Murray Kempton describes a narrative that began on the day of the 1929 crash, referring to the “myth” of the 1920s and the “myth” of the 1930s:
The myth of the twenties had involved the search for individual expression, whether in beauty, laughter, or defiance of convention; all this was judged by the myth of the thirties as selfish and footling and egocentric. It did not seem proper at the time to say that the twenties were not quite so simple, and their values were mixed, some good and some bad.13
Thus the stock market crash was viewed as a dividing line between the self-centered, self-deceiving 1920s and the intellectually and morally superior, albeit depressed, 1930s. Even today, the narrative notion that a stock market crash is a kind of divine punishment remains with us.
Celebrities and the Shoeshine Boy Narrative
One example of celebrity attachment to the 1929 crash narrative is the shoeshine boy narrative of the late 1920s. In this narrative, a great man, either John D. Rockefeller or Bernard Baruch or Joseph Kennedy (all of them still celebrities today, Kennedy only because he was the father of John F. Kennedy, who later became president of the United States), decided to sell stocks before the peak in 1929 after a shoeshine boy offered him advice on investing in the stock market. Jody Chudley provided a version of this story in Business Insider in 2017:
In 1929, JFK’s father Joseph Kennedy Sr. picked up on one of those subtle signs and didn’t just get out at the top, he scored a massive windfall on the way down as well.
Like for virtually anyone invested in the stock market, the 1920s were good to Joseph Kennedy Sr. How could they not be, all you had to do was buy all the stock you could and watch it go up.
After having made a bundle owning stocks in the roaring bull market of the 1920’s, Joe Kennedy Sr. found himself needing to get his shoes polished up.
While sitting in the shoeshine chair, Kennedy Sr. was alarmed to have the shoeshine boy gift him with several tips on which stocks he should own—yes, a shoeshine boy playing the stock market.
This unsolicited advice resulted in a life-changing moment for Kennedy Sr. who promptly went back to his office and started unloading his stock portfolio.
In fact, he didn’t just get out of the market, he aggressively shorted it—and got filthy rich because of it during the epic crash that soon followed.
They don’t ring bells at the top, but apparently when shoeshine boys start giving stock advice it is time to head for the exits.14
I could not, however, find evidence of this story in the ProQuest News & Newspapers database for the 1920s and 1930s. The earliest mention I found of a shoeshine boy giving stock tips to a rich and important man was in Bernard Baruch’s 1957 memoirs,15 but even there the story is not exactly that of an epiphany at the moment the shoeshine boy spoke.
The shoeshine boy story also has variants that mention bootblacks, barbers, or policemen as the stock tipper. For example, a 1915 article in the Minneapolis Morning Tribune argued that the advancing market was not about to turn down because:
We do not hear of the chamber maids and bootblacks who have cleaned up fortunes by lucky plays in the street. These romances usually mark the approach of the culmination of the advance.16
This 1915 narrative does not seem to have the moral force of the shoeshine boy narrative, for it is not connected to any catastrophic Armageddon event, it does not moralize as effectively, and it does not effectively tie the story to a celebrity.
Relevance of the Stock Market Crash Narrative Today
Though much time has passed since the 1929 crash, and much of the zeitgeist of the 1930s is lost to us now, the feeling lingers that the United States might experience another stock market crash. This continuing economic narrative is a lasting legacy of 1929, and it probably serves to amplify end-of-boom drops in the stock market and drops in confidence. Moreover, any awareness that some people frame their thinking in terms of such a narrative might lead to expectations that others will also display such amplifying reactions. As of this writing, in 2019, the stock market crash story is not contagious, but it remains a part of public thinking and might return with a mutation or change in the economic environment.
Policymakers might take a lesson from both the real estate bubble narratives and the stock market crash narratives: during economic inflections, there is real analytical value to looking beyond the headlines and statistics. We should also consider that certain stories that recur with mutations play a significant role in our lives. Stories and legends from the past are scripts for the next boom or crash.
The next two chapters describe economic narratives that differ from those we have covered so far in that they engender moral outrage and an impulse to fight back. In both chapters, we examine a dominant emotion of anger—against business in chapter 17, and against labor in chapter 18. This anger takes a form that may cause significant changes in economic behavior.
Chapter 17
Boycotts, Profiteers, and Evil Business
Anger at business varies through time. People may start thinking business is evil when prices of consumer goods increase substantially. Narratives blame business aggressiveness for rising prices, and public anger may continue after the inflation stops, if the public believes that prices are still too high. Anger can also become inflamed when businesses cut wages. Such anger may induce organized boycotts or disorganized decisions to postpone spending until prices are lower. In such cases, people view their buying decisions in moral terms, not just as satisfying their wants. Anger narratives may also interact with self-interested thoughts of postponing expenditures until prices come down. We see the effects of such angry narratives clearly in major economic events, including the depression of the 1890s, the 1920–21 depression, the Great Depression, and the 1974–75 recession. We see glimpses of such anger today, and we may see it strongly again in the future.
The Boycott Narrative
The word boycott (with slight modifications reflecting language idiosyncrasies) entered most of the world’s major languages starting in 1880. Charles C. Boycott has found eternal fame not because he invented the boycott but because he was its most celebrated victim. Boycott was the land manager for an absentee landlord in Ireland. Responding to a bad crop in 1880, he offered to cut by 10% the rents to be paid by tenant landlords, but the tenants demanded a 25% cut. He resisted. An Irish organization of land tenants then appealed to the broader community for support against Boycott. In October 1880, Boycott described his travails in a letter to the editor of the Times of London:
On the 22d of September a process-server, escorted by a police force of 17 men, retreated on my house for protection, followed by a howling mob of people, who yelled and hooted at the members of my family. On the ensuing day, September 23, the people collected in crowds upon my farm, and some hundred or so came up to my house and ordered off, under threats of ulterior consequences, all my farm labourers, workmen, and stablemen, commanding them never to work for me again.… The shopkeepers have been warned to stop all supplies to my house.… I can get no workmen to do anything, and my ruin is openly avowed as the object of the Land League unless I throw up everything and leave the country.1
This is a vivid story, but why did it go viral worldwide? First, it was controversial. On one side, the action against Boycott seemed to offend human sensibilities, but on the other side, it addressed the prominent questions of rising inequality and the concentration of wealth and power. It was not the first time such actions had been taken. But this time the idea developed that asking for moral support in the form of a boycott from the general community might be a powerful tool. Indeed, the boycott seemed to be a new and superior tactic for labor because it involved the entire community, which did not directly benefit from the boycott. Thus it seemed to be proof that the action was moral, not self-interested. The idea was highly contagious, and it spread far and wide.
Boycott would eventually become the centerpiece of its own economic narrative. Like some other narratives, it centers on an
emotional response—in this case, anger against businesspeople. The boycott narrative brings with it a sense of conspiracy also generated by anger. As we will see in this chapter, the boycott narrative and others in its constellation tend to recur when there is a broad-based undercurrent of social opprobrium, and they are economically important because they affect people’s willingness to spend and willingness to compromise.
The Boycott Narrative Goes Viral
In The Boycott in American Trade Unions (1916), labor historian Leo Wolman wrote:
Almost without warning the boycott suddenly emerged in 1880 to become for the next ten or fifteen years the most effective weapon of unionism. There was no object so mean and no person so exalted as to escape its power.2
By the middle of the depression of the 1890s, the narrative began to change, and the public was becoming fed up with a constant succession of boycotts. The moral authority of boycotts disappears when most people begin to express suspicion and annoyance with them. As Wolman notes:
The influence of the American Federation of Labor has been exerted in inducing in its members a greater conservatism in the employment of the boycott. Practically the great majority of its legislative acts from 1893 to 1908 have been designed to control the too frequent use of the boycott. At the convention of 1894 the executive council remarked “the impracticability of indorsement of too many applications of this sort. There is too much diffusion of effort which fails to accomplish the best results.” Thereafter, every few years saw the adoption of new rules restricting the endorsement of boycotts.3
But boycotts did not go away forever, and they have recurred periodically throughout modern economic history. In each case, the boycott lasts only as long as the narrative behind it remains strong. When the underlying narrative weakens, the boycott eventually falls apart.
Profiteer Stories Reinvigorate the Boycott Narrative with World War I
Related to boycotts was the emerging profiteer narrative. Figure 17.1 shows the epidemic contagion of profiteer, a new word associated with anger against businesspeople. The term was coined in 1912, according to the Oxford English Dictionary. It was mentioned extremely frequently around World War I and just after, with its use peaking during the depression of 1920–21. Profiteer is a play on the much older word privateer, meaning a pirate ship that has government support to prey on enemy foreign shipping. Such vivid mental images enhanced profiteer contagion. Associated phrases at the time were excess profits and, as we have seen, boycotts.
In 1918, the last year of World War I, the New York Tribune offered an example of these narratives:
There is a local story, writes “The Cleveland Plain Dealer,” to the effect that two men in a streetcar were discoursing upon the great struggle, when one of them said: “The war has been a godsend to my plant,” and the other, chuckling, replied: “If it lasts two years longer I’ll be on Easy Street.” Whereupon, as the story runs, a woman stood up and smote both men grievously with her umbrella, exclaiming as she did so: “If that’s what the war means to you, this is what your remarks mean to me!”4
This narrative, accompanied here by a powerful visual image of an angry woman using her umbrella as a weapon, was highly contagious. This narrative and similar narratives persisted after the war, strongly affecting attitudes toward business for several more years.
The sharpest depression (meaning fastest decline and recovery) in US history since the advent of modern statistics occurred from 1920 to 1921. At that time, people called the depression the “post-war depression,” and the unhyphenated word postwar also emerged, unambiguously referring to World War I, which was considered a unique turning point in history. The phrase describing it, the war to end all wars, had gone viral during and just after World War I. A few decades later, World War II eclipsed World War I, and the meaning of postwar changed to refer to the period after World War II. As a result, the depression of 1920–21 lost a uniquely identifying name. In a 2014 book, James Grant suggested calling it “The Forgotten Depression,” which was the title of his book about it.
FIGURE 17.1. Frequency of Appearance of Profiteer in Books, 1900–2008, and News, 1900–2019
Profiteer was a strong short epidemic starting during World War I but did not peak until the 1920–21 depression. Sources: Google Ngrams, no smoothing, and author’s calculations from ProQuest News & Newspapers.
Nonetheless, the 1920–21 depression was a powerful narrative at the time of the Great Depression of the 1930s. It was part of the script for that depression. Ultimately, every important event from the depression of the early 1920s through the Great Depression of the 1930s was put in the emotional context of either “prewar” or “postwar.” For example, in 1933, twenty-year-old soldiers who survived World War I, then in their midthirties, still maintained wartime friendships and in many cases still nursed wartime wounds. Both depressions also generated an atmosphere of public outrage toward business, as exemplified by the angry woman attacking the two businessmen with her umbrella.
The Return to “Normalcy”
After World War I, with immediate postwar inflation totaling 100%, a deflation narrative developed by 1920. The story that consumer prices would fall dramatically was strongly contagious owing to its association with the profiteer narrative. Indeed, during the 1920–21 depression, thousands of newspaper articles noted that certain individual prices had fallen to their prewar 1913 or 1914 levels. The newspapers’ writers and editors knew that readers would respond well to such stories because, to most people, it seemed natural that once the war was over, prices would return to their old levels: a very important perceived “return to normalcy” that might eventually encourage consumers to buy a new house or a new car, but only after prices came down fully.
The idea that prices would fall to prewar levels was encouraged by the talk during the 1920 presidential campaign. Presidential candidate Warren Harding popularized the word normalcy to describe the world’s conditions before World War I, promising to bring back those conditions. Use of the word normalcy long before 1920 can be documented—it was not Harding’s invention—but the word was used so rarely before 1920 that many people believed that Harding had coined it. Harding used normalcy much as Donald J. Trump used the words bigly and yuge in his 2016 election campaign promises to make America great again. In both Harding’s campaign and Trump’s, words loaned a concreteness to the narrative, were frequently joked about, and seemed almost to provide a name for the narrative. For Harding, the word normalcy reflected a tendency to conflate the depression conditions of 1920 with the still-vivid trauma of the war, making for an emotionally intense narrative of the times.
In his March 1921 inaugural address as new president of the United States, Harding summarized what he’d emphasized throughout his 1920 election campaign:
The business world reflects the disturbance of war’s reaction. Herein flows the lifeblood of material existence. The economic mechanism is intricate and its parts interdependent, and has suffered the shocks and jars incident to abnormal demands, credit inflations, and price upheavals. The normal balances have been impaired, the channels of distribution have been clogged, the relations of labor and management have been strained. We must seek the readjustment with care and courage. Our people must give and take. Prices must reflect the receding fever of war activities. Perhaps we never shall know the old levels of wages again, because war invariably readjusts compensations, and the necessaries of life will show their inseparable relationship, but we must strive for normalcy to reach stability.5
To Buy or Not to Buy
In the still-bruised emotional atmosphere of the 1920s, waiting to buy discretionary items until the prices fell seemed an obvious strategy, both moral and practical, to most consumers. But postponing purchases helped bring on a depression. As one observer wrote in 1920:
The buying public knows that the war is over and has reached the point where it refuses to pay war prices for articles. Goods do not move, for people simply will not buy.6
/> Populist anger grew, along with protests against profiteering manufacturers and retailers. The protests sought to take advantage of a basic economic principle:
If people determine to buy foodstuffs or anything else only what they actually cannot do without, the working of the inexorable law of supply and demand will operate automatically to bring conditions to a more normal state.7
Thus thrift became a new virtue as people waited for the return of the “normal” prices of 1913.
Why 1913? An authoritative retail price index precursor to the modern Consumer Price Index (CPI) was first published in the United States by the Bureau of Labor Statistics in 1919, just before the 1920–21 depression. The index used past data starting in 1913, the last year of complete peace before the surprise start of World War I in 1914.8 The index highlighted a very dramatic price increase since 1913. Thus 1913 became the benchmark date for price comparisons, and consumers sought to delay purchases until prices returned to their 1913 levels. In January 1920, the commissioner of labor statistics, Royal Meeker, said, “The prices we kicked about in 1913 have come to be regarded as ideal,”9 noting that the ideal was mistaken. The Consumer Price Index began with a value of 9.8 in 1913. By 1920, it had more than doubled to 20.9, and by mid-1921 it had fallen to 17.3. It would have to fall a lot further to get back down to 9.8.
Narrative Economics Page 27