I

In the first third of the twentieth century, as the United States underwent far-reaching corporate reorganization, financial innovation, and social reform, a relatively small group of people wrestled publicly with big questions about economic equity, cultural values, and organizational form. Although a number of big businessmen and financial tycoons figured prominently in those debates, recent historiography often reads these men out of this era’s intellectual and policy debates or treats them as narrow and narrowly self-interested economic actors, though in the last few years a new generation of historians of capitalism has begun to rethink the place of the businessman in American public life.^{Footnote 1} Then, too, an older scholarly literature does chart the business communities’ role in debating and forging early twentieth-century American political economy. This 1970s-era scholarship demonstrates the critical role “corporate liberals” played in influencing New Deal reforms and the ways in which “welfare capitalism” prefigured statist solutions to American economic insecurity and class conflict.^{Footnote 2} Certainly, as this literature argues, some businessmen were “corporate liberals” who leaned toward New Deal reforms. Many, however, were not. They opposed the New Deal and insisted on different approaches to Americans’ concerns about economic insecurity and relative material deprivations. They were the people who, as a few historians have recently shown, would spearhead the modern conservative movement.^{Footnote 3}

One of the most prominent and influential of these conservative businessmen was John J. Raskob. Raskob’s answers to the political economy crises of the interwar years would become central to the modern conservative political and economic order in the United States. Raskob rejected statist solutions to problems of economic insecurity and relative material deprivation. Statist solutions, he argued, produced character-destroying dependency, stifled innovation, and resulted in economic inefficiency (in the mid-1930s, these beliefs would lead him to found and organize the anti–New Deal organization, the American Liberty League). Likewise, he rejected labor union collective-bargaining approaches; unions, too, he argued, hurt economic productivity and promoted demoralizing class conflict rather than profit-inducing workplace unity. Raskob offered a different path.

To borrow a phrase from a later generation of political conservatives, Raskob was an early advocate of an ownership society. He sought to link the fortunes of the masses to the productivity and profitability of corporate America. Specifically, Raskob believed that an intertwined system of widespread equity investment and easily available consumer credit would allow the great majority of Americans to prosper and reap the benefits of the capitalist system. Famously, Raskob declared at the very height of the Roaring Twenties that “everybody ought to be rich.”^{Footnote 4} He meant that if people had the opportunity and the tools to become their own independent financial managers, everybody could live the American dream.

Raskob was not the first to argue that financial self-management was fundamental to American life. Daniel Levy, in his pathbreaking work, Freaks of Fortune, demonstrates that in the nineteenth century Americans, wrestling with capitalist transformation, emphasized financial self-management as a way to manage the risk inherent in a market society. A range of elites, Levy argues, “developed a vision of freedom that linked the liberal idea of self-ownership to the personal assumption of ‘risk.’ In a democratic society, according to the new gospel, free and equal men must take, run, own, assume, bear, carry, and manage risk.”^{Footnote 5} While Raskob seriously underplayed the dangers of taking on the economic risks explicit in corporate stock-ownership and consumer debt, he did believe that Americans could successfully weather the vicissitudes of life under a capitalist system not by accepting a government-mandated safety net but by taking advantage of the tools of economic management that capitalism made possible. And Raskob, in the twentieth century, created some of those tools.

Raskob promoted his ideas through word and deed. He engineered employee stock-ownership plans at the two corporations in which he served as chief financial officer: DuPont and General Motors. And in 1929, as was reported in almost every major newspaper in the United States, he planned to create the largest equity-based investment trust ever seen in the United States. To further his vision of a mass, equity-investment society, throughout the 1920s Raskob promoted both employee stock-ownership plans and mass investment in the stock market. Second, Raskob championed a major extension of consumer credit so that far more Americans could reap the bounty of corporate productivity. Raskob sought not only to facilitate this consumer credit revolution—specifically by creating the General Motors Acceptance Corporation—but also to legitimate consumer debt among the wider public. Raskob believed that widespread ownership of corporate stock and widely available consumer credit would, together, create social peace, improved corporate productivity, and shared economic prosperity in the United States. Raskob expected that this new social compact would give corporate leaders the right to manage their enterprises with a great deal of latitude, free of what he saw as profit-harming government interference and recalcitrant unionists. If Americans’ material desires and economic security were yoked to corporate America, he believed, the broad citizenry would enthusiastically support this system of political economy. Raskob envisioned an America in which a majority of citizens would become their own financial managers, using consumer credit and equity investments to secure a good life for themselves.

Raskob’s practical vision of tens of millions of families achieving a prosperous, good life by investing profitably in corporate equities and raising their standard of living through “intelligent debt” became a piece of American conventional wisdom and a bulwark of post–World War II conservatives’ political economy. Raskob was by no means the only advocate of this mass credit-mass investment American system of financial self-management. Such men as Andrew Carnegie, Edward Filene, Owen Young, George Perkins, Gerard Swope, and others articulated and, in some cases, implemented related plans, though they were far more focused on the mass-investment aspect of financial self-management. In the 1920s, Raskob was among the most influential of these capitalist idea men and one of the few major business figures of his time who both publicized and implemented a mass credit-mass investment approach to Americans’ economic needs.

Raskob’s vision of a mass investment-mass credit system of independent financial management did not, obviously, fare well come the Great Depression. But even through the nadir of the depression, Raskob insisted that his vision—and not that of New Dealers and their labor union allies—represented Americans’ best hopes for mass prosperity. And unlike some of his business peers, who accepted an underconsumption model to explain the Great Depression and thus embraced the necessity of state-safeguarded, labor union–induced increased mass purchasing power in the form of higher wages, Raskob never wavered in his antistatist core beliefs.^{Footnote 6} His seeming indifference to Americans’ economic insecurity during the depression and his refusal to acknowledge the massive losses his stock market promotions caused hourly workers invested in employee stock-ownership plans, as well as the general public, did not win him many political friends in the 1930s and probably contributed to his near disappearance from American memory.

Franklin Roosevelt helped write Raskob’s political obituary. He saw Raskob as an archetypal figure of the old economic elite. After a seemingly cordial private meeting with Raskob in 1936, Roosevelt told a senior staffer that, personally, he liked the man but that he was, alas, “an illustration of how the long time, privileged crowd failed to understand the social crises in America.”^{Footnote 7} Despite being written off by Roosevelt—and several generations of historians—Raskob’s antistatist conservative vision of an America built on and by independent, citizen-financial managers never disappeared. His rallying cry—“Everybody ought to be rich!”—figures in economic conservatives’ fundamental belief in the aspirational nature of the American people. Raskob’s antistatist capitalist approach to political economy in the United States endures—even if his name and reputation have not.

II

In the early decades of the twentieth century, capitalist idea men such as Raskob often played a double role. First, because of their privileged position within the United States, they were readily heard in the nation’s public conversation.^{Footnote 8} Second, their positions often gave them the means to implement their ideas, at least within the businesses they controlled and so long as they were operating within the existing legal and cultural regimes they felt bound to observe. To borrow a phrase from Theodore White, who tried to explain the role of the idea men who helped run the Kennedy administration, capitalists of this sort were the action-intellectuals of their time.^{Footnote 9} The difference between the Kennedy action-intellectuals and the capitalist action-intellectuals of the first third of the twentieth century was the locus and focus of their operations. Rather than look toward the state as the site of social reform and policy innovation, these capitalist action-intellectuals quite often operated both conceptually and organizationally within the corporate or business sphere. They innovated within their realm, but their big ideas were felt throughout society and helped structure the polity.

While some–perhaps most—of these capitalists depended on others for their ideas and beliefs, simply grasping onto anything that seemed to offer legitimacy to their self-interested pursuit of profits and power, a few were original or at least incisive thinkers, deeply influenced by their social and political milieu. Some were motivated, at least in part, by genuine intellectual curiosity and driven by the desire to solve the great issues of the day.

Raskob entered the intellectual and policy fray because he wanted to mitigate class conflict. Most fundamentally, he meant to safeguard his own privileged socioeconomic position. But Raskob was also a deeply religious Catholic who believed in the spiritual need for social harmony and a man with a lively mind and nearly inexhaustible energy who was fascinated by the intellectual puzzle capitalist inequality presented to American life. Raskob never read the Federalist Papers or studied the work of Alexander Hamilton, but he would have recognized Hamilton’s attempts at aligning key elements of the populace to the new American republic as similar to his interest in linking a strong majority to the new industrial capitalist nation he believed he and others were creating. In the early republic, Alexander Hamilton (in the words of historian Mark Schmeller) did his best “to manage public opinion by attaching the interests of the credit-worthy to the state.”^{Footnote 10} In the early twentieth century, John Raskob and his allies did their best to manage public opinion and create a new conventional wisdom in the United States by attaching the interests of the creditworthy—a population Raskob meant to expand dramatically so as to include many wage earners—to American corporations and speculative financial markets.

Raskob was one of Jazz Age America’s best-known capitalists. “John J. Raskob of Wilmington, Delaware, is to-day the organizing genius of this country,” reported Samuel Crowther in the October 1920 issue of The World’s Work.^{Footnote 11} By 1927, Raskob was celebrated in Commerce and Finance as “an artist, though one who deals in facts and figures rather than pigments or marble.”^{Footnote 12}Time magazine ran dozens of stories on Raskob through the 1920s; he appeared in the pages of the New York Times, New York World, and the Wall Street Journal hundreds of times. During World War I, Raskob was in charge of the DuPont Company’s finances. Then, after engineering DuPont’s massive investment in the faltering General Motors Corporation in 1918, he became that company’s financial czar. Later, at the end of the 1920s, he conceived, then built and owned a controlling interest in the Empire State Building. Raskob’s reputation reached its public apogee in 1929, when, as noted earlier, he proclaimed in the pages of the Ladies Home Journal: “Everybody ought to be rich!” He’d be infamous, soon thereafter, when the path to riches he promoted—monthly investments in the stock market purchased on the installment plan—proved spectacularly bad advice.

Nonetheless, from the late 1910s through the 1920s, Raskob’s well-publicized image as a self-made man helped propel his fame and gave legitimacy to his claims about the merits of the free market and to his innovative methods for spreading prosperity to tens of millions of Americans. Raskob’s protean career—corporate manager, financial innovator, and real estate developer—gave him access to a far-ranging cross section of industrial and financial leaders that included Andrew Carnegie, Julius Rosenwald, Alfred Sloan, Pierre du Pont, Bernard Baruch, and Dwight Morrow. His standing as chairman of Al Smith’s 1928 campaign and of the Democratic National Committee from 1928 to 1932 gave him entry into elite political circles as well. His economic success lent him legitimacy with the public and in the eyes of publishers and editors. And, finally, his position as chief financial officer at both DuPont and GM gave him ample opportunity to implement and try out some of his most important ideas.

So while Raskob was not in a traditional historiographical sense an intellectual, he was a man of ideas. In his America, at least, he was recognized for his conceptual innovations, originality, and even for the elegance with which he expressed his thoughts.^{Footnote 13} And assuredly he read widely, thought hard about many of the leading questions of his day, and spoke publicly and published journal and magazine articles (some of which he wrote himself) on those questions. But normally Raskob expressed himself like a capitalist. Raskob wrote more sparkling and novel debentures for stock and bond investments—widely read by fascinated members of the investment community—than he wrote essays. And while he did write journal and magazine articles about consumer credit and the moral and economic merits of a consumer society, he was far better known for having turned those ideas about consumer society into the General Motors Acceptance Corporation, the pathbreaking automobile installment-buying and lending arm of General Motors.

Raskob’s big idea, as was stated in the introduction, was that mass consumer credit, combined with leveraged employee stock-ownership plans and broadly available investment trusts, was the key answer to the great political economy questions of the early twentieth century. Raskob was an advocate of the democratization of “other people’s money.” That phrase, of course, had been coined by Louis Brandeis in 1913 to condemn the men who were engineering wholesale industrial consolidation through clever financial schemes. Raskob was one of those men. In 1902, he and Pierre du Pont had pulled off one of the most successful ever industrial leveraged buyouts—using just $2,100 in cash to purchase the largest explosives company in the United States. Over the next few years, a self-taught Raskob worked with du Pont to use similar financial leveraging to take over some 70 percent of the explosives industry.^{Footnote 14} But Raskob believed that such financial tools were not and should not be available only to the capitalist class. He believed that “intelligent debt,” as he called it, and leveraged financing could and should be the means by which working people, as well as corporate managers, could achieve economic equity. That economic equity, he believed, would economically and politically align workers, as well as other investors, with the business enterprises that Raskob believed drove American economic growth and wealth.^{Footnote 15} “Intelligent debt,” Raskob believed, could also allow many more Americans to grow the burgeoning consumer society that American industrialists and merchants were creating. Raskob hoped that mass credit and investment opportunities would bridge the class divide in the United States, obviating the need for redistributionist public policy.

Raskob’s intellectual sources for his germinating ideas were varied and not generally of a predictable kind. While Progressive Era intellectuals went to Europe and/or read about various social reform proposals being devised across the Atlantic world, Raskob studied British corporate debentures to learn how to better secure the interest and interests of equity investors. Raskob never went to college and his education was usually of the most practical kind. His questions mostly arose through business challenges, but they often were developed and debated in a circle of more general inquiry. By the time Raskob was in his late twenties, and already a rich man, he had begun to think about, as he put it, ways to “uplift or improve the relations existing between capital and labor.”^{Footnote 16}

Raskob subscribed to an increasing number of serious magazines of opinion in the first decade of the twentieth century and was on the lookout for books that addressed issues of political economy. In December 1908, he read an article by Andrew Carnegie in The World’s Work titled “How Labor will Absorb Capital,” and wrote directly to Carnegie, one of the wealthiest men in the world, with his own thoughts on the matter. “I have been studying for some time the problem as to how best interest laborers in the Companies by which they are employed,” he informed Mr. Carnegie.^{Footnote 17}

Raskob’s plan was impressively innovative, financially sophisticated, and quite detailed. It involved reserving 12.5 percent of a given company’s earnings for shareholders and then using whatever additional profits remained to establish a bonus pool for all employees—not just high-ranking executives, but middle managers and the lowest worker on the assembly line as well. Raskob then sketched out a complex means of distributing this bonus pool through a stock plan. The bottom line, Raskob explained to Carnegie, was that “there would be a double incentive for every man to do his best.”^{Footnote 18} Carnegie wrote Raskob back immediately, praising his effort but, intriguingly, criticizing Raskob for reserving too much money for the investing class and not enough for workers: “The final form will not be reached until the capitalist and the workman are upon equal terms and share profits upon some agreed upon scale.”^{Footnote 19} Raskob did not respond to Carnegie’s letter and made no immediate attempt to implement his rough plan at DuPont. But Raskob did not stop thinking about the problem he had identified: How could wage earners justly share in the rewards of a successful capitalist economy?

Raskob was not alone in promoting employee stock-ownership plans and, as his correspondence with Carnegie demonstrates, he knew it. As historian Julia Ott has explained, already by the turn of the century a few leading economists had made similar arguments, concluding that the wealth-producing characteristics of the capitalist system needed to be—and easily could be—made to benefit far more people.^{Footnote 20} Well before Raskob had read Andrew Carnegie’s article in the World’s Work, the industrialist and Morgan banker George Perkins had led the charge to implement employee stock plans in 1903 at both U.S. Steel and McCormick, on whose boards he served. Raskob, thus, was a member of a broader intellectual movement that included academic, corporate, and financial participants, all of whom were actively seeking more equitable solutions to the fierce prosperity and glaring poverty that the new corporate capitalism was producing.

During the 1910s, Raskob continued to read and to think about the political economy of the new corporate America he was helping to create. In 1914 and 1915, in partnership with his boss, Pierre du Pont, he began turning some of his ideas about the utility of employee stock-ownership into a workable plan at DuPont. Still, when massive labor strikes, worker unrest, and even class violence began to break out across the United States at the end of the Great War, Raskob worried that he and his corporate peers had no big idea that would end the strife. To one of his new friends at General Motors, Charles S. Mott (who was also the progressive mayor of Flint with a powerful interest in what both men called the “labor question”), John wrote, “My mind is very much confused on this issue but if I can crystallize my views in a few words I shall be glad to write you further.”^{Footnote 21}

Raskob received his chance to “crystallize” his views in late 1919. President Woodrow Wilson’s financial adviser, Bernard Baruch (who had led the War Industries Board), invited Raskob to participate in a major White House summit aimed at ending the bitter labor strife that was convulsing the nation. Raskob readily accepted. At the National Industrial Conference meetings in Washington, Raskob sat around a huge table, day after day for two weeks, puzzling out the labor question with a who’s who of American society. It was, for Raskob, a world-class seminar in political economy.

Representing the more moderate faction of organized labor was Samuel Gompers, the aging leader of the American Federation of Labor. John L. Lewis of the United Mine Workers was there as well, standing up for the more militant labor faction. John D. Rockefeller Jr., Bernard Baruch, Elbert Gary, and other leading industrialists, as well as the president of the United States Chamber of Commerce and the head of the National Industrial Conference Board, represented the by-no-means-unified, capitalist viewpoint. A diverse set of other luminaries, including the philanthropist (and erstwhile capitalist) Robert S. Brookings and Harvard president Charles Eliot, leavened the mix.

Relative to the other men in the room, Raskob was, in the public’s mind, an unknown quantity. The New York Times, in its extensive opening coverage of the conference, explained Raskob’s role and qualifications. After listing his corporate titles, the Times reported: “He has been much interested in improving the relations between employers and employees in the companies in which he is interested. He himself, less than twenty years ago began at the bottom of the ladder as a stenographer in the employ of P.S. du Pont.”^{Footnote 22} Raskob, at least according to the Times, was supposed to be capable of understanding both sides of the story.^{Footnote 23} Representatives of both capital and labor seemed to agree with the Times; Raskob was elected to be the conference secretary, in charge of the meetings.

Raskob quickly understood that labor and capital were bitterly divided. The labor representatives had one major goal: they wanted the conference to strongly support the rights of workers to join national unions—not company unions. Those national unions would then act as collective-bargaining units for all their members. John L. Lewis, seen as the most radical of the labor men at the conference, wanted much more. All mines in the United States, he argued, needed to be nationalized and miners guaranteed thirty-hour workweeks at far higher pay than they currently received. On the other end of the spectrum was U.S. Steel chairman and chief executive officer Elbert Henry Gary, who was in the midst of battling a long-standing steel strike. He insisted that the entire purpose of the conference should be to fight “for a principle fundamental to American institutions.” “The issue raised here,” he said, should be “embracing the open shop.”^{Footnote 24} Gary wanted the conference to reject collective bargaining of any kind.

Raskob came to the meeting with no sure answers. He probably approved of the remarks made by the always optimistic Secretary of the Interior Franklin Lane, who tried to reassure the public at the conference’s opening with these anodyne words: “Men say that this problem of labor and capital is unsolvable. You cannot say that to me. . . .We will draft here a declaration of dependence, not of independence.”^{Footnote 25} But while Raskob remained sympathetic to the workingman’s need for greater economic security, he moved quickly to the side of his corporate colleagues, including Elbert Gary. Raskob had no sympathy for John L. Lewis’s talk of nationalizing the mines or of mandating collective-bargaining units run by national labor unions. If the only choice was between mandatory closed shops and open shops, Raskob had no doubts as to which side of the debate he belonged. Using his role as conference secretary, Raskob did his best to shut Lewis up and prevented a formal vote on the collective-bargaining question.^{Footnote 26}

Raskob had, for the first time, publicly aligned himself with capital and against organized labor. He would for the rest of his life hold to the capitalists’ faith that productivity and profitability were the best measures by which corporate performance should be judged. Raskob left the national conference a more conservative man than he had entered it, at least when it came to the “labor question.” Especially after listening to his labor adversaries, Raskob was surer than ever that capitalists best understood how to maximize return on investment and create productive enterprises; workers’ best chance for better living conditions, he believed ever more strongly, depended on their willingness to yoke themselves to those enterprises that employed them and produced America’s array of reasonably priced and satisfying consumer goods.

Shortly after the conference ended, Raskob searched for a clear statement of his still-inchoate beliefs. He read a short book by George Wilder Cartwright, a California politician and writer, whose Mutual Interests of Capital and Labor was making the rounds of the Chamber of Commerce circuit. Cartwright argued that employers had to pay their workers a good wage. Good wages, he argued, kept the men productive. He also argued that good wages, made possible by strong productivity, would assure that working people had sufficient disposable income to buy the items modern industry mass produced. Cartwright argued that a fair wage could be scientifically calculated, and that it was employers’ duty to calculate that wage and to pay it. In turn, he argued, employees should work hard, be loyal to their employers, and consume the good things the capitalist economy generated. If employers failed to pay a “scientific” fair wage, then employees had the absolute right to quit and find a better job. Raskob loved the book. He bought five hundred copies directly from the publisher and sent one to almost every leading businessman he knew.^{Footnote 27}

In 1920, Raskob found time between his crushing corporate obligations to craft and publicize his own take on the place of the new industrial corporation in American life. In the fall, he placed a long essay in System, the nation’s most prestigious journal of business management. Raskob made a detailed case for employee stock-ownership plans. At the top end of the new corporate economy, he had lived through the transition from owner-managers to manager-owners and he was personally aware that, as he wrote, “Today in the big corporation we no longer have the strict relation of employer and employee.” He explained: “Not many years ago . . . big concerns were owned on the family basis and no matter how high an ‘outsider’ rose, he remained a salaried man. . . . But in this day of corporate ownership, it is the exception rather than the rule not to find the leading executives with a fairly strong stock interest. That establishes their identity with the company, they hold the dual position of representative of capital and servants of capital. They hold a position that every man working for the corporation can and should attain. And when all do we shall be rid of the idea of working for the soulless corporation.” Raskob then demonstrated how stock-ownership plans would lift employees “out of the usual blind alley of work and we need not bother about pension funds or other charitable undertakings.” Raskob concluded: “No man ever got rich just by saving his wages—he gets rich by making use of the money he has saved.”^{Footnote 28}

Raskob argued that large corporate employers should offer stock options to all employees. “We calculate,” he wrote, “that any man working for twenty or thirty years will thus have a fund on which he can retire and live not merely comfortably but very well indeed.”^{Footnote 29} This sort of plan was exactly what Raskob was implementing at both DuPont and, by 1920, at GM, and not just for top managers. Raskob wanted everyone to be a capitalist committed to the profitability of the business that employed him.

The well-known business writer Samuel Crowther praised Raskob’s vision in The World’s Work. While noting that Raskob’s investment strategy linking together DuPont and GM had produced a massive industrial combination that might raise a previous generation’s concerns about trusts and monopolies, he assured his mostly well-to-do readers: “These are not the old ideas of combination: they are new. The principal thought is not combination but work. It is an enlarging—not a shutting off—of opportunity through something that might be described as a kind of socialization of money in the hands of individuals.”^{Footnote 30}

Crowther’s lengthy profile on Raskob’s vision of shared capitalist prosperity was picked up the next month by the popular digest magazine Current Opinion.^{Footnote 31} The article focused on Raskob’s vision of a class-conflict-free society made whole and prosperous by a new corporate order in which “every man in the organization [is given] a chance to buy stock and then adding out of the profits of the companies to the stock that he buys.”^{Footnote 32} Raskob, the piece suggested to a larger audience, offered Americans an alternative to the bitter labor wars of the past few years while also assuaging the concerns many middle-class Americans had about the threat giant corporations presented to their dreams of work-place autonomy built on individual productive labor. John Raskob had become an apostle of a new kind of American prosperity.

Raskob was not the only person pitching employee stock-ownership plans in the first year of the 1920s, but he was the only one who could back it up with both his own rise from a $5 a week stenographer to multimillionaire deal-maker extraordinaire and his actual experience devising and implementing such programs at DuPont and General Motors. One again, it is important to understand that Raskob was not just talking about the virtues of employee stock ownership and stock bonus plans for managers. Working with his boss, Pierre du Pont, he had successfully promoted a profit-sharing scheme at the DuPont Company and helped implement an employee stock-ownership and bonus program, as well as a pension program for workers. Working at General Motors with Pierre du Pont and then Alfred Sloan, he improved on his DuPont plan by instigating a GM employee investment plan that included a home-ownership savings option with an employer matching grant, as well as a more complex stock-option plan for hourly workers. Almost all workers participated in the voluntary program, which ended only in 1935, when the mandatory federal Social Security payment program replaced it. Raskob also organized GM’s famous “millionaires’ club” for the company’s highest flyers, which involved generous, leveraged stock options parceled out of a capital pool drawn from corporate earnings and managed by the corporation’s top executives. Raskob saw all of these financial incentives as tools to build corporate loyalty, corporate unity, and more broadly an ownership society in which capitalists, managers, and workers all gained from corporate success.

While Raskob chose not to participate in the various conferences addressing capitalist inequities that new organizations such as the Brookings Institution held during the early 1920s, he was a keen member of the Rockefeller-backed Special Conference Committee that met regularly to brainstorm about the “labor question” that had rocked the nation in 1919. Raskob did his best to interest his corporate peers at DuPont and General Motors in the Special Conference Committee’s recommendations, characterized by historians as “welfare capitalism.”

During these same years, Raskob read numerous books on political economy. Some of those titles came recommended by the United States Chamber of Commerce, which sent suggested readings to its members. The national Chamber, founded in 1912, promoted business interests in Washington, but it also served as one of the most important intellectual networks for its many members, few of whom had attended institutions of higher education. Raskob usually bought multiple copies of the books recommended by the Chamber and then passed them out and discussed them with his friends and colleagues. In the early 1920s, when Raskob and several of the other chief executives at GM regularly rode the train back and forth from New York to Detroit, Raskob regularly discussed his readings with his colleagues. At the height of his economic power, Raskob was searching for an intellectual context for his beliefs and for new ways to think about the perplexities of modern life. Throughout the 1910s and 1920s, when new books cost between $1 and $2, Raskob spent hundreds of dollars a year at New York City bookstores.

III

Raskob’s first big idea was to make corporate employees into corporate owners through widely available stock-option plans. He promoted such ideas widely and cogently and implemented them at the corporations in which he served as head of finance and board member: General Motors and the DuPont Company. His second big idea was to make cars far more affordable—not by wringing out every excess production cost or by narrowing corporate profit margins, but by bringing installment buying to the car business. Raskob wanted to bring the kind of financial leverage he had exercised on behalf of DuPont and his own investments to middle-class American consumers. The idea was at its core a bottom-line venture: by allowing middle-class and solidly employed working-class Americans to buy cars on credit, General Motors could greatly increase its revenues and, Raskob argued, its profits. But Raskob was trying to do more than make money for GM; installment buying of cars would also enable a much broader swath of the America public to share in the bounty of modern corporate capitalism, linking the realization of their material desires to the capitalist system that produced them.^{Footnote 33}

Overwhelmingly, in 1918, new cars were sold on a cash basis. And new autos were expensive. Henry Ford was doing everything he could to make his Model T affordable, but even with Ford’s relentless efforts to reduce the cost of his assembly-line-produced, stripped down Model T, his cars demanded a level of savings most Americans did not have. A well-paid white-collar worker would have to come up with savings equal to about three months of his salary to buy the Model T, which was the cheapest new car on the market. A typical workingman would be lucky if half a year’s salary would put him in the driver’s seat of a Ford Model T. And GM cars cost more than Ford’s. Even GM’s lowest-priced car, the Chevrolet, could not compete on price. Most of GM’s cars, especially Buicks and Cadillacs, cost a lot more. Too few people could save enough money to buy new cars, especially a GM auto, to create the millions of sales that GM founder Billy Durant and John Raskob envisioned.

Raskob saw the obvious answer: “other people’s money.” Car sales should become a credit business. Raskob wanted GM to use the same financial arm to provide its auto dealers with the credit they needed to expand and stabilize their inventory. More cars on the dealers’ lots and in their showrooms, even during slow buying seasons, meant more sales and more cash flow for GM. In early 1918, Raskob proposed to the GM board that a committee be formed “to study the whole subject of the installment selling of automobiles.”^{Footnote 34}

Raskob was not working from scratch and he knew it. Installment buying had been around for a long time in the United States. In the mid-nineteenth century, the farm machine business could not have boomed without some form of consumer credit and an installment-buying plan. Edward Clark and I. M. Singer of the Singer sewing machine company figured out how to use installment buying to sell the first widely adopted household appliance. By the late nineteenth century, Singer was by far the market leader, offering its sewing machines with a simple and effective sales pitch: “dollar down, dollar a week.”^{Footnote 35} By the early twentieth century, installment buying was taking off in the United States.

This credit boom and installment buying were made possible by steadily improving wages. By 1920, Americans had the highest wage scale in the world and the average American worker had double the purchasing power of his 1860 counterpart. American workers and their families were becoming consumers. In 1918, when Raskob asked GM to investigate the installment selling of automobiles, he knew that American wage earners still had limited savings—indeed most Americans had no or almost no savings at all—but most did have an ever-increasing amount of disposable income. Millions of Americans could afford a car if they did not have to come up with a large up-front payment but could instead pay over time. The math backed up Raskob’s insight.

Raskob knew that other businessmen, including some in the auto industry, had begun to make their own forays into auto financing. In 1912, a few Chicago auto dealers had begun to offer to finance new car purchases, advertising “easy payments.” A handful of West Coast dealers did the same. But these dealer-supplied credit plans were severely limited by the dealers’ own credit problems; they were constantly scrounging for cash to pay off the manufacturers so that they could put enough makes and models in their showrooms and lots to offer car buyers an enticing array of choices. Dealers did not have a rich enough cash flow to support their own finance schemes. A sharp eyed, San-Francisco based entrepreneur named L. F. Weaver noticed the demand and in 1913 he started the first auto finance company. Weaver extended credit both to consumers and to dealerships. He was a good businessman, but his operations were local and, relatively speaking, small-time. Two years later, on November 1, 1915, a much bigger operation started up in Toledo, Ohio. The Guaranty Securities Company teamed up with the Willys-Overland Company to finance the popular Overland auto, which competed directly with Chevrolet.^{Footnote 36} Raskob, keyed into the capital markets, must have gotten wind of their plans.

Raskob did not know that Henry Ford had seen the same opening but had passed on it. In 1916, around the same time Raskob became involved in running General Motors, Henry Ford’s son, Edsel, had hired a consultant to look into Guaranty’s business and explore its implications for his father’s company. The consultant, an economist named Edward Rumely, concluded: “The automobile industry will pass from a cash basis to a time basis.”^{Footnote 37} In his carefully argued report, he made a strong case. Edsel Ford believed him and tried to convince his father that they needed to establish some kind of credit arm.

Henry Ford, as usual, rejected his son’s advice. In this case, he dismissed Edsel based on what he considered moral grounds. Ford hated bankers. The major reason Ford became an infamous anti-Semite was because he believed that Jews controlled the banking and loan-making industry that he despised.^{Footnote 38} Ford also hated debtors. He did not want to become the former nor create a new class of the latter. Ford was not alone in his fierce distrust of a debt-ridden society held hostage by creditors. In the late nineteenth century, Populists had railed against “hyena-faced Shylocks.”^{Footnote 39} And in the 1920s, Ford ally Senator James Couzens had publicly warned his fellow Americans: “When financiers flourish on credit, you may depend on it that plenty of other people are withering.”^{Footnote 40} Many Americans remained skeptical about the benefits of consumer debt and suspicious of those who offered consumer credit.

Ford concentrated on making his Model T as inexpensive as he could so that people who avoided frivolous purchases could buy one. A cheap, reliable, easily repaired, unadorned vehicle, he believed, was the answer to the American people’s transportation needs. Ford believed in thrift, not credit. The stubborn carmaker had a different vision of what a mass-consumer capitalist marketplace could and should look like. It was not the vision that would prevail.

Raskob was not a lone genius who dreamed up the auto finance business out of whole cloth. He patched his idea together from existing bits and pieces, some of them, such as the Guaranty Securities model, fairly well-formed pieces. But Raskob, unlike Henry Ford, not only knew about the installment sales business and the forays others were making specifically into auto installment sales, but he both believed in it and had the status and will to make it happen at General Motors. He drove his auto company into this new, still uncertain, still relatively untested business with complete confidence.

Raskob worked with a team of men to study installment buying and figure out how to make it work best for General Motors. They worked the numbers and studied how other finance companies, especially Guaranty Securities, structured the business and safeguarded their loans. At a time when no national consumer credit-rating agency existed, one of the biggest questions was how to determine who was eligible for credit and how much to charge people for the privilege of receiving it. Along the same lines, Raskob and the rest of the men had to figure out what to do about buyers who defaulted on their loans.^{Footnote 41} Working with fellow executives at GM, Raskob oversaw a careful analysis of the installment business.^{Footnote 42}

The General Motors Acceptance Corporation was launched on January 24, 1919, with just over $2 million in capital. The new business was novel enough to warrant a top-of-the-fold story on the Sunday business section of the New York Times.^{Footnote 43} Raskob did his best not to take a hands-on approach to GMAC, leaving day-to-day management to others, but he championed GMAC in GM’s ceaseless internal wars, fighting to ensure that his creation received the capital and people it needed to grow and prosper. GMAC opened its first office in New York City with fifteen employees and by March was providing credit to dealers and individual consumers with branch offices in San Francisco, Chicago, Toronto, and Detroit. Raskob made the rounds, explaining the strategy of installment buying and ensuring that GMAC’s managers knew they had a champion. At the car dealerships, the salesmen were thrilled. One of the first to hear about the innovation remembered: “We were utterly amazed at the daring of the corporation to extend credit to both its dealers and its customers on the sale of such an expensive article as an automobile.”^{Footnote 44}

At the end of 1919, Raskob hosted a party in New York for the managers of GMAC. Raskob, uncharacteristically, gave an emotional, impromptu, and highly charged speech. He told the men that they were at the forefront of a major change in American life and that within a year GM was going to need to increase GMAC’s capital position tenfold to meet demand. Credit, he said, was the lifeblood of the new American economy. Credit, wisely managed, he told his men, almost all of them veterans just returned from the battlefields of Europe, was the means by which working Americans could share in the bounty that American manufacturing could now produce. Credit would be the engine that kept the American economy growing. Credit would enable working Americans to be full participants in a peaceful and equitable new industrial society.

Raskob believed in GM’s auto credit plan, but he also was intent on testing and proving the viability of his idea in real time. In April 1920, just a little over a year after GMAC had launched, Raskob and his team released a massive study, based on survey data, of their consumer loan business through September 1919. The survey findings were publicized, as was the intent, by major newspapers around the country. The survey was directly aimed at showing bankers that GMAC’s consumer customers were creditworthy and that the new business was, therefore, sound and creditworthy, too. The publicity surrounding the survey was also, more subtly, directed at potential borrowers, letting them know that going into debt to buy a car put a person in the company not of life’s losers but of society’s more successful citizens.

The lead in the Washington Post read: “Of more than passing interest to bankers and others are figures recently compiled by the General Motors Acceptance Corporation as to the financial responsibility and resources of purchasers of automobiles on the deferred payment plan.”^{Footnote 45} The report highlighted that a sizable number of GMAC’s customers were bankers, lawyers, dentists, and other professionals. Farmers, businessmen, and many others representing a broad swath of the middle class also availed themselves of GMAC’s services. The subtitle of the Post piece read: “Average Purchaser has Monthly Income of $275 and owns $6000 Real Estate.”^{Footnote 46} Economically secure, middle- and upper-middle class Americans, GM could demonstrate, had embraced the auto installment buying plan. Raskob wanted to change not just GM’s sales model but also Americans’ approach to consumer debt.

Exceeding even Raskob’s early expectations, by the end of 1920 GMAC loaned out more $80 million in the United States, with $46,693,170 going to individual consumers. By April 1922, GMAC had financed 146,937 sales to consumers.^{Footnote 47} In the mid-1920s, Raskob contracted with one of America’s leading economists, Professor Edwin Robert Anderson Seligman of Columbia University, to study GMAC’s economic effects not on the company but on American society. In 1927, Seligman published his findings in The Economics of Installment Selling. Seligman corroborated GM’s own earlier assessments that auto credit was strengthening consumers’ buying power without adverse effects. To promote these findings, Raskob gave an interview to a writer for the popular magazine, Collier’s Weekly. In an article titled “They Turn Your Promise into Cash,” Raskob allowed that socialists dreamed of “plenty for everybody and fair shake for all.” But capitalists, he said, by creating installment buying plans could do more than dream: “Our route will be by the capitalist road of upbuilding rather than by the socialistic road of tearing down.”^{Footnote 48} Soon thereafter, Raskob hosted a dinner for five hundred of the most influential businessmen, financiers, and economists in the United States; Seligman lectured on the economic merits of consumer credit. As Raskob intended, newspapers and magazines spread the good news.^{Footnote 49}

GMAC was from the very beginning a massive success and, as it became evermore so, John Raskob emerged as the well-publicized and celebrated champion of consumer credit. The men who took on the management of GMAC were not faint in their praise for their founder: “GMAC was conceived, as we say, in the practical imagination of John J. Raskob. There may have been other people who had some such idea in mind, but whatever such claims might be, it was Mr. Raskob who beat them to the goal, and no one could take that distinction from him.”^{Footnote 50}

Many years later, on GMAC’s thirtieth anniversary, GM president Alfred Sloan, who had attended that first big GMAC meeting, celebrated Raskob’s consumerist vision. He reminded GMAC’s employees that in 1919 few Americans, let alone industrial leaders, anticipated a time when “consumer durable goods” would be seen as a major part of the American economy, let alone be considered “a necessity of the American way of living.” He continued, “Such thinking was advanced only by the most imaginative. It was decried by those who considered themselves more realistic.” Many, and here Sloan got in a dig at Henry Ford, said that consumer credit “constituted a danger of the first magnitude calculated not only to undermine the business prosperity, but the morale of the American people as well.” Echoing Raskob, Sloan concluded, “Yet, everyone had the ambition and perhaps, from the American point of view, the right to own such things.”^{Footnote 51} Other companies followed GM’s lead in providing consumers the credit they needed to buy consumer durables, most importantly General Electric, which formed its in-house credit arm in 1921.^{Footnote 52} GMAC would remain central to the General Motors business model for nearly a century.

Raskob imagined a new American way of life based on mass investment and mass credit and did his best to bring it to fruition. He wanted workers to be shareholders in the corporations that employed them. Corporate executives, he urged, needed to devise voluntary and rewarding plans that would allow and entice workers to make those investments. He acted on those ideas at DuPont and General Motors. He also wanted the great majority of American households to be able to buy the new consumer durables that were changing everyday life in the United States. To do so, he convinced his fellow executives at General Motors to instigate an installment buying plan for autos, linking the expanding ranks of the creditworthy to the corporate order he was helping to organize.

IV

Not all went will, by any means, with Raskob’s various schemes. His most notorious disaster came in the fall of 1929, when he had to terminate the Equities Securities Company, the giant investment trust he had been planning for many months. Equities was going to be a kind of stock market share-buying company modeled along the lines of GMAC: people without much savings but with some disposable income would buy corporate stock on the installment plan. Not only would his imagined Equities Securities Company extend credit directly or in coordination with local banks so that people could leverage a small amount of their income or savings to make regular and substantial investments in the market, but the company would also pick the stocks for its investors, creating a workingman’s investment trust. Raskob was hoping to make millions of Americans, not just employees, shareholders in corporate America.

Raskob had been tinkering with the stock market investment trust idea since mid-1928. He had discussed the idea, at that time, at a White House dinner with President Coolidge and other leading businessmen and had thereafter sought advice from retail genius Julius Rosenwald, Pierre du Pont, and the economist Edward Seligman. Raskob was aware that others had already rigged up investment trusts to bring small investors into the stock market. Raskob, however, believed that because of his reputation and his financial skills he could scale up the investment trust idea like no else could.^{Footnote 53}

In May 1929, Raskob launched his new idea. A front-page story in the New York Times declared, “Raskob Will Help Workers to Invest: Plans Large Company to Hold Stock and Let Small Buyers Share Profits.” Raskob told the Times that he would hire the best financial experts in the United States to direct his customers’ investments. A “factory mechanic in Detroit with $200” to invest, he told the reporter, would be able to secure a strong financial future for his family. ^{Footnote 54}

Raskob’s workers’ investment trust became the talk of the nation. Virtually every major paper in the country ran a story on it. The Literary Digest quoted a prominent New York banker: “This is the greatest vision of Wall Street’s greatest mind.” The Ashville Times declared: “It is apparently a splendid idea for the common welfare, well based upon a solid rock of this country’s material prosperity.” The Philadelphia Evening Public Ledger concurred, suggesting that Raskob’s invention “might prove to be the most modern and the most useful of all the numerous humanitarian enterprises founded at various times by rich Americans.” “What Raskob has in mind,” stated the Newark News, “might well be called the ultimate step in industrial socialization, the most outstanding development and most rapidly moving trend of big business today.”^{Footnote 55}

Unfortunately, as Raskob knew, launching an investment trust in 1929 was problematic. As early as the fall of 1928, Raskob had begun to worry that the market was seriously overbought.^{Footnote 56} So, even as he continued to promote his investment trust through the summer and early fall of 1929, he hesitated in opening up the business. Ironically, to put the matter gently, Raskob’s big promotional push for the investment trust came in August 1929, when he teamed up with the well-known business writer Samuel Crowther to pitch his idea to a broad middle-class readership in the Ladies’ Home Journal. The title of the showy piece was the infamous: “Everybody Ought to be Rich.”^{Footnote 57} Within a few weeks of the article’s appearance, Raskob recognized that his timing was spectacularly bad. By early October, Raskob knew that the workingman’s investment trust had been a time-consuming bust and that the hoopla surrounding it would be a badge of infamy his enemies would use against him in the dark times ahead.

Raskob’s workingman’s trust was not his only idea to fall prey to the hard times that followed the stock market crash. Raskob’s so-called welfare-capitalism approach that aimed both to share corporate profits and ensure worker loyalty would fare poorly during the Great Depression. Corporations, including General Motors, turned away from the voluntary benefits programs they had begun offering their workers only a decade or so earlier.^{Footnote 58} More devastating, workers who did participate in the 1920s stock-option plans would see their investments decline by nearly 90 percent between early October 1929 and mid-1932; most who had participated through a stock-option program based on leveraged purchasing, which most did, lost their entire investment.

The purpose of this article, however, is not to praise or condemn the specific aspects of Raskob’s bold ideas to unify Americans around the common coin of corporate equities and consumer credit. The narrower historical purpose is simply to demonstrate the power the capitalist John Raskob had in giving shape not just to the corporations for which he worked but to the society he sought to influence. And while the 1930s represented a spectacular detour for Raskob’s plans, his overarching belief in the power of the marketplace to produce prosperity and in the role of giant corporations in giving stability to the American economy does still undergird American life. The consumer credit revolution he helped to usher in changed American values as much as it reshaped the material conditions of America’s households.^{Footnote 59} His belief—shared by many others, often across traditional political lines—that Americans needed to tie their savings and their fortunes to the corporate business world has taken modern form in 401K plans, the lure of employee stock options and ESOPs, and every giant pension program that invests in equities. Raskob’s legacy is all around us. The ideas that he developed in his capitalist clique and his ability to communicate and implement those ideas reverberated through American society and still play a fundamental role in the political imagination of economic conservatives. The capitalist as social engineer is a social type whose style, methods of operation, reach, and limits have a definite history; the ebb and flow of his—or her—power is at the center of the American experience.