1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar

The Ludwig von Mises Institute

Advancing Austrian Economics, Liberty, and Peace

Advancing the scholarship of liberty in the tradition of the Austrian School

Search Mises.org

9

1930

By early 1930, people were generally convinced that there was little to worry about. Hoover's decisive actions on so many fronts—wages, construction, public works, farm supports, etc., indicated to the public that this time swift national planning would turn the tide quickly. Farm prices then seemed to be recovering, and unemployment had not yet reached catastrophic proportions, averaging less than 9 percent of the labor force in 1930. Such leaders as Hoover, William Green, and Charles Schwab issued buoyantly optimistic statements about early recovery, and Hoover was hailed on all sides as a great statesman. At the end of June, Hoover urged further state and city action to expand public works and thus cure unemployment, and on July 3rd, Congress authorized the expenditure of a giant $915 million public works program, including a Hoover Dam on the Colorado River.

More Inflation

Dr. Anderson records that, at the end of December, 1929, the leading Federal Reserve officials wanted to pursue a laissez-faire policy: "the disposition was to let the money market 'sweat it out' and reach monetary ease by the wholesome process of liquidation." The Federal Reserve was prepared to let the money market find its own level, without providing artificial stimuli that could only prolong the crisis.[1] But early in 1930, the government instituted a massive easy money program. Rediscount rates of the New York Fed fell from 4? percent in February to 2 percent by the end of the year. Buying rates on acceptances, and the call loan rate, fell similarly. At the end of August, Governor Roy Young of the Federal Reserve Board resigned, and was replaced by a more thoroughgoing inflationist, Eugene Meyer, Jr., who had been so active in government lending to farmers. During the entire year, 1930, total member bank reserves increased by $116 million. Controlled reserves rose by $209 million; $218 million consisted of an increase in government securities held. Gold stock increased by $309 million, and there was a net increase in member bank reserves of $116 million. Despite this increase in reserves, the total money supply (including all money-substitutes) remained almost constant during the year, falling very slightly from $73.52 billion at the end of 1929 to $73.27 billion at the end of 1930. There would have been a substantial rise were it not for the shaky banks which were forced to contract their operations in view of the general depression. Security issues increased, and for a while stock prices rose again, but the latter soon fell back sharply, and production and employment kept falling steadily.

A leader in the easy money policy of late 1929 and 1930 was once more the New York Federal Reserve, headed by Governor George Harrison. The Federal Reserve, in fact, began the inflationist policy on its own. Inflation would have been greater in 1930 had not the stock market boom collapsed in the spring, and if not for the wave of bank failures in late 1930.[2] The inflationists were not satisfied with events, and by late October, Business Week thundered denunciation of the alleged "deflationists in the saddle," supposedly inspired by the largest commercial and investment banks.[3]

The Smoot–Hawley Tariff

In mid-1930, another chicken born in 1929 came home to roost. One of Hoover's first acts upon becoming President was to hold a special session on tariffs, beginning in the spring of 1929. Whereas we have seen that a policy of high tariffs cum foreign loans was bound to hurt the farmers' export markets when the loans tapered off, Hoover's answer was to raise tariffs still further, on agricultural and on manufactured products. A generation later, Hoover was still to maintain that a high tariff helps the farmer by building up his domestic market and lessening his "dependence" on export markets, which means, in fact, that it hurts him grievously by destroying his export markets.[4] Congress continued to work on a higher tariff, and finally reported a bill in mid-1930, which Hoover signed approvingly. In short, it was at a precarious time of depression that the Hoover administration chose to hobble international trade, injure the American consumer, and cripple the American farmers' export markets by raising tariffs higher than their already high levels. Hoover was urged to veto the Smoot–Hawley Tariff by almost all the nation's economists, in a remarkable display of consensus, by the leading bankers, and by many other leaders. The main proponents were the Progressive bloc, the three leading farm organizations, and the American Federation of Labor.

No one had advocated higher tariffs during the 1928 campaign, and Hoover originated the drive for a higher tariff in an effort to help the farmers by raising duties on agricultural products. When the bill came to the House, however, it added tariffs on many other products. The increased duties on agriculture were not very important, since farm products were generally export commodities, and little was imported. Duties were raised on sugar to "do something for" the Western beet-sugar farmer; on wheat to subsidize the marginal Northwestern wheat farmers at the expense of their Canadian neighbors; on flaxseed to protect the Northwest farmers against Argentina; on cotton to protect the marginal Imperial Valley farmer against Egypt; on cattle and dairy products to injure the Canadian border trade; on hides, leather, and shoes; on wool, wool rags, and woolen textiles; on agricultural chemicals; on meat to hamper imports from Argentina; on cotton textiles to relieve this "depressed industry"; on velvets and other silks; on decorated china, surgical instruments, and other glass instruments; on pocket knives and watch movements.[5] The tariff rates were now the highest in American history.

The stock market broke sharply on the day that Hoover agreed to sign the Smoot–Hawley Bill. This bill gave the signal for protectionism to proliferate all over the world. Markets, and the international division of labor, were hampered, and American consumers were further burdened, and farm as well as other export industries were hindered by the ensuing decline of international trade.

One prominent protectionist drive was put on by the silver bloc. In February, the mining interests suggested an international monetary conference to raise and then stabilize silver prices, as well as to levy a tariff on silver. The resolution was put through the Senate in February, 1931, but the State Department could not interest foreign governments in such a conference. Main supporters of this price-raising scheme were the Western governors, at the behest of the American Silver Producers' Association, Senators such as Key Pittman of Nevada and Reed Smoot of Utah, J.H. Hammond, a mining engineer, Rend Leon, a New York banker, and F.H. Brownell, President of the American Smelting and Refining Company.

Hoover in the Second Half of 1930

During the second half of 1930, production, prices, foreign trade, and employment continued to decline. On July 29, Hoover called for an investigation of bankruptcy laws in order to weaken them and prevent many bankruptcies—thus turning to the ancient device of attempting to revive confidence by injuring creditors and propping up unsound positions. In August, it was revealed that merchant shipping construction had swelled from 170,000 tons in July, 1929, to 487,000 tons in July, 1930—due to Federal subsidies. On September 9, Hoover took an unusual step: to relieve the unemployment problem, and also to help keep wage rates up, the President effectively banned further immigration into the United States, and did so through a mere State Department press announcement. The decree barred all but the wealthiest immigrants as "public charges," in a few months reducing immigration from Europe by 90 percent.

Interestingly enough, Hoover's high-handed action came in defiance of previous Congressional refusal to agree to his proposal to cut immigration quotas in half, and it also came after the Senate had rejected a bill to suspend all immigration except by relatives for five years, offered by Senator Hugo Black (D., Ala.). Typical of the restrictionist, wage-raising arguments for blocking immigration was the charge of Senator Black that "foreign immigration has been utilized by the big business interests of the country as a direct weapon to break down the price of wages of the people of the land."[6] As might have been expected, William Green warmly endorsed Hoover's stand.

Reducing the labor force as a "cure" for unemployment is similar to "curing" a surplus of a certain commodity by passing a law prohibiting anyone from selling the product, and anticipated Hitler's "cure" for unemployment by forcibly sending married women back to the home. Hoover also records that he accelerated the deportation of "undesirable" aliens, again helping to ease the unemployment picture. He deported sixteen to twenty thousand aliens per year.[7] As a consequence, while the immigration law had already reduced net immigration into the United States to about 200,000 per year, Hoover's decree reduced net immigration to 35,000 in 1931, and in 1932 there was a net emigration of 77,000. In addition, Hoover's Emergency Committee on Employment organized concerted propaganda to urge young people to return to school in the fall, and thus leave the labor market.

At the end of July, Hoover organized a planning conference of leading organizations, designed to widen home ownership and bolster shaky home mortgages. The Planning Committee established by Hoover included representatives of the National Association of Real Estate Boards, the American Federation of Labor, the American Farm Bureau Federation, the National Farmers Union, the National Grange, the U.S. Chamber of Commerce, the American Institute of Architects, and the American Home Economic Association.

By October, Hoover apparently felt that the time had come for self-congratulation. In an address to the American Bankers' Association, he summed up his multi-faceted intervention as follows:

I determined that it was my duty, even without precedent, to call upon the business of the country for coordinated and constructive action to resist the forces of disintegration. The business community, the bankers, labor, and the government have cooperated in wider spread measures of mitigation than have ever been attempted before. Our bankers and the reserve system have carried the country through the credit . . . storm without impairment. Our leading business concerns have sustained wages, have distributed employment, have expedited heavy construction. The Government has expanded public works, assisted in credit to agriculture, and has restricted immigration. These measures have maintained a higher degree of consumption than would otherwise have been the case. They have thus prevented a large measure of unemployment. . . . Our present experience in relief should form the basis of even more amplified plans in the future.

So they did form the basis-of plans that aggravated the depression even further. To the bankers, Hoover delivered his pet theory of the crash: that it was caused by credit being too scarce to commercial borrowers, it being unduly "absorbed" by speculation. He hailed the Federal Reserve System as the great instrument of promoting stability, and called for an "ample supply of credit at low rates of interest," as well as public works, as the best methods of ending the depression.

The wage agreement that Hoover had extracted at the White House Conferences unfortunately held firm for a long while, thus becoming the prime generator of unemployment. Hoover still proudly records that the wage agreement lasted in the organized trades throughout his term, while most of the non-union employers also complied. In August, William Green had praised the stabilizing effects of Hoover's program, emphasizing its success in maintaining wage rates. And in October, when Green presented Hoover to the annual Convention of the A.F. of L., he was exuberant:

The great influence which [Hoover] exercised upon that occasion [the White House Conferences] served to maintain wage standards to prevent a general reduction of wages. As we emerge from this distressing period of unemployment we . . . understand and appreciate the value of the service which the President rendered the wage earners of the country.

Green had no doubt that Hoover's "great influence served to maintain wage standards and prevent a general reduction of wages."

In his address before the Convention, Hoover returned to the glorious theme of the White House Conferences:

At these White House Conferences the leaders of business and industry undertook to do their utmost to maintain the rate of wages.

and to distribute work among the employees. He hailed the success of that pledge, for the

great manufacturing companies, the railways, utilities, and business houses have been able to maintain the established wages. Employers have spread their employment systematically.

The spreading of employment was, in fact, a spreading of unemployment, and helped to maintain the existing wage scales by keeping these unemployed off the labor market. Hoover virtually admitted this when he said:

Through distribution of employment large numbers of workers have been saved from being forced into competition for new jobs.

Another evil in this work-sharing program was that employers were not permitted to discharge their least marginally-productive workers—those whose productivity was below the artificially high wage-rates. Hence, costs to the employers became greater, and they suffered aggravated losses.

Hoover also commended the businessmen for their great resolution in maintaining wage scales even in the face of falling prices,[8] and pointed out that public works had "taken up the slack" and that railroads and public utilities had been induced to increase their construction by $500 million.

Also in October, Hoover launched the first of repeated attacks against his old bete noire: the New York Stock Exchange. He threatened Federal regulation of the Exchange despite the fact that it was wholly under the jurisdiction of New York State and that therefore such regulation would be patently unconstitutional. Hoover forced Richard Whitney, head of the Exchange, to agree "voluntarily" to withhold loans of stock for purposes of short-selling. Short-selling was—and usually is—the chief object of attack by demagogues who believed that short sales were somehow fundamentally responsible for falling stock prices, thereby forgetting that for every short seller there must necessarily be a buyer, and also that short-selling accelerates the necessary depression-adjustment in stock prices. Senator Smith Brookbart of Iowa had, as early as January, 1930, introduced a bill to prohibit all short selling.

In the same month, Hoover formed a nationwide organization for the relief of distress. Colonel Arthur Woods was appointed to head the President's Emergency Committee for Employment; in the group were Fred C. Croxton, Edward Bernays, and Dr. Lillian Gilbreth.[9] As in Hoover's previous venture in 1921, the committee organized committees in each state and locality for unemployment relief. Shortly afterward, Hoover again asked for enlarged Federal public works appropriations. One public work already begun in September was the appropriately named "Hoover Dam" in Arizona, a government project to sell water and electric power. The New Deal was later happy to complete the project, as it also did with the Grand Coulee Dam on the Columbia River, and with dams in the Central Valley of California.[10]

In Hoover's second annual message in December, the President, while conceding that factory employment had fallen by 16 percent since 1928, and manufacturing production had declined by 20 percent, proudly pointed out that consumption and wage rates had held to their former levels, bank deposits were 5 percent higher, and department store sales only 7 percent less. Unfortunately, Hoover did not attempt to relate these movements, or to realize that the declines of employment and production were the consequences of policies that bolstered consumption and wage rates. Hoover conceded that wheat and cotton prices were 40 percent below 1928, and farm prices 20 percent lower, but he hailed the achievement of the FFB in keeping wheat prices 50 percent higher than that of Canada, and wool prices 80 percent higher than in Denmark. Hoover apparently never saw that keeping prices above the world market would be self-defeating, since few customers would buy American products at prices artificially higher than they could obtain abroad.

In keeping with the general tone of optimism, the American Economic Association stated at year's end that recovery in the spring of 1931 seemed assured. More astute than these "established" economists were a few others who operated with better theoretical tools. Thus, at the end of July, H. Parker Willis charged, in an editorial in the New York Journal of Commerce, that the current easy money policy of the Federal Reserve was causing the increase in bank failures, "chiefly due to [their] inability to liquidate." Willis pointed out that the country was suffering from frozen and wasteful malinvestments in plants, buildings, and other capital, and that the depression would only be cured when these unsound credit positions were liquidated.[11] The economist Joseph Stagg Lawrence upheld thrift and attacked the prevalent idea that consumption led to prosperity. He pointed out that purchases of consumer goods were being maintained, while the main declines were taking place in producers' goods industries, such as construction, steel, and freight traffic.[12]

One of the best counsels on the depression was set forth in an annual report by Albert H. Wiggin, chairman of the board of the Chase National Bank, in January, 1931. We can assume that he was helped in making the report by Dr. Benjamin M. Anderson, economist for the bank. Wiggin called for the reduction of the Federal capital gains tax, pointing out that the 12? percent tax on realized capital gains induced people to hold onto their stock rather than sell during the boom, and then fostered selling during a depression, in order to take the realized stock losses. Wiggin also urged reduction in the tariff, noting that we had merely delayed the adverse effects of the protective tariff from 1924 until 1929 by heavy purchase of foreign bonds. With the decline in the foreign bond market, foreign countries no longer had the funds to purchase our exports. Only a reduction in our tariffs would permit American exports to flourish. Wiggin further pointed out that production had declined far more than consumption, thus indicating that it was not lack of "purchasing power" that was causing the depression. Finally, he noted that in the 1921 depression, costs and wages had been quickly scaled down, and unsound activities liquidated:

Past costs of production were forgotten, and goods were sold for what the market would pay . . . [but] we attempted, as a matter of collective policy, to hold the line firm following the crash of 1929. Wages were not to be reduced, buying by railroads and construction by public utilities were to be increased, prices were to be maintained, and cheap money was to be the foundation. The policy has . . . failed. . . . It is bad policy for a government, or for an industry by concerted act, to try to keep prices permanently above the level which the supply and demand situation justifies. . . . We must keep the markets open and prices free. It is not true that high wages make prosperity. Instead, prosperity makes high wages. When wages are kept higher than the market situation justifies, employment and the buying-power of labor fall off. . . . Our depression has been prolonged and not alleviated by delay in making necessary readjustments.[13]

Unfortunately, Wiggin's wise advice went unheeded.

The Public Works Agitation

While a few economists gave sound advice to little avail, scores of others helped make matters worse by agitating for a broad public works program. The Employment Stabilization Act had first been introduced into the Senate by Senator Robert Wagner of New York in 1928, under the inspiration of the veteran public works agitator Otto Tod Mallery as part of a comprehensive plan of government intervention to combat unemployment.[14]

The act provided for an Employment Stabilization Board, consisting of several Cabinet officers, to increase public works in order to stabilize industry and relieve unemployment in a depression. In early 1930, Senator Wagner seized the opportunity to introduce his program again. He asserted, with due consistency, that since we now had a Federal tariff and a Federal Reserve System, why not also accept the responsibility for unemployment? No one thought to answer Wagner that his logic could be turned around to indicate repeal of both the protective tariff and the Federal Reserve. Wagner's bill authorized $150 million per annum for his program.

The California Joint Immigration Committee presented as an "alternative" to the Wagner Bill a proposal of its own to restrict immigration, thus preventing aliens from competing with high-wage American workers, and preventing them from breaking down an artificial wage scale. This bill was supported by the American Legion of California, the California Federation of Labor, and the Native Sons of the Golden West. Hoover granted their request in September. For the Wagner Bill, the main witnesses in the Senate were the inevitable John B. Andrews of the American Association for Labor Legislation, William Green, Frances Perkins, Norman Thomas of the Socialist Party, and James A. Emery of the National Association of Manufacturers. There was, indeed, very little opposition in the Senate: Senator Hiram Johnson (R., Calif.), head of the subcommittee considering the measure, approved, as did Senator Vandenberg (R., Mich.) and President Hoover. An outpouring of the nation's economists endorsed the Wagner Bill, in petitions presented to Congress by Professors Samuel Joseph of the City College of New York, and Joseph P. Chamberlain of Columbia University. Joseph's petition asserted that the bill laid the foundation for a national program to relieve unemployment, and that the principle of public works was "widely accepted" by economists as a means of stimulating construction and putting men to work.[15]

The Senate passed the Wagner Bill by an unrecorded vote. The bill ran into delays in the House despite the almost complete lack of opposition in the hearings and the pressure for the bill exerted by Andrews, Green, Perkins, Emery, Douglas, Foster and Catchings. Representative George S. Graham (R., Penn.), Chairman of the Judiciary Committee, managed to amend the substance out of the bill, and thus to deadlock the Senate-House Conference and block the bill.[16] In the meanwhile, Congress approved the various Hoover requests for additional public works appropriations, although one $150 million request was cut to $116 million.

In December, 1930, the Emergency Committee for Federal Public Works, headed by Harold S. Butenheim, editor of American City, appealed for large-scale borrowing of one billion dollars for public works, and the plea was endorsed by 93 leading economists. Among these were Thomas S. Adams, Thomas Nixon Carver, Edgar S. Furniss, Edwin R.A. Seligman, Leo Wolman, and many of the names on the Wagner Bill petitions.[17] Finally, in February, 1931, Congress passed the Employment Stabilization Act in original form and Hoover gladly signed the measure. He quickly designated the Secretary of Commerce as chairman of the Federal Employment Stabilization Board.[18] The Senate also did something in the same month destined to have far-reaching effects in the future: it passed the Wagner resolution to study the establishment of Federal unemployment insurance.

Behind the scenes, Gerard Swope, president of General Electric, urged a much larger public works plan upon Hoover. In September, 1930, Swope proposed to Hoover an immediate one billion dollar bond issue for Federal public works, to be matched by another one billion dollars similarly raised by state and local governments, under Federal guarantee. Swope's favorite argument was to point to wartime, with its bold national planning, as the ideal to be emulated. Fortunately, Hoover's own leanings in this direction were much too cautious to allow the adoption of Swope's proposal.[19]

Also urging Hoover further than he would go was Colonel Arthur Woods, head of the President's Emergency Committee for Employment, who suggested a $750 million federal-state public-works program, including a Federal Reconstruction Board for loans to states for public works.[20]

The Fiscal Burdens of Government

In the pleasant but illusory world of "national product statistics," government expenditures on goods and services constitute an addition to the nation's product. Actually, since government's revenue, in contrast to all other institutions, is coerced from the taxpayers rather than paid voluntarily, it is far more realistic to regard all government expenditures as a depredation upon, rather than an addition to, the national product. In fact, either government expenditures or receipts, whichever is the higher, may be regarded as the burden on private national product, and subtraction of the former figure from Gross Private Product (GPP) will yield an estimate of the private product left in private hands. The ratio of government depredation (government expenditures or receipts, whichever is the higher) over Gross Private Product yields the approximate percentage of government depredation of the private product of the economy.[21]

In a depression, it is particularly important that the government's fiscal burden on the economy be reduced. In the first place, it is especially important at such a time to free the economy from the heavy load of government's acquiring resources, and second, a lowering of the burden will tend to shift total spending so as to increase investment and lower consumption, thus providing a double impetus toward curing a depression.

How did the government react when the 1929 depression hit? Were fiscal burdens on the economy raised or lowered? Fortunately, detailed statistics are available from 1929 on, permitting us to estimate the answer to that question. In 1929, the Gross National Product (GNP) was $104.4 billion; Gross Private Product was $99.3 billion. (See our calculations in the Appendix.) Total Federal depredations on the private product equaled Federal receipts, which were $5.2 billion. (Federal expenditures were a bit lower at $4 billion.) State and Local depredations were $9 billion, the figure for expenditures, receipts being estimated at $8.8 billion. Total government depredations on the private product in 1929 were, therefore, $14.2 billion, a burden of 14.3 percent of the gross private product (or, if we wish, 15.7 percent of the Net Private Product). In 1930, GNP fell to $91.1 billion and GPP to $85.8 billion. Federal expenditures rose to $4.2 billion, while receipts fell to $4.4 billion; state and local expenditures rose to $9.7 billion, and state and local receipts to $9.1 billion. Total government depredations in 1930, therefore, remained about level at $14.1 billion. But this now constituted 16.4 percent of the Gross Private Product, and 18.2 percent of the net private product. The fiscal burden of government had substantially increased when it should have been lowered.

Given any particular tax rates, we would expect revenue to fall in a depression, as national income fell, if government simply remained passive. Government's particular responsibility, then, is to reduce its expenditures. Instead, expenditures rose by $800 million. Of this, $700 million came from state and local governments (the major categories: $170 million increase in salaries to employees; $300 million increase in construction spending). The Federal government increased its expenditure by $130 million, of which $50 million was new construction. The Hoover policy of stimulating public works was already taking effect.[22]

During 1929, the Federal government had a huge surplus of $1.2 billion ($4.1 billion receipts, $2.9 billion expenditures excluding government enterprises; an estimated $5.2 billion receipts and $4.1 billion expenditures including government enterprises), and it is to the Hoover administration's credit that as soon as the depression struck, Hoover and Mellon suggested that the top normal personal income tax rate be cut from 5 percent to 4 percent, and the corporate income tax be reduced from 12 percent to 11 percent.[23] This suggestion was speedily enacted by Congress at the end of 1929. As a partial consequence, Federal receipts fell to $4.4 billion in 1930 (or $3.3 billion excluding government enterprises). Federal expenditures, in the meanwhile, rose to $4.2 billion ($3.1 billion excluding government enterprises), still leaving a considerable surplus. The Federal fiscal burden on the private product remained approximately the same, falling from 5.2 percent to 5.1 percent of gross private product, and from 5.8 to 5.7 percent of net private product. The main onus for increasing the fiscal burden of government during 1930 falls upon state and local governments, which increased their rate of depredation from 9.1 percent to 11.3 percent of the gross private product, from 9.9 percent to 12.5 percent of the net product.


  1. Benjamin M. Anderson, Economics and the Public Welfare (New York: D. Van Nostrand, 1949), pp. 222-23.

  2. The New York Federal Reserve also continued to lead in collaborating with foreign central banks, often against the wishes of the administration. Thus, the Bank of International Settlements, an attempt at an inter-central banks' central bank, instigated by Montagu Norman, treated the New York Bank as America's central bank. Chairman of the BIS's first organizing committee was Jackson E. Reynolds, a director of the New York Federal Reserve, and its first president was Gates W. McGarrah, who resigned as Governor of the New York Reserve Bank in February, 1930, to assume the post. J.P. Morgan and Company supplied much of the American capital in the new Bank. In November, Governor Harrison made a "regular business trip" abroad to confer with other central bankers, and discuss loans to foreign governments. In 1931, the New York Federal Reserve extended loans to the BIS. Yet there was no legislative sanction for our participation in the Bank.

  3. Business Week (October 22, 1930). Dr. Virgil Jordan was the chief economist for Business Week—then as now, a leading spokesman for "enlightened" business opinion.

  4. Herbert Hoover, Memoirs of Herbert Hoover (New York: Macmillan, 1952), vol. 2, pp. 291ff. See John H. Fahey, "Tariff Barriers and Business Depressions," Proceedings of the Academy of Political Science (June, 1931): 41ff.

  5. See Frank W. Taussig, "The Tariff Act of 1930," Quarterly Journal of Economics (November, 1930): 1-21; and idem, "The Tariff, 1929-1930," Quarterly Journal of Economics (February, 1930): 175-204.

  6. Robert A. Divine, American Immigration Policy, 1924-1952 (New Haven, Conn.: Yale University Press, 1957), p. 78.

  7. The labor union movement applauded the program, with William Green urging increased Congressional appropriations for the Federal border patrol to keep out immigrants. In California, Filipino field hands were beaten and shot to keep them from employment in the agricultural valleys. Irving Bernstein, The Lean Years: A History of the American Worker, 1920-1933 (Boston: Houghton Mifflin, 1960), p. 305.

  8. In the same month, October, however, Hoover's aide Edward Eyre Hunt, writing to Colonel Woods, was critical of whatever wage cuts had occurred. Bernstein, The Lean Years: A History of The American Worker, 1920-1933, p. 259.

  9. Bernays's major contribution was insistence on the public-relations superiority of the word "employment," rather than "unemployment," in the name of the organization. Ibid., pp. 302-03.

  10. Hoover's interest in governmental dams by no means began with the depression, as witness his proud launching of the Boulder Dam in December, 1928. That private business is not always a reliable champion of free private enterprise, is shown by the approval of the dam by such utility companies as the Southern California Edison Company, which hoped to benefit by purchasing cheap, subsidized government power. In addition, private power companies saw Boulder Dam as a risky, submarginal project plagued by grave engineering difficulties, and were content to have the taxpayers assume the risk.

  11. On the other hand, it must be admitted that Hoover staunchly resisted Congressional attempts during 1931 and 1932 to launch into socialized electric power production and distribution at Muscle Shoals, a project strongly opposed by private power companies and later enlarged by the New Deal into the Tennessee Valley Authority (TVA). See Harris Gaylord Warren, Herbert Hoover and the Great Depression (New York: Oxford University Press, 1959), pp. 64, 77-80.

  12. Commercial and Financial Chronicle 131 (August 2, 1930): 690-91.

  13. Joseph Stagg Lawrence, "The Attack on Thrift," Journal of the American Bankers' Association (January, 1931): 597ff.

  14. Commercial and Financial Chronicle 132 (January 17, 1931): 428-29.

  15. See U.S. Senate, Committee on Banking and Currency, History of the Employment Stabilization Act of 1931 (Washington, D.C.: U.S. Government Printing Office, 1945); Joseph E. Reeve, Monetary Reform Movements (Washington, D.C.: American Council on Public Affairs, 1943), pp. 1ff.; U.S. Senate, Committee on Judiciary, 71st Congress, 2nd Session, Hearings on S. 3059 (Washington, D.C., 1930).

  16. The economists and others who signed these petitions included the following:

    • Edith Abbott
    • Asher Achinstein
    • Emily Green Balch
    • Bruce Bliven
    • Sophinisba P. Breckenridge
    • Paul F. Brissenden
    • William Adams Brown, Jr.
    • Edward C. Carter
    • Ralph Cassady, Jr.
    • Waddill Catchings
    • Zechariah Chafee, Jr.
    • Joseph P. Chamberlain
    • John Bates Clark
    • John Maurice Clark
    • Victor S. Clark
    • Joanna C. Colcord
    • John R. Commons
    • Morris L. Cooke
    • Morris A. Copeland
    • Malcolm Cowley
    • Donald Cowling
    • Jerome Davis
    • Davis F. Dewey
    • Paul H. Douglas
    • Stephen P. Duggan
    • Seba Eldridge
    • Henry Pratt Fairchild
    • John M. Ferguson
    • Frank A. Fetter
    • Edward A. Filene
    • Irving Fisher
    • Elisha M. Friedman
    • A. Anton Friedrich
    • S. Colum Gilfillan
    • Meredith B. Givens
    • Carter Goodrich
    • Henry F. Grady
    • Robert L. Hale
    • Walton Hamilton
    • Mason B. Hammond
    • Charles O. Hardy
    • Sidney Hillman
    • Arthur N. Holcombe
    • Paul T. Homan
    • B.W. Huebsch
    • Alvin S. Johnson
    • H.V. Kaltenborn
    • Edwin W. Kemmerer
    • Willford I. King
    • Alfred Knopf
    • Hazel Kyrk
    • Harry W. Laidler
    • Corliss Lamont
    • Kenneth S. Latourette
    • William Leiserson
    • J.E. LeRossignol
    • Roswell C. McCrea
    • Otto Tod Mallery
    • Harry A. Millis
    • Broadus Mitchell
    • Harold G. Moulton
    • Paul M. O'Leary
    • Thomas I. Parkinson
    • S. Howard Patterson
    • Harold L. Reed
    • Father John A. Ryan
    • Francis B. Sayre
    • G.T. Schwenning
    • Henry R. Seager
    • Thorsten Sellin
    • Mary K. Simkhovitch
    • Nahum I. Stone
    • Frank Tannenbaum
    • Frank W. Taussig
    • Ordway Tead
    • Willard Thorp
    • Mary Van Kleeck
    • Oswald G. Villard
    • Lillian Wald
    • J.P. Warbasse
    • Colston E. Warne
    • Gordon S. Watkins
    • William O. Weyforth
    • Joseph H. Willits
    • Chase Going Woodhouse Matthew Woll

    Also involved in the agitation, by virtue of their being officers and members of the American Association for Labor Legislation during this period, were the following economists and other intellectual leaders:

    • Willard E. Atkins
    • C.C. Burlingham
    • Stuart Chase
    • Dorothy W. Douglas
    • Richard T. Ely
    • Felix Frankfurter
    • Arthur D. Gayer
    • Harold M. Groves
    • Luther Gulick
    • Mrs. Thomas W. Lamont
    • Eduard C. Lindeman
    • William N. Loucks
    • Wesley C. Mitchell
    • Jessica Peixotto
    • Donald Richberg
    • Bernard L. Shientag
    • Sumner H. Slichter
    • Edwin S. Smith
    • George Soule
    • William F. Willoughby
    • Edwin E. Witte
  17. Bernstein, The Lean Years: A History of The American Worker, 1920-1933, p. 304.

  18. See Joseph Dorfman, The Economic Mind in American Civilization (New York: Viking Press, 1959), vol. 5, pp. 674-75.

  19. The following month, five Progressive Senators called a conference to agitate for a gigantic $5 billion public works program; the conference was addressed by Detroit's progressive Mayor, Frank Murphy, Professor Leo Wolman, and Father John A. Ryan. Senator LaFollette and William Randolph Hearst also called for a similar measure.

  20. See David Loth, Swope of GE (New York: Simon and Schuster, 1958), pp. 198-200.

  21. Bernstein, The Lean Years: A History of The American Worker, 1920-1933, p. 304.

  22. Generally, government expenditures are compared with Gross National Product (GNP) in weighing the fiscal extent of government activity in the economy. But since government expenditure is more depredation than production, it is first necessary to deduct "product originating in government and in government enterprises" from GNP to arrive at Gross Private Product. It might be thought that total government expenditures should not be deducted from GPP, because this involves double counting of government expenditures on bureaucrats' salaries ("product originating in government"). But this is not double counting, for the great bulk of money spent on bureaucratic salaries is gathered by means of taxation of the private sector, and, therefore, it too involves depredation upon the private economy. Our method involves a slight amount of overcounting of depredation, however, insofar as funds for government spending come from taxation of the bureaucrats themselves, and are therefore not deducted from private product. This amount, particularly in the 1929-1932 period, may safely be ignored, however, as there is no accurate way of estimating it and no better way of estimating government depredation on the private sector.

  23. If government expenditures and receipts are just balanced, then obviously each is a measure of depredation, as funds are acquired by taxation and channelled into expenditures. If expenditures are larger, then the deficit is either financed by issuing new money or by borrowing private savings. In either case, the deficit constitutes a drain of resources from the private sector. If there is a surplus of receipts over expenditures then the surplus taxes are drains on the private sector. For a more extended discussion, and a tabulation of estimates of these figures for the 1929-1932 period, see the Appendix.

  24. While the data in the Appendix below list the rise in Federal expenditure to be $200 million, this is the effect of rounding. The actual increase was $133 million.

  25. See Sidney Ratner, American Taxation (New York: W.W. Norton, 1942), p. 443.