management are recapitulated in some such fashion as we have attempted, the
result is bound to be an impressive sum.’ Stated another labor scholar (Slichter
1929 : 432 ), ‘modern personnel methods are one of the most ambitious social
experiments of the age.’
Over the next ten years, however, the prestige and inXuence of HRM, and
particularly the strategic ‘goodwill’ version associated with the Welfare Capitalist
movement, took a dramatic nose-dive. The Great Depression began in late 1929
and the economy went into a downward spiral until in early 1933 gross domestic
product had fallen 30 percent and one-quarter of the workforce was unemployed.
The economies of other countries followed suit and, indeed, Great Britain had
started the descent earlier.
Companies had no choice but to retrench and look for deep cost savings. The
term ‘rationalization’ became an oft-used phrase on both sides of the Atlantic.
Thus, smaller, less proWtable, or less progressive companiesWrst began to cut wages,
make lay-oVs, and disband their personnel programs. Then the pressures of
competition and imminent bankruptcy forced the others to fall in line, leading
even the vanguard of Welfare Capitalist companies to start liquidating labor
(Cohen 1990 ). Doing so of course meant losing their costly investment in employee
goodwill, but without proWts they could not aVord a progressive HRM program
and mass unemployment solved the turnover and selection problems and provided
a highly eVective alternative method for inducing hard work and compliant
behavior. Surveying the wreckage created by the Depression, Leiserson ( 1933 : 114 )
observed, ‘depression has undoneWfteen years or so of good personnel work.’
Presciently, he also noted, ‘labor is going to look to legislation and not to personnel
management for a solution of the unemployment problem.’
Public policy in the United States made a dramatic U-turn in order to solve the
economic debacle. The Roosevelt administration launched the New Deal in mid-
1933 and attempted to stimulate purchasing power by raising wages and household
income through minimum wage laws, social insurance programs (unemployment
and old age insurance), mass unionism, and public works spending. Government
intrusion into employment relations thus noticeably increased. Most worrisome to
business, the New Deal encouraged workers to join unions and they did so by the
millions. In the space ofWve years, union density almost doubled in the United
States and the bulk of the mass production industries were unionized. Suddenly,
unilateral employer determination of wages, conditions, and employment proced-
ures through HRM was replaced by joint determination through collective bar-
gaining. To help ensure that collective bargaining displaced the Welfare Capitalist
non-union HRM model, the employer-created representation plans were legally
banned (Kaufman 2000 a). The extent of change was even greater in some other
countries, such as Germany and Japan. Fascist governments came to power,
banished opposition political parties and trade unions, extended a tight grip of
state control over industry, and mobilized their economies for war.
26 bruce e. kaufman