Here is a history lesson worth remembering. It concerns a plot by bankers to overthrow the government and a time when the Army turned on the veterans.
In 1933, a US Marines General implicated a series of high-flying American bankers and industrialists in a bizarre plot to raise an army, seize Washington and overthrow Franklin D Roosevelt.
The Business Plot was an alleged political conspiracy in 1933. Retired Marine Corps Major General Smedley Butler claimed that wealthy businessmen were plotting to create a fascist veterans’ organization and use it in a coup d’état to overthrow United States President Franklin D. Roosevelt, with Butler as leader of that organization. In 1934, Butler testified to the Special Committee on Un-American Activities Congressional committee (the “McCormack-Dickstein Committee”) on these claims. In the opinion of the committee, these allegations were credible. No one was prosecuted.
While historians have questioned whether or not a coup was actually close to execution, most agree that some sort of “wild scheme” was contemplated and discussed. Contemporaneous media dismissed the plot, with a New York Times editorial characterizing it as a “gigantic hoax” When the committee’s final report was released, the Times said the committee “purported to report that a two-month investigation had convinced it that General Butler’s story of a fascist march on Washington was alarmingly true” and “It also alleged that definite proof had been found that the much publicized Fascist march on Washington, which was to have been led by Major. Gen. Smedley D. Butler, retired, according to testimony at a hearing, was actually contemplated.
On July 17, 1932, thousands of World War I veterans converged on Washington, D.C., set up tent camps, and demanded immediate payment of bonuses due them according to the World War Adjusted Compensation Act of 1924 (the original act made the bonuses initially due no earlier than 1925 and no later than 1945). Walter W. Waters, a former Army sergeant led this “Bonus Army”. The Bonus Army was encouraged by an appearance from retired Marine Corps Major General Smedley Butler; as a popular military figure of the time, Butler had some influence over the veterans. A few days after Butler’s arrival, President Herbert Hoover ordered the marchers removed, and US Army cavalry troops under the command of General Douglas MacArthur destroyed their camps.
Shacks, erected by the Bonus Army on the Anacostia flats, burning after being set on fire by the U.S. military (1932)
Butler, although a self-described Republican, responded by supporting Franklin D. Roosevelt in the 1932 US presidential election.
By 1933 Butler started denouncing capitalism and bankers, saying as a Marine general he was “a racketeer for capitalism.”
Reaction to Roosevelt
The election of Roosevelt was upsetting for many conservative businessmen of the time, his “campaign promise that the government would provide jobs for all the unemployed had the perverse effect of creating a new wave of unemployment by businessmen frightened by fears of socialism and reckless government spending.”
The Hoover administration had steadfastly defended the gold standard even when Britain abandoned it in September 1931. With a devalued currency, British manufactured goods became cheaper than American counterparts, resulting in more economic hardship for American industry. Roosevelt’s campaign had promised to re-evaluate America’s commitment to the gold standard and, through a series of actions from March 6 to April 18, 1933, abandoned it.
Conservative businessmen and other supporters of the gold standard were dismayed. Hoover, who had championed the standard, wrote that its abandonment was the first step toward “communism, fascism, socialism, statism, planned economy.” He argued that the standard was needed to stop governments from “confiscating the savings of the people by manipulation of inflation and deflation….We have gold because we cannot trust Governments.”
Roosevelt also dissolved any “gold clause” within contracts, public or private, that guaranteed payment in gold. This clause was part of every government bond and most corporate bonds. “It was a standard feature of mortgage agreements and other contracts. For creditors, it offered protection against inflation or congressional tinkering with the currency.” For debtors, though, it was dangerous, as “The gold dollar, before Roosevelt reduced it, was $1.69. This meant that a bank, for example, could suddenly require a farmer to make mortgage payments in gold coin-transferring a $10,000 mortgage into one worth $16,900, raising the farmer’s debt burden by nearly 70 percent.” Likewise, the U.S. treasury could be required to pay the bearer of a $10,000 Liberty Bond $16,900 in gold coins. (The constitutionality of this Roosevelt policy was later challenged before the Supreme Court in the Gold Clause Cases.)
With the end of the gold standard, “conservative financiers were horrified. They viewed a currency not solidly backed by gold as inflationary, undermining both private and business fortunes and leading to national bankruptcy. Roosevelt was damned as a socialist or Communist out to destroy private enterprise by sapping the gold backing of wealth in order to subsidize the poor.”
Ending the gold standard allowed the country to escape the cycle of deflation, but the shift was not painless. “Since higher prices were not yet accompanied by higher wages, inflation meant lower [real] incomes for those fortunate enough to be employed. Until the effects of increased investment spending ramified through the economy, there was little reason for investment incomes and hence consumption to rise dramatically. Industrial production remained volatile.”
To encourage foreign investment, Roosevelt had the Reconstruction Finance Corporation purchase gold with dollars, thereby driving up the price of gold and reducing the value of the dollar. Still, this did not immediately affect the balance of trade. Those considering buying American goods anticipated that there would be a further depreciation that would allow their own currency further purchasing power and therefore greater profits, so they held back their orders. At the same time, Americans fearing additional depreciation purchased more foreign commodities in fear they would lose purchasing power in the future. “The volume of U.S. imports rose by 10 percent between 1932 and 1933. In contrast, exports stagnated. The consequence was a deteriorating balance of trade.”
Another Roosevelt policy also had an unanticipated effect on the recovery: the National Industrial Recovery Act of June 16, 1933, provided established minimum wages of 40 cents an hour and revised upward the entire wage structure of many of the industries it covered; this placed upward pressure on labor costs.
The sustained recovery of industrial production “had to await stabilization of the dollar in 1934, along with the concomitant growth of commodity exports and capital imports.”
The Committee began examining evidence on November 20, 1934. On November 24, the committee released a statement detailing the testimony it had heard about the plot and its preliminary findings. On February 15, 1935, the committee submitted its final report to the House of Representatives.
During the McCormack–Dickstein Committee hearings, Butler testified that Gerald C. MacGuire attempted to recruit him to lead a coup, promising him an army of 500,000 men for a march on Washington, D.C., and financial backing. Butler testified that the pretext for the coup would be that the president’s health was failing.
Despite Butler’s support for Roosevelt in the election and his reputation as a strong critic of capitalism, Butler said the plotters felt his good reputation and popularity were vital in attracting support amongst the general public and saw him as easier to manipulate than others.
Though Butler had never spoken to them, Butler implicated several prominent businessmen, including chemical industrialist Irénée du Pont, and veteran leaders as backers of the plot. The committee chose not to publish these allegations because they were hearsay.
Given a successful coup, Butler said that the plan was for him to have held near-absolute power in the newly created position of “Secretary of General Affairs”, while Roosevelt would have assumed a figurehead role.
Those implicated in the plot by Butler all denied any involvement. MacGuire was the only figure identified by Butler who testified before the committee. Others Butler accused were not called to appear to testify because the “committee has had no evidence before it that would in the slightest degree warrant calling before it such men… The committee will not take cognizance of names brought into testimony which constitute mere hearsay.”
In response, Butler said that the committee had deliberately edited out of its published findings the leading business people whom he had named in connection with the plot. He said on February 17, 1935, on Radio WCAU, “Like most committees it has slaughtered the little and allowed the big to escape. The big shots weren’t even called to testify. They were all mentioned in the testimony. Why was all mention of these names suppressed from the testimony?”
On the final day of the committee, January 29, 1935, John L. Spivak published the first of two articles in the communist magazine New Masses, revealing portions of the Congressional committee testimony that had been redacted as hearsay. Spivak argued that the plot was part of a “conspiracy of Jewish financiers working with fascist groups”, referring specifically to Felix Warburg, the McCormack–Dickstein Committee, and certain members of the American Jewish Committee in collusion with J.P. Morgan. Hans Schmidt concludes that while Spivak made a cogent argument for taking the suppressed testimony seriously, he embellished his article with his “overblown” claims regarding Jewish financiers, which Schmidt dismisses as guilt by association not supported by the evidence of the Butler-MacGuire conversations themselves
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