American Finance and Business in Khaki
THE TIME TO TALK CONSTRUCTIVELY TO THE PUBLIC IS NOW
By MERRYLE STANLEY RUKEYSER
At Mid-Winter Meeting of the Ohio Bankers Association, Columbus, Ohio, February 12, 1942
Vital Speeches of the Day, Vol. VII, pp. 348-352.
I AM glad you were able to stay, Governor Bricker, because I never like to attack a public man when he isn't present. Happily today I don't have to perform that job because I say with all sincerity that it has been a matter of inspiration to many of us in other commonwealths to know that you have in Ohio a chief executive who has found a way to succeed in politics while at the same time remaining faithful to simple arithmetic.
It is a great matter of discipline and inspiration to all of us to know that you have a chief executive in Ohio, a man who doesn't find that a state surplus burns a hole in his pocket. Don't just applaud him here in front of his face; go out on the street corners where that doctrine isn't so much appreciated and fight for that principle because, as our great President once said, more democracies are wrecked on the rocks of fiscal ineptitude than in any other way.
I have been very much impressed with the streamlined meeting that your Ohio Bankers' Association holds at its midwinter conference, selecting a holiday and crowding it into a few hours. I think that is a good example for all of the other banking associations of the nation and for all the other business conventions of the nation. Why, we can end the job of licking the Japs and the Germans and the Italians by at least a month if we conserve on the time of bankers and business executives and men who can be more productive than sitting around at protracted wartime sessions of hot air.
I want to say a few words to you today about the opportunities that you men in finance have to be of service to your nation at this very critical time. As I see it, bankers are intelligent centers in their communities and they are privileged to take an overall view of their local economy to see not only the problems of one business, but the interrelations of all business, and as such they are in better position than the individual businessman to interpret the effect of putting the national economy in khaki on individual enterprises and they can render a great patriotic service by preparing their townsmen for the inevitable and getting them ready for the bumps so that they are not taken by surprise. And that involvessome foresight, some intelligent reading of regulations coming from the center of our government at Washington and some ability to foresee the sequence of events which are inevitable.
I have just come from Washington. I didn't get any great reasons for optimism in my short visit. One of the things I wanted to check up on was whether they were going to drive the parasites from Washington and I found that they were only thinking of the parasites who didn't belong in their camp.
Now I am very much annoyed when I hear outsiders come before bankers and businessmen and tell them, Number One, there is a war; Number Two, that they have a patriotic obligation. Why, gentlemen, I regard you as intelligence centers of your communities and I would be insulting you to point out those obvious things. You know best of all that we are strengthened in this great war conflict to the extent that we are united, that we are strong to the extent that we are productive and that we will be productive to the extent that we are harmonious.
Now this isn't one clique's war; it isn't one political party's war; it isn't a war of one wing, of one political party. You and I and our children will have to pay the price for victory or defeat, so it is our war. Fortuitously, an accidental circumstance, unhappy at the time—the Japanese sneak attack on Pearl Harbor—handed us a secret weapon in the form of national unity to a greater extent than has prevailed for many years.
Now we have this national unity, but I am interested in examining it, in looking at the factors that limit it, in looking at some of the factors that make it permanent, because we don't want a national unity based on a sheer accident; we want a harmony based on an intelligent understanding of all groups that that is the road to victory in the war and to progress in peace.
Now, gentlemen, we weren't entirely united before Pearl Harbor. To speak with candor, there was, particularly in the banking and business fraternity, some mental reservation about the wisdom of the economic philosophy of some of our leaders. I don't think we ought now in the midst of a two-ocean war against very hard-boiled enemies to weaken ourselves with internal debate and with discussion of controversial issues. On the contrary, I seriously propose that we try to freeze existing relationships for the duration and to postpone for the duration all avoidable domestic controversies.
As a symbol that this type of cooperation will be a two-way street, not a one-way street, I think that our leadership at Washington could render a tremendous service to itself and to the nation in this matter of continuing this fortuitous harmony by making a pledge to the people here and now that these necessary emergency wartime interferences with the freedom of consumers and of businessmen and bankers will be demobilized within a few months after victory has been won.
But it is not enough to have a commitment, as important as that is. lt is important also to have an intelligent public opinion which will implement the carrying out of that commitment because in the last war Woodrow Wilson foresaw that necessity and he did put a time limit on these emergency apparatuses that he set up in World War Number One, but after the Armistice had been signed some men had become accustomed to these economic crutches and had developed vested interests in them and had found it rather profitable to proceed in a cartel spirit and some men of various groups wrote the President letters and sent him tele-
grams and cables urging him not to demobilize these bureaus and commissions and agencies until after the post-war readjustment had been accomplished. He called in his advisers, discussed it with them, and they unanimously said to him, "Mr. President, if you fail to take advantage of this psychological moment for getting rid of this regimentation, these instrumentalities may be fastened on us forever." And he did get rid of them. And, though we had, after the post-armistice boom of 1919 and early 1920 when the pent-up demand for durable goods resulted in a boom, in the depression of 1920-21, a severe jolt, we were able to take it and go through it and retain our American way of life; and if we had similar assurances now and a similar determination to carry them out, then the responsible men in business and in banking, whose unqualified cooperation is essential to winning this great battle of production, would be more enthusiastic, more without reservation. Let's be candid. We want beyond all else to win this war against the Axis—there is no debate about that. We don't want our property rights or our human rights or our civil rights to be subject to Japanese overlords or Nazi overlords or Fascist overlords—we are united on that. But at the same time, in order to meet the competition to the fullest and to exert on the field of battle and in the air and on the seas the full strength of a united nation, we want to release the genius of American industry, the inventiveness of the American people, the full and unqualified support of thinking men in banking and finance, and in order to do that we need to give some assurances thatafter we win the war we won't lose the peace. Now I am not interested at this stage in making a plea for fairer treatment of business executives or banking people. I think we are in too serious a situation to be bothered with those comparatively trivial matters. I am interested in setting free the business executive to do this job of production because we, the American people, need these men. After this tooling up period, which was so tediously slow, we have already got at least a trickle of production of armaments of every kind and the problem now is a management job of converting the trickle into a flood tide. In order to do this job we need to set business and financial management free to do it and I say that any political pap as usual, any visionary reforms as usual which detract these men from this management job of accelerating production is contrary to the national interest.
I ask this relief from distractions and sideshows, not as a courtesy to businessmen or bankers or investors or owners, but in the interests of 130 million people who are in a life-and-death struggle and who can't afford to toy with their intellectual and human tools—with their leaders on the management side who are the intellectual bottleneck and who will determine whether we shall have the military goods at the place we need them and on time.
Now what have I in mind when I say set these men free to do their job? I have in mind recognizing that, while there cannot be business as usual during the war, neither can there be political pap as usual, neither can there be visionary political experimentation as usual or controversial law-enforcement as usual.
Let me be specific, let me give you a bill of particulars so you will know what is going through my mind. With the news coming from the Pacific, it is clear to all of us that we need planes and many planes and need them as fast as human ingenuity can turn them out. Well now, the Curtiss-Wright plant is producing pursuit planes and in reasonable quantities. Forgetting Pearl Harbor, the examiner of the National Labor Relations Board a fortnight or so ago issued a reportto the Labor Board suggesting that the present union in one of the Curtiss-Wright plants was not the type of union that he thought ideally suited to the purposes. Well, let's concede for the sake of argument that he is right and that a different type of union, from a long-term standpoint, would be very much better. I say that in face of the present crises we can postpone that matter of reorganization of the internal labor relation affairs of that plant because that plant is a tool for victory, that plant is busily engaged now turning out these necessary planes and that this is no time for either a tea party or for a protracted election to re-establish and change labor relations. As long as the tool is functioning I say we should use it now, and after we have produced the planes and won the war, then let us experiment with more beautiful and more ideally created labor unions.
Now, in the second place, businessmen since 1890 have learned how to live under the anti-trust laws; whether the net result of the legislation has promoted production or retarded it is beside the point, but they learned how to live under it. Now we have in the Attorney General's office of the United States a very literary gentlemen, Mr. Thurman Arnold, author of "The Folklore of Capitalism." He is probably the most entertaining prosecutor we have ever had in Washington, and, as a paragrapher and editorial writer I am very much indebted to him because there is never a dull moment while he is functioning. But I say to you in all seriousness that Mr. Thurman Arnold has evolved a new i philosophy of enforcement of the Sherman Act; it is a different one than prevailed among his predecessors. Let's concede for the sake or argument that it is a better theory, but I say that too is a type of internal problem that we can freeze for the present and postpone until after we have succeeded in beating the Japs, the Germans and the Italians, because it is a terrific distraction of executive talent to keep them in the jitters now as to whether they will be criminally indicted or civilly prosecuted because someone has a different interpretation of the Sherman Act than his predecessors had, and I say particularly at this time when Donald M. Nelson as generalissimo of production is trying to pool the tools and the resources of heavy industries in order to cut red tape and to accelerate production of necessary war materials, that it is an absurdity amidst that effort to have enforcement as usual of the anti-trust laws which forbids that type of collaboration among competitors and I say that for the duration, at least as far as more industries are concerned, the Sherman Act should be suspended and certainly Thurman Arnold's new formulas of interpretation should be frozen and suspended until after victory has been won.
Now, Number Three in this bill of particulars. I have recently gone from coast to coast examining at first-hand our war industries, our armament plans, our conversion plans, and I have been encouraged in some places; as industrial management gets its teeth into this problem, we are going to have a surprisingly rapid acceleration of production. The tooling up period was distressingly slow, but we are essentially tooled-up now and we are giving management a chance to exercise its great genius for mass production in which we excel all the world so that in this coming stage if we give these men an opportunity to do their stuff, we are going to be amazed at the rapidity and quality of American production of lethal weapons. But there are going to be several bottlenecks.
One of the bottlenecks in these industrial centers will be the availability of power, and that is basic to all production, war and peace production. They are already thinking in some industrial centers in which I visited of rationingpower, they have already done it in the South, of course, in some sections. They are going to restrict outdoor signs, if necessary; they are going to make voluntary appeals to the households to cut down on their use of current. Many of the utility managements have foreseen this expansion in the demand for power and have an order on new turbines and other equipment, but it is almost the general experience, city by city, that some of these pieces of heavy equipment which are on order are going to be greatly delayed because, especially since Pearl Harbor, the heavy industries producing such items have quite properly given first priority to the immediate needs of the Navy.
So I say that we are going to have a crisis in the quantity of power available and in those circumstances with equipment short and with turbines on order instead of on hand, we should in our own interest release the full genius of electric utility management to find ways and means through better technology and greater efficiency to spread the availability of the power generating units that we have on hand, and in this great crisis I say that we should not distract the attention of these executives by going ahead with long-term plans such as that which the S.E.C. is now administering for disentangling the public utility empires and relocating local properties. Let's concede for the sake of argument that it would be an excellent thing from a long-term peacetime standpoint to unscramble the public utility egg, I am inclined to think it would be, but I say that too is the type of thing that we can postpone now until after we have defeated the Japs, the Germans and the Italians, because it distracts the attention of utility executives, takes them to Washington, involves them in hearings and discussions with lawyers when they should be devoting their full time and effort to making the available supplies of power do the utmost job for victory.
And so on through the line, take the matter of taxation. In the matter of taxation, industry and finance and the American people are going to have the most onerous load ever visualized in any country in history. We are not only going to pay for our own war effort, but we are going to be very generous to our associates. So I say that in view of this inevitable heavy load it behooves us to put our heads together and devise the most scientific, the most equitable, the most non-demagogic tax bill that the human mind can conceive. I say in these circumstances there is no time for demagogy as usual in the tax law. We ought to concentrate on a revenue-producing tax bill, and that is not only true of the new legislation but is equally true of the enforcement rules in the Internal Revenue Bureau.
Let me illustrate what I have in mind. Our whole war effort, our whole war production is contingent on the availability of certain scarce items from the mines of the nation, copper, nickel, lead, tin and others. We don't produce any tin at home, but we do produce the other items. Under our present arbitrary tax depletion rulings, it is not to the interest of any company to go and mine immediately the richest veins. On the contrary, it is ordinary prudence to mine some of the less available, less satisfactory veins. But in war time, with the enemy striking at our outlying possessions and threatening our own shores, this is no time for that type of thing. In the interests of accelerating the production of scarce items which are essential to the war program, the Internal Revenue Bureau should summon to Washington the treasurers of these great mining corporations and sit around a round table and say, "Now what can we do tax-wise that will accelerate production?"
When we do this, then we shall know the meaning ofgenuine national unity. When we do these things we will be beyond nominal harmony; we will then be on the road toward exerting our full strength in this great war crisis.
And in the competition against the Axis powers, let's not underestimate their ability to hit hard. In business it is our custom to view the competitor objectively, to see his strong and his weak points and act accordingly. I think Providence is on our side and I think Providence in the long run may be the determining factor, but I say let's give Providence a helping hand by making sure that we outproduce the Axis. I believe we can do it if we recognize the talents inherent in American industry and finance.
I emphasize this point because in the last nine years or so some of our leadership has corrupted its own thinking about industry and finance. In thinking that the businessman was a racketeer and that the financier was merely an undesirable money changer, we have somewhat corrupted our capacity to think about economic matters and I am afraid also our capacity to govern. So that in the interests of a full exertion of the entire strength of the American nation, it seems to me that the Number One job is to begin to think straight, and then if we think straight we will begin to think in elementary terms about the process of producing and exchanging goods and we will know that our great American standards of living, which have exceeded those of any other nation in the world, have not been the result of accident or natural phenomena, that on the contrary they have been the consequences of intelligent leadership and foresight. We exceed all other nations in supporting the human muscle with added units of horsepower and our Americans have earned more because with the help of electricity and other power they have been able to produce more and the businessman who has been kicked around for eight or nine years or more has been a useful citizen because he linked his efforts with those of science and invention and engineering and he gave us the practical blueprint for achieving our human aims toward a better sociological level.
Now if we are going to use these tools, these human tools, these mechanical tools in war time we have got to think straight about these matters. We can't afford the luxury in war time of our peace time illusions, Marxian half-truths and misconceptions about the economic process because men in government are now virtually in the position of business management themselves. The Federal Government has become the Number One buyer of all goods and services produced, and they are very much now in the same position as the executive manager was himself a few years ago.
Specifically, in February 1942, with the Japs hammering at our outlying possessions, and those of our close associates in the war, no one in responsibility in our Federal Government would be in a mood today to condone—let's say—the sitdown strikes against which their opposition was somewhat tepid five years ago.
Now in this transformation that is taking place, great changes are going to be effected in your lives and in mine, in your daily operations in the bank and in mine, and unless we foresee what is coming and begin to adjust ourselves to the inevitable, we ourselves may be on the economic casualty list.
In order to finance this tremendous, this gigantic war program which the President has announced to Congress, in order to do that, we won't, in that great political scientist Goering's phrase, be able to have a full quota of butter as well as guns. In order to achieve that Fifty-odd Billion Dollar defense program which the President spoke of, we aregoing to have a tremendous industrial shift, a shift away from the products which civilians desired and used to products that the government must have in order to attain victory. That is going to have a tremendous effect on the flow of business in the United States and is already having a great influence. It means, for one thing, that there will be a shift of production from advertisable and merchandisable items sold to individual civilians to non-advertisable and non-merchandisable items sold directly to the Federal Government and that will have an effect on the welfare of newspapers, magazines, radios and other agencies which are engaged in this process of enabling business to reach the mentality and the emotions of their customers.
On the side of banking and the lending operations of banks, you have got to make up your mind which trades and industries are going on the economic casualty list and which ones are going to endure throughout the war. This is no matter of theory. We have already seen the civilian automobile industry completely knocked out, and, although these automobile manufacturers will shift to war work and will keep going, it by no means follows that their associated distributorships and dealerships and service agencies will also survive this war period. So that in judging the credit standard of a would-be borrower, it is not enough for you to look at his past record; you have also got to make up your mind whether or not he is going to be on the new prescribed list because, though he may be willing to pay, his ability may be affected by decisions made at some remote places. The killing off of industries by the new business morticians at Washington is not yet over.
I had an opportunity yesterday to visit some of these business undertakers at the O.P.A. and the W.P.B., and I can tell you, my friends, that others are on the list, radio for civilians, many electrical appliances for civilians, and whereas there won't be complete knockouts of other industries, such as perhaps sewing machines and typewriters, there will be a very radical reduction in their production programs. And I am not saying that that is a bad thing; it is essential to the winning of the war that we should stop producing those things which in peace time our people like and desire and want to buy, and that we concentrate in this war period on lethal weapons, which will produce the new objective, which is not the more abundant life for our people, but rather to produce some dead Japanese, Germans and Italians.
But from the standpoint of your operating problems, my friends, unless you are able to recognize in your loans and in your discounts and in your other decisions that we are living in a highly abnormal period, you may not be fulfilling your full trusteeship in a period such as we are going through, because, though the soap box orators can say to you, "Hoopla, join the parade," you still have some obligation to your depositors, you still have some obligations to your stockholders and to yourselves, and you know that, unless your receipts equal or exceed your expenditures, your franchise to remain in business will be terminated.
And if you are going to stay in business, then you have got to view these problems realistically and if you think that business or banking are too far removed from the main stream, then it is your privilege and it is your opportunity to enlist in the armed forces and get nearer the front; but if you stay in the background, then you have an obligation to study the realities and to act accordingly, always giving first consideration to the national needs.
Now in this period through which we are passing we see many divergent trends, we see industry unusually busy andemployment in many places rising. But there is no uniformity of trend because in some of these priority-destroyed industries, instead of increasing employment, there is unemployment and thus we see deflation taking place concurrently with inflation and in these times when hysteria is just around the corner, it is the time for the banker as the leader in his community to know the facts and keep calm, even midst the bombings if they should come, and to avoid participating in what I call siren economics.
We saw some of that in New York a few days after Pearl Harbor when the sirens blew, giving the impression that there was an air raid, which there wasn't; people began to sell without rhyme or reason; they had no theory about the future, no philosophy about the future. They concurrently and simultaneously sold high-grade bonds, commodities and common stocks, not realizing that on one theory of what was coming certain commodities and possibly even stocks should be attractive, whereas on a reverse theory high-grade bonds would be attractive, but concurrently they were selling everything. That is what I call siren economics in which you judge economic values with your middle brain and let your higher intelligence rest.
The banker can't afford that. He is to be the leader in his community; he is the one who must know the facts so well that he can tell his friends and his associates to keep their shirts on, and if the banker and the businessman show some intelligent understanding of what the average civilian is likely to go through, he will make lasting friendships for our enterprise system, because at a time when the civilian of necessity must pull in his belt and make sacrifices it behooves the businessman and banker to show some sympathetic understanding of the nature of this man's problems. Very few others are looking at the civilian's problems. On the contrary, they are saying to him, "Buy defense bonds, pay taxes, contribute to all these agencies, keep your family going." But nobody is saying to him with what. And the businessman who recognizes that the Number One problem of the consumer is going to be handling his own personal budget this year will strike a sympathetic note. I don't care what solution he proposes, whether it is going from the corner store with a high mark-up to the chain store or whether it is trading down from merchant tailor suits to mass production suits, but the businessman and the financier who knows that the civilian has a problem in war time and who gives him sympathetic guidance and advice will be making friends not only for himself and his bank or his business institution, but also for the enterprise system, because the time to retain customer loyalty is during a seller's market when the free and easy way is to be impolite and discourteous to your customers and to say, as they do on some of the railroads, "Well, you are damn lucky to get an upper berth." The time to retain consumer loyalty is in a seller's market because you don't have much competition in being courteous in those times and if you are thoughtful about the enterprise system during this critical period and if you are a friend in need for the consumer, you will be contributing to building up both an emotional attitude and an objective understanding by the public of the nature of the enterprise system.
And when after victory comes, when the great post-war emotional crisis emerges and when there is a clamor on the part of men then put out of employment when armament-making ceases to run these government plants, to make anything in them just to give jobs, that will be the great postwar crisis when the future of the free enterprise system will be decided. If we have an understanding of the values of enterprise, the value in terms of liberty for thirty millionAmerican families, then we will have a chance to win that fight, and if we go into that crisis with a lot of creative ideas on the part of enterprises and financiers for making new products, for cheapening old products and for employing men in useful private jobs, then we will have a chance to win that battle and the time to be thinking about it is now. While giving first consideration to winning the war, we should be giving second thought to making clearer to the public, to our employees, to our customers, to the general public, the nature of the enterprise system, why it is tied in with human liberty and religious liberty and civil liberty and why, when it goes out the window our civil and religious rights go with it. The European experience demonstrates that the time to talk constructively to the public is now when they are rather fully employed and when they are not in a hostile mood. If you wait until after the crisis comes, when men are again trudging the streets unemployed, then it will be too late for finance and business to tell its story, for anything it says then will be regarded as purely defensive.
So that I say that the measure of the crisis is also a measure of the opportunity for service and that he also serves and helps to win the war who sticks to his last and becomes a little bit more productive. The great need in this hour of crisis is not merely the appearance of being helpful, but lots of quiet, undramatic people who stick to their jobs and do their jobs a little more effectively, and if we are in that mood I have no doubt that we will be able to ultimately defeat the slave labor of Asia and Europe.