Lords of Creation

by Frederick Lewis Allen

  One of the significant events of 1934 was Upton Sinclair’s almost-successful campaign for the Governorship of California, with a program which aimed to set up a socialist order for the impoverished side by side with the going capitalist order. Yet even this curious proposal was not, perhaps, so significant of the temper of the country as was Dr. Townsend’s ingenuous scheme for bringing back prosperity by paying to every old person in the country an old-age pension of two thousand dollars a year; or as Senator Huey Long’s vague proposals for “sharing the wealth” of the country (apparently without remaking the complex wealth-producing machinery so that re-concentration of economic power in new hands would not follow upon confiscation); or as the extraordinary influence of that latter-day Bryan of the radio, Father Coughlin of Detroit, with his bitterly eloquent attacks upon the bankers and the Federal Reserve System and his pleas for inflation.

  Just as in 1896 the Populists had followed Bryan into the free-silver campaign, so in 1935 enormous numbers of Americans, battered and discouraged by a far worse crisis yet by no means temperamentally radical, looked for magic formulae which would conjure prosperity out of a hat—or out of the government printing-presses. They did not want the profit system to be abandoned. Anger and despair might sometimes drive them to riot against the seizure of their farms for debt, against the sale of their milk at starvation prices, against employers who threw them out into the streets, against scabs who took the jobs which were all they had to bargain with; but what the vast majority of them wanted was not revolution but jobs and money and hope, with as little change in the going system as possible. That they groped with pathetic eagerness for short and easy ways out of the wilderness followed inevitably from the ugly fact that the years were crawling by and still the American economy was partly paralyzed and jobs and money were cruelly scarce.

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  There was thunder on the Right, too.

  At first it was barely audible above the echoes of the banking crash, the shouts of acclaim for Roosevelt the deliverer, and the tumult and confusion at Washington. The big bankers and insiders were licking their wounds, thankful for the moment to follow any leader who might salvage the economic wreck; they distrusted Roosevelt’s ideas, but felt that there was no possibility of stopping him; and besides, the stock market was going up, and life is seldom altogether intolerable for the financial and business community when it sees plus signs after the names of its favorite securities in the afternoon papers. When, however, the Roosevelt bull market of 1933 broke, the conservatives began to recover their voices; and from that moment on, their cries of irritation and disapproval and fear became louder and louder.

  The attack from the Right came in a series of overlapping waves of protest and panic; and it is interesting to notice that the usual sequence of events was somewhat as follows: each wave was met by the Administration with a conciliatory move—whereupon there was a momentary return of conservative hope that now the worst was over and business could go ahead again; but business failed to go ahead, and a new wave of adverse opinion rose.

  1. The first wave (in the early autumn of 1933) was of dismay at the “regimentation” under the NRA, at the idea of raising wages before profits were assured, and at the attempt of the framers of the National Industrial Recovery Act (who were represented in the conservative press as radical professorial “brain-trusters”) to balance their permission to employers to organize by permitting labor to organize too. A considerable section of the business community and most of the financial community agreed with Hearst that the letters NRA stood for “No Recovery Allowed” and said so emphatically. Other conservatives, perhaps more astute, had meanwhile discovered that there were distinct advantages in climbing aboard the NRA bandwagon and helping to steer it, that General Johnson’s bark was worse than his bite, that there were ways of getting round the labor provisions of Section 7a, and that even if most employers had to raise wages, it was possible for them also to raise prices.

  2. Already, however, the second wave was mounting high. This was a wave of fury and fear at the Warren gold-buying scheme in the last months of 1933 and the beginning of 1934—a scheme which, according to Wall Street, led straight to printing-press inflation. The inflation panic was eased somewhat when Roosevelt stabilized the currency in terms of gold at the end of January, 1934, and the conservatives breathed again—briefly.

  3. The third wave was of protest at the Administration’s reform plans. These lamentations and prophecies of disaster reached a temporary climax during the spring of 1934, when Congress was debating the stock-exchange bill and considering the modification of the Securities Act of 1933. Richard Whitney, President of the New York Stock Exchange, declared that the stock-exchange bill, as first drafted, would “mean the end of liquidity in our markets.” Bankers declared that recovery was impossible unless the Securities Act were modified. Financial writers in the newspapers declared that Washington was engaged in senseless persecution of Wall Street. Indignant financiers declared that the Administration which professed to want to protect the investor was proceeding to abolish him altogether. So heavy was the barrage of adverse criticism that both the stock-exchange bill and the Securities Act were somewhat modified,—and the President appointed, as head of the agency which was to administer them, a former stock-market-pool operator! By the end of June, 1934, the financial columns of the New York Herald-Tribune were remarking that “Wall Street is perking up with regard to Federal control; the brokers, giving increased study to the Act, are beginning to voice the opinion that the measure may well serve as the needed impetus to a revival in trading”; and soon the opinion was freely expressed in the Street that now money would begin again to pour into the capital market.

  4. As the summer of 1934 wore on, however, this did not happen—and a new outcry arose. What business needed, it seemed, was a clear indication from the government that it was not opposed to the profit system. Business men were afraid to go ahead because they thought the Administration was bent on ending or taking away all profits. This wave ebbed somewhat when the President duly said a good word for profits (“Not clear enough!” cried the intransigeants), and it ebbed still more when he appeared in a friendly mood before the members of the American Bankers Association, and Jackson Reynolds of the First National Bank, in an admirably diplomatic speech, prepared the way for what was hopefully referred to in the press as a “reconciliation” between the President and the financiers.

  5. During the winter of 1934–35 and the spring of 1935, however, there were two more waves of protest. One was directed against the Administration’s proposed bill to regulate holding companies in the public utility field; and the other, prompted by new fears of inflation, was directed against governmental extravagance.

  To write as if these various waves of protest were separate and distinct is of course to over-simplify the story. The objections to the government’s unorthodox financial operations, to the heavy governmental expenditures and the unbalanced budget, to heavy taxes, to “interference” with business, to the government’s going into business itself via the Tennessee Valley Authority and other agencies, and to the campaign for financial reform, were continuous and simultaneous. The dominant note in the whole long chorus of conservative lamentation and attack was that what the country was suffering from was mainly “lack of confidence,” and that confidence would not return until the government ceased experimenting and reforming. (“Confidence”—that ever-potent word: have we not met it before in this chronicle?) As Silas H. Strawn put the argument in an address to the United States Chamber of Commerce in May, 1934 (when there were still ten million men out of work), Roosevelt ought to issue a clear-cut statement “that the emergency is over and that there will be no more requests for emergency legislation.” As General Johnson put it in the Saturday Evening Post the following winter, “It is trite to say that the single missing element is confidence.… Men can’t go back to work until money goes back to work, and money won’t go back to work until those who have
or are responsible for money to invest in creating work know that, once it is out of their hands, no magic is going to frisk it away.” …

  This general view of the crisis—accompanied by distrust of Roosevelt’s impulsiveness—gained such headway that by the spring of 1935, according to such a well-informed observer as the writer of Kiplinger’s Washington Letter, some eighty per cent of the business men in the country, large and small, were opposed to the New Deal, and some thirty per cent of them were bitter in their opposition.

  One reason why the thunder on the Right was so loud was that most of the press was under the control of men who represented the insiders’ point of view. The average well-to-do American, encountering these arguments constantly in his newspapers and magazines, absorbed them almost through his pores, until by 1935 he half forgot that there had been any depression at all before Roosevelt came into power, and was fully persuaded that the only wise thing for Americans to do would be—as Walter Lippmann said bitterly in his Harvard Phi Beta Kappa address in 1935—“to sit and wait, like Chinese coolies in a famine, until, for some mysterious reason, the warm blood of confidence rises once more in the veins of bank directors and corporation executives.” Another reason why the thunder on the Right was loud was that money was being widely spent by big corporations to inculcate such views among their proxy-signers and among newspaper readers. Another reason was, perhaps, that the campaigns against specific Administration measures—the attempts to prove that they would create economic havoc—intensified the alarms of conservatives generally, and thus the panic was to a considerable degree self-induced. It would be interesting, for example, to know how much of the decline in public-utility securities during 1934 and early 1935 should be ascribed to the Administration’s activities, and how much should be ascribed to advertisements and circulars which sedulously disseminated the idea that Congress was about to “complete the destruction of the savings of millions of investors.”

  It would be far from fair, of course, to dismiss the agitation on the Right as mere “propaganda.” No one who heard a banker or broker or business man inveigh against the New Deal as a compound of economic absurdities and a deterrent to recovery could doubt that these men spoke from the heart, utterly convinced that the patient who had been so ill for five long years would soon recover if only the physician in Washington would stop giving him medicine and tell him he was well. Yet one may reasonably doubt whether the “lack of confidence” which in effect kept capital on strike, year after year, was due wholly to fear or dislike of the Administration’s programs. Surely it was due also to an instinctive realization, among the powerful insiders, that the American economy was still far out of balance, New Deal or no New Deal, and that the makings of a really prosperous market for new business were simply not visible.

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  With cannon to left of him and cannon to right of him, and his program clearly not reaching its objective, the President showed a gradual change in temper. As the months went by and new obstacles rose up before him, he began to seem less the brilliant and decisive leader that he had been in March, 1933, and more the political opportunist that he had been as Governor of New York and Democratic candidate in 1932. As the winds of opinion shifted, so he shifted, from Left to Right and back again. (History was repeating itself: a second Roosevelt was balancing on the political tightrope.) Close observers of the New Deal noticed an increasing tendency to announce new programs with a blare of trumpets and then, as opposition developed, to moderate them. Every president has to play politics, but before long the Postmaster-General’s influence upon New Deal appointments began to seem unnecessarily potent. Some of Roosevelt’s plans for recovery, furthermore, began to look less like the product of disinterested economic thought than like impromptu attempts to placate this group and that—to toss a few potential silver profits here, a little conservatism there, a little social idealism elsewhere.

  If one says this, however, one should in fairness add that Roosevelt had undertaken a well-nigh impossible task—that of being President of the American economy as well as of the American polity, despite the fact that his chief talents were for conciliation rather than for economic statesmanship; and that he had undertaken it at a time when the economy was undergoing changes impossible to bring under control. Since Roosevelt did not possess dictatorial power—and did not wish to possess it-he was bound to depend mainly upon the voluntary cooperation of the public, and this cooperation came hard; for although the citizen will lay down his life for his country, apparently he will not lay down his money. Roosevelt had to persuade, encourage, compromise, cajole.

  Luckily there was one respect in which his own political advantage and the advantage of the republic were almost identical. His instinct for the middle of the political road, his engaging smile, his appealing manner, and even, perhaps, the compromises which made his policies so confusing, all helped to preserve, in a time of very severe stress, that “domestic tranquillity” for the insurance of which the people of the United States had formed their more perfect union. Even men who abominated Roosevelt’s economic ideas and distrusted his promises felt that at least he wanted to hold the country together.

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  By the end of May, 1935, when the Supreme Court’s unanimous decision against the NRA brought the second phase of the New Deal to a close, the condition of the national economy was roughly as follows:

  Business activity—as measured by the Annalist’s index—was not far from eighty per cent of the “estimated normal.”

  It was being maintained at this rate with the aid of the expenditure by the government of so many billion dollars that the net debt of the Federal Government was rapidly rising. (From the end of 1930 to the end of the Hoover Administration it had risen from about 16 billions to over 21, and from the end of the Hoover Administration to the end of 1934 it had risen further to almost 26 billions.) What was going on might be described as a race between recovery and national bankruptcy. Debt still weighed heavily upon the country: as private debt decreased a little, public debt increased.

  Generally speaking, the people at the upper end of the economic scale were better off than they had been at the beginning of the New Deal. (There were numerous exceptions—men and women still struggling with debt or impoverished by the vanishing of their investments—and these exceptions were often very audible.) Big business, generally speaking, was out of the red. The combined profits of 210 large corporations for the first quarter of 1935 were 21.8 per cent bigger than for the first quarter of 1934, according to figures compiled by the National City Bank. They were not yet large, but the trend was upward—a trend revealed also in the income-tax returns for 1934, which showed noteworthy gains in the incomes of the rich. Small business, however, was (again generally speaking) still on the ragged edge. Salary-earners and wage-earners—if they still had jobs—were perhaps a little better off. The farmers—except in the drought regions—were mostly a good deal better off. But at the bottom of the economic scale the conditions were appalling.

  The number of men out of work, according to most estimates, was still at least ten millions. (The situation was much better than when Roosevelt came to the White House, but had improved little if at all during the long stalemate.) Of these ten millions, some five millions had so far exhausted their resources as to need public relief. Add to these five millions another million or two of people who were on relief for reasons other than unemployment as measured in the statistical estimates—men, for example, who needed aid because their farms had been ruined by drought or because their small businesses had gone under—and then multiply the resulting figure by three, in order to include not only the men on relief but also their families, and you arrive at an explanation of the fact that over twenty millions of Americans (say one person in six in the country) were dependent upon the meager bounty of the rest of the population.

  If the unemployment situation was at least holding its own, the relief situation was not; for with every month of continued depression,
more people used up their savings and joined the class of economic serfs.

  These serfs, scattered throughout the country, ranged in former occupation from architects to stevedores. All ages were represented among them, though most of them were young. Some of them, of course, were chronic misfits. Others had been upstanding citizens, but were now becoming chronic dependents, with such small prospect of economic independence that they accepted life on the dole as the best thing in sight—unless, perhaps, some of them could manage to draw two doles. Others were still stubbornly trying to climb back to self-support, but found the way blocked by the shortage of jobs. Not only was this group growing in numbers; inevitably it was—on the average—deteriorating in character and spirit. To use the cold-blooded language of business rather than the language of human compassion: if the members of this group could find a chance to work and earn before it was too late, they might become a body of consumers worth reckoning with; denied such a chance, they were on their way to becoming a permanent dead weight on the taxpayers. Great numbers of them were becoming potential tramps, panhandlers, gangsters, members of the mob, whether of reaction or revolution. The phrase “land of opportunity,” once so great with promise, had become ironic indeed.

  Furthermore, the race was not only between recovery and governmental bankruptcy, and between recovery and demoralization of the jobless, but also between recovery and technological change. I have spoken of the indices as standing at about eighty per cent of “normal.” Yet it was obvious that so far had invention and mechanization and efficiency increased, that business would have to attain a volume far above “normal” to absorb even a majority of the dispossessed. New machinery was still replacing men; indeed, the depression had accelerated the process. And it was far from being at an end. To give two examples of what was in prospect, the invention of a new cotton-picking machine threatened to annihilate many of the share-croppers of the South, and chemistry was showing the way to such intensive production of foodstuffs that the days of the small farmer appeared to be numbered. All this scientific and mechanical progress opened, of course, vistas of incredible plenty—if only the distributing apparatus would work. But the distributing apparatus, as we have seen, was out of gear.