A Program to Eliminate the Great Depression

George W. Anderson

[Reprinted from Land and Freedom, May-June, 1932]

The following statement was made before the United States Senate by Senator David I.Walsh, of Massachusetts, on the subject of the causes of solutions to the Great Depression.

Mr. President, following a speech delivered by me in the closing days of the last session outlining what I believe to be some of the chief causes of the economic depression in this country, I received many comments from various groups and individuals.

One statement, which I consider a real contribution to the solution of the present economic problems, is by George W. Anderson, a retired justice of the United States Circuit Court at Boston.

I ask that it be referred to the Committee on Finance and be printed in the Record (appears in Record of Dec. 19, 1931). A synopsis of the statement by Judge Anderson follows:

A FEW OBSERVATIONS ON OUR AMERICAN SYSTEM

The main purpose of this writing is analysis and description only; merely a record of observations on our American system.

For fifty years of adult life I have observed and studied American institutions. Recurrent periods of business depression and business prosperity have marked the whole half century. Our fatalistic economists call these cyclical and inevitable. In the present depression I think I observe some significant differences.

There is a lack of the general optimism characteristic of the earlier hard times, more conceded bewilderment over both causes and prospects. There is more intelligent doubt of the soundness of capitalism, more doubt of the value of competition and the anti-trust acts, less faith (perhaps less desire) of success in the fight against Big Business.

There is no general acceptance of the old panacea for most business troubles -- reduction of wages. Rather is there a considerable recognition of the fact that only by increasing the purchasing power of the mass of wage earners can any adequate market be made for our large surplus output in every line.

No one can conceive of any intelligent man now doing what Andrew Carnegie did in 1886 writing a book and entitling it Triumphant Democracy. With over 500 individual incomes exceeding a million dollars and 26 exceeding $5,000,000, we have at least 6,000,000 of industrial unemployed, reducing probably 25,000,000 of our citizens to dire poverty, many of them to actual suffering. The "abolition of poverty" is not a shining success.

Turning to ownership, it is commonly accepted that about 4 per cent of our people own 80 per cent of the country's property. Moreover, comparative analysis of the income-tax returns for a period of years seems to show a steady drift toward an increasing concentration of property and income. It may well be questioned whether [such] inequality, both in property holding and in current income, is not relatively as great now as under the feudal system. Such democracy as we have had for two generations has been, in the main, grounded on the Homestead Act of 1862. Under this act settlers were enabled to get at small cost 160 acres of fertile public land. This resulted in millions of independent farmers establishing wholesome homes in the Mississippi Valley. They were the backbone of our democracy. But our drift for several decades has been urban and industrial. The resources of our excessively large fortunes and incomes are mainly:

1. Urban land values and ground rents, all unearned, socially created.
   
2. Subsurface deposits of minerals and metals, also unearned, are rightful property of the whole people.
   
3. Profits derived from corporation manipulations, various forms of stock waterings, largely in public utilities (privately owned monopolies), the rates of which are, in essence, taxes. This source probably grounds more unearned incomes and property than the first two sources.
   
4. Inheritances, which tend to perpetuate and increase the inequalities, mostly originally derived from one or all of the first three sources.

Urban and subsurface values in land may be buttressed under our Constitutions, Federal and State. Doubtless by taxation a partial recognition of the public right therein might be secured.

1. For land permanently destined to agricultural uses, a fee title to surface rights would plainly be the soundest public policy, if the occupants were, generally, the owners. But the great increase in tenant farmers and a rack-renting system have put this policy in serious question. The chief defect in this policy, however, is that farming land does not always and everywhere remain farming land. Manhattan Island was once a farming community; when it became a great merchandising and financial city, the heirs and grantees of the original land owners acquired huge unearned fortunes (like the Astors), all created by the teeming population and their customers. Except in degree this result in New York City is typical of the situation in the whole nation, now become predominantly urban.
   
   Henry George a half century ago showed the inevitable results of this theory and propounded his remedy in Progress and Poverty. No effective step has been taken toward asserting the irrefutable
   public rights to the socially created, unearned increment in urban lands. Neither the Single Tax nor any other remedy has been adopted.
   
2. Private ownership of subsurface minerals and metals grounded the Rockefeller billionaire fortune. It also gave us the coal and iron police of Pennsylvania, the inhuman labor conditions in the West Virginia coal fields, and a horde of steel, copper, oil, etc., multimillionaires, many of them highly undesirable citizens.
   
3. Some aspects of corporation manipulation, particularly by our investment bankers, were dealt with by Mr. Louis D. Brandeis (now Mr. Justice Brandeis) seventeen years ago in his book entitled Other People's Money and How the Bankers Use It. All the evils that he there so brilliantly portrayed are, I think, yet in full force and operation.
   
   Bonuses running as high as a million dollars a year to a single executive seem a new device for enriching the insiders at the expense of the powerless small investors in some of our great corporations.

The history of the last four years puts in fair question the value of our present leadership in business, economics, banking and government. The first two years were marked by a wild and senseless gambling craze as groundless as the Mississippi bubble encouraged, even instigated, from high official sources.

The last two years have shown an inevitable reaction, with a bewildered and helpless confusion in all quarters never equalled within the memory of man.

A fundamental principle, the slogan of our present ruling classes, is " no government in business." Curiously and inconsistently, we have the spectacle of the Federal Government, in utter disregard of constitutional limitations, going " into business" through the Farm Board and expending hundreds of millions of dollars in the purchase of wheat and cotton. A cruder, more unintelligent, sporadic form of socialism cannot be imagined. A great experiment in state socialism is apparently now being carried on in Russia. Its results are being watched with great interest by most of our intelligent classes with great fear by the subservient, highly vocal organs of our present chaotic and planless capitalistic system.

We now see much discussion of an "American plan," apparently to be made by an "economic council" with "a board of strategy and planning to survey productive facilities and consumption capacity." Assuming such "economic council" and its output of a very wise plan, who could make it operative?

Dr. Nicholas Butler's suggestion that our statesmen and economists might well read and consider Progress and Poverty is the only intimation that I have seen from any responsible, capitalistic source that limiting the opportunities for individual acquisition of socially created property might do something for the hard times. No one else (so far as I have seen) has ventured to suggest that we adopt the policy of "rendering unto Caesar the things that belong to Caesar."

All governments are, on adequate analysis, oligarchies. The United States is no exception; only in form is it democratic or even republican. Our Government has, fairly enough, been called an "invisible government." The number of our real rulers may not be more than in Russia or Italy probably less than in England. There is not and never has been any such thing as a "government of the people, by the people, for the people" anywhere, at anytime. It is a non-existent trinity. The most to be sought or even hoped for is government for the people.

There is no visible sign that we shall substantially limit the present opportunities for predatory wealth, cut down the existing methods of exploitation, both of productive labor and of natural resources. "Individualism," as its proponents really mean it, connotes keeping essentially all of the outstanding methods of heaping up large fortunes and excessive, unearned incomes. We have no respect for property rights grounded on productive work only. Getting not producing we regard as sacred under our Constitution. " Normalcy " with us is a predatory … capitalism. Instead of promoting individualism and personal incentive of an honest and wholesome kind, it is discouraged. A "rugged individualism" is not legitimately grounded on gambling chances for acquiring unearned natural resources, properties socially created, or properties produced by others. An economic system in which property rights should be approximately grounded on useful work, not inconsistent with social welfare, might be called either capitalistic or socialistic, but it would be a tolerant organization and infinitely preferable to our present chaotic and grossly unjust "American system," which does not work.

Evolution to a better system not revolution is the desideratum. Revolutions ordinarily are but new forms of chaos and waste; evolution, though frequently slow and disappointing, is generally constructive.