ECONOMIC SUPREMACY AND POLITICAL REPRESSION
The European war had raged for three years before the United States finally joined the Allies (Great Britain, France, Italy, and Russia) as a combatant in April 1917, against the Central Powers (Germany, Austro-Hungary, and the Ottoman Empire). American troops were slow to arrive in Europe, and only half of the million men of the American Expeditionary Force actually fought on the Western Front. But their presence alone marked new challenges and responsibilities for the United States as soon as the Armistice was signed in November 1918. Though it had risen quickly on the world stage, U.S. leadership stumbled into the postwar world, now in shambles. The socialist revolution in Russia shocked and frightened the architects of the world capitalist order in Europe and the United States. American diplomacy under an ailing president, Woodrow Wilson, had reached a crossroads. Despite an immediate isolationist impulse to avoid future European entanglements, there was no avoiding the imperatives that came with being the world’s industrial leader and new banker. From the latter standpoint, America’s leading capitalists agreed that European recovery was vital to U.S. economic interests at home and abroad.
World war had catapulted the United States into the world’s mightiest economic powerhouse. Even before it entered the conflict, America’s support for the Allied war effort had accelerated the concentration of wealth and the supremacy of monopoly-finance capital over the U.S. economy. Indeed, the war had been good for America’s industrial giants and its biggest banks. Capital loaned to the Allies to buy U.S. goods had pumped at least $5 billion of purchasing power, a substantial part of the total national income, into the domestic economy.8 Returns on investment, especially in munitions, were stunning. Corporate profits soared. Wealthy owners and managers got richer. Better yet, there was enough to go around. Workers made more money and lived better. Farmers reaping the rewards of booming agricultural prices borrowed from local banks to buy new machinery and cultivate more land. The pace of these developments quickened when the United States entered the war. As American soldiers fell on the Western Front, a select few of their countrymen made big killings in the marketplace. By 1919, a year after the war ended, America’s corporations were producing 87 percent of all manufactured goods in the domestic economy.9 Eighteen of the largest two hundred corporations saw net earnings rise to $337 billion during the war. Profits in the steel and iron industries were three times more than original investments. Earnings in the electrical and appliance industries were even better, rising almost two hundred times above their initial investments. Meanwhile, more Americans were adding to their personal wealth. According to income tax returns, the number of millionaires had almost quadrupled.10
Then the war ended, and so did the prosperity. Wartime contracts worth billions were canceled immediately, sending industry and agriculture into an uncertain and threatening future. Quickly the boom turned into its opposite. Ruinous inflation, unemployment, and labor unrest shook the economic and political order. The cost of living skyrocketed, but wages and salaries failed to keep pace. Disgusted with their inability to gain any advantages with employers, more than four million workers in various states went out on strike or merely walked off their jobs in 1919. From a general strike in Seattle to striking steel workers in Pittsburgh and coal miners in West Virginia, America’s working class challenged the power of the bosses.
Government, in tandem with Big Business, responded decisively to the worker insurgency. As Bruce Minton and John Stuart wrote in The Fat Years and the Lean (1940), “The true role of the state became clear.” It had become “the weapon … of the industrialists, the financiers, the small minority in Wall Street,” who had taken “almost complete possession of the governing agencies.” The state became “the hired policeman of the employers.” On their behalf, government launched a crusade to rid the nation of all public enemies, especially the communists and anarchists who were blamed for infecting workers with radical ideas. Attorney General A. Mitchell Palmer set out to eradicate these “termites of revolution,” who, he claimed, were fed by Lenin and the “Red hordes.” Justice Department agents “careened through America, violating every principle of the Bill of Rights.” The most significant of the “Palmer Raids” occurred on January 2, 1920, and resulted in the arrest of more than 2,700 men and women, many of whom were jailed for months without being charged. According to Minton and Stuart, 556 were held for deportation, with many deported without proper hearings. The combined arrests included 1,400 members of the Industrial Workers of the World (IWW); 300 were convicted for violating laws against criminal syndicalism and anarchy.11
Big Business stood squarely behind Palmer. “The recent action of the Government in the deportation of undesirables is to be commended,” wrote Stephen C. Mason, then president of the National Association of Manufacturers (NAM). “It is the only punishment that fits the crime of anarchy, sedition, or revolution by force, and the Government should comb the country with a fine-tooth comb and not let up until the last one of these pests is sent back to the country from which he came.”12 Businessmen blamed the same public enemies but singled out immigrants for infecting American workers—old-stock, Anglo-Saxon—with alien thinking and uppity Negroes who forgot their place in white society. “There is only one way to treat this disease,” wrote U.S. Steel chairman Elbert H. Gary whose own workers had struck hard, “and that is to stamp it out, to meet it boldly wherever it can be found, to expose it and to give it no chance for development.”13 The NAM waged concerted economic and political warfare on labor organizations. In the midst of the 1919 strike wave, it established an Open Shop Department designated to promote another of its creations, the American Plan, which took aim at the union movement and the closed shop. Its premise was as political and ideological as it was economic by assuming that “all law abiding citizens have the right to work when they please, for whom they please, and whatever terms are mutually agreed on between employee and employer and without interference or discrimination upon the part of others.” Throughout the 1920s, the American Plan was used to promote company unions where workers were deprived of any bargaining powers. It pushed successfully for greater use of the “yellow-dog contract” that forced workers to agree not to join a union and, in some cases, to pledge not to strike. Meanwhile, it promoted the doctrine of “True Americanism” that aimed to define the difference between the old-stock citizens considered the backbone of the nation and alien forces that threatened them. Big Business and state power came together effectively in court-ordered injunctions that made it illegal for workers to strike or even engage in collective bargaining. Despite minor concessions to some workers, the combined power of the state and Big Business proved too much for the working class.14
As business and government joined hands, organized labor sought a seat at the table. During the Great War, prosperity had seeped downward to select parts of the working class. This was especially true for workers who were directly involved in wartime production, and earned higher wages and lived more comfortably. But even before peace came in 1918, organized labor struck a deal with Big Business that held up until the 1929 crash. The unions in the American Federation of Labor (AFL), long committed to a reformist and limited agenda in their dealings with employers, had argued that labor’s fulfillment of wartime production demands had earned it a rightful place in decision making with government and business. Samuel Gompers and other AFL leaders had demonstrated loyalty to American capitalism by their hard line against the IWW and other radicals who had tried to convince American workers not to support an imperialist war against their brethren in Europe. At the same time, the AFL kept rank-and-file workers in line by winning concessions for higher wages and better working conditions. But the ideological disposition of the AFL was far deeper than its routine activities. In its deliberate aim to reject any hint of socialism and promote what it considered a viable alternative to it, the AFL under Gompers’s leadership sought harmonious relations with capital in the hope that it would lead American workers into a corporate-capitalist economic partnership with Big Business.15
Government repression and the support it got from business leaders certainly helped to promote other sources of political reaction in the immediate postwar period. The American Legion, counterpart of European para-military groups whose members helped to build the ranks of fascist organizations, declared war against all suspected insurrectionists, and directed
