On March 4, 1933, sixty-five years ago, Franklin Delano Roosevelt became president in the midst of the Great Depression. The government had already tried manipulating the currency, doubling income tax rates, subsidizing farmers, and erecting high tariffs against imports, but the Depression had only worsened. As a candidate, Roosevelt had promised to balance the budget and stop deficit spending. Instead, once he was in office, he immediately launched the New Deal, a stunning array of new government programs. Michigan figures into the subsequent events with stories that deserve a retelling.
Many in Michigan supported the New Deal, especially Governor Frank Murphy, whom Roosevelt later appointed to the Supreme Court. Others were critical, such as the colorful but erratic Rev. Charles Coughlin, priest of the Royal Oak parish near Detroit. Father Coughlin had a nationwide radio program on CBS that reached over 40 million listeners. At first, the tart-tongued Coughlin supported Roosevelt, but later called him "the great betrayer and liar" and "Franklin Double-Crossing Roosevelt."
Henry Ford denounced Roosevelt’s National Recovery Act (NRA), which required businessmen to fix prices and wages, and carve up markets in their industries. Entrepreneurs would go to jail if they gave discounts to customers below the price set by industry codes. A tailor in New Jersey, for example, was jailed for pressing a pair of pants for 35 cents, instead of the NRA code-rate of 40 cents.
While most American industrialists were willing, if not eager, to comply with the NRA, Ford resisted and refused to sign any code. "I do not think that this country is ready to be treated like Russia for a while," he wrote. "There is a lot of the pioneer spirit here yet." However, all other carmakers signed the code, which astounded Ford. His colleagues preferred Roosevelt’s promise of stability and government regulation to competition and free trade.
Ford stood almost alone, defying the law, and he needed a legal loophole to keep out of jail. He didn’t need to sign the auto code, he argued, as long as he complied with its provisions. This he did with good humor. "The code minimum wage is hardly a good dole," Ford teased. Later he said of the auto code, "If we tried to live up to it we would have to live down to it."
President Roosevelt tried to pressure the recalcitrant Ford into signing the code. Ford would receive no government contracts until he signed—and with the large increase in government agencies during the 1930s, that meant a huge business. For example, the bid of a Ford agency on 500 trucks for the Civilian Conservation Corps was $169,000 below the next best offer. The government announced, however, that it would reject Ford’s bid and pay $169,000 more for the trucks because Ford never signed the auto code.
Joining Ford in support of free competition was Sewell Avery, the president of Montgomery Ward. Avery was born in Saginaw and educated at the University of Michigan Law School. His family was prominent in the state’s lumber industry and Avery became president of U. S. Gypsum, the nation’s leading seller of plaster and wallboard. His business sense was remarkable and he made U. S. Gypsum profitable even during the Great Depression. Montgomery Ward stockholders unhappy with the company’s performance elected him president in 1931 hoping he could transfer his genius to retailing.
Avery, according to one employee, "turned the place inside out . . . . All the fellows were hustling and bustling to make the grade." Montgomery Ward again became profitable and its stock recovered sharply with Avery at the helm.
Then came the NRA codes for retailing. Avery called the New Dealers "impractical and dreamlike idealists." He stood alone among the nation’s retailers and courageously ignored the NRA codes. When the government clamped down, Avery refused to pay $30,000 for code administration. The government barred him from receiving any government contracts. The stalemate ended in May 1935, when the Supreme Court declared the NRA unconstitutional.
Roosevelt supported mandatory collective bargaining and secured legislation imposing it. As a result, Ford Motor Company was forced to unionize in 1941. During World War II, Avery challenged government efforts to unionize warehouse and retail workers. Finally, after a long resistance, the Attorney General came to the Montgomery Ward headquarters in Chicago and forcibly evicted Avery. National Guardsmen carried him out of the building in full view of spectators and cameramen. "To hell with the government," Avery snapped at the Attorney General. "You . . . New Dealer!"
Avery seemed to have lost the battle, but in a sense he won the war. A Gallup poll showed that 61 percent of Americans sided with Avery, not the government. Many newspapers compared Roosevelt with foreign dictators and, within three years, Avery was back at the helm at Montgomery Ward and the government had ended its price-fixing schemes.
Michigan resistance to the New Deal helped curtail the excesses of government and leave a legacy of free competition to the next generation. For that, and their many other accomplishments, entrepreneurs like Henry Ford and Sewell Avery deserve posthumous appreciation.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
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