AN ECONOMIC NIGHTMARE
i
You may define a mass delusion; you cannot explain it really. It is a
malady of the imagination, incurable by reason, that apparently must
run its course. If it does not lead people to self-destruction in a
wild dilemma between two symbols of faith it will yield at last to the
facts of experience.
Once the peace of the world was shattered by this absurd question: Was
the male or the female faculty the first cause of the universe? There
was no answer, for man himself had invented the riddle; nevertheless
what one believed about it was more important than life, happiness or
civilization. Proponents of the male principle adopted the color white.
Worshippers of the female principle took for their sign and symbol
the color red, inclining to yellow. Under these two banners there
took place a religious warfare which involved all mankind, dispersed,
submerged and destroyed whole races of people and covered Asia, Africa
and Europe with tragic ruins. Then someone accidentally thought of
a third principle which reconciled those two and human sanity was
restored on earth. All this is now forgotten.
Since then people have been mad together about a number of
things,--God, tulips, witches, definitions, alchemy and vanities
of precept. In 1894 they were mad about money,--not about the use,
possession and distribution of it, but as to the color of it, whether
it should be silver,--that is to say, white like the symbol of those
old worshippers of the masculine faculty, or gold,--that is, red
inclining to yellow, as was the symbol of those who in the dimness of
human history adored the feminine faculty.
And as people divided on this question of silver or gold they became
utterly delirious. Either side was willing to see the government’s
credit ruined, as it very nearly was, for the vindication of a fetich.
They did not know it. They had not the remotest notion why or how they
were mad because they were unable to realize that they were mad at all.
I have recently turned over the pages of the newspapers and periodicals
of that time to verify the recollection that events as they occurred
were treated with no awareness of their significance. And it was so.
Intelligence was in suspense. The faculty of judgment slept as in a
dream; the imagination ran loose, inventing fears and phantasies. That
the government stood on the verge of bankruptcy or that the United
States Treasury was about to shut up under a run of panic-stricken gold
hoarders was regarded not as a national emergency in which all were
concerned alike, but as proof that one theory was right and another
wrong, so that one side viewed the imminent disaster gloatingly and was
disappointed at its temporary postponement, while the other resorted to
sophistries and denied self-evident things.
Nor does anyone know to this day why people were then mad. Economists
write about it as the struggle for sound money (gold), against unsound
money (silver), and that leaves it where it was. Money is not a thing
either true or untrue. It is merely a token of other things which are
useful and enjoyable. Both silver and gold are sound for that purpose.
Their use is of convenience, and the proportions and quantities in
which they shall circulate as currency is rationally a matter of
arithmetic. Yet here were millions of people emotionally crazed over
the question of which should be paramount, one side talking of the
crime of dethroning silver and the other of the gold infamy.
ii
All other business having come to a stop while this matter was at an
impasse, a truce was effected in this wise by law: Gold should remain
paramount, nominally, but the Treasury should buy each month a great
quantity of silver bullion, turn it into white money, force the white
money into circulation and then keep it equal to gold in value. Now,
the amount of precious metal in a silver dollar was worth only half
as much as the amount of precious metal in a gold dollar. Yet Congress
decreed that gold and silver dollars should be interchangeable and
put upon the Treasury a mandate to keep them equal in value. How? By
what magic? Why, by the magic of a phrase. The phrase was: “It is the
established policy of the United States to maintain the two metals at a
parity with each other by law.”
Naïve trust in the power of words to command reality is found in all
mass delusions.
The Coxeyites were laughed at for thinking that prosperity could be
created by phrases written in the form of law. Congress thought the
same thing. It supposed that the economic distress in the country could
be cured by making fifty cents’ worth of silver equal to one hundred
cents’ worth of gold, and that this miracle of parity could be achieved
by decree.
Anyone would know what to expect. The gold people ran with white
dollars to the Treasury and exchanged them for gold and either hoarded
the gold or sold it in Europe. In this way the government’s gold fund
was continually depleted, and this was disastrous because its credit,
the nation’s credit in the world at large, rested on that gold fund.
It sold bonds to buy more gold, but no matter how fast it got more
gold into the Treasury even faster came people with white money to
be redeemed in money the color of red inclining to yellow, and all
the time the Treasury was obliged by law to buy each month a great
quantity of silver bullion and turn it into white money, so that the
supply of white money to be exchanged for gold was inexhaustible.
Wall Street was the stronghold of the gold people. It was to Wall
Street that the government came to sell bonds for the gold it required
to replenish its gold fund. The spectacle of the Secretary of the
Treasury standing there with his hat out, like a Turkish beggar,
was viewed exultingly by the gold people. “_Carlisle’s Bonds Won’t
Go_,” said the New York Sun in a front page headline, on one of these
occasions. Carlisle was the Secretary of the United States Treasury,
entreating the gold people to buy the government’s bonds with gold.
They did it each time, but no sooner was the gold in the Treasury than
they exchanged it out again with white money.
This could not go on without wrecking the country’s financial system.
That would mean disaster for everyone, silver and gold people alike;
yet nobody knew how to stop. The silver people said the solution was to
dethrone the gold token and make white money paramount; the others said
the only way was to cast the white money fetich into the nearest ash
heap and worship exclusively money of the color red inclining to yellow.
iii
Delusions are states of refuge. The mind, unable to comprehend
realities or to deal with them, finds its ease in superstitions,
beliefs and modes of irrational procedure. It is easier to believe than
to think.
The realities of this period in our economic history, apart from the
madness, were extremely bewildering. For five or six years preceding
there had been an ecstasy of great profits. The prodigious manner in
which wealth multiplied had swindled men’s dreams. No one lay down at
night but he was richer than when he got up, nor without the certainty
of being richer still on the morrow. The golden age had come to pass.
Wishing was having. The government had become so rich from duties
collected on imported luxuries that the Treasury surplus became a
national problem. It could not be properly spent; therefore it was
wasted. And still it grew. This time for sure the tree of Mammon would
touch the Heavens and human happiness must endure forever.
Then suddenly it had fallen. Speculation, greed and dishonesty had
invisibly devoured its heart. The trunk was hollow. Everything turned
hollow. People were astonished, horrified and wild with dismay.
They would not blame themselves. They wished to blame each other
without quite knowing how. The casual facts were hard to see in right
relations. Popular imagination had not been trained to grasp them. The
whole world was dealing with new forces, resulting from the application
of capital to machine production on a vast scale, and there had
just appeared for the first time in full magnitude that monstrous
contradiction which we name overproduction. This was a world-wide
phenomenon, but stranger here than in European countries because this
country was newly industrialized on the modern plan and knew not how to
manage the conditions it had created; could not understand them in fact.
“Ve are a giant in zwaddling cloths,” exclaimed Mordecai, the Jewish
banker, who was one of the directors of the Great Midwestern. He said
it solemnly at every directors’ meeting.
Just so. Still, it was incomprehensible to people generally, and as
the pain of loss, chagrin and disappointment unbearably increased the
conglomerate mind performed the weird self-saving act of going mad.
That is to say, people made a superstition of their economic sins and
cast the blame for all their ills upon two objects,--gold and silver
tokens. Thus what had been an economic crisis only, subject to repair,
became a fiasco of intelligence.
The Europeans, all gold people, who had bought enormous quantities of
American stocks and bonds, said: “What now! These people are going
crazy. They may refuse ever to pay us back in gold.” Whereupon they
began hastily to sell American securities.
“After all,” sighed the London Times, “the United States for all its
great resources is a poor country.”
In the panic of 1893 confidence was destroyed. People disbelieved in
their own things, in themselves, in each other.
Important banking institutions failed for scandalous reasons. Railroads
went headlong into bankruptcy, until more than a billion dollars’ worth
of bonds were in default, and in many cases the disclosures of inside
speculation were most disgraceful.
United States Senators were discovered speculating in the stock of
corporations that were interested in tariff legislation, particularly
the Sugar Trust.
The name of Wall Street became accursed, not that morality was lower
in Wall Street than anywhere else, but because the consequences of its
sins were conspicuous.
All industry sickened.
A scourge of unemployment fell upon the land and labor as such, with
no theory of its own about money, knowing only what it meant to be out
of work, assailed the befuddled intelligence of the country with that
embarrassing question: Why were men helplessly idle in this environment
of boundless opportunity?
The Coxeyites thought it was for want of money. So many people thought.
They proposed that the government should raise money for extensive
public works, thereby creating jobs for the workless, but the United
States Treasury, which only a short time before contained a surplus
so large that Congress had to invent ways of spending it, was now in
desperate straits. The government’s income was not sufficient to pay
its daily bills. However, neither the curse of unemployment nor the
poverty of the United States Treasury was owing to a scarcity of money.
The banks were overflowing with money,--idle money, which they were
willing to lend at ½ of 1 per cent. just to get it out of their vaults.
In one instance a bank offered to lend a large amount of money without
interest. But nobody would borrow money. What should they do with it?
There was no profit in business.
So there was unemployment of both labor and capital.
iv
At the time of my arrival in Wall Street conditions were already
very bad. They grew worse. There was the shocking disclosure after
bankruptcy that one of the principal railroads had deliberately
falsified its figures over a period of years. European investors were
large holders of the shares and bonds of this property, and naturally
the incident caused all American securities to be disesteemed abroad.
Foreign selling now heavily increased for that reason, and as the
foreigners sold their American securities on the New York Stock
Exchange they demanded gold.
The United States Treasury had survived two runs upon its gold fund,
but its condition was chronically perilous, and began at length to
be despaired of. Gold was leaving the country by every steamer. The
feud between the gold and silver people grew steadily more insane and
preoccupied Congress to such a degree that it neglected to consider
ways and means of keeping the government in current funds. Labor, which
had been clamorous and denunciatory, now became militant. Reports of
troops being used to quell riots of the unemployed were incessant
in the daily news. Wheat fell to a very low price and the farmers
embraced Populism, a hot-eyed political movement in which every form
of radicalism this side of anarchy was represented. Then came the
disastrous American Railway Union strike, bringing organized labor
into direct conflict with the authority of the Federal Government. The
nation was in a fit of jumps. Public opinion was hysterical.
As I understood more and more the bearing of such events I marvelled
at Galt’s solitary serenity. He was still buying Great Midwestern
stock, as we all knew. Each time another lot of it passed into his name
word of it came up surreptitiously from the transfer office. Some of
the directors at the same time were selling out. This fact Harbinger
confided to me in a burst of gloom; he thought it very ominous, nothing
less than an augury of bankruptcy. I felt that Galt ought to know, yet
I hesitated a long time about telling him. My decision finally to do so
was sentimental. I had by this time conceived a deep liking for him,
and the thought that he was putting his money into Great Midwestern
stock,--his own, Gram’ma’s and Vera’s,--while the directors were
getting theirs out bothered me in my sleep. But when I told him he
grinned at me.
“I know it, Coxey. They didn’t know enough to sell when the price was
high, and they don’t know any better now.”
That was all he said. The ethical aspect of the matter, if there was
one, apparently did not interest him.
Now befell a magnificent disaster. One of the furnace doors came
unfastened in the Heavens, and a scorching wind, a regular sirocco,
began to blow in the Missouri Valley. More than half the rich,
wealth-making American corn crop was ruined. This was a body-blow for
the Great Midwestern. It meant a slump in traffic which nothing could
repair. On the third day the news was complete. We received it in the
form of private telegraph reports from the Chicago office. They were
on my desk when Galt came in. I called his attention to them, but he
looked away, saying:
“The Lord is ferninst us, Coxey. Maybe ... he ... is.”
v
That night I went home with him to dinner. He was in one of his absent
moods and very tired. Natalie overwhelmed him as usual in the hallway,
and when he neither grumbled nor resisted she put off her boisterous
manner and began to look at him anxiously. At dinner everyone was
silent. He communicated his mood. Vera was there at her mother’s left.
Efforts to make conversation were listless, Galt participating in none
of them. There was a sense of something that was expected to happen;
that was Gram’ma’s remorseless evening question.
“What is the price of Great Midwestern stock today?” she asked,
speaking very distinctly.
“Five and a half,” said Galt, in a petulant voice.
The announcement was received stoically, with not the slightest change
of countenance anywhere, though that was the lowest price at which the
stock had ever sold and represented a serious loss for the house of
Galt. However, the state of feeling made itself felt without words. It
became at last intolerable for Galt. He threw down his napkin, shouted
three times, “Wow! Wow! Wow!”, and each time brought his fist down
on the table with a force that made the china jump. With that he got
up and left us. We heard him unlock the door of his room and slam it
behind him.
“What has happened?” asked Vera, looking at me.
I told them of the disaster to the corn crop and how for that reason
there had been heavy selling of Great Midwestern shares.
Vera shrugged her shoulders. Later in the evening when we were
alone she looked about her at the walls and ceiling, as one with a
premonition of farewell, and said bitterly: “A pretty shipwreck it
will be this time.”
“Has your money gone into it, too?” I asked.
She nodded, and said: “Now he wants to mortgage the house.”