Great Depression and Grand Confusion

The following is an excellent excerpt from the book “THE RICH DON’T ALWAYS WIN: The Forgotten Triumph Over Plutocracy That Created The American Middle Class, 1900-1970” by Sam Pizzigati from Chapter Five on page 123 titled “Great Depression and Grand Confusion” and I quote: “Over five hundred taxpayers reported incomes over $1 million in 1929. Three years later, the IRS would count only twenty millionaire-dollar returns. The widening economic collapse that began in 1929 left almost all Americans, the rich included, financially poorer and psychologically shaken.
“The present depression,” the former Vanity Fair editor Edmund Wilson wrote in 1931, “may be one of the turning-points in our history, our first real crisis since the Civil War.”
Year by year, the economy sank ever deeper into distress. The “present depression” evolved into the “Great Depression.” And no corner of America could escape the squeeze. On the farm, cows that sold for eight-three dollars in 1929 would fetch twenty-eight dollars in the early 1930s. In the nation’s great manufacturing hubs, factories went silent. Steel production plummeted by 59 percent. Unemployment soared to over 25 percent. Detroit had 302,000 auto workers on the job in 1929. By 1931, the city’s auto workers totaled just 185,000. Those workers who kept their jobs kept most all of their wages—at first. Large employers loudly pledged a no-wage-cut policy in the Depression’s early months. They would keep their pledge, by and large, until US Steel broke ranks in September 1931. In quick order, the nation’s other economic giants matched US Steel and sliced wages 10 percent.
Perspective reporters would soon be describing a nation that no American had ever experienced. Gerald Johnson, a veteran journalist with newspapers from New York to his native North Carolina, had a particularly pungent take on how the new hard times were hitting the “ordinary American.”
“If that ordinary American was a workman, he had no job; if a farmer, he had no market; if a small merchant or manufacturer, he had no customers,” Johnson wrote.
An families would have no homes. Banks repossessed. Landlords evicted. Reeling households, writes labor historian Paul Buhle, would have “their worldly goods moved onto the street unless ‘reds’ halted the police and ‘renegotiated’ with the authorities.”
Average Americans had never before experienced such economic suffering, mainly because average Americans in every previous national economic meltdown had lived on the farm. They had the land to fall back on. They could raise much of what they ate. They could get by with little cash income. By the early 1930s, that rural America had largely disappeared. Only a fifth of Great Depression-era working Americans made their living off agriculture. America’s vast majority lived urban existences. They had no land. Without cash, they didn’t eat.
Private charity helped. A little. In New York, a “businessmen’s committee” provided twelve thousand jobless half-time “made work” at fifty-four dollars per month. The City Welfare Bureau, a public agency, chipped in with home relief checks that rose up to $6.60 per week for families with children. All combined, private and public relief in New York reached a grand total of ninety thousand families with a jobless head of household. In the summer of 1932, New York had 391,000 such households.
The hard times extended deep into America’s modest middle class. In the New York borough of Queens, developers had constructed the model suburban community of Sunnyside Gardens int eh 1920s. The families of about five hundred professionals—writers, architects, small businesspeople—called Sunnyside Gardens home when the hard times first hit in 1919. Three years later, a survey found family income in Sunnyside Gardens down by half. Family bank savings account balances had fallen 76 percent, unpaid dentist and doctor bills had risen 150 percent. Half the development’s families had been forced to cancel their life insurance policies.
At the upper-class level, most wealthy families suffered financial setbacks of some sort. In 1932 Bethlehem Steel chief Charles M. Schwab would even famously declare that “there are no rich men in America today.” Schwab was exaggerating, in a material sense. Most rich remained financially secure. They kept to their normal routines and enjoyed their normal comforts. But Schwab’s declaration rested on much firmer psychological ground. The rich no longer felt rich. More to the point, they didn’t feel in control. They had lost their plutocratic grip on the future.
Matthew Josephson, a New York writer of modest means, had an artist friend who had married into a wealthy family. Josephson would from time to time attend dinner parties at the couple’s “charmingly decorated house in the East Fifties.” At one, the wealthy hostess stood to offer an unexpected “formal little speech of farewell.” The couple’s income from stocks and bonds, the hostess announced, had fallen by 25 percent. The couple would be leaving Manhattan “to live in a simple country house,” and, she added with dignity and seriousness, “to wait there for The Revolution!”
Years later, Josephson would still remember the scene vividly: “Everyone laughed nervously. But in 1932 and 1933 rich people sometimes sounded like Marie Antoinette being driven from the Palace of Versailles.”
This fear of social upheaval oozed throughout comfortable circles. “Revolution, not prosperity,” seemed just “around the corner,” Randolph Paul, then a Wall Street tax lawyer, would recall nearly two decades later.
The rich felt themselves dead-center in an angry America’s cross hairs. Everywhere they looked, someone seemed to be taking aim at their wealth and power and the “New Era” they had so proudly proclaimed back in the 1920s. That New Era, their values, now stood revealed as a fraud of monumental proportions. The blame for the calamity that had befallen American rested squarely on their shoulders.
“No earthquakes, or tidal waves, or volcanoes had damaged the land,” as journalist Gerald Johnson put it. “No pestilence like the Black Death had swept away the workers. No invading army had burned down the factories and torn up the railroads and highways. No convulsion of nature of any kind had smitten the United States. Nothing had failed, except the economic system, that is, business.”
“We have permitted business and financial autocracy to reach such a point that its logical counter part is a Mussolini,” echoed the widely respected philosopher John Dewey in 1932, “unless a violent revolution brings forth a Lenin.”
And a Lenin didn’t appear out of the question to America’s rattled elite. New York’s Union Square saw so many Communist Party demonstrations that people were only half jokingly referring to the dilapidated park as “Red Square.” At one protest, on May Day, 1932, sixty thousand people showed up. The nervous police had machine guns at the ready on rooftops overlooking the square.
Out in the country, conservatives shared an equal sense of dread. One fearful leader of the agricultural establishment, Edward O’Neal of the American Farm Bureau Federation, brought Congress a warning in testimony delivered early in 1933: “Unless something is done for the American farmer, we will have revolution in the countryside in less than twelve months.”
Angry farmers from upstate New York to Oregon, some armed, were resisting foreclosures, overturning milk trucks, and refusing to make payments to banks. Similar raucous behavior was breaking out on city streets. Groups of thirty of forty unemployed men, related historian Robert McElvaine, would regularly march into large chain stores an demand food. Most of the incidents went unreported. Newspaper editors “feared publicity might precipitate other such action.”
Much larger groups of protestors—World War I veterans—began marching on Washington to demand early payment of the bonuses Congress in 1924 had promised to pay out in 1945. By the summer of 1932, a “Bonus Army” encampment in the nation’s capital would hold over twenty thousand veterans and their families. The US House of Representatives felt the veterans’ pain—and public pressure—and endorsed the early bonus payout. The Senate rejected it. The Hoover administration then had the veterans forcibly—and bloodily—evicted when they refused to call off their protest.
Back in the early 1920s, the nation’s men of property had been able to count on veterans from the American Legion to bust up picket lines and help them keep the labor “peace.” Now veterans were challenging their plutocratic betters. And other former New Era allies of property had become restive as well, even the Catholic Church hierarchy. A new 1931 encyclical from Pius XI informed the faithful that government had an obligation “to adjust ownership to meet the needs of the public good.” America, a conservative Catholic magazine, chose to take the pope’s words seriously. The editors called for more government control over the economy and deemed capitalism as Americans have known it “a stupid and malicious giant.”
America’s besieged plutocrats could, on the other hand, still count on the full faith and support of the nation’s elected leaders. The nation’s top politicos continued to genuflect before men of means. The policy prescriptions elected officials advanced would essentially boil down to appeals that the wealthy do the right thing. The wrong thing, President Hoover and congressional leaders of both parties agreed, would be any step that jeopardized “business confidence.”
President Hoover initially approached the crisis with the same can-do engineering zeal that had won him fame as the world’s top emergency food relief coordinator during World War I. The Hoover White House quickly forged grand partnerships with business to get the economy moving again, with a “no wage cut” pledge a key element of that effort. Hoover even boosted spending somewhat for public works. But nothing Hoover did seemed to be enough to restart America’s economic engine. And the more the economy lurched backward, the more Hoover accepted the basic plutocratic perspective on the hard times. The Depression, the plutocrats held, amounted to an economic natural disaster. Such disasters could not be predicted or prevented. The American people simply had to have patience and faith in their betters. If they did, all would eventually be well.
“All the really important millionaires,” as the widely syndicated conservative columnist Arthur Brisbane assured America, “are planning to continue prosperity.”
The veteran progressives still in Congress had no patience. They seethed. The leaders of both major parties, New York congressman Fiorello LaGuardia confided in a 1931 letter to fellow GOP insurgent George Norris from Nebraska, were still legislating “on fundamentals laid down in the age of the stage coach, the spinning wheel, and tallow candles.” That tendency, LaGuardia added, had concentrated “great wealth under the control of a few families in this country” and left “large masses of workers entirely at their mercy for their very existence.’
Democratic and Republican leaders alike seemed equally committed to keeping those few families in control of that great wealth, no matter how brutal the crisis might become. And by late 1931 the fiscal brutality of the crisis had become too blatant to ignore. The federal government was collecting far too little revenue from a Depression-ravaged economy to function. The government, the White House and congressional leadership both understood, had to raise more revenue. But the new revenue the government so desperately needed, top Democrats and Republicans also agreed, must not come from the rich.
In November 1931, just before Thanksgiving, Democratic Senate floor leader Joseph Robinson from Arkansas arrived back in Washington to drive that point home with comments the Washington Post called “so conservative as to sound like a statement from Secretary of the Treasury Andrew Mellon.” Robinson warned against any move that might subject the nation’s wealthy to significant new taxation. Serious people understood, the Democratic Party Senate leader would explain, that the government could only tax the rich so much “without discouraging investment and production.”
The new House Speaker, the Democrat John Nance Garner from Texas, stressed the same theme the next month. He delivered what the Los Angeles Times Washington correspondent would dub a “mild spanking “to his Democratic Party colleagues who had had the nerve to suggest boosting tax rates on high incomes back to wartime levels. A few weeks later, another leading Democrat, acting House Ways and Means Committee Chairman Charles Crisp of Georgia, continued the spanking. The nation could never meet its fiscal emergency by “soaking the rich,” Crisp informed his colleagues. Average Americans will have to “gird” themselves for “tremendous sacrifices.” A national sales tax, or some other tax that demanded “stamina” and “backbone” from all Americans, was going to have to be levied.
The Hoover administration agreed, in part. The Treasury Department would ask Congress to enact new or higher federal excise taxes on many everyday purchases and services, everything from tobacco to telephone calls. But the Republican Hoover administration would not go along with a national sales tax. Undersecretary of the Treasury Ogden Mills, soon to become treasury secretary after Andrew Mellon resigned to become ambassador to Great Britain, asked Congress instead to up the nation’s top income bracket tax rate from 25 to 40 percent and lower the income threshold that determines who has to face federal income taxation. All married couples making over $2.500—about $41,000 today—should be paying income tax, urged Mills. If Congress adopted the Treasury plan, he noted, the number of Americans with federal income tax liability would rise from 1.9 million out of a nation of 120 million to 3.6 million. Mills, himself an heir to a megamillion banking and mining fortune, would even ask Congress to raise the federal estate tax rate.
What explains the White House’s sudden willingness to contemplate slightly higher tax levies on America’s comfortable? Hoover administration officials may have considered a little political discretion here the better part of valor. Better to modestly increase taxes on the wealthy than to risk the popular wrath that a national sales tax might unleash.”

(WHAT HAPPENED IN THE 1930s, IS EXACTLY THE SAME THING THAT IS HAPPENING NOW. WE HAVE TWO PARTIES THAT NEITHER ONE WANTS TO RAISE THE INCOME TAX RATE–HIGH ENOUGH AT THE TOP BRACKET TO REALLY BRING IN ENOUGH REVENUE TO BALANCE THE BUDGET. CONSEQUENTLY, WE KEEP BORROWING FROM OTHER COUNTRIES. ON TOP OF THAT, OUR BANKING SYSTEM KEEPS DETERIORATING BECAUSE WE KEEP USING THOSE GROWING, UNREGULATED, TOXIC DERIVATIVES AS REAL MONEY. WHEN YOU GET A GROUP OF BILLIONAIRES OF LESS THAN ONE PERCENT HAVING THAT MUCH MONEY, THERE’S NO WAY THEY CAN BUY ENOUGH MATERIAL GOODS TO KEEP THE ECONOMY GOING. WITH THE FACT THAT OUR UNIONS IN THIS COUNTRY GOT SO WEAK THEY CAN’T REALLY BARGAIN LIKE THEY COULD FOR THE GOOD OF THE WORKING PEOPLE AND WE HAVE A GOVERNMENT THAT DOESN’T WANT TO RAISE THE MINIMUM WAGE ANY HIGHER THAN $7.25 AN HOUR. IT TOOK PRESIDENT FRANKLIN ROOSEVELT TO STRAIGHTEN OUT THE PROBLEM AND HE STARTED WITH, AFTER BEING IN OFFICE ONLY TWO DAYS, CLOSED THE BANKS FOR A WEEK. WHERE HE ACTUALLY CLOSED DOWN THE BAD BANKS AND GUARANTEED THE ONES THAT WERE BEING RUN CORRECTLY BY PUTTING IN PLACE THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC). THEN, THE CUSTOMERS, IN RETURN STARTED PUTTING THEIR MONEY BACK INTO THE BANKS WHICH THEY HAD TAKEN OUT. HE STARTED THE CCC (CIVILIAN CONSERVATION CORPS) AND THE WPA (WORKS PROGRESS ADMINISTRATION). SOME OF THE IDEAS EVEN CAME FROM PRESIDENT HOOVER HIMSELF BUT HE NEVER FOLLOWED THROUGH ON. PRES FDR ALSO STARTED SOCIAL SECURITY WHICH TODAY, IF WE DIDN’T HAVE, WE’D HAVE AN INSTANT DEPRESSION BECAUSE OF THE FACT THAT MOST OF THE ELDERLY WOULDN’T HAVE ANYTHING TO LIVE ON. A GOOD EXAMPLE OF WHAT TO DO IS TO WATCH THE PBS SERIES THAT WAS ON SEVERAL WEEKS AGO, WHICH LASTED FOR SEVEN NIGHTS, TITLED “THE ROOSEVELTS” WRITTEN BY KEN BURNS AND FEATURED THEODORE, FRANKLIN AND ELEANOR ROOSEVELT. WE CAN, AND MUST, LEARN FROM HISTORY.

LaVern Isely, Overtaxed Independent Middle Class Taxpayer and Public Citizen and AARP Members

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About tim074

I'm a retired dairy farmer that was a member of the National Farmer's Organization (NFO). Before going farming, I spent 4 years in the United States Air Force where I saved up enough money to get my down payment to go farming. I also enjoy writing and reading biographies and I write about myself as well as articles and excerpts I find interesting. I'm specifically interested in finances, particularly in the banking industry because if it wasn't for help from my local Community Bank, I never could have started farming which I was successful at. So, I'm real interested in the Small Business Administration and I know they are the ones creating jobs. I have been a member of Common Cause and am now a member of Public Citizen as well as AARP. I have, in the past, written over 150 articles on the Obama Blog (my.barackobama.com) and I'd like to tie these two sites together. I'm also on Twitter, MySpace and Facebook and find these outlets terrifically interesting particularly what many of these people did concerning the uprising in the Arab world. I believe this is a smaller world than we think it is and my goal is to try to bring people together to live in peace because management needs labor like labor needs management. Up to now, that hasn't been so easy to find.
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