When “Liberal” and “Business” Belonged in the Same Sentence

by ed dolan
Gary Waters/Ikon Images
 

andrew l. yarrow is a former New York Times reporter and history professor. His most recent book is Man Out: Men on the Sidelines of American Life.

Published May 19, 2020

 

In a year moderate Democrats are trying to thread the needle to appeal to the working class and poor while still coming across as business friendly, they could take a page from an incredibly influential policy organization of the 1940s and 1950s that you’ve barely heard of.

The Committee for Economic Development (CED) has long provided the kind of research and policy proposals that many Democrats and Republicans, as well as business and labor, could support. If civility and bipartisanship ever make a comeback, this postwar organization of business leaders, policymakers and academics may be a model for moving forward.

When Elite Was Not a Four-Letter Word

Flash back to the early 1940s, when the nation came together to defeat the Nazis. The inevitably close business-government collaboration during World War II — not to mention memories of the Great Depression — gave the leaders of big business new respect for the difficulty of running a nation and managing an economy. Hence the birth of the CED, which was pivotal in planning a postwar “economy of abundance.”

 
The Committee for Economic Development was incorporated in 1942 to “enlist the services of the best brains from our universities and business” to solve “the problems of how high productive employment could be attained and maintained in a free society.”
 

The brainchild of FDR’s Commerce Secretary Jesse Jones along with former Studebaker exec Paul Hoffman, former Encyclopaedia Britannica publisher William Benton and former Macy’s treasurer Beardsley Ruml, the CED was incorporated in 1942 to “enlist the services of the best brains from our universities and business” to solve “the problems of how high productive employment could be attained and maintained in a free society.”

Hoffman, the CED’s first chairman, was no stranger to policy influence. He led the Advertising Council, which effectively invented the “public service” announcement, and later was president of the Ford Foundation and administrator of the UN Development Program. Though a Republican, Hoffman helped sell the Truman administration’s Marshall Plan to the business community — and even served as its first administrator.

Benton, equally illustrious, was (at various times) cofounder of the Benton & Bowles ad agency, vice president of the University of Chicago and a Democratic senator from Connecticut, as well as publisher of the renowned encyclopedia. Ruml, an advisor to President Hoover and later a University of Chicago dean, led the development of aptitude tests for the military and ushered in tax withholding under the 1942 Revenue Act.

The CED’s early trustees read like a who’s who of the American media establishment — a list that includes ad man Raymond Rubicam, Washington Post publisher Philip Graham, Look magazine publisher Gardner Cowles, Leon Shimkin of Simon & Schuster, CBS president Frank Stanton, Time magazine executive Roy Larsen and Eric Johnston, president of the Motion Picture Academy of America. Not to be forgotten, the group included the presidents of Dartmouth, the University of California, Washington University, Vassar and Colgate and the dean of the Harvard Business School.

Early CED organizers had a strong sense of public purpose, believing that American society could be improved by objective research into social and economic problems. This would result in “findings and recommendations for business and public policy which will contribute to the strengthening of our free society, and to the maintenance of high employment, increasing productivity and living standards, greater economic stability and greater opportunity for all people.” The sentiments seem both high falutin’ and shop worn now, but were definitely a break from the past at the time.

 
In their view, government was responsible for preventing depressions through fiscal and monetary policy and ultimately to ensure that all Americans could find jobs. With all players doing their part, they wrote, “America stands at the gate of an age of plenty.
 
Rewriting the Rules of Economic Policy

Far more liberal than the National Association of Manufacturers or the U.S. Chamber of Commerce, the Committee embraced “careful Democrats and open-minded Republicans,” as later-CED President Robert Holland put it. The organization established some 3,000 local CED committees during the war, enlisting 60,000 business leaders throughout the country. Complementing this national “field division” was a research division that enlisted notable economists, including Harvard’s Sumner Slichter and Ford Motors’s Theodore Yntema.

The CED saw transition planning as its paramount objective and initially intended to disband after the war. But the pull of power proved greater. It played a part in formulating the 1944 Bretton Woods Agreement that provided loans to war-devastated Europe, pegged currencies to the dollar and committed to avoiding trade wars. The Committee’s 1944 booklet, “A Postwar Federal Tax Plan for High Employment,” conventionally called for a balanced budget. However, influenced by Keynesian concerns about the consequences of cutting off war expenditures cold turkey, the CED also called for federal spending to boost purchasing power.

Ruml and Herbert Stein (later the CED’s research director and finally Richard Nixon’s chief economic adviser), broke with anti-interventionist Republicans in advocating a Keynesian “full employment budget” and government tax-and-spending policies that could serve as “automatic stabilizers.” The idea was to run deficits automatically when the economy needed stimulus and surpluses when it overheated. Benton and Yntema went far further, publishing the “Economics of a Free Society” in 1944, a manifesto that called for a mixed economy that would be denounced by some today as socialism.

In their view, government was responsible for preventing depressions through fiscal and monetary policy and ultimately to ensure that all Americans could find jobs. With all players doing their part, they wrote, “America stands at the gate of an age of plenty.” The economy is designed to serve “the good of all,” they insisted, and wealth is a prerequisite to other freedoms.

The CED issued a flurry of book-length research reports after 1944, repeatedly emphasizing government’s role in fostering full employment and high production, urging a “large shelf of public works.” It also took the remarkable position (for an organization full of Republicans) that “taxes should reduce inequalities in wealth, income and power [which] are abhorrent to democracy.”

The CED’s faith in a mixed economy and its embrace of Keynesian economics also led CED writers Gardiner Means, Stein and Yntema to call for a “committee of high officials” to advise the president on how best to plan investment and employment. This was the inspiration for the Council of Economic Advisers, created by the Employment Act of 1946, which for the first time institutionalized the role of economists as high-level policy advisers.

By the second Eisenhower administration, the CED began to focus on social issues such as slum clearance, urban decay, municipal services and traffic congestion. It also took up the issue of economic competition with the Soviet Union, worrying about “rapid Soviet gains” while noting the backwardness and regimentation of the Soviet economy.

In the late 1950s, as CED predictions about a new economy of abundance were panning out, it published a book, Economic Growth in the United States: Past and Future, that surveyed the nation’s economic achievements and predicted its future successes, interspersing upward-sloping charts with glittering prose describing America’s “high, rising and broadly diffused income.” Forecasting the “inspiring prospect” of unprecedented wealth by 1980, the authors concluded: “It lies within our power to lead the world into a material utopia which in the past has been a mere dream.”

The Center Did Not Hold

The CED’s influence (along with that of serious academic economists and liberally minded business leaders) gradually diminished after the stagflation of the 1970s shook the public’s confidence that the experts knew best. But it still publishes thoughtful policy papers and sponsors discussions on economic and social problems. (Indeed, Joseph Minarik, the current head of research, was a major player in formulating the big 1980s tax reform and ran the Office of Management and Budget for the Clinton administration.) And sadly, the diminishment shows in the triumph of slogan over policy planning in today’s Washington.

main topic: Policy & Regulation
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