FROM RURAL TO URBAN
What is sometimes so obvious it is seldom mentioned, just automatically incorporated into one’s approach, is the change: a radical change occurred during these years in the character of sub-state economic development. Up to this period, the Big Cities were driving economic development policy and practice. States and certainly the federal government were secondary actors, except in rare instances like gift and loans clauses or transportation infrastructure financing. Federal tariff policy was deeply affected by municipal-level pressures. With the Depression, that municipal-driven character changed, probably forever. To be sure, municipal-level policy actors will continue to play a leading role in American economic policy through the Transition Era (1961). That will be very evident after Chapter 11. It will not be until the 1960s, the Great Society, that the federal (and state) governments will put municipalities “in their place” as “creatures” of higher-level governments.
The Depression is when this radical change begins in earnest. During the twenties, the federal government had become marginally more involved in state/sub-state ED-related matters such as western infrastructure, highways and harbors. Republican presidents, especially Hoover, took the lead in encouraging cities to adopt planning ordinances—and were simpatico with the City Efficient movement. The Depression hit during Hoover’s first year in office—crushing local governments, creating massive service demands, lowering tax revenues and destroying the fiscal capacity of state/substate governments. The federal government seemed the only government able to respond. There was, however, little in the history of American government, prevailing economic theory or the tenets of 1920s’ business conservatism/dual federalism that offered any roadmap for the feds. Stories of Hoover’s well-meaning but hopelessly inadequate reactions are well known. As time went on, conditions worsened and, as the 1932 election drew nearer, the Republican Congress and President tried harder to address the pain.
The result was a surprising set of ED-related initiatives. One initiative is a total shock: the Davis–Bacon Act of 1931, which required “prevailing wages” on federally financed projects. Crafted by New York Republican Congressman Robert Bacon in 1927 (reacting to a Virginia project that hired low-wage Alabaman African-Americans), the legislation had failed 13 times by 1931; but Hoover, under pressure from unions and the Republican Congress, embraced the legislation. The Secretary of Labor set prevailing wage rates/fringe benefits. The legislation’s scope, expanded over the following decades, increasingly overlapping with union-based prevailing wages.
Another initiative, the 1930 President’s Research Committee on Social Trends, called attention to “the sprawl of great cities,” resulting in the formation of another special committee to investigate the “metropolitan community” (Gelfand, 1975, p. 80). That committee hired University of Michigan sociologist Roderick McKenzie, a former student of Robert Park, to prepare a report. McKenzie produced The Metropolitan Community (1933):
[The] “disturbing” introduction of the automobile that had exerted the “most potent force” since 1900 in causing the redistribution of America’s population and the social disorganization of America’s cities. The centrifugal drift of people away from the central city areas … had given rise to a whole host of problems: blight, overloaded public facilities. Insufficient tax resources, haphazard suburban building, to name but a few. (Gelfand, 1975, p. 81)
Hoover’s presidential commission asserted that decentralization was the nation’s chief urban problem, and enumerated its many causes and consequences.
The New Deal Ain’t What You Think It Is
Big Cities found dealing with FDR in his first term a bit of a slog. He faced intense opposition from southern Democrats as well as from Republicans (Katznelson, 2014). FDR himself was a mixed bag of Progressive and Privatist tendencies, surprisingly sensitive to the South and West, but not Big City governments, business or chambers. FDR’s first-term New Deal was neither an urban nor a Big City enterprise—Roosevelt himself was ambivalent to Big Cities and not especially supportive of their economic development. His home and second White House was not located in New York City, but in rural Dutchess County; his second home was Warm Springs Georgia. He was more the Dutch patroon, rooted in an agricultural heritage living in an America which only recently had become majority urban. These internal contradictions and the oftentimes quarrelsome politics of the Democratic Party limited the New Deal’s impact on Big City ED. FDR’s first-term New Deal initiatives disproportionately addressed the Depression’s damage to people—the poor, aged and unemployed, agriculture and rural America—not manufacturing and not cities (Gelfand, 1975).
Rather, Roosevelt was an old-style, 1920-ish Progressive, a believer in home rule and in a federalism where the state, not municipal governments, was the logical partner to federal programs. He wanted as little as possible to do with Big City politics and municipal affairs such as budgets and finances. If anyone was to attempt that fool’s errand of bailing out cities, it should be the states. His was a “marble cake” federalism in which each level of government was fiscally responsible for its delegated powers/ policy areas. FDR’s marble cake federalism sent federal dollars to states which then distributed monies to cities and towns through formulas. Moreover, most New Deal initiatives went to individuals in need, not governments). Accordingly, FDR’s New Deal Programs were “urban”:
only in the sense [they] assisted people who lived in cities; guarantees of collective bargaining for the organized; work relief for the jobless; public housing for the slum resident; judgeships for the immigrant blocs. None of these programs represented a deliberate attempt to remake the cities as the Rural Electrification Administration, the Resettlement Administration, and the Tennessee Valley Authority changed the face of the countryside … Roosevelt … was interested in the city dweller, not the city. (Gelfand, 1975, p. 68)
Roosevelt believed that cities—teetering on the edge of bankruptcy, unable to assist the desperate and volatile unemployed—constituted the greatest threat to the Republic. Accordingly, his first administration emphasized emergency measures designed to help individuals deal with the collapse of the private economy. Wagner-Peyser, an economic development initiative to be sure, was to him an emergency measure meant to get people back to work—fast. While believing the Big Cities represented “progress,” he also advocated a rural-industrial strategy that promised to exchange “speculative living in the city for one of stabilized living in a real home in the country.” Roosevelt’s first “urban” New Deal initiative was the Resettlement Program.
[Since] technological advances now made it possible to enjoy all the attractions of urban life in a bucolic setting, Roosevelt suggested that the government foster the development of rural-industrial communities, uniting subsistence farming with part-time factory employment. He was advocating nothing less than an officially sponsored exodus from the cities … Convinced that the “pendulum has swung too far in the direction of the cities and that a readjustment must take place to restore the economic and sociological balance” he urged a national program of population redistribution to relieve “the overbalance of population in our industrial centers’. (Gelfand, 1975, p. 25)
To this end, Roosevelt inserted a $25 million subsistence homesteads program in his $3.3 billion public works bill of 1933—the National Industrial Recovery Act. That bill was the major exception to Roosevelt’s first-term preference for agriculture and rural areas. NIRA is FDR’s first initiative that commenced the slum clearance, public housing and eventually urban renewal (Lowe, 1967, pp. 22–4). That story discussed in Chapter 11.
In another example, municipalities needed an off-budget fiscal mechanism, such as municipal (revenue) bonds, to finance an augmented public works program. With federal support for municipal revenue bonds, FDR could have forged a direct federal–local relationship to combat the Depression. Harry Hopkins uncovered research by University of Chicago finance professor Simeon Leland that demonstrated that local budget austerity inherent in state constitutional balanced budget requirements operated at counter-purposes to federal-level Keynesian deficit spending. Accordingly, in 1934 Hopkins developed a legislative proposal calling for a “National Municipal Bank” (reminiscent of an Infrastructure Bank), capable of loans to municipalities for public/ private civic improvement projects.
The Conference of Mayors lobbied aggressively for the bank, but pushback from Secretary of the Treasury Henry Morgenthau and Congress was intense. FDR abandoned the issue. In its place, FDR amazingly sent to Congress a Hoover-style, classic liberal, anti-Keynesian proposal to end the tax-exempt status of state and municipal bonding. This, of course, would have sounded the death knell for state and local counter-cyclical infrastructure investment through IRBs.4 The measure mercifully failed. In the end, nothing came of the National Municipal Bank, and the tax-exempt status of state and local bonds was preserved.
By 1936, however, a beleaguered Roosevelt—believing he needed votes of Big City residents to win a second term—changed his tune toward urban legislation: “Only deeds … would permit the gentleman farmer from Dutchess County to maintain his urban following … relief monies poured into the cities, accompanied by important patronage posts (Gelfand, 1975, p. 67). Big Cities first aligned with the presidential wing of the Democratic Party during the 1936 election. Federal funds that followed in subsequent FDR administrations were motivated more by elections than a Progressive spirit.
FDR’s New Deal was motivated less from a Progressive community development perspective than an ad hoc mixture of desperation and experimentation, and later a politically expedient alliance with urban residents for votes. As far as the cities went, the New Deal resisted using federal powers and resources at the city level; opposed direct federal–municipal relationships; and did not see the federal government as a Progressive instrument for municipal-level change.
“Our Cities”
Roosevelt, a long-standing advocate of planning, created (July 1933) the National Resources Planning Board (NRB) with his uncle, Frederic Delano, a lifelong leader in the planning movement, as its chair. Before it fell off the national stage in 1943 (enjoying three name changes during the decade), the NRB became the “bully pulpit” for urban and planning advocates, and the personal platform for political scientist Charles E. Merriam.5 Merriam was quite the dynamo. He advocated the abolition of states, making cities co-sovereign with the federal government and a force in the Conference of Mayors and the American Municipal Association. By late 1934, Merriam had convinced the NRB to establish a special committee on urbanism. The committee would:
- inventory urban physical, social and economic conditions;
- discover emerging trends in urbanization;
- outline the urban future;
- develop proposals for remedying deficiencies; and 5. formulate a national urban policy (Gelfand, 1975, pp. 86–7).
On the seventh day, it would rest!
Merriam appointed Louis Brownlow (of Brownlow Commission fame), the president of the American Municipal League, a couple of city planners from Harvard (Charles Eliot and Arthur Comey) and University of Chicago urbanist Louis Wirth (whose committee research was summarized in “Urbanism as a Way of Life”).6 The impossible job description took two years to complete; on September 20, 1937 the final report, Our Cities: Their Role in the National Economy, was released.7 It outlined how the United States had turned the page from a rural agricultural nation to a “nation of cities.”
As long as the United States was principally a rural and agricultural country … it was to be expected that our outlook and policies should have been largely rural. But since the city has come to play such a predominant role in the national existence, it becomes imperative that it acquire a central position in the formulation of national policy. (Gelfand, 1975, pp. 91–2) In essence, it concluded the nation’s agenda was now an urban one. Roosevelt’s ambivalence, if not pushback, to this report suggested, however, in his Preface to Our Cities:
For the first time in our history, the attention of the United States Government has been officially directed to the role of the city in our national economy. … It may be questioned whether the National Government has given the same careful attention to some of the specific and common problems of urban dwellers, as it has to the problems of farmers … and it is the purpose of this report to indicate some of the emerging city problems in which … the National Government may be helpful. … [However] it is not the business of the United States Government to assume responsibility for the solution of purely local problems. Nevertheless, [the federal government] cannot remain indifferent to the common life of American citizens simply because they happen to be found in what we call “cities.” (Gelfand, 1975, pp. 90–91)
A week after the publication of Our Cities, in his speech dedicating the Bonneville Dam, Roosevelt asserted: “Today many people are beginning to realize that there is inherent weakness in cities which become too large for their times and inherent strength in a wider geographical distribution of population.” The statement, it would seem, is a stunning endorsement of suburban decentralization, and a hint that city pathologies are a major reason for population dispersal from cities (Gelfand, 1975, p. 96). If correct, from day one Roosevelt was not on board with Our Cities. No specific federal initiatives followed from the report.
Our Cities was not on the New York Times bestseller list. The report received lukewarm support from urban-related national associations, was scarcely noticed by mayors and business elites, ignored in the practitioner world, and never mentioned in the Congressional Record. Our Cities, however, deeply influenced urban-minded academia. According to Gelfand, Our Cities was “directly responsible for the establishment of a Bureau of Urban Research at Princeton University in the summer of 1941” and “the Princeton unit would serve as a model for later urban study centers” (Gelfand, 1975, p. 93).
Federal Government Assumes Workforce ED Leadership
It is a good bet that most contemporary economic developers do not think of the US Department of Labor (DOL) employment services and unemployment relief program as “economic development.” When most, I suspect, think of workforce, they instinctively think of CETA, JTPA, WIA and vocational and community college programs. The federal programs that are the focus of this section have been in place so long they are not often included in state/sub-state ED. One of the lessons that emerges from this history, however, is that the federal government has a demonstrated long-standing involvement in certain aspects of our state/sub-state workforce strategies. Its involvement is obscured a bit because these programs typically run through state bureaucracies.
They are people-focused, not place-based (reflecting as they should a national perspective). Nevertheless, they can be found in most every jurisdiction, and are the primary resource for unemployed job seekers throughout the nation. Starting around World War I, but most obviously during the New Deal Depression years, the Feds displaced state and municipal public employment exchanges, and carved out a major role in public retraining programs for disabled and unemployed people. As one of the very first New Deal Acts, the 1933 Wagner–Peyser Act carved out public employment exchanges as the preserve of the federal government. These programs are the first of a core of federal programs that through their distinctive intergovernmental nexus provided semi-direct federally funded services to a jurisdiction’s unemployed and those seeking employment.
Ohio, the first public employment exchange, started in 1890; in 1894 Seattle set up the first known municipal-level public employment exchange, followed by New York State in 1897 and Illinois in 1899. By 1900 there were 15 public employment offices (all levels), and by 1912, 64. After the 1913–14 depression, 109 offices existed, 79 managed by states and 30 by municipalities (1915). During World War I, an Employment Service Department was set up within the federal DOL: at the peak of its war-time operations 850 offices were set up, but at war’s end it shut down (Douglas and Director, 1934, pp. 317–42). To the surprise of us all, then, public employment exchanges were a little-noticed state/municipal ED initiative that testifies to the early importance of state/sub-state governments in workforce programs, and the clear and consistent need by government to offer employment assistance to its residents. During the Roaring Twenties, however, the US Employment Service and state employment exchanges were mostly dormant (Becker, 1965, p. 15). That changed, of course, by 1933 when 13 million were unemployed.
The New Deal Wagner–Peyser Act did not set up a federally operated public exchange system, choosing instead to provide grants to states to set up and operate, congruent with federal requirements, their state system of exchanges. The predominant federal requirement was that states must make the service available to all workers and assist all companies in their efforts to find employees. As such, the US Employment Service could piggyback on those states operating a public employment exchange—in 1933 there were 23 states and 120 offices (Adams, 1965, p. 194)—as well as encourage the other states to establish their own. A national public employment system would result. The intention was to leave as much autonomy as feasible to states so as to meet local needs. By 1935, 34 states had set up a public employment exchange. The 1935 Social Security Act included an unemployment insurance program that operated from these employment exchanges. In 1939 the US State Employment Service transferred from the DOL to Social Security. In 1944 the Serviceman’s Readjustment Act expanded services to veterans; established a veterans’ preference in referrals; and set up a veterans’ division within the now-named Bureau of Employment Security.
Public training programs have a longer, albeit sporadic history. Trade education began in Boston’s schools after 1820. The 1917 Smith-Hughes Act established a federal role in vocational training for agriculture, industry and home economics. The US Office for Vocation Rehabilitation started retraining disabled people for employment in the 1920s. The New Deal 1937 Fitzgerald Act set up the federal Bureau of Apprenticeship and Training, and during the war a “Training-within-Industry” section was set up in the (War) Office of Production Management (Somers, 1965, pp. 228–30). Retraining was not the hot button then it is today, but the federal government early on displayed an interest and carved out a niche.
States were less active. Wisconsin started an apprentice program in 1915 operated by its State Industrial Commission. The Industrial Commission “movement,” was a Progressive-era worker health and safety reform. Alice Hamilton,8 a doctor volunteering in Jane Adams’s Hull House, was a primary advocate and employee for the first such commission in Illinois.9 The Depression prompted a number of state/local retraining initiatives, involving relief recipients, which were temporary, small and poorly funded. (The first known state unemployment/retraining program was established by Pennsylvania only in 1957.)
Ron W. Coan 