Economics and the Public Welfare
A Financial and Economic History
of the United States, 1914-46

by Benjamin M. Anderson

Review by
Robert Wilfred Franson

Van Nostrand: New York, 1949
602 pages

LibertyPress: Indianapolis, 1979
foreword by Arthur Kemp

January 2014

Maladjusting the American economy

Benjamin M. Anderson was chief economist for Chase National Bank during the central years he covers in his history, in an American era when banks were at least hoped to be aboveboard in policy, expected to be competent in operation, and reasonably presumed to be upholders of the market economy and free enterprise. Anderson was in various ways a participant in the events he records and analyzes, including testifying before Congress. His Economics and the Public Welfare: A Financial and Economic History of the United States, 1914-46 is end-stopped by the First and Second World Wars, but the emphasis is on the interwar years:

 II. The Postwar Boom, Crisis, and Revival, 1919-23
III. The First Phase of the New Deal, 1924-32
 IV. The New Deal in Maturity, 1933-39

Since Franklin D. Roosevelt did not become President until 1933, we may see by the above structure that Anderson shows that much of what Roosevelt campaigned on as New Deal policies were already being imposed on the American economy during the 1920s. Anderson provides masses of detail in support of his general themes. The effects of a cheap money policy (unnaturally low interest rates) and the maintenance of the gold standard, economic and political conditions in Europe and international conferences, commerce and employment and the Federal Reserve System, American banking practices and Acts of Congress, are all mustered, explained, and evaluated.

One challenge for any reader of Economics and the Public Welfare is simply its mass of detail. Must one be trained in economics to learn from the book? Not at all. While not a popular simplification, many non-economists including myself have learned from Anderson's exposition.

For a reader of a later era, there are several additional difficulties. First is the common one of any "recent history" when read by later generations, that men, institutions, and issues which once were common knowledge to the thoughtful citizen, are not in personal memory nor even what is taught in general education. A second difficulty for later readers is Anderson's frequent use of examples and tables which contain bygone dollar amounts. We may adjust fairly easily to the smaller population in the 1920s and 1930s to consider employment figures, for instance; but the inflation of the American dollar (the debasement of its value) has been so staggering that Anderson's dollar amounts all seem tiny, playthings of our nation's adolescence. A corollary of these is understanding the importance of gold, money denominated in or interchangeable with gold: the gold standard. Anderson presents a strong case how honest adherence to the gold standard would have mitigated or prevented many of the economic problems of the time.

Here's an example of Benjamin Anderson's slyly devastating evaluation of the incoming Roosevelt Administration in early 1933. With the Great Depression ravaging American businesses, jobs, and lives, there was an opportunity to lower tariffs and allow international trade to flow freely to revive economies in America and Europe:

But the "Young Men" who advised the President did not want either foreign trade or gold. They wanted internal regimentation. It takes economic imagination and economic understanding to look beyond the particular industry or particular trade in dealing with the tariff problem, and the the "Young Men" lacked economic understanding, though it cannot be denied that they had a good deal of imagination regarding economic matters.

Anderson points out that thousands of small-town banks disappeared in the 1920s as automobiles and hardened roads made for easier travel to larger centers. Here's another anecdote, relating to issues of branch banking versus the myriad local banks which once served towns and smaller cities, about people looking up from the pointed end of the economy:

This writer at the time urged a plan which would make use of local banking knowledge in refunding farm mortgages, with a federal government guaranty, in such a way as to keep good farmers and the land together. Farm prices had fallen to such fantastically low levels that the ablest farmers were [financially] embarrassed.

In May 1932 I had studied the farm mortgage situation first hand in Boone County, Missouri, where in many cases I not only knew the farmers, but also had known their fathers before them. I had found the banks and other local creditors showing great forbearance to embarrassed farmers. In one case, for example, a good farmer had come in, proposing to deed his farm to the two banks to which he owed money, to save them the expense of foreclosure. He was unable to pay interest. The bankers told him that of course he could not pay interest with farm prices as they were, but that he could run the farm so much better than anybody else they knew that he should go back and run the farm. There would be no interest in 1932, and the next year the interest would be half of what the contract called for. The farmer walked out with his head high. In another case, where a farmer was incompetent, the creditors had reluctantly taken the farm over, but had told the farmer and his wife to stay in the house, and had given the farmer employment on the place.

Other times, other bankers! The bulk of material in Economics and the Public Welfare is not so sparkling, nor the results as golden for the American economy as a whole, but there is a lot here.


© 2014 Robert Wilfred Franson

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