Some people said I was drawing a false equivalence in yesterday’s post on the business attitude toward economic recovery measures, which I don’t mean to do. What I’m saying is that from a left-wing perspective, sometimes people have the mentality that a potential solution to a problem can’t be “real” unless the proponent of the proposed solution successfully identifies who the “bad guys” are who are plotting to strangle the economy for their own enrichment. My point is just that during the Great Depression insistence on monetary orthodoxy was worse than a crime it was a mistake. The leading lights of the business community were perfectly sincerely in their belief that financial orthodoxy was good for America, and they were also completely wrong. Not just wrong about what was good for America, but about what was wrong for their own businesses.
Here’s more contemporary coverage from Time Magazine:
Twelve professors of finance in Northwestern University, University of Chicago, University of Wisconsin, University of Michigan, Ohio State University and University of Illinois is sued a manifesto: “It is now assumed in Washington that the price of gold and the prices of other commodities move automatically in the same direction. . . . It is a sobering thought that the 1926 price level was based on a gold dollar of the old weight. . . . There is no point in insisting on a return to the old gold parity, but a scheme to depreciate the dollar to uncertain limits . . . does not inspire confidence. The peril of sheer greenbackism is real and not imaginary.” [...]
Mr. Loree, president of Delaware & Hudson R. R., old wise man of the sea of practical economics, took a $100 bill out of his pocket and held it up: “It says on the face of it that it is redeemable in gold on demand at the United States Treasury. Now it is a mere scrap of paper. We have violated that obligation just as flagrantly as Germany violated its treaty with Belgium.” James Brown, president of the Chamber and partner of Manhattan’s Brown Brothers, Harriman & Co., read a telegram from Professor Edwin Walter Kemmerer of Princeton, famed financial adviser to many nations: “I hope the Chamber of Commerce will recommend an early return to the gold standard, and an immediate commitment by the Government to do so. Our gold supply and credit situation are such as to render a prompt return to the gold standard entirely feasible. The danger of an uncontrolled inflation, which is already serious, increases with every day of governmental delay in announcing a definite stabilization plan.”
We could spend the next 80 years trying to understand the psychological, ideological, and class biases behind these views. The fact of the matter, however, is that the Chamber of Commerce was mistaken. Businessmen don’t suffer as much during a recession as working class people do, but businessmen are better off in a boom than a bust. But our Galtian Overlords, even if they’re very smart about the businesses they run, don’t have particular insight into macro-stability issues.