Saturday, February 27, 2010

Frederick Lewis Allen reminds us there is little new under our sun

Frederick Lewis Allen (1890-1954), an outstanding literary mind, wrote two books, one about the 1920s, called "Only Yesterday" (1931) and "Since Yesterday" (1940), that should be read by everyone in high school or college for the next two hundred years. He has an incredible insight about the intersection between politics, economics and culture that will become immediately apparent to someone who has lived life for some time on this planet, though it might not be as clear to those high schoolers or college students without some supervising explanation. For those coming of age now, they are likely to believe the hype that what we are going through is "unprecedented," and while there are always differences, the similarities are what I find striking.

Allen died without children (his wife died relatively young), and somehow these books have fallen into a public domain in various parts of the world. I now offer a glimpse of Allen's prose and insight that I have found deeply compelling to re-read in the past several months (I had initially read both books as a high schooler and admit I needed supervisory guidance to grasp Allen's insight, though not the very straight-forward and delicious prose). Here, in an early chapter from "Since Yesterday," Lewis discusses the year 1930, just after the last financial bubble of the Twenties had burst:

President Hoover went into action. He persuaded Secretary Mellon to announce that he would propose to the coming Congress a reduction in individual and corporate income taxes. He called to Washington groups of big bankers and industrialists, railroad and public-utility executives, labor leaders, and farm leaders, and obtained assurances that capital expenditures would go on, that wage-rates would not be cut, that no claims for increased wages other than those in negotiation would be pressed. He urged the governors and mayors of the country to expand public works in every practicable direction, and showed the way by arranging to increase the Federal public-buildings expenditure by nearly half a billion dollars (which at that time seemed like pretty heavy government spending). Hoover and his associates began at every opportunity to declare that conditions were "fundamentally sound," to predict a revival of business in the spring, to insist that there was nothing to be disturbed about.

Thereupon the bankers and brokers and investors and business men, and citizens generally, caught their breath and looked about them to take stock of the new situation. Outwardly they became aggressively confident, however they might be gnawed inwardly by worry. Why, of course everything was all right. The newspapers and magazines carried advertisements radiating cheer: "Wall Street may sell stocks, but Main Street is still buying goods." "All right, Mister--now that the headache is over, LET'S GO TO WORK." It was in those days soon after the Panic that a new song rose to quick popularity--a song copyrighted on November 7, 1929, when the stock market was still reeling: "Happy Days Are Here Again!"

But it was useless to declare, as many men did, that nothing more had happened than that a lot of gamblers had lost money and a preposterous price-structure had been salutarily deflated. For in the first place the individual losses, whether sustained by millionaires or clerks, had immediate repercussions. People began to economize; indeed, during the worst days of the Panic some businesses had come almost to a standstill as buyers waited for the hurricane to blow itself out. And if the rich, not the poor, had been the chief immediate victims of the crash (it was not iron-workers and sharecroppers who were throwing themselves out of windows that autumn, but brokers and promoters), nevertheless trouble spread fast as servants were discharged, as jewelry shops and high-priced dress shops and other luxury businesses found their trade ebbing and threw off now idle employees, as worried executives decided to postpone building the extension to the factory, or to abandon this or that unprofitable department, or to cut down on production till the sales prospects were clearer. Quickly the ripples of uncertainty and retrenchment widened and unemployment spread.

Moreover, the collapse in investment values had undermined the credit system of the country at innumerable points, endangering loans and mortgages and corporate structures which only a few weeks previously had seemed as safe as bedrock. The Federal Reserve officials reported to Hoover, "It will take perhaps months before readjustment is accomplished." Still more serious was the fact--not so apparent then as later--that the smash-up of the Big Bull Market had put out of business the powerful bellows of inflation which had kept industry roaring when all manner of things were awry with the national economy. The speculative boom, by continually pouring new funds into the economic bloodstream, had enabled Coolidge-Hoover prosperity to continue long after its natural time.

Finally, the Panic had come as a shock--a first shock--to the illusion that American capitalism led a charmed life. Like a man of rugged health suffering his first acute illness, the American business man suddenly realized that he too was a possible prey for forces of destruction. Nor was the shock confined to the United States. All over the world, America's apparently unbeatable prosperity had served as an advertisement of the advantages of political democracy and economic finance capitalism. Throughout Europe, where the nations were loaded down with war debts and struggling with adverse budgets and snarling at one another over their respective shares of a trade that would not expand, men looked at the news from the United States and thought, "And now, perhaps, the jig is up even there." . . .

But if business was so shaken by the Panic that during the winter of 1929-30 it responded only languidly to the faith-healing treatment being prescribed for it by the Administration, the stock market found its feet more readily. Presently the old game was going on again. Those pool operators whose resources were at least half intact were pushing stocks up again. Speculators, big and little, convinced that what had caught them was no more than a downturn in the business cycle, that the bottom had been passed, and that the prosperity band wagon was getting under way again, leaped in to recoup their losses. Prices leaped, the volume of trading became as heavy as in 1929, and a Little Bull Market was under way. That zeal for mergers and combinations and holding-company empires which had inflamed the rugged individualists of the nineteen-twenties reasserted itself: the Van Sweringers completed their purchase of the Missouri Pacific; the process of amalgamation in the aviation industry and in numerous others was resumed; the Chase National Bank in New York absorbed two of its competitors and became the biggest bank in all the world; and the investment salesmen reaped a new harvest selling to the suckers five hundred million dollars' worth of the very latest thing in investments--shares in fixed investment trusts, which would buy the very best stocks (as of 1930) and hold on to them till hell froze.

Who noticed that there was more zeal for consolidating businesses than for expanding them or initiating them? In the favorite phrase of the day, Prosperity was just around the corner.

But a new day was not dawning. This light in the economic skies was only the afterglow of the old one. What if the stock ticker--recording Steel at 198 3/4, Telephone at 274 1/4, General Motors at 103 5/8, General Electric at 95 3/8, Standard Oil of New Jersey at 84 7/8--promised fair weather? Even at the height of the Little Bull Market there were breadlines in the streets. In March Miss Frances Perkins, Industrial Commissioner for New York State, was declaring that unemployment was worse than it had been since that state had begun collecting figures in 1914. In several cities, jobless men by the hundreds or thousands were forming pathetic processions to dramatize their plight--only to be savagely smashed by the police. In April the business index turned down again, and the stock market likewise. In May and June the market broke severely. While Hoover, grimly fastening a smile on his face, was announcing, "We have now passed the worst and with continued unity of effort we shall rapidly recover," and predicting that business would be normal by fall--in this very season the long, grinding, heart-breaking decline of American business was beginning once more.


Allen's later discussion of FDR's first six months as president is something I wish Obama had read before he started office. The similarities between Hoover's and Obama's sensibilities are striking to me, though in Obama's defense, there was not the type of filibustering over the smallest bill, and there was, in the dark, spring days of 1933, a very abject fear from the Bonus March fiasco that there might be revolution if the Congress did not listen to FDR and his advisers. There is still time for Obama to act more like FDR, but that time is closing faster than he may think.

Stylistically, Allen writes in a manner I admit I consciously aped from him and Catherine Drinker Bowen in my own novel on RFK, which was to write in a way that impels the reader to push to the next page, and the page after that. It is a language of immediacy with an active voice (Though Allen had a gift of brevity from his perch at the Atlantic Monthly that did not require him to cite many sources or establish credibility...and unlike my book, he was not writing simultaneously about two eras:-).).

Based upon my own knowledge of that era of the early 20th Century, which I must say as a matter of fact, not brag, is formidable, I highly recommend Allen's works on the Twenties and Thirties. In fact, whatever you are reading, just drop it and get hold of these works--which I did myself during these past several months. In tandem with reading a daily newspaper, these two books will better explain our modern time than most books coming off bookstore shelves or online today. However, I recommend beginning with "Only Yesterday" as it will deepen your appreciation of "Since Yesterday". I also believe the reader will be fascinated by Allen's brilliant explanation of the stock and land bubbles of the Twenties, and how, during the so-called "Roaring Twenties," industrial workers and farmers largely endured hard economic times, contrary to popular assumptions that drive our understanding of that era. In this, Lewis had clearly digested the insights of pre-Cold War economists like Stuart Chase, who had a better understanding than most modern economists about how economic systems actually impact working class and agricultural folks.

1 Comments:

At 11:18 AM, Anonymous Anonymous said...

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