Aftershock

I knew less than nothing about its economic and social effects. Everyone who relied on him—family, friends, business associates, the communities that depended on the businesses he ran—expected him to find a way out of the pit. Yet all I could find within myself was despair, he wrote. When Eccles' anxious bank depositors began demanding their money, he called in loans and reduced credit in order to shore up the bank's reserves. But the reduced lending caused further economic harm. Small businesses couldn't get the loans they needed to stay alive. In spite of his actions, Eccles had nagging concerns that by tightening credit instead of easing it, he and other bankers were saving their banks at the expense of the entire community. In seeking individual salvation, we were contributing to collective ruin, he wrote. business in Wall Street, including financier Bernard Baruch, W. W. Atterbury, president of the Pennsylvania Railroad, and Myron Taylor, chairman of the United States Steel Corporation, they had sought to reassure the country that the market would correct itself automatically and that the government's only responsibility was to balance the federal budget. Lower prices and interest rates, they said, would inevitably lure natural new investments by men who still had money and credit, and whose revived activity would produce an upswing in the economy. Entrepreneurs, they assumed, would put their money into new technologies that would lead the way to prosperity. But Eccles wondered why anyone would invest when the economy was so severely disabled. Such investments, he reasoned, take place in a climate of high prosperity, when the purchasing power of the masses increases the demands for a higher standard of living and enables them to purchase more than their bare wants. In the America of the 1930s, what hope was there for developments on the technological frontier, when millions of our people hadn't enough purchasing power for even their barest needs? he wrote. There was a more elaborate and purportedly ethical argument offered by those who said nothing could be done. Many of those business leaders and economists of the day believed a depression was the scientific operation of economic laws that were God-given and not man-made. They could not be interfered with. They said depressions were phenomena like the one described in the Biblical story of Joseph and the Seven Kind, in which Pharaoh dreamed of seven bountiful years followed by seven years of famine, and that America was now experiencing the lean years that inevitably followed the full ones. Eccles wrote, They further explained that we were in the lean years because we had been spendthrifts and wastrels in the roaring twenties. We had wasted what we had earned instead of saving it. We had enormously inflated values. But in time we would sober up, they thought, and the economy would right itself through the action of men who had been prudent and thrifty all along, who had saved their money and at the right time would reinvest it in new production. Then the famine would end. Eccles thought this was nonsense. A devout Mormon, he saw that what passed for the God-given operations of economics was nothing more than a determination of this or that interest, specially favored by the status quo, to resist any new rules that might be to their disadvantage. He wrote, It became apparent to me, as a capitalist, that if I lent myself to this sort of action and resisted any change designed to benefit all the people, I could be consumed by the poisons of social lag I had helped create. Eccles also saw that men with great economic power had an undue influence in making the rules of the economic game, in shaping the actions of government that enforced those rules, and in conditioning the attitude taken by people as a whole toward those rules. After I had lost faith in my business heroes, I concluded that I and everyone else had an equal right to share in the process by which economic rules are made and changed. One of the country's most powerful economic leaders concluded that the economic game was not being played on a level field. It was tilted in favor of those with the most wealth and power. Eccles made his national public debut before the Senate Finance Committee in February 1933, just weeks before Franklin D. Roosevelt was sworn in as President. The Committee was holding hearings on what, if anything, should be done to deal with the ongoing economic crisis. Others had advised reducing the national debt and balancing the federal budget. But Eccles had different advice, anticipating what British economist John Maynard Keynes would counsel three years later in his famous book, The Greatest Deal.