932, this shift in attitude — seen in the cotton, oil, and agricultural sectors — spread quickly across nearly every industry in America. Under the strain of the Great Depression, American business leaders, along with intellectuals and labor activists, began clamoring for a fully collectivist corporate state — in which the federal government would organize industries into mandatory cartels, restrict production, and raise prices.

Among those calling for a corporatist state with mandatory industrial cartelization, the most prominent figure was Gerard Swope (1872–1957), a seasoned corporate liberal and head of General Electric. In the fall of 1931, Swope presented his now-famous ‘swope Plan” at a meeting of the National Electrical Manufacturers Association, and by December, it had received the endorsement of the U.S. Chamber of Commerce

The Chamber’s president, Henry I. Harriman, was especially enthusiastic about the plan. He declared that any businessperson who opposed it would be “considered a maverick …… isolated, branded, and eventually forced to fall in line.” Charles F. Abbott, of the American Institute of Steel Construction, praised the Swope Plan as a “public safety measure” to combat those “who arrogantly claim the right to do whatever they please.”

The American Federation of Labor supported a similar proposal — one that would grant labor unions a somewhat larger role in the overall regulatory structure. Two especially active proponents of such ideas were John L. Lewis and Sidney Hillman, who later co-founded the Congress of Industrial Organizations (CIO), a labor federation aligned with New Deal principles.

Dr. Virgil Jordan, an economist at the National Industrial Conference Board, summarized the business community’s sentiment. Speaking approvingly, he concluded that business leaders were ready to welcome an “economic Mussolini.”

Given Herbert Hoover’s long-standing commitment to corporatism, industry leaders naturally expected Hoover to fully endorse this new wave of business collectivism. However, they were surprised and dismayed to find that Hoover abruptly pulled back from the brink, refusing to pursue the very logic he had followed throughout his entire career.