Paul G. Hoffman

Architect of Foreign Aid

Alan R. Raucher

• Publisher: The University Press of Kentucky
• Year: 2021
• ISBN:
  9780813185545
• Topic: Politics & International Relations
• Subtopic: International Relations
• Index: Politics & International Relations

Having gained fame and success in business, Paul G. Hoffman went on to become involved in a wide range of public concerns. In this new and revealing biography Alan R. Raucher provides the first assessment of Hoffman's entire career, beginning with his rise to the presidency of Studebaker and his success in applying progressive management to lift it from bankruptcy to profitability. A firm believer in the automobile, Hoffman became known as a sales genius, as a promoter of the new human relations approach to labor management, and as the industry's apostle of automotive safety.

Raucher follows the movement of Hoffman's career into the broad public arena. Having developed a reputation as a progressive industrial statesman, Hoffman was a logical choice in 1948 to become the first administrator of the Marshall Plan, a key position in which he used economic foreign aid primarily to rebuild Western Europe in order to contain the spread of Communism. As the Cold War continued he came to regard economic foreign aid as a necessary sacrifice and dismissed all suggestions that the U.S. actually gave away billions of dollars in order to promote its own prosperity.

Hoffman became convinced that foreign aid could promote peace and prosperity, especially through economic development in the poorer countries. As the first president of the new Ford Foundation, as a confidant of President Eisenhower, and as a top official of the U.N. Secretariat from the late 1950s to the early 1970s, Hoffman continued to confront the problems of the emerging Third World in a career that sheds light on the rise of the powerful development establishment and on its attitudes and policies.

1 Making
A Million
Selling Cars

When he attracted national attention as a public figure, journalistic profiles sometimes suggested that Paul G. Hoffman (1891–1974) fit the much admired model of the self-made American businessman. But, a stickler for accuracy, he eventually set the record straight. He certainly did not start from humble origins in rural or small-town America to become a millionaire by his own efforts. More typical of successful businessmen of his time, he came from a background that gave him distinct advantages, both material and cultural.

Paul Hoffman was born in Chicago, the boom city of late-nineteenth-century America. Rebuilt and still growing after its terrible fire, the city of new skyscrapers was the intellectual and cultural capital of the Midwest, attracting to it professionals, writers, social crusaders, and other talented and ambitious individuals. With money from John D. Rockefeller, the University of Chicago rose to challenge the leading eastern universities. The Columbian Exposition, the World’s Fair hosted by the city in 1893, gave proof of its dynamism.

There was, of course, an underside to Chicago. Probably more than any other American city of that era, it was the site of often violent labor strife. Its rapid industrialization and modernization, plus large-scale immigration, seemed to exaggerate the conflict between labor and capital. Five years before Hoffman was born, Chicago won notoriety with the Haymarket riot and the conspiracy trial that followed. When he was three, the strike that began in nearby Pullman spread into a national railway strike, with Chicago the hub of the labor effort. A few years after that, the squalor and brutality of the city’s meatpacking industry became the focal point of exposés and public revulsion.

None of those seamy aspects of the city touched Paul Hoffman, however. He came from one of the city’s prosperous and prominent pioneer families, and from such origins he acquired the values and the self-confidence that always impressed those who knew him.

Paul’s grandfather, William Delos Hoffman, achieved success as the Illinois agent for a sewing machine company. He married the daughter of John Gray, wealthy and civic-minded developer of the Grayland subdivision, who served on Chicago’s first school board and then as sheriff of Cook County. By the 1880s Paul’s grandparents lived on the South Side of Chicago as one of the city’s wealthiest families. Mrs. Hoffman considered herself a great society lady and raised her son, George Delos Hoffman, without regard to expense. After he graduated from high school and learned German, he was sent not to college but to Germany to study the flute. But when he returned after a few years and married against his mother’s wishes, she disinherited him.¹

Nevertheless, George Delos Hoffman, Paul’s father, himself became quite well off as an inventor and businessman. Tinkering with steam engines and heating equipment, he invented an important control valve that was named after him. Around the turn of the century he organized and ran the Norwall Valve Company, though owning only a minority share. Early in 1907, when Norwall sold out to the American Radiator Company, one of the newly integrated corporations, he became a department head for that larger concern.²

As he prospered and Chicago changed, George Hoffman moved his family in 1892 to Western Springs. Paul, then a year old, grew up in that Chicago suburb in surroundings he described as “upper middle class.” The Hoffmans’ house, the biggest in town, even had its own ballroom. George Hoffman, a natural spender who could not resist new inventions, bought one of the first automobiles in town as well as the first washing machine and the first dishwasher—neither of which worked. His success, however, was not unmixed. George Hoffman’s income varied enormously, and the family did know the value of frugality and the need for saving.³

Serious-minded and usually preoccupied with his job and inventions, George Hoffman spent much time in his laboratory and traveling on business. He had no interest in trivial conversation or sociability, and when his children were young, he remained a remote figure with little time or affection for them. Yet he set an example that won their respect and instilled strong values. His son remembered him as a mild-mannered and patient perfectionist who never said anything derogatory about any individual. Without religion himself, he adhered to a personal code that forbade drinking, smoking, gambling, profanity, and gossip. He remained true to his solidly Republican family tradition and proud enough of his ancestry to join the Sons of the American Revolution, but George Hoffman always tolerated different and opposing views, even within his own family. Most important, he imparted to his children a respect for independent thought, progressive ideas, technological innovation, and modernity.⁴

Paul’s mother, Eleanor Lott Hoffman, a lighthearted woman with a good sense of humor, provided her children with maternal warmth, fun, and a cultured environment. A native of a small Illinois town, she had graduated from a private high school for girls, where she studied painting. She also shared with her husband a love of music, sometimes accompanying him on the piano when he played the flute. Although the family roles were fairly conventional, Mrs. Hoffman was not the silent and subservient wife; with a mind of her own and contrary to her husband’s practices, she was a devout Christian Scientist and a nonvoting supporter of the Democrats.⁵

As his mother’s favorite, Paul received both affection and encouragement to work hard in school. Her ambition for him and reassurance that he was bright no doubt accounted for some of his unbridled self-confidence. In any case, his teachers in public school found him a good student, especially in mathematics, history, and composition. To his mother’s delight, they skipped him two grades.⁶

The early independence encouraged by his family environment was tested during Paul’s last year in high school when American Radiator transferred his father to New York: Paul decided to finish school where he had started and stayed behind. Lonely but self-confident and adaptable, he moved from the family home in Western Springs to a boardinghouse in nearby La Grange until he graduated in 1907 from what became Lyons Township High School. Then sixteen years old, he rejoined the family in New York and worked that summer for $5 a week as an office boy for American Radiator.⁷

In 1908, when the family returned to Chicago, Paul entered the University of Chicago intending to become a lawyer. In what he recalled as a glorious time, he joined the Delta Tau Delta fraternity, where, thoroughly sociable, he enjoyed the friendships and give-and-take of living within a large group. That little dream world, where serious discussion about classes or public affairs never intruded, also gave him a smug sense of social superiority. Academically, however, his experience at the university proved disappointing. First of all, his pride was deflated when he failed the entrance examination in composition and had to take a noncredit course in writing. His other classes bored him, and at the end of the year his professors did not encourage him to return. Therefore, at the age of eighteen, eager to earn money, Paul Hoffman ended his formal education and found a job in Chicago.⁸

The very year that he made that decision, a completely unrelated development provided him with an important lesson that he carried the rest of his life: Architect and urban planner Daniel Burnham made public his Plan of Chicago, an elaborate scheme for building streets and parks. Besides the fact that the plan tacitly encouraged the use of automobiles, Hoffman may have seen in it a similarity to the efforts of his great-grandfather, John Gray, to have the city buy valuable land for Chicago’s public schools. In any case, from the 1930s on, he quoted Daniel Burnham’s credo: “Make no small plans, for they have no magic to stir the imagination of men. Make big plans.”⁹

A few years later, Paul’s father made his own big plans. The American Radiator Company provided the stimulus in 1911 by demoting him to district branch manager in southern California at about half his previous salary.¹⁰ Amid the shabbiness, instability, and unrestrained commercialism of that area, George Hoffman settled his family in the town that best suited his tastes and aspirations: Pasadena. Founded during the 1870s by middle-class residents of Indianapolis as an orange-growing area, Pasadena reflected the civic consciousness that midwesterners had carried from their distant New England roots. With many churches, good schools, libraries, associations for music and debate, and blue laws, this model of rectitude was already the place for the emerging elite when Hoffman arrived.¹¹ Understandably, he liked what he found there and decided to stay permanently, but not with American Radiator.

Ever an optimist, he borrowed a few thousand dollars from his friends, acquired a substantial credit line, and launched his own business in 1913. Drawing on his previous technical experience and familiarity with modern industrial enterprise, he founded a company to produce heating and plumbing parts. The Hoffman Specialty Manufacturing Corporation, located in Waterbury, Connecticut, the principal home of the brass industry, became a leader in a field where no big firms dominated and enabled its founder to earn as much as $250,000 a year. The success of that business, which later provided income for his children and grandchildren, also permitted George Hoffman to pursue from his home in Pasadena an avocation of avocado growing and marketing, and a successful experiment with dairy farming.¹²

By his willingness to take risks and back new ideas, by augmenting traditional nineteenth-century business values with his experience in the bureaucratic administration of a modern, integrated corporation, George Hoffman taught his son the spirit of entrepreneurship. For Paul, who had become at twenty a close business confidant of his father, that background provided skills and an outlook that served him well in his own business career. By personality and training, then, he was prepared to deal with a changing economy and a changing world.

Paul Hoffman started his own career at the bottom of the automobile business. The choice reflected his early fascination with cars and the personal experience that began when his father bought a used Pope-Toledo, one of the most expensive American makes. For $1,500 the family had acquired a small, open, unreliable vehicle for travel on unpaved and thoroughly inadequate roads. Because he had done all the driving for the family and made the frequently needed repairs, Paul developed skills that proved especially valuable when he dropped out of the university in 1909. Despite the fact that he had to start in a menial position, he began working for a car dealer in Chicago, eventually becoming a salesman.¹³

Even as a young salesman not yet earning full commission, he demonstrated qualities of the traditional success formula: a friendly personality, a willingness to work hard, and an ability to recognize new opportunities. Assigned a rural territory around Chicago, he sold “on the hoof,” driving a car until he found a buyer and then returning to the dealership for another car. By offering free rides to bankers and physicians in nearby small towns, he discovered prospective buyers. Once he had demonstrated success in selling to prosperous farmers, he moved to a better-established dealership for cars manufactured in nearby South Bend, Indiana, by the Studebakers, a family his father knew. By 1911, when he decided to follow his family to California, he was earning $300 to $400 a month selling Studebakers.¹⁴

The move to California opened new opportunities. First, he learned about the country by traveling alone from Chicago, paying his way by selling car parts. When he arrived in Pasadena, he moved into his father’s home and got a job selling Studebakers in downtown Los Angeles. Not yet a car owner himself, he commuted to work by motorcycle and trolley. In Los Angeles he enjoyed instant and phenomenal success; during one month in 1912, he set a sales record and earned $1,250.¹⁵ Then, perhaps demonstrating that the year of remedial composition at the university had not been wasted, he also won the grand prize in the Studebaker national sales contest. For his essay on how to sell cars, he received $100, a cup, and a trip back to corporation headquarters in South Bend, where he met J. B. Studebaker and other top executives.

In southern California, where the population swelled with the steady tide of fellow midwesterners, his success as a salesman enabled Hoffman to climb rapidly up the organizational ladder. He knew how to get the most out of a demonstration drive, how to convey his enthusiasm, and how to gain trust from prospective buyers. Studebaker rewarded him with a promotion to sales manager for Los Angeles and Orange Counties in 1915 and for the entire southern California district two years later. In those positions he not only remained his own best salesman but also showed leadership skills in motivating his subordinates: besides selling cars, he sold salesmanship. Self-assured but never arrogant, most of all he sold himself.

World War I proved only a minor interruption in Hoffman’s business career. Already married and a father, he enlisted in the army and rose from private to lieutenant without leaving the country. Then, in 1919, a veteran not yet thirty years old, he decided to plunge into business for himself. He no longer wanted to remain a mere employee, even if well paid. Just as his father had successfully left a managerial position with a major corporation to establish his own business, he too had bigger ambitions.

Hoffman’s ambitions posed a difficult decision for the top management of the Studebaker Corporation. The company offered to make him manager of the New York City distributorship, its largest, and a member of the board of directors at a salary of $50,000. But rather than accept that position, he told Studebaker president Albert Erskine that he wanted to own a distributorship for all of Los Angeles and Orange Counties. Erskine decided that Hoffman was so valuable to the organization that it could not risk losing him and therefore agreed to sell the southern California distributorship for $60,000, provided he took on a partner.¹⁶

Thus, with capital borrowed from relatives and friends, Hoffman acquired his own business. By choosing the independence and uncertainties of the small businessman, he took a calculated risk: he thought that he could make a lot more money working for himself than for a Studebaker salary, and he was right. Of course, the fact that the distributorship received 3 percent from the sale of every Studebaker it supplied to dealers in southern California ...