The Roosevelt Recession and the Hoover Depression

Charles R. Eckert

[A speech delivered in the U.S. House of Representatives, Monday, 6 June 1938]

Mr. Speaker, in popular thought, business depressions are as natural as the tides. They come and go - no one seems to know from whence nor how nor why. Like erratic meteors of the sky, they are regarded by many as a passing phase of nature over which man has no control. And so it seems that nothing can be done except assuage the suffering that follows in their wake. To meet this problem, all manner of measures are proposed to remove the sting of these inexplicable and immutable dispensations.

Business depressions play a large part in politics and government. When a major depression hits the country, there is a tendency to blame the party in power for the calamity and the President in the White House becomes a target of abuse. Thus in the memory of many now living, there settled upon the Nation the depression of 1894. Grover Cleveland was President of the United States. He was a Democrat, and according to the logic of those yearning for the control of government for selfish ends, Cleveland and the Democratic Party were responsible for the 1894 depression. They said it was a child of the Democratic Party. With this cry, the reactionary forces won elections year after year until 1932. By that time the slogan was exploded. Its magic force was gone.

For in 1929 when every rule of big business was in full operation -easy money, unimpaired credit, unbounded confidence, and a balanced Budget - the economic structure collapsed, and there came upon the country the Hoover depression, the most severe, devastating, stubborn, and pernicious in the Nation's history. The formula for good times failed. The depression came in spite of easy money, unimpaired credit, unbounded confidence, and a balanced Budget. If the conditions preceding the collapse of 1929 could, as if by magic be brought into play immediately, genuine prosperity would not be ours, for the reason that the root cause of hard times, depressions, unemployment, and poverty is a chronic defect in the very structure of our economic system. And until this defect is removed and corrected, hard times and depressions are as inevitable as the flow and ebb of the sea.

In the interest of fairness, the depression that came into being in such shocking reality in 1929 was not a Hoover depression. Depressions do not come and go at the whim and caprice of Presidents and the fortunes of political parties. But as the 1929 depression was not a Hoover depression, so the hard times that settled upon the country in 1894 was not a Cleveland depression. Henry George, one of the foremost social philosophers of all time, in an article published in 1894, said:

To ascertain the cause of failure or abnormal .action in that complex machine, the human body, the first effort of the surgeon is to locate the difficulty. So the first step toward determining the causes of business depression is to see what business depression really is.

By business depression we mean a lessening in rapidity and volume of the exchanges by which, in our highly specialized industrial system, commodities pass into the hands of consumers. This lessening of exchanges, which from the side of the merchant or manufacturer we call business depression, is evidently not due to any scarcity of the things that merchants or manufacturers have to exchange. From that point of view there seems, indeed, a plethora of such things. Nor is it due to any lessening in the desire of consumers for them. On the contrary, seasons of business depression are seasons of bitter want on the part of large numbers - of want so intense and general that charity is called on to prevent actual starvation from need of things that manufacturers and merchants have to sell.

It may seem, in first view, as if this lessening of exchanges came from some impediment in the machinery of exchange. Since tariffs have for their object the checking of certain exchanges, there is a superficial plausibility in looking to them for the cause. While, as money is the common measure of value and a common medium of exchange, in terms of which most exchanges are made, it is, perhaps, even more plausible to look to monetary regulations. But however important any tariff question or any money question may be, neither has sufficient importance to account for the phenomena. …

Seasons of business depression come and go without change in tariffs and monetary regulations and exist in different countries under widely varying tariffs and monetary systems. The real cause must lie deeper. …

Every businessman sees that business depression conies from lack of purchasing power on the part of would-be consumers, or, as our colloquial phrase is, from their lack of money. But money is only an intermediary performing in exchanges the same office that poker chips do in a game. In the last analysis it is a labor certificate. …Thus what they really pay for commodities with is labor. It is not merely true in the sense he meant it, that, as Adam Smith says, "Labor was the first price, the original purchase money that was paid for all things." It is the final price that is paid for all things.

The lessening of "effective demand," which is the proximate cause of business depressions, means, therefore, a lessening of the ability to convert labor into exchangeable forms-means what we call scarcity of unemployment. …

What is employment? It is the expenditure of exertion in the production of commodities or satisfactions. It is what, in a phrase having clearer connotations, we term "work." ….I employ a man to black my boots. He expends his labor to give me the satisfaction of polished boots. What is the 5 cents I give him in return? It is a counter or chip through which he may obtain at will the expenditure of labor to that equivalent in any of various forms - food, shelter, newspapers, a streetcar ride, and so on. …

Now, employment or work is the expenditure of labor in the production of commodities or satisfactions. But on what? Manifestly on land, for land is to man the whole physical universe. Take any country as a whole or the world as a whole. On what and from what does its whole population live? Despite our millions and our complex civilization, our extensions of exchanges, and bur inventions of machines - are we not all living as the first man did and the last man must, by the application of labor to land? Try a mental experiment: Picture, in imagination, the farmer at the plow, the miner in the ore vein, the railroad train on its rushing way, the steamer crossing the ocean, the great factory with its whirring wheels and thousand operatives, builders erecting a house, linemen stringing a telegraph wire, a salesman selling books, a bookkeeper casting up accounts, a bootblack polishing the boots of a customer. Make any such picture in imagination and then by mental exclusion withdraw from it, item by item, all that belongs to land. What will be left?

Land is the source of all employment, the natural element indispensable to all work. Land and labor - these are the two primary factors that by their union produce all wealth and bring about all material satisfactions. Given labor - that is to say, the ability to work and the willingness to work - and there never has and never can be any scarcity of employment so long as labor can obtain access to land. Were Adam and Eve bothered by "scarcity of employment"? Did the first settlers in this country or the men who afterward settled those parts of the country where land was still easily had know anything of it? That the monopoly of land-the exclusion of labor from land by the high price demanded for it - is the cause of scarcity of employment and business depressions is as clear as the sun at noonday. …

Idle acres mean idle hands, and idle hands mean a lessening of purchasing power on the part of the great body of consumers that must bring depression to all business. Every great period of land speculation that has taken place in our history has been followed by a period of business depression, and it always must be so. …The upas of our civilization is our treatment of land. It is that which is converting even the march of invention into a blight.

Henry George here traces the primary cause of business depressions to its very roots. It is clear that neither Presidents nor political parties are responsible for business depressions excepting to the extent that they fail to remove the causes. While it is unfair to place the responsibility of the 1929 collapse upon President Hoover, it is equally unfair to place upon President Roosevelt the responsibility of the present recession. The so-called Hoover depression is still on. It has not yet run its course. This is quite clear when we view depressions in retrospect. The present recession is simply a relapse of the 1929 collapse, due to the fact that the underlying causes of the so-called Hoover depression have not yet been removed or corrected. That task still lies ahead.

It may be asked, What about the New Deal? Is not the New Deal intended to abolish poverty and unemployment and open the way for a more abundant life for the great mass of American citizens? Exactly. If the New Deal contemplates fundamental reforms and removes the root causes of business depressions, prosperity, and the more abundant life will be the lot of all.

It will be said, of course, that the New Deal has failed. It has failed only in the sense that the fundamental causes of business depressions have not yet been corrected and no discerning person expects that to be accomplished in 5 short years. That will require decades rather than months and years for it is a long, weary, and arduous task.

There is nothing strange about the present business recession. It is in keeping with the experiences of the past. Instability is of the very nature of the present economic order. Disorders of the body politic are not unlike the disorders of the human body. In the case of human illness, a relapse frequently occurs. That is not necessarily fatal. In many instances it is an indication of the need for different and more drastic treatment for permanent recovery. The same is true of the body politic. Those responsible for the treatment and cure of the social organism when indisposed must exercise the same skill and judgment that the wise physician displays. Frequently the patient, after weeks and months of steady progress on the road to recovery, takes a turn for the worse, and it is at such moments that the real skill and genius of the healing art are subjected to the acid test.

Such moments come to the statesman. It is then that his mettle is tested, his skill tried, his understanding brought to account.

Let it be repeated, the present recession is simply an incident to the so-called Hoover depression. But in spite of the fact that the recession is but a passing event of the economic disaster of 1929, there will be no end to the cry of "Roosevelt depression" on the part of the emissaries of reaction and the horde of hungry office seekers, in the hope that the New Deal may be liquidated and the way cleared for a return to the good old days of Government of, by, and for the privileged few.

Short is the memory of man. So the friends of progress and reform must keep in mind the facts in connection with the present recession and the benefits of the New Deal. While the problem of unemployment has not been solved yet, is anyone so bold as to say that the many salutary and helpful acts of the Government during the last 5 years have been useless and in vain? Those who seek to stir the prejudices of the people and pit them against the administration would not dare remind the country that the financial aid given to banks, railroads, insurance companies, building and loan associations, farmers, manufacturers, home owners, and others, and the help given to millions of destitute Americans through agencies such as the W.P.A., the P.W.A., the C.C.C., the National Youth Administration, the Federal Housing Administration, and many other governmental agencies saved the Nation from unspeakable disaster. To appraise the value of the Government's activities during the dark days of 1933 is beyond human computation.

Suffice it to say that a program less comprehensive and less effective might have resulted in consequences too dire to contemplate. During the early days of the Roosevelt administration, conditions throughout the land were so charged with revolutionary dynamite that the task confronting Roosevelt and the Democratic Party, in 1933 was so herculean and disturbing that it stirs one to admiration and surprise. There was a great job before the administration. It was approached with courage and true patriotism. Let no one be deceived by the cry of "Roosevelt depression," but rather be moved to greater concern about the future needs essential for a lasting and permanent recovery.

The New Deal must be reinforced with measures that will remove the basic and ancient wrongs responsible for the ever-recurring depressions. Mere palliatives will not suffice. That is amply proven by the present recession. Steps must be taken to correct the glaring inequalities and injustices that exist in the present economic system. Assistance to the unfortunate and help for the needy are very necessary in times of stress and strain. But commendable as such efforts are and admirable as they may be in the sight of the Lord, yet governments, both Federal and State, have not fulfilled their true function so long as one able-bodied person in all the land is denied the opportunity to work.

And this is not to be interpreted as saying that it is the duty of anyone, be he industrialist, merchant, farmer, or what not, to provide work for the unemployed nor is it primarily the function of governments to furnish work for the unemployed. This becomes a duty and a necessity on the part of governments only when they fail so to adjust the economic structure as to keep open and accessible at all times and under all circumstances the opportunities that Nature and Nature s God have given to the children of men. Herein lies the great sin of omission on the part of governments and, of course, so long as governments persist in their sinful ways, providing relief and employment properly and necessarily becomes the duty of government.

The aim, however, must ever remain as the first duty of government to accord to everyone an equal right in the bounty of Nature. The New Deal, if it is to meet the hopes and expectations of its many ardent supporters and friends, must supplement its splendid work of relief and its many other useful and splendid achievements by reforming the economic structure so that the least as well as the greatest will enjoy an equal share in the natural resources. Short of this, the New Deal is due to fail in its ultimate objectives. For, after all, 'men want freedom and independence and the opportunity to earn their own livelihood and live their lives in their own way. True, sturdy, stalwart men abhor the thought of being wards of governments. They seek right and justice, and with right and justice, free men will take care of themselves.

In order that the yearnings of the average American may be realized the New Deal must be reformed by removing the ancient wrongs and inequalities that lurk in the system. Unless this is done depressions will continue to curse the Nation.