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The Unexpected Origins of the Social Security Act of 1935

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 If you look up Social Security in the Wikipedia (here) and look at the History section you will find this

“A limited form of the Social Security program began as a measure to implement “social insurance” during the Great Depression of the 1930s, when poverty rates among senior citizens exceeded 50%.

Creation: The Social Security Act
 
President Roosevelt signs the Social Security Act, at approximately 3:30 pm EST on August 14, 1935.[9] Standing with Roosevelt are Rep. Robert Doughton (D-NC); unknown person in shadow; Sen. Robert Wagner (D-NY); Rep. John Dingell (D-MI); unknown man in bowtie; the Secretary of Labor, Frances Perkins; Sen. Pat Harrison (D-MS); and Rep. David Lewis (D-MD).The Social Security Act was drafted during Roosevelt’s first term by the President’s Committee on Economic Security, under Frances Perkins, and passed by Congress as part of the New Deal. The act was an attempt to limit what were seen as dangers in the modern American life, including old age, poverty, unemployment, and the burdens of widows and fatherless children. By signing this act on August 14, 1935, President Roosevelt became the first president to advocate the protection of the elderly.[10]”

The Origins of Social Security in Corporate America

But what of the origins of this going back to the late 1800’s?  I stumbled upon this history of Social Security.  It gives some interesting insights into the origins of “old-age insurance”  created by the leaders of corprate america who owned and controlled the biggest and most powerful corporations of the 1920s and 1930s – Standard Oil of New Jersey, General Electric, and Metropolitan Life Insurance.

Here are a few paragraphs.  You can find the full paper ( 22 pages) at the end of this posting

This case study is one of several that could be used to demonstrate how the policy-planning network operates on issues of concern to the corporate community as a whole. But I have chosen to focus on the origins of the old-age insurance title in the Social Security Act, which is now known as “social security” even though the concept of social security originally encompassed unemployment insurance and various kinds of welfare payments that are included in the act. I focus on old-age insurance for a number of reasons, starting with the fact that its origins may come as a surprise to many readers, but also because the program is now the biggest and most popular government program that serves everyday people. It’s also an interesting policy because it has been under heavy attack from corporate leaders and their ideological allies for the past 30 years.

Most people now think liberals and labor leaders created the program because they are the ones who defend it. But as this document will show, the basic principles behind old-age insurance were created and actively supported by the corporate moderates who owned and controlled the biggest and most powerful corporations of the 1920s and 1930s, companies such as Standard Oil of New Jersey, General Electric, and Metropolitan Life Insurance. In fact, government social insurance, including both unemployment insurance and old-age insurance, made enormous business and political sense to corporate moderates from the 1930s to the early 1970s…

If my claims are as solidly grounded in new archival research as I think they are, it is worth asking why this analysis of the origins of social security is not better known. This question is especially pertinent because newspaper articles and memoirs from the 1930s suggest that my analysis would not come as a complete surprise to knowledgeable political observers who experienced and lived the New Deal firsthand. They knew that a few hundred large companies sat astride the economy and that plantation capitalists ruled the South through the Southern Democrats. They were familiar with the specific corporate leaders and their hired experts that are discussed in this document, and they understood their key role.

Historical background, 1870s to 1920s

Government old-age pensions for a few of its employees go back to the nineteenth century and veterans of the Civil War, and later their widows and children, received government pensions that lasted into the early twentieth century (Skocpol 1992). Although these government pensions may have given the general idea of old-age insurance some respectability in the eyes of average citizens, this early history of government benefits is largely irrelevant because these pensions did not serve as a precedent. Instead, the starting point was in a few corporations, such as American Express in 1875, that saw pensions as a way to replace superannuated workers with more productive younger workers. Shortly thereafter, other corporations thought that pensions might be an a way to induce loyalty in workers and quell labor unrest, but that idea never really worked because the workers had no legal right to private pensions until the late 1920s. Even then, there were loopholes. Death benefits, accident insurance, and unemployment compensation turned out to be more important in terms of reducing labor strife, but they didn’t work very well either (Graebner 1980; Sass 1997). However, the Pennsylvania Railroad, one of the largest railroads in the country, had a full-fledged pension plan for all employees at age 70 by 1900…

…A pamphlet written for the American Management Association in 1928 by a personal employee of Rockefeller, Jr., best exemplifies the pre-depression thinking about company pensions within corporate moderate organizations in the policy-planning network. According to this detailed analysis, which contains discussions of the moral, economic, and technical issues involved in industrial pensions, a pension is part of a good personnel program. Especially in the case of corporations that have been around for many years, a pension is “a means, at once humane and approved by public opinion, of purging its active payroll of men who, by reason of age or disability, have become liabilities rather than assets” (Cowdrick 1928, p. 10). Pensions also provide the “opportunity to promote their younger subordinates” (p. 11). The pamphlet concluded with the prediction that industrial pensions will be “increasingly valuable to employers” (Cowdrick 1928, p. 21).

You can read the complete paper here –
https://frrl.files.wordpress.com/2010/09/the-unexpected-origins-of-the-social-security-act-of-1935.pdf

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Written by frrl

September 7, 2010 at 1:46 am

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