Economics and The Public Welfare

Chapter 47

Contradictory Policies

We have seen the contradiction in the New Deal between the policy of liberal foreign trade and foreign exchange stabilization on the one hand, and the policy of internal regimentation on the other. There are further contradictions. There is a contradiction between the policy of inflation and internal currency depreciation, and the policy of foreign exchange stabilization. And there is a contradiction between the policy of inflation and the policy of internal regimentation. There is a contradiction also between the policy of the Thomas Amendment inflation measure on the one hand, and the policy of the Glass Bill and the Securities Act, which look toward extreme conservatism in finance, on the other.

For inflationary measures to be effective there must be markets in which money can be used, and prices must be free to respond to the use of money. If, however, as we build up a flood of money, we simultaneously erect dams to prevent the use of money, as was done by the Securities Act and as was done by the policy of self-contained isolation which needed to retain high tariffs and even to increase tariffs if it were to be effective—the inflationary measures, which presupposed open markets, were neutralized. Both the agricultural act of the spring of 1933 and the National Industrial Recovery Act of 1933 looked toward internal regimentation, and both contained provisions for restrictions on imports. These were necessary to protect the higher agricultural prices and the higher industrial prices aimed at by these measures.

If our economic life had been a closely meshed mechanism, it would have been shattered to pieces by the various contradictory measures of the spring of 1933. Fortunately, however, our economic life is not a closely meshed mechanism, but rather a loosely articulated organism with a very tough hide and with an immense vitality. It could respond to the contradictory, painful stimuli by shrinking at both ends, by twisting and turning, and by enduring pain. It was not killed.