Barack Obama, Herbert Hoover, and the futility of business ‘pledges’

As part of the pre-publicity campaign for tonight’s State of the Union address, the White House has let it be known President Obama has extracted a pledge from several big corporations not to discriminate against the long-term unemployed.

Obama should be careful about this, because the most prominent exponent before him of this sort of jawboning of big business was Herbert Hoover. In his case, the strategy didn’t work so well.

The advance leak of the unemployment pledge, which supposedly will be announced during tonight’s speech, serves several PR purposes. It reminds us long-term unemployment, which is defined as joblessness lasting more than six months, has become the economy’s most intractable burden. Workers in that condition have a materially poorer chance of rejoining the workforce than those who have been jobless for shorter periods.

The leak allows the White House and big corporations to show they care, even that they’re working to address the crisis. AT&T, Procter & Gamble, Lockheed Martin and Xerox, which have been named as firms that signed the pledge, get special props for being out ahead of the crowd. President Obama demonstrates his determination to take the problem of long-term unemployment on board.

And of course, no one actually has to do anything concrete. That’s what makes the pledge such a vivid reminder of the way Hoover dealt with the economic crisis in 1929.

Hoover would summon platoons of corporate CEOs to the White House for sessions of moral suasion. (Hoover, known as a rigorously moral individual, was good at this.) These sessions would result in pledges by the CEOs to resist layoffs and maintain wage rates, if necessary by sacrificing their profits.

Hoover’s contemporary, the pundit Walter Lippmann, thought these jawboning sessions symbolized Hoover’s fecklessness. “Scarcely a week passes but some new story comes out of Washington as to how Mr. Hoover has had somebody on the telephone and is attempting to fix this situation or that,” he wrote. “This is the reason why he has fallen under the double criticism that he is both inactive and meddlesome.”

In his memoirs, Hoover insisted that “throughout my whole administration,” the pledges “held up fairly well...[I]ndustrial goodwill developed in a most gratifying and inspiring way.” In fact, the pledges were worthless. They didn’t hold up through Hoover’s term, but only until about mid-1931, when the crushing weight of the Depression had their signatories fleeing from them. In September 1931, U.S. Steel became the first big employer to abandon its pledge outright, cutting wages by 10%. Other major companies promptly followed.

The pledge on long-term unemployment has exactly as much weight and significance. It’s brimming with uplifting verbiage: “Businesses succeed when their communities thrive. We recognize the benefits ... of taking advantage of the talent, experience and skills of all Americans, including the long-term unemployed.”

The companies commit themselves to not running want ads that “discourage or discriminate against unemployed individuals.” (This is already illegal in a couple of states.) They will “review” procedures that might “intentionally or inadvertently” disadvantage the long-term unemployed. They will publicize on their websites and hiring materials their aversion to discriminating against the long-term unemployed. They will be “interviewing or otherwise considering” long-term unemployed individuals. Etc., etc.

None of this is bad, of course, and all of it is necessary. But it may or may not be just words. If this is the extent of the administration’s strategy to help the long-term unemployed, it’s thin gruel.

What would show a real commitment would be all-out pressure on Congress to extend unemployment benefits, because the loss of those benefits itself drives the long-term jobless out of employment-seeking. It would propose a genuine, nationwide, multibillion-dollar training and reemployment program, including grants to states and localities to hire the unemployed -- after all, the precipitous decline in government employment has been a major factor in the overall weakness of the job market.

But nothing like that has been whispered about by White House officials anonymously leaking pieces of the State of the Union. Apparently, we have to wait until the speech itself to hear whether there will be more meat on these bleached old bones than the aspirational pledge offered by a bunch of corporate CEOs with their eyes fixed firmly on -- and only on -- public opinion.