Gerard Swope

Introduction

Gerard Swope (born December 1 1872 in St. Louis, MO; died November 20, 1957 in New York, NY) was an American engineer and electronics businessman who worked his way up through the ranks to become president of General Electric Company, a position he held from 1922 to 1939 and from 1942 to 1944.[1] A well-educated engineer and an experienced organizer, negotiator and salesman, Gerard Swope is especially known as a modernizer of labor relations in an era when electrical manufacturing represented “the liberal wing of the business community.”[2] For all employees of General Electric, he introduced new economic security measures, such as unemployment insurance, that influenced American industry and policy makers. He advocated for employee profit-sharing, worker representation, and pensions, as well as introducing the forty-hour week. Under his leadership, the company entered the age of mass production for mass consumption by manufacturing electric appliances for home use.[3]

As David Loth, author of the only published biography on Swope, put it in 1958, Swope “gave a twist to the American industrial system, which has affected its course ever since.”[4] Business historian Alfred D. Chandler Jr. has described Gerard Swope as a “brilliant executive… [who] made most of his company’s basic entrepreneurial decisions himself.”[5] In 2005, editors and readers of Forbes magazine ranked him as the twentieth-most influential businessman of all time. A decisive element of his success was his collaboration with Owen D. Young, the chairman of the board of General Electric. Swope and Young were described by Fortune magazine as “the most illustrious team U.S. industry has ever known.” Both coped with questions about the role of industry and state between two world wars, the Great Depression and New Deal.

Family and Ethnic Background

Gerard Swope was born on December 1, 1872 in St. Louis, Missouri, as the first son and second of four children of Isaac and Ida Swope, who were both German-Jewish immigrants. His father, Isaac, was born in 1831 as Isaac Schwab in the German town of Lengsfeld, near Eisenach in the state of Thuringia.[6] Gerard Swope met his relatives in Germany only once, while attending his elder sister’s wedding in 1887. He never knew why his father had emigrated.[7] Lengsfeld was a regional center of Jewish life. To this day, Stadtlengsfeld is the site of one of the largest Jewish cemeteries in Thuringia. Hirsch and Breinchen Schwab, Gerard Swope’s grandparents, are among those buried there.[8] In 1800, almost forty percent of its inhabitants were of Jewish origin. By 1893, the number of Jewish inhabitants had dropped significantly—from 800 to 114.[9] This massive decline was related to two major waves of emigration from Lengsfeld during the mid-19th century, also involving non-Jews. The high number of Jewish emigrants from Lengsfeld mirrored the high rate of overall Jewish emigration from Germany to the United States in the 19th century.[10] The Jewish cemetery as well as the synagogue of Stadtlengsfeld were attacked during the “Kristallnacht” pogrom on November 9–10, 1938. The remaining Jews of Stadtlengsfeld were driven out or deported by 1943; only a few successfully immigrated to the United States or Palestine.[11] A special factor influencing emigration from Lengsfeld—for both non-Jewish and Jewish Germans—was most likely the local economic situation, including the demise of a fustian-weaving mill, which had been of great importance for the regional economy.[12] Among the emigrants from Lengsfeld in this period was the architect Dankmar Adler (1844–1900), who immigrated with his father at the age of ten. Adler became a pioneer in the construction of skyscrapers and a leading representative of the “Chicago School” of architecture.

Isaac Schwab left Lengsfeld in 1857 at the age of twenty-six for the United States, as five of his seven siblings already had.[13] He followed two brothers to St. Louis, where they had Anglicized their family name to Swope and founded a successful wholesale shoe company. Isaac Swope opened a business that constructed watch cases with parts imported from Switzerland, eventually employing about fifty workers. In 1865, Isaac returned to Germany to find a bride. He soon married Ida Cohn (1848–1925) of Muehlhausen, a city in northwestern Thuringia. Ida’s father, Gerson Berend Cohn (d. 1859), the first German Jew to receive a Ph.D. from the University of Breslau, served as rabbi of Muehlhausen and chief rabbi of Thuringia. Gerson Cohn also founded a small business school.[14] In 1866, Ida Schwab followed her husband to St. Louis, where she engaged herself in social clubs. The couple had four children, two girls and two boys: Golda (b. 1867), Gerard (1872), Julia (1875) and Herbert Bayard (1882).[15] Gerard, their first son, was named after Ida’s father.[16] Isaac Swope’s watch business provided a middle-class lifestyle for the family until the depression of 1893 led to the collapse of his business and a substantial decline in his fortune.[17]

Herbert, Gerard’s younger brother (d. 1958), became a journalist and won the first Pulitzer Prize for reporting, in 1917, for a series of nineteen articles on Germany during World War I, later published as a book entitled Inside the German Empire.[18] Herbert Bayard Swope had been sent to Germany as a special correspondent in 1916. In his book he described observations on the war, attitudes of ordinary Germans as well as of members of the political and military elite.[19] “The World’s Special Staff Observer concluded,” Herbert’s biographer summarized, “that the Germans could never conquer the rest of the world, that they themselves could never be conquered, that they were in surprisingly better economic and spiritual shape than most of the rest of the world was aware, that they would not accept any peace terms to which the Allies were likely to agree, and that they had a powerful dislike for all Americans.”[20] Later, as the principal assistant and speechwriter to former stock trader and presidential adviser Bernard M. Baruch (1870–1965), Herbert B. Swope invented the term “cold war.”[21] From 1920 to 1929, he led the liberal newspaper the New York World as executive editor. His paper also won a Pulitzer Prize (1922) for reporting on the Ku Klux Klan.[22]

In 1899, after the death of Isaac Swope, who never recovered mentally from the failure of his business, Ida Swope moved to Berlin to live with her daughters.[23] Golda, Gerard’s elder sister, had been living in the German capital since 1885 and was married to a banker named Albert Cohn. They had three sons, who—probably with the help of Herbert and Gerard—fled to Shanghai, Australia, and Brazil years later when the Nazis came to power.[24] Gerard Swope’s youngest sister Julia, called Dolly, married Herbert Lewin, a German broker, who died while swimming in the North Sea when she was pregnant. Their only child, a son, was killed in a motorcycle accident just after his graduation from college.[25] Her brothers helped Dolly to find a job as a receptionist at the American Embassy in Berlin. She also was committed to the “Soziale Arbeitsgemeinschaft Berlin-Ost,” a neighborhood social settlement based on English and American models, with which Gerard also was associated.[26] In 1939, Dolly Swope returned to the United States. She died in 1941 of a heart attack in New York’s Grand Central Terminal, while waiting for a train to visit Gerard.[27]

In 1891 Gerard Swope entered Massachusetts Institute of Technology (MIT) to study electrical engineering. At MIT, he also attended classes on philosophy and lectures on business law by Louis D. Brandeis, the later Supreme Court Justice and a critic of large companies. After his graduation in 1895, Swope joined the Western Electric Company in Chicago. He had already worked as a helper at the General Electric Company’s repair shop at the Chicago World’s Fair, in the summer of 1893, for “a dollar a day.” Later, the saying “Gerard Swope, helper at $1 a day” became popular in GE corporate communications and in media reports on Swope.[28] At the Western Electric shops, located near the West Side of Chicago, he started out as a workman dismantling old machinery.[29] After doing some accounting work, he switched to the engineering department, where he designed motors and generators. When he arranged a large order for a sale of electrical equipment to a new factory in his hometown of St. Louis, he was sent to the commercial department of the company in Chicago. His switch to the field of sales was the most important step of his career. “As a matter of fact,” Swope concluded in an oral history interview conducted by historian Harlan B. Phillips in 1959, “looking back on things I was a much better commercial person than I was an engineer at any time.”[30]

Besides working for Western Electric Company, Swope was invited as an engineer to teach classes in English, algebra and electricity at Hull House, which was located close to the Western Electric shop. This social settlement was situated “in the worst part of the slum region of Chicago.”[31] It had been founded in 1889 by Jane Addams (1860–1935), the settlement worker, philosopher and leader of women’s suffrage.[32] Addams was perhaps the most prominent non-presidential reformer of the Progressive era. She was described as “America’s most useful citizen” by Theodore Roosevelt and was the first American woman to receive the Nobel Peace Prize (in 1931). Among Swope’s students at Hull House were workers and foremen of the Western Electric plant, and immigrants who lived in the neighborhood.[33] Besides teaching, he organized a men’s club for discussion on various current topics, and in 1897 he decided to spend a year living at Hull House. “I never would have been aware of the problem of the poor, the working classes, if it hadn’t been for this experience at Hull House,” Swope later said. “Living at Hull House with the associations formed there both within and outside, increased my knowledge of and stimulated my interest in the hard way of life of the poor, the immigrant and the educated, and the way they were exploited in sweat shops and in politics. Since that time, I have never ceased to be interested in civic affairs, in the organizations of the workingman, in the insecurities of life, unemployment and old age, and laws that would guard against them.”[34]

At Hull House Gerard Swope met Mary Dayton Hill of New Jersey, who also worked there as a teacher and social worker. They became a couple and were married in an informal wedding on Mackinac Island, Michigan, in the summer of 1901, with Addams serving as maid of honor. Mary Swope gave birth to five children: the first, Henrietta Hill (1902–1980), became an astronomer whose career ultimately took her to the Mount Wilson Observatory in Pasadena, California. One of the most successful American star finders, she discovered the locations of more than 2,000 stars. Mary Swope’s first son, Isaac (b. 1904), was named after Gerard’s father and later studied at MIT as well. He was followed by twins Gerard, Jr. (1905–1979) and David (1905–1980). The youngest son, John (1908–1979), was a pilot and freelance photographer for Life magazine and Hollywood.[35]

Business Development

In 1899, Swope was sent to head the office of Western Electric in St. Louis, and then moved to the Cincinnati office. In 1906, Swope, then 33, returned to the headquarters of Western Electric in Chicago, where he continued working as assistant supervisor of all branch houses and sales manager for electrical machinery. This new management position meant a major increase in work, and he saw his family only on weekends. During this period, Swope encountered his own limitations. He sought to cure what he described as a “nervous depression,” a complete breakdown in his health through overwork, by reducing his overtime, by visiting field offices and by hiking in Yellowstone Park, the Great Lakes and the Canadian wilderness.[36] In 1908, Swope became General Sales Manager of Western Electric, which had become the largest American electrical manufacturing company.[37] That same year the headquarters were relocated to New York and Swope moved with his family to New Jersey. In 1909, Western Electric (which was controlled by AT&T) sold its power apparatus division to General Electric. “That was one reason why I eventually left Western Electric,” Swope, who had led the division, later explained.[38]

After successfully negotiating several important deals, including one on patents for an automatic telephone system, Swope was assigned as a trouble shooter to examine all foreign business transactions. He visited eight European countries within ten weeks to analyze the company’s European business and recommended its reorganization. Afterwards he started to direct all Western Electric works outside the United States, in addition to his operational tasks.[39] But not until 1913 Swope was given charge of all foreign business; he organized the International Western Electric Company as its vice president.[40] He also became vice president and director of Western Electric.[41]

In 1913, Swope was focusing on European telephone markets and working on a deal with German electrical company Siemens & Halske. At the outbreak of World War I he was in Germany and then moved on to Switzerland, Italy, France, Belgium and finally to London. Over the following years he tried to reorganize the foreign business of Western Electric, which had factories in the major warring countries and even had a plant in Belgium seized and turned over to military production.[42] In 1917, he switched to the Far East and began traveling to Japan and China, where he established the first business transaction for the company.[43] Asia became increasingly important in his work and a topic of private interest.[44] When the United States entered the war, Swope was visiting Japan. After his return home in December 1917 he was asked to join the War Department in Washington, D.C. Swope worked as a director of purchase, storage and traffic under the command of General George W. Goethals (1858–1928), builder of the Panama Canal. Goethals was a member of the War Industries Board, headed by Bernard M. Baruch, which tried to increase the defense effort of private industry through price fixing and the standardization of production.[45] As a businessman in a military structure, Swope’s task was to speed up production in the factories. “The work in Washington was kindred to what I had been doing for Western Electric. It was different kinds of stuff, to be sure,” Swope remarked, “but mine was a coordinating job, putting harder drive behind our productive effort.”[46] Swope proposed major structural changes in the military supply chain which remained in use until World War II.[47]

After World War I, Swope was offered a new position at General Electric by the then- chairman of the board, Charles A. Coffin (1844–1926), cofounder and first president of the company. The rival company had long been interested in hiring Swope to organize its whole foreign business based on his outstanding accomplishments at Western Electric. At GE, he was given the responsibility of organizing and leading a newly formed subsidiary, the International General Electric Company (IGE), as its president. Perhaps because of his experience at Western Electric, Swope rejected a further offer to become vice president of GE, in order to, in his own words, keep a “certain amount of independence.”[48] He demanded full responsibility and wanted to be independent in handling all business outside the U.S. and in choosing the staff and board of directors.[49] As president of IGE, Swope dealt with expanding the foreign business in Europe and Asia. “What General Electric wanted,” Swope said, “was an international business, outlets for their own production… Certainly it would be to the advantage of General Electric, as well as these foreign countries, to spread the know-how. Moreover, if any new inventions were made in these countries matters were arranged so that General Electric would gain exclusive rights in the United States and we, in turn, would grant them exclusive rights to our inventions in their countries.”[50]

Gerard Swope’s career as president of General Electric began in 1922, when he was elected chief executive by the board of directors on May 16. Swope was forty-nine at the time. Owen D. Young (1874–1962), the company’s legal counsel, had recommended him for this position, and was elected chairman of the board on the same occasion. Young described their relationship as that of “captain and navigator”; they were also nicknamed “Mr. Outside” (Young) and “Mr. Inside” (Swope).[51] Swope immediately started to focus the company on the electrification of the home.[52] It was believed that an increase in electrical appliances for the home would lead to an increase in demand for electricity, which would lead to an increasing demand for generators and other equipment produced by GE. The best-selling consumer item turned out to be the refrigerator. In 1923, GE began to promote rural electrification, especially for farms.[53] It also continued to develop radio technology and business, after having founded the Radio Cooperation of America (RCA) in 1919.

Following an advertising and publicity conference initiated by Swope in 1922, the company started to reshape its public image by establishing GE as a single trademark for all of its products.[54] The development of a new “corporate design” had been successfully accomplished by the German firm AEG between 1907 and 1914.[55] Swope had previously planned a similar strategy for Western Electric in 1911.[56] The GE campaign was developed by the then-unknown advertising pioneer Bruce F. Barton (1886–1967).[57] Between 1922 and 1930 the advertising budget of GE was increased by six hundred percent and the corporation sponsored advertising campaigns designed “to develop an Electrical Consciousness.”[58]

One of Swope’s key passions was labor relations. He claimed to be inspired by a workers’ self-initiative during the recession of 1921, when employees provided one percent of their weekly wages to a relief fund for unemployed colleagues. “This struck me as a fine instance of fellow human feeling,” he later recalled, “and really gave me the thought that if we were ever to come to some method of ameliorating the hardships of unemployment all of the people who were working would be glad to help those who were less fortunate, and especially if at the same time they saw the company, as such, would cooperate and contribute.”[59] After his election as president of GE, Swope made an intensive study of manufacturing methods and the company’s labor relations. “I am interested in everything that pertains to the increased efficiency of this organization,” Swope wrote, “and one of the greatest things that management has got to do today is to make our human relation more efficient. What we have to consider are the hours of labor, conditions under which they labor, and the compensation they receive.”[60]

In 1923, the “G.E. Employees Securities Corporation” was founded to manage a fund with GE employees’ shares. But this new company was also allowed to invest in shares of companies other than GE. Two years before, GE employees had received shares that dropped significantly in value the following year. This new strategy aimed to minimize the fund’s exposure to risk.[61] According to Swope biographer David Loth, the Securities Corporation eventually became one of the largest investment funds in the United States and the biggest single shareholder of General Electric.[62] Higher paid employees could receive company-guaranteed mortgages to build their own homes. Paid vacations were introduced for workers with more than ten years of service for the company.

In 1925, Swope proposed an unemployment insurance plan for managers and employees of General Electric. For him, the concept of unemployment insurance was part of a strategy to tackle unemployment, which also consisted of measures for “Stabilization of Employment.”[63] Swope finally introduced it for 45,000 employees during the Depression in the summer of 1930, while 4,500 others got a job guarantee for fifty weeks. Labor historian Irving Bernstein characterized it as “the most carefully thought-out company scheme and much the largest.”[64] Other companies followed the example of GE and New York’s governor, Franklin D. Roosevelt, praised it. Swope was also “an eager advocate” for old-age pensions.[65]

Foreign expansion was an important element of Swope’s strategy as head of GE. In 1924, GE participated in organizing an international incandescent lamp cartel called Phoebus. Phoebus was based in Geneva, Switzerland and included all major lamp producing companies outside North America.[66] The members of the cartel intended to regulate the world lamp market by negotiating patent-licensing agreements, production rights, division of markets, standardization and quality of products.[67] During the interwar years, the Phoebus cartel embraced three-fourths of the world’s electric lamp production.[68] GE was not a formal member of Phoebus, to avoid a conflict with antitrust legislation in the United States, but its participation strengthened relationships with European manufacturers.[69] Most importantly, GE decided not to sell bulbs in Europe and could in return protect its own business interests in the bigger American market.[70] In 1930, Swope joined executives from the world’s other major electrical companies at IGE’s European headquarters in Paris to negotiate the International Notification and Compensation Agreement (INCA). The members of the INCA formed a cartel for the distribution of electrical equipment based on exchanging information on major international projects and sharing information about bids in advance. The winner of the bid then had to compensate the other companies.[71]

Swope and Young aimed for GE to amass a worldwide presence in the electrical industry by purchasing stakes in electrical companies scattered from Europe to Japan.[72] The company hoped to stabilize the electrical industry, especially in Europe, and to establish better conditions for exporting GE products.[73] Part of the strategy of GE in the interwar years was also to support the merger of smaller companies with bigger units and expand its financial participation in foreign companies, aiming to exert a major influence on international development.[74] At first Swope tried to develop the business in Asia (particularly Japan and China) by (re)negotiating contracts; he then extended his efforts to Europe. There, he was involved in the reorganization of the British, French and German electrical industries, which had lost their dominant position on the global market after World War I and been overtaken by GE.[75]

Among IGE’s acquisitions were two important purchases in Germany in 1929. First, IGE acquired 15% of shares in a German venture called Osram. Osram, a subsidiary jointly established by Deutsche Glasglühlicht AG, AEG and Siemens & Halske, was the largest lamp producer in Europe and an important member of the Phoebus cartel. The formation of cartels had been an important part of business strategy of the German electrical industry prior to World War I.[76] Second, IGE purchased a minority interest of 25% of AEG shares and raised its holdings to 32% in 1932; this dropped between 1934 and 1945 to 18%.[77] While IGE expanded its influence as the single-largest shareholder of AEG, the crisis-ridden German company was interested in access to much-needed capital.[78] In 1929 Swope joined the supervisory board of AEG together with Owen D. Young and two other GE representatives.[79] The acquisition of shares, as in the cases of AEG or Osram, did not mean that GE exerted a major influence on the company policy. “This basic line of G.E.’s strategy, which was also stressed in negotiations with other companies,” historian Harm Schröter argues, “was designed to sustain the feeling of independence in the respective firm.”[80]

The Great Depression, however, soon produced crises for GE in both the United States and Germany. As the electrical industry was hit harder than others by the Great Depression between 1929 and 1933, losing 70 percent of its value, Swope intervened in vain at the White House, trying to convince President Herbert Hoover to invest in public works on a large scale, financed by the sale of U.S. bonds in 1930. Among his proposals were various federal housing programs.[81] In the spring of 1931, GE reduced the work week from forty-eight hours to forty, a limit that “later was adopted generally and has remained the standard,” as Swope remarked.[82] This measure was meant as a contribution in the fight against unemployment. In 1934, GE became the largest American enterprise to widen its profit sharing to encompass its entire workforce.[83] GE biographer John W. Hammond assessed the changes in the company's social policy as the most important achievement of the Swope and Young era.[84] Besides financial participation, Swope also supported a plan of representation of employees in all plants and advocated “a greater voice in management” for those “who are giving their lives to the business, their minds and their thoughts.”[85] Kim McQuaid has pointed out, however, that Swope “offered no ideas on how to integrate organized labor or governmental regulators into business affairs.”[86]

Job security for employees was the main starting point in the far-reaching proposal for “Stabilization of Industry” that Swope presented in New York City at a meeting of the National Electric Manufacturers’ Association in September 1931. At a time of crisis, Swope focused on industry and its role in securing or even creating jobs: “Industry exists basically for serving the needs of the people,” Swope declared in his paper, “and therefore production and consumption must be coordinated.”[87] He wanted industry to take the lead instead of government. His proposal, which came to be known as the “Swope plan,” consisted of two major elements. First, Swope proposed the establishment of old-age pensions and unemployment insurance for all industrial and commercial businesses in the United States, based on pension funds and life and disability insurance policies financed both by employees and employer. It was meant as a protection against a “psychology of fear,” which the employees “themselves help to provide.”[88] Secondly, he suggested the creation of trade associations for all companies with more than 50 employees. Under the Swope plan, they would regulate various topics ranging from business ethics or methods of accounting to the simplification and standardization of products and prices. Trade associations had been of great importance during World War I but were still a controversial concept.[89]

In designing his plan, Swope also drew on his experiences in the international arena to deal with economic crises at home. One source of inspiration with regard to the prominent role of trade associations was probably the German-Jewish industrialist and liberal politician Walther Rathenau (1867–1922), son of Emil Rathenau, founder of electrical company AEG. In 1892, AEG had established a foundation to support its female employees and, following American models, introduced industrial social workers for female employees in 1900. Then, in 1903, AEG founded one of the first kindergartens run by a public-private partnership. Walther Rathenau himself advocated a private pension fund and workers’ representation.[90] In 1915, Rathenau was involved in a successful reorganization of the entire resource management of the German war industry that combined private and state economic principles and was used as an example for the Allied war effort in World War I.[91] Confronted with a fundamental political crisis in Germany after the war and competing with other plans, Rathenau proposed an extensive reorganization of German economy, state and society as an alternative to communism as well as to a deregulated capitalism.[92] But his ideas went far beyond his experiences with AEG’s corporate social policy. First among Rathenau’s models was the American trust, but, calling for a specifically German path of change, he wanted to transform it into a “social trust” by a far-reaching democratization.[93] In his design of a “new economy,” Rathenau believed trade associations should work like autonomous syndicates actively regulated by the state.[94] “Economy is no longer a matter for the individual, but a matter of all,” Rathenau argued.[95] He hammered out numerous writings with programmatic titles such as “Of Things to Come” (1917), “The New Economy” (1918), “The New State,” “Autonomous Economy,” and “The New Society” (all 1919). Although some of his publications reached high circulation, Rathenau’s economic program was not taken up and he was later assassinated in 1922, by a right-wing paramilitary group, while serving as minister of foreign affairs.

Like Rathenau, Swope believed trade associations could play a key role in organizing industry and business.[96] The Swope plan’s opponents, including President Hoover, criticized it as unconstitutional, others as a socialist, fascist or monopolistic approach.[97] Hoover, although supporting the idea of trade associations in general, feared that the Swope Plan would lead to the formation of monopolies and cartels and economic stagnation.[98] Serious concerns also came from close colleagues and friends. Owen D. Young apparently hesitated to offer his full support of the Swope plan.[99] He asked several employees to check the enforceability of the different elements of the Swope plan. In an internal memorandum, Philip D. Reed, later chosen by Swope as his successor as president of GE, analyzed the possibilities for action by Congress. He doubted that Congress would approve proposals such as the establishment of trade associations.[100] In a later opinion concerning the establishment of a National Economic Council, Young argued against any form of “regimentation of industry” and advocated a more “loosely organized” and only temporary operating organization.[101] Thomas W. Lamont, a partner in the investment bank J.P. Morgan & Co. who was an influential advisor to both American businesses working abroad and the American foreign policy establishment, forwarded Swope a memorandum drafted by an employee. The memorandum critiqued the Swope plan as “a very considerable further extension of paternalism and socialism” and sharply criticized its proposals for the stabilization of prices and production, declaring they were “a plea for centralized economic planning” and would be “a revolutionary change in our economic and social system and in our philosophy of government.” The analysis concluded that the demands of the Swope plan would abolish individual freedom of enterprise and free competition, which were the conditions for prosperity and overcoming depression.[102] Commentators from the Left, on the other hand, complained the plan would not go far enough.[103]

Nevertheless, Swope started to promote his plan. Between autumn 1931 and spring 1934 he delivered twenty-three speeches and statements on “stabilization of industry.” He authored numerous articles, gave interviews and organized a wide distribution of his proposal to representatives in Congress, newspapers, banks, companies and universities.[104] He argued that most of his proposals were neither new nor outside common law. Trade associations would promote lower costs and lower selling prices as proven advantages of standardization and mass production, which in turn would build a larger group of consumers. They also would help prevent overproduction, and in turn a limitation in production would lead to the conservation of limited natural resources.[105] The most important feature of his plan was the stabilization of employment: “Employment, even though part time,” he said before the U.S. House of Representatives Labor Committee, “preserves moral and self-respect, and reduces the amount of relief, the funds for which are becoming increasingly harder to raise and their distribution ever more difficult.”[106]

It is striking that both Swope and Walther Rathenau shared similar experiences as company leaders of the modern electrical industry and as organizers in the war industry during World War I.[107] Based on their experiences, Swope and Rathenau seemed to have almost the same views on a more rational organization of production and distribution. But unlike Rathenau, who was very disappointed by the role of German entrepreneurs and tended to present himself as not only a political but a spiritual leader, Swope did not see himself as an advocate of comprehensive social reorganization but rather of measures to restore industry and employment. The Swope plan was designed for a stable western democracy. Swope remained a businessman and insisted on an activist use of industrial policy as a mechanism for economic recovery and social change. Swope’s proposals stimulated the discussions and concept of the National Industry Recovery Act and the work of the National Recovery Agency (NRA), especially with regard to proposals such as work sharing and adjustment of wages.[108] When the NRA—which Swope never favored because it differed strongly from his own plan—lost support from business, Swope proposed its replacement with a new National Chamber of Commerce and Industry and trade associations.[109] Furthermore, Swope’s proposals about income security influenced the Social Security Act of 1935.[110]

When their joint leadership ended in 1939, Swope and Young left behind a very successful record, according to their successors: between 1922 and 1939, average sales rose from $200 million (or $2.6 billion in 2010 dollars) to more than $300 million (or $4.7 billion in 2010 dollars); investments from about $60 million to more than $140 million (or, in 2010 dollars, from $780 million to $2.2 billion); the average employee’s earnings went up from $1,400 to $1,900 (from $57,800 to $78,500 in 2010 dollars). The number of stockholders had increased eightfold from about 28,000 to more than 200,000 and included many educational and charitable institutions, as well as many women, suggesting the extent to which General Electric had become a “safe” investment for the American middle class.[111] Swope and Young had successfully led the company through the Great Depression and fundamentally transformed General Electric from the inside as well as in terms of its position in the economy and society.

Meanwhile, in Germany, General Electric’s ownership stake was more sharply criticized than any other American industrial investment, both in direct attacks by Siemens, the other electrical giant, and in nationalistic arguments appearing in the German press. A public debate on “Überfremdung” (“foreign infiltration”) occurred, and the Nazi Party demanded a boycott.[112] In 1930, Swope tried to urge Siemens to become more cooperative by buying debentures of Siemens & Halske from Dillon, Read & Co.[113] But he failed to push the rival companies, Siemens and AEG, towards a common policy or even a merger, which had been discussed by the two companies earlier.[114] In the late 1930s, GE mainly aimed to protect its own investments in AEG and Osram. In 1938, at the instigation of AEG, a contract on technical collaboration between AEG and GE was extended to the 1950s. According to AEG officials, GE would not have accepted such an agreement in the following years. Active influence on the company policy of AEG in the remainder of the Nazi period did not take place. In 1938, Swope and Young resigned their positions as members of AEG’s supervisory board, officially as part of their age-related withdrawal from active service.

But this move also has to be seen in connection with the anti-Semitic policy in Nazi Germany: in the same year when Swope left this position, the Nazis issued a new law which prohibited the membership of Jews in supervisory boards. Since 1933, AEG had been attacked as “Jewish AEG.” Due to pressure from the Nazi party, by 1938 most of AEG’s Jewish employees, numbering several hundred men and woman at all job levels, had left the company. Only a single Jewish member remained on the supervisory board, and only until 1939. A spectacular merger of AEG with the financing company “Gesellschaft für elektrische Unternehmungen” (Gesfürel) was carried out because the German-Jewish owners hoped to save their firm and themselves. For AEG, the merger with the most important finance company of the German electrical industry allowed the rehabilitation of its finances.[115] The successors of Swope and Young remained members of AEG’s supervisory board until 1941. When the United States entered World War II, all IGE stakes in German companies were treated as alien property in Nazi Germany. During the war, patent and trade agreements with AEG were suspended.[116] All of IGE’s foreign investments in Axis and enemy-occupied countries (approximately $66 million, or $880 million in 2010 dollars) were written off. In 1941, GE was confronted with an antitrust suit by the Department of Justice on the company’s dominant role in the world lamp market. Angry over this development, Swope stepped back from his activities in defense production.[117] The subject of the investigation was GE’s participation in the Phoebus cartel on the production and selling of incandescent lamps. The Phoebus cartel ceased to exist with the outbreak of World War II in 1939.[118] Due to the war and under pressure from the U.S. Army the case was not pursued, but it was resumed after 1945.[119]

World War II led Swope and Young—now aged seventy and sixty-eight—to return to GE as company leaders (1942–1944) while their successors served on the War Production Board. As the largest electrical manufacturing company, GE actively participated in the war effort by producing an unequaled range of military equipment for all branches. Between 1940 and 1945 more than $3 billion (or $37.2 billion in 2010 dollars) was invested in expanding production; half of the money was provided by the government, the other half by GE. Eleven new big plants were added to the thirty-four existing GE factories. Among the wide variety of war materiel produced in these factories were turbine generators and motors for the Navy’s battleships, components for torpedoes, and instruments and engines for airplanes. Scientists from the General Electric Research Laboratory contributed to the development of the atomic bomb.[120] The workforce rose from 76,000 to more than 170,000 employees at the end of the war. More than 50,000 workers, both men and women, who joined the army, had to be replaced. The company invested more than $80 million in training programs (or $1.07 billion in 2010 dollars).[121] When Swope and Young finally left office, some of their achievements were withdrawn; for example, profit sharing was abolished. After World War II, marketing executive and later GE vice-president Lemuel R. Boulware initiated a turn to a more aggressive “take it or leave it” bargaining policy towards the unions that became known as Boulwarism.[122]

Social Status, Networks, Family and Public Life

After reaching GE’s official retirement age of sixty-seven in 1939, Swope committed himself further to social causes. The experiences at Hull House remained a highlight in Swope’s career as well as in his private life. After leaving Hull House and Chicago, Gerard and Mary Swope committed themselves to social settlement work in St. Louis. In 1903, Mary gave weaving workshops for the women of the neighborhood and taught Irish, Russian and Italian immigrants, while Gerard headed committees for the establishment of playgrounds and public baths.[123] While living in New York City, Mary Hill Swope became involved in the Henry Street Visiting Nurse Service and Greenwich House, a New York settlement house. Gerard Swope served on its board of directors.[124] Engaged in pacifist movements prior to World War II, Mary Hill Swope was “a prominent member” of the Women’s International League for Peace and Freedom.[125] Gerard Swope served as a chairman of the Health Insurance Plan of Greater New York and headed the New York City Housing Authority (from December 1939), which under his chairmanship started to build large apartment buildings for middle-income families in Brooklyn and Queens such as the Vladeck, East River and Fort Greene Houses. In 1949, Swope became chairman of the American Institute of Pacific Relations.[126]

Swope’s immigrant German ancestry seemed to be of secondary importance to his career with regards to the influence of immigrant networks. Some authors emphasize the impact of cultural habits, characterizing Swope as a typical German or Prussian in his working methods. Herbert B. Swope biographer Alfred Allan Lewis argued that his mother had affected Gerard in this respect by implanting “the tired Teutonic structures… [of] obedience, sobriety, diligence, industry, and punctuality” in him.[127] Kim McQuaid regarded such attributes as decisive for Swope’s career, as his “combination of Prussian efficiency and merchandising knowhow” would have made him “a logical candidate for president.”[128] But the significance of such attributes seems to be very speculative. In Swope’s accessible records, there is no indication of whether “Prussian” or “German” virtues had a special meaning for him. He described his family as traditionally German.[129] Swope himself wanted to be seen as a hardworking model of the American Dream, deeply concerned about the well-being of company and community.

Swope had a strong belief in and special awareness of the role of immigration. In a memorial lecture about engineer Charles P. Steinmetz (1865–1923), Swope underscored the impact of immigration on American society and economy. Steinmetz was a political immigrant from Breslau, then in Germany, who strongly believed in the potential of modern technology and production for the benefit of all and became a famous mathematician at GE. “One cannot help but feel stimulated by the thought that the open door and the freedom of opportunity that was in this case offered to an exceptionally gifted man, characterizes the United States and its institutions,” Swope stressed. “The country has long had a conception and a tradition of freedom and has offered an equality of opportunity to men and women for their development, which on the whole has brought about a fairer distribution of material wealth and livelihood than in any other country in the history of the world.”[130]

In religious terms, Swope was raised in a liberal Jewish family. His parents, Isaac and Ida, both from Orthodox families, joined the Reform Synagogue of St. Louis. “In our family there wasn’t any very strict religious life,” Gerard Swope recalled in 1955. “My father and mother were Jews, but reformed, and our life at home wasn’t at all in any way religious or ceremonial.”[131] According to him, Judaism also played no role in his career, and there is no indication that he was ever confronted with open anti-Semitism at home as executives of the German AEG were even before 1933.[132] Asked by a young man seeking advice if there was anti-Semitism in engineering education and industry in the United States, he answered that there were many engineering students with Jewish parents. He also wrote that he had not heard about any anti-Semitism in industry and “surely not in the General Electric Company.”[133]

Swope was deeply concerned about the rise to power of the Nazis. His sister Golda, who lived in Berlin, died before Hitler took power, but in 1933 his younger sister Dolly and three nephews were still living in Berlin.[134] He became involved on a general scale: shortly after the start of World War II, he approached Franklin D. Roosevelt with a plan to help emigrants from Europe. Swope delivered his plan in the early summer of 1940, when the Nazis had just occupied France and the Netherlands and were preparing for the war with Britain. In a memorandum from June 1940, he proposed that the United States should buy British, French and Dutch possessions in Central and South America “at a fair price, placing the proceeds as a credit for these countries against which they might purchase supplies of all kinds in the United States. We should offer to sell these islands or lands to the neighboring Central and South American countries on the same terms at which we purchased them, but allowing these South and Central American countries to pay for them over a period of time… These foreign possessions contain… approximately 237,000 square miles or something over 150 million acres and can be developed as the homeland of thousands of people now being driven from Europe.”[135] This unknown plan can be added to other, somewhat controversial proposals by other German and American Jewish businessmen to find a way to rescue European Jews. The German-Jewish banker Max Warburg tried to negotiate an emigration of German Jews to Palestine. Bernard M. Baruch proposed settling Jewish refugees in Africa.[136] By presenting detailed proposals which also incorporated ideas for financing mass emigration, they all hoped to bypass restrictive international and U.S. refugee policy.

For his social commitment, civic service and his achievements in business, Gerard Swope received numerous awards such as the Order of the Rising Sun from Japan (1917), the Distinguished Service Medal from the United States (1918), Chevalier of the French Legion of Honor (1918), the Gold Medal of the National Institute of Social Sciences (1932), the Hoover Medal (1933) and honorary degrees from Union College, Rutgers, Colgate and Washington universities and Stevens Institute of Technology in the United States, and Israel’s Technion. In 1948, he rejected the award “Honorary Commander of the Most Excellent Order of the British Empire,” because of the British position towards Israel. “In spite of the repeated recommendations of several Commissions of your own Government, of an American-British Commission, and then finally of the action of the United Nations of a separate State in Palestine,” Swope wrote to the British ambassador in the United States, “the vacillating, reprehensible, and non-constructive attitude of your Government has left me without respect for its position.”[137]

His relationship to Israel can be best illustrated in his last project, his support for the Technion Institute of Technology, located on Mount Carmel in Haifa, which had been founded in 1924 on the initiative of German-Jewish philanthropists.[138] According to Technion, Gerard Swope was its “greatest American benefactor.”[139] During his first and only trip to Israel in May 1957, Swope met David Ben-Gurion (1886–1973), Israel’s first prime minister and founder of the Israeli Workers’ Party. Six months later, on November 20, 1957, Gerard Swope died at age eighty-four of pneumonia in New York City; his wife, Mary, had died in 1955

Swope left the bulk of his fortune of $7 million (or $54.2 million in 2010 dollars) solely to Technion for “educational and scientific purposes.” The money was used for four chairs, a student loan fund, the construction of residential homes and a program to promote research by Technion graduates at MIT.[140] This exceptional legacy can be read as a strong expression of support for a modern Jewish state and strong belief in good education, a crucial starting point for the unique career of Gerard Swope in America.

Conclusion

As the son of German-Jewish immigrants, Gerard Swope was confronted with the chances and problems of immigrant life in various ways: he experienced the rise and fall of his father’s business; as a teacher in Hull House, he was confronted with social problems of poor immigrants in Chicago; at General Electric, he witnessed the results of successful integration for both the individual and the company, in the example of engineer Charles Steinmetz; and, during World War II, he looked for a way to support emigration from Nazi-dominated Europe. Gerard Swope himself went far beyond an immigrant perspective. However, the basic values of freedom and equality of opportunity that he earlier had underlined as decisive characteristics of American policies towards immigration were ideals he embraced throughout his own career.

The specific factors influencing his career were good education, professional skills and experience in different areas, combined with a liberal attitude and social commitment. This mix determined his views on the role of a modern manager balancing the demands of employees, shareholders and customers. In a time of crisis, he wanted private industry to become an active participant in assuring social and economic stability for all, based on his experiences at GE. His unique achievement was to shift human or labor relations to the center of industrial policy in the age of mass production, at a point in economic history when change had previously been connected with methods of technical production. This enabled him to implement social progress beyond all expectations.

Notes