The Plot Against American Democracy

In an excerpt from Gangsters of Capitalism, Jonathan M. Katz details how the authors of the Depression-era “Business Plot” aimed to take power away from FDR and stop his “socialist” New Deal

Smedley Butler knew a coup when he smelled one. He had been involved in many himself. He had overthrown governments and protected “friendly” client ones around the world on behalf of some of the same U.S. bankers, lawyers, and businessmen apparently now looking for his help.

For 33 years and four months Butler had been a United States Marine, a veteran of nearly every overseas conflict back to the war against Spain in 1898. Respected by his peers, beloved by his men, he was known as “The Fighting Hell-Devil Marine,” “Old Gimlet Eye,” “The Leatherneck’s Friend,” and the famous “Fighting Quaker” of the Devil Dogs. Bestselling books had been written about him. Hollywood adored him. President Roosevelt’s cousin, the late Theodore himself, was said to have called Butler “the ideal American soldier.” Over the course of his career, he had received the Army and Navy Distinguished Service medals, the French Ordre de l’Étoile Noir, and, in the distinction that would ensure his place in the Marine Corps pantheon, the Medal of Honor — twice.

Butler knew what most Americans did not: that in all those years, he and his Marines had destroyed democracies and helped put into power the Hitlers and Mussolinis of Latin America, dictators like the Dominican Republic’s Rafael Trujillo and Nicaragua’s soon-to-be leader Anastasio Somoza — men who would employ violent repression and their U.S.-created militaries to protect American investments and their own power. He had done so on behalf of moneyed interests like City Bank, J. P. Morgan, and the Wall Street financier Grayson M.P. Murphy.

And now a bond salesman, who worked for Murphy, was pitching Butler on a domestic operation that set off the old veteran’s alarm bells. The bond salesman was Gerald C. MacGuire, a 37-year-old Navy veteran with a head Butler thought looked like a cannonball. MacGuire had been pursuing Butler relentlessly throughout 1933 and 1934, starting with visits to the Butler’s converted farmhouse on Philadelphia’s Main Line. In Newark, where Butler was attending the reunion of a National Guard division, MacGuire showed up at his hotel room and tossed a wad of cash on the bed — $18,000, he said. In early 1934, Butler had received a series of postcards from MacGuire, sent from the hotspots of fascist Europe, including Hitler’s Berlin.

In August 1934, MacGuire called Butler from Philadelphia and asked to meet. Butler suggested an abandoned café at the back of the lobby of the Bellevue-Stratford Hotel.

First MacGuire recounted all he had seen in Europe. He’d learned that Mussolini and Hitler were able to stay in power because they kept soldiers on their payrolls in various ways. “But that setup would not suit us at all,” the businessman opined.

But in France, MacGuire had “found just exactly the organization we’re going to have.” Called the Croix de Feu, or Fiery Cross, it was like a more militant version of the American Legion: an association of French World War veterans and paramilitaries. On Feb. 6, 1934 — six weeks before MacGuire arrived — the Croix de Feu had taken part in a riot of mainly far-right and fascist groups that had tried to storm the French legislature. The insurrection was stopped by police; at least 15 people, mostly rioters, were killed. But in the aftermath, France’s center-left prime minister had been forced to resign in favor of a conservative.

MacGuire had attended a meeting of the Croix de Feu in Paris. It was the sort of “super-organization” he believed Americans could get behind — especially with a beloved war hero like Butler at the helm.

Then he made his proposal: The Marine would lead half a million veterans in a march on Washington, blending the Croix de Feu’s assault on the French legislature with the March on Rome that had put Mussolini’s Fascisti in power in Italy a decade earlier. They would be financed and armed by some of the most powerful corporations in America — including DuPont, the nation’s biggest manufacturer of explosives and synthetic materials.

The purpose of the action was to stop Roosevelt’s New Deal, the president’s program to end the Great Depression, which one of the millionaire du Pont brothers deemed “nothing more or less than the Socialistic doctrine called by another name.” Butler’s veteran army, MacGuire explained, would pressure the president to appoint a new secretary of state, or “secretary of general affairs,” who would take on the executive powers of government. If Roosevelt went along, he would be allowed to remain as a figurehead, like the king of Italy. Otherwise, he would be forced to resign, placing the new super-secretary in the White House.

Butler recognized this immediately as a coup. He knew the people who were behind it. He had made a life in the overlapping seams of capital and empire, and he knew that the subversion of democracy by force had turned out to be a required part of the job he had chosen. “I spent most of my time being a high-class muscle man for big business, for Wall Street, and for the bankers,” Butler would write a year later. “In short, I was a racketeer for capitalism.”

And Butler knew another thing that most Americans didn’t: how much they would suffer if anyone did to their democracy what he had done to so many others across the globe.

“Now, about this super-organization,” MacGuire asked the general. “Would you be interested in heading it?”

“I am interested in it, but I do not know about heading it,” Butler told the bond salesman, as he resolved to report everything he had learned to Congress. “I am very greatly interested in it, because, you know, Jerry, my interest is, my one hobby is, maintaining a democracy. If you get these 500,000 soldiers advocating anything smelling of fascism, I am going to get 500,000 more and lick the hell out of you, and we will have a real war right at home.”

Eight decades after he publicly revealed his conversations about what became known as the Business Plot, Smedley Butler is no longer a household name. A few history buffs — and a not-inconsiderable number of conspiracy-theory enthusiasts — remember him for his whistleblowing of the alleged fascist coup. Another repository of his memory is kept among modern-day Marines, who learn one detail of his life in boot camp — the two Medals of Honor — and to sing his name along with those of his legendary Marine contemporaries, Dan Daly and Lewis “Chesty” Puller, in a running cadence about devotion to the Corps: “It was good for Smedley Butler/And it’s good enough for me.”

I first encountered the other side of Butler’s legacy in Haiti, after I moved there to be the correspondent for the Associated Press. To Haitians, Butler is no hero. He is remembered by scholars there as the most mechan — corrupt or evil — of the Marines. He helped lead the U.S. invasion of that republic in 1915 and played a singular role in setting up an occupation that lasted nearly two decades. Butler also instigated a system of forced labor, the corvée, in which Haitians were required to build hundreds of miles of roads for no pay, and were killed or jailed they did not comply. Haitians saw it for what it was: a form of slavery, enraging a people whose ancestors had freed themselves from enslavement and French colonialism over a century before.

Such facts do not make a dent in the mainstream narrative of U.S. history. Most Americans prefer to think of ourselves as plucky heroes: the rebels who topple the empire, not the storm troopers running its battle stations. U.S. textbooks — and more importantly the novels, video games, monuments, tourist sites, and films where most people encounter versions of American history — are more often about the Civil War or World War II, the struggles most easily framed in moral certitudes of right and wrong, and in which those fighting under the U.S. flag had the strongest claims to being on the side of good.

“Imperialism,” on the other hand, is a foreign-sounding word. It brings up images, if it brings any at all, of redcoats terrorizing Boston, or perhaps British officials in linen suits sipping gin and tonics in Bombay. The idea that the United States, a country founded in rebellion against empire, could have colonized and conquered other peoples seems anathema to everything we are taught America stands for.

And it is. It was no coincidence that thousands of young men like Smedley Butler were convinced to sign up for America’s first overseas war of empire on the promise of ending Spanish tyranny and imperialism in Cuba. Brought up as a Quaker on Philadelphia’s Main Line, Butler held on to principles of equality and fairness throughout his life, even as he fought to install and defend despotic regimes all over the world. That tension — between the ideal of the United States as a leading champion of democracy on the one hand and a leading destroyer of democracy on the other — remains the often unacknowledged fault line running through American politics today.

For some past leaders, there was never a tension at all. When the U.S. seized its first inhabited overseas colonies in 1898, some proudly wore the label. “I am, as I expected I would be, a pretty good imperialist,” Theodore Roosevelt mused to a British friend while on safari in East Africa in 1910. But as the costs of full-on annexation became clear, and control through influence and subterfuge became the modus operandi of U.S. empire, American leaders reverted seamlessly back to republican rhetoric.

The denial deepened during the Cold War. In 1955, the historian William Appleman Williams wrote, “One of the central themes of American historiography is that there is no American Empire.” It was essential for the conflict against the Soviet Union — “the Evil Empire,” as Ronald Reagan would call it — to heighten the supposed contrasts: They overthrew governments, we defended legitimate ones; they were expansionist, we went abroad only in defense of freedom.

As long as the United States seemed eternally ascendant, it was easy to tell ourselves, as Americans, that the global dominance of U.S. capital and the unparalleled reach of the U.S. military had been coincidences, or fate; that America’s rise as a cultural and economic superpower was just natural — a galaxy of individual choices, freely made, by a planet hungry for an endless supply of Marvel superheroes and the perfect salty crunch of McDonald’s fries.

But the illusion is fading. The myth of American invulnerability was shattered by the Sept. 11, 2001, attacks. The attempt to recover a sense of dominance resulted in the catastrophic “forever wars” launched in Afghanistan, Iraq, Libya, Syria, Somalia, and elsewhere. The deaths of well over half a million Americans in the coronavirus pandemic, and our seeming inability to halt or contend with the threats of climate change, are further reminders that we can neither accumulate nor consume our way out of a fragile and interconnected world.

As I looked through history to find the origins of the patterns of self-dealing and imperiousness that mark so much of American policy, I kept running into the Quaker Marine with the funny name. Smedley Butler’s military career started in the place where the United States’ overseas empire truly began, and the place that continues to symbolize the most egregious abuses of American power: Guantánamo Bay. His last overseas deployment, in China from 1927 to 1929, gave him a front-row seat to both the start of the civil war between the Communists and the Nationalists and the slowly materializing Japanese invasion that would ultimately open World War II.

In the years between, Butler blazed a path for U.S. empire, helping seize the Philippines and the land for the Panama Canal, and invading and helping plunder Honduras, Nicaragua, Haiti, the Dominican Republic, Mexico, and more. Butler was also a pioneer of the militarization of police: first spearheading the creation of client police forces across Latin America, then introducing those tactics to U.S. cities during a two-year stint running the Philadelphia police during Prohibition.

Yet Butler would spend the last decade of his life trying to keep the forces of tyranny and violence he had unleashed abroad from consuming the country he loved. He watched the rise of fascism in Europe with alarm. In 1935, Butler published a short book about the collusion between business and the armed forces called War Is a Racket. The warnings in that thin volume would be refined and amplified years later by his fellow general, turned president, Dwight Eisenhower, whose speechwriters would dub it the military-industrial complex.

Major General Smedley Butler bares plot by 'Fascists' in Newtown Square Pennsylvania.

Late in 1935, Butler would go further, declaring in a series of articles for a radical magazine: “Only the United Kingdom has beaten our record for square miles of territory acquired by military conquest. Our exploits against the American Indian, against the Filipinos, the Mexicans, and against Spain are on a par with the campaigns of Genghis Khan, the Japanese in Manchuria, and the African attack of Mussolini.”

Butler was not just throwing stones. In that article, he repeatedly called himself a racketeer — a gangster — and enumerated his crimes:

I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street.…

I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-12. I brought light to the Dominican Republic for American sugar interests in 1916. I helped make Honduras “right” for American fruit companies in 1903. In China, in 1927, I helped see to it that Standard Oil went its way unmolested.

During those years, I had, as the boys in the back room would say, a swell racket. I was rewarded with honors, medals, promotion. Looking back on it, I feel I might have given Al Capone a few hints. The best he could do was operate in three city districts. We Marines operated on three continents.

Butler was telling a messier story than the ones Americans like to hear about ourselves. But we ignore the past at our peril. Americans may not recognize the events Butler referred to in his confession, but America’s imperial history is well remembered in the places we invaded and conquered — where leaders and elites use it and shape it to their own ends. Nowhere is more poised to use its colonial past to its future advantage than China, once a moribund kingdom in which U.S. forces, twice led by Butler, intervened at will in the early 20th century. As they embark on their own imperial project across Asia, Africa, and Latin America, Chinese officials use their self-story of “national humiliation” to position themselves as an antidote to American control, finding willing audiences in countries grappling with their own histories of subjugation by the United States.

On Nov. 20, 1934, readers of the New York Post were startled by a headline: “Gen. Butler Accuses N.Y. Brokers of Plotting Dictatorship in U.S.; $3,000,000 Bid for Fascist Army Bared; Says He Was Asked to Lead 500,000 for Capital ‘Putsch’; U.S. Probing Charge.”

Smedley Butler revealed the Business Plot before a two-man panel of the Special House Committee on Un-American Activities. The executive session was held in the supper room of the New York City Bar Association on West 44th Street. Present were the committee chairman, John W. McCormack of Massachusetts, and vice chairman, Samuel Dickstein of New York.

For 30 minutes, Butler told the story, starting with the first visit of the bond salesman Gerald C. MacGuire to his house in Newtown Square in 1933.

Finally, Butler told the congressmen about his last meeting with MacGuire at the Bellevue-Stratford Hotel. At that meeting, Butler testified, MacGuire had told him to expect to see a powerful organization forming to back the putsch from behind the scenes. “He says: ‘You watch. In two or three weeks you will see it come out in the paper. There will be big fellows in it. This is to be the background of it. These are to be the villagers in the opera.’” The bond salesman told the Marine this group would advertise itself as a “society to maintain the Constitution.”

“And in about two weeks,” Butler told the congressmen, “the American Liberty League appeared, which was just about what he described it to be.”

The Liberty League was announced on Aug. 23, 1934, on the front page of The New York Times. The article quoted its founders’ claim that it was a “nonpartisan group” whose aim was to “combat radicalism, preserve property rights, uphold and preserve the Constitution.” Its real goal, other observers told the Times, was to oppose the New Deal and the taxes and controls it promised to impose on their fortunes.

Among the Liberty League’s principal founders was the multimillionaire Irénée du Pont, former president of the explosives and chemical manufacturing giant. Other backers included the head of General Motors, Alfred P. Sloan, as well as executives of Phillips Petroleum, Sun Oil, General Foods, and the McCann Erickson ad agency. The former Democratic presidential candidates Al Smith and John W. Davis — both of them foes of FDR, the latter counsel to J.P. Morgan & Co. — were among the League’s members as well. Its treasurer was MacGuire’s boss, Grayson Murphy.

Sitting beside Butler in the hearing room was the journalist who wrote the Post article, Paul Comly French. Knowing the committee might find his story hard to swallow — or easy to suppress — Butler had called on the reporter, whom he knew from his time running the Philadelphia police, to conduct his own investigation. French told the congressmen what MacGuire had told him: “We need a fascist government in this country, he insisted, to save the nation from the communists who want to tear it down and wreck all that we have built in America. The only men who have the patriotism to do it are the soldiers, and Smedley Butler is the ideal leader. He could organize a million men overnight.”

MacGuire, the journalist added, had “continually discussed the need of a man on a white horse, as he called it, a dictator who would come galloping in on his white horse. He said that was the only way to save the capitalistic system.”

Butler added one more enticing detail. MacGuire had told him that his group in the plot — presumably a clique headed by Grayson Murphy — was eager to have Butler lead the coup, but that “the Morgan interests” — that is, bankers or businessmen connected to J. P. Morgan & Co. — were against him. “The Morgan interests say you cannot be trusted, that you are too radical and so forth, that you are too much on the side of the little fellow,” he said the bond salesman had explained. They preferred a more authoritarian general: Douglas MacArthur.

All of these were, in essence, merely leads. The committee would have to investigate to make the case in full. What evidence was there to show that anyone beside MacGuire, and likely Murphy, had known about the plot? How far had the planning gone? Was Butler — or whoever would lead the coup — to be the “man on a white horse,” or were they simply to pave the way for the dictator who would “save the capitalistic system”?

But the committee’s investigation would be brief and conducted in an atmosphere of overweening incredulity. As soon as Butler’s allegations became public, the most powerful men in media did everything they could to cast doubt on them and the Marine. The New York Times fronted its story with the denials of the accused: Grayson M.P. Murphy called it “a fantasy.” “Perfect moonshine! Too unutterably ridiculous to comment upon!” exclaimed Thomas W. Lamont, the senior partner at J.P. Morgan & Co. “He’d better be damn careful,” said the ex-Army general and ex-FDR administration official Hugh S. Johnson, whom Butler said was mooted as a potential “secretary of general affairs.” “Nobody said a word to me about anything of the kind, and if they did, I’d throw them out the window.”

Douglas MacArthur called it “the best laugh story of the year.”

Time magazine lampooned the allegations in a satire headlined “Plot Without Plotters.” The writer imagined Butler on horseback, spurs clinking, as he led a column of half a million men and bankers up Pennsylvania Avenue. In an unsigned editorial, Adolph Ochs’ New York Times likened Butler to an early-20th-century Prussian con man.

There would only be one other witness of note before the committee. MacGuire spent three days testifying before McCormack and Dickstein, contradicting, then likely perjuring himself. He admitted having met the Croix de Feu in Paris, though he claimed it was in passing at a mass at Notre-Dame. The bond salesman also admitted having met many times with Butler — but insisted, implausibly, that it was Butler who told him he was involved with “some vigilante committee somewhere,” and that the bond salesman had tried to talk him out of it.

There was no further inquiry. The committee was disbanded at the end of 1934. McCormack argued, unpersuasively, that it was not necessary to subpoena Grayson Murphy because the committee already had “cold evidence linking him with this movement.”

“We did not want,” the future speaker of the House added, “to give him a chance to pose as an innocent victim.”

The committee’s final report was both complimentary to Butler and exceptionally vague:

In the last few weeks of the committee’s official life it received evidence showing that certain persons had made an attempt to establish a fascist organization in this country There is no question but that these attempts were discussed, were planned, and might have been placed in execution when and if the financial backers deemed it expedient.

The committee said it had “verified all the pertinent statements made by General Butler.” But it named no one directly in connection with the alleged coup.

Was there a Business Plot? In the absence of a full investigation, it is difficult to say. It seems MacGuire was convinced he was a front man for one. (He would not live long enough to reveal more: Four months after the hearings, the bond salesman died at the age of 37.)

It seems possible that at least some of the alleged principals’ denials were honest. MacGuire’s claim that all the members of the Liberty League were planning to back a coup against Roosevelt does not make it so. The incredulity with which men like Thomas Lamont and Douglas MacArthur greeted the story could be explained by the possibility that they had not heard of such a plan before Butler blew the whistle.

But it is equally plausible that, had Butler not come forward, or had MacGuire approached someone else, the coup or something like it might have been attempted. Several alleged in connection with the plot were avid fans of fascism. Lamont described himself as “something like a missionary” for Mussolini, as he made J.P. Morgan one of fascist Italy’s main overseas banking partners. The American Legion, an alleged source of manpower for the putsch, featured yearly convention greetings from “a wounded soldier in the Great War … his excellency, Benito Mussolini.” The capo del governo himself was invited to speak at the 1930 convention, until the invitation was rescinded amid protests from organized labor.

Hugh S. Johnson, Time’s 1933 Man of the Year, had lavishly praised the “shining name” of Mussolini and the fascist stato corporativo as models of anti-labor collectivism while running the New Deal’s short-lived National Recovery Administration. Johnson’s firing by FDR from the NRA in September 1934 was predicted by MacGuire, who told Butler the former Army general had “talked too damn much.” (Johnson would later help launch the Nazi-sympathizing America First Committee, though he soon took pains to distance himself from the hardcore antisemites in the group.)

Nothing lends more plausibility to the idea that a coup to sideline Roosevelt was at least discussed — and that Butler’s name was floated to lead it — than the likely involvement of MacGuire’s boss, the banker Grayson M.P. Murphy. The financier’s biography reads like a shadow version of Butler’s. Born in Philadelphia, he transferred to West Point during the war against Spain. Murphy then joined the Military Intelligence Division, running spy missions in the Philippines in 1902 and Panama in 1903. Then he entered the private sector, helping J.P. Morgan conduct “dollar diplomacy” in the Dominican Republic and Honduras. In 1920, Murphy toured war-ravaged Europe to make “intelligence estimates and establish a private intelligence network” with William J. “Wild Bill” Donovan — who would later lead the Office of Strategic Services, the forerunner to the CIA. This was the résumé of someone who, at the very least, knew his way around the planning of a coup.

Again, all of that is circumstantial evidence; none of it points definitively to a plan to overthrow the U.S. government. But it was enough to warrant further investigation. So why did no one look deeper at the time? Why was the idea that a president could be overthrown by a conspiracy of well-connected businessmen — and a few armed divisions led by a rabble-rousing general —  considered so ridiculous that the mere suggestion was met with peals of laughter across America?

It was because, for decades, Americans had been trained to react in just that way: by excusing, covering up, or simply laughing away all evidence that showed how many of those same people had been behind similar schemes all over the world. Butler had led troops on the bankers’ behalf to overthrow presidents in Nicaragua and Honduras, and gone on a spy run to investigate regime change on behalf of the oil companies in Mexico. He had risked his Marines’ lives for Standard Oil in China and worked with Murphy’s customs agents in an invasion that helped lead to a far-right dictatorship in the Dominican Republic. In Haiti, Butler had done what even the Croix de Feu and its French fascist allies could not: shut down a national assembly at gunpoint.

In his own country, in his own time, Smedley Butler drew a line. “My interest, my one hobby, is maintaining a democracy,” he told the bond salesman. Butler clung to an idea of America as a place where the whole of the people chose their leaders, the “little guy” got a fair shot against the powerful, and everyone could live free from tyranny. It was an idea that had never existed in practice for all, and seldom for most. As long as Americans refused to grasp the reality of what their country actually was — of what their soldiers and emissaries did with their money and in their name all over the world — the idea would remain a self-defeating fairy tale. Still, as long as that idea of America survived, there was a chance its promise might be realized.

The real danger, Butler knew, lay in that idea’s negation. If a faction gained power that exemplified the worst of America’s history and instincts — with a leader willing to use his capital and influence to destroy what semblance of democracy existed for his own ends — that faction could overwhelm the nation’s fragile institutions and send one of the most powerful empires the world had ever seen tumbling irretrievably into darkness.