a/^ IBLE M@NEY I1LE MEN Books by Stuart Chase THE TRAGEDY OF WASTE MEN AND MACHINES PROSPERITY: FACT OR MYTH THE NEMESIS OF AMERICAN BUSINESS MEXICO A NEW DEAL THE ECONOMY OF ABUNDANCE GOVERNMENT IN BUSINESS RICH LAND, POOR LAND THE TYRANNY OF WORDS YOUR MONEY'S WORTH (With F. J. Schlink) THE NEW WESTERN FRONT IDLE MONEY IDLE MEN IDLE MONEY IDLE MEN BY STUART CHASE Hay court, Brace and Company HX) New York 11 COPYRIGHT, 1938, 1939, 1940, BY STUART CHASE All rights reserved, including the right to reproduce this book or portions thereof in any form. Typography by Robert Josephy PRINTED IN THE UNITED STATES OP AMERICA BY QUINN & BODEN COMPANY, INC., RAHWAY, N. J. ACKNOWLEDGMENT. Thanks are due to the editors of Harper's Magazine, The Atlantic Monthly, Common Sense, Comtopolitan Magazine and Survey Graphic for permission to use material that first ap- peared in their pages. F0REW®R» THE adjustment of men to their technical inventions proceeds on various fronts, civil and military, and at varying rates. At some points the adjustment needs to be speeded up if men are not to suffer; at other points brakes need to be applied. This is the basic theme of practically everything I have ever written. These essays are another contribution to the subject. Natural brakes are found in undeveloped parts of the planet: in Thibet, the Antarctic, a "wilderness area" in a national park in the United States. They are found in every isolated handicraft community, like a village of Mexican Indians. Artificial brakes are diffi- cult to apply. There is a possibility that the movement away from great cities, called decentralization, will serve to retard excessive mechanization. I wish to heaven a brake could be found for the satanic de- struction by bombing planes. The points where acceleration is called for are mostly archaic institutions, habits which are begin- ning to rust. The English language, for example, can be regarded as an institution which is on the handi- craft level except in such a subject as technical physics. If the language of economics could approach the pre- cision of the language of physics, I believe that not only would much fruitless controversy be avoided, viii FOREWORD but rapid progress would be made in dissolving what is known as the paradox of plenty. Financial institutions too have a tendency to hamper the movement of goods and prevent their wide dis- tribution to people who have lost the security of a self-sufficient handicraft culture. It is financial habit which makes it so difficult to absorb unemployed men in useful work. While their labor is utterly wasted, costing the community untold millions of man-years of effort, it is widely held that the community cannot "afford" to employ them, that to do so is "unsound." Some of the essays in this book call for accelerated adjustment in the lag between technology and finance —the ability to produce and the ability to buy back. They explain why I think the American economy in one sense has reached maturity, and why, by a slight change of direction, its possibilities of development are almost limitless. Progress born of opening up new territories, build- ing new cities, accompanied by huge increases in pop- ulation, is halting. It had to. The world is only so big. Extensive investment in perpetual growth is a mathe- matical impossibility. But progress in the sense of quality rather than quantity, better houses rather than more houses, higher living standards for the low in- come groups, better facilities for health, education, recreation, a nobler architecture, a more lordly engi- neering—to all such intensive investment no boundaries are visible. We can go on improving this country until FOREWORD IX the next Ice Age. I have illustrated this type of prog- ress in the chapter called Design for i960. Yet because orthodox banking finds it difficult to finance intensive investment, those of us who urge it are labeled "defeatists." This is another paradox. Progress is being in fact defeated by an institution which moves too slowly. We have been plagued with idle men and idle funds for eleven years. If it should take the human race five centuries to learn to control the inanimate energy which its in- ventors have let loose, that would not be much time in terms of evolution. On that scale we are perhaps a third of the way along the road. But the scale is arbitrary. Ever since Galileo developed the telescope, ever since primitive farmers learned to move their crops in wheeled carts, people have had to change their habits and their beliefs to keep up with technical progress. The war of mechanized forces now raging abroad cannot fail to break down some elements of that re- sistance. What is going to happen to our foreign trade, to our farmers, to our gold? How is our huge defense expenditure to be financed? Again, as in 1933, when the banking structure collapsed, we may be forced to shift our fiscal institutions away from orthodox con- cepts. I hope we shall not resist financial change until it becomes too late. CONTENTS F«REW*R» Vii i. Back of the Sudget 3 2. "Government" vs. "Business" 39 3. Population Curves 57 4. A Penny Saved 83 5. American Business Rolls Its 1,010,000,000 Outlays for plant and equipment $ 770,000,000 Investments in subsidiaries 176,000,000 Total $ 946,000,000 Thus internal funds more than covered all plant and equipment expenditures. BUSINESS ROLLS ITS OWN II7 mr. nehemkis: "General Motors is virtually a self- contained unit in the sense that it has little or no need to go to the public markets for financing?" mr. sloan: "That is absolutely correct." Mr. Henderson asks if internal funds are adequate to finance the company if the national income should rise to 80 billion dollars, with the consequent increased demands for motor cars. mr. sloan: "I am quite certain that we can handle it." Mr. Lubin asks if a piece of equipment today, cost- ing say $1,000, would yield a greater output than a similar machine costing $ 1,000 fifteen years ago. mr. sloan: "Unquestionably. It is astounding the progress that has been made." In other words, as equipment is replaced out of depreciation funds the new equipment, dollar for dollar, can produce more goods and is thus in effect an addition to plant capacity. This point is illuminated by General Motors' own product. A truck costing $1,000 today is a more efficient piece of machinery than a $1,000 truck bought in 1925. Business men who have to invest large sums in trucks— say laundry owners or coal dealers— can get far more for their money when the depreciation allowed on the old truck is invested in a new one. mr. lubin: "The present investment in the auto- mobile industry is sufficient to take care of any rea- sonable demand?" mr. sloan: "I think it is." Il8 IDLE MONEY IDLE MEN Thus not only General Motors but the whole auto- mobile industry is pretty well tooled up for any calls which the immediate future may bring. In this con- nection Mr. Berle in his testimony pointed out that Henry Ford built his entire mammoth plant out of earnings plowed back into the business. He hated and feared the capital markets. Our next witness is John W. Barriger, III, chief examiner for the Railroad Division of the Reconstruc- tion Finance Corporation. He is co-author of the fa- mous Prince Plan for railroad reorganization. He pre- sents the figures on internal financing for the whole railroad industry. His is a very significant story. If there is one industry which has gone running to the capital markets for cash in times past, and to which, in times past, Wall Street has come running waving a checkbook, it is the railroads. Yet here, as in steel, electrical equipment, aircraft, motors, the trend re- mains unbroken. During seventeen years, 192 1 through 1937, American Class I railroads accumulated 3.6 billion dollars in their depreciation accounts; 2 billion dollars in their surplus accounts, and 1.8 billion dollars from other internal sources. They spent 10.3 billion dollars for plant and equipment. From internal sources $ 7,400,000,000 72% From the capital markets 1,900,000,000 19% From decreases in working capital 1,000,000,000 9% Total capital expenditures $10,300,000,000 100% BUSINESS ROLLS ITS OWN 119 Wall Street is not completely neglected, but less than 20 per cent of all railroad capital outlays in those seventeen years has come from that source. This is amazing. If you had asked me to guess, I should have said that at least half the new railroad money in recent years came from the capital markets. VI The Securities and Exchange Commission now puts on one of its own statisticians— Dr. Oscar L. Altman, formerly of the Economics Department of Ohio State University. He is young, but exceedingly competent. He has to be, for it is his duty to document this trend not for one company or one industry but for the whole national economy. He pours a torrent of charts and exhibits into the record. He first picks up the 470,000 non-financial cor- porations which report to the Treasury Department. As a group, their annual depreciation and depletion allowances increased steadily from 2.5 billion dollars in 1920 to 4.1 billion dollars in 1930. Falling off some- what in the depression, allowances recovered to 3.7 billion dollars by 1937. The increase is due in part, Dr. Altman says, to the greater value of the plant being depreciated; in part to income tax regulations requiring systematic depreciation. He points out that of all expenditures for plant, about two thirds go for replacement and about one third for expansion. 120 IDLE MONEY IDLE MEN Dr. Altman then gives the over-all figures for Amer- ican business as a whole, including enterprises not in- corporated, as well as the 470,000 corporations. The average annual expenditure for plant and equipment from 1923 through 1929 was 8.5 billion dollars. The average accumulation of internal funds from depre- ciation, depletion and profits retained, was 6.4 billion dollars. Thus in the 1920's, American business financed 75 per cent of capital investment from its o*um savings; only 25 per cent came from your savings and mine, via the capital markets. But note how this trend is stepped up with the recovery from depression lows. In the three years 1935, 1936, 1937, all American business spent 17.4 billion dollars for plant— almost 6 billion dollars per year. Of this sum, 16 billion dollars, or no less than 92 per cent, came from internal sources. From 1930 through 1938 seven large automobile companies saved 564 million dollars and spent only 430 million dollars for plant. Internal funds were 31 per cent more than investment requirements! In the same years, eleven large oil companies met 95 per cent of their capital requirements internally. A special study of 56 large companies, with assets of 12 billion dollars, shows 90 per cent of plant outlays covered by depreciation, depletion and profits retained during the period 1930-1938. "In years of high activity," says Dr. Altman, "business enterprises draw upon the capital markets, but never since 1922 for more than BUSINESS ROLLS ITS OWN 121 2 billion dollars in a year. During years of low activ- ity, business enterprises do not require any funds from the capital markets. Instead, they contribute funds to the capital market, either by paying out dividends in excess of earnings or by converting depreciation al- lowances into bank deposits." Let this extraordinary conclusion revolve for a while in your mind. Observe that in the latter case, depreciation allowances could be earmarked as idle cash balances. Mr. Nehemkis asks the witness if internal financing is aided by income tax laws and regulations. Dr. Alt- man says that it is. Business men cannot figure the profits upon which their taxes are to be paid without first allowing for depreciation and depletion. They are thus, in a sense, forced to save, whether they de- sire to or not. Every accounting firm has clients who wish to reduce taxes by keeping depreciation allow- ances at a maximum. Dr. Altman thought it probable that over-deprecia- tion was general, and for two reasons. Price changes on the whole have been downward in recent years. So when a given piece of equipment wears out, its duplicate can be bought more cheaply. The new ma- chine may not only be cheaper; it will probably turn out more goods than the old one, and so will add to plant capacity. "Only part of the depreciation allow- ances need to be reinvested to maintain capacity. . . ." Research and technological progress are "con- 122 IDLE MONEY IDLE MEN tinually increasing the physical productivity of a dol- lar's worth of investment." Dr. Altman might have added, though he did not, that the new and improved machine often requires fewer men to operate it. Thus it reduces labor costs and may cause unemployment. But that is another story. VII Our last witness will be Dr. Alvin H. Hansen, professor of economics at Harvard. He is short and sturdy. He wears a green eye shade. The integrity of his mind is evident in every word he says. You may not always agree with him, but you know he is an honest man making an earnest effort to explain the complex workings of modern finance and production. The Committee follow his testimony with undivided attention. Representatives of the press are restless, for the argument cuts deeper than spot news can handle. Using the Kuznets studies of the National Bureau of Economic Research, Dr. Hansen demonstrates a conclusion similar to that of Dr. Altman: American business is now spending primarily for replacement rather than for expansion. "When a society has accumulated a vast amount of capital goods," says Dr. Hansen, "it is evident that the mere expenditure of depreciation allowances pro- vides wide scope for continuous improvement of plant and equipment. The larger the amount of capital BUSINESS ROLLS ITS OWN 123 equipment the larger will be the depreciation, de- pletion, and obsolescence allowances." The process becomes automatic and cumulative. The rhythm will be interrupted only if prices increase sharply. In this event, depreciation allowances on their straight-line basis may become inadequate for full replacement in some cases. But the trend of prices has been down since 1920. The Kuznets figures show depreciation and deple- tion allowances for all corporations of 5 billion dol- lars in 1929, while only 2 billion dollars was raised in the capital markets for new productive expenditures. mr. Henderson: "Does that mean two and one half times as much was available from the depreciation account as was supplied through the capital markets?" dr. Hansen: "Two and one half times as much available, yes, sir. "I want to stress the point that it is quite wrong to assume that you can't make any progress in increas- ing productivity without a large volume of savings. ... In modern times you can have a perfectly enor- mous increase in productive capacity merely by ex- pending depreciation allowances and not tapping a cent of [individual] savings. . . . Savings do us good or harm according as they find, or do not find, invest- ment outlets in productive expansion of plant and durable goods, including residential building and pub- lic works." The American industrial structure has passed 124 IDLE MONEY IDLE MEN through its formative stage of rapid expansion, and is maturing. (In the 1880's, it is safe to say, expendi- tures for expansion led expenditures for replacement, and outside savings were in brisk demand.) It can keep up with the latest technological improvements out of internal funds, now accumulated over the years to massive proportions. It can even expand productivity from depreciation reserves alone in many cases. Let me emphasize this point. If depreciation ac- counting did only what it was originally supposed to do, namely, keep the productive capacity of a given plant strictly at par, any expansion of capacity would demand savings from outside the company (or from retained profits, but let us waive those). The testi- mony shows that this nice equilibrium has not been achieved. Due to the two facts of over-depreciation and the increasing productivity of machine technol- ogy, industrial concerns are using their depreciation allowances to expand productivity, if, as, and when they need to. Automatically this cuts down the de- mand for outside savings and loans from Wall Street. What is the answer? Dr. Hansen sees— as any intelli- gent observer must see— only three long-range an- swers, unless the whole economic structure is to be torn down and redesigned: 1. The possibility of developing a series of brand new industries requiring capital in billion-dollar blocks. No such industries are yet on the horizon, though no man can say they will not come. BUSINESS ROLLS ITS OWN 125 2. A drastic shifting of the national savings into housing and into public investment, where deprecia- tion reserves are not so massive, and where the need from the community point of view is great— slum clearance, conservation, schools, hospitals, rural elec- trification, agricultural resettlement, and the like. 3. A drastic decline in the ratio of savings to na- tional income— more money spent for consumers' goods, relatively less for capital goods. VIII In any given time period of production, enough money is distributed out of the processes of produc- tion to buy back the entire output. If the money which flows out in the form of wages, salaries, inter- est, rent, profits is promptly spent for either con- sumers' or capital goods, the economic system will keep on an even keel. But if part of the outflow is hoarded then the goods produced cannot be bought back at the prices asked. Some will pile up on the shelves, some will sell below cost, employees will be discharged, the economy will go on part time. This formula was emphasized on the witness stand by Dr. Hansen, Dr. Laughlin Currie, Dr. Donald H. Daven- port, and especially by Ralph W. Manuel, president of the Marquette National Bank of Minneapolis.1 1 The formula is developed at length in the chapter A Pen?iy Saved, beginning on page 83. 126 IDLE MONEY IDLE MEN The hoarding can be done by individuals or by corporations or by both. In the case of the individual, the idle money does not usually go under a mattress, but into banks or insurance companies, which often can make no productive use of the funds entrusted to them. Mr. Manuel cited the case of a manufacturer who has $85,000 in his checking account in Mr. Manuel's bank. It has lain there for years, "leached out of our economy." In the case of the corporation, the idle money may accumulate in depreciation or depletion reserves, or in surplus account. In all cases, the effect is to interrupt the circuit of dollars. And there we are, impaled again on the paradox of plenty. Too much money— or better, not enough circulation of the available supply. No conspirators plotted this impasse. No fell clan of economic royal- ists is responsible. No New Deal dictated the account- ing principles upon which depreciation rests. The situation cannot be corrected by putting Mr. Stettinius or Mr. Roosevelt or the American Institute of Ac- countants in the dog-house. The war, by speeding up investment in munitions, may screen the effect for a time, but presently it will be back in the center of the stage. It is impossible to operate a maturing econ- omy with financial methods appropriate to a rapidly expanding one. If this dilemma were not so serious it would be funny. We have, as a nation, so much money that millions of us are close to the starvation line. It is BUSINESS ROLLS ITS OWN 127 serious to the point of tragedy. And the paradox will never be resolved by calling names, impugning mo- tives, or summoning the shades of Adam Smith or Karl Marx. It will be resolved when enough Ameri- cans of intelligence and good will sit down together to examine the facts, patiently and exhaustively, as they did in this lofty, marbled hearing room in Wash- ington. 6. SHADOW OVER WALL STREET "WALL STREET" is a label which has hitherto covered two major functions in the American econ- omy. The first is performed by the stock broker, the second by the investment banker. The broker, as agent for the public, buys and sells stocks and bonds which have already been issued. For this service he collects a commission. In 1929 brokers collected 227 million dollars; in 1938, 43 million dollars. The public is not placing orders for stocks and bonds so fast as in 1929, and this fact naturally saddens the broker. But who can say when the public interest will revive? In Sep- tember, 1939, it revived briskly— though not for long. The investment banker does not trade on the floor of the stock exchange like the broker. His task is to collect the savings of the public and loan them to large corporate borrowers— railroads, steel companies, mu- nicipalities, and so on. To do this he usually under- writes an issue of bonds or stocks, handsomely en- graved by the borrower. Suppose he takes an issue at, say, 95. He gives $95 in cash to the railroad or the steel company in exchange for each $100 of engraved securities.Then he places the issue with banks, insur- ance companies, trustees, the investing public. If he places it at 99 he makes a four-point spread on the transaction. Often he advises the borrower as to the 128 SHADOW OVER WALL STREET 129 best type of security to issue, whether bond, preferred or common stock. When learned authorities say that "industrial cap- italism" has been succeeded by "finance capitalism" they are referring to this process. Along about 1890 investment bankers began to occupy a pivotal place in the routing of savings into investment. They con- trolled, on the one hand, the great reservoirs of savings —insurance companies, trust companies and commer- cial banks— and controlled, on the other hand, the policies of big industrial companies who wanted money. If an insurance company displeased the in- vestment bankers it was likely to find itself deprived of succulent issues for its portfolio. If an industrial company displeased these bankers it might not get the funds which it needed to expand operations. This statement of the case is oversimplified, but it gives the general idea of finance capitalism. Investment bankers made the master decisions, rather than railroad presidents, manufacturers, or merchants. By their con- trol of long-term credit they could make or break an industry and, indeed, could block out the whole industrial pattern of the nation. In comparison, the broker, at his post on the stock exchange, was as a valet to his lord. Today brokerage houses are painfully short of com- missions, but no one is proposing to close the ex- changes. The lords of creation, however, are in a more melancholy position. Not only are their commissions 130 IDLE MONEY IDLE MEN pitifully diminished compared with former years, but the sweep of economic forces is rendering their very function obsolete. It is not necessary to draw a moral lesson from this. Some investment bankers have been unscrupulous. Many have become wealthy. Coincident with their transactions, American industry built up a plant for the mass production of useful goods which became the wonder of the world. Did the bankers help or did they hinder? Who knows? "Wall Street," defined as investment banking, is today losing business for three reasons. In the preced- ing essay I described one reason— the shrinkage in ap- plications for outside funds as going concerns increas- ingly finance themselves. In the second place, when a large industrial com- pany does need funds from external sources it often obtains them through the process of "private place- ment," which by-passes the investment banker alto- gether. In the third place, the rate of growth of American business has been declining for many years, even before the depression. This again operates to cut down the need for capital and for savings, with severe repercussions on the investment banker. We shall now examine evidence given in the TNEC hearings on idle money, in May of 1939, as it bears on the last two points— private placement and the decline in the growth rate of industry. We shall con- sider the effects not only on the investment banker, SHADOW OVER WALL STREET 131 but on the whole economy. Private placement is an important problem for the banker, but not for the rest of us. The industrial growth rate affects every citizen. II Adolph A. Berle, Jr., in his testimony presented a chart which is reproduced on page 133. It shows the shadow over Wall Street better than words can show it. The whole bar represents cor- porate securities issued in each year from 192 1 through 1938. The black portion of the bar represents those issues which were spent for plant and equipment, the kind of investments which put men to work. The cross-hatched portion represents those issues where no physical construction was involved, but rather a ma- nipulation of paper— refunding operations, refinanc- ing, split-ups, mergers, and the like. To say that this is a useless function is not true, but it is not a lordly function. No wealth is created by it; no jobs are created except for a few clerks. Look at the financial pages of the New York Times almost any day and you will probably find an item or two reading something like this: Offering was made to the public yesterday by an underwriting group headed by X. Y. and Company, of 10,000 shares of 5% cumulative, convertible preferred stock of the A. B. Steel Company. Net proceeds will be used in part to redeem certificates of indebtedness due in 132 IDLE MONEY IDLE MEN 1947. Hie remainder of the proceeds will be used to repay part of a $500,000 bank loan. This is a "churning paper" issue and goes into the white section of the bar. Issues for the black section are harder to find in the Times or anywhere else. When you discover one, it will read somewhat as follows: Offering was made of 2 million dollars 41/2% first mortgage 15 year bonds of the Q. R. Steel Company to provide funds for the financing of an alloy steel plant at Warren, Indiana. X. Y. and Company will head the underwriting syndicate. Money represented by the black bar built factories, hydro-electric systems, smelters, refineries, and sky- scrapers. Observe that in no year did it amount to as much as 2 billion dollars. It almost reached that mark in 1924 and again in 1930. After 1930 there was a steep decline. With partial recovery following 1934, the black dollars have remained at a low level. In 1938 some 2 billion dollars of corporate securities were issued, but only 438 million dollars went into plant. Meanwhile, you see from the chart that the white dollars rose like a profile of the Andes to a peak of more than 8 billion dollars (10 billion dollars with the black dollars included) in 1929. This reflects the culminating splendor of the era of Charles Mitchell and Samuel Insull. Then the white bar falls to less than half a billion in 1933. With recovery there is a CHART 6 CORPORATE SECURITIES ISSUED, 1921-38 134 IDLE MONEY IDLE MEN rally to another peak of about 4 billion dollars in 1936. Mergers and pyramided holding companies were no longer the style, however, but rather refunding operations where 6 per cents were swapped for 4 per cents, or where debts were swapped for equities. Total issues, white and black, averaged 6 billion dollars in the twenties, two thirds of it and more in the white division. Less than a third did any useful work. Then both divisions went down into the depths, where the useful work portion remains. "Here you have," said Mr. Berle, "the whole huge drama." One reason of course for the low estate of the useful work division is the mounting importance of internal financ- ing. After 1934 huge sums were again spent for plant and equipment— no less than 7.5 billion dollars in 1937, according to the testimony of Dr. Laughlin Currie— but most of the money came from deprecia- tion reserves rather than from the capital markets. Ill Mr. Berle then set forth the evidence on private placement. This is a procedure whereby a large cor- porate borrower, of either black or white money, goes directly to a large savings institution to negotiate a long-term loan, neglecting the investment banker. Suppose, instead of borrowing from your bank, you borrow from a man who is about to make a deposit in your bank. You stop him on the street and he takes SHADOW OVER WALL STREET 1 35 the bills out of his pocket. The bank gets neither the deposit nor your promissory note for its portfolio. The bank is left out in the cold. Poor bank. Poor in- vestment banker. Here are the figures in recent years: Total corporate Per cent bonds and notes Amount privately privately issued placed placed 1934 $ 455,000,000 §100,000,000 22 1935 2,117,000,000 364,000,000 17 1936 4,026,000,000 443,000,000 11 1937 1,676,000,000 447,000,000 27 1938 1,980,000,000 733,000,000 37 In 1938 more than a third of all bonds and notes were placed without benefit of Wall Street. The big industrial company went directly to the big insur- ance company and got the money. Incidentally, the money was yours and mine. We had given it to the insurance company in that inevitable part of our pre- mium payments which is not for insurance protection, but for reserves— and so a kind of forced saving. One reason for the plethora of idle money is to be found right here. There are some 120 million individual life insurance policies outstanding, most of them carrying a provision for automatic saving. The insurance com- pany has to find investment outlets. It is not easy. "There seems to be no likelihood of the diminution of this situation," said Mr. Berle. "Your investment banker, who used to do substantially the whole job, is now out of a job so far as the major, or high-grade 136 IDLE MONEY IDLE MEN issue is concerned. They are prepared to do without him, except perhaps as a minor service agent." . . . Can you imagine J. P. Morgan, the elder, as a minor service agent? Many changes have taken place in the machinery of commercial banking in the past century— the use of checks, the creation of checkbook money, the Federal Reserve System, and so on. But the House of Morgan continued to sell bonds in about the same way as did the House of Rothschild in Napoleon's time. The Rothschilds themselves had not greatly changed the method devised by the British East India Company generations earlier. It is possible that the machinery of long-term credit could be improved. IV We come now to evidence bearing on the decline in the growth rate of industry. Has the American busi- ness economy matured or has it not? Few questions are more bitterly disputed; few are more important. If maturity is a fact, as reflected in a declining growth rate, then it is pretty well agreed that financial meth- ods appropriate for a briskly expanding economy will have to be revised. If maturity is not a fact, it is un- necessary to experiment with new methods. Several gentlemen who aspire to the Republican nomination for the presidency have planted their flags squarely SHADOW OVER WALL STREET 1 3 7 on the proposition that maturity is defeatism and un- thinkable. What are the facts? Two kinds of facts are involved— records and causes. What actually has been the growth rate in recent years? W7hat measurable reasons can be assigned for any change in the rate? The record, if it is a true one, is not subject to argument; the reasons are. Dr. Laughlin Currie of the Federal Reserve Board placed an exhaustive statistical study of capital forma- tion before the Committee, perhaps the most complete ever made. It shows, for each year from 192 1 through 1938, gross national income and gross expenditures for capital goods; things bought not for consumption but for plant, equipment, and the like. These expenditures he termed outlets for, or offsets to, savings. He then subdivided the total into the following outlets for each of the 18 years: Manufacturing plant. Mining plant. Commercial building. Railroad construction. Utility construction. Residential housing. Construction by non-profit institutions such as clubs and churches. Government outlays. Foreign loans. The financing of consumer credit. Inventory accumulations. 138 IDLE MONEY IDLE MEN These expenditures fall into two main groups— first, the plant of productive business enterprises, including manufacturing, mining, commercial, railroad, and utility outlays; second, all other outlays. Remember that both replacements and new construction are in- cluded. In 1923 the productive business sector spent 7.8 billion dollars for plant and equipment; in 1928 it spent 8.7 billion dollars. In view of the fact that the automotive, radio, and motion picture industries were rapidly expanding during this period, the increase in all business outlays is not great. In 1929, however, an all-time high of 10 billion dollars was spent. Then came a dizzy decline to 2.4 billion dollars in 1933; and in 1937 a recovery to 7.5 billion dollars— almost as much as in 1923. During the 1920's the ratio of total savings, both individual and corporate, to national income was run- ning about 20 per cent. This meant that some 15 bil- lion dollars of capital formation, on the average, was necessary to offset the savings and maintain pros- perity. Outlays for productive business, averaging some 8 billion dollars, accounted for only about half of the necessary amount. What made up the differ- ence? These five major items: 1 . Residential housing. A huge shortage in residen- tial housing had developed during the World War for that limited group of Americans who could afford to buy or rent new living quarters. It was made good SHADOW OVER WALL STREET 1 39 after 1920. Expenditures rose to some 5 billion dollars in 1925, held that peak in 1926, and then began to decline. By 1929 they were down to 2.8 billion dollars. In the depression, housing outlays dropped with a thud, and they are still far below the levels of the last decade. 2. Foreign loans. During the twenties exports ex- ceeded imports by some 10 billion dollars, showing that we loaned foreigners the money to buy the excess of our exports. This item began to shrink about 1928, as it became increasingly apparent that foreign bor- rowers were not going to pay what they owed. Many of them did not pay and will not pay. Perhaps most of them couldn't pay. 3 . Consumer credit. A large volume of savings was absorbed during the twenties, as installment buying grew to ever greater proportions. Loans were made to financial companies which carried you and me while we paid off installments on our cars and radios. Un- fortunately, this outlet has a ceiling. Indeed it has a boomerang. When a depression develops from other causes, consumer credit goes into reverse. Installment payments exceed new purchases, thus reducing pur- chasing power when it is most needed. Remember what you did in 1932. You probably paid off the in- stallments on your old car and did not buy a new one. Many purchasers lost both car and installments. 4. Inventory accumulations. Goods on the shelves tended as a whole to increase during the twenties, I4O IDLE MONEY IDLE MEN with ups and downs from year to year. The net rise offset a like amount of savings and helped to close the investment circuit. This device, as every business man knows, has a ceiling and a boomerang too. It can- not be counted upon as a steady absorber of idle money. 5. Government construction. About a billion a year, according to Dr. Currie's figures, went into government plant during the 1920's. The principal outlays were for highways and school buildings. The borrowers were states and cities, not the Federal Gov- ernment. The Federal Government, during the dec- ade, was retiring the national debt, and so, in effect, increasing the fund of savings looking for investment. How? In 1925, let us say, you owned a $1,000 Liberty Bond. The government called it in and gave you $1,000 in cash. Now you had either to spend it or look round for a new investment. After 1929 states and cities retrenched drastically, and as a group stopped borrowing anybody's savings. As a group, they are still down in their bombproof shelters. As they went down the Federal Government went up. It is interest- ing to see the two curves reverse their directions and presently cross.1 Dr. Currie's figures make it clear that productive business enterprise in the 1920's was failing by a very wide margin to absorb the nation's savings. In the 1930's the margin was even wider. The circuit was 1 See the chart on page 13. SHADOW OVER WALL STREET 141 closed— when it was closed— by the five factors just listed. Over each hangs a question-mark as a perma- nent investment channel. Two of them— consumer credit and inventory accumulations— are worthless as permanent stabilizers. They go up and they go down. One of them— foreign loans— is out, for all investors in their senses. One— residential housing— is still promis- ing for the long swing. Unhappily it is still badly de- pressed. The fifth and last factor— government con- struction—has done more than the others to close the circuit since 1933. In 1936 it accounted for 26 per cent of the offsets to savings, dropped to 5 per cent in 1937, when expenditures were heavily cut (followed by swift depression), rose to 30 per cent in 1938. Gov- ernment outlays, however, are beset with controversy. Many critics accept them under protest, as emergency measures only. For permanent aid, government invest- ment is held to be both morally deplorable and eco- nomically ruinous. Ruinous it may be, but the record of the 1930's shows plainly the ruin it averted. Where are the national savings to go? Business plant used only 53 per cent of them in the booming 1920's. Three outlets are useless for the future. Residential housing shows little sign of attracting investors on the scale required, at least without government subsidy. In spite of some giant new industries in the 1920's, business plant did not expand very much. The outlay has seldom exceeded 8 billion dollars a year for twenty years. Meanwhile, when gross national income rises I42 IDLE MONEY IDLE MEN to the hoped-for goal of 100 billion dollars, Dr. Currie tells us that it must be associated with 19 billion dollars of capital formation, if swift collapse is not to follow. What shall we stuff in to hold the barricade? The larger the national income the larger the gap to be filled with new investment. Of course if the ratio of savings to national income should decline, stuffing would not be so necessary. The figures which Dr. Donald H. Davenport pre- sented at the hearings indicate no diminution in the ratio. Billions are accumulating every year in the great reservoirs of individual savings, in the insurance com- panies, savings banks, building and loan associations, in the time deposits of commercial banks. There is as yet no decline in thrift, as measured by the assets of these institutions. In 19 10 such assets stood at 16 bil- lion dollars; in 1938 at more than 60 billion dollars. Another 9 billion dollars was in government savings institutions— baby bonds, pension funds, postal savings. Dr. Alvin H. Hansen corroborated Dr. Currie's testimony. He pointed out that the chief factor which held industrial plant at the level it did attain through the twenties was the motor car, with its subsidiary enterprises— rubber, glass, steel. Toward the end of the decade the automotive industry was still growing but at a diminished rate. By that time everybody who could afford a car— and many who could not— had one. Since 1928 the industry has remained strong, but it has SHADOW OVER WALL STREET 143 shown no tendency to exceed the output of the late twenties. Meanwhile no comparable absorber of savings has appeared to take the place of the motor car. "It is not enough," said Dr. Hansen, "that a mature industry continues its activity at a high level on a horizontal plane. ... It is the cessation of growth which is dis- astrous, for when it has ceased to grow there is no further need for plant expansion." We remember that Mr. Sloan told the committee that plant facilities of the motor industry were ample for all expected de- mands, without recourse to outside savings. Dr. Han- sen said that a new industry, comparable to the auto- mobile, might appear at any time. He would be glad to see one. Where is it? One can't invest one's savings in lofty ideals about the inevitability of progress. He said that in the recovery year of 1936 more than 4 billion dollars of capital formation went into the flimsy outlet of inventory accumulations, while resi- dential construction was only about a third of what it had averaged in the 1920's. He found little basis for permanent recovery in such figures. V Granting, as I think we must, that the facts as to savings and investment channels in recent years were accurately described by Dr. Hansen, Dr. Currie, Dr. Davenport, and others, the question arises why the de- 144 IDLE MONEY IDLE MEN mands of productive business— manufacturing, mining, commerce, railroads, utilities— for new plant reached a kind of plateau in the 1920's, and are even lower today. We have observed the record; what did the witnesses before the TNEC have to say about causes? Six points were brought out: 1. The increasing efficiency of capital equipment due to technological advance. 2. The condition of excess capacity in many in- dustries, which has been more or less chronic since the last war. (It is also chronic in many agricultural crops.) 3. The long-term trend toward economic national- ism and autarchy, which discourages foreign loans. 4. The closing of geographical frontiers for capital investment and expansion. 5. The decline in the growth rate of population. 6. The psychological effect of a lack of confidence on the part of enterprisers and investors. Let us briefly examine each of these. Mr. Sloan, we remember, testified that a dollar's worth of capital goods today will produce more out- put than a dollar's worth a few years ago. Dr. Oscar L. Altman called attention to the work of industrial research laboratories in reducing costs. When I went through the research laboratory of the A. O. Smith Corporation in Milwaukee, makers of automobile frames and pressure vessels, seven hundred techni- cians were employed there. American industry may SHADOW OVER WALL STREET 145 not be expanding rapidly, but the technics of more efficient production are growing like a green bay tree. Their initial effect is probably to increase capital out- lays while reducing payroll costs. But when this hurdle is passed the long-term effect is to reduce the demand for capital.2 Milo Perkins gave significant testimony about excess capacity. It consisted of case histories rather than figures. Mr. Perkins is a Texas manufacturer, now in charge of the Food Stamp Plan of the Federal Surplus Commodities Corporation. He has been keeping a record of conversations with business men who come to see him in Washington. Many come. He asks them about plant expansion in their business. "I find," he says, "that most business men are intimately aware of the lack of opportunity for capital investment in their own particular line, but they do a great deal of wishful thinking about the large number of jobs which could be created in the other fellow's back yard." 2 In this connection an article by William J. Enright, in the New York Times for March 17, 1940, is not without interest. The headline reads: "research cuts use of venture money." Mr. Enright says: "Industry's need to develop and finance all new products and processes within its own laboratories is the chief reason today why the opportunity for venture capital is lack- ing, a development usually ascribed to politically created 'un- certainty,' according to research executives last week. . . . From the quality and importance viewpoint, the 1,800 research laboratories [of large-scale enterprise] with their 50,000 workers create the new industries." 146 IDLE MONEY IDLE MEN Recently he asked a group of flour millers how many mills their industry would build to help absorb the unemployed. (All presidential candidates should listen to this. It may save them some painful surprises if they should be so unfortunate as to be elected.) The millers replied that Mr. Perkins well knew they had twice the capacity the country needed, even on a 100 billion dollar national income basis— and besides, their business was different. They felt certain that other industries stood in great need of new factories, but the flour business, no. Emphatically not. Mr. Perkins' record book is a succession of such stories. Each group affirms that its business is differ- ent; it needs no more capacity— heaven forbid; but bil- lions are required elsewhere. "I haven't found any group of manufacturers in the country who recom- mend the building of additional plants, with the na- tional income where it is now; who recommend them in the line of business with which they are intimately familiar— hosiery, cotton textiles, cottonseed oil, bag- ging, and so on down the line." Plant expansion is a worthy goal to which all busi- ness men subscribe in the abstract. But when you cate- gorically ask Mr. Smith, of Smith and Smith, how much more expansion— and competition— he wants in his own industry, the abstraction melts before the superior fire of the concrete case. It would be inter- esting in this connection, says Mr. Perkins, to summon the secretaries of all the important trade associations SHADOW OVER WALL STREET 147 and ask them to specify the shortages of capacity in the industry whose welfare they are hired to protect. Both Dr. Hansen and Mr. Berle testified on the rise of autarchy and the virtual collapse of the world free market. Dr. Hansen said: "The outlet for foreign loans and investments has been totally absent during the past decade and the prospects are not bright for the years ahead." Are you loaning any of your savings in Europe or Asia today? (Some outlet in Latin America, with government guarantee, may be possible now that the war has come.) Dr. Hansen outlined the geographical check to in- dustrial expansion. The past century witnessed the de- velopment of the American West, of South America, Australia, Canada, as agricultural and mining areas were exploited, and giant cities built. This trend domi- nated economic life. It minimized the risk of new ventures. If optimism carried railroad construction too far, or overbuilt a city, the damage was tempo- rary. Expansion and growth soon made good the error. Business men could look far into the future with gigantic plants, anticipating capital outlays. As all the world knows, this rhythm has been broken. The virgin lands filled up. What resources remain to be exploited by private capital in Asia and South America are likely to be developed slowly, if at all. Dr. Hansen went on to describe the effects of the growth of population on the demand for capital. The enormous outlays of the nineteenth century were con- 148 IDLE MONEY IDLE MEN ditioned by technological advances, but also by an unprecedented increase in population throughout the western world— calling forth more housing, transport, municipal utilities, and the like. "It seems not un- reasonable to suppose— and some rough estimates lead to this conclusion— that approximately one half of the capital outlays of the past century were due to the growth of population, and its expansion into new ter- ritory." Dr. Hansen presented a chart which showed popu- lation increasing, but at a declining rate, to 1980. He was thus extremely cautious in his estimates. Many students of the trend expect the peak to be reached before i960. Whether minimum or maximum esti- mates are taken, the restraining effect on construction activity, land values, the willingness to gamble on the future, is sure to be profound. Finally, it should be emphasized that no witness was disposed to deny that the psychological state called "confidence" was an important factor in the halting of new investment. Mr. Berle said flatly that recent government policies covering utilities, labor re- lations, taxation, were in part responsible for the freez- ing of capital markets. But to say that they were re- sponsible for the whole decline is to disregard many stubborn facts— depreciation policies, excess capacity, the secular trends in population, foreign loans, and so forth, just recited. A half-truth stated loudly enough, said Mr. Berle, often becomes the sincere and honest SHADOW OVER WALL STREET 149 belief of the financial community. Confidence is in- deed lacking. Is this due to recent government policies or to long-term economic causes? My opinion is that it is due to both, with emphasis strongly on the latter. VI Assuming that the above factors have reduced the relative need for capital expansion in private enter- prise, it does not follow that the American economy has reached a dead level. It does not follow at all. Evidence was produced by Dr. Will Alexander, Milo Perkins, John Ferris, and others to show that millions of people stand in dire need of a decent house to live in, enough good food to eat, adequate clothes to wear, better medical care, and educational facilities. Mr. Perkins said that if everybody in the United States spent as much money for cotton goods as is now spent by families in the $2,500 income group, they would add half a billion dollars to the income of the South, and increase cotton consumption by two million bales. This demand could be paralleled for nearly every common article you can think of. If we could some- how finance it, the pull on both agriculture and indus- try would be terrific, passing capacity in many cases, and calling for new plant and equipment. How are we going to finance it? This is an intensive rather than an extensive type of expansion. It tends to lack profit appeal. The financial mechanism has 150 IDLE MONEY IDLE MEN hitherto been geared to extensive expansion— new- lands, new populations, new industries. Here profits are risky but often large. One way to visualize the distinction between exten- sive and intensive investment is to think of the largest city in your vicinity. Is it growing? Are land values increasing? Is there demand for more skyscrapers, more housing space, more railroad facilities, more banks, more stores? The answer for most American cities is no. The cities are built. There will be few more Birminghams, Denvers, Fort Worths, spring- ing up from waste land. Into their building went mountains of raw materials, armies of men. A great city where a few decades earlier cows were pastured —that represents extensive investment. Now look at your city again. Is it beautiful in all its aspects? Is it well built? Are the streets wide enough, the parks spacious enough, the public build- ings fair enough? Are all the houses fit for decent people to live in? What about the water supply and the sewers? What about sweat shops, dark factories, foul offices? Every American city stands in need of huge expenditures for improvement, just to make it a civilized abode for a civilized people. That is intensive investment. To balance the federal budget and practice econ- omy only hammers down the already wretched pur- chasing ability of the lower-income groups. Yet to borrow and distribute enough purchasing power in the SHADOW OVER WALL STREET 151 form of relief to enable people to buy two million bales of cotton goods, and other things they need, might run the federal debt out of sight in a very short time. Some critics claim they can't see the top of it now. We seem to be caught in the rigidities of a finan- cial system designed for a different rate of growth. It is a waste of words to discuss the demonstrable possi- bilities of intensive expansion unless one is prepared to show how it can be financed. Another broad field for expansion is public works as such. Others are conservation and scientific re- search. Henry Dennison, Massachusetts manufacturer, introduced some very interesting testimony covering the possibilities of public investment, if, as, and when it was accepted as a legitimate outlet on a larger scale. The need again is demonstrable. Idle men and idle money could find wide employment in this sector. But again we strike an institutional stone wall. Public investment, despite the fact that we have had it since the Republic began, despite the fact that it was an im- portant factor of prosperity in the 1920's, that motor cars make no sense without public highways to run on, that airplanes make no sense without public air- ports to land on, that the lumber business makes no sense without trees to cut a few decades hence, that the whole country will make no sense if erosion by water and wind is allowed to compound its ravages unchecked— public investment is taboo in orthodox minds. Senator O'Mahoney was suspicious of it; Sen- 152 IDLE MONEY IDLE MEN ator Kinsr would have none of it. When it was touched on the atmosphere of the committee room became tense. Notwithstanding this, Dr. Hansen had the temerity to propose public investment supported by increased taxes as part of the solution of the idle-money prob- lem. Mr. Berle had the temerity actually to draft a plan for a battery of new capital banks to finance both public and private investment, at selective inter- est rates, so that the burden of debt could be kept at reasonable levels. This was the most dramatic session of all before the TNEC. The Committee sat stunned, yet fascinated at the boldness and the logic of Mr. Berle's invention. The Committee must have known that the facts were leading them— as they are leading our economy— into an impasse from which there is no escape by the road of orthodox finance. But to hear a cold, clear brain propose an unconventional way out was a little like listening to a naughty story in the church vestry. VII In another section we will enlarge on these con- structive proposals, together with others designed to meet the challenge of intensive investment. But preliminary to remedies, it is important to know the extent and sequence of the situation which is to be remedied. I have tried to concentrate on two related sets of data— the dominating place of internal SHADOW OVER WALL STREET 1 53 financing in our economy today and the collateral obsolescence of the investment banker. Thrift has not declined, but opportunities for investment in private enterprise have. If, under pressure of brute circum- stance or otherwise, the rate of savings does decline, the investment banker's function will be further cir- cumscribed. If savings are routed into public invest- ment via Air. Berle's capital banks, the investment banker will not be cheered. Which way shall he turn? The hearings make it clear that, while agreement is becoming widespread as to the facts, many Ameri- cans are not prepared to accept Mr. Berle's banks, or Dr. Hansen's tax reforms, or Mr. Dennison's program for public construction. They prefer to wait for some god from some machine to come and make every- thing click again as it did before the world turned up- side down. Perhaps the god will come. Perhaps he will be a Re- publican god. It may be that he can turn the world right side up again, and make things click. Perhaps he can even make the sun to shine in Wall Street. Here, in the careful testimony of these hearings, are the facts he must overcome to do it. It will be interesting to watch him battle with the facts; interesting to know where he will find 1 5 billion dollars, more or less, of productive investment, every year. If the facts defeat him, as I am afraid they will, it may then be psychologically possible to work out financial solutions which fit the facts. Even the bitter- 154 IDLE MONEY IDLE MEN enders will realize that the rhythm of the nineteenth century cannot be recaptured. With agreement gen- eral, we can, as a people, set about achieving that in- tensive expansion in living standards for all Americans which our magnificent industrial plant stands ready to give us whenever we say the word. 7. GREAT DAM IN a desert in Egypt has stood for six thousand years the most massive structure ever built by man. In a desert in the State of Washington a new champion arises. The Great Pyramid weighs some 7,000,000 tons —say 120 Queen Marys piled together and squashed solid. The Grand Coulee Dam on the Columbia River already exceeds this total. When it is finished it will weigh 23,000,000 tons, more than thrice the heft of Cheops. One of these masses is built of cut stone, the other of poured concrete. One took 50,000 men twenty years to build, the other will take 5,000 men six years, in a task not only three times greater but vastly more complex and dangerous. Both structures relied on the labor of those who would otherwise have been un- employed. Egyptian peasants in the off season built Cheops; American workingmen and engineers shelved by a great depression are building Grand Coulee. Pyramids were houses for the dead. Dams are centers of energy for the living. It is better, I think, to live in the age of the Great Dams than in the age of the Great Pyramids. Owners of stocks and bonds in utility companies, to judge by their dinner-table conversation, prefer pyra- mids. It is still too early, however, to calculate the final 155 I56 IDLE MONEY IDLE MEN effect of cheap hydro-electric power on utility earn- ings. In the Tennessee Valley, to date, power from government dams has so stimulated consumption that some private utilities in the South are said to be doing the best business in their history. The big dams, how- ever, are not primarily power projects, I believe, but something more fundamental. In the last hundred years, man has all but wrecked the balance of nature in the North American continent. Flood, drought, dust storms, erosion, the destruction of forest and grass cover, are making severe inroads on the organic sta- bility of the United States. Some 10,000,000 Ameri- cans have already lost their living from natural re- sources. The most important function of the great dams will be to restore equilibrium. In the long run, it will probably be found that the TVA is not so much a power project as an attempt to replace a declining cotton culture with a more diversi- fied agriculture. The proposed dams in New England and in the Ohio Valley are primarily for flood con- trol. The dams in the far West are concerned with irrigation and water conservation in an area of limited rainfall. The two huge dams of the Central Valley project in California are designed to halt a declining water table, and, by a regulated flow of fresh water, to hold back the salt water of the Pacific, which is seeping in to ruin the rich farm land of the Sacramento delta. GREAT DAM 157 Power companies build dams for one purpose- power. Sometimes the reservoir silts up because ero- sion on the watershed cannot be controlled, and then there isn't any more power. I have seen such useless reservoirs in Tennessee and Texas. The federal proj- ects are of a different order. They are coming to be known as multiple-purpose dams. Consider, for in- stance, the Central Valley project, with one large dam on the Sacramento River in the north, and a second on the San Joaquin in the south. They will serve twelve purposes: 1. Flood control 2. Navigation 3. Irrigation 4. Power 5. Domestic water supply 6. Salt-water seepage control 7. Underground water-table control 8. Fisheries, especially salmon 9. Game conservation 10. Erosion control 11. Reforestation 12. Recreation The Central Valley is one of the richest agricultural areas on earth, but the water table is dropping alarm- ingly; the Pacific is coming in. The dams would be dirt cheap at the price if hydro-electric generators were unknown. But if you have a dam and a river anyway, why waste the energy coming over it, espe- 158 IDLE MONEY IDLE MEN cially when much of it will be needed to pump water around the irrigation canals? Boulder Dam in the Colorado has already saved the lower valley from one disastrous flood. It will supply the Imperial Valley with dependable irrigation; it will supply Los Angeles with drinking water. It is already furnishing cheap power in the Southwest. New gen- erators are being installed to take care of the mount- ing demand. Meanwhile Lake Mead, backing up no miles into the Grand Canyon, is a lovely inland sea, and a welcome recreation center in desert country. When I was there last spring, cowboys were taking to launches and sailboats. Grand Coulee is primarily an irrigation project. The power will be used to pump water for that proj- ect. There will also be plenty of power for sale. The dam will control floodwaters down the Columbia 450 miles to the sea. It will deepen the channel between Portland and Bonneville from two to three feet, and thus make navigation on the lower river more depend- able. The lake above the dam, reaching 151 miles to the Canadian border, will be used for fisheries and rec- reation. If one looks on these vast and awful structures sim- ply as bones for utility magnates to choke on, he mis- apprehends the age in which he lives. It is like think- ing that the pyramids were built for the view. These dams will be integrating the economy of a continent when utility magnates, and their quaint financial GREAT DAM 1 59 methods, will be museum and library curiosa, perished from the earth these hundreds of years, along with slums, trade-unions, and contract bridge. Like the Panama Canal, such projects are too vast, they involve too many public interests, to be promoted by private companies. They have to be undertaken by all the people, functioning through the Federal Government. II Draw a line on the map from Spokane almost due west to Seattle, a distance of some three hundred miles. A third of the way along lies Grand Coulee, roughly one hundred miles from Spokane, two hun- dred from Seattle, one hundred miles south of the Canadian border. I reached the site from Spokane by motor in about two hours. We crossed a dry, rolling plain, with a few prosperous farms and the scars of much erosion. It is always difficult for an Easterner to realize that east of the Cascade Mountains, which are not far from the coast, large sections of Washington and Oregon are natural cow country, arid as the Great Plains. The stereotype of the Northwest is a mixture of snow- capped mountains, towering fir trees, leaping water- falls, and soaking rain. This is true enough of the coast, but quite incorrect for a large section of the in- terior, where you find flat lands, sagebrush, bunch grass, and a ten-inch rainfall. l6o IDLE MONEY IDLE MEN The sky has a luminous quality such as you see in the Southwest, but the landscape is comparatively dull. Suddenly the plain bursts open! We halt at the rim of a canyon and look down into the depths. At the bottom, one thousand feet below, the Columbia is doing a hairpin turn, twisting from a southwest flow to a northeast flow. The canyon is scarred with exca- vations, and just beyond the twist is the line of the dam. This is an urgent river, white-foamed and charg- ing, quite different from the murky, placid Mississippi. We wind down a steep switchback road to the bottom. Four years ago there was a sheep path here, one sorry peach orchard, and a crude ferry to take the sheep across to pasture. Charlie Osborne ran the orchard, and Sam Seaton ran the ferry. They consti- tuted the total population of the canyon. The walls and river looked much as they did after the last ice sheet moved north. They look different now. When American engi- neers move, they move. Government dams are said to lack the incentive of private profit. Then what incen- tive has driven the colossal, earth-changing force which has been loosed here? There is a dump pile that could swallow the Empire State Building. There is a conveyor system, of the general dimensions of Brook- lyn Bridge, to carry gravel from the dump pile to the cement mixers. The mixers would dwarf a Minneapo- lis grain elevator. There are three distinct towns where GREAT DAM 161 as many as 15,000 people have lived— workers and their families. The dam is low and straight, shouldered deep into scarred granite walls on either side of the canyon. The river pours through a series of cement grooves in the center, arranged like huge building blocks. To the right and left, the walls are higher, and on the downside the emplacements for the twin power houses have been made ready. On top of the dam I see an object which looks like a red box for thumbtacks, but which turns out, on closer inspection, to be a stand- ard box freight car. Only then do I begin to grasp the sheer magnitude of the mass. Most of it is already under water. The big job has been done. The cofferdams which shunted the river now to the east and then to the west, so that bed- rock might be bared and the foundations poured, have been removed. They were as long as the dam at Muscle Shoals. On the great swelling foundation it 1 62 IDLE MONEY IDLE MEN now remains to build up the narrower top another three hundred feet; up to those marks on either side of the canyon walls where the big signs are posted: safety pays. Pour, pour, pour, for three more years. The big job, the hard job, is done. It took thousands of sweating men; it took forty lives. Nothing like it has ever been accomplished in the world before. Grand Coulee is anchored for millennia in its granite cradle, its joints grouted by cement and water, under high pressure, to form one monolithic mass. Norris Dam is a toy compared to this. Boulder looks more dramatic, arched and dead-white in its narrower, blue- black canyon; but, for all its greater height, its bulk is only a third as great. This dam, on the second largest river on the conti- nent, may remain the grandest structure ever built by man for a thousand years to come. It has been de- signed to take the Columbia at full flood over the upper spillways— one million cubic feet per second, five times the flow of Niagara, and three times the height of the fall. That will be a sight to travel round the world to see! Will she hold? She will. We Ameri- cans may be poor hands at shuffling stocks and bonds and credit instruments in a manner to keep the eco- nomic structure from collapsing, but, by the eternal, we can build dams. Wrien one side of the excavation below the coffer- dam threatened a major landslide, a quick-thinking engineer worked out a plan to freeze the tumbling GREAT DAM 163 earth. Pipes were laid, a refrigerating plant was swiftly built, and the earth was frozen solid until the dam's foundation was poured and set. When it was found that it would cost several million dollars to haul in agglomerate for the mixers, engineers discovered an adequate supply a mile away in the sloping canyon walls, rigged the most gigantic conveyor system ever heard of, and saved the freight charges. When the river went wild, and the steel cofferdam sprang a seri- ous leak, they threw in a bulldozer— a sort of tractor— to stop the hole until more formal repairs could be brought up. I have tried to separate visual impressions from sta- tistics. Personally, I prefer my statistics neat. Here is a jigger or two of them: — Length of dam at crest Width at base Width at crest Height above bedrock Height above river Spillway width Generative capacity Capacity of each turbine Annual firm power Annual secondary power Capacity of pumping system Concrete required Excavation Length of lake above dam Area of lake Capacity of lake Balancing reservoir— length Balancing reservoir— area Balancing reservoir— capacity 4,300 ft. 500 ft. 30 ft. 550 ft. 355 ^. 1,650 ft. 1,890,000 kws. 150,000 h.p. 8,320,000,000 kw.-hrs. 4,200,000,000 kw.-hrs. 16,000 cu. ft. per sec. 10,370,000 cu. yds. 20,000,000 cu. yds. 151 miles 82,000 acres 10,000,000 acre-ft. 26 miles 27,000 acres 1,150,000 acre-ft. 1 64 IDLE MONEY IDLE MEN Elevation of river above sea level 1,000 ft. Mean annual runoff at dam 80,000,000 acre-ft. Maximum required for irrigation 6,000,000 acre-ft. Mean flow (exceeded only by Mississippi) 1 1 0,000 cu. ft. per sec. Maximum recorded flow 492,000 cu. ft. per sec. Minimum recorded flow 17,000 cu. ft. per sec. Regulated minimum flow 35,000 cu. ft. per sec. Drainage area above dam (bigger than the United Kingdom) 1 1 3,000 sq. miles Cost of dam $186,000,000.00 Cost of irrigation works $209,000,000.00 Certain of these figures are especially interesting. I said earlier that the dam had been designed to hold a flood of one million cubic feet per second. The great- est flood so far recorded was less than half that total— 492,000 second-feet. In the driest period recorded, the flow was 17,000 second-feet. The dam and reservoir will double this. Hereafter the minimum will be at least 35,000 second-feet, refreshing the channel, keep- ing navigation going, keeping the turbines at Bonne- ville turning down below. The average annual runoff is 80,000,000 acre-feet, which can be visualized as eighty million acres of water, one foot deep. At their maximum, the irrigation works will require only 6,000,000 acre-feet, or less than 10 per cent. Second- ary power— available only at high-water periods— is about half as much as the firm power. The latter is the power available twenty-four hours a day the year round. The pumps to the balancing reservoir will be operated exclusively on secondary power. While they run, 16,000 cubic feet of water will go tumbling into GREAT DAM 165 the reservoir every second. This balancing reservoir is the heart of the irrigation system. Let us take a look at it. The idea goes back to the last ice age. Ill We climb into the car again, and wind up the west canyon wall to the rim. Leading off to the south is another canyon, or coulee, which is dry. The bottom is perhaps seven hundred feet above where the river is now. It is about two miles wide, with sheer rock walls on either side. In the middle is a great mesa called Steamboat Rock. The walls are stained with orange and red lichens, and snow lies in the fissures. This is dramatic scenery, worthy of New Mexico. We follow the canyon down some thirty miles, where it ends in a 400-foot precipice, curved in a great bow three miles wide. These are the famous "Dry Falls." At the bottom are a few small pools of water, and many rattlesnakes. What does it all mean? The geologists have worked it out. When the last ice sheet crept south, it forced a huge pile of frozen debris into the Columbia canyon at approximately the site of the present dam. The river rose then as it is rising now, only nature's dam was higher and the river, fed by a continental ice sheet, was ten times its present volume. The rising waters reached the lip of the old canyon and tumbled out upon the plain, running to the south. In due time they 1 66 IDLE MONEY IDLE MEN cut the new and higher canyon through which we have just driven. At its end they went over a wall of hard rock and carved the Dry Falls. The volume is estimated at fifty Niagaras. That was a waterfall! For thousands of years it thundered. Then the ice sheet began to shrink. The frozen debris in the old channel melted out. The river, no longer dammed, went back to its ancient course. The great falls went dry. It is in the higher canyon that the storage reservoir is to be situated. This technically is the "Grand Coulee." A 70-foot earth dam will be built at either end, stretching from wall to wall. Steamboat Rock will become a flat-topped island. A battery of giant pumps, just behind the river dam on the west side, will lift water from the lower lake up into the Grand Coulee. The vertical distance is 280 feet. The balanc- ing reservoir will then feed the irrigation area off to the south, by gravity canals, of which the longest will run for one hundred miles. Thus men are doing in a smaller way what the Ice Age did in a bigger way- spreading the waters of the Columbia over the plains below the Dry Falls. Large sections in the arid region of Washington are excellent soil for the dry farming of wheat, notably the Palouse district south of Spokane. The area to be watered by Grand Coulee, with the present eight- inch rainfall, is too dry for any kind of farming. The lava soil, however, is very rich. Years ago the tract was opened up and settlers streamed in. They tore up GREAT DAM l6j the bunch grass with plows, and got fine crops for two or three seasons. Then the surface moisture in the soil was exhausted. The region turned to semi-desert, for after this assault even the faithful bunch grass dried out and died. The Soil Conservation Service has been at work to keep the region from turning into a nice little dust bowl. It is a mournful trip to go about these three counties of Grant, Franklin, and Adams and see the aban- doned homesteads, with machinery rusting in the front yard. It was mournful for the settlers to look over the edge of their burning plateau and see the Co- lumbia, carrying unlimited water, five hundred feet below them. No feasible pumping system could get the water up. After flowing through the dam, the river turns west and then south in a great bend, and forms the westerly boundary of the proposed irrigation area. But to get water into the area the river must be tapped much farther upstream. A man named Billy Clapp, eating ham and eggs in a cafeteria in the little town of DO Ephrata, in 191 8, is credited with solving the riddle. He thumped the table with his coffee cup and pro- posed to duplicate the geology of the Ice Age. They called him a crackpot until Colonel Goethals, after a careful survey, checked the plan. Hoover and Coolidge then fell into line. It remained for Roosevelt actually to start the dirt flying. The area to be irrigated is almost as large as Con- 1 68 IDLE MONEY IDLE MEN necticut. It is estimated that two grand canals coming down from the balancing reservoir, one to the west, one to the east, with their feeders, can transform 1,200,000 acres from semi-desert to a garden spot. The skeptic can cross the river, drive a few miles to the west and see the Yakima Valley, as lush a garden spot as you please, already reclaimed from desert by irriga- tion. In 1900 there were 13,000 people in the Yakima Valley; now there are 1 10,000. First and last, Yakima and many other irrigation projects have had a lot of trouble with land specu- lators. These fast-moving gentlemen discount the future work of farmer and God. They harness the farmer with a staggering debt burden before he plants a crop. At Grand Coulee for once the dirt farmer will get a break. Congress has passed a law forbidding land speculators to practice here. The area will be con- demned and valued as desert land. The bona fide settler will pay desert prices— say $7.50 an acre. If he later sells, it must be at desert-land valuation— plus his tangible improvements. The farmer will be charged by the government, without interest, for his share in the irrigation investment, plus his share of the mainte- nance cost of getting water on his land. A single man will be entitled to not more than forty acres; a family to not more than eighty. A total family investment for land, water costs, house, barn, tools, machinery, electric power connection, has not been determined. Estimates run from $8,000 to $10,000. GREAT DAM 1 69 A well-run irrigation project is agriculture with the weather risk eliminated. No more droughts, no more floods. Water comes to the soil at the time it is needed, especially in the growing season, and in the amount needed. It happens that high water in the Columbia comes precisely during the growing season in June and July. This is the time when the vast Columbia Ice Field in British Columbia, the chief source of the river, begins to melt in earnest. So, when farmers need the water most, the Columbia has it to spare; and when the pumps to the balancing reservoir need power most, a maximum of water is ready to flow down the pentstocks, furnishing cheap secondary power to the giant motors on the pumps. IV How about the financial and business aspect? Where is the money coming from? Who's going to pay for it? Why bring in more agricultural land when farmers all over the country have gone broke because they have produced so much? W ho is going to use a billion kilowatts of firm power from the dam— grass- hoppers, prairie dogs? If even part of the power is used, what is going to happen to the widows and orphans who have put their hard-earned savings into utility securities? These are relevant questions. But they are not all the questions. The impartial conclusion as to the social 170 IDLE MONEY IDLE MEN and economic justification of Grand Coulee can be arrived at only after all the relevant questions have been taken into consideration. For instance: Why do Chambers of Commerce in the Northwest enthusias- tically support the project? Why did Goethals, Hoover, and Coolidge favor it? If there are 10,000,000 unemployed persons in the country who should be given work if possible, is it better to put them at build- ing battleships, raking leaves, or constructing new energy stations for food, water, conservation, recrea- tion, and electric power? If men must be fed anyway, is it better to get something useful for the taxpayer's money, or to get nothing, and let the men rot into the ranks of the unemployables? If investors in private power companies are really damaged, may it not be better to compensate them directly than to deny cheap power to millions of consumers? W'hat is going to happen to the 100,000 migrants from the dust bowl into the Northwest? Many of them are excellent farmers. Is it better to give them new land for the lands they have lost, and let them at least feed themselves, or to allow them to haunt the bread lines, the relief stations, and the factory doors of the Pacific States, while their families drift from bad to worse? I have seen them. I have talked to them. They want to be given a chance to go to work. They look to these new projects as the Israel- ites looked to Canaan. Where are the crop surpluses which cause most of the trouble? In wheat, cotton, corn, and tobacco. GREAT DAM 171 What irrigated crops are grown in the Northwest? Apples, pears, nuts, celery, alfalfa, grapes, dairy prod- ucts, and specialty livestock. Are American consumers surfeited with these products? They are not. They may be surfeited in some areas with hog and hominy, corn pone and sowbelly, but not with apples, celery, tomatoes, butter, and such products rich in vitamins. I do not mean that market surpluses never occur in these crops, but that they are smaller and are usually consumable. Has the consumption of power in the Northwest grown at the rate of 9.5 per cent, compounded an- nually, in recent years? It has. Is population growing in this area? Owing to one of the greatest migrations in history, it is growing rapidly. Even if the growth rate of power consumption is cut in half, will all of the power from Grand Coulee be absorbed? Every kilowatt-hour, in less than fifteen years. Are there possibilities of new electrochemical industries in the region? In Idaho is the largest known deposit of phos- phate rock in the world. Power is needed to turn it into fertilizer. Does increased power use follow a lowering of rates? Almost always. Does the cost of power drop with increased load? Almost always. Is it a good idea to build up more regional self-sufficiency, saving long freight hauls and excessive interdepend- ence? Is it economic to mine ore in Washington and send it to Pittsburgh to be refined, to Bridgeport to be machined, and back to Washington to be consumed as a finished product? Is it wholesome or desirable to 172 IDLE MONEY IDLE MEN have the West and South in perpetual hock to New York? These, also, are relevant questions. I have indicated answers to some of them. Others require more study than they have yet received. Perhaps, on balance, the great dams are not justified by the financial beliefs of 1928. Perhaps they are not altogether sound, self- liquidating investments at 6 per cent. But this, sigh as we may, is 1940, and, for better or worse, a differ- ent world. Nineteen fifty promises to be stranger still. We can never go back to 1928. We are going hell-bent for somewhere, the like of which, financially, has never been seen before. This is also true of Europe under the impact of the war. Concrete dams in granite cradles are solid. They are not like debentures and mortgages, which go up in smoke. Even companies owning skyscrapers go up in smoke, but the steel and concrete never quiver. In a time of disturbing transition, it may not be a bad idea to build solid things that add to the long-range wealth and energy of the people; that reduce flood and drought, water the desert, conserve soil, supply "pro- tective" foods, and release great blocks of light, heat, and power. I may be wrong. Right or wrong, no American can stand below the spillways of the Grand Coulee and not be proud to belong to the nation which could rear this mighty thing. 8. DESIGN FOR 1960 FAR and away the most popular exhibit at the New York World's Fair is the so-called Futurama in the General Motors building. People wait for hours to see it. Every day throughout the Fair's first season, a queue of visitors stood in the sun or in the rain for as much as two hours, waiting to get in. The Futurama is a dream on a relief map. The map covers 36,000 square feet and is a third of a mile long, as the spectator views it. It cost $7,000,000. On its sur- face are toy models of 500,000 buildings, 1,000,000 trees, 50,000 motor cars— 10,000 of them moving. Its purpose is to show what America— or a broad section of it— might look like in i960. The success of the ex- hibit indicates either that citizens are keenly interested in the future of their country, or that they delight in little cars running over little bridges and disappearing into little tunnels. Perhaps they are both interested and delighted. I was. At a time when the future of the Old World has never been so dark, it is well for Americans to study seriously the future of the New World. They were born on the side of the planet which has a future be- yond bombs and torpedoes, beyond inconceivable de- struction. The curtain may be ringing down on Euro- pean civilization for many vears to come. While 173 174 IDLE MONEY IDLE MEN Europe destroys, America can build. It may be that a strongly built America can some day help the people of Europe to their feet again. Mr. Norman Bel Geddes, who designed the Futurama, lets us look for- ward to shining cities, sunlit fields, to a vision of peace, plenty and ordered beauty. Is it possible to build such a country as Mr. Geddes puts before us? Have science and engineering reached a point where any part of the great model can actually be constructed, life size? Granted that we can build it, have we a financial system modern enough to en- able us to pay for it? Granted that we can build and pay for it, is it the kind of world we should really enjoy living in? Or is it too clean, too fast, too neatly planned? This map is a great challenge. We ought to begin thinking about it hard. Life does not stand still in the power age. We have a choice of going down into the abyss with Europe, efficiently using science to destroy ourselves, or of going forward to employ science in some such noble enterprise as this. If we have the sense and the determination to choose construction rather than destruction, a blueprint to build from becomes urgently important. II When you have done your minutes or hours of waiting in line and come to the door of the Futurama, DESIGN FOR i960 175 you pass into a vast, dimly lit hall and begin to walk slowly down a ramp. Opposite you on the wall is the biggest outline of the United States you have ever seen, with the white lines of highways on a blue- black ground. You hear a clear, quiet voice explain- ing these highways, their present failings and their future needs. In a minute or two you reach the bottom of the ramp, and step on a moving platform which runs from under the hall to what seem to be subterranean regions beyond. Guards help you to a seat. Behind every two chairs is a soft-voiced loud-speaker— if you see what I mean. For all your journey the voice con- tinues to explain the wonders which your eyes be- hold. The line of chairs turns a corner in a dark tunnel, and suddenly the world of i960 opens before you, reaching over hill and dale, field and village, to a far horizon. It is as if you were flying slowly at perhaps a thousand feet, looking out upon a rural landscape on a fine clear day in early summer. You know that it is all a model, with a fifty-foot house reduced to a few inches, but the effect is very real. Cows are graz- ing in the pastures. Blossoming fruit trees in immacu- late pattern cover whole hillsides. Crop lands are plowed on the contours; in steeper country they are terraced. Barns and silos are streamlined. This land is intensively cultivated, protected from flood and erosion, and enormously productive. Why not, in 176 IDLE MONEY IDLE MEN Utopia? The trees of one large orchard are enclosed in glass globes for insect control. A tiny automobile leaves a farmyard and heads for a narrow country road. You see it approach a wider highway, and this in turn becomes a feeder for a great super highway which now looms into focus. This runs straight as a ruler, except in high mountains. It is fourteen lanes wide: seven lanes westbound and seven eastbound. The four outside lanes are for traffic at fifty miles an hour, the fifth and sixth for traffic at seventy-five miles an hour, the seventh for one hun- dred miles an hour, no more, no less. Every few miles a traffic-control tower bridges the road. Its function is not to stop cars by flashing red lights, but to guide cars by radio beams, keeping them at the prescribed speed, or steering them from lower to higher speed lanes. Presently you see an intersection with a north and south super highway, but not an antiquated clover leaf of 1940. In this i960 intersection, the cars on the 100- and 7 5 -mile lanes go roaring straight ahead at un- diminished speed. The 50-mile lanes permit both right and left turns at fifty miles an hour! This is accom- plished by making one main roadway leap over the other, and by a series of ramps which connect the north-south highway with the east-west highway on curves with a long, easy radius. It is complicated, but hardly more so than a 1940 clover leaf. Indeed there is no simple way to handle a main intersection where DESIGN FOR i960 177 drivers come from four directions, and each driver demands the choice of turning right, turning left, or going straight. Four drivers, with three choices each, require arrangements for twelve different paths. Mr. Geddes' solution of this problem is ingenious and, I suspect, fabulously expensive. You follow the great West Road— still in your com- fortable moving chair, with the clear voice talking in your ear— past lakes, industrial towns, an amusement park with a huge roller-coaster, past forests, farm lands, into the foothills of a range of mountains. The highway begins to climb the backbone of the conti- nent. It runs upstream beside a great river, harnessed with stupendous engineering works— dams, power plants, irrigation projects, canals, flood control de- vices. Higher and higher it goes, until the ruggedness of the terrain forces the differing speed lanes to divide and take their own routes— some over dizzy suspen- sion bridges, some diving through tunnels in sheer mountain walls, some looping in zigzags up steep side- valleys. Here is a monastery perched on a wild crag; here a ski resort on the top of the continent. We are above the tree line now, in a world of bare rock and snow. The highway tops the continental di- vide and starts down. Down through some more mas- sive engineering structures, to a point where the mountain bastions part to frame a level plain, a wide river, and at the horizon, the slender skyscrapers of a city. 178 IDLE MONEY IDLE MEN The highway heads for that city, going under a rail- road. The fourteen lanes which were dispersed in the mountains are together again. You pass industrial com- munities, smelters, quarries, garden cities, dairy and truck farms, and an airport three miles in diameter, paved solid. Beside it stands a Zeppelin hangar de- signed to swing around with the wind. As you pass a satellite city with a skyscraper or two, the traffic be- comes heavier. Rather than widening, however, the road breaks into two levels, then three. As a three- decker, fourteen lanes wide, it crosses the river on a suspension bridge which looks strong enough to sup- port the Great Pyramid. The Metropolis is by-passed, but many feeder lanes lead into it. Close to the city now, you see a network of parks and open spaces which have displaced the slums. You see streamlined buildings with flat roofs for autogyros, glass skyscrapers a quarter of a mile high, so spaced that the shadow of one never falls upon another. You note the bold solutions of traffic and parking prob- lems, and the teardrop design of the cars, trucks and busses which move along the sunken streets. Your chair moves on past a blank wall. Suddenly you see a section of the city greatly enlarged from the earlier scale. You see the detail of skyscraper con- struction, and how the streets are arranged on two levels: moving motors and parking areas below, side- walks and store fronts above. The shopper never meets DESIGN FOR i960 179 a motor from the time he leaves his car and comes up- stairs to the stores and sidewalks. Your chair comes to a stop. A guard helps you off the slowly moving platform. You are out in the sun- shine, blinking like a mole. But you are standing on a full-sized reproduction of the toy street which you have just left! Here are the sidewalk and the shops; leaning over the rail you see the cars on the submerged street below— Buicks and Cadillacs 1940, however; no sign of i960 teardrops. Not the least part of Mr. Geddes' invention was to end on this note. No sooner do you look at the model and say "impracticable," than you suddenly find yourself walking on a street in that impracticable world. Ill If your reactions to i960 were like mine, your out- standing impression was of a civilization which had been cleaned, garnished and ordered. Waste, clutter and ugliness were out of it. In a day's march— at 100 miles an hour if you want— there were no dumps, sludge piles, slums, billboards, polluted streams, rust- ing roadside jalopies, recently vacated lunch boxes, open sewers, back-of-the-tracks housing, hot dog stands, tenant farmers' shacks, flush-toilet camps, broken-down villages, eroded hillsides, flood-gouged valleys, fire-swept forests, man-made deserts. Another major impression was that modern science and engi- l8o IDLE MONEY IDLE MEN neering had been given a free ticket to do their very best, unhampered by considerations of vested inter- ests, property rights or financial profit and loss. These are the six chief prophecies of the Futurama: i . Super highways, with their feeders, intersections and traffic control devices 2 . New types of motor cars and trucks to run upon these highways, truly streamlined, with engines in the rear 3. Controlled rivers, dammed and tamed for naviga- tion, power, irrigation, recreation, water supply, pre- vention of floods 4. Planned farm and forest areas, with soil conserva- tion, terracing, intensive agriculture, forest preserva- tion 5. Planned cities, with traffic at last under control, slumless, smokeless, open to air and sun 6. Planned towns and industrial communities, built specifically for the motor age. What actual exhibits have we in America today which indicate that we are moving in that direction? First and last, we have many. Mr. Geddes has not so much created a brand-new country for our inspection, as he has carried the achievements of the present world to what he considers logical conclusions. There is no engineering reason why America could not be recon- structed along such magnificent lines as these. We have what it takes— technical creativeness and skill, research facilities, man power, natural resources, and DESIGN FOR i960 l8l the grandest slice of continent on the planet to operate upon. Suppose we make an inventory of tangible accom- plishments under these six heads. Super Highways. A super highway, as modern en- gineers define it, and as the Futurama shows it, is not just a bigger and better road. It is a nenv kind of road, designed specifically for motor cars traveling at high speeds. Horses, buggies and pedestrians have no place on it. Most of our present roads were first built for horses and buggies. When the automobile came along, some of the curves were taken out, the road was widened here and there, concrete was slapped on top. The result is an old wagon road with its face lifted. On a i960 super highway, a car going in one direc- tion can never come in contact with a car going in the other. It can never meet a vehicle going across its path, and never— except at toll booths— meet a red light. It can never get into a crawling traffic line or a bottle- neck. A central zone, preferably planted with trees to absorb the glare of headlights, separates the two traffic directions. Cars entering the super highway come from the side at moderate speed, and work to- ward the central zone for high speed. All intersecting roads, railroads, cattle crossings, paths, are led over or under the highway. You can't hit anything but the car ahead of you or the side of the road. If you have a radio control box on your dashboard, as Mr. Geddes 152 IDLE MONEY IDLE MEN suggests, you can't even hit that. You can go to sleep and your car will be automatically held to its course by short wave impulses. Outside the Futurama, one of the most modern super highways in the country is the Alerritt Park- way in Connecticut. It runs from the New York State line to Bridgeport, and is under construction to New Haven. It is a honey. I know, because I often use it. It is graded so that you can set your speed at 50 miles an hour, the legal limit, and practically hold the needle on that number from one end to the other— a distance of perhaps thirty miles. You go under and over mas- sive concrete bridges. No car can cross your path unless it is going your way. There are two broad lanes in each direction, and the central zone is at least twenty feet wide, planted with grass and many young trees. The roadsides are almost uninhabited, hills and fields and woodland, without a filling station, a hot dog joint, a Tumble Inn or a billboard. About every two miles, traffic can come in from the side or leave the highway, by carefully designed feeder lanes. It is impossible to meet a car on these one-way feeders. At night the low concrete curbs on the shoulders sparkle with tiny reflectors. Here and there throughout the country super high- ways are appearing. One runs from Los Angeles to Bakersfield, another from Harrisburg to Pittsburgh. Both Germany and Italy have built thousands of miles of express highways. They are designed so that rail- DESIGN FOR i960 1 83 road tracks may be laid upon them, and are chiefly for military purposes. The United States Bureau of Public Roads has re- cently released a voluminous report on a plan for six continental super highways. Three would span the country from east to west, and three from north to south, to a total of 14,300 miles. They would be built in four lanes, where the traffic warranted, and two lanes in the great open spaces. The total cost would be just short of 3 billion dollars, and the average cost per mile about §200,000. They would by-pass all cities and towns, but not far enough away to dis- courage traffic. The maximum speed would be seventy miles an hour. Curves would be held to 3 degrees, and grades to 3 per cent, except in very mountainous country where 6 degrees and 6 per cent would be the limit. There would be no intersections at grade. "At no point would a driver encounter another ve- hicle crossing his path." The four-lane section would be divided in the middle by a grass-covered island twenty to forty feet wide. The Merritt Parkway is an operating example and this report a paper example prepared by practical en- gineers, of the last word in modern highway design. Both are far short of Mr. Geddes' super highway. They have fewer lanes, slower speeds, sharper curves, less masterful intersections. They are not lighted with fluorescent tubes along the shoulders; they are inno- cent of control towers and automatic short wave 1 84 IDLE MONEY IDLE MEN guides for drivers. A man went to sleep on the Merritt Parkway the other night and woke up in the hospital. We are unquestionably going to have more and better super highways— if we do not shoot all our wealth away in war. But I doubt if we shall ever get anything quite so resplendent as Mr. Geddes' super- super road. I question it on two grounds— function and expense. There are one hundred and thirty million people and thirty million motor cars in the United States today. By i960, statisticians calculate there will be not more than one hundred and forty-five million people and thirty-eight million motor cars. By the year 2000 it is highly probable that there will be fewer people in the country than there are today. Granted that we need better roads to care for pres- ent congestion; granted that there will be 8 million more cars on the roads by i960; will the need be so great as to demand a type of highway which can carry perhaps ten times the traffic of our best roads today, and cost not $200,000 a mile but anywhere from $1,000,000 to $5,000,000 a mile? I doubt it. The concept is too big for the probable traffic. In populous sections in the East and on the Pacific coast, a ten- lane super highway might well be justified. But four- teen lanes smack from Philadelphia to San Francisco, from Chicago to New Orleans, I cannot picture. Who wants to drive at 100 miles an hour anyway? Who wants to drive hour after hour at 75? Even if radio controls can aid safety at these speeds— they can DESIGN FOR i960 185 hardly guarantee it— where is the fun of hurtling across the land at such a rate? You can't see the country! Is the human organism capable of steady travel at such land speeds in a small self-driven vehicle, without cracking up? We are not all Barney Oldfields. Where are you going at such a rate? What are you going to do when you get there? I am convinced that American engineering has reached a point where Mr. Geddes' highways can be built— except perhaps in high mountains. I am not con- vinced that they are worth building on such a scale, either in i960 or at any other date. We shall approach their design. We shall be grateful for many ingenious techniques suggested by Mr. Geddes. Above all we shall be inspired by his vision of great construction. Super Cars. One spring day about three years ago, I heard a loud honking outside my house. I walked out through the gate and stopped short in astonishment. On the road was a cross between a whale and an auto- mobile, the first teardrop car I had ever seen. In the driver's seat was my friend Buckminister Fuller, who had invented and helped to build it. He invited me to get in beside him. After I had watched him maneuver for a while he let me take the wheel. Presently I was driving a Futurama .196a model all over Fairfield County^ -#Jv(Vvr-*^ A Eerov -Eigfofr. engine was in the monster's tail. The driver sat behind a curved glass porch with visi- r 1 86 IDLE MONEY IDLE MEN bility like that of an open roadster above, while below he could see a stone two feet ahead of him on the road. This unaccustomed exposure made one feel prac- tically naked. The overall dimensions were standard, but you could put four people on the front seat and two cots in the back compartment. To back up you turned the wheel the reverse of the usual way. You could park in your own length because of the three wheels. You could get forty miles to the gallon. In mass production, Mr. Fuller hoped to sell his "Dy- maxion" car for ten cents a pound. The model I drove weighed about two thousand pounds— so figure it out. A number of serious difficulties must be removed before the Dymaxion, or any other teardrop, can dis- place our present models. Something of the sort will certainly be on the market by i960, but I advise you not to postpone buying a 1941 model in the hope of getting a genuine teardrop. You may wait a long time. Blowout-proof tires are already on the market, and a man is working in a laboratory in New York on a practical method for short wave radio control of cars. It has already been developed for planes and ships— why not for automobiles? Tamed Rivers. After the super highway and its traffic, the most striking thing about the Futurama was the prospect of a great river, dammed and tamed and working for man all the way down. Are such things possible? They are. Long before i960, probably DESIGN FOR i960 187 by 1947, you will see one of the lordliest and wildest rivers of this continent, the Tennessee, controlled by men, just like Mr. Geddes' river. There is nothing visionary here. The job is well along. It is also under way on the Columbia,1 the Colorado, the Sacramento, the San Joaquin, the Connecticut, the Merrimac, and many other rivers. By i960 there will not be a great river in America which does not reflect in whole or in part the Futurama design. Consider the Tennessee watershed. It covers parts of seven states and supports 2,000,000 people. Four great dams have already been built, five more are under construction, and one is being surveyed. These ten dams, with their locks, power houses and storage reservoirs, will form one mighty system, "harnessing the Tennessee River in the joint interest of naviga- tion and flood control, and selling incidental power as a means of return on the investment." The dams will "step up" the river for navigation, and "step it down" for flood control. Norris and Hiawassee dams will store excess water in wet periods, and release it to replenish the lower river in dry periods. I have seen the central switchboards from which the whole vast system will be controlled. An annual flood damage estimated at $2,000,000 will probably be wiped out. The "hydro-highway," with a nine-foot channel extending for 650 miles from Paducah to Knoxville, may be moving nine million 1 See Chapter 7, Great Dam. 1 88 IDLE MONEY IDLE MEN tons of water-borne freight by 1947. Residents in the Valley are already receiving electric power at about two cents a kilowatt hour, which is less than half the national average. A million acres are being defended against soil erosion. A hundred million trees have been planted on the Valley's slopes. Norris Lake, backing up behind the dam for eighty miles, is gradually be- coming a recreation center. ( Nothing in the Futurama is so exciting as the tangi- ble accomplishment here on the Tennessee. Nothing is so exciting as one's first glimpse of the awful face of Boulder Dam on the Colorado. Planned Farm and Forest Areas. Mr. Geddes touched me very closely when he showed the soil of America respected and cared for rather than wracked by erosion, dust storm, forest fire and neglect. There are moments when I feel more love for the strength and grandeur of the North American continent than for the wasteful, greedy and careless breed which lives upon its bounty. I should like to see a human race worthy of the land it occupies. In the Futurama, man has reached that stature and come to terms with na- ture. Here land is protected, fields are terraced. Slopes are wooded. Although no foresters are in evidence, I know they must be there. I am sure wild life is pro- tected, streams run clear and sparkling to the sea, and the dust bowl is no more. Up to about 1930, it looked as if this could never DESIGN FOR i960 1 89 happen. It looked as if we should go on destroying our soils, forests, waters, fish, birds and beasts until America became as uninhabitable as the wastelands of Asia Minor. But in the last few years the picture has changed. Thanks in large part to President Roose- velt, we have begun to build instead of destroy. Per- haps it was the great dust storms sweeping over the land that converted so many of us to conservation. Out on the Great Plains farmers are becoming grass- root conscious. Thousands of acres are being returned to buffalo grass, blue stem, wild rye— acres which never should have been broken by the plow. At its demonstration stations the Soil Conservation Service is spreading oases in the dust bowl. CCC boys, the men of the Forest Service, with their vast shelter-belt of trees from Canada to the Gulf, agricultural colleges, and many others are working away. There is reason to hope that, granted normal rainfall, the whole dust bowl can be reclaimed. Over the rest of the country, too, a great battle is being waged to save the land, and there is a good chance that this battle may be won. Planned Cities. Washington was planned by a French engineer one hundred and fifty years ago. But he didn't allow for motor cars. Today there are few worse cities to navigate in. The metropolis in the Futurama has disentangled traffic jams by means of double-decked streets, underground parking, huge express routes, and by means of turning at least a 190 IDLE MONEY IDLE MEN third of the city's area to open spaces, playgrounds and parks. St. Louis is the basis for Mr. Geddes' model and his reforms. Can it be done in St. Louis, or any other American metropolis? Certainly not by i960; perhaps never as pictured here. St. Louis today has a population of about a million, including the metropolitan area. The Futurama city plans for two million. But the actual population trend is in the other direction. Hardly a skyscraper has been built in the last ten years. The tendency is to spread out into suburbs and rural areas rather than to centralize. People are tired of being pumped back and forth in subways. In the past year 1,500,000 women and children have been evacuated from London, while the population of Paris has been enormously reduced. Will they all come back when the war is over? I doubt it. In the old days, when war clouds gathered, people came running in from the outlying country to the protec- tion of the city's walls. Today they run away. A huge congested city is the most dangerous place in the world when bombs and shells begin to fly. I think this country has seen the end of building skyscrapers in a big way. They are fine to look at, but they don't pay out. We could build Mr. Geddes' city, complete, but it would not be worth the trouble. If we took virgin land at $10 an acre to build it on, the chances would be better. But a complete remodeling of cities where DESIGN FOR i960 191 they stand, with vested interests in land values, titles, deeds, mortgages; with the complications of taxes and public utilities— is unlikely. My guess is that American cities will be slowly modified to meet the pressures of traffic, slums, congestion, along the lines of the plan for New York already being followed by the inde- fatigable Mr. Moses. We shall have slum clearance, new housing developments, wider highways, broader parks, better sewage systems, improved parking facili- ties, but not the double-decked, streamlined, super- skyscraper city of the Futurama. Flanned Towns. If the destiny of the great city is shadowy, the future of the smaller community is clear. We have a dozen tangible exhibits already supporting the vision of Mr. Geddes. We are now planning and building towns and industrial communities specifically for the motor age. In England one finds the so-called garden cities of Welwyn and Letchworth. There are others in Germany and Holland. Sweden has built a model industrial community near the great iron mines, within the Arctic Circle. In this country we have Radburn in New Jersey, Chatham Village near Pittsburgh, and most modern of all, three astonishing communities financed by the Resettlement Administration: Greenbelt, near Wash- ington, Greenhills near Cincinnati, Greendale near Milwaukee. These towns show the general pattern of how millions of us may some day live. 192 IDLE MONEY IDLE MEN Houses in most towns today look out, on one side, at a street with heavy traffic, and on the other at a garage and a garbage pail. The houses are enclosed in a tight gridiron block with traffic on four sides. In the horse-and-buggy era this wasn't so bad. But now we know that by the end of 1940, 3,200 children will have been killed on the streets by motor cars. Ten times that number will have been injured. The new motor age towns are arranged to prevent this killing. The gridiron block is discarded. A kind of super block is substituted, five times as large, irreg- ular in shape, following the natural contours of the land. Houses are built around the border of the block, with garages and service entrances on the street side. The whole inside of the block becomes a park, with gardens, playgrounds and foot paths. No car can get into this area. The living rooms of the house face on this quiet, green area. The house is turned around, and looks inward. Children going to school, fathers going to the station, mothers going to market, walk on a winding foot path under the trees through the center of the block, proceed through an underpass into foot paths in the next block, and so to their destination, without ever meeting an automobile. If they want to drive, they go out the other way and never meet a pedestrian. Here is Greenbelt, Maryland. It covers 2,100 acres, and houses about 5,000 people. Most of the men work DESIGN FOR i960 193 in Washington, or in Baltimore. They can reach either city by car in less than an hour. The big blocks form a horseshoe around a community center, with post office, bus terminal, schools, auditorium, library, an inn, a theater and the usual shops. In another center lie athletic fields, tennis courts, swimming pools, a lake and picnic grounds. Around the community spreads a broad belt of fields and woods— which gives it its name. This green belt, by law, can never be cut up or built over, but will protect the town forever. A few farms are in the area, worked by members of the community as full-time commercial farmers. Markets for their produce are five minutes away at the shopping center. There are also gardens for those who want to raise their own vegetables and fruits. In addition to these features, some of the new towns provide an area for light industry and smokeless factories. Thus members of the community can have full-time jobs within walking distance. Greenbelt is not on paper, remember, but a living, growing enterprise. The other day the papers ran a story which shows how good it is. 'While the birth rate throughout the nation is falling, even in towns with comparable age-groups, the birth rate in Green- belt is going up! Mothers know that in such sur- roundings, children have a chance. Yet most of the people living in Greenbelt have incomes of less than $2,000 a year. 194 IDLE MONEY IDLE MEN IV Exhibits in the actual world show that we have the scientific knowledge and the engineering ability to build an American landscape close to the design of the Futurama. But no economist in the country would risk his reputation by suggesting that we have a financial system which permits us to build it. We can find the engineers, but not the money. By i960, how- ever, the financial methods used today will be all but unrecognizable. Watch them change before your eyes as the European war gathers momentum. The financial side of the Futurama is a poser, but not, I think, in- superable. We have idle money and we have idle men. This world we have sketched can use them to the last dollar and the last man. Great sections of the American land- scape must be torn down, redesigned, rebuilt; and this will demand intensive investment on a colossal scale. Orthodox finance cannot cope with it. But the required man power, raw materials and technical skill are ready to go to work. We no longer ride in carry- alls. Must financial invention halt forever in the carry- all age? If we can streamline the Tennessee River, why can't we streamline a bank? Some parts of the picture will certainly require more than twenty years to accomplish. The date 1 960 is premature. If the whole country is to be included DESIGN FOR i960 195 in the plan, the year 2000 would be safer. Some parts of the picture may not please most of us anyway. We ought to have a chance to say whether we want to live in just this kind of world. Quite apart from applications in the real world, a study of the Futurama and similar designs can give us hope, courage and the will to advance. It can make us realize how far short we now fall of achieving a civilized environment in America. It can make us see the tremendous opportunities for progress that the future holds. Not all the discoveries have been made, or all the frontiers opened, or all the capital improve- ments constructed, or all the opportunities for em- ployment exhausted. Our young people have not reached a stone wall. Helping to build some such world as this will take all their energy and enthusiasm for generations. 9. THE RULES OF THE GAME THERE are 132 million persons in the community we call the United States. They all have to eat. If they could live on air, like Spanish moss, the economic problem would be less complicated. Let us stop for a moment to simplify what we know about the way people get food and other things they need for sur- vival. It can do no harm to look at economic prob- lems from this angle. Even oversimplifying a subject as complex as this sometimes helps to clarify it. All the nations of Europe are retreating to such a calculus today. They are asking: Where can we get the sup- plies to feed our people? In theory there are two systems by which Ameri- cans can organize themselves for eating. They can split up into small agricultural groups where food, houses, clothing, come off the place. Or they can specialize most of the work on a nationwide basis, with the aid of inanimate energy. In the former, we find little productive units employing handicraft meth- ods, and loosely tied together. Each unit is capable of survival even if cut off from its fellows. In high energy societies, on the other hand, survival depends on a very complicated process of exchange and co- operation throughout the great community. If the 196 THE RULES OF THE GAME 1 97 electric power supply breaks down, or the railroads cease to run, the whole community is paralyzed. To get a meal in a handicraft village may require the co-operation of a dozen persons. To get a meal in America today requires the co-operation of literally millions of persons— farmers, coal miners, truck driv- ers, grocery store clerks, canners, steel workers, book- keepers. In 1790, according to Secretary Wallace, 19 families on the farm fed themselves and one city family, on the average. Today, again on the average, they supply themselves and 60 families in the towns. One could not ask for more striking proof of the change from a low to high energy culture. Western countries, following the industrial revolu- tion, have committed themselves to the principle of the division of labor, and bartered self-reliance on the land for the heavier tonnages and wider varieties of power production. It is not all clear gain. When the intricate machinery of exchange is disrupted, as in a depression, a large fraction of the great society lives more miserably, both mentally and physically, than under the older pattern. Despite this misery, it is safe to say that few Americans want to go back and live as their forefathers did in the Massachusetts Bay Colony. It is also safe to say that they could not if they wanted to. The land would not support 132 million persons under those primitive techniques. Granting that we are destined to eat in the sweat of one another's brow— onions from California, wheat 198 IDLE MONEY IDLE MEN from North Dakota, pork from Chicago, oranges from Florida— how can we get the output passed around? Those of us who work contribute our mite to the general pot of production— a nut screwed on a car frame, a song on the radio, a tap on a boot heel, a crank on a cash register. How can we pull what we must have for survival out of the pot? Here again two general systems are available: ra- tioning and money. Barter is not available for internal exchanges in specialized societies, though it can be used for bulk exchanges between nations. A wage worker possesses no product to barter with. He makes only a fraction of the article, say one ten-thousandth part of an electrical refrigerator. The rationing method is used in provisioning armies, prisons, institutions. Something akin to it is found in the supply of certain "free" goods to modern com- munities—highways, public schools, clinics, parks, water, milk to children, the food stamps of the Fed- eral Surplus Commodities Corporation. Citizens are invited, in effect, to step up to the pot and help them- selves. Rationing is becoming widespread in Europe under war conditions, for neutrals as well as bellig- erents. It is increasing in this country. As technology lowers the cost of goods, it is bound to increase. Some day perhaps all food, all basic necessities, will be available without price for whoever wants them. That day is not here yet. Uranium 235 may speed its ar- rival. THE RULES OF THE GAME 199 For a long time to come we shall have to use money. We make our contribution to the general pot as work- ers or loaners of capital, and receive in exchange a piece of paper with numbers on it. With the paper in hand, whether check or currency, we can then make demands on the pot for our food and other sup- plies. The paper is without value. The numbers are very important. Once they represented defined weights of gold or silver, but the connection with metal has now become extremely tenuous. The num- bers are "managed" in the sense that they are hedged about with government restrictions as to their total volume, their expansion and contraction. If this seems a fanciful description, look at the next piece of money that you receive. Is the paper worth anything? Does the size of the paper vary with the numbers stamped on it? How much gold does the paper represent? How are you going to get gold if you should want it? People have all sorts of illusions about money. No subject is more plagued with theologists, wizards and medicine men. Alchemy did not cease with the chem- ical proof that base metals could not be turned into gold. But if one grasps the fundamental concept that money is a device for moving goods in societies which practice the division of labor, the charms and spells of the magicians begin to evaporate. One shakes one- self clear from the emotions and mysteries which sur- round the idea of gold and treasure. One begins to 200 IDLE MONEY IDLE MEN recognize the staring eye, the clenched fist, of the money crank, as the first stages of dementia. Money is what money does. If we concentrate on what it does, we put down in our notebook that numbers move from hand to hand, while goods or titles to goods move in the opposite direction. II In all the talk about money, in all the millions of pages that have been written about it, the rules that make the most sense, from the standpoint of prac- tical performance, are few and simple. At the risk of repetition, let us list them here: i . Considering the whole community, money which goes out as costs and profits must come back as sales and income, or the output in any given period will not be cleared except at a monetary loss. Inventories will accumulate unsold, workers will be dismissed, prices will fall, the familiar downswing of depression and deflation will begin. 2. The money can come back by direct purchase of consumers' goods, or it can come back indirectly by the saving-investment route. Either way, it passes con- tinuously in a closed circuit. 3. If money is saved and not promptly invested in work-making enterprises, the circuit is broken, and trouble begins. Work -making enterprises are just that: the construction of factories, skyscrapers, machinery, THE RULES OF THE GAME 201 dams, battleships, pyramids, bailing out the Great Lakes— anything which employs labor and siphons savings back into the circuit. The choice between good investments and bad ones is important, but that is another question. From the standpoint of the circuit, the worst investment is better than none at all. 4. The gap in the circuit can be plugged tempo- rarily, by stuffing it with bank credit, a variety of money which the commercial banks have the power to create. When a gap develops, however, it usually means that opportunities for investment are shrinking. In such a situation the cautious banker does not extend credit, he contracts it. That is, he calls loans and cancels some of the bank credit in circulation. This makes the gap wider. 5. The Federal Government can help to close the gap in the spending stream by taxing idle savings or by borrowing idle savings and going into debt, or by both. It can print government bonds, give them to the banks, and spend the resulting credit or deposit. The government has power to balance the dollar cir- cuit in a deepening depression where individuals or companies cannot. Do you remember how unavailing were the "buy now" campaigns in 1932? Most people think that the government, representing the whole community, must act in a depression as the prudent individual acts. This notion is as fallacious as it is general. When individuals cannot spend, the govern- 202 IDLE MONEY IDLE MEN ment must do so or the gap will grow wider and the survival of the community may be threatened. 6. The money device can be wrecked, and in cer- tain historical cases it has been wrecked, by pumping so much new paper into the stream that prices for goods ascend to astronomic numbers. In these cases the creditor class is cleaned out, and everybody but a few speculators is frightened and miserable. This con- dition is known as a runaway inflation. It happened in Russia and Germany after the last war, and to a lesser degree, and at a slower tempo, in Italy and France. When inflation passes a certain point, the numbers in use lose their meaning, and the government, or who- ever controls the numbers, has to begin all over again. A new unit is then created— a new mark or franc or lira— with a different amount of gold or other asset behind it. In Germany, the mark gave way to the Reichsmark, at a ratio of several light years to one. One way out of a severe deflation also may be to create a new unit of money. 7. If a community is going to employ money to get supplies out of the general pot, it is clear from much painful recent experience that it must first con- trive to keep the volume of savings in line with invest- ment opportunities. Second, it must guard against adding new numbers to the stream in a volume which will lead to a runaway inflation. So long, however, as there remains a considerable number of idle machines and idle men, economists are pretty well agreed that THE RULES OF THE GAME 203 runaway inflation cannot develop. J. M. Keynes has especially emphasized this point. Prices in general will not go very high so long as factories and workers remain unemployed. But when capacity is reached, look out! The agonized cries about inflation in the United States during the past few years were need- less because the number of people unemployed never went below 7,000,000. Serious inflation in this country will come, if at all, only after unemployment has dropped below 2,000,000. Both France and England must now begin to worry about inflation as unem- ployed workers go into the army or into war indus- tries. This set of rules for operating the money device has stood more rigorous tests than any other that I know of. It is a theory, if you like, a hypothesis, but it can be used to explain what has happened in most countries since 19 14. It explains why Russia, with little "money" or "credit" in the old sense of gold and treasure, could build and install some 30 billion dollars' worth of capital goods in her first five year plan. It explains why Italy did not go bankrupt, as freely prophesied, by the huge expenditures of the Ethiopian war. It explains why Germany, a poor nation, could pull herself up by her bootstraps and finance the most colossal armament program ever heard of. It explains what happened in the United States during the soar- ing twenties, why the boom collapsed, how partial re- covery was engineered, and why the rising national 204 IDLE MONEY IDLE MEN income has twice been halted at 70 billion dollars. It explains what France and Britain are doing to feed their people and keep their war supplies coming. It explains why 100 members of Parliament met the other day to hear Mr. Keynes explain his program of "forced savings" to finance the war. Incidentally, no sooner had the Germans heard of this plan than they put it into effect. The service of gold to the money device is psycho- logical rather than material. Insofar as individuals feel safer about using paper because in some cave there is metal laid away, gold has a function. It still has an important material function in settling trade balances between nations. If Congress declared tomorrow that a dollar was worth zero grains of gold, what would happen? I suspect, and I may be wrong, that except for many columns of horrified editorials in the press, nothing very much would happen. You could still buy a Ford for $595, f.o.b. Detroit. I base this guess on what happened in 1934 when the president said a dollar was "worth" only 15 grains of gold, although the day before it had been "worth" 26 grains. Internal prices hardly quivered. Why not eight grains or three or one or zero? The effects on sales of bombers, and on foreign trade generally, would of course be con- siderable. But 95 per cent of our business is in the home market. If the community pot is full of goods which are constantly being renewed, the numbers on THE RULES OF THE GAME 205 the paper are soundly backed. But if the goods stream halts, no amount of precious metal can uphold the dollar. Ill Since 1929, goods in America have not been moving at their accustomed rate. As measured by the dollar flow of national income, the fall was from 80 billion dollars in 1929 to some 40 billion dollars in 1932. Many prices, however, also fell headlong. Thus the flow of goods was not cut in half, but was greatly reduced. It is roughly estimated that consumers' goods declined a quarter; capital goods three quarters from their prosperity levels. The rule against pumping too many new dollars into the active circuit has not been broken to the point of price inflation. Prices for most goods are lower than they were eleven years ago. The unemployed, even in the so-called recovery year of 1937, numbered about 1 1 ,000,000, including those on emergency work relief.1 There has been no runaway inflation or any- thing approaching it. But far more dollars are in the 1 Figures from the 1937 Census of Unemployment. Available workers who were totally unemployed or engaged in emergency work, Nov. 30, 1937. 15-24 years of age 3,923,000 25-44 u u 4,064,000 45-64 " " " 2,605,000 Over 64 " 349,000 Total 10,941,000 206 IDLE MONEY IDLE MEN system in 1940 than in 1929. Currency dollars have increased from about 4 billion dollars to more than 7 billion dollars. Demand deposits in the banks have increased from about 27 billion dollars in 1929 to 38 billion dollars in 1940. But these new dollars seem to be frozen; they do not move. We produced more goods with fewer dollars in the system in 1929 be- cause the money was flowing around the circuit. The rule about closing the gulf between savings and investment has been virtually ignored for eleven years. The result has been chronic stagnation. Labor- saving machinery, furthermore, has been coming steadily upon the market, tending to make unemploy- ment more acute. Witness the increase in coal-cutting machinery and the new continuous process steel mills. The government has filled part of the gap, but not all of it, by deficit spending. Twice it has led the national income up to about the 70 billion dollar level —in 1937 and again late in 1939— and twice it has let go, hoping that private investment, or a war boom, or something, would carry on. In 1937, when the gov- ernment bailed out, employment and production de- clined faster than ever before. As I write, in the spring of 1940, a war boom has not developed and Congress is being importuned for more relief. If the govern- ment could keep spending until the national income reached 80 billion dollars, perhaps at that figure pri- vate investment would seriously take hold. Person- ally, however, I doubt it. I do not think that pump THE RULES OF THE GAME 20J priming, in the sense of temporary expenditures so that private business can later take over, is ever going to balance our economy. I think that we need a two- cylinder pump, one cylinder for private investment, one for public, both permanent. What do we know of the quantities and ratios which are used in the rules of the money device out- lined above? Not nearly so much as we should. The Germans are said to have excellent statistics. The French and British must now rapidly refine theirs. But we have some pretty reliable estimates, espe- cially from the research section of the Federal Re- serve Board at Washington, and their accuracy con- tinues to improve. Visiting the TVA, I saw a man in a conning tower at one of the dams, watching red lights and throwing electric switches. He was regulating the height of water in the reservoirs, the rate of water flow, the kilowatts of power generated, throughout the whole vast watershed of the Tennessee River. We shall never regulate our dollar flow with any such precision, but we can approach it. Here are the chief red lights to watch: The Total Number of Dollars in the System. They are readily measured by currency outstanding and demand deposits in commercial banks. The total in 1940 is about 45 billion dollars— 7 billion dollars in currency, 38 billion dollars in deposits. In 1929 the 208 IDLE MONEY IDLE MEN combined total was 31 billion dollars. These figures reduce to nonsense all monetary schemes which de- pend for their action on increasing the amount of money in the system. We have 14 billion more dollars than we had in 1929, while production is less and peo- ple are hungrier. It is motion we need, not more dollars. These figures also prove that money is not wealth, so far as the whole community is concerned. With more of it, we are worse off. The Rate of Spending. One rough measure can be obtained by dividing the national income by the dol- lars in the system. In 1929 the net national income was about 81 billion dollars. Dollars in the system were 31 billion. Each dollar on the average went around the circuit 2.6 times. In 1939 the national in- come was about 68 billion dollars and there were 45 billion dollars in the system at the end of the year. Each dollar went around 1.5 times. This indicates a terrific decline in the rate of transfer in 1940, and checks with what we know about prosperity in the two years. If the 45 billion dollars today began to move at the 1929 rate of 2.6, the national income would be 117 billion dollars! A serious inflationary situation would certainly develop if this came sud- denly. Price Levels. We cannot tell much about the dis- tribution of goods on the basis of dollar figures alone. We have to know something about prices. If all prices including wage rates were twice as high as they are THE RULES OF THE GAME 209 today, the national income would be close to 140 billion dollars, but nobody would be any better off. There are a number of indices purporting to show the movement of price levels for all products com- bined, but I don't take any stock in them. I agree with Bassett Jones and Michael Heilperin that they are mathematical monsters. It is, however, possible to watch price changes in a number of basic commodities, like coal, oil, wheat, lumber, steel, cement, beef and so on, and come to a conclusion as to whether prices are moving up or down for the community as a whole. We know they moved up in the last war, until the "high cost of living" became a fighting phrase. We know they tumbled down in the depression of 192 1, recovered in 1922. We know that most prices did not change greatly during the boom of the twenties, that prices of many competitive products fell disas- trously in the depression, while the "administered" prices of Big Business fell but little. We know there has been some price recovery since 1933, but that most prices are lower than they were in 1929, much lower than they were in 1920. With these trends in hand, we can conclude that the national income in recent years is a rough measure of goods passed around, and not just a measure of price increases. No man at the controls is warranted in saying that the community is better off because the national in- come is going up. He must also know how prices are moving. 2IO IDLE MONEY IDLE MEN The Kate of Saving. The best measurement I have seen is the analysis made by Dr. Laughlin Currie. The National Bureau of Economic Research under Dr. Kuznetz has also prepared estimates. So have the Brookings Institution and the National Resources Committee. These studies indicate that when the na- tional income is from 70 to 80 billion dollars, we save around 15 billion dollars, as a community, or one dollar in five. The Currie figures show a rate averag- ing 19.6 per cent of gross national income for the years 1923 through 1929, then a decline, with a 19 per cent rate again in 1937. Roughly half the total is saved by individuals, half by business concerns in their various reserves for depreciation, depletion, ob- solescence and surplus. The Rate of Investment. Dr. Currie's figures meas- ure this by detailing outlays year by year for private plant and equipment, housing, government plant, for- eign loans, and so on. They show how the gap is bridged by installment credit and inventory accum- ulations, which are not dependable productive invest- ments. The chart on page 133 which shows capital issues devoted to durable goods construction gives one index of productive investment. Dr. Altman's figures before the Temporary National Economic Committee, exhibiting total outlays for replacements and betterments, gives another. The investment activi- ties of insurance companies, savings banks, building and loan societies, shed light on the rate, as do the construction figures of the F. W. Dodge Company. THE RULES OF THE GAME 211 All figures indicate an investment rate in productive plant well below the levels of the 1920's, and well below the savings rate. The Idle Money Rate. This cannot be measured directly, since it depends on an exact figure for the investment rate. But the gap between savings and in- vestment is amply proved by figures showing an in- crease in cash holdings by banks, insurance companies, individuals. It is shown in the 6 billion dollars of excess bank reserves— an all time high. It is shown in such headlines as this, in the financial pages of the New York Tillies for April 7, 1940: 41.7 PER CENT ASSETS IDLE IN WALL ST. BANKS SWIFTLY RISING RESERVE NOT ACCOMPANIED BY A DE- MAND FOR CREDIT, SURVEY SHOWS. DEPOSITS INCREASE. LOANS AND DISCOUNTS ACTUALLY DECLINE AT 1 5 IN- STITUTIONS. Idle money is reflected in a declining rate of spend- ing. It is luminously reflected in a falling interest rate. It is reflected in the unprecedentedly low rates for short term money. It is reflected in a count of the un- employed. IV These are factors with which any federal admin- istration must deal. To neglect them is to invite dis- aster. The problem of control is to adjust the rate of 212 IDLE MONEY IDLE MEN investment to the rate of savings, or failing this to cut down the rate of savings, until the two rates balance. Only so can the community continue to eat regularly. Any research which helps to measure the rates will be invaluable, but action can be taken without figures to the decimal point. Perhaps the best measure of all would be reliable figures on unemployment. If the total shrinks, the controls are wise; if unemployment grows, they are obviously bad. It is not dollars we want to stabilize primarily, but community survival and well-being. The Federal Government is in a position to increase the rate of investment by borrowing idle money and putting it to work. It is in a position to reduce the rate of savings by taxing idle funds. The British gov- ernment has been doing the latter for a generation. By 1935 it had reduced the rate of savings, according to Dr. Alvin Hansen, to some 7 per cent of the na- tional income. The New Deal has borrowed idle funds, but it has not greatly increased the kind of taxes which drain off idle funds. Taxes on corporate savings (undistributed profits) were turned on for a while, and then turned off. The rate of investment has not been stimulated to the point of absorbing more than a third to a half of the 15 million unemployed who were on the streets when the New Deal took over in 1933. Control levers have been pulled, but not always the right ones, and not hard enough. It is only in the last few years, however, that the rules for THE RULES OF THE GAME 2 1 3 operating the money device have been sketched out. Most financial men do not yet understand them; some have not even heard of them. Although they devote their lives to dealing in money, they seem surprisingly uninterested in its over-all performance. Opponents of the New Deal correctly point out that unemployment has not been eliminated. They should rest their case there. But they go on to say that to eliminate unemployment, the budget must be balanced and income taxes lowered. One glance at the above rules shows the folly of such a program. It means reducing the rate of spending and raising the rate of savings, thus widening the gap between savings and investment at both ends. If past experience is any guide, it will do exactly the opposite of what its sup- porters hope it will do. They argue, however, that a balanced budget will make business men feel so good that they will gladly borrow our savings and expand their plants. The tim- ing is all against this thesis. The first effects of a drive for economy will inevitably be to reduce the sales and income of business enterprises. If the budget is cut by 2 billion dollars, that means approximately a 2 billion dollar reduction in retail sales. Thus with orders declining on the books, and excess capacity plaguing nearly every industry, a business man is ex- pected to pick up the telephone and order 1,000 bar- rels of cement, 100,000 feet of lumber and 5,000 tons of steel to build an annex to the shop. This expecta- 214 IDLE MONEY IDLE MEN tion fails to make sense in any calculus of profit and loss that I know of. If somebody, somehow, can boost the national income above 80 billion dollars, while increasing the rate of spending and thus putting orders on the books, then business men will start picking up their telephones. In retrospect, also, the timing is wrong. It is as- sumed that business men were ready to expand, but along came the government, shouldered them out, took and squandered the savings which they wanted to lay out on plant improvements. The exact opposite is true. Business men in 1932 were terrified at the prospect of increasing their capital investment, despite earnest exhortations to do so by Mr. Hoover. When they did not make such expenditures, because they could not, the government did. In due course, as the national income climbed from 40 to 70 billion dollars, many began to spend for plant improvement, as Dr. Currie's figures show. The government led and they followed. It is a pity that opponents of the New Deal will not at least glance at the rules described above, and at the figures which support them. It may be that after November, 1940, some of these gentlemen will be empowered by the sovereign voters to regulate the money device. It is not a device to be monkeyed with blindfold. It is not greatly affected by genuflections to orthodox principles, or by words about confidence. There are 132 million of us out here who have to eat. THE RULES OF THE GA M E 2 1 5 You cannot spend your way to prosperity, say the budget-balancers. But if you are going to use money, there isn't any other way to do it. The national in- come is a spending rate. To increase it, somebody must spend more heavily. In the past this has meant more debt. Perhaps it does not have to be that way in the future. There are, I believe, other and better ways to increase the rate of spending and the national income. In the next chapter I will describe one of them. It is a program to which any administration is welcome— Republican, Democrat, Progressive. It is based on the observed working of the money device, and on the rules we have outlined. 10. SIX MODEST PROPOSALS SUPPOSE, dear reader, that you are elected President of the United States. You are charged with putting ten million Americans to work while keeping the federal debt within bounds. What will you do? What legisla- tion will you propose to Congress when it meets in January, after your inauguration? During your cam- paign you have indulged in amiable generalities. You have promised this and you have promised that. You have talked to cheering crowds about the blessings of freedom and the menace of totalitarianism. You have lauded the American Way. All that is over now. You must act. You sit at an unfamiliar desk in an unfamiliar room in a large, white, unfamiliar house, an untouched tablet in front of you. On that tablet you must write a message to Congress, and to 132 million citizens, telling what you propose to do. You write on the tablet: "Private enterprise must be encouraged." Excellent. But how? You have to tell how. You have to say more than "Nice kitty, pretty puss." You run your fingers through your hair and decide to skip this for the moment. You grasp your fountain pen firmly and put down: "I propose to balance the budget." Yes, sir, you do. So does every Presidential candidate. So did Mr. Roosevelt. It's a natural. But how? Who shall be cut— farmers, reliefers, 216 SIX MODEST PROPOSALS 2 1 7 home owners, the air force, old age pensioners? Who shall be taxed— big folks, little folks, corporations? You've got to tell Congress and the people just who is to be hurt and how much. You are President; you asked for it. Here are millions of Americans in most pitiable in- security. They look to you. Here is the world beyond America in turmoil more shattering than ever recorded in history. Every rule of international law, sound finance, laissez faire, live and let live, is being violated. You cannot let things alone or they will overwhelm you. You have to lead; you have to tell us what to do. This is not 1885; it is 1941. You do not know what to do? You never thought it was going to be like this? Is there a plane leaving for the upper x\mazon? Quiet now. Just rest for a mo- ment. There are things to do which will put the Amer- ican economy on its feet. There are definite rules for operating the flow of money, of goods, of employ- ment. Let me set before you a few suggestions, based on these rules. This is not Chase's plan to save the world. It is not a magic formula, or even anything brand new. It is a composite of measures known to all good non- classical economists, with more than half of the neces- sarv machinery now in operation. It contains certain practical details recommended by various persons, especially two seasoned public servants, Marriner Eccles, Chairman of the Federal Reserve Bank, and 2l8 IDLE MONEY IDLE MEN A. A. Berle, Jr., Assistant Secretary of State. The plan does not fit the dogmas of orthodox economists or orthodox Marxists or any other dogmas. But it will fit the money mechanism. In the short space at my disposal I can give you only a very general picture. Details are available elsewhere.1 You want the national income to go up. So do we all, especially business men. To push it up you must first see that more of it gets into the pockets of the lower income groups. Money placed there is spent faster and keeps going longer than money given to the Sixty Families, for instance. If every family that now receives less than $1,250 a year could suddenly receive $2,500 a year, the national income would jump by more than a third, and the resulting prosperity would enrich storekeepers, textile manufacturers, automobile workers, builders, doctors, furniture sales- men, farmers. Think of the new clothes and lamps and magazines and cooking utensils that would be bought, the new prospects for electric current, bath- tubs, cosmetics, dental fillings, plaster, paint and col- lege educations. Business men are quite right when they say that there is room for more production and even capital expansion in this country. But few of them realize that it cannot be achieved without some financial 1 See, for instance, An Economic Frogram for American De- mocracy, by seven Harvard and Tufts economists. Vanguard Press, 1938. SIX MODEST PROPOSALS 2IQ changes. They have hunted all over the planet for places to sell their wares. Here is a 20 billion dollar a year market right under our noses, crying to be opened up. One reason it cannot be tapped is found in idle savings. Another is found in sticky prices. This market cannot be reached, even in periods of pros- perity, with our present distribution of income, in which one dollar out of five is saved. It is like a sales- man knocking at the door of a family who long for his goods but cannot possibly buy them. Would busi- ness men make some initial sacrifices to gain access to this market? Would they submit to taxes on idle funds, for instance? Perhaps they will if you can show them the connection, Mr. President. In the boom years of the twenties, the fringes of this market were tapped, principally by installment buying. That method carries an interest rate of 10 to 15 per cent, and costs too much. The way to reach the market is through a shift in the distribution of the national income, whereby idle funds are siphoned over to the lowest third, to employ them in public works, to give them unemployment insurance and old age pensions. Then the money is spent, the national income rises, and presently more jobs open up in private enterprise. This great market will remain bolted and locked unless and until buying power is deliberately shifted in that direction. Here are six specific suggestions that should, among other things, accomplish that end. 220 IDLE MONEY IDLE MEN First, it is proposed that you set up a permanent PWA, on the assumption that a certain volume of public investment is, and will be, necessary to absorb savings, and is desirable for community welfare and survival as well. The annual amount will need study. Two to three billion is suggested provisionally. With savings of 12 to 15 billion dollars a year, this would hardly be too high. The structures you build with this money should be engineered with maximum effi- ciency, and a full use of labor-saving machinery, as Grand Coulee is being engineered today. They must not be undertaken simply to "make work." You must have top-notch administrators to allocate the fund- so much for housing, farm resettlement, multiple pur- pose dams (like the project for the Central Valley of California), soil, forest and grassland conservation, abatement of stream pollution, rural electrification, hospitals, schools, super highways, municipal plant. Some of these works will be constructed under federal auspices, but most will be by loans or grants to state and local governments, the latter contributing part of the cost. Most will be built by private contractors, as Grand Coulee and the new Delaware water system for New York are now being built. You are perhaps disappointed in this proposal. What is new about it? you ask. Nothing except its per- manence. It ceases to be pump priming and becomes a regular outlay, like that for the navy. Public works are now being built, but not on an adequate and de- SIX MODEST PROPOSALS 221 pendable scale. The PWA "lifts the face of America" —as Life describes, with many pictures— and then abruptly goes out of business. Presently, as employ- ment falls, it opens up again. You cannot count on it. Contractors and manufacturers cannot count on it. Now you see it and now you don't. It ought to be there in the middle of the stage all the time— a back- bone of investment which never crumbles. The un- employed of Germany were absorbed by a rearma- ment program, spending for ultimate death and de- struction. We will answer by a different and better kind of spending. Worthwhile projects have already been blueprinted, costed, approved. See John Carmody. The National Resources Committee has a great file of them. See Henry Dennison. The machinery to put such a pro- gram into operation is oiled and ready, with eight years' experience behind it. At 2 billion dollars a year, the works program will account directly for close to one million jobs. Second, you are advised to put the federal budget on a business basis, like that of Sweden before this war. Even Wendell Willkie, writing in Fortune, ap- proves the Swedish budget. This means separating capital expenditures from running expenses, as in any well-managed enterprise. In the capital budget, self- liquidating outlays should be separated from others. Projects like the George Washington toll bridge in New York pay for themselves eventually out of earn- 222 IDLE MONEY IDLE MEN ings. To class the construction of this bridge as a running expense is nonsensical. Other projects, such as a courthouse, will not pay for themselves. They must be paid for by general taxation. But it is not fair to make taxpayers think they are liable to pay in full during the year in which the courthouse is built. It will last a generation at least. Let the operating budget accordingly bear one-thirtieth of the original cost each year. The same rule might apply to the construction of battleships, except that battleships may any day become obsolescent due to the invention of a new aerial bomb, or go to the bottom due to its action. Into the operating budget will come taxes. Out of it will go running expenses, interest, and amortization payments on capital construction. When it balances, citizens and business men can feel that government finances are on an even keel. Self-liquidating public works will not come into it at all, although it will be wise to set aside a regular reserve for losses. Third, it is suggested that you amend the social security law to give every citizen, male or female, who reaches the age of 65, and is not employed, a flat sum every month as an old age pension. Give it right out of the operating budget. In addition, let the Federal Government match dollar for dollar any allowances granted by states. Thus, if Kansas grants $6 a month, another $6 will come from Washington, making $12 to add to the basic $30— if that is the sum you begin with. The pension will have to be large enough to SIX MODEST PROPOSALS 223 give the old a reasonable degree of security, but not too large for the budget to handle without perpetual borrowing. You may have to borrow to begin with. Even $30 a month gives spending power and removes some of the desperate urge to individual savings. How about the rich? Give it to them like anyone else. There are comparatively few of them. If you don't, then you must have a means test and swarms of inspectors. Mr. Eccles has proposed that anybody over 65 filing an income tax return shall list his pension as a special item, to be taxed back to the Treasury. If he is so unfortunate as to fall out of the income reporting class, then he automatically keeps his pen- sion. The present law covers only about a third of the population. It is also hard on those who are already beyond the income-producing age. It requires an enor- mous staff to administer it. To date it has added seri- ously to the idle money problem by accumulating a 4 billion dollar excess of cash income over cash outgo. It is thus a kind of forced saving device. The 4 billion dollars is not all immobilized, of course, for the Treasury borrows some of it at 2 y2 per cent. The reserve for unemployment benefits under the act has a similar effect. In the bad year of 1938, when spend- ing was particularly necessary, 800 million dollars more went into this reserve than came out of it. More forced saving. Revise the whole act, says Mr. Eccles, simplify it, 224 IDLE MONEY IDLE MEN cut the cost of running it, bring all Americans under its protection automatically. Would this satisfy the Townsendites? It would go a long way in that direc- tion. In prosperous states, pensions might run as high as $50 a month. When the national income got above 80 billion dollars, all pension levels could be raised. Fourth, you can meet the cost of pensions largely on a pay-as-you-go basis, by increases in personal in- come and inheritance taxes, and in corporation in- come taxes. Corporations would have more money to pay income taxes if they were relieved of their present old age benefit payments. The British under conservative governments have paid pensions out of income taxes. That is the way they got their savings ratio down to 7 per cent. There is nothing new or radical about this policy. We do it ourselves to a degree. The income tax is one of man's most admirable inventions. One does not have to pay it unless one has the income. It amounts to a levy on idle money, if aimed at the brackets burdened with funds which cannot be invested. Property taxes, on the other hand, can be, and are, levied on penniless men. The National Resources Committee has made a careful study of the distribution of the national in- come for the years 1935 and 1936. American families were divided into three groups. Let us call them A, B and C. The A families were relatively poor people who received $1,250 or less a year. They comprised SIX MODEST PROPOSALS 225 59 per cent of the population. The B families receiv- ing from $1,250 to $5,000 a year accounted for 38 per cent of the population. The C families were the well- to-do, with incomes from $5,000 up. They accounted for only 3 per cent of the population. Let that sink in, Mr. President. Only three American families in one hundred get as much as $5,000 a year. The A families as a group saved nothing, and worse. They went into the hole to the extent of 1.5 billion dollars. Where did they get the difference? From digging into past savings— or "dis-saving" as it is sometimes called— and from subsidies. The B families saved 2.8 billion dollars as a group, which does not amount to much per family. The C families saved 4.8 billion dollars. Here is where idle money chiefly accumulates. This group cannot pos- sibly spend its income for consumers' goods. Many of its members would be suffocated if they tried it. They are forced to save. Let us step up income taxes all along the $2,500 to $50,000 a year line. Senator La Follette has long advocated such a broadening of the income tax base. Rates above $50,000 are already very high. Below $2,500 you begin to cut heavily into spending for consumers' goods, and that gets you nowhere. We are after idle dollars. If they can be kept moving, through the income tax device, the national income will tend to go up and stay up. The long swing effect on a 226 IDLE MONEY IDLE MEN given taxpayer may be actually to increase his in- come. I belong in Class C. When I made out my 1938 income tax return, I placed a British return beside it on the desk, and made that out, too. I found that if I had lived in England in 1938, 1 should have paid about four times as much as I paid here. My first impulse was to yell: "Murder!" My second was to reflect that after all I do not have to pay a tax unless I have the income to pay it with. My third was that unless some- thing sensible is done about frozen funds, I may pres- ently have no income at all. To meet the pension plan, there is no need to raise rates as high as those in Britain in 1938. Part of the money will come from an increase in corporation in- come tax rates, part from a tax on undistributed profits, part from increased taxes on large inheritances. All taxes should be designed specifically to tap excess savings, both corporate and individual. Insofar as people are likely to spend money, do not tax it. Do not tax undistributed earnings of small businesses— they are needed to grow on. Keep away from sales taxes, except on "luxuries" like tobacco, alcohol, horse racing. A sales tax reduces the power to spend, without increasing production or the national income by one dollar. Thus, a tax on re- tail sales makes goods cost more and reduces the buy- ing power of consumers. This buying power may then be lifted over, via the tax, and given to the unem- SIX MODEST PROPOSALS 227 ployed in the form of relief payments, or to old folks in the form of pensions. This may or may not be more just, but its effect on the dollar circuit is neg- ligible. The present social security law is a payroll tax and thus akin to a sales tax. Fifth, provide a flexible WPA program for the re- maining unemployed. The theory runs like this: A man has a job in private industry or in the permanent PWA. If he loses it, due to no fault of his own, he begins to draw his unemployment benefits. They will keep him and his family going while he looks for new work. If he cannot find it, then, when his benefit period of, say, 26 weeks runs out, he automatically be- comes eligible for the WPA. Here the pay is less than in private industry, giving him incentive to keep hus- tling for a regular job. The WPA will expand in bad times, close up in good times. Its projects will be use- ful but temporary. When the national income goes above 80 billion dollars it will probably not be needed at all. II Will these five measures, each capable of immedi- ate legislation, each based on machinery already in operation, balance the economy? Nobody can tell pre- cisely, because their effects will change as the national income rises. Applying them tomorrow, you will not be able to balance even the operating budget this year, on a 70 billion dollar national income level. You will 228 IDLE MONEY IDLE MEN have to do some borrowing for pensions and the WPA division. But as the PWA projects get under way, as the old folks spend money otherwise hoarded, and as idle funds cease to pile up in social security reserves, the national income will rise. As it rises, receipts from income taxes will be greater with no further increase in rates. The operating budget moves nearer to balance. There are some eight million Americans over 65 in the country today. At $30 a month, $360 a year, that means not far short of 3 billion dollars. On a 70 bil- lion dollar national income level, we could perhaps get this by pushing taxes on both individuals and corpora- tions to the full British rate.2 This push would be too much. Push it halfway up, and meet the rest by bor- rowing. On an 80 billion dollar level, the situation will be easier all around. At some point— perhaps at the 90 billion dollar mark— government borrowing for any purposes can be stopped. Between the income tax and the capital budget, the burden of federal debt will cease to grow at all. But to reach that point, more stimulus will prob- ably be needed. There is plenty to be found in the proposal of Adolph Berle, Jr. And so 2 Congressman Knute Hill of Washington, in the Congressional Record, March 5, 1940, discusses what the income tax could yield. After a study of Treasury figures, he says: "On the basis of British income-tax rates, we could raise nearly 3 billion dollars more than we do, through the personal and corporation income tax." SIX MODEST PROPOSALS 229 Sixth, you can create, Mr. President, a new bank for long-term capital loans. This bank can be operated by the government, on a strictly non-political basis, or operated jointly by the government and private capital. It will be tied into the Federal Reserve Sys- tem. It will take idle savings and loan them for new construction, and will also have power to create credit, like the commercial banks. The latter will re- turn to their accepted field of short-term loans. The new bank will not compete with them, but will spe- cialize in the long-term field where new construction is involved. The investment banker will continue with refunding operations, and with such clients as prefer his services. The new bank will have the power to make loans at selective rates of interest. Its purpose will be to use the interest rate in such a way as to put men to work and get things built. This idea would have been fan- tastic in an era where capital was scarce. It makes in- creasing sense as capital becomes abundant and the interest rate falls. In such circumstances, why not re- duce still further the cost of capital, make things cheaper to build, and so stimulate demand for new structures of all kinds? Years ago I studied a proposal by Guy Mallon, a Cincinnati banker, for a government agency to oper- ate a vast revolving fund for public works, without interest. The credit was to be created, as banks al- ready create it, then loaned to states and cities for non- 23O IDLE MONEY IDLE MEN interest-bearing bonds. These bonds would be amor- ce tized over the life of the highway, water system, school building, constructed with the loan. As amor- tization payments came in, new loans could be made. By eliminating interest, said Mr. Mallon, you could build twice as many things and put twice as many men to work; taxpayers would get twice as much for their money. Arthur C. Holden, a leading New York archi- tect, has written a book in which he explores the astonishing possibilities of non-interest, or nominal interest, loans for construction, with systematic amor- tization. Mr. Justice Douglas has worked on a plan for regional banks of capital issue, especially to assist small business men. Both Senator Pepper and Repre- sentative Voorhis have introduced legislation along this general line. The Jones-Wheeler bill standardiz- ing a low interest rate on farm mortgages is another illustration of the trend. There is certainly nothing novel in the idea of a bank of capital issue. Here, says Mr. Berle, is the city of New York. While he was its Chamberlain, studies showed that it needed 438 million dollars of hospital construction over the next decade, just to hold the health of the city at par. Where can the city get the money? In the capital markets at 3V2 Per cent. This means that over the life of the hospital buildings, say 30 years, the city will have to pay out about a billion dollars in cash, or more than twice the original construction cost, due to the accumulation of interest. New York SIX MODEST PROPOSALS 231 cannot afford to spend a billion. The hospital program cannot be carried out, however essential to the health of the city, however potent as a stimulus to employ- ment. But the city can afford 438 million dollars— perhaps a little more. Mr. Berle would have the new bank loan the city the money to build its hospitals at not over one half of i per cent. This almost abolishes the interest burden, and gives taxpayers their hospitals at half the final cost. The city can now act promptly. It has blueprints already drawn. It lets contracts to private builders who employ carpenters, masons, steel workers. The new hospitals will rise, until presently there are enough to admit all the sick people in New York and care for them adequately. If this sounds like financial hocus-pocus, it is be- cause we are so conditioned by the hocus-pocus of interest as a kind of Act of God, that we blanch at the idea of building things for only the cost of build- ing them— the actual man power and materials laid out during construction. In the physical calculus this is the only cost. That is why nations can go on fighting as long as their man power and materials hold out. Europe today is full of illustrations of this rule. The bank will not confine itself to hospitals or to loans at a half of 1 per cent. It will handle any self- liquidating projects, private or public, making its loans subject to strict amortization. It could be the financial agent for much of the PWA program outlined above. 232 IDLE MONEY IDLE MEN It will "quote any rate of interest . . . necessary to get the work done." For worthy non-profit enter- prises, like hospitals or flood control, the interest rate will be close to zero, only covering the cost of book- keeping. For housing projects in the low income groups, say 1 per cent; for income-producing projects like toll bridges, say 2 per cent; for loans to the rail- roads for new equipment, perhaps 3 per cent; for loans to small business men, the market rate as now appli- cable to big business, say 3 l/2 or 4 per cent. The bank will use the interest rate to stimulate enterprise. Its use at present is often to discourage enterprise. Savings deposited in this bank will be put to work. The return on them will not be great, but the princi- pal will be safe. A proposal from another quarter is that such a bank might take the gold from Fort Knox as its initial capital, so far as the gold represents excess reserves. There is now about 6 billion dollars so ear- marked. This would give the idle gold a job, where now it has none. A financial invention along this general line would offer many advantages. It would enormously reduce the cost of construction. Small business men could afford to launch new enterprises which are doomed with long-term interest rates at 6 per cent and up. Railroads could afford new equipment. Taxpayers could afford more of the PWA's face-lifting improve- ments—the kind of improvements that would make the country begin to resemble Mr. Geddes' inspiring SIX MODEST PROPOSALS 233 relief map of it. The problem of "where's the money coming from?" would be cut in half, or thereabouts. If you personally could build a house for a total money outlay over the years of $6,000, instead of a present outlay, at 5 per cent, of $10,000, wouldn't you be encouraged to call an architect and a builder? Mr. Berle's bank might help arrange this for you. If it can, the nation will be ringing with the sound of hammers. This invention would tend to hold down the prin- cipal of the federal debt, in that the bank could handle many of the PWA projects on its own credit. It would greatly reduce the burden of debt for both tax- payers and business men by keeping the interest rate at a minimum. It would help balance the operating budget of the government. A great many jobs would be created in new busi- nesses and new construction. The wages and salaries paid would bring many families above the subsistence level and enable them to buy consumers' goods of all kinds. The market of the lower third would be tapped. This in turn would stimulate the industries supplying these goods. Investment in private industry would increase. The effect would be far better than pump-priming; it would amount to an extra cylinder on the pump. The permanent PWA would have a parallel function. If these new cylinders should pump efficiently enough to raise the national income as high as 90 234 IDLE MONEY IDLE MEN billion dollars and employ everybody who now needs a job, they could then slow down. The bank could accomplish this by restricting its loans. Its non-politi- cal management should concentrate on keeping it flexible and responsive to changes in income and em- ployment. By the use of a system of statistical indices it could be governed almost as automatically as the electric pump in my cellar, which goes to work when water pressure falls to 35 pounds and stops pumping when pressure reaches 70 pounds. The Berle bank, with the other five parts of our program, is capable, if properly administered, of putting to work every employable man and woman within a very few years. This plan can push the national income up, while keeping the debt burden down. It can build the plant we need for housing our people, for conserving our resources, for health and education. It can stimulate private enterprise in gen- eral by raising the national income, and in particular by providing capital, especially for the man with a better mousetrap to put on the market, at rock bottom cost. Ill It looks good, this program, but it is no cure-all. Here are some of the things it will not do. It will not straighten the crimps in the system put there by monopoly and administered prices. If the big business gentlemen who fix prices run them up as fast as the SIX MODEST PROPOSALS 235 national income rises, we shall all be out of luck. You had best consult Thurman Arnold about how to con- trol this. It does little to prevent industrial waste, high pressure selling, the merciless gouging of con- sumers by some commercial interests. It doesn't pro- mote the C.I.O., the co-operative commonwealth, or Mr. Borsodi's plan for simple living. It does nothing directly about farmers except to increase their incomes and stimulate soil conservation. It does not replace bonded indebtedness with equity financing and so re- duce the burden of private debt. (The bank could, however, take a lead in this direction.) It does not entirely eliminate migratory labor or sweatshops. It doesn't stop speed-ups on factory belt lines. It doesn't do away with bad Hollywood films, automobile acci- dents, silicosis, the misuse of leisure, the moral perils of the strip tease, or a lot of things that ought to be done, or that people think ought to be done. This program is concerned primarily with speeding the transfer of dollars, to the end that goods are passed around and people are put to work. Here you are in a shower bath, and the water is too hot. What can you do? You can turn the cold water valve up, or the hot water valve down. The first will give you more total water, the second, less. You can balance the budget by turning the spending valve down or by turning the income tax valve up. The first reduces the national in- come and makes citizens more miserable. The second 236 IDLE MONEY IDLE MEN increases the national income by delivering idle money to the spending stream. Assuming, Mr. President, that you like this program and wish to adopt it in spite of the fact that it is no complete panacea, what opposition can you expect? You can expect plenty, both fair and foul. Radicals will not like it because the "profit system"— whatever that may mean to each particular radical— is not put in the ashcan. Conservatives will not like it because they are not used to such goings-on— money at one half of 1 per cent indeed! What does a man save and skimp and deny himself for anyway? Well, right now in 1940, he skimps and saves and denies himself often to get zero per cent for his money, and a jolly good chance of losing the principal if things do not pick up in the next few years. No savings are safe with the national income below 70 billion dollars. Specifically, the following groups will tend to op- pose the program, at least until they understand its long-run implications: Investment bankers. Commercial bankers— less from any injury it will do them than as a kind of knee-jerk response. Income taxpayers in the middle brackets. Real estate people who have a vested interest in slums, overcrowding and high-cost housing. Professors of classical economics. Many writers of newspaper editorials. In so far as these groups oppose it directly— vote SIX MODEST PROPOSALS 237 against it and criticize it for real or fancied harm to themselves— their opposition is perfectly fair. But they will oppose it indirectly, try to discredit it in all possi- ble ways, and try to convince uninformed people in other groups that it will harm them too. To put a plan of this kind before plain citizens in its true light is extraordinarily difficult in this country because of the wealth and power of opposing groups. If they think it has a chance of adoption, they may raise a war- chest and put on a campaign, in the course of which politicians will distort it, editors will twist it, column- ists will grow hysterical, high-priced press agents will get out pamphlets in full color, glittering with $10 words, to prove it is "communistic." The communists will sneer at it but that will not matter to the press campaign. Professor Raymond Moley may even be in- duced to write an article calling it a menace and the work of theorists and professors. In short, the air will be blue with rhetoric and passion, most of it beside the point. This is one of the penalties of living in a democ- racy. It will take a big man, a bold man, and a very clear-headed man to see it through. If these people are against the plan, who will be for it? The following groups will benefit by it, and many of them who are not too badly confused by the press campaign will probably support it: Business men who want better sales and profits. Business men who want cheap money for capital outlays. 238 IDLE MONEY IDLE MEN Old people who want pensions. Young people who want work and hope for the future, who want to get married and can't afford to. All people who want to rent or build better homes to live in. Conservationists. Sick people who want adequate hospitals. Educators and children who want better schools. States, cities, towns that want cheap money. The unemployed. Thus for everyone who thinks his interests are threatened by this program, there are probably ten who have a material interest in its favor. But most of these people are not well organized as groups, or very articulate, except the Townsendites. So the plan will seem to receive more criticism than support, and not the kind of criticism it deserves. It should be studied closely but impartially. Objec- tions should be raised by people as well-informed and disinterested as the framers of the plan. For the plan is thoroughly disinterested. It does not require any great uprooting of traditions. It demands a minimum of new institutions, far less than the wrench of inaugurating the original income tax, the Federal Reserve System, the AAA. It out- rages almost no folklore, except dogma about money being always "worth" 6 per cent. It steps on few toes at first, and none in the long run, save possibly those of investment bankers, who apparently are on the way SIX MODEST PROPOSALS 239 out in any event. It solves the problem of community- survival. It ought to be enough to make the United States lead the world hands down, as a place where people can eat and still be free. I do not know of any other course, Mr. President, where you can get so much for so little. But there are other courses. You can set up a dictatorial NRA to fix prices, wages, production quotas for everything. You can close the stock exchanges and inaugurate a capital levy. You can go in for state socialism in a big way, taking over the railroads, utilities, insurance companies, coal mines, steel companies, packing plants. You can print currency and keep citizens happy for a year or two, until the flow of money overwhelms the flow of goods and prices go out of sight. You can start a war and absorb money and men in the military ma- chine. Or you can do nothing and await the grand smash. Well, Mr. President? 11. MEN FIRST, MONEY SECOND SWITZERLAND is not at war as I write. Yet the war is costing her $1,000,000 a day, $360,000,000 a year, for military defense measures alone. A compara- ble defense appropriation for the United States would be more than 1 2 billion dollars a year. Our whole fed- eral budget, "squanderings," defense and everything, has been about 9 billion dollars. If we were in Swit- zerland's shoes, our annual deficit would be about 1 5 billion dollars! What would the Economy League say to that? Britain is spending at a rate per capita which would mean 40 billion dollars a year over here. She is spend- ing nearly half her national income for war purposes. On this basis, with no increase in taxes, our deficit would be more than 30 billion dollars. In two years, at this rate, the federal debt would go sailing over the 100 billion dollar mark. The National Economy League confirms this estimate. To hold it down a lit- tle, every man with an income of more than $5,000 would probably have to pay 25 to 90 per cent of it in taxes— as in Britain. The French, a thrifty people, are pumping 60 per cent of their income into the war machine. The Ger- mans are undoubtedly pumping a greater percentage into theirs. Sweden and Italy and Turkey can hardly 240 MEN FIRST, MONEY SECOND 24I be behind the Swiss allotment, and may be above it. Rumania has more than a million men chronically under arms, and they all have to eat. There is not a nation in Europe, at war or "neutral," which is not running a per capita deficit that makes the New Deal deficits look like chicken feed. I should guess that at least 50 million men in Europe are under arms or making munitions. If the war stopped tomorrow, they would all be unemployed. This would produce a situation only less acute than the war itself. There is no conceivable method whereby it could be solved on the principles of free enterprise and "sound" finance. All belligerents and most neutrals have established ironclad controls of everything coming into their country and everything going out. They are ration- ing their internal supplies. The British have two for- eign currencies, a regular pound at $4.03, and a "Black Bourse" pound which goeth where the wind listeth. It already listeth pretty violently into Mr. Hull's con- cepts of international free trade. Whoever wins the war, there will be little free trade in the Eastern Hemisphere. Instead there will be barter, blocked cur- rencies, and rationing, with the chances strongly against anyone's taking our gold in exchange for goods. The British and French already have what amounts to a new money unit, the pound-franc. If they win, they promise to operate their Empires as one closed system. If the Germans win, they will operate 242 IDLE MONEY IDLE MEN whatever lands they have dominion over as a closed system. Russia is already such a system, and Japan is on the way. We have had trouble with blocked marks in South America; we are beginning to have trouble with blocked pounds; but these are the merest hints of the trouble which is coming. To survive economi- cally in this post-war world, we shall either have to go completely isolationist, or meet barter deal with barter deal, meet government control of foreign trade with government controls of our own. The Germans have cleaned out their rich men and capitalists. Goebbels has publicly announced that all private property is subject to requisition. The British and French are not far behind. The Allies are sup- posed to be fighting to defend capitalism and free enterprise, but there is little power or cash left in that quarter now. Every day the war continues there will be less. Income and inheritance taxes are at astro- nomical heights. American securities owned by British citizens have been commandeered. Mr. Churchill has been appointed supreme dictator, with power to com- mandeer any person, any property, in England. The economic systems of European neutrals and former neutrals are becoming hopelessly unhinged. Look at Denmark, with her merchant marine gone, her colonies gone, and with reduced feed for her live- stock. Her great dairy industry was based on imported fertilizer, oil cake, and other feed. Now imports are cut off by the blockade. Look at Holland, with a MEN FIRST, MONEY SECOND 243 headless empire. To exist at all, neutrals may have to ally themselves with one of the major belliger- ent powers, and so become vassals rather than sov- ereign states. The war seems to be teaching that sov- ereignty under modern technological conditions is impossible without at least 5,000 fighting planes, and dependable sources of foodstuffs, coal, petroleum and metals. After this war, there may be no little countries left in Europe at all. Those which escape outright an- nexation will be bound into federations. Their peoples will conclude, I think, that they cannot ever again afford the luxury of sovereignty. It is federation or national blackout. The airplane is primarily respon- sible. Germany has won many initial successes because a supreme command can have orders carried out secretly and swiftly. The Allies have already met this threat with stern dictatorial measures of their own. You cannot beat the Nazi war machine by muddling through. It is a choice between sacrificing "freedom" and accepting defeat in war, and the choice has been made. The Allies to win, or to prevent defeat, will do what they have to do. If this means invading neu- trals as the Nazis have done, they must do it. They are certainly partly responsible for the invasion of Norway. International law was never more than a set of habits. A legal code is an absurdity without police to enforce it, but we have never had a world police- man. Under the pressure of war the habits are being 244 IDLE MONEY IDLE MEN violated right and left, and the whole structure is col- lapsing. What are we going to put in its place? The economy of Europe is already distorted almost beyond recognition. Where are the gold standard, property rights, the rights of neutrals? Where are free trade and free exchange? Where are the rights of labor and the rights of capital? In a year or two more of war, the European economy will look like some- thing from the back of the moon. That goes for most of Asia as well. If Germany wins in 1940, the econ- omy of Europe may be stabilized, but in a form never seen on land or sea. No nation today asks: "Where's the money coming from?" Yet no nation is going bankrupt financially, or worrying about going bankrupt that way. When Italy invaded Ethiopia without gold or credit, the bankers of the world worried for her solvency, but Mussolini did not worry. Nobody now is letting gold and credit seriously interfere with action. There are just two questions governments are asking: Have we the men? Have we the raw materials? If we have, we are all right; if not, we are sunk. Switzerland cannot possibly afford the costs of permanent mobilization. Of course she can't. But the army, in defiance of all calculus of cost, will continue to guard her passes. Men first; money second. For three centuries, more or less, the opposite prin- ciple has prevailed in western countries. Money first; men second. The deciding question has been: Can the MEN FIRST, MONEY SECOND 245 project be paid for? If the money could not be found it was not done, no matter how many able-bodied men walked the streets, or what mountains of raw materials were available. The New Deal has been hag- ridden with this imperative. The Republicans expect to elect a president to enforce the principle. Yet in the old world it is breaking up. In Canada it is break- ing up. The reversal of this time-honored rule is not alto- gether unexpected. In the first world war it was jolted. The Allies took what they needed from us, and have not paid for it yet. They never will pay for it. Such a default— 12 billion dollars to date— would have been unthinkable in the nineteenth century. It is almost forgotten in the United States today. The Allies needed these supplies to win; whether they could pay for them was a secondary consideration. Russia, cover- ing one sixth of the habitable land of the planet, was first to forsake conventional ideas of money in 19 17. They have given Russia little trouble for twenty-three years. In the world depression of 1929, the money-first principle was jarred some more. As unemployment spread, governments took steps to care for their help- less citizens, no matter what it cost. Unbalanced bud- gets became universal. And now, with the new war, the principle is on its last legs. Look at Japan and China, as well as Europe. Look at Australia, New Zealand, South Africa. Is the time coming when money is no longer the 246 IDLE MONEY IDLE MEN pre-eminent consideration, when it no longer controls the movement of goods, but is secondary to that movement? Will the United States capitulate to the new imperative? If it does not, how long can the old fort be held? How long can we go on saying that idle men cannot be put to work on useful projects, because we cannot afford it? Powerful governments are feeling their way toward supplying their citizens directly, without benefit of rentiers, interest rates, re- turns to capital, higgling the market. If this keeps up how long will it be before the only place to see a stock exchange ticker will be in a museum? I do not pretend to know. I am just looking at what is going on before my eyes. II If we enter the war on a big scale, the answer is easy. Almost immediately the national economy will go on a physical basis. The budget balancers will be stricken dumb. No one will think much about national debt. We shall do what we have to do in the way of moving men, ships, iron ore, munitions, fighting planes, and to hell with the cost. There will be just one query: Is energy available to move them? My guess is that if we go to war we shall never return to the convention of putting money first. I may be wrong. If we do not go to war— and despite its educational value in finance, I hope we don't— the outlook is more MEN FIRST, MONEY SECOND 247 uncertain. It may be that we are in for one last stand by the defenders of money iiber Alles. That principle has many able and sincere defenders. They really be- lieve that it is the best way to run a country. Unless a thing "pays" it should not be undertaken. This is why government projects, however beneficent, come under their censure. A public investment strikes them as per- verse. The financial motive, they say, the incentive of profit, gets things done, while planning for the gen- eral welfare degenerates into bureaucratic inefficiency and waste. This is a powerful argument, supported by most Americans, as any Gallup poll would show. Strangely enough, however, it is not supported by Mr. Churchill and Mr. Goering, who above all others are trying to get things done. One last stand we may have, on the line of free enterprise, "economy" and sound finance. I doubt if the line can be held for long. It will buckle because, for reasons given elsewhere in this book, it cannot adequately move the goods, or substantially reduce the number of the unemployed. With everything in its favor, including the blessing of Mr. Hoover, and the acclaim of the people, it buckled in 1929 right down to the edge of doom. If it could not hold then, how can it hold now, with our economy in a condi- tion of chronic stagnation? This is a free country, and if the majority of the voters want it tried, it should be tried. Let a Republican president see what he can do. 248 IDLE MONEY IDLE MEN Again, what will happen when the war ends? An exhausted world may be in desperate need of our goods, yet unable to pay for them. Shall we not be called upon to underwrite huge credits for orphans and famine sufferers abroad? Is there any way to do this on the basis of sound finance and 6 per cent? If, after fair trial, it can be proved to the satisfac- tion of the voters that the old line cannot be main- tained, then a program for genuine recovery becomes politically possible. Then we can do what needs to be done at home or abroad. The essence of such a pro- gram is the use of money to employ men and to move goods. If an interest rate of zero facilitates the move- ment, it will be used. If a heavy tax on idle money facilitates the movement, it will be used. (One such program I have outlined in an earlier section.) We shall follow other nations in assuming that anything can be paid for if men and machines are unemployed, and materials are available. Such a program need not be anywhere near as drastic as those now in force in Europe, in parts of Asia, or even in Canada. It need not lower the stand- ard of living of a single working man. Indeed, to run our economy efficiently, living standards should be increased. If we give the subject concentrated attention, we can work out something which might well be a model for other nations to imitate after the war is over. They have not hesitated to accept our leader- MEN FIRST, MONEY SECOND 249 ship in many industrial techniques and inventions. If we could lead in solving the financial problems raised by the pressure of those techniques, it might prove the most useful invention that we ever exploited. We have time to test and check our model. They have no time. But we can do them little good by exporting economic models designed for the days of President McKinley. We cannot do our own citizens any good by adopting such models. We cannot find useful work for our people by singing songs about the American dream. We must have a program designed for the power age, for a time of great turmoil and transition. Unless we are to go against a massive world trend, that means men first and money second. INDEX OF NAMES Alexander, Will W., 149 Altman, Oscar L., 119-122, 144, 210 Angas, Major, 32 Arnold, Thurman, 06 Baker, O. E., 66 Barriger, John W., Ill, 118 Bennett, Hugh H., 43 Berle, Adolph A., Jr., 102, 118, 131, 134-136, 148, 152, 153, 218, 228-234 Bonaparte, Napoleon, 136 Borsodi, Ralph, 235 Carmody, John, 221 Chase, Harvey S., 5, 104 Churchill, Winston, 242, 247 Clapp, Billy, 167 Coolidge, Calvin, 167, 170 Coster-Musica, F. Donald, 45 Crowther, Geoffrey, 24 Currie, Lauchlin, 9, 125, 134, 137-143, 210, 214 Davenport, Donald H, 125, 142, I43. Dennison, Henry, 151, 153, 221 Douglas, William O., 230 Dublin, Louis I., 62, 63, 65 Eccles, Marriner, 217, 223 Enright, William J., 145 Ferris, John, 149 Folsom, Joseph K., 66 Ford, Henry, 29, 39 251 Frank, Jerome, 99 Fuller, Buckminster, 185-186 Galilei, Galileo, ix Geddes, Norman Bel, 174-191, 232 Goebbels, Joseph Paul, 242 Goering, Hermann, 247 Goethals, George W., 167, 170 Hamilton, Alexander, 6 Hansen, Alvin, 17, 78, 100, 122- 125, 142-143, 148, 152, 153, 212 Heilperin, Michael, 209 Henderson, Leon, 99, 100, 113- "5, 123 Hill, Knute, 228 Hitler, Adolph, 63 Hobson, John A., 90 Holden, Arthur C, 230 Hoover, Herbert, 3, 13, 30, 31, 54, 167, 170, 214, 247 Hopkins, Harry, 45 Hull, Cordell, 241 Insull, Samuel, 132 Johnson, Hugh S., 40 Jones, Bassett, 209 Jordan, Virgil, 94 Keynes, John Maynard, 16, 203, 204 King, William H., 99, 100, 113, 152 Korzybski, Alfred, 47 252 INDEX OF NAMES Kuczynski, Robert R., 63 Kuznets, S. S., 122, 123, 210 La Follette, Robert M., Jr., 225 Leed, Philip, 114 Lorimer, Frank, 71 Lotka, Alfred J., 63, 65, 67 Lubin, Isidore, 99, 112, 117 Lynd, Helen and Robert, 30 Mallon, Guy, 229, 230 Manuel, Ralph W., 83-86, 125- 126 Marx, Karl, 127 McKinley, William, 249 Mitchell, Charles, 132 Moley, Raymond, 237 Morgan, J. P., 136 Moses, Robert, 191 Moulton, Harold G., 86, 92 Mussolini, Benito, 63 Nehemkis, Peter R., Jr., 99, 117, 121 Ogden, C. K., 47 O'Mahoney, Joseph C, 99, 151 Osborn, Frederick, 63, 71 Osborne, Charlie, 160 Pendergast, Tom, 45 Pepper, Claude, 230 Perkins, Milo, 145-146, 149 Rentschler, Frederick B., 115- 116 Richards, I. A., 47 Roosevelt, Franklin Delano, 3, 41. 45i 49. 5°» 5<5, 126, 167, 189, 216 Scheinfeld, Amram, 80 Seaton, Sam, 160 Sloan, Alfred P., 39, 43, 102, 116-117, 143, 144 Smith, Adam, 127 Stettinius, Edward, 100, 102, 110-113, 126 Taft, William Howard, 5, 19 Voorhis, H. Jerry, 230 Wallace, Henry A., 197 Whitney, Richard, 45 Willkie, Wendell, 41, 221 Young, Owen D., 100, 102, 113- "5 d