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labor leaders, called to a White House conference on November 21,
also agreed to cooperate in the program and not press for further
wage increases, this gesture being presumably a sign of their basic
 patriotism. These leaders included William Green, Matthew
Woll, John L. Lewis, William Hutcheson, A.F. Whitney, and
Alvanley Johnston. The agreement put very little strain upon their
patriotism, however, since the Hoover program was tailor-made to
fit the very doctrine that union leaders had been long proclaiming.
There was no chance of wage increases in an unhampered market.
The point is that unions did not have the power to enforce wage
floors throughout industry (unions in this era being weak, consti-
tuting only about 7 percent of the labor force, and concentrated in
a few industries), and so the federal government was proposing to
do it for them.
But even in an agreement so favorable to unions, the labor lead-
ers were ready to scrap their part of the bargain at the first oppor-
tunity. William Green wrote the affiliated unions on November 27,
The Depression Begins: President Hoover Takes Command 213
emphasizing that the agreement concluded with Hoover was not
binding, and assuring his colleagues that they were free to press for
higher wage rates in their negotiations.2
In his annual message to Congress on December 3, Hoover
pointed out that depressions had always been marked by retrench-
ment of construction activity and reduction of wage rates, but now
things were different:
I have instituted . . . systematic . . . cooperation with
business . . . that wages and therefore earning power
shall not be reduced and that a special effort shall be
made to expand construction . . . a very large degree of
individual suffering and unemployment has been pre-
vented.
On December 5, Hoover called together a larger conference of
industrial leaders in Washington, to adopt the Hoover program.
Hoover addressed the conference to hail their agreement, as an
advance in the whole conception of the relationship of
businesses to public welfare. You represent the business
of the United States, undertaking through your own
voluntary action to contribute something very definite
to the advancement of stability and progress in our eco-
nomic life. This is a far cry from the arbitrary and dog-
eat-dog attitude of the business world of some thirty or
forty years ago.
With all the leading industrialists thus pledged to maintain wage
rates, expand construction, and share any reduced work, it was no
wonder that the American Federation of Labor hailed the new
development. Its journal, the American Federationist, editorialized
on January 1, 1930:
The President s conference has given industrial leaders
a new sense of their responsibilities. . . . Never before
have they been called upon to act together . . . in earlier
2
Irving Bernstein, The Lean Years: A History of the American Worker, 1920 1933
(Boston: Houghton Mifflin, 1960), p. 253.
214 America s Great Depression
recessions they have acted individually to protect their
own interests and . . . have intensified depressions.3
By the following March, the A.F. of L. was hailing the new attitude
toward wages, with employers now realizing in contrast to the
1921 depression that it is poor business to destroy consumer pur-
chasing power, and it greeted the fact that not one of the big cor-
porations had thought of lowering wages as a means of reducing
unit costs. The A.F. of L. proclaimed that business was now adopt-
ing the purchasing-power gospel of W.T. Foster, and stated that the
United States will  go down in history as the creator of [an] . . .
epoch in the march of civilization high wages. 4
INFLATING CREDIT
If the Federal Reserve had an inflationist attitude during the
boom, it was just as ready to try to cure the depression by inflating
further. It stepped in immediately to expand credit and bolster
shaky financial positions. In an act unprecedented in its history, the
Federal Reserve moved in during the week of the crash the final
week of October and in that brief period added almost $300 mil-
lion to the reserves of the nation s banks. During that week, the
Federal Reserve doubled its holdings of government securities,
adding over $150 million to reserves, and it discounted about $200
million more for member banks. Instead of going through a
healthy and rapid liquidation of unsound positions, the economy
was fated to be continually bolstered by governmental measures
that could only prolong its diseased state. This enormous expan-
sion was generated to prevent liquidation on the stock market and
to permit the New York City banks to take over the brokers loans
that the  other, non-bank, lenders were liquidating. The great
bulk of the increased reserves all  controlled  were pumped
into New York. As a result, the weekly reporting member banks
expanded their deposits during the fateful last week of October by
3
In addition to the above sources on the Hoover conferences, see Robert P.
Lamont,  The White House Conferences, The Journal of Business (July, 1930): 269.
4
The American Federationist 37 (March, 1930): 344.
The Depression Begins: President Hoover Takes Command 215
$1.8 billion (a monetary expansion of nearly 10 percent in one
week), of which $1.6 billion were increased deposits in New York
City banks, and only $0.2 billion were in banks outside of New
York. The Federal Reserve also promptly and sharply lowered its [ Pobierz całość w formacie PDF ]