THE three years that followed the Wall Street crash of October, 1929, were a growing nightmare to every group among us. Our national production and national income fell lower and lower, and that shrinkage was felt by all—agriculture and industry, workers and employers, small business and large, landlords and stockholders, factory hands, white-collar workers, and professional people. Each one of us saw his income shrink as our national economic life contracted.

The pattern varied from group to group, but the fundamental fact was the same.

Our farmers tried persistently to make up for lower prices by producing more, but the glutted markets meant still lower prices. As a result, farm incomes dropped steadily.

Industry, with greater control over its production, cut prices cautiously. When even that didn’t help to hold up sales, businessmen reduced their output into line with what people would still buy at those prices. For both reasons, business income also dropped steadily and more and more firms went into the red.

The factory and white-collar workers who weren’t needed to get the reduced production found themselves jobless. The workers who still had jobs found themselves taking pay cuts, a new one every six or eight months. All workers saw their incomes fall. For millions they fell to zero.

Doctors and lawyers still found people in their waiting rooms, but they had more trouble collecting their fees even when they reduced them from normal levels. Their incomes dropped like the rest. America was not alone in its rapidly growing economic misery. There was mounting depression throughout the world—in the agricultural countries like Argentina and the great industrial countries like Britain and Germany. All were sucked into the down-ward spiral. Each nation in turn helped pull down the others. We in America were pulled down by the other countries, but they in turn were pulled down by us. And just because we were the biggest and most powerful and were falling the fastest, we had more effect on them than they on us.

Here at home the official remedy for the depression was traditionally simple—just endure it and hope for the best.

President Hoover did call a White House meeting of leading industrialists promptly after the crash and asked them to pledge not to cut their payrolls. But he wasn’t very persuasive and he couldn’t be very persuasive, for he offered no action on the part of government that could provide any assurance that if they followed his advice they would stay out of the bankruptcy courts.

As the depression deepened, there was some talk of expanding public works to provide jobs and put purchasing power into circulation. But there was even stronger talk of government economy, and the economy talk won out.

Government didn’t expand public works to add to the number of private jobs. Instead it laid off employees of its own. Government didn’t put more purchasing power into circulation to offset the cut in purchasing power being paid out by business. Instead, it made the shrinkage of purchasing power worse by cutting its own payrolls.

As the depression grew worse still, there was an increasing clamor that something be done. This was resisted. Some said that the depression was necessary to squeeze the “unsound elements” out of the economy and so to prepare the way for a sound recovery. Perhaps some people can understand what this means. Perhaps some people can understand how shrinking purchasing power, in the city and on the farm, how business losses and bankruptcies and farm foreclosures can cure what ails our economy, without crushing our people in the process. But so far I’ve never found anyone who could make it clear to me.

Others simply reminded us that we had always come out of past depressions and we would undoubtedly come out of this one. “So just tighten your belts a little further,” they advised. “It may take a little time, but be patient and in due course everything will straighten itself out.”

It is not easy to recall how dreadful conditions became. The price of corn in Iowa had fallen from 90 cents a bushel in 1929 to 59 cents in 1930, but by the end of 1932 it was selling at the unbelievable price of 12 cents a bushel. And the heartbreak that this meant to the Iowa corn farmers was matched by that felt by our dairymen in Vermont, New York, and Wisconsin, our cotton growers in Mississippi, the tobacco raisers of the Carolinas, and our wheat and cattle men of the West.

Milk at $1.08 a hundredweight. Cotton at 4.5 cents a pound. Tobacco at 8.5 cents a pound. Wheat at 32 cents a bushel, and cattle at $3.28 a hundredweight! Such were the lows to which the Great Depression dragged the farmers of this country.

In the cities, there was the same heartbreak but often even greater misery. In 1932, 15 million workers tramped the streets, hopelessly looking for jobs. Other millions were working only a day or two each week, and everyone felt the haunting fear that the next pay envelope would be the last.

And what about business? Did businessmen come off any better? Hardly. In the single year 1932 over 30,000 firms went to the wall. In that year 75 per cent of all American corporations were in the red. Business lost a total of 6 billion dollars. There was plenty of heartbreak in those figures, too.

As we look back today, it seems incredible that millions of us were willing to go hungry while crops rotted in the fields, that millions of us were willing to go without all the things we needed so badly, while factories stood idle and men lined up everywhere asking for jobs.

What that senseless waste cost us in misery and frustration, in broken hopes and broken lives, cannot be calculated. But we can calculate how much work went undone because the jobs weren’t there and how much output went unproduced because the factories were idle.

Between 1929 and 1940 the depression cost us 88 million man-years of lost work. It cost us 350 billion dollars of goods and services that were never produced. That’s a lot of work and a lot of output for a country even as rich as ours to pour down the drain. If we had kept those men on the job, if we had got that output, here’s what it could have meant to us.

We could have built 10 million additional homes, a new home for every third family. We could have had 5000 new hospitals and 7500 new schools— both of which we still need badly. We could have harnessed five more great rivers—as we did harness the Tennessee—to produce cheap power, cheap fertilizer, cheap transportation, and to protect the river regions from the devastation of floods. Tens of thousands of more miles of modern highways could have added to our national system of roads.

In addition we could have had 20 million more automobiles than we actually bought during these years; 40 million more radios; 40 million washing machines and vacuum cleaners, too. For the first time every family in the land could have had enough food and the right food. We could have had 400 million more men’s suits and 1200 million more women’s dresses, together with 200 million coats, so that none of us need have been shabby.

Most important of all for many families, we could have paid an additional billion and a half doctors’ and dentists’ bills. And every family that didn’t have a vacation in the country or at the shore during these years could have had one every year.

All these things and more we could have built between 1929 and 1940 if all of our people could have been provided with jobs—if, that is, we had licked the problem of unemployment.

We didn’t see all these things then as clearly as we see them now. But we knew that something was terribly wrong and we showed it in the national election of 1932. We had had enough of do-nothing government; we wanted action. And we got it!

Before I go on to that, there is an interesting point I would like to make. When trouble came in the early thirties, there was plenty of talk that the free-enterprise system was doomed, that it couldn’t work, that it had to be changed.

But did we change our system? No, we changed the administration of our government instead. This is a tribute to the good sense of the American people. They rightly put their finger on where the trouble lay. That is where they changed things.

This is something that some nervous businessmen should remember. At the bottom of the depression, when our free-enterprise system was working at its very worst and was in fact approaching paralysis, the American people still wanted to keep it.

In the election of 1932 there was no broad group, neither workers, nor farmers, nor businessmen, who voted to change the system. They voted for an administration that they believed would keep the system and make it work. That’s something some of us should keep in mind the next time we are tempted to label each new proposal “communistic.”

And it’s something politicians should keep in mind, too. The people of this country want the free-enterprise system, but they want it to work. And they know where the final responsibility lies for making it work. They know business alone can’t carry that responsibility, that farmers alone can’t carry it, that workers alone can’t carry it.

They know that final responsibility for the general welfare, for making our system work for all of us, must rest on all of us through our government.

I have said that in the election of 1932 the people voted for action and that action was what they got. In the early months of 1933, after a steady drift to lower and still lower levels of production and income, and before the new administration had taken office, our economic system began to fall apart at the seams. Bank failures, which had been increasing at an ominous rate, suddenly spread like a prairie fire, whipping across whole states at a time. Men rushed to save what little they had left. The result was sheer panic.

That was the situation which confronted the new president when he took office in March. He moved swiftly to correct it. After closing the remaining banks to permit a few days of stocktaking, he reopened them, at the same time making it clear that they had the full strength of the national government behind them. The panic was dispelled. Our banking system began to recover. And soon legislation was passed establishing a national system of deposit insurance that made future bank runs almost impossible.

The New Deal did not begin with a blueprint and move methodically step by step. It moved quickly and wherever the need was most acute. It was the banking situation that called for immediate attention and so it was banking legislation that was first enacted. But there were dozens of other situations that were scarcely less urgent. And so, soon there were dozens of measures that were thrown into the Congressional hopper.

To provide jobs and income quickly there was emergency relief, the Civil Works Administration, and a broad public-works program. Before long, CWA and PWA signs dotted the landscape of our cities and villages. Everybody remembers that.

Matching the swiftness of these moves on the banking front and on the relief and public-works front, there was action to stop the foreclosure of homes and the foreclosure of farms. There was action to raise wages and to restore prices to more profitable levels. There was action to establish a floor under wages and to provide insurance against the risks of old age and unemployment.

Some of the moves were made to speed recovery, some to provide long-needed reforms. But always the helping hand of government was extended—to the farmer, to the businessman, to the workers, to the home builder, to the investor. Everywhere the effort was to create jobs, to get purchasing power flowing, to get the wheels of industry turning again.

There are tens of millions of Americans who will always remember Franklin Roosevelt with deep affection because the steps that were taken meant the difference between going hungry and cold and having some food on the table and some coal in the stove.

There are many others who still shudder at the very mention of the New Deal, and who have never been able to understand why so many of their fellow citizens were devoted to Mr. Roosevelt. I think it must be because, never having gone hungry and cold themselves, they cannot imagine what a difference it makes to be hungry and cold no longer.

There was much waste and inefficiency and some politics in relief, national and local. Certainly these programs don’t furnish a model for dealing with unemployment. But the situation was desperate and desperate measures were called for. Those who today look back and see only the mistakes that were made miss the point of the story.

A neat and orderly and efficient government with Congressional and public understanding could have prevented the conditions of 1932. Once these conditions had been allowed to develop, neatness and orderliness for the time being were no longer possible.

The succeeding years were to see the early emergency measures added to, amended, replaced. They were to see some, such as the NRA, struck down by the courts. But always there was a new program or a combination of programs. Always the administration was “trying something and if that didn’t work, trying something else.” Always there was action, action directed toward carrying out more clearly the recognized responsibility of government for the general welfare.

The “somethings” seemed to work. Or did they? I would be the last to defend every action that was taken by the New Deal. As I have already said, there was nothing resembling a plan, a blueprint. There was no program with its parts neatly matching one another. Quite the contrary. The action taken was frequently hasty and ill-considered. Too often, even when the moves were not downright mistakes, they pulled in opposite directions, the one undoing the accomplishments of the other.

And most serious of all, there was something less than teamwork between government and business, and it showed in the results. Both sides contributed to it, and government not a little. In this atmosphere many businessmen fought hard against such innovations as the Wagner Act, Tennessee Valley Authority, the Social Security Act, and minimum wage legislation. Bitterness and recriminations on one side stirred up bitterness and recriminations on the other. Everyone was hurt and our difficulties were increased.

Much of the trouble stemmed from the newness of our problems. No longer were our people willing to sit idly by while economic depression ran its traditionally brutal course. This represented a turning in our economic history. The steps taken to correct the underlying cause of our dilemma were new and unfamiliar. Too often businessmen, overlooking the nature of the problems with which we were grappling, viewed each step as a socialistic threat to their own independence.

The Case For and Against the New Deal

But let’s get back to the really basic question—what were the results? Did the New Deal work, or didn’t it? That we had sharp economic recovery no one can question. The total volume of goods and services which we produced surged from 55 billion dollars in 1932 to a level almost twice as high in 1940.

Farm income rose from less than 2 billion dollars in 1932 to nearly 5 billion dollars eight years later. Non-agricultural employment increased by 10 million. Corporations, which in 1932 lost 5 billion dollars, earned profits of 7% billion dollars in 1940. All this spells recovery in any language.

But there is another side to the story. In 1940, as we saw in Chapter 2, our economy was far from healthy. In 1940 our national production still totaled about the same as in 1929, somewhat more, perhaps, when allowance is made for the lower level of prices in 1940. Ten years later and in spite of the tremendous increase in our ability to produce, we were merely back to the level at which the depression had overtaken us. And after seven years of recovery there were still 8 million men looking for jobs. Certainly that is nothing to cheer about.

Now, as we have seen, depressions are nothing new in our history. We’ve had them all the way back to our early days, and they’ve grown steadily worse. But throughout our history and in spite of the ravages of periodic depression, we have always made upward progress. While every boom was succeeded by a depression, the recovery which followed always carried us to new peaks. This time, after ten years, we were only back where we had started.

How can this be explained? Is there, after all, some unseen governor on our motor that shuts off the gas when we reach a certain speed? There has been much debate on the subject, and three views have been put forward.

First, it is said that while the recovery of the 1930’s, unlike every preceding recovery, did not push our economy up and out into new high ground, it is equally true that no collapse in our history had ever smashed our economy so completely as did that from 1929 to 1933. To pull a truck out of a ditch is one thing; to put it together after a forty-foot drop is quite another.

Besides, as some point out, it is not surprising that after so grueling an ordeal men everywhere should play it safe for a while and that they should take no unnecessary chances. Because of this natural caution business investment spending for new factories and facilities failed to develop on the scale needed for a full recovery and for full employment.

This explanation sounds reasonable to me. It may not be the whole story, but it is certainly a good part of it.

The second view is advanced by people who consistently opposed the New Deal. They argue that a normal recovery would have come about all by itself just as it always has before. All the New Deal accomplished, they claim, was to hold recovery back. Some of these people blame the result on New Deal spending for relief and public works, some blame it on the Wagner Act, some on taxation, some on our gold policy.

Some are sure it was the regulation of securities, others the competition of the TVA with private utilities, and still others say that it was just the general attitude of government toward business in every field where the two came into contact. In other words, according to this view, business investment spending failed to develop because business was nervous about what the government might do next.

Like most other Americans, I believe in the need for a healthy business confidence in our economy and for good relations between business and government. Although I am unwilling to accept all the arguments of those who say that bad relations between government and business held back recovery in the 1930’s, I do believe that there is force in their general position.

Had there been greater teamwork between government and business, had we, all of us, made a genuine effort to understand each other and to pull in harness, the recovery would surely have gone further. Later in the book, I shall come back to this factor again and again.

However, there is a point here which should be faced, whether we like it or not, and that is the attitude of the great majority of our people toward government and business. Today, our people look to government to see that our economy really functions, and that there are jobs for all who want them. If any action on the part of the government unwittingly tends to discourage business investment spending, the popular demand will be, not for less governmental action to encourage business to move ahead, but for more governmental action in order to fill in the deficiency.

Some people assume that the failure of the Attlee government in England would mean automatically a return to power of another Tory government. I believe they are wrong. Far more likely the failure of the present government to meet the hopes of the people would mean a swing toward even greater governmental participation in the economic life of Britain.

In our own country, this trend places a heavy burden on both government and business, for obviously we want only the minimum of governmental action necessary to meet our needs. It calls for carefully considered action on the part of government action keyed to the psychological as well as the pure economic factors in our enterprise system. And it calls for a clear realization on the part of business that government participation in our economic life is here to stay, and that business must learn to fit its procedures and planning into a somewhat new pattern.

But a third explanation was widely suggested as to why in 1940 we had been barely able to struggle back to the production levels of 1929. This third view held that both of the other explanations missed the point. The trouble with our economy, exponents of this view told us, lies much deeper than either the defenders or the opponents of the New Deal are aware.

“The trouble with us,” these people told us before the war, “is that we have become a mature economy. We are still growing, but our period of really rapid growth is behind us. Our population is increasing more and more slowly, our country is developed, the frontiers are gone. We don’t need the energy and investment that were necessary to span a continent, to open up the West and the South, to build houses for a people whose numbers were being swollen by a flood of immigration, to build cities where before there was only wilderness. Therefore, the result must be economic stagnation, not just depression following every boom, but depression in greater or lesser degree year in and year out.”

The answer to this pessimistic analysis was made abundantly clear after Pearl Harbor. Let’s see what happened when this “mature economy” of ours went to war!