tween themselves and other agencies dealing with foreign economic problems. Apparently the Senate felt the same way, for in October it adopted a resolution asking each. executive department to prepare a detailed statement covering "the character, amount, and estimated cost of work which has any relation to the foreign commerce of the United States." Ten agencies responded. Replies from the Commerce and State Departments stressed the lack of coordination and made clear each department's determination to be the principal coordinating agency.45

But if the Economic Liaison Committee was not successful in solving the problem of coordination, its formation and that of the Foreign Trade Committee were no less significant. In the first place, the establishment of the two committees was a testimony to the importance that the administration attached to the promotion of foreign commerce even during the war and to the preparations it made for after-the-war trade. During the conflict the government had attempted, really for the first time on such a large scale, to integrate foreign economic and political policy, using economic and political means to bring about the defeat of Germany and the development of American commerce abroad.

intergovernmental conflict over postwar economic policy with respect to Europe and Latin America, see also Joan Hoff Wilson, American Business and Foreign Policy, 1920-1933 (Lexington, Ky., 1971), pp. 16-18, 103-113; Tulchin, Aftermath of War, pp. 155-170. It might be pointed out that these authors tend to emphasize the lack of government coordination in matters of foreign trade in contrast to the argument presented in this paper. The difference in interpretation is perhaps due to the fact that this paper considers overall organizational development in foreign trade while Wilson and Tulchin emphasize conflicting interest groups in foreign trade promotion.

45 Foreign Commerce of the United States: Letters from the Heads of Executive Departments Transmitting Pursuant to a Senate Resolution of October 3, 1919, Detailed Statements Covering the Character, Amount, and Estimated Cost of Work Which Has Any Relation to the Foreign Commerce of the United States, Senate Doc. 190, 66 Cong., 2 sess., esp. pp. 5-9, 39-44.

The lessons of the war were not lost. In fact, Secretary Lansing based his argument for giving the State Department primary responsibility in the foreign economic field on the need to coordinate foreign economic and political decisions. Nor did he mean simply subordinating economic to political factors. "The relation between world trade and world politics is now so close," he wrote the Senate, "that it is hardly possible to draw a line between political activities which are purely political and those which have ultimate effect upon commercial relations. . . . Heretofore we have confronted the world with scattered forces. If we are to profit by the lessons of the war, has not the time now arrived for us to establish a unity of command. Chief among the results to be achieved is a higher coordination of political and economic data so that the two may be considered jointly in their relation to each other." 46

Even after the Liaison Committee was formed, therefore, the administration continued its efforts to coordinate foreign economic and political policy. In August Wilson asked Lansing to hold another meeting of agency heads for this purpose.*7 At the same time, the Liaison Committee deliberated on a variety of matters during the remainder of Wilson's term, including such questions as foreign investments, tariffs, and American branch factories abroad.48 While it failed to develop a united policy on many of these problems, its work was considered important enough so that in 1922 President Warren G. Harding issued an

46 Ibid., pp. 5-7.

47 A. C. Kirk to Bernard Baruch, Aug. 11, 1919, Robert Lansing Papers, Library of Congress. See also, Wilson to Baruch, Aug. 8, 1919, Bernard Baruch Papers, Princeton University Library, Princeton, N. J.

48 See, for example, "Minutes of Conference at the Office of Mr. Lay, State Department," Apr. 22, 1919, C. E. McGuire to Wesley Frost, July 28, 1919, "Memorandum of the Economic Liaison Committee," Jan. 1, 1922, State Department Records, RG 59, NA. See also, "Minutes of 3rd Regular General Meeting," Apr. 9, 1919, Polk Papers.

executive order establishing the committee on a permanent basis.49

Second, and perhaps most important, the formation of the Central Foreign Trade and Economic Liaison Committees remains significant because of what it suggests about the European influence on administration policy. In brief, the administration's perception of economic developments in Europe accentuated the movement in the United States toward greater government coordination and centralization of economic activity. This, in turn, had serious consequences for Wilson's postwar economic plans. For while the president was no longer

49 "Presidential Executive Order of March 24, 1922," State Department Records, RG 59, NA. See also, Chairman, Economic Liaison Committee, to Charles W. Collins, June 22, 1922, ibid.

the laissez faire advocate he had been when he first took office in 1913, he still based his plans for the postwar world on a domestic and international economy predicated on the principles of private enterprise and private initiative operating in a free marketplace.50 Paradoxically, the administration's perception of European economic developments and its own concern for trade development after the war helped undermine this program domestically and internationally.

50 N. Gordon Levin, Jr., Woodrow Wilson and World Politics: America's Response to War and Revolution (New York, 1968), esp. pp. 1-10; Arno J. Mayer, Wilson vs. Lenin: Political Origins of the New Diplomacy, 1917-1918 (Cleveland, 1964), pp. 329-367. See also, Martin Sklar, "Woodrow Wilson and the Political Economy of Modern United States Liberalism," Studies on the Left 1 (1960): 17-47.

JAMES E. SARGENT

"Too often in recent history liberal gov

ernments have been wrecked on the rocks of loose fiscal policy." Lewis W. Douglas, Franklin D. Roosevelt's director of the budget during 1933-34, inserted these words into Roosevelt's March 1933 congressional message calling for "drastic" economy in government.1 They aptly illustrate Douglas's preoccupation with orderly fiscal policy and reflect the president's sincere belief in a balanced federal budget. Congress responded within ten days by passing an "Act to Maintain the Credit of the United States Government," popularly known as the Economy Act-one of the three pillars of Roosevelt's early New Deal recovery program enacted during the Hundred Days of 1933. But despite a fond personal relationship and shared political and policy views

1974 by James E. Sargent

An earlier version of this article was read at the annual meeting of the Organization of American Historians at Chicago in April 1973.

1 Samuel I. Rosenman, ed., The Public Papers and Addresses of Franklin D. Roosevelt (New York, 1938-50), 2:50 (hereafter cited as Public Papers); Lewis W. Douglas and Raymond Moley, draft of economy message, Mar. 8, 1933, Douglas Papers, University of Arizona Library, Tucson; interviews with Douglas, Feb. 1970.

tionships illustrate some key points about the early New Deal. Roosevelt's making of fiscal policy, for example, was ambivalent at best and disorderly at worst. Also, he increasingly rejected Douglas's fiscal advice and ultimately accepted his resignation rather than bow to pressures from advisers on his political right.

Roosevelt's private attitudes and public positions on economy in government during his governorship of New York and his 1932 presidential campaign were politically popular, economically orthodox, and in keeping with the accepted fiscal precepts of the times. Throughout his second gubernatorial term he continually insisted that cabinet members "cut costs drastically." Just before his nomination for president in June 1932, he telegraphed Robert R. McCormick of the Chicago Tribune that he believed federal expenditures could be cut "twenty percent" by eliminating unessential functions and by reorganizing executive departments. On July 24 in another telegram he endorsed the efforts of the National Economy League, an organization that hoped to force reductions of over $400 million in federal expenditures. Discussing the Democratic platform in a radio speech six days later, Roosevelt strongly endorsed the party's plank for a balanced budget and severely criticized the "disastrous fiscal policy" of the Republicans.3

In a presidential campaign unusual for its preoccupation with federal finances, Roosevelt stated his economy in government views comprehensively in his Pittsburgh speech of October 19, 1932. In words drafted by fiscal conservative Hugh S. Johnson, approved by financier Bernard M. Baruch, and redrafted only slightly by chief brain truster Raymond Moley, Roosevelt plainly implied that the Hoover administration lacked both the will and the ability to put federal finances in proper order.

3 Kimmel, Federal Budget, pp. 143-174; Frank Freidel, Franklin D. Roosevelt: The Triumph (Boston, 1952), pp. 183-184, 361; Public Papers, 1:662663.

Roosevelt likened federal finances to household finances-"the financial problem of making both ends meet." Continuing, he said that government operations now cost every family $625 per year; that from 1927 to 1931 the cost of government had risen $1 billion, a 50 percent increase; and therefore he believed it imperative to maintain the federal credit by balancing the budget. He pledged to follow the Democrats' economy plank, "to reduce the cost of current Federal Government operations by 25 percent," and to demand that cabinet members pledge in advance support for the plank and consequent departmental reorganizations. In stating these precepts he left himself one loophole, although a minor one when taken within the context of the speech and entire campaign. "If starvation and dire need on the part of any of our citizens make necessary the appropriation of additional funds which would keep the budget out of balance," he stated, "I shall not hesitate to tell the American people the full truth and ask them to authorize the expenditure of that additional amount." 4

Such fiscal views led Roosevelt in late February 1933 to consider Congressman Lewis W. Douglas of Arizona for budget director, the position Roosevelt called “a key to everything else." By then Douglas's fiscal views were well known. The warmly personable, keenly intelligent, highly articulate Douglas, thirty-eight years old in 1932, had already made a reputation in Washington as an intellectual leader of the congressional economy forces, a firm believer in orderly fiscal policies and a balanced budget, a free trade internationalist Democrat, and a public servant of the highest integrity. Three terms in Congress since 1927 had only confirmed his belief in what he considered the three pillars of nineteenth-century world order: free trade, common international currencies, and the

4 Kimmel, Federal Budget, pp. 161-167; Freidel, Roosevelt, pp. 361-362; Arthur M. Schlesinger, Jr., The Coming of the New Deal (Boston, 1957), p. 10; Public Papers, 1:795-811.