The New Deal: General Johnson, Fascism, and anti-Fascism

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Hugh Samuel Johnson (January 28, 1935).
In March 1933, Franklin D. Roosevelt was sworn in as President of the United States. In the months before, he assembled a team of economic advisors and university professors to develop his economic program that would become the New Deal. Among them was Bernard Baruch and his collaborator, General Hugh S. Johnson.

Johnson first came in contact with Bernard M. Baruch during the First World War as part of the War Industries Board. They were tasked with ensuring production and delivery of war materials to Europe. Baruch became a mentor to Johnson and they would collaborate often in the post-war years. In the years leading up to the Great Depression, both Johnson and Baruch became increasingly alarmed at the condition of the American economy.

" . . . [Baruch] laid down for me the organic chart for our efforts. It was a prophecy of what was to come and it proved as accurate as a mariner's chartthe inflationary boom, the inevitable collapse, the unbearable burden of the debt structure, the foolishness of foreign loans, their eventual repudiation, and the coming of the deluge. He did not attempt to time it. He said that could not be done, but he gave me two certain criteria.

     'Watch automobile sales and the construction figuresthis whole false fabric is built on the unprecedent conjunction of these two big credit-inflated boomswhen they slide, the whole structure will collapse.' "
Despite knowing how the collapse would come, they did not know when. As the 1928 Presidential elections began ramping up, Baruch and Johnson feared a Hoover Presidency would compound the problem.

"We both felt that Mr. Hoover's plan to maintain prosperity by foreign trade financed by loans to 'backward and crippled countries' could lead only to disaster. My studies showed that, in spite of fabulous and inflated profits to a few large groupings, the bulk of manufacture in the United States was operating in the red, and that very certainly, at the height of our "prosperity," no less than three million employables were without work. Even then the farm situation was desperate and the whole tenor of the economic thought on which Mr. Hoover seemed to rely indicated a belief that anything done to help agriculture would handicap industry in expanding export trade. The latter expansion Mr. Hoover believed (and frequently said) was absolutely essential to the maintenance of domestic prosperity."
This lead to Baruch and Johnson (and later George Peek) to actively aid the Al Smith campaign for President. When Smith lost to Hoover, Baruch and Johnson reverted back to private life. The 1929 collapse came and the start of, what Johnson called, "the Great American Deluge" began. Within months, Baruch and Johnson began studying the collapse to find a solution to the crisis.

In June 1932, Johnson wrote and distributed a Fascist Program among close colleagues which he believed would solve the crisis. He signed it with the alias "Muscleinny" (Mussolini) and included 8 reasons for dissolving Congress and a list of Acts to aid national recovery.

Reason No. 1: In the greatest crisis in our history, the Constitutional government was rendered futile by the approaching elections. Influenced by selfish interests and organized minorities, it frittered away five months while our country descended to the edge of destitution.
General Reasons: The combination of these causes threatened immediately ruin to our country. It was a ridiculous if ghastly paradox. It was entirely avoidable and unnecessary. In this crisis, and especially in this political year, divided powers were wholly inadequate. The sole cure was singleness of control and immediate action.
Act No. I: The President, Vice President, and all members of Congress have been sent to a very pleasant archipelago not under American jurisdiction. . . . The Constitution will, in all things, be respected, with the single exception that these decrees will be treated as duly enacted laws. . . . In other words, not one single power has been assumed that did not reside in Congress and the President. They could have done all things necessary to salvation without thisbut they did not and apparently would not.
Johnson and Baruch attended the Democratic National Convention in Chicago. When Roosevelt was nominated, Baruch paid the Party $50,000 to include Johnson in FDR's Brain Trust.

After Roosevelt was elected, Johnson began collaborating with Rexford Tugwell on the early drafts of the National Industrial Recovery Act. Tugwell spoke briefly with Roosevelt and came away with the impression that they had complete authority to draft a bill, but Roosevelt's impression was that they were simply doing research. When Frances Perkins met with Johnson and Tugwell, she quickly realized their plan was similar to others that had been proposed.

"At the earliest opportunity I reported to the President that two fairly complete plans were being mapped out—one by Wagner and Jacobstein, the other by Tugwell and Johnson. They both rested on the idea of suspending the effect of the anti-trust laws in return for voluntary agreement by industries for fair competition, minimum wage levels, and maximum hours. I told him that the plans were not very different and both apparently had gotten around constitutional difficulties. The President asked Henry Wallace and me to get the two groups together. That was arranged, and the conferees met daily."

Both Perkins and Roosevelt realized early on that Johnson's plan concentrated a  great deal of power to whoever administered the program. They gradually included revisions that diffused power to several sources.

"[William Green] thought the bill could be used as a method for putting the labor unions out of business. General Johnson took the bill and redrafted it, incorporating Section 7A, which was meant to assure labor's right to collective bargaining. Written in general terms, 7A was a problem in semantics. It was a set of words to suit labor leaders, William Green in particular. When they discovered later what could be done under 7A, they called it 'labor's Magna Charta.'"
At a later cabinet meeting, Roosevelt decided to split the administration of the public works programs and industrial recovery into two separate administrations. Johnson had expected to head both but they decided to give Public Works to Harold L. Ickes.

"It was pointed out that the administrative task of Title II would require close and constant timing. No chances could be taken with it. It could become a pork barrel; it could become corrupt; it could be extremely wasteful of the people's money. It must be administered with the utmost of careful controls, of integrity, and of cautious, businesslike legal procedures. . . . the President told him, as agreeably, I think, as it could have been told, that in talking it over with the cabinet it had seemed to them all that to ask any one man to administer both Title I and Title II was putting an inhuman burden upon that man; that to direct and develop industrial recovery under Title I was tough enough; and that he had come to the conclusion that he should lift the burden of the more pedestrian but difficult and time consuming job of public works under Title II from his shoulders; and that he had just decided to appoint Ickes to administer Title II."
Despite this Johnson still gravitated toward dictatorial administration of the National Recovery Administration and Perkins and Roosevelt continued to split his responsibilities to other sources.

"He planned to give his personal approval to each code. Then he would recommend it to the President, who would sign it. It would become the over-all pattern for that industry, entitling those who signed the agreement to be exempted from the more difficult sections of the antitrust law. He expected to have his own legal counsel, economists, and statisticians, and to make up his mind and proceed to the President without advice or approval of the other, older government agencies and without public hearings or publication of proposed codes in advance. . . . When this was reported to the President, he saw the hazard of such procedure. He persuaded rather than directed General Johnson to utilize the economic and statistical bureaus of the Departments of Commerce and Labor and to consult the Attorney General systematically on the ground of economy and integration of government activities. Incidentally, this process gave two cabinet officers knowledge of what was going on before it was too late to check monopolistic or undemocratic trends and to inform the President of dangers and problems ahead."
It was widely known within the Brain Trust and in the FDR Cabinet that Johnson favored a Fascistic approach to the NIRA. Johnson gave Perkins and other Cabinet officials a copy of Raffaello Viglione's The Corporate State, which laid out the Corporatist system in Fascist Italy.

The Corporatist System that Johnson was building had simply replaced the Italian Corporations with Johnson's own "Code Authorities." Each Authority would manage a sector of Industry while Labor and the Employers would collectively manage that industry to insure fair treatment of workers and fair competition between businesses. As in Italy, the Authorities would (ideally) manage themselves without the need for government advisement. Johnson didn't think there was a need for Labor and Employers to be advising him. When Perkins recommended he do so, Johnson proposed having one Labor Representative sit on his right and a Businessman sit on his left. Johnson eventually agreed to a Labor Advisory Board under the condition that Perkins have total control of the committee and appointments to it. There was also the inclusion of the Industrial Advisory Board and the Consumers Advisory board. The LAB and IAB were designed to be entirely independent of Johnson's Recovery Administration but would advise his NRA and the code-making process. Board members in the IAB and LAB were chosen by Industry or Labor professionals rather than by the NRA, Congress, or the Representative labor/industrial Authorities. The members of the CAB were chosen by the NRA.

Further insistence from Perkins and Roosevelt pushed Johnson for further labor representation through the inclusion of Section 7(a), which guaranteed collective bargaining and union organizing. To emulate Italy's Labor Courts, Johnson established the National Labor Board which placed Industrial Representatives and Labor Representatives on a board to settle labor disputes. Senator Robert F. Wagner was chosen as Chairman of the Labor Board. Later, as it became clearer that Section 7(a) and much of the National Industrial Recovery Act would be ruled unconstitutional, Wagner began drafting a new bill that would retain much of 7(a) and re-emerge as the National Labor Relations Board.


Communist Reaction

Shortly after the NIRA passed Congress, the Communist Party and Earl Browder lead the charge against the New Deal. Following the Comintern's strategy, Browder initially portrayed the Democrats as the Social Fascists who, as had happened in Germany, misinformed and betrayed the workers' interests to the bourgeoisie. The alliance of the Socialist Party and the American Federation of Labor with Roosevelt and the Democrats was a sign that they were leading the workers to a Fascist Corporate State.

". . . But the fascist direction in which the Roosevelt policies are carrying the United States is becoming clear to the whole world. Nowhere is this more manifest than in the efforts to merge the reformist American Federation of Labor into the machinery of government, under the avowed banner of the fascist conception of the 'corporate state,' prohibition of strikes, compulsory arbitration, governmental fixing of wages, and even control of the inner life of the trade unions. For the edification of the masses this was spoken of as a 'partnership of capital and labor, together with the government.' Under this program the A. F. of L. is given governmental support and even financial assistance, and a determined effort is made to control and eventually choke off the strike movement, by driving the workers into the A. F. of L. where it is hoped the official leadership will be able to bring the masses under control.
Browder was the Chairman of the Communist Party of the United States, and he was responsible for propagating the Comintern strategy in America. The Communist International during the period defined Fascism as "the open, terroristic dictatorship of the most reactionary, most chauvinist and most imperialist elements of finance capital." This interpretation came from Lenin's writings on Imperialism and the development of Finance Capital as a product of banking and industrial monopolization. Chauvinism was a reference to the French Revolution and the Napoleon loyalist Nicolas Chauvin. The term was often used to describe excessive loyalty to the nation or aristocracy, and Browder used it to describe Roosevelt's militarization and rearmament programs.

"The development of Roosevelt's program is a striking illustration of the fact that there is no Chinese wall between democracy and fascism. Roosevelt operates with all of the arts of 'democratic' rule, with an emphasized liberal and social-demagogic cover, quite a contrast with Hoover who was an outspokenly reactionary. Yet behind this smoke screen, Roosevelt is carrying out more thoroughly, more brutally than Hoover, the capitalist attack against the living standards of the masses and the sharpest national chauvinism in foreign relations."
Browder also believed that, despite the strengthening of labor laws, the New Deal was largely concentrating power and capital in the hands of the big capitalists rather than the workers or small capitalists.

"With the cry, 'take the Government out of the hands of Wall Street,' Roosevelt is carrying through the greatest drive for extending trustification and monopoly, exterminating independent producers and small capitalists, and establishing the power of finance capital more thoroughly than ever before. He has turned the public treasury into the pockets of the big capitalists. While Hoover gave $300,000,000 in a year, Roosevelt has given $5,000,000,000 in three months. As for the extra-legal developments of fascism, we should remember that it is precisely in the South which is the basis of power of the Democratic Party, that the Ku Klux Klan originated and is now being revived. It is the South that for generations has given lie to all Democratic pretensions of liberalism by its brutal lynching, disfranchisement and Jim-Crowing of the Negro masses, and upon this basis has reduced the standard of living of the white workers in the South far below that of the rest of the country. . . . It is clear that fascism already finds much of its work done in America and more of it is being done by Roosevelt."
 The Comintern's "Social Fascism" line placed the Social Democratic Parties and the American Democrats in league with the German National Socialists and Italian Fascists. Their belief being that their misguided attempt at saving Democracy from Fascism was the equivalent of sabotaging the labor movement for the interests of finance capitalism. The Stalin-era Comintern relayed to international parties that Fascism and Democracy were capitalist institutions that would inherently crush any proletarian movement.

"What are the ideas, the misconceptions, with which the social-fascists confuse and disarm the workers? First, is the idea that fascism is the opposite of capitalist democracy, and this democracy is therefore the means of combating and defeating fascism. This false idea serves a double purpose. By means of counterposing 'democracy against dictatorship,' it tries to identify in the worker's mind the fascist dictatorship with the proletarian dictatorship in the Soviet Union, and thus cause the worker to reject the road of revolution. At the same time, this slogan is used to hide the fact that capitalist democracy is not the enemy, but the mother of fascism; that it is not the destroyer, but the creator of fascism. It uses the truth that fascism destroys democracy, to propagate the falsehood that democracy will also destroy fascism. Thus does the Socialist Party and trade union officialdom, to the extent that the workers follow them, tie the working class to the chariot wheels of a capitalist democracy which is being transformed into fascism, paralyze their resistance, deliver them over to fascism bound and helpless."
Browder and the Comintern believed that the situation in America under the Roosevelt Administration was following a similar path to the one that had preceded the rise of Hitler in Germany. In much of the Comintern's literature of the era, the German or Austrian Social Democrats like Bruening, Schleicher or Kautsky were Social Fascists, who were fighting to secure Bourgeois Democracy from both Fascism and Communism. The base of support for Democracy was the middle class capitalists, but the base of support for Fascism was finance capital. Browder applied this formula to Roosevelt.

"In Germany this meant support to Hindenburg, Bruening, Von Papen, Schleicher; and their 'emergency decrees' directed against the workers. In the United States, it is support to Roosevelt, LaGuardia, the N.R.A., and the 'emergency decrees' of the strike-breaking labor boards, arbitration boards, 'code authorities,' etc. In each case, the slogan is 'choose the lesser evil'; in each case, the workers are asked to 'fight against fascism' by supporting the men and measures that are introducing fascism. . . . [the second misconception] is the idea that fascism represents, not finance capital, but rather a 'revolutionary movement' directed against both finance capital and against the working class by the impoverished middle classes. This idea helps finance capital to get and keep control over these middle classes, strengthens their illusions, divides the workers from them and prevents the workers from setting themselves the task of winning over the middle classes to support of the proletarian revolution, causes the workers to support their misleaders in their alliance with finance capital 'against fascism.' In Germany, this idea was, concretely, alliance with Hindenburg against Hitler; in Austria, with Dollfuss against the Nazis; in the United States with Roosevelt 'against Wall Street.'"
The CPUSA openly and repeatedly claimed that the policies Roosevelt was implementing in America was the same as those Hitler had implemented in Germany.

"A part of [America's] drive toward war is the rising wave of fascist violence against workers, farmers and the discontented middle classes. Concentration camps already exist in Georgia, hailed by Hitler himself as following the Nazi model. National Guards have been called out in twelve States in the past months to shoot down strikers and demonstrators. More than fifty workers have been murdered, hundreds wounded, thousands sent to prison. In California, the so-called vigilantes have burned, destroyed, tortured, maimed, openly violated every item on the Bill of Rights, on the call of General Hugh Johnson, speaking for the Washington administration, and with the active cooperation of local police and officialdom, on the best model of Hitler."
Browder and the CPUSA quickly called for open resistance against the New Deal and American Fascism. The strategy Browder laid out for the Party was aimed at winning the workers away from the American Federation of Labor, the Socialist Party, and the Democratic Party, and agitating against the New Deal and National Recovery Administration. Browder laid plain that he did not differentiate between Hitler and Roosevelt.

"Comrades, we can take up this task with greater confidence when we see how our brother German Party has met more serious task than this, and has overcome a thousand-fold more difficulties than we have, even in the conditions under which they are working in Germany at the present time. If the German Communist Party, with such determinism and heroism, succeeds in meeting the conditions of struggle against the Hitler regime, certainly we also will be able to meet the offensive of the Roosevelt New Deal and establish our Party as a mass leader in America."


Fascist Reaction

In May 1933, Hitler had already laid the foundation of the Corporate State in Germany. After the May Day celebrations orchestrated by Joseph Goebbels, all labor unions were smashed and replaced with the German Labor Front (Deutsche Arbeitsfront). When the NIRA passed Congress in June, Hitler and other leading National Socialists were quick to embrace it as a grand corporatist and authoritarian experiment.

In July 1933, Hitler was interviewed by Anne O'Hare McCormick on Germany's recovery efforts. Hitler stated, without reservations, that recovery was impeded by bureaucracy and parliament, and complimented the New Deal.

"Parliament has obstructed my reforms. It has disappeared also. In Germany and elsewhere parliaments have proved themselves utterly incapable of dealing with the preposterous developments of the last ten years. . . . I admire Premiere Mussolini because during many years he has carried out his plans regardless of ridicule and obstruction. I have sympathy with President Roosevelt because he marches straight toward his objective over Congress, over lobbies, over stubborn bureaucracies."
McCormick explicitly asked Hitler if Germany would ever revert back to a parliament. He replied,

"Yes, but with a Parliament of another and better type, in which representation will be on a technical basis. Such a development is the Italian corporative State."
In 1934, Hitler sent a brief letter (through Ambassador Dodd) to Roosevelt expressing his admiration of the New Deal.

"The Chancellor of the Reich begs Ambassador Dood to be good enough to transmit his greetings to President Roosevelt and at the same time to state that he sincerely congratulates President Roosevelt for his heroic efforts in the interests of the American people. The President's successful battle against economic distress is being followed by the entire German people with interest and admiration. The Chancellor is in accord with the President in view that the virtue of duty, readiness for sacrifice, and discipline should dominate the entire people. These moral demands which the President places before every individual citizens of the United States, are also the quintessence of the German State philosophy which finds its expression in the slogan 'The Public Weal Transcends the Interests of the Individual'."
In the first year of the New Deal, both Hitler and Mussolini were optimistic that the American experiment was similar to the corporatist experiment in Germany and Italy. Mussolini had great interest in the New Deal, and often sent diplomats to America to study the new system. Italy's Minister of Finance, Guido Jung, and Ambassador Augusto Rosso often met with Roosevelt and his Brain Trust. Roosevelt's Ambassador, Breckinridge Long, also had great respect for the Italian system.

Despite Mussolini's optimism, he did not believe the New Deal went far enough. In February 1934, he told Italy:

The American experiment will be followed with much attention. Even in the United States the intervention of the State in economic affairs has been direct; sometimes it assumes peremptory forms. Those codes are nothing but collective contracts, which the President obliges one and all to accept.
Mussolini believed that the basis of the New Deal, although influenced by Fascism, was still deeply entrenched with liberal ideals. He noted in his book review of Roosevelt's "Looking Forward" that the Americans had acknowledged that economic liberalism (lassaiz faire) was increasingly incompatible with public well-being, but that their refusal to believe that the depression was a crisis of the capitalist system rather than a crisis in the system, would be the New Deal's downfall. Despite this, he had hope that cooperation could lead the United States away from liberalism and towards Fascism. He praised Roosevelt's proposal in "Looking Forward" for an economic Bill of Rights, and encouraged the abandonment of the dogmas of economic liberalism. He praised state intervention in the economy as a step in the right direction.

In October 1934, Roosevelt sent Rexford Tugwell, another admirer of Mussolini, to Italy to study the corporatist system. Tugwell noted in his diary that Fascist regimentation was beneficial.

"I find Italy doing many of the things which seem to me necessary. The good people here too are worried about the budget etc. Mussolini, certainly has the same people opposed to him as FDR has. But he has the press controlled so that they cannot scream lies at him daily. And he has a compact and disciplined nation although it lacks resources."
In Germany, Robert Ley and the members of DAF began solidifying the corporatist system into German Law.  The Leipzig Agreement was introduced in March 1935, and established various Employer and Worker organizations within DAF. Ley also introduced a number of codes to insure fair competition between businesses.

Robert A. Brady, an economist and collaborator of Frances Perkins during the first New Deal era, noted in The German Spirit and Structure of German Fascism that the Leipzig agreement largely resembled the National Recovery Administration, from its structure down to its laws.

"It requires no discerning eye to see that this series of major assumptions and guiding rules for the conduct of business-as-usual under Nazi domination is identical in type. content, and tone with that long familiar to American readers who have kept up with the trends of legislation and court decisions in the United States having to do with "fair competition" and "trust-busting." More significant still, the issues, the methods of handling them, and the conclusions reached are those employed in the drafting and attempted enforcement of the N.R.A. Codes."
By 1935, a rift developed between Italy and the United States. The end of Johnson's National Recovery Administration, imposed by a Supreme Court ruling, lead to the abandonment of corporatist policies in America. The Italian invasion of Ethiopia also greatly reduced Italy's prestige among Americans. Prior to the invasion, American perception of Mussolini was that of a peacemaker who would lead Europe away from aggression.

Post-1935, Mussolini and Hitler became critical of the New Deal. Robert Ley, Hitler's administrator of the German Labor Front and architect of German corporatism, wrote:

"American workers know nothing about such social benefits as old age care, care for the handicapped or accident and health insurance. Roosevelt’s New Deal has attempted to copy the German model. The copy is a bad one. The renowned social apostle is bluffing here as everywhere else. Despite complicated regulations, only a small number of workers enjoy a decent retirement. Insurance against accidents, industries mishaps,and illness simply does not exist."
In 1942, as the United States entered the war, Robert Ley blamed the failure of the New Deal on Roosevelt's "chaotic" government policies.

He assumed office at the same time as Hitler’s seizure of power. From the first days of his presidency, he was overshadowed by the Führer. His New Deal, it is true, attempted to imitate numerous of the Führer’s policies. But what led to success by us was condemned to failure in America, because Roosevelt is a man without particular gifts, and because of the particular conditions prevailing in America’s model democracy. His plans were not designed for a particular people or race, but rather only for a population consisting of the most varied racial elements from throughout the world. His plans were condemned to failure, for he never had the ability to lead. The only chance was dictatorial measures.


Decline

In 1935, the Supreme Court ruled that the Industrial Codes of the NIRA were equivalent to laws. As a result, the Code Authorities were deemed unconstitutional on the ground that only Congress has the power to enact such laws. A year before a decision had been reached on the legality of the NIRA, Hugh Johnson had been ousted for his drunken escapades and a very public affair with one of his secretaries. He went on to write an autobiography, The Blue Eagle: From Egg to Earth, which detailed his life as an administrator and organizer within the Army, his friendship with Bernard Baruch, and his work for the N.R.A.

Earl Browder's attempt at rallying an anti-Fascist movement against the New Deal was undermined by the Soviet Union's policy changes. The "Popular Front" line urged the CPUSA to abandon "Social Fascism" and to begin collaborating with the Socialist Party against Fascism abroad. With the development of Civil War in Spain, the Communist International encouraged mobilization against Spanish Fascism. By 1939, the line changed once again to peace, since the Molotov-Ribbentrop Non-Aggression Pact was signed between the Fascists and the Communists. When Hitler betrayed the Pact, the Comintern once again mobilized for war. By 1945, the wartime alliance between the United States and the Soviet Union led Browder to falsely believe that a new era of cooperation between the two nations during peacetime was possible. Browder encouraged the CPUSA to embrace cooperation but the Communist International was quick to denounce the idea. By 1946, Earl Browder was accused of Marxist revisionism and expelled from the party.

After the 1935 invasion of Ethiopia by Fascist Italy, American approval for Mussolini and Fascism drastically shifted away. Mussolini, who was once hailed as a peacemaker and a future leader of post-WWI Europe, was derided for defying the League of Nations and utilizing chemical weapons against Ethiopia. Many Fascist intellectuals within Mussolini's government marked this moment as when all traces of their ideals were destroyed.

Robert Ley would go on to shamelessly exploit the workers that his corporatist organization was supposed to protect. DAF funds and worker savings were funneled for Ley's personal use, and many of his administrators followed suit. Corruption was rampant, but Ley was protected by the Nazi Party apparatus.

Conclusion

The economist Robert Brady put it bluntly in 1937:

"The American N.R.A. program was, in short, a 'fascist' program in idea, in principle, andin the mainin structure. What differences there were between the two lie, in the main, in variation in types of industry most vitally affected, in the scale of industrial operations, and in the degree to which powers could be enforced. In these respects the principle contrast are found in the fact that the preceding organizations in Germany were much more highly developed, the plans were more consistently and ruthlessly carried through, and the state lent its authority more wholeheartedly to the task. Germany's 'New Deal,' in other words, came earlier because centralization had proceeded further in that country."


Sources

The Roosevelt I Knew - Frances Perkins

Communism in the United States - Earl Browder

The Spirit and Structure of German Fascism - Robert A. Brady

Roosevelt Betrays America - Robert Ley

America as a Perversion of European Culture - Robert Ley

Hitler Seeks Jobs for All Germans - Anne O'Hare McCormick. New York Times. July 10, 1933.

Roosevelt and the System - Benito Mussolini. July 7, 1933.

Speech on the 13th Year for the Corporative State. Benito Mussolini. January 12, 1934.

What America Wants? - Benito Mussolini. August 17, 1934.

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