1924. At the beginning of 1920, the U.S. Shipping Board owned and operated a fleet of 1,525 cargo ships and tankers. These vessels competed with privately owned ships, whose owners (along with the NAM) lobbied Washington to get rid of the government fleet. Republicans were happy to oblige. By the end of 1925, the government-owned merchant marine, which just a few years earlier had been world-class, consisted of only 276 aging vessels.58
Such moves in the direction of deregulation and privatization were in keeping with the development of the Republican Party, which emphasized the need for economic liberty. When President Coolidge proclaimed in December 1923 that “the business of America is business,” he meant that the government’s role should be to assist private enterprise—and get out of its way. Nationally, there were now fewer Republicans who embraced progressivism and more who saw state regulation as an evil that needed to be minimized.59 Progressivism was not quite dead in the 1920s, however. The Republican-majority Congress did pass bills providing subsidies for farmers, which were defeated only by Coolidge’s vetoes. And at the state and local levels, certainly, voters and politicians, as well as many business leaders, continued to support some new regulations and state enterprises.60
Despite the ascendance of pro-business Republicanism in the 1920s, some progressive experiments of the 1910s did not fade away so easily. This was true for a small network of Navy-owned petroleum reserves, which included some lands in California that had been set aside in 1912, as well as some in Wyoming, created three years later, dubbed “Teapot Dome.” Josephus Daniels, naturally, had argued throughout his tenure as Navy secretary that the oil reserves must remain under public control. But not long after Daniels left office in 1921, President Harding transferred authority over the reserves from the Navy to the Interior Department. That agency was now headed by Albert B. Fall, a former U.S. senator from New Mexico who was known as a friend to mining and oil companies. In 1922, as Fall proceeded to negotiate leases with private interests, Daniels put critics of the plan in touch with sympathetic Navy officers; he also used his Raleigh, North Carolina, newspaper to call for congressional investigations.
To Daniels’s delight, Congress did discover some remarkable improprieties connected with the privatization of the Navy oil fields, which have gone down in history under the name of the “Teapot Dome” scandal. Perhaps the most sensational finding was that Edward L. Doheny, with whom Fall had negotiated a lease on one of the California reserves, had engaged his son to give Fall a small black bag containing $100,000 in cash. Fall received similar “loans” from his friend Harry Sinclair, who had received the Teapot Dome leases. One of the men hurt most by the investigation, ironically, was William McAdoo, whose law firm had assisted with some of Doheny’s business in Mexico. Although this connection had no direct relation to the Navy reserve leases, it may have helped prevent McAdoo from becoming the Democrats’ candidate for president in 1924. Instead, the party chose the more business-friendly John W. Davis. This decision encouraged Robert M. La Follette, Jr. to run as a third-party candidate, under the banner of the Progressive Party. Both were crushed in 1924 by Coolidge, who had managed to prevent Teapot Dome from damaging his campaign.61
Although the Teapot Dome scandal offered sensational evidence of corruption practiced by a single government official, it should be understood as part of the wider struggle over the economic legacies of the Great War. Even before Fall’s bribe-taking was revealed, Daniels and his progressive allies—including La Follette in the Senate and Gifford Pinchot, the conservationist governor of Pennsylvania—were attacking the leases as evidence of the excesses of postwar privatization under the new Republican administration. In most fields, the progressives in the early 1920s lacked the political power to prevent this reassertion of private authority in the American economy. But in this case, thanks in part to Fall’s crimes, they prevailed: the reserves were returned to the Navy.
There was another closely watched struggle over postwar privatization in which progressives managed to wield surprising influence during the 1920s, even without a dramatic corruption scandal. This was the Muscle Shoals controversy, which, after many twists and turns, ended with the establishment of one of the most important public enterprises in American history, the Tennessee Valley Authority (TVA).
The Muscle Shoals dispute originated with the War Department’s massive efforts in 1917–18 to ramp up the nation’s capacity to produce explosives. In December 1917, the War Department contracted with the American Cyanamid Company to build and run a large GOCO nitrates plant at Muscle Shoals, Alabama. This complex, built at a cost of $68 million, was slated to produce forty thousand tons of nitrates a year, which would help free the United States from its dependence on Chilean nitrates. To provide electricity for the plant, the War Department started to build a large new dam, which would take advantage of the natural waterfalls at Muscle Shoals. The nitrates plant was finished in October 1918, too late to make a contribution to the war effort. Construction on the dam, which, at the time, represented the biggest hydropower project ever undertaken in the United States, was still far from complete.62
During the 1920s, the fate of the big GOCO explosives plant and hydroelectric power project at Muscle Shoals became the subject of intense public debate. At first, it seemed certain that the facility would be leased or sold to the private sector. The most prominent of the early bidders was Henry Ford, the auto industry titan, who suggested that he was interested in using Muscle Shoals as the foundation for a new Detroit—a major manufacturing center for the South. “The destiny of our country, agriculturally and industrially,” Ford proclaimed in early 1922 as he discussed terms with Secretary of War John W. Weeks, “lies at Muscle Shoals.”63 Ford appeared to be the choice of President Coolidge, who recommended in a December 1923 speech that Muscle Shoals be sold.
Resistance to such a sale proved unexpectedly potent. The growing Teapot Dome scandal encouraged critics of the proposed deal with Ford. They were led in Congress by Senator Norris, a champion of public ownership of electric power. One of Norris’s allies, Congressman Fiorello H. La Guardia (D-NY), warned in March 1924 that privatization of the costly Muscle Shoals facilities could become an even bigger Teapot Dome. Such opposition helped delay any action before the 1924 elections. Frustrated, Ford withdrew his offer in October of that year. Although the progressives still had not won over a majority in Congress, they had succeeded, by the time Wilson Dam was finished in 1925, in keeping Muscle Shoals in government hands.64
During the late 1920s, Norris and his allies gained even more ground, thanks to public concerns about the organization of the American electricutility industry, dominated by large holding companies. These entities, most of which were controlled by the J. P. Morgan financial empire and Chicago utility titan Samuel Insull, were criticized by progressives as a monopolistic “power trust” that harmed the public interest. In 1928, a Federal Trade Commission investigation of the industry noted that the holding companies had been lobbying against the creation of a public utility at Muscle Shoals. Senator Norris, backed by the League of Women Voters and a variety of other groups, had been working on a bill that would make Muscle Shoals the center of a large utility and waterways management system in the South. Norris managed to get Congress to pass one such bill in 1928, but President Coolidge vetoed it. In 1931, President Hoover vetoed a similar bill.65
Hoover’s opposition to public power at Muscle Shoals suggests how much he differed from his former colleagues in Wilson’s cabinet and from the New Dealers who would soon set up shop in Washington. Hoover’s work to promote government-business cooperation, which he pursued especially during his tenure as secretary of commerce in the 1920s, is sometimes described as “progressive” and distinct from the approach of traditional free-market business conservatives.66 And as president, Hoover continued to favor some policies that would make government bigger, not smaller.67 But on the Muscle Shoals question, Hoover had no interest in compromising with progressives. During the 1928 campaign, he dismissed the Norris scheme as “state socialism.” In his 1931 veto message, Hoover explained that the Norris bill “raises one of the most important issues confronting our people.” For Hoover, there was only one acceptable position to take on this critical question. “I am firmly opposed,”
