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stated that the prevailing theory during the 1920s was that high
and rising wages were necessary to a full flow of purchasing power
and, therefore, to good business. 41
As the final outgrowth of the famous conference of 1921,
Hoover s Committee on Recent Economic Changes issued a gen-
eral multi-volume report on the American economy in 1929. Once
again, the basic investigations were made by the National Bureau.
The Committee did not at all foresee the great depression.
Instead, it hailed the price stability of the 1920s and the higher
wages. It celebrated the boom, little realizing that this was instead
its swan song: with rising wages and relatively stable prices we
have become consumers of what we produce to an extent never
before realized. In the early postwar period, the Committee
opined, there were reactionary calls for the liquidation of labor
back to prewar standards. But, soon, the leaders of industrial
thought came to see that high wages sustained purchasing power,
which in turn sustained prosperity.
They began consciously to propound the principle of
high wages and low costs as a policy of enlightened
industrial practice. This principle has since attracted the
attention of economists all over the world its applica-
tion on a broad scale is so novel.42
This change in the industrial climate, according to the Com-
mittee, came about in a few short years, largely due to the influ-
ence of the Conference on Unemployment. By the fall of 1926,
steel magnate Eugene Grace was already heralding the new dis-
pensation in the Saturday Evening Post.43
41
National Industrial Conference Board, Salary and Wage Policy in the
Depression (New York: Conference Board, 1932), p. 3; Leo Wolman, Wages in
Relation to Economic Recovery (Chicago: University of Chicago Press, 1931), p. 1.
42
Committee on Recent Economic Changes, Recent Economic Changes in the
United States (New York: McGraw Hill, 1929), vol. 1, p. xi.
43
Committee on Recent Economic Changes, Recent Economic Changes in the
United States, (New York: McGraw Hill, 1929), vol. 2; Henry Dennison,
Management, p. 523.
Prelude to Depression: Mr. Hoover and Laissez-Faire 207
The conclusions of the Hoover-appointed economic commit-
tee were ominous in their own right. To maintain the dynamic
equilibrium of the 1920s, it declared, leadership must be at hand
to provide more and more deliberate public attention and con-
trol. In fact, research and study, the orderly classification of
knowledge . . . well may make complete control of the economic
system a possibility. To maintain the equilibrium, We . . . (must)
develop a technique of balance, the technique to be supplied by
economists, statisticians, and engineers, all working in harmony
together.
And so, President Herbert Hoover, on the eve of the Great
Depression, stood ready to meet any storm warnings on the busi-
ness horizon.44 Hoover, the Great Engineer, stood now armed
on many fronts with the mighty weapons and blueprints of a new
economic science. Unfettered by outworn laissez-faire creeds, he
would use his scientific weapons boldly, if need be, to bring the
business cycle under governmental control. As we shall see,
Hoover did not fail to employ promptly and vigorously his mod-
ern political principles, or the new tools provided him by mod-
ern economists. And, as a direct consequence, America was
brought to her knees as never before. Yet, by an ironic twist of fate,
the shambles that Hoover abandoned when he left office was
attributed, by Democratic critics, to his devotion to the outworn
tenets of laissez-faire.
44
Another important foretaste of the later National Recovery Act (NRA) was
Hoover s use of the Department of Commerce during the 1920s to help trade
associations form codes, endorsed by the Federal Trade Commission (FTC), to
curtail competition in the name of eliminating unfair trade practices.
8
The Depression Begins:
President Hoover Takes Command
nd so we see that when the Great Depression struck, her-
alded by the stock market crash of October 24, President
AHoover stood prepared for the ordeal, ready to launch an
unprecedented program of government intervention for high wage
rates, public works, and bolstering of unsound positions that was
later to be christened the New Deal. As Hoover recalls:
the primary question at once arose as to whether the
President and the Federal government should undertake
to investigate and remedy the evils. . . . No President
before had ever believed that there was a governmental
responsibility in such cases. No matter what the urging
on previous occasions, Presidents steadfastly had main-
tained that the Federal government was apart from such
eruptions . . . therefore, we had to pioneer a new field.1
As his admiring biographers, Myers and Newton, declared, Pres-
ident Hoover was the first President in our history to offer Federal
leadership in mobilizing the economic resources of the people. He
was, of course, not the last. As Hoover later proudly proclaimed: It
1
Hoover, Memoirs of Herbert Hoover (New York: MacMillan, 1937), vol. 3, pp.
29ff. For the sake of simplicity, any quotations from, or references based upon the
Memoirs, Myers and Newton s The Hoover Administration, Wilbur and Hyde s The
Hoover Policies, or Hoover s The State Papers of Herbert Hoover, will not be foot-
noted from this point on.
209
210 America s Great Depression
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