American Experiment

by James Macgregor Burns

  But industry was still the fundamental strength of the nation; Hoover and the economic leadership assumed that the financial panic would pass, after a healthful cleansing, and then the economy would right itself. This is what had always happened in the past. But, to the bewilderment of Administration and business leaders, this was dramatically not happening in 1930. On the contrary, the first half of that year brought a massive drop in consumer spending that in turn closed shops and factories. The Gross National Product, the measure of all goods produced in the country, fell from $103.1 billion in 1929 to $90.4 billion in 1930, $75.8 billion in 1931, and $58 billion in 1932. Unemployment in the same years rose from 1.55 million in 1929 to 4.34 in 1930, 8.02 in 1931, 12.06 million in 1932. National income, $81 billion in 1929, shrank to $68 to $53 to $41 billion in 1932. The three years 1930–32, according to Dixon Wecter, “took a toll of eighty-five thousand business failures with liabilities of four and a half billion dollars and the suspension of five thousand banks. Nine million savings accounts were wiped out….”

  The nation’s great industrial centers—the sinews and pride of American capitalism—were especially hard hit. By 1932, a million were jobless in New York City, 660,000 in Chicago; in Cleveland, 50 percent of the working force lacked work, in Akron 60 percent, in Toledo 80 percent. It was estimated that, during the three years after the crash, an average of 100,000 workers were laid off every week. The huge steel furnaces were banked down; the automobile industry by 1932 was operating at one-fifth of its 1929 capacity.

  Farmers were hit even harder. Agriculture had been ailing long before the crash, as prices of farm products declined steadily through the decade while maintaining a precarious parity with the fall of other price levels in the economy. But not for years had farmers faced such a cataclysm as 1930. Within a year the price of December wheat at Chicago plummeted from $1.35 to 76 cents a bushel, of July wheat from $1.37 to 61 cents. Millions of farmers plunged deeper into debt, many of them into bankruptcy. And as usual in depressions, it was the weakest, poorest people on America’s farmlands—tenant farmers, migratory workers, blacks, women—who were most vulnerable.

  President Hoover had been neither uncaring nor inactive in the days following the crash. He summoned to meetings the leaders of the “solid” part of the economy—top industrialists, railway and utility managers, farm spokesmen, union heads. To halt the deflationary spiral, he asked the industry leaders to agree not to cut wages or payrolls. His guests responded with optimistic statements, pep talks, and promises. Henry Ford, acting with his usual well-publicized boldness, left with Hoover a pledge to hike auto workers’ pay to seven dollars a day. In the hope of expanding the supply of credit enough to offset the contraction, the President took steps toward tax reduction, increased spending on public works, and a Federal Reserve cut in the discount rate.

  Hoover also tackled the psychological aspect of the problem. So earnestly did he believe in the importance of confidence, according to David Burner, that he “attended a World Series game in Philadelphia simply to make an example of his own serenity.” And he made a point of using the term “depression” because he feared people would be frightened by such blunt words as “panic” or “crisis.”

  When the stock market recovered in the winter of 1930, it appeared that Hoover’s policies might be working. “I am convinced we have passed the worst and with continued effort we shall rapidly recover,” said the President. Then the market slide resumed, week after week, month after month. Skepticism rose. Hoover’s tax reductions, it was noted, grossly favored the rich. The industrialists forgot the promises they had made in Washington when they returned to their bleak factory towns. Congress resisted measures that might unbalance the federal budget.

  Increasingly, people saw an economic crisis and called it that. And they were less and less concerned about Hoover’s serenity, which appeared intact, than about his wisdom and compassion.

  In later years, memories of the Great Depression would take their shape from photographs of long breadlines, people selling apples, men living in shacks called Hoovervilles, emaciated women and children, the jobless clustering by the hundreds in front of factory gates. But perhaps the most remarkable aspect of the depression at the time was its invisibility. Walking through an American city, Frederick L. Allen wrote, you “might notice that a great many shops were untenanted, with dusty plate-glass windows and signs indicating that they were ready to lease; that few factory chimneys were smoking; that the streets were not so crowded with trucks as in earlier years, that there was no uproar of riveters to assail the ears, that beggars and panhandlers were on the sidewalks in unprecedented numbers (in the Park Avenue district of New York a man might be asked for money four or five times in a ten-block walk). Traveling by railroad, you might notice that the trains were shorter, the Pullman cars fewer—and that fewer freight trains were on the line. Traveling overnight, you might find only two or three other passengers in your sleeping car.” Otherwise things might seem to be going on much as usual.

  Nor were people as militant and activist as later generations might have expected. The desperate men lined up quietly in the soup lines. People were evicted from their homes or farms and resignedly went off somewhere. The unemployed demonstrated, but only infrequently. Some workers struck, but no more than before; the number of strikes remained about the same during the depression, and union membership even declined. Workers gathered before factory gates not to take over the plant, or to burn it down, but in hope of a job. The dominant emotion was not anger or hostility but resignation or fear. Instead of rising up, people hunkered down. People in Cincinnati wore buttons: “I won’t talk depression.” During the depression, billboards appeared reading, “Wasn’t the Depression Terrible?”

  This social passivity rested on the profoundest of psychological forces that swept pervasively through the population—loss of security and lack of self-esteem. A wiped-out bank account did not send people out onto the streets or even to the bank; it was too devastating. Losing a job, seeking a job, being denied a job—these meant constant blows to self-esteem. “Anonymous” wrote for Outlook magazine about how “I Lost My Job.” In the spring of 1929, he had left a $65-a-week staff job with a New York newspaper to become a public relations man for a big eastern railroad at three times that pay. A year later the public relations department was wiped out in a merger.

  What Anonymous then endured would come to be familiar to millions of families: dispossession from his apartment for failure to pay the rent—moving with his wife and baby into the home of her family, to the latter’s intense annoyance—getting ample free advice from the family to sell brushes or silk stockings—studying the Help Wanted columns and starting the dolorous rounds of nonemployment—borrowing on insurance policies—earning a few dollars by selling Christmas cards, mainly to kind friends—losing his final cash reserve in the closing of the Bank of the United States—earning $30 on jury duty—watching his job application blank torn up by a clerk when he had the temerity to inquire about the job—contemplating suicide but lacking the courage—having to move his father from a home into a “poorhouse”—appealing for help to relatives he hardly knew on his mother’s side of the family—receiving $10 from them—taking a furnished room with wife and baby—left with $12 at the time of writing his article.

  Some took the drastic way out that Anonymous flirted with. Reports of bankrupted millionaires jumping out of skyscraper windows after the crash became part of the legend of the Great Crash. The suicide rate was relatively low in late 1929, but it did rise during the next three years. But it was not brokers but unemployed workers who were more likely to contemplate or threaten suicide, like the former Youngstown steel operative who, begging for a job in 1932, said, “If you can’t do something for me, I’m going to kill myself.”

  As usual, women were highly vulnerable to economic threat, whether as wives or workers or both. Marriage, divorce, and birth rates all fell sharply in the early 1930s. It was often too expensi
ve to get a divorce or to have children. There was evidently a decline in sexual relations owing to fear of pregnancy, psychological demoralization following loss of a job, and women fatigued by having to work both outside and inside the home. Married women were tempting targets for legislators and organizations. Of 1,500 school systems contacted in 1930–31, over three-quarters would not hire married women and almost two-thirds dismissed women teachers if they were married. Although the unemployment rate for women was 4.7 percent in 1930 compared to 7.1 percent for men, this was partly because many women held low-income jobs for which men could not or would not compete.

  And as usual, blacks were most vulnerable of all. They had little seniority and only a weak, semiskilled status at best. Working mainly in service and unskilled industries, they were the classic “last hired, first fired.”When skilled white workers lost their jobs, they often slid into the dirtier, more demeaning jobs, displacing blacks. A social worker in Atlanta noted that white men “have taken over such positions as elevator operators, tradesmen, teamsters, expressmen, bill posting, city sanitary wagon drivers … stewards, cooks, waiters and bell boys in hotels, hospital attendants, mechanics at filling stations, delivery boys from drug stores” and even chauffeurs and maids. Sometimes whites forced blacks out of jobs through intimidation, sometimes through force. In the southwestern division of the Illinois Central, black firemen were lured from their cabs with flares and then shot down.

  The desperate jobless, blighted women, intimidated blacks—these and millions of other fearful, poverty-stricken Americans might have formed a mighty army of the wretched, a coalition of the deprived. But misery did not seem to like company. The depression exacerbated tensions among the wretched of the earth as blacks and whites fought for jobs, women lost jobs because their husbands had them, and jobless workers competed to be first in line at the employment office.

  In his textbook for Soviet schoolchildren M. Ilin had described how, in a country “boasting millions of machines, storerooms are bursting with goods; corn is burned in place of coal; milk is poured into the river.” Ilin had quoted stories from the 1920–21 recession. Already, as he wrote, he was hearing reports of a new depression, new spilling of milk.

  “What does this mean?” he asked. “Who profits by it?

  “It is profitable to the Foxes and the Boxes. Mr. Fox burns a few trainloads of grain in order to raise the price of corn. Mr. Box gives orders to spill tens of thousands of bottles of milk into the river in order that milk may not be sold too cheaply. And in the mean time school physicians in New York report that one out of every four children in the city is undernourished.” The fact that farmers, not capitalists, were destroying grain and milk might not have daunted Mr. Ilin; these were kulaks, and kulaks too were capitalists.

  The Crisis of Ideas

  Americans entered the decade of the thirties with their economy half paralyzed, their family and individual lives impoverished, their hopes and expectations blighted. With the poet Carl Sandburg they might ask, “Where to? What next?” Their only hope lay in thinking their way out of the crisis, and acting on the basis of that thought. But this was an intellectual capacity that leaders of established wisdom found utterly lacking in the people as a whole. The Enlightenment idea, Lippmann had written in Public Opinion ten years before, that assumed humankind had direct experience and understanding of the complex world around it, was false for a mass society. People were governed by stereotypes, prejudice, propaganda. A few years later, in The Phantom Public, Lippmann had taken an even stronger position. “The public will arrive in the middle of the third act and will leave before the last curtain, having stayed just long enough perhaps to decide who is the hero and who the villain of the piece.”

  The best hope, Lippmann believed, lay with the experts, armed with the latest inside information—experts who could rise above narrowness and bias. Who in times of crisis could better assume that role than the experienced insiders who had actually run American industry and finance, who could now tell what was wrong and put the economy back on track? Innovators and enterprisers, they would not be mired in the failed ideas of the past.

  Surely the big industrialists in particular would be a fount of fresh wisdom during the crisis—and their potent propaganda and political arm, the National Association of Manufacturers, providentially happened to be in annual session assembled when Wall Street was experiencing one of its first panics in the fall of 1929. Confronting this “financial” crisis caused by upstart speculators, the NAM stuck to its ancient wisdom about economics and politics. The test would come as the depression deepened and it became clear that the nation was caught in a general industrial and business crisis and not merely a Wall Street dip.

  But the citadel of NAM conservatism remained unpenetrated. A few weeks after the market crash, the NAM president, John E. Edgerton, congratulated Hoover on his conference of business leaders and assured the President that “complete confidence will very soon be restored, if, as you advised, everybody goes to work and quits talking about the securities of our economic future, and, if there are no attempts made among the people to capitalize for personal or group advantage a situation which lends itself so readily to publicity.” Evidently the NAM shared Lippmann’s doubts about the competence of the people, though perhaps for different reasons.

  A year later, in the face of sharply mounting unemployment, Edgerton was holding his ideological fort. The most important cause of poverty, he said, lay in the failings of the unemployed themselves. Poverty “results not alone from involuntary unemployment, but more often from voluntary unemployment, thriftlessness, sin in various forms, disease, and other misfortunes.” Fred W. Sargent, railroad president and director of the Chamber of Commerce, gave his answer: “We should go back to the policies that have thus far made us great; to stop petitions for public improvement far beyond our means to afford; to realize that we cannot solve our problems of governmental finance by easy expedients, and to admit that nothing can take the place of collective thrift, self-denial and intelligent citizen participation in government.”

  Citizen participation in government? Were the leaders of industry urging the mass public to go into politics to protect its own interests? Only if it was intelligent participation—that is, not harmful to property and social stability. Noting that “there are already formulated and in process a variety of legislative proposals on public unemployment insurance, old age pensions, and similar measures for the consideration of the Legislatures which are to meet in 1931,” Edgerton warned that all such proposals were intended “in the name of expediency and social progress to shift individual responsibility to the already overburdened shoulders of government and industry and thereby take us a long step further towards the Socialistic goal, the abolition of private property.”

  Was there no role, then, for government in the crisis? Yes, there was a role—to fight crime. This was government’s greatest responsibility; there was no need, Edgerton said, “for it to become more concerned with or to look for other tasks.” Indeed, a sincere and successful attack on crime would promptly end the depression itself! “Driving crime from its appalling entrenchments in this land of boasted civilization” would itself “mean food to the hungry, clothes for the naked, jobs for the unemployed, peace in industry, and security to all.”

  At this point—when industry leaders were proposing to solve the great depression through crime-fighting—this leadership was clearly losing touch with economic reality. But the NAM did not speak for all or even most of industry—there were enlightened business leaders, and the most powerful and convinced of these was sitting in the White House—the “Great Engineer,” former Secretary of Commerce, now President, Herbert Hoover.

  Hoover saw his presidency as an exercise in moderate, rational government. “Our program,” he said later, “was one of deliberate purpose to do everything possible to uphold general confidence which lies at the root of maintained initiative and enterprise; to check monetary, security, and commodity
panics in our exchanges; ... to accelerate construction work so as to absorb as many employees as possible from industries hit by decreased demand; to hold up the level of wages by voluntary agreement and thus maintain the living standards of the vast majority who remain in employment; to avoid accelerating the depression by the hardship and disarrangement of strikes and lockouts; and by upholding consuming power of the wage earners to in turn support agriculture.”

  To the extent that he could deal with problems in an orderly, temperate manner, Hoover was reasonably successful with some of these policies. His troubles arose whenever the compelling needs of the time required him to move toward, or away from, ideas on which he was inflexible. Thus he had an overpowering faith in voluntary cooperation, local initiative, efforts by the Red Cross and charities, and if necessary governmental action by the states and localities—a faith he simply would not give up many months after it was clear that voluntarism of these sorts could not possibly break the grip of the depression. He maintained a zealous opposition to direct federal relief to the poor and the jobless because, he said, it would rob them of their character and initiative, and he stuck to this position long after no alternative to the “dole,” as Hoover preferred to call it, seemed feasible.

  If Hoover had shared Andrew Mellon’s conservative ideology, he might have stuck to orthodox finance, rigorous economy, and pro-business policies until the economy, purged of its waste and inefficiency, could return to rigorous capitalistic rules and norms. That was Mellon’s strategy; the Treasury Secretary, Hoover would remember, “had only one formula: ‘Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate …. purge the rottenness out of the system.’ ” But Hoover was too much the moderate, the liberal Republican, the critic of big finance to do this, and hence he was unable to embrace the kind of forthright alternative that a stronger leader might have followed in similar circumstances.