In the wake of the Facebook IPO smelling fishier by the day, I ran across an article printed on the front page of the January 21, 1931 edition of the Spencer Evening World newspaper that seems strangely current for our times.
Written by Indiana Congressman Arthur Herbert Greenwood and headlined Man’s Method of Ownership Distribution Cause Depression, Congressman Greenwood asks, “What is the matter with the country?” and concludes Wall Street is at the root of much evil.
Congressman Greenwood notes that in a Land of Abundance too many people are hungry and cold. He writes, “Yes, even with an abundance of money, there is much unemployment and wages are not to be had by the man who wants a job. The economic machinery is out of gear. Surely wrong methods of business, of production and distribution have been pursued. Special privilege at the hands of the government gave corporate wealth a hot-house growth but it has not been tempered to withstand emergencies. The whole economic structure has fallen because sound practices of growth have not been observed.”
Congressman Greenwood relates that some segments of the media will try to tell the Public that the Depression is all “psychological” and that people just need to get out and spend and the ministers who preach that the Depression is Divine punishment for laxity of Faith. Congressman Greenwood notes that there is “four times as much money on deposit in banks as there is money per capita in circulation,” mirroring the hording of cash by corporations and that we are experiencing today, and posits what could have caused this crisis of faith only to answer it was Wall Street, “Blowing bubbles on the stock market.”
“Even good corporations did not escape the tampering of the manipulator,” Congressman Greenwood writes, “They were inflated like toy balloons until they bursted. Stocks that were high on par, were blown to eight or 10 times their true value. This offered a rare opportunity for those on the inside to unload. The gullible public, knowing but little of the game they were playing, were left holding the bag. It was an orgy of gambling and the unsophisticated, as usual, lost to those that managed the game.”
Congressman Greenwood points the finger at, “Over-capitalization and high powered salesmanship,” which, “have been the instrumentality of the manipulators. Tangible assets of a million dollars were counted as good for a capitalization of two million dollars: with one million of preferred stocks and first mortgage bonds to cover the tangible property. The two million of common had no real value but depended upon the earning power. Sometimes dividends materialized but many times they did not. It is always a slow process to build up a business through a period of years to the place where the common stock yields a return. This method seemed too slow to the high-binders of the New York Stock Exchange and the stock-jobbers, generally. They proposed to pull off a fast one on the American people, and they did it. They appealed to the desire of the people to get rich quickly. Those who ventured into the gambling game either lost on a margin or they now possess a collection of beautifully colored certificates which will not yield a dividend commensurate with their cost, in the next 25 years. In the big game there were many cappers and stool pigeons used as decoys. Some were in high positions of state. They could be counted upon any time to assure the hesitating public that “Business is on a sound basis. Our exports were more for the past months than the corresponding month of last year. Savings deposits were on the increase.” Some of these publicity agents knew better while others, perhaps, were beguiled. Nevertheless, they helped fleece the lambs.”
Congressman Greenwood decried the increased use of sales taxes to generate revenue and the recent Supreme Court Ruling that exempted earning on stock from Federal income taxes, a loophole soon rectified by Congress. He answered the Preacher that, “people have not lost their faith, not in mother earth to yield food, clothing and shelter but in man’s method of ownership and distribution.”
Congressman Greenwood opines that, “ “We will have to build anew along better lines,” which is what he and his cohorts did; repealing Prohibition, establishing the FDIC and SEC, electrifying rural America, implementing Social Security, building dams and roads, subsidizing artists through public works projects, creating the FHA and the first government back home ownership loan program, passing that National Labor Relations Act and creating the National Labor Relations Board and for the first time establishing a maximum number of hours worked in a week without overtime compensation (44), a minimum wage (.25 cents an hour) and outlawing child labor for those under 16 and regulating the use of labor by people between 16 and 18 years of age; a Golden Age that lasted until Slick Willie signed on to NAFTA and off on the repeal of the Glass-Steagall Act, first passed in 1932. Maybe it’s time to take Congressman Greenwood’s advice, leaving the part about “the darkey traversing the graveyard at night, are whistling to keep up their courage” for the Republicans to use.
On a related note, while watching the 1938 film, Gold Diggers in Paris, on TCM over the weekend I noticed in one of the outside shots a large billboard advertising a bank’s interest rate of 4% on all savings accounts. No wonder banks were failing left and right paying out such exorbitant sums to their customers!