Meanwhile a host of prophets of the new economic era were shouting their fatuous proclamations of hope. They upbraided the Reserve Board for its attempts to interfere with the constructive forces of business. They defended speculation on the ground that the great men of all time had been adventurous, that Columbus, the American Revolutionists, and the pioneers of the West had been in heavy bondage to speculative fortune, and even that “Christ himself took a chance.” So altered, indeed, was the whole economic atmosphere, that many distinguished and hitherto conservative economists were persuaded that a New Era had indeed begun.
And so the tickers chattered throughout the land, and the prices leaped and fell back and leaped yet higher, and the big manipulators pushed up this stock and that, and the little speculators ventured in and got something for almost nothing and bought new radios and new cars with a part of their winnings and staked the rest on new ventures, bigger and bigger ventures, and wherever there were men and women with invested capital the talk was of stocks, stocks, stocks, and the summer of 1929 came and went with prices soaring higher and higher, and it seemed as if the great advance had only just begun.
What shall we say of this wild bull market?
First, that for most of those engaged in it, it was a gamble pure and simple—if not, indeed, something much less pure and simple: a gamble in which some of the players had the inside knowledge and the financial power to determine the immediate outcome.
Second, that the economic justification offered for it by some of the apostles of the new era was fantastic. The current argument was that as the shares of successful companies became more and more widely distributed, the country would approach a condition in which everybody would prosper by holding stock, receiving dividends from it, and enjoying its appreciation in value. In so far as this argument dealt with income from dividends, it implied that the population could become prosperous by living on a sum of money which represented the difference between what they paid for goods and what they were paid for making them. In so far as it dealt with income from appreciation, it implied that during these years the population would live upon money which represented the expectation of such a difference in the nineteen-thirties: that, in effect, they would borrow and spend at once what they hoped that the nineteen-thirties would produce.
In the third place, the boom was not by any means an isolated phenomenon, apart from the general financial tendencies of the day. It was merely the most spectacular manifestation of those tendencies; of the spirit of some-thing-for-nothing with which innumerable financiers and business men had become imbued.
Finally, this gamble drew into the stock market over eight and a half billion dollars of credit, introduced inflated values everywhere into bank portfolios and corporate financing, built up preposterous claims upon the profit-making powers of business concerns, invited unsound industrial expansion, and in these and other ways added to the increasing instability of the American economy. Harshly as one may justly comment upon the treachery of corporation officers who gambled in their own stocks at the expense of their stockholders, and upon the timidity or irresponsibility of supposed business and financial leaders who let the madness go on without lifting a hand to stop it, the morals of the big bull market were unimportant compared with its economic effects. The sublimest folly of those days was the often-expressed belief that the speculative gamble was after all an unimportant affair—that if it were to end in a shakeout, a few speculators would lose their shirts and this would be the sum of the damage. Never were words spoken which betrayed a more tragic incompetence to understand what such collective frenzy must precipitate.
Chapter Twelve
THE OVERLORDS, 1929
LET us pause for a moment, while the big bull market L is still sweeping the prices of stocks irresistibly upward, and look briefly at the men involved in the financial drama now approaching its climax. It is the summer of 1929, that golden noon of the great age of American capitalism. We stand in the narrow canyon of Wall Street, half deafened by the uproar of riveters fashioning yet taller and more confident palaces of fortune, and watch the men surging past us on their varied errands. This is the capital of the American economy; these men are the insiders, who wield such far-reaching and expanding powers, and their allies and associates and emulators and underlings. What sort of people are they? Do they form a distinct ruling caste? In what sort of society do they move? What are their interests and preoccupations outside business, their standards of ethical conduct in business, their influence upon the quality of American civilization?
The difficulties of generalization are immense. One does not easily find common denominators for the personalities of, say, Thomas W. Lamont and Amadeo P. Giannini, or of John D. Rockefeller, Jr., and John J. Raskob. Yet the attempt must be made if we are to understand what happened to the American economy. It may be somewhat facilitated if, as in the third chapter of this book—when we glanced at the careers and influence of some of the colossi of American finance as of the year 1905—we analyze a few samples in the process of arriving at our conclusions.
It is interesting to note, by way of preliminary observation, that the leaders of American finance and industry in the latter nineteen-twenties were hardly better known to the public at large than their predecessors of twenty-odd years before, despite the diligent ministrations of public-relations experts and the swollen popular respect for financial and industrial success.
You may recall that in Chapter III we compared the number of lines in the Reader’s Guide to Periodical Literature for 1900–04 which were given to listing magazine articles about ten leading financiers and also about ten leading politicians of that day; and that the tabulation gave us a total of only 88 lines for the financiers as against 799 lines for the politicians. Suppose we make a similar comparison between the number of lines given to listing magazine articles about ten leaders of finance and industry and ten politicians in the Reader’s Guide for 1925–28 (a considerably larger volume). Such a tabulation may give us a rough suggestion of the extent to which the general public knew about these men as individuals and were interested in their careers and personalities.
Clearly the road to financial and industrial power was not a road to wide personal renown—at least of the sort that is reflected in magazine articles—even in the nineteen-twenties. Ford, of course, was a shining exception to this rule; but Ford was clearly exceptional in other ways too. A financial maverick, he did not distribute the shares of his company, did not collaborate with the banking powers, eschewed Wall Street and all its ways; and he had a peculiar gift for dramatizing himself and his achievement. Some of the other men listed in the left-hand column of our table have been much publicized since 1929—but that goes only to show that a banker’s name does not become a household word in America until he is investigated.
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The men whom we see about us as we stand in the Wall Street of 1929 and survey the passing crowd are mostly well groomed, conservatively and impeccably tailored, pleasant-voiced, easy and courteous in address. There are, of course, rough diamonds among them, particularly among the playboys of the stock market, but it is doubtful if there are so many in 1929 as there were in 1905, and the dominant type is smoothly polished; even the go-getting Babbitt tends to straighten his necktie and lower his voice and adopt a more gracious demeanor in these patrician precints. Wall Street is a school of manners. Go into one of the luncheon clubs where the men of the Street gather and you will note with half an eye that most of them have the air of gentlemen. How does this happen, in a nation whose business men, according to the observations of generations of foreign commentators and to the strictures of the contemporary Menckens, have been among the most strident—if also the most kindly—members of the human race?
One explanation, of course, would be that the Wall Street standard, in dress and in deportment, is set by men of assured wealth and the social and cultural advantages which wealth can bring, and that the others imitate them. But there is perhap
s another explanation. There are fewer farmers’ sons, laborers’ sons, and ex-grocers’ boys in the Wall Street of 1929 than in that of 1905. As the population of the United States slackens its growth and frontier opportunities are cut off and the increasing size of the big corporations sets directors and executives farther apart from their armies of workers, it is becoming harder for young men to climb, as Rockefeller and Carnegie and Baker did, from the lower levels of fortune to the upper. The roaring stock market is making new fortunes every day—but only for those who have at least a little capital to begin with or a favorable position close to the insiders. The American people are slowly settling into economic strata; and the upper stratum of all—or at least that part of it which is represented in Wall Street—is tending in some degree to become self-perpetuating.
You may recall that in the third chapter of this book we found that of the ten financial leaders of 1905 whose careers we examined, only one had been to college. Of the ten financial and industrial leaders of 1929 whom we listed a moment ago, six had been to college. But suppose we examine a list, not of ten men of 1929 but of fifty (in order to secure a broader basis for generalization, not merely on this but on other points); that we limit it to New York men (in order to facilitate various later comparisons); and that we make it up chiefly of bankers and other financial leaders rather than of industrialists such as predominated in James W. Gerard’s list of “sixty-four rulers of America” (drawn up in 1930). This list of ours—including the ten senior Morgan partners in New York, six other private and investment bankers, eleven commercial bankers, and a scattering of insurance company heads, powerful private investors, brokers, market operators, industrialists, utility executives, etc., as indicated in the footnote on this page*—would make, of course, no pretence to include the fifty most powerful or influential men in the Wall Street of 1929, but it would be at least reasonably representative of the much-abused and much-feared influence of the Street, the temper of the financial leadership at the heart of the American system.
We find that of these fifty men, no less than forty had been to college or had had equivalent training. (Eleven of them had been to Harvard, five to the Massachusetts Institute of Technology, four to Yale, three to Amherst, three to Cornell, and the rest to scattered institutions—not, as it happened, including Princeton.) A very distinct change had taken place since 1905.
Incidentally, it is interesting to note that when, in 1932, Taussig and Joslyn published a study of the origins of 7351 “business leaders” of America—men who occupied important business positions throughout the country—they found that 45.3 per cent of these men had been to college. They also found that among the men in this big group who were connected with very large business concerns—the men who might be said to represent “big business”—the proportion who had been to college was considerably above 45.3 per cent; it was 53.8 per cent. If among our fifty representative Wall Street leaders the proportion ran as high as 80 per cent, the conclusion would seem to be inescapable: the higher one went in the scale of economic influence in the nineteen-twenties, the fewer graduates did one find of that traditional alma mater of the successful American business man, the school of hard knocks. For this fact the increasing prestige of the colleges was no doubt partly responsible. Yet presumably the sequence of cause and effect sometimes went the other way. Many a self-made man sent his sons to college not primarily to get an education but to “meet the right people.”
Many of the fifty men in our list had won their way to financial preeminence from beginnings which would hardly have suggested the promise of future Wall Street success. Owen D. Young, for example, had been brought up in the simple frugality of a farm in upper New York State. John J. Raskob was the son of a struggling cigar-maker in Lockport, New York, and began his business career at the age of nineteen as a five-dollar-a-week stenographer. (Just as Insull started on the road to success by becoming Edison’s secretary, so young Raskob profited by the lucky chance of becoming secretary to Pierre S. duPont.) Albert H. Wiggin’s father was a Unitarian clergyman in a Massachusetts town, and young Wiggin went to work as a bank clerk in Boston at the age of seventeen. Clarence Dillon’s father, born Samuel Lapowski, was a clothing merchant and small banker of San Antonio.
Yet there were other men in the group who might fairly be said to have been born to the financial deep purple: men like the Morgans, George F. Baker, Jr., John D. Rockefeller, Jr., Percy Rockefeller, Vincent Astor, or William Woodward. And as the sons of the privileged swarmed each year into downtown New York from the older universities, it was difficult to escape the conclusion that the number of those who owed their favorable positions at least partly to inherited advantage was growing. There was pretty surely a tendency toward the formation of a ruling financial caste.
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But this tendency had not as yet gone very far, as the instances of Owen Young and Raskob suggest, to say nothing of Insull and the Van Sweringens and Giannini. And the complexity of the economic class structure of America was accompanied and perhaps accentuated by a marked social complexity, nowhere more striking than in New York City itself, the metropolis whose centripetal force attracted financial talent and financial ambition from other cities and towns throughout the country.
New York had changed greatly since those early days of the twentieth century when there were no fifty-story skyscrapers, and automobiles were still playthings of the rich, and traffic policemen and traffic lights were unknown, and Central Park was gay of a spring afternoon with the victorias and barouches of the well-to-do, and the outlying clusters of population in Westchester and the New Jersey hills and on Long Island were still country villages. The social world in which prominent metropolitan financiers now found themselves had changed likewise. Society as Mrs. Astor had hopefully visioned it—a strict, self-contained group of men and women whose members all knew one another and took their aristocratic position seriously—had less of a semblance of reality than ever before; even the leadership of Mrs. Stuyvesant Fish, after Mrs. Astor’s death, had failed to maintain the precarious prestige of the inner group. The battle for social recognition still went on, of course; it will continue to go on so long as men and women still know envy and vanity and pride; in various other cities of the country there were still fairly definite barriers of caste which controlled admission to the Assemblies or the Cotillions of the fashionably assured, and there were large numbers of people to whom these barriers were important, reluctant though they might be to admit it; but in New York, the outlines of Society had become so faint as to be almost invisible except to those who insisted upon seeing them. It became a truism for members of the passing generation to say that Society no longer possessed accepted authority.
For this change there were many reasons. One was that the city had become too huge for its society to remain under the domination of any one group of mutual acquaintances. Not only had the population of New York increased from a scant four million in 1905 to a full six million in 1929, with an even sharper increase in the outlying suburbs of the metropolitan area; there had also been a vast growth in the number of New Yorkers of great wealth. According to the income tax returns for 1928, there were as many as 243 people in New York State with incomes of a million dollars a year or more; presumably the great majority of these people lived in the city or its environs. New York had become the new frontier, the land of promise which beckoned to rich and poor the country over. It is a characteristic fact that of our fifty financiers, not more than sixteen had been born in New York City or its immediate environs. (Of the others, twenty-one were born in the Eastern States; eleven came from the Middle West, West, or South; two were born in Germany.) Rare was a dinner-party of the prosperous at which a majority of the guests were native New Yorkers. Society was swamped by sheer numbers.
Another reason for the change in the social texture, perhaps, was the fashion—led by those who in the early nineteen-twenties had attracted the shocked attention of the country as the “younger generation
”—for carefree disregard of social conventions, for the cultivation of “amusing” people outside the almost-invisible social boundaries, for speakeasy life with its attendant social promiscuity.
Lords of Creation Page 35
