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Prophet of Prosperity

A second look at a great American capitalist.

Jun 25, 2007, Vol. 12, No. 39 • By EDWIN M. YODER JR.
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Mellon

An American Life

by David Cannadine

Knopf, 800 pp., $35

The portrayal of American worthies in the binary mode, as either paragons or demons, may originate with Parson Weems. But even now our estimates of the eminent are often caricature, with Daumier and Nast as the presiding muses. That is one of many reasons David Cannadine's resolutely rounded portrait of Andrew Mellon is a significant addition to the canon of American biography.

Mellon's name is now associated with a great charitable foundation, as well as the National Gallery of Art, whose core collection--and the great building on the Mall that houses it--was his personal gift to the nation. But there was a time when Mellon was viewed, through lenses darkened by Depression-era disillusion, as one of the exemplary rascals of the Roaring Twenties. Accordingly, Cannadine's measured portrait will disappoint those who cling to that view, as well as those who apotheosize the Pittsburgh banker and perennial Treasury secretary (1921-32) as the faultless prophet of prosperity. Cannadine has no patience with the binary approach, which he rightly dismisses as unhistorical.

Mellon's father, "Judge" Thomas Mellon, was a protestant Irish immigrant to western Pennsylvania who imported the Calvinist attitudes that, somewhat secularized, marked his son. Andrew Mellon led a melancholy and reclusive private life, seared by an unhappy divorce and distant relationships with his two children: a personal aspect that receives a degree of attention exceeding its intrinsic interest here. For most readers of this very long book, the compelling interest of Mellon's life lies in his career as public man, featuring his decade as secretary of the Treasury under three Republican presidents.

Cannadine's examination of the Treasury years may surprise those who assume that a rock-ribbed Republican, nurtured in banking, mining, and manufacture, and fiercely hostile to unionism, would reflexively pursue the self-interested policies we too often expect of tycoons raised to public office. Mellon was, indeed, the first apostle of supply-side economics: Steep cuts in marginal income tax rates. What is less clearly understood is Mellon's rationale.

He was himself, after John D. Rockefeller and his fellow townsman Andrew Carnegie, the nation's third largest payer of income taxes. He saw them as his duty. But he argued that at a time when few Americans paid any income tax--the tax in its post-16th Amendment incarnation was only a decade or so old--rich men were driven by high marginal rates (up to 50 percent on the last dollar) to shelter capital in tax-exempt government securities. Lower marginal rates, the core of the "Mellon Plan," would, he insisted, tilt investment towards equities, nourishing industrial capitalization and, perhaps, boosting net revenues. Sen. James Couzens of Michigan, a progressive Republican and a fellow millionaire, trenchantly disputed Mellon's analysis, and the "battle of the millionaires" became a star turn of fiscal debate in the mid-twenties. Mellon finally got his tax reform bill in 1926, but the argument goes on. It was a point in Mellon's favor when it was revealed that Couzens had heavily invested his own fortune in tax-exempts.

The most engaging pages of this book, humanizing Mellon's notoriously austere and taciturn personality, concern his art collection, his supervision of the building of the great beaux arts Federal Triangle in Washington, and, far from least, the Justice Department's assault on him in the mid-1930s as an alleged tax delinquent--an episode that shows Franklin D. Roosevelt and Atty. Gen. Homer Cummings at their pettiest. The essence of the charge was that Mellon, by dubious gifts to his charitable foundation, had drastically underpaid his 1931-32 taxes. With interest and penalties, the bill assessed came to more than $3 million.

Cannadine suggests that Mellon was targeted as a very visible representative of the "malefactors of great wealth" reviled by FDR's cousin Theodore in the Progressive era, and identified by FDR himself as "money changers" who must be driven from "the temple of American civilization." Cannadine has written well of the vicissitudes of the British aristocracy, and is perhaps more attuned than a native biographer to the class overtones of this paradigmatic clash. It pitted old money (FDR's family fortune was founded in the old China trade) against the upstart 19th- and 20th-century millionaires.

A piquant sidelight was that, on New Year's Eve 1936, with the tax case still pending, Mellon came by invitation to the White House for tea to be thanked by FDR for the gift of his art collection to the nation. As usual, FDR was so disarming that Mellon left marveling at what a nice man he was! But it must have diluted the charm when Mellon discovered, if he did, that while he had paid tens of thousands in income tax in the years in which he was accused of evasion, FDR himself had paid all of $31.31 on an income of nearly $20,000. After a long and heavily publicized process before the Treasury's Board of Tax Appeals, Mellon was vindicated, though not soon enough to savor the victory. He died of uremia and bronchial pneumonia at 82 in August 1937, some months before the vindication.

Mellon's munificent gift of art to the nation has been much chronicled, never better than in S.N. Behrman's delightful sketch Duveen half-a-century ago, a zesty supplement to Cannadine's hurried and impatient handling of Mellon's great late-life collecting passion. Sir Joseph, later Baron, Duveen was a transatlantic art dealer of Dutch-Jewish ancestry and wiles whose theory it was that new money in America and old art in Europe needed bringing together--by himself. A notable cartoon of a later day depicts Duveen as a huge, predatory cat assailing a tiny, timid bird (Mellon) in a hotel elevator.

The implication, however, is as misleading as the anecdote it is based on; for Mellon was as shrewd a bargainer as Duveen was a salesman. Duveen, however, managed many of Mellon's signal acquisitions, and by 1930, Mellon's purchases of Old Masters had piled up so rapidly (and awkwardly, since there was a Depression on) that many were secreted in the basement of Washington's Corcoran Gallery.

Behrman's book originated as a saucy New Yorker profile and remains delicious reading, although its rarely understated storytelling needs a bit of salting. Behrman's main defect was that he gave credence to the legend that Mellon's gift was an after-the-fact tax dodge that saved him from criminal prosecution. In fact, there was ample evidence--enunciated with panache by Duveen himself at Mellon's "trial"--that the donor had planned his gift for a decade. Whatever else may be said, Mellon was as generous as he was dutiful.

The late Paul Mellon commissioned this warts-and-all portrait of the father with whom he had a troubled relationship; and Cannadine doesn't scant the negative side. Andrew Mellon, with many of the super-rich of his time, had no sympathy for the as-yet-unrecognized legal claims of labor; and it hardly helped the family reputation when his brother Richard, custodian of the Pittsburgh assets, declined to make it clear in a congressional hearing that machine guns would be out of place in the hands of company "police" keeping order in the Pennsylvania coal fields.

Andrew Mellon seems to have had only the slightest sense of what today we call "conflict of interest." Throughout his tenure at the Treasury he was active in the management of his personal fortune. Mellon was as blinded as other contemporaries (of all persuasions) by the mystique of classical economics. He believed that no official tools could alleviate the huge distress of the Great Depression, even with a third or more of the labor force jobless, 5,000 banks in failure, and tens of thousands of homeowners facing foreclosure.

The Depression became the debacle of an era, the graveyard of the rigid theory of governmental noninterventionism Mellon championed, and far from incidentally, the source of a lingering disfavor. The Mellon worldview had been overtaken by the more adventurous spirit of the New Deal, and by John Maynard Keynes's withering dissection of classical microeconomics in the General Theory of Employment, Interest, and Money (1936). Keynes's most famous words--that "practical men . . . are the slaves of some defunct economist"--might have been Andrew Mellon's public epitaph.

Cannadine, a fine historian of British origin, misses a few American political subtleties, occasionally confuses names, and entertains more than one stark misconception: for instance, that Chief Justice Charles Evans Hughes was the leader of the anti-New Deal Supreme Court faction before 1937. And he and this reviewer have very different conceptions of F. Scott Fitzgerald's most famous creation, Jay Gatsby. Still, the overriding point of this massive and impressive chronicle is that no figure of Andrew Mellon's magnitude can or should be dismissed as the stuff of caricature or cartoon. David Cannadine has proved his point.

Edwin M. Yoder Jr.'s novel, Lions at Lamb House, will be published in September.