Economics and The Public Welfare

Chapter 55

Governmental Confusion, Governmental Hostility, and Private Enterprise

The impact of all these multitudinous measures—industrial, agricultural, financial, monetary, and other—upon a bewildered industrial and financial community was extraordinarily heavy. We must add the effect of continuing disquieting utterances by the President. The President had castigated the bankers in his inaugural speech. He had made a slurring comparison of British and American bankers in a speech in the summer of 1934. When Government bonds broke badly in September of 1934, conversations were held with various members of the Cabinet and others in Washington, as well as with Colonel House in New York. One Cabinet member said that, regardless of the merits of the individual reforms which the President had been pushing, the pace was obviously too fast, more was being done than could be digested. But he added that more was coming, including a Social Security Act which would impose heavy tax burdens upon business corporations. He and others of the President’s advisers were trying to hold him down, and were trying to get him to make reassuring statements to offset the bad effects of things which he had said regarding bankers and finance. But his hopes were not high.

At this same time the effort was made to find in Washington if there were any man who understood it all, if there were any man charged with responsibility for seeing all the different parts of the New Deal in their interrelations, if there were any man who knew all the new bureaus that had been created and could see the Government as a whole. One could find no such man. One could find no man who claimed this knowledge or who knew anybody else who had it. We were turning loose forces of incalculable magnitude so rapidly that the men who were in official position could know only the parts for which they themselves had administrative responsibility.

That private enterprise could survive and rally in the midst of so great a disorder is an amazing demonstration of the vitality of private enterprise. It did revive. From the extreme gloom of September, 1934, there came a rally in the autumn.

Through manipulation by the Treasury or the Federal Reserve banks, Government bonds rose in price. The yield on three- to five-year Treasury notes, which had risen from 1 1/2% to nearly 1/2%, dropped again to 1 3/4% by the end of the year.1

The price of industrial stocks moved up very moderately in the autumn. The Federal Reserve Index of Production (1923-1925 = 100), which had dropped to 71 in September of 1934, moved up to 90 by January of 1935. Levels were still very low, but the vitality of private enterprise under extremely adverse conditions was manifest.

• 1This point will be discussed at length in Chap. 34.