IV. The War on Business

IV. The War on Business REVOLUTIONARIES in the New Deal set out immediately after President Roosevelt's inauguration to grab control of the nation's economic system. Their plans contemplated destruc tion of private enterprise. "Business," said Professor Rexford Guy Tugwell, "wililogi cally be required to disappear. This is not an overstatement for the sake of emphasis; it is literally meant." In the same address, titled "Economic Planning and Laissez faire," Tugwell told the annual convention of the American Economic Society in 1932 that the government would do away with private business by controlling the use of capital for in vestment. "Planning," he said, "will necessarily become a func tion of the federal government; either that or the planning agency will supersede that government." This was the orthodox communist gospel according to Marx and Lenin, whose writings reiterated that business men could be tied hand and foot by the centralization of credit in the hands of the state.

There was no doubt about the objective of the New Dealers, so boldly expressed by one of Roosevelt's leading braintrusters, but there was a choice of methods. Some favored a violent as sault, others preferred the seductive approach. It was a choice between the tactics of the "hoot" owl and those of the "scrootch" owl, which were compared in the Senate by the late Huey Long of Louisiana as follows: "A hoot owl bangs into the nest and knocks the hen clean out and catches her while she's falling. But a scrootch owl slips into the roost and scrootches up to the hen and talks softly to 48 THE TWENTY-YEAR REVOLUTION her. And the hen just falls in love with him. And the first thing you know-there ain't no hen." The New Dealers compromised by adopting both methods. The NRA, which offered glittering inducements to employ ers and labor, was the "scrootch" owl approach. Employers were granted exemption from the anti-trust laws; they were permitted to fix prices, control production, and otherwise elimi nate competition. Labor was given a guarantee of minimum wages, maximum hours, and the right to organize unions and bargain collectively. Employers and employees were to be part ners, with the government as senior partner, and everyone would be prosperous and happy.

The NRA was copied from Mussolini's so-called "corpora tive" system. Frances Perkins, in The Roosevelt I Knew, recalls that she felt a little uneasy when the late General Hugh John son, who was secretly working with Tugwell on a bill to create the NRA, handed her a copy of The Corporate State by Raf faello Viglione, "in which the neat Italian system of dictator ship for the benefit of the people was glowingly described." Miss Perkins also wondered whether Johnson, a flamboyant ex cavalry officer, really "understood the democratic process ... and whether he might not be moving by emotion and indirec tion toward a dangerous pattern." It was Johnson's idea, she recalls, that the Labor Advisory Board of the NRA "ought to rush out and give orders that no one was to strike," and that the Department of Labor ought to "rule" labor. But whatever Miss Perkins may have thought about the Italian dictatorship, the New Dealers were not disturbed by the fascist character of the NRA. Fascism did not acquire an evil name in Washington until Hitler became a menace to· the Soviet Union. In Roose velt's first term, the late Harry Hopkins, Federal Relief Admin istrator, held a press conference on his return from Italy to tell the country what a magnificent job Mussolini was doing.

Title II of the NRA law appropriated 3.3 billion dollars for a public works program which was administered by Interior Secretary Harold Ickes. Other billions were appropriated for leafraking and boondoggling activities under Hopkins. Having THE WAR ON BUSINESS 49 provided for industry and labor in the NRA, the New Dealers set up the AAA (Agricultural Adjustment Administration), under which Henry Wallace paid farmers hundreds of millions of dollars to destroy pigs, plow under cotton, burn oats, or re frain from planting wheat. Miss Perkins recalls. that the late John Maynard Keynes, nritish author of a formula for perpetual prosperity through government spending, came to Washington in 1934 and was "liberally consulted" by a number of "government people" in cluding Roosevelt. Keynes, she relates, "pointed out that the combination. of relief, public works, raising wages by NRA codes, distributing moneys to farmers under agricultural ad justment, was doing exactly what his theory would indicate as correct procedure. He was full of faith that we in the United States would prove to the world that this was the answer."

Thus the New Deal was well launched on a program of Keynesism. And Earl Browder, former head of the American Communist Party, maintains in his pamphlet, Keynes, Foster and Marx, that Keynesism, which he defines as state capitalism, is the road to communism. Although welcomed at first with a popular fervor approach ing delirium, stimulated by all the known instruments of ex hortation and ballyhoo, the NRA soon disillusioned labor, the farmers, consumers, business men, and everyone else ex cept the 6,000 members of its Washington staff and the other thousands who worked for the local code authorities. Con sumers complained that it was a scheme to jack up prices and keep them up. Labor leaders and industrialists battled for con trol of the NRA. A wave of strikes swept the country. Gen eral Johnson quarreled with Donald Richberg, NRA's general counsel. The people were shocked by reports of such acts as the jailing of a New Jersey tailor named Jack Magid, whose crime was pressing a suit for thirty-five cents when the code fixed the price at forty cents. The NRA was blowing up, ·as Miss Perkins said, from "internal combustion," when a unani mous Supreme Court, on May 27, 1935, did the New Deal a favor by declaring the law unconstitutional. The court ruled 50 THE TWENTY-YEAR REVOLUTION that Congress had unlawfully delegated its lawmaking author ity to the President and the NRA.

Another attempt by the New Dealers to take over the eco nomic system by the "scrootch" owl method was more success ful. This was the program to centralize credit in the hands of government. By 1940, according to a report to the Senate by Treasury Secretary Morgenthau given in response to a resolu tion by Senator Byrd (D., Va.), the RFC and thirty other gov ernment lending agencies had loaned nearly 25 billion dollars. Meanwhile, Federal Reserve Board figures showed that new private capital investment for the six years 1933-1938 aver aged only $669,000,000 a year and totalled less than it did for the single year 1930, when it was 4.4 billion. The yearly aver age for the 10 year period 1923-1932 had been 3.7 billion. The Baltimore Sun reported that federal agencies were part owners of 2,000 corporations with total assets of 4 billion dol lars and had some control, through regulations, subsidies, loans and the fear of "getting in wrong," over more than 23,000 cor porations with assets of 70 billion dollars. And this was before the war.

Meanwhile the New Dealers were also employing violent as sault, or "hoot" owl methods, in their campaign to destroy busi ness. One of their favorite weapons was the investigating power of Congress, which they used to attack business and create popular support for encroaching government regimentation or competition. In 1933, Ferdinand Pecora, a Sicilian-born assistant district attorney of New York, was hired by the Senate Banking and Currency Committee to investigate abuses by investment bank ers and the New York Stock Exchange. There was general agreement that such abuses had occurred and that reforms were both desirable and inevitable. Nevertheless, the Securities and Exchange Act could have been drafted and passed without calling a· single witness. Pecora and a great staff of lawyers, accountants, and detectives had examined all the files of the banking houses and had all the evidence they needed, but they THE WAR ON BUSINESS 51 put on a public inquisition, somewhat like the Soviet demon stration trials of purge victims already adjudged guilty. Their purpose was to instill suspicion of the business community as a whole in the minds of the people. Sensational publicity was obtained by such press agent stunts as planting a female midget on J. P. Morgan's lap.

In the same year, Senator Hugo Black, the Alabama Ku Kluxer who later became a Supreme Court Justice, pilloried representatives of shipping and air line companies which were receiving subsidies under government mail contracts. As a re sult of Black's inquisition, President Roosevelt, in February, 1934, canceled the air mail contracts and ordered the army air corps to carry the mail. One month later, after ten army flyers had lost their lives, the President ordered the air corps to stop flying the mail. Postmaster General Farley, in his book Behind the Ballots, acknowledged: "The outcome was tragedy-un foreseen and unavoidable-and the unhappy fate of the brave military aviators who perished in line of duty served to over shadow entirely the question of whether the private contracts had been let on a just and equitable basis." In 1935, Black was chairman of a so-called lobby investi gating committee which harried opponents of the Wheeler Rayburn public utility bill, imposing a death sentence upon holding companies. His committee issued dragnet subpoenas for all telegrams sent or received during periods of several months by opponents or suspected opponents of the "death sentence" bill. Black disdained complaints that his activities flouted the Fourth Amendment to the Constitution, which pro vides that "the right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures, shall not be violated.... "

In the same year, the Senate Munitions Committee headed by Senator Gerald P. Nye (R., N. D.) conducted an investiga tion which resulted in the adoption of neutrality legislation. Through the efforts of the senators, this committee adduced information of great historical value about the duplicity of President Wilson and the influence of J. P. Morgan and Com52 THE TWENTY-YEAR REVOLUTION pany, fiscal agents of Great Britain, in the campaign to take this country into the First World War. However, the staff di rector, Stephen Raushenbush and his principal assistants, Alger Hiss and Robert,Wohlforth, concentrated on smearing Ameri can munitions makers as "merchants of death." This was in keeping with the communist program to drive the major in dustrial corporations with vast facilities for research and de velopment out of national defense production, and thus to weaken the United States as a potential enemy of the Soviet Union.

As we have seen, Communists took over the CIO campaign to organize the mass production industries in 1935 and 1936. After the NRA, with its collective bargaining provision, section 7 (a), had been killed by the Supreme Court, the Wagner Labor Relations Act was adopted and under it the old National Labor Relations Board (NLRB) was reconstituted. The Communists immediately took over the NLRB, which became a government enforcement arm of the communist organization campaign in the heavy industries. Between the tyranny of the NLRB and the revolutionary activity of the Communists in the unions, such as sitdown strikes, mass picketing, and organized violence that resulted in a state of anarchy, American industry was sub jected to a reign of terror which alarmed the nation. . Communist domination of the NLRB during this revolu tionary "class struggle," which dictator Stalin had ordered, has been established beyond any possibility of reasonable doubt in sworn testimony before Senator Jenner's Internal Security Sub committee. The three members of the NLRB were J. Warren Madden, chairman; Edwin S. Smith; and Donald Wakefield Smith. Madden found himself increasingly at odds with the two Smiths and was happy in 1941 to take a job on the Federal Court of Claims. Donald Wakefield Smith, with Jim Curley of Boston, later was convicted of using the mails in a scheme to defraud, and still later was pardoned by President Truman.

Nathan Witt, successor to Harold Ware as leader of the So viet underground apparatus in which Alger Hiss served the THE WAR ON BUSINESS 53 Kremlin, was assistant general counsel of the NLRB until No vember, 1937, when he became its secretary. Interrogated on May 26, 1953, by Robert Morris, counsel for Senator Jenner's committee, Witt refused to answer questions about his member ship and activity in the Communist Party, appealing to the Fifth Amendment. Edwin S. Smith, appearing before the Jenner committee on May 21, 1953, acknowledged that he was registered as an agent for a Soviet principal, among others. Like Witt, he refused to answer questions about his Communist Party membership and activity, citing his constitutional privilege against self-incrimi nation. The chief economist of the NLRB from 1935 to 1940 was David J. Saposs. Before the Jenner committee on June 4, 1953, Saposs testified that Witt, as executive officer of the board, had "full responsibility for the staff in the NLRB, except the attorneys, and it gave him responsibility for the staff in the regions, the hiring of regional directors, the hiring of field ex aminers; again, everyone in the field offices, except the attor neys."

The attorneys were hired by Thomas I. Emerson, head of the review division, Saposs testified. He was also responsible for Washington review of cases from the field. In response to questioning, Saposs stated that Emerson was sympathetic to the point of view of Edwin Smith and Witt, and with them formed a triumvirate in NLRB matters. Asked if Smith and Witt ran the board, Saposs replied, "No doubt about it. They enjoyed it." Saposs testified that Allan Rosenberg, assistant NLRB sec retary, was "sort of regarded as Nathan Witt's hatchet man." He declared that Harry Bridges, the Australian Communist who was throttling the shipping industry on the west coast, was "sort of regarded as a hero by these people" and that "Edwin Smith devoted a lot of time trying to convince me that Harry Bridges was the greatest labor leader in the United States." When the Pacific longshoremen's case came before the NLRB, Saposs said, he was not permitted to prepare the economic data, 54 THE TWENTY-YEAR REVOLUTION although that was his responsibility. "My surmise is that they deliberately kept me from preparing any of the material be cause by that time they knew what my point of view was and they knew what my general understanding was of the ma neuvers, the manipulations of the Communists and the fellow travelers," Saposs declared.

The alliance between the Communists in the NLRB and the Communists in the unions produced many so-called hearings about the country that resembled a Soviet purge trial more than a quasi-judicial proceeding in a free country. Trial ex aminers insulted company lawyers, resolving every point, every objection, in favor of the NLRB attorneys. Hearsay and hear say of hearsay was admitted in evidence. And the United States Supreme Court held that the labor board's findings of fact, un der the Wagner Act, were not subject to review. The courts could review law questions, but not the facts. Not content with their control of the NLRB, the Commu nists organized a Senate inquisition in 1936 to place responsi bility upon the employers for the industrial warfare being waged by revolutionaries in the unions. This was the so-called Civil Liberties Subcommittee, headed by the late Senator Robert M. La Follette Jr., of Wisconsin. Robert Wohlforth, who had worked with Alger Hiss and Stephen Raushenbush on the staff of the Nye munitions committee, was secretary of the La Fol lette subcommittee. John Abt, a co-conspirator with Hiss in the communist underground, was chief counsel. Charles Flato, who "invoked the privilege" when questioned by the Jenner subcommittee about his communist connections, was public relations director of the Civil Liberties Subcommittee, in charge of reports, press releases and other propaganda. Charles Kramer, alias Krivitsky, a veteran of the Ware cell, was a field investigator, who worked on reports and prepared for public hearings. When questioned by the Jenner subcommittee on May 6, 1953, Kramer refused, under the Constitutional privi lege against self-incrimination, to deny sworn testimony linkTHE WAR ON BUSINESS 55 ing him with the Ware cell in the 1930's and with Elizabeth Bentley's espionage apparatus during the war.

Kramer testified that he and Wohlforth investigated the 1937 Memorial Day riot at the Republic Steel Company's plant in South Chicago, in which ten men were killed by police bul lets. Witnesses selected by Kramer and Wohlforth appeared before the La Follette committee and accused the Chicago po lice of unprovoked murder. The incident was characterized by newspapers throughout the country as the "Memorial Day massacre." Kramer's testimony, together with other evidence placed in the record by Attorney Morris, make it unmistakably clear that the Communists not only planned and led the Memorial Day riot but initiated and provided the witnesses for the La Fol lette committee's hearing. The record contains excerpts from an article in the July, 1937, issue of The Labor Defender, official organ of the International Labor Defense, which has been declared subversive and communist by the Attorney Gen eral. This article declares that the ILD "took the precaution of making a movie" of the disturbance and then sent telegrams of protest to the La Follette committee and "all progressive sena tors and congressmen." It states that the committee immedi ately accepted "our ILD film and affidavits."

When questioned by Morris, Kramer did not deny that he cooperated with the Communists in carrying out his investiga tion. "I have no idea of who it was that I interviewed or under what circumstances," he said. He said he could not recall work ing with David J. Bentall, that he "may have" worked with Joe Weber, that the name of Nick Fontecchio sounded familiar, that he had no recollection of Jack Spiegle,and that Lupe Mar shall was a witness before the committee. Morris then placed the following communication from the Chicago police depart ment in the record: "Our records show that one Joe Weber and Lupe Marshall, who are known Communists, were taken into custody on May 30, 1937, and charged with violation of sec tion 139 of chapter 38. Our records further show that Nick 56 THE TWENTY-YEAR REVOLUTION Fontecchio, George Patterson, and Jack Spiegle are also known organizers or are affiliated with organizations of communist activities."

Morris questioned Kramer as follows: Morris: "Did you meet with Lupe Marshall in Chicago?" Kramer: "I met with most of the witnesses, and so did the other members of the staff, yes. I don't know whether spe cifically I met with her or not. I am pretty sure that I did." Morris: "Now, Mr. Kramer, you did meet with Communists in Chicago at that time, did you not?" Kramer: "I told you that I met with any number of people, including members of the police department and the sheriff's office.... " Morris: "Is it your testimony that you did not meet with peo ple you knew to be Communists?" Kramer: "My testimony is exactly as I stated, that I met with people who came into the course of the investigation." One of the witnesses who defended the rioters and denounced the police at the La Follette committee's hearing was Meyer Levine. Levine wrote an article for the July, 1937, issue of The Labor Defender, maintaining the same position. In 1940, however, he published a book called Citizens, in which he de clared that the whole attack "was under the leadership of known Communists" who had seized control of the CIO steel work ers' union and "had been drilling all week in secret." Ben Man dell, research director of the Jenner committee, testified that he had received information from the union "that those respon sible for the violence, which was inimical to the interests of the labor movement, were subsequently dropped from the ad ministration of that union by the national union itself."

The La Follette committee's hearings were so flagrantly prejudiced that the Senate Postoffice Committee, which had been investigating collusion between the strikers and the postal authorities, called witnesses to bring out the facts of the South Chicago riot. Captain James L. Mooney of the Chicago police department testified that the two hundred policemen on duty at the plant were forced to shoot to save their own lives when THE WAR ON BUSINESS 57 the two thousand rioters, armed with such deadly weapons as concrete slabs, automobile parts, and clubs with meathooks at tached, advanced singing the communist "Internationale." He said he pleaded with the rioters to disperse, but they kept com ing and began hurling missiles at the policemen. "If ten of them were killed that's too bad, but there would have been 200 killed if they had ever got through to that plant," Captain Mooney declared.

In its four-year inquisition, the La Follette subcommittee took 18,000,000 words of testimony from 485 witnesses on 98 days of public hearings. Most of the testimony accused em ployers of using "labor spies" and professional strikebreakers and maintaining arsenals of "industrial munitions," such as machine guns, sawed-off shotguns, and tear gas, to prevent or ganization of their employees. In an article in Collier's Magazine, on February 8, 1947, Senator La Follette confessed: "I know from first hand experi ence that Communist sympathizers have infiltrated into com mittee staffs on Capitol Hill in Washington... . . A few years ago, .when I was chairman of the Senate Civil Liberties Com mittee, I was forced to take measures in an effort to stamp out influences within my own committee staff." In the same article, La Follette, on whom the Communists turned in 1946, com plained that a "left wing official of a left wing union" in Mil waukee issued a statement on behalf of the Milwaukee county and Wisconsin state CIO councils denying that the Senator was a liberal. One of the strangest paradoxes in modern political history is that the Communists, in purging La Follette, were responsible for sending Joe McCarthy to the Senate.

Not only the NLRB and the La Follette committee but the executive branch of the government supported the revolution ary strike.. program. When the sitdown strikes broke out in Flint, Michigan, spread to other General Motors plants, and finally extended to different parts of the country, Miss Perkins encouraged the insurrectionists by saying their method should not be regarded as illegal. (The United States Supreme Court 58 THE TWENTY-YEAR REVOLUTION later said it was illegal.) Governor Frank Murphy of Michigan, as well as New Deal governors in Iowa, Ohio, and Pennsyl vania, used state troops to prevent local law officers from en forcing court orders for the ejection of the invaders. Governor Davey of Ohio and Governor Kraschel of Iowa later had a change of heart and refused to use the soldiers to protect the sitdown strikers. Miss Perkins insists that the employers took "a very intran sigent attitude" in refusing to negotiate while their plants were occupied by the invaders. "I never could see why employers should be so stuffy about it-and Roosevelt agreed with me,"

she writes. She maintains this attitude despite her admission that she and Murphy were alarmed by the discovery that "peo ple who did not work in the industry were filtering into the factories." Miss Perkins relates that she finally induced the President to call Knudsen, president of General Motors, and urge him to go into conference with the CIO leaders without demanding prior evacuation of the plants. Knudsen agreed. In 1937, during the violent Little Steel strikes, Governor Davey of Ohio announced that he had turned down an "auto cratic and dictatorial plan" proposed to him over the long dis tance telephone by Miss Perkins. Davey had ordered the state troops to protect all employees wishing to return to work, and the plants of the Youngstown Sheet and Tube Company had reopened. Davey said Miss Perkins asked him to keep the plants closed pending a settlement with the union. He said she also asked him to subpoena Tom Girdler of Republic Steel and Frank Purnell of Youngstown and hold them until they agreed to sign contracts with the CIO union.

Representative Cox (D., Ga.) told the house on June 28th that if such a demand had been made by any cabinet officer other than a woman, there would have been a dozen impeach ment resolutions. But the Democrats were worried about losing the 1938 congressional elections. Representative Hook (D., Mich.) told the House he was not opposed to industrial or ganization but was opposed to "communistic and anarchistic THE WAR ON BUSINESS 59 groups boring from within ·the labor movement." Senator El lender (D., La.) warned the Senate that revolutionaries were trying to organize all the workers in the country under one banner and that such a stupendous aggregation could "paralyze industry overnight." Free government was imperiled, he said. Finally Roosevelt himself became alarmed. Blaming extrem ists on both sides, he pronounced~ "A plague 0' both your houses." Miss Perkins also resisted congressional demands for the de portation of Harry Bridges as an undesirable alien. In the face of sworn testimony by witnesses who said they had known him as a Communist, she insisted that there was no evidence on which to deport him. She told the President, she states in her book, that Bridges, "a conspicuous and successful labor leader, had been charged with being a Communist by witnesses whose veracity and competence .remained to be proved." Roosevelt asked whether Bridges had done anything to overthrow the goverriment, and when Miss Perkins said he had not, the Presi dent exclaimed: "Then why in the world should a man be pun ished for what he thinks, for what he believes?"

When the immigration service was under the Labor De partment, Dean James M. Landis of-the Harvard Law School, sitting as a special examiner, found that Bridges was not a Communist. When the service was transferred to the Justice Department, Judge Charles B. Sears was appointed to hold another hearing, and he found that Bridges was a Commu nist. In June, 1945, the Supreme Court reversed Judge Sears' finding. The late Justice Murphy, who had capitulated to the revolutionaries when he was governor of Michigan, now dis tinguished himself with the remarkable observation that "the record in this case will stand forever as a monument of man's intolerance to man." Bridges became a naturalized citizen in 1949. In June, 1953, the Supreme Court invalidated his con viction on charges of conspiracy in obtaining his citizenship. He was accused of perjury in denying that he had been a Com60 THE TWENTY-YEAR REVOLUTION munist. The Court held that his conviction was barred by the statute of limitations.

The undistributed profits tax of 1936 was the first attempt to strangle business by controlling the allocation of investment capital, as advocated by Tugwell. Herman Oliphant, Treasury Department legal adviser, was credited with selling this Marxian bill of goods to Roosevelt while Treasury Secretary Morgen thau was away on a vacation. However, Tugwell had already advocated such a scheme in a book called The Industrial Dis cipline and the Governmental Arts, published in 1933. The tax was designed to force corporations to payout all of their earn ings in dividends which are subject to the individual income tax. The plan had two main purposes: (1) to prevent the ac cumulation of capital for plant expansion and rehabilitation, thus forcing corporations to turn to the government for credit; (2) to prevent the accumulation of reserves to weather the eco nomic storm of the next depression, which would create a na tional emergency and provide a pretext for the government to take over the whole system.

As originally proposed, the plan called for the elimination of all other corporation taxes and the substitution of a gradu ated tax on undistributed profits. If all earnings were distrib uted, there would be no tax; if none were distributed, the tax would be confiscatory. A compromise plan adopted by Con gress combined previously existing levies with a graduated sur tax on undistributed profits, ranging up to twenty-seven per cent. When the Roosevelt depression struck the country in 1937, beginning with the "Black Tuesday" stock market crash of October 19, the New Dealers attacked business with a ven geance. Unemployment was increasing at an alarming rate. A government census report estimated it at about 11,000,000 in November. Henry Morgenthau recalls in his diaries, published in Collier's Magazine in 1947, that the new depression was the subject of a gloomy cabinet discussion on November 4. He told Roosevelt that something had to be done about business.

THE WAR ON BUSINESS 61 "You want me to tum on the old record?", asked Roosevelt, contemptuously alluding to his repeated promises to balance the budget. "What business wants to know," Morgenthau said, "is this: 'Are we headed toward state socialism or are we going to con tinue on a capitalistic basis?' " "1 have told them that again and again," Roosevelt pro tested. "All right, Mr. President, tell them for the fifteenth time," Morgenthau persisted. "That's what business wants to know." "That's what. business wants to know," echoed Jim Farley. Roosevelt impatiently cut them off. He said he was sick and tired of hearing complaints about economic conditions from people who didn't know what to do about it. "Business, par ticularly the banking business, has ganged up on me," he de clared. That was the signal for the new assault on business. Assistant Attorney General Robert H. Jackson and. Interior Secretary Ickes made a series of speeches denouncing the so-called sixty families who were accused of ruling America. They charged that business had gone on a sitdown strike against the admin istration. Meanwhile, the Justice Department declared war on "monopolists." Business men who had been told by the NRA that it was their patriotic duty to get together, fix prices and eliminate cutthroat competition, now were denounced as public enemies and haled into court for price fixing.

In 1938, the New Dealers opened their last big show trial be fore the war. This was the Temporary National Economic Com mittee, comprising representatives of the Senate, the House, and the executive agencies of government. Although the TNEC was headed by Senator Joseph C. O'Mahoney (D., Wyo.), the ring master was Leon Henderson, executive director. Accord ing to the Morgenthau diaries, Henderson at that time was one of the leading advocates of a big new spending program. Others were Ickes and Hopkins, administrators respectively of the PWA and the WP.A; Tommy Corcoran and Ben Cohen, au thors of New Deal legislation, and Lauchlin Currie, Assistant 62 THE TWENTY-YEAR REVOLUTION Research Director of the Federal Reserve Board, who later moved into the White House and was identified by Miss Bent ley as an agent of the Kremlin. Henderson himself had been a director of Howard Scott's crackpot totalitarian movement called Technocracy in the early 1930's.

Roosevelt asked the TNEC to find out "why vast amounts of capital lie idle in stagnant pools." The New Deal answer, as given to the TNEC on May 23, 1939, by A. A. Berle Jr., As sistant Secretary of State, who appeared as a witness for the SEC, was simple. "The private financial system as at present constituted does not work," said Berle. "Briefly," Berle continued, "the government will have to en ter into the direct financing of activities now supposed to be private; and a continuance of that direct financing must mean inevitably that the government ultimately will control and own those activities. Put differently, if the government undertakes to create wealth by using its own credit at the rate of four bil lions or so a year and its work is well done, the government will be acquiring direct productive mechanisms at the rate of four billions' worth a year or thereabouts. Over a period of years the government will gradually come to own most of the productive plants in the United States."

The TNEC report attracted little attention. War had broken out in Europe when it appeared, and Roosevelt had resolved to end the depression by undertaking a large-scale armaments program, as Hitler had done in Germany.