Democracy Faces Its Oldest Problem


By O. J. ARNOLD, President, Northwestern National Life Insurance Company and Vice-President, United States Chamber of Commerce

Before a Joint Meeting of the Cleveland Association of Life Underwriters and Cleveland Chamber of Commerce

Cleveland, Ohio, June 30, 1939

Vital Speeches of the Day, Vol. 5, pp. 632-38

ALL our recent history seems, to business men, to date back only to 1929. Occasionally some previous year is mentioned—crystallized and reduced to the form of a statistic. We speak of the 1914 dollar, the 1924 standard of living, or the 1928 level of production, but those years seem remote and even the statistics appear unreal and unreliable to use in the face of all the changes which have taken place since.

And yet all that we have seen both in world history and in our own domestic life in these recent years is not isolated history—insulated from what has gone before. And certainly it cannot be isolated from the events and fortunes of years to come. To the contrary, the history of these recent years marks only the recurrence in somewhat more violent form of an old conflict that fills all past history and will be with us tomorrow and tomorrow. That conflict, in the broadest sense, is the conflict of people for security—always present in the everyday life of men, always reflected in the intercourse of nations in the constant struggle of the "have" nations and the "have not" nations, and constantly at work within the political framework of each individual nation in the struggles of political factions and of classes.

After any great war, with its sad effects in heightening human misery and its destruction of the too small store of wealth possessed by any people, the intensity of this struggle— between the "haves" and "have nots"—is always increased. In Russia the war was at mid-point when the masses without property or substance, given opportunity in the fact that they were armed, arose and threw off the rule of the small minority of propertied people. In Italy and Germany postwar poverty steadily increased the "have not" element in the population. A growing restiveness among this oppressed class of people enabled small bands of so-called "strong men"— in reality hired political opportunists—to gain control of the government.

In our horror at reports of the injustices of government in these countries, we sometimes lose sight of the fact that these reports are only the current echoes of an old struggle that has been with us throughout history. In one country a dictatorial government has denied men the right to satisfy the urge, so great in all men, to own just enough material wealth to gain some small sense of personal security. In another country, government by force takes material wealth away from those the leaders consider unworthy to own it, and gives it to those they consider worthy. And in neither case does any man know from one day to the next whether he is secure or whether his substance will in the end be protected or confiscated by his government.

And in spite of all their claims of distributing wealth fully and of giving security to all men, neither of these systems of government will ever satisfy the longing in the hearts of men to have something of their very own which they may husband and protect.

John Steinbeck in his novel "The Grapes of Wrath" has, with bitterness but with great understanding, expressed this longing of men desperate to regain some substance of their own, in this passage which I quote:

"And such a man drove along the roads and knew temptation at every field, and knew the lust to take these fields and make them grow strength for his children and a little comfort for his wife. The temptation was before him always. The fields goaded him. . . ."

Any government which seeks to take to itself all land and all wealth and to say to men "You may not have anything for yourselves, you may not defend your own security, you may have security only as the government is able or willing to give it to you"—any government which follows such a policy does not reckon with this fundamental longing of men. And yet the collectivist governments, no matter of what kind, are moving pell-mell and always in the direction of making the state the supreme owner of all and the supreme dictator of all men's lives and security.

The founders of our democracy fully realized that this problem of the security of individuals and of classes was the central problem of government. The aim of democracy is to give all men an equal right and opportunity to attain some substance of their own, and thus to prevent the threat of revolution and the invitation to seizure of property that are present always in one degree or another under any other form of government. But in a democracy in which all classes of people—the "haves" and the "have nots"—may vote and have a hand in the government, it was recognized by the founding fathers that this very right to vote must necessarily endanger the right of men to their property. For in a democracy, if men of no personal security or no substance at any time outnumber the men of property and a degree of security —then inevitably chaos will follow and the very purposes of government will be destroyed in the ensuing struggle. In that fact lies the driving and impelling force of democracy— democracy to maintain itself must continue always to make more and more of its people secure.

Webster bluntly summarized this challenge to democracy. Speaking of the potential danger of a dominant poverty-stricken class in our population, he said: "Popular power (under such conditions) must break in upon the right of property, or else the influence of property must limit and control the exercise of popular power—the holders of estates will be obliged in such case, either in some way to restrain therights of suffrage, or else such rights of suffrage will ere long divide the property." And there, I submit, you have the problem of today in a nutshell—the problem which has driven one nation to Communism and others to Fascism at the cost, in either case, of the rights and liberties of a large portion of the people.

And let me quote you the words of Madison spoken in 1787: "Viewing the subject on its merits alone, the freeholders of the country (i. e., the property-holders) would be the safest depositories of republican liberty. In future times (mark these words well) a great majority of the people will not only be without land, but any other sort of property. These will either combine under the influences of their common situation (in which case the rights of property and the public liberty will not be secure in their hands), or, which is more probable, they will become the tools of opulence and ambition, in which case there will he equal danger on another side."

Make no mistake. This is not a remote problem to which I refer—-a bit of romantic history. It is a vast problem, and its vastness perhaps makes it seem remote to those of us who are busy with our workaday activities. Yet it is today a vital, living, daily problem of great moment to you and to me. Indeed, in the compass of the past twenty years, we have seen our democracy swing from one extreme to the other extreme predicted by Madison 150 years ago.

There is no gainsaying the fact that in the 1920's an irresponsible fringe of the propertied class in our democracy encouraged corruption in high places and countenanced a general disregard of the fundamental processes and responsibilities of a democracy. And when the reckoning came, they were found to have destroyed the savings and some measure of the security of large numbers of our citizens. And there is no gainsaying the fact that in the 1930's the other extreme has been a stark reality of our American scene—with men and women unemployed, embittered, hard pressed and disillusioned, desperate to the point of Madison's worst fears of the other alternative.

But America has always met these crises. Throughout the history of our American way of government and of life, there has been one great sustaining force that has acted as a bulwark against these extreme movements in which democracy threatens to accomplish its own destruction. And that bulwark has been the solid mass of enterprising, freedom loving, hard working, sympathetic, creative people who at any and all times in our history have made up the bulk of our body politic.

Although the founders of our democracy knew the importance of a strong, secure people, no one could foresee in those early days just how that powerful body of independent, secure and responsible citizenry would grow. History had thus far shown only the property owning class and property-less class, with little or no middle ground. The propertied class were the owners of industry or of estates. The other class were the laborers who worked in virtual slavery for the men of industry or the serfs who worked with even less freedom for men of estates. The make-up and framework of a dominant class somewhere between these extremes—a class that worked and produced its own security through savings, insurance and other material wealth—was not an historic reality;

But on the other hand, there were some things in which those men of 150 years ago had great faith—a greater faith than our leadership of today is able apparently to muster. They had great faith that a government committed to encouragement of the enterprise of a free people might— through the force and power and ingenuity of its people— prevent the growth of any permanent poverty-stricken class and thus give all its people a personal stake in their government And today the great middle class in America alonehave a stake in their government greater than the combined wealth of all nations 150 years ago. Such has been the justification of the faith of the founders of our democracy.

Now, I want to say with all the earnestness I can muster that the American people today need nothing so much as a great soul-stirring revival of that same faith.

We need to recognize that our own enterprise—and nothing but our enterprise—can make our democracy work in the long run. We need to recognize that the security and substance of our people is now, as always, the only safeguard of this democratic government. We need to recognize that less security and less substance can only feed the fires of the bitter and endless struggle that marks the history of men— the struggle between the "haves" and the "have nots." And we need only to look at the world around us to bring home the lesson that this struggle is swift, volcanic and dangerous in its consequences. Neither you nor I can tell—if its bitterness is spent—who will be secure and who will have lost all freedom and all security. Whenever government becomes less than a government of all the people, you may be sure only that it will be a government for and by a part of the people.

I have no intention to be pessimistic or an alarmist in what I am saying to you. I do not think that America has lost sight of these foundations of government. Indeed, there is much to encourage us today in demonstrated strength of American democracy. These things we know:

That in a great national election at the very depths of a long depression, the American people gave less than a handful of votes to the candidates of those parties which nominally are the advocates of destroying the right of property for the individual and giving that right only to an all-powerful state.

That the American people still rise literally as a body, with wrathful and scornful indignation when there is a public meeting of the uniformed puppets who would make America a dictatorship of the other variety.

That the American people have believed and voted and held steadfast to the principle that no American shall starve, even though they have differed over the machinery of relief.

That the American people rose against a then popular idol and stopped in its tracks a coterie of men who would have altered arbitrarily the fundamental system of balance in government which protects so well both the right of men to keep their substance and the right of men without substance to keep their freedom to seek and gain it.

That the will to toil honestly, to gain substance and security by their own hands, still is strong in the hearts of the vast majority of Americans; that the majority of idle do not want to be idle any more than a majority of business men want a return of the easy profits and fictitious values of the speculative orgy of 1929.

That in spite of an unquestioned increase in the bitterness of the struggle for security in recent years, and in spite of a vast amount of deliberate fomenting of class consciousness in high and low places, the American people still are dominantly a people of goodwill, of tolerance and of faith in the fruits of peaceful enterprise.

The knowledge of these important truths and facts inspires in all of us, I think, a mixed feeling of faith and doubt. Faith because the fundamental structure of our democracy is still sound. We have proved that we can take it. But doubt because we see that in spite of its fundamental strength of spirit, our democracy still lacks the health of body to protect it against the political, social and economic diseases abroad in the world. But it seems to me that if we can only sustain the spirit, and as a people move in keeping with that spirit to restore our economic strength, we will yet show to the whole distressed world the way to a restored faith in goodwill, tolerance and peaceful enterprise.

In keeping with this belief, I am going to venture a seriesof concrete suggestions. I sincerely hope none of you will feel that any single one of these suggestions is made in rancor or in bias or that it arises from a sense of partisanship.

If you will pardon what may appear to be a personal digression, I would like to say this; The executives of a life insurance company are in perhaps a unique position in our economic life. On the one hand, a life insurance man cannot but abhor those forces in industry, finance or government which jeopardize the savings or substance of the masses of people. For it is his task, through all conditions—whether 1929 or 1932 or 1939—to steer his course away from every danger and keep intact the people's substance entrusted to him. The security of 65 million people, bound up in contracts which would protect them in their old age and their loved ones throughout the hazards of life, is, I assure you, no light trust imposed upon our industry. I am fully aware of the fact that life insurance above anything else has been the means whereby the largest number of people in our country have attained some measure of security for themselves and their families. It is one of the devices an industrial society has developed to provide the security and sense of substance that was lacking to the industrial worker of a century ago. And I say that with full knowledge of the fact that life insurance is bought by people of property as well as by people without property. But I think it may interest business men to know that more than half of the ordinary life insurance policies purchased in the United States are bought by people with incomes of less than $1,500 a year. And that is ordinary life insurance and does not include the so-called industrial types of insurance or the whole field of group insurance, which is predominantly designed for industrial people. No life insurance man can think lightly of his responsibility to these millions of people to whom life insurance represents the substance of the property and security they own.

On the other hand, in the execution of the task entrusted to him, a life insurance man is dependent to a large extent on the world of business—of big business, if you will. When enterprise goes haywire, as it did in the 1920's, his task is made doubly difficult. When enterprise becomes stagnant and fearful, as it has for the last ten years, he has troubles of another kind but equally difficult.

In a period like the 1920s, his knowledge of investment markets and problems cannot but make him realize that his must be one safe anchor to the windward in a speculative storm. He realizes that his own care must be redoubled because others have become careless. And while he knows no more than anyone else when the time will come, he realizes it is inevitable that speculative values will one day be wiped out and along with them the savings of millions of people. In that day he must be ready to step into the breach.

In times like the past few years, he must be prepared to carry a tremendously increased burden—and I assure you it is a heavy one. In the decade ending in 1938 the total payments by life insurance companies to policyholders and their beneficiaries were two and a quarter times greater than in the preceding decade—and that does not take into account the tremendous increase in cash paid out in policy loans. Some sense of the magnitude of this burden is found in the fact that the New Deal's entire program of relief and work projects of all kinds from 1933 through 1938 paid out 12 billion, 800 million dollars; while in that same period life insurance in its regular operations in handling the savings of the people—and without creating any indebtedness—has poured into the national economy a total of 15 billion, 700 million dollars, exclusive, again, of policy loans, which averaged more than 3 billion dollars outstanding from 1933 through 1938.

In times like 1939, with a government policy of cheap money, rising taxation, and rapidly increasing public debt which forces a heavy investment in government securities and a drying up of private sources of investment, he finds itnecessary to wage a strong fight to keep the cost of insurance from rising beyond the reach of the large body of people whom insurance should serve—must serve—if the security of life insurance is to be kept as the vital source of strength which it is to our economic and political life. He has on the one hand a great stake in the security and strength of his government because he has invested heavily in it. And on the other hand, he finds scarcity of investment in private enterprise means unemployment for millions, a shrinking market, a marked increase in the difficulties his salesmen encounter, and hence higher sales and service costs.

And in such a position no life insurance man of responsibility can afford, from sheer bias or partisanship, to favor capital as against labor, business as against government, or a propertied or wealthy class as against that class whose hope of substance and security lies in the life insurance they own.

While the structure of life insurance is strong—and the life insurance companies can sustain loss of policyholders, loss of interest and even substantial losses in invested capital over a period of years—to a life insurance man the essence of good business and of safety for his company and its policyholders can best be found when security is on the increase, employment widespread, business happy and thriving, capital moving freely into creative enterprises, and security markets so sound and reliable that dangerous speculative activity constitutes a minimum threat for the present or for the future. While that is a wholly impractical picture of an ideal state of national being, to us who have been out of kilter so long, I trust it demonstrates the point I am making—that a responsible life insurance man has no particular reason to take sides to satisfy prejudice, passion or bias in matters of our national political economy.

I say, therefore, that these suggestions I shall make are to the best of my ability free from such bias. And in support of that fact, I am going to address myself first to the business man—to the men like yourselves in this room who make up the rank and file of business in this country.

First: Business men must foster and nourish at all times the growing sense of broad responsibility—of business trusteeship—that is one of the most encouraging signs to me in the entire national horizon. Business has no business being maudlin or sentimental, and I am not endeavoring to encourage such a spirit in business. But good business is fundamentally honest. The business community cannot afford to be greedy to the point of self-destruction. If not for ethical or sentimental reasons, then for practical, hard-boiled reasons business men must learn that safe business is decent business which recognizes its responsibilities—all of them.

Under the broad term of public relations, there has been rapidly growing in this country a wise and promising business sentiment. It has accepted as a fundamental rule the fact that public relations begin at home—that if your own employees do not think well and honorably of you, you cannot expect those with whom you want to do business to think well of you. While the ability to maintain peaceful and orderly labor relations seems in recent years to be beset with many problems apparently having little to do with the direct relationship between employer and employee, the strengthening of this fundamental relationship will ultimately be accomplished by labor leaders of fair minds and business men of fair minds—not by laws which straightjacket human relationships.

If public relations are to be sound, it is equally true that business must recognize its responsibility to the consumer. The theory of "let the buyer beware" can only be the rule of shortsighted men—hit-and-run business men or salesmen. And I want particularly to call the attention of salesmen to this principle. A healthy sense of responsibility for the buyer's welfare is not only good business but it is the foundation of good salesmanship that builds profitable, permanent markets.

Except for a very small minority, I do not believe business men have in the past disregarded these responsibilities to the worker and the consumer. All the bitterness of our national labor struggles cannot wipe out the simple fact that business has paid the bill and business has supplied the strength and creative brains in the past fifty years or so to multiply times the annual wage rate of labor and cut the hours of labor 30 per cent, while providing infinitely better working conditions, health conditions and opportunities for personal welfare. And all the record of profiteering and shoddy dealing in business cannot wipe out the fact that today's cheapest automobile on the market is a better automobile than the best that could be bought only a few years ago; and the tires on today's car will go 10 times farther, though they cost one-fourth as much as a tire did only 20 to 30 years ago. And I could multiply those facts endlessly in proof. Yet if the community of business has not disregarded these fundamentals, it has not always embraced them and consciously held them to be major objectives of the business program. Not until these objectives are so embraced and made a part of the lore and precept of business will we have our public relations on a plane where business may expect a respite from the constant efforts of legislators to make business over. You cannot legislate that sort of conviction into the minds of men, but until it is fixed in the minds of men legislators will give it a try.

Second: Business men must foster and nourish at all times the growing sense of the importance of progressive, forward-looking research to the health of the economic community. Ultimately, it is up to the world of business enterprise to bring forth the solutions to our domestic problem of economy. I need only cite the fact that all the efforts of government for many years have not dissolved one whit the problem of removing the barriers from our distributive machinery—a problem which the recent years of scarcity amid abundance have surely demonstrated is a vital problem. While I marvel at, and rejoice in the rapidly increasing facilities for industrial research designed to create and improve products of manufacture, I am somewhat less impressed with the too slow development of research into our distributive machinery. Make no mistake, this is a tremendous problem for which business must supply the solution in the long run, and I would like to see business do something more about it. Similarly, government experimentation and tinkering with our domestic farm problem over a period of many years has arrived at essentially nothing in the way of a solution. But I am inclined to believe that the recent efforts of business to solve the problem of absorption of farm surpluses, through new industrial uses, hold much promise as a real solution. Business should get behind this movement in a larger way. I truly believe that a sense of statesmanship on the part of business in recognizing these as practical problems for business to solve will pay vast returns to business in the long run. Moreover, I believe these and similar problems constitute the real frontiers of America today, and I would like to see a healthy rebirth of the pioneering spirit—ruthless though it may be— in an attack on these frontiers.

Third: Business men must feel the necessity for business to develop a far stronger spirit of self-reliance. Historically, ours has always been a government liberal with subsidies. And subsidies have their rightful place in the economy of a young nation. But there is always danger that a government committed to subsidies will go to seed in a government which rules by hand-outs. Business men normally decry government spending of the gift variety or even government subsidies or loans. But it is a hard thing for anyone to "look a gift horse in the mouth." And business men have all too much in recent years countenanced the practice of feeding at the trough of public money while preaching the inviolability of private

enterprise. That is a corruption of our national life which must cease. It will not be stopped by government, I assure you. Government constantly seeks power—it is never otherwise. And you may be sure that whether it be by subsidies, by loans or by direct gifts, the money you take from government other than money honestly earned is taken at the ultimate cost of some freedom in the direction of your affairs.

I might add that this injunction goes for all our people. It holds true for the farmer, who seals his corn at $.57 for the government agent, while he knows it will bring him only $.40 at the railroad a few miles away. It holds true for the business men of a community who look with horror on a rising public debt but who individually and through organizations petition the government to undertake all manner of local improvements in their own community. Indeed the very multiplicity of agencies and undertakings through which public money may be obtained today is a threat to our national character. And as I see it, business men should take the lead in resisting this threat. Let business regain a full and vigorous measure of self-reliance, borrow its money privately, build its advancement soundly and with full recognition of all the hazards of private risk—and the habit and example thus established may yet prevent the disaster of an all-powerful central government ruling states, cities and private enterprise alike through the power of financial controls.

Lastly, business men must sometime begin to spend more of their mental energies and forces in these constructive channels I have enumerated, and less in exhausting to their last possibilities the alarms and uncertainties of this uncertain period. It is true the cost of government to the average business has risen frightfully in recent years. Moreover, the widened sphere of government activity and the seemingly endless curiosity of government concerning management of business has increased administrative detail many times over for the average business man. These are things which make it difficult for business men to forget the activities of government and to focus their thoughts and energies in the constructive work of the business community. Yet in spite of all this, and without attempting to encourage business men to foolhardy optimism, I would in the same breath say to business men—unless we get this system of private enterprise of ours off dead center, all of the fears and alarms and bitterness and uncertainty which have marked the recent years for all of us will not grow better. They will grow worse. The unemployed millions can't supply the enterprise to put themselves back to work. In the last analysis, you are the ones who must do the job. The alternative is the increasing control of enterprise by a government which must of necessity curb the freedom of all economic groups—whether it be capital, labor or consumers. Face that issue squarely, and you will realize that there is a great issue at stake in the question of whether today's great need is to carp and decry or to work and make hay.

And having thus expressed myself without reserve to you men of business, may I in equal goodwill suggest what our great body of enterprising people—unemployed, employers and employees alike—should ask of government in this critical period of democratic history.

I would place first as a suggestion to government, state and national, that it cease in these critical times to feed fagots to the fire of class struggle and recognize that the crisis in our democracy today does not rest on what group or class shall be given greater power and what class less power in our affairs. I am in profound sympathy with the thought that a democratic government must watch over and protect all of its people. But I am likewise of the belief that no element in our society—except a corrupt element—should be harassed or accused by government. I cannot for the life of me see that we encourage sane and lasting progress in these greatmoral issues of our democracy by pitting class against class or embittering the elements of our society one against another. Nor can I see that these great moral issues are intricatelybound up in the immediate crisis of democracy today eventhough they are of vital importance to the ultimate strengthening of our democratic way of life. I feel certain that the ten or eleven million unemployed in our business communities would gladly trade a firm and secure job today for all of the progress in moral issues that has been made in the past ten years. In making that statement, I do not mean to discount in the slightest the validity of the spiritual and moral objectives of our government. But the immediate crisis of today is to get private enterprise off dead center and use its great force—the only force capable of doing the job—to renew the democratic march toward an ever growing body of secure people of substance in our democracy. For unless we move forward with vigor and soon, we may find to our deep regret that we have appropriated more for social reforms than we can afford to pay, in which case the reforms will surely be lost along with our business enterprise.

To support this suggestion, I need only quote the words of one of those men high in the inner councils of our present national administration. I quote:

"I have never belonged to the school of thought which holds that merely dividing up the present national income differently would provide a decent living for all. If new jobs arc to be provided, the national income must be increased. It is only by increasing the national income and increasing the number of people who receive their income through private wages, that we can hope to attain anything resembling security in America."

I would place second as a suggestion to government this statement: The attempt to stamp out evils and injustices and corrupt privilege in our national life warrants the hearty support of all people. If given the opportunity, there will be no more willing and vigorous supporters of this movement than that vast body of honest and trustworthy men of business and finance, who have as much or more at stake in the integrity of the business community than any other group of people. But to hurl threats at all business and to use legislative processes to place strictures on all business in an attempt to guard against the fringe of unscrupulous business simply will not work. Broad rules and regulations designed to cover all business are likely only to work hardships on some and create new opportunities for privilege and greed by others. What big business can take in its stride may destroy small business, or at least drive it to a "dog eat dog" existence, which hurts business, workers and consumer alike. The textile business and the automobile business and the insurance business are as unlike entities as you may well find in all creation. Sectional, national and local problems of business simply do not follow identical patterns. Shouldering business with a mounting framework of rigid laws will undoubtedly produce a new "regimented" or "planned" economy in this country. But it will not produce an economy of equal opportunity or greater business responsibility, either one.

And again I call to the support of this viewpoint the statement of another of the ablest authorities of the inner circle of our present national government. I quote:

"A fair criticism of the technique of the New Deal has been that it indulged in shotgun imposition of regulation without adequate definition of standards. The possibility of perversion of an agency like the Securities and Exchange Commission, for example, gives pause for thought."

As a third suggestion to government, may I point out a simple, practical economic principle. Venture capital is the "advance guard" of enterprise. It is the reconnoitering squad that moves ahead to determine whether the great body of enterprise itself may safely move forward to create more

wealth, more employment and more security for the people. As such, it has by natural selection become the keenest of perception, the most alert, and the most far-seeing of all branches of enterprise. It will not put out its head in foolhardy adventuresomeness when bullets are flying around. It will not go to work when the chances are not at least 50-50 in favor of coming back safely with a whole skin. It cannot be harassed or driven out into action. And those characteristics of venture capital are in themselves the finest safeguard our enterprise system possesses.

Recognizing this fact, I would suggest to government some essential principles to be considered in any and all efforts to stimulate this kind of capital, which must be the forerunner of any large increases in employment.

Venture capital is capital that takes a risk. It is not the normal kind of credit we think of when we talk of investing the savings or deposits of the public in well secured loans or bonds. The kind of capital needed today is capital that assumes partnership in business in the hope of substantial returns. It is capital that has only business brains and ability as its major security. It is capital, therefore, which cannot afford to venture forth when risks are so great that there is no lure or enticement in business partnership or promotion.

It is capital, moreover, which cannot be driven or harassed out of hiding. It can only be enticed out of hiding when there is sufficient certainty and confidence in the long time future to give some assurance of a return commensurate with the risks involved. A breathing spell is not enough; for it implies both too brief a period to let enterprise get on its feet and the promise of some new form of harassment when this breathing spell is spent.

Any attempt of government to harass this kind of capital into enterprise, therefore, carries with it an inherent danger. Since true venture capital will not be harassed into action, any attempt to force the development of new enterprise is likely only to force into the risk of new enterprise the savings and deposits of people whose savings do not belong there. While it is distressing to see idle money in the banks and in insurance companies of the country—a fact which the head of our national government has recently decried—it must be remembered that the function of savings institutions is to keep savings out of risky adventures in business. Surely 1929 is not so far behind us we can afford to lose sight of the fact that the savings of our people do not belong in the field of equities and participation in venturesome risks.

And by the same token, government has no business in this field—a field with which government seems currently to be flirting. There can only be the gravest of danger to the substance of our people in substituting political pull for private acumen as the basis of widespread enterprise loans, and that statement holds true whether certain enterprises be labeled "self-liquidating projects" or straight capital ventures. It holds good whether the money ventured be money from the public treasury or money backed by government guarantees of safety. The very suggestion that government must now enter this field carries inherent in it the thought that government will take risks with the people's money which the people themselves now refuse to take. And if the established criteria of men of sound judgment investing their own money are to be set aside by a government willing to speculate with the people's money, what criteria—I ask—will take their place? There can be only one answer—the criteria of political pull and expediency which, if applied to this field, will surely offer the greatest temptation to corruption and abuse in government our nation has ever faced.

From these essential principles I can deduce only two conclusions which will hold water with reference to the whole problem of venture capital needed to create new employment for men and dollars both. The first of these is to recognize

and accept the fact that venture capital is as astute in its field as government is astute in its field; that the absence of venture capital today is not due to sheer stubbornness but is directly traceable to the fact that venture capital feels too little confidence in the present state of affairs in our national economy.

And the second conclusion follows without recourse: The proper solution to the present problem lies not in attempting to force savings and deposits or the taxpayers' money into venturesome risks which private capital refuses to take, but in removing in so far as government is able the threats which keep enterprise capital at a standstill. To temporize with the problem at this late date while we experiment with schemes for forcing new ventures through government projects can only mean further delay in loosing the flood of private capital which is so critically needed today.

I could cite innumerable quotations of leaders in government to emphasize the importance at this juncture of stimulating venturesome capital. Many of you are familiar with such statements. But I want especially to call attention to this quotation which, I believe, bears directly on the views I have expressed:

"In my judgment, so far as there is a dearth of funds available for business and industry today, it is a dearth of risk or venturesome money and not a dearth of bank credit. . . . I suppose we should not be astonished when there results an attempt to have banks enter that field in order that someone may take up the burden. But here is an outpost which should be held. The risk sector of our economy is not a proper place for the employment of deposit money. The providing of adventuresome capital is a very necessary function but it is a job for the entrepreneur, not bankers."

As a fourth suggestion to government, may I offer the thought that 150 years of national life committed to the principle that our American government is a government designed to aid and encourage a system of private enterprise— industry, agriculture and commerce—should not be too lightly cast off. And you will notice I emphasize the words "aid and encourage."

No one in his right senses will deny that it is a function of government to police business. It is a rightful function of government to see that business conducts itself in the best interests of the whole community. No business man of repute, I believe, objects to the aims of business reforms undertaken in recent years or considers them an impossible burden on business, even though he may question many individual phases of the way in which these reforms are drawn up and applied. But business—and especially cautious enterprise capital—does fear these things as I see it: First, the apparently insistent urge of government to extend a heavy hand of bureaucratic control over business—ever and always motivated by a desire to master and subdue business and always presented in the guise of a weak argument that government must help business to maintain order in its own house. Second, the insistent urge of government to get a stake in business and thus to put business squarely up against subsidized competition or regulation of business by decree—forces against which private business cannot be expected to compete. Third, the apparently insistent desire of government to seize on private profits which must be the forerunner of new private enterprise and to distribute them in what government considers to be a sublime and beneficent manner. And none of these three things is in any way in keeping with the fundamental aims of a democracy committed to encouragement of private enterprise. Again I quote authority intimately connected with our national government:

"It is not surprising that business confidence has been affected by events of the past decade. Economic developmentsalone were sufficient to disturb the sleep of any business man. Add to that the revolutionary developments in other countries, add to that the legislative reforms and new government activities, and you have the reason why many people have lost their confidence. Old methods of doing things were changed—the old setting was replaced by a new one—new laws—new procedure—new precedent. Inconsistencies and conflicts were magnified."

Lastly, and in keeping with these suggestions enumerated above, may I venture that government can—without losing one whit of the stature it has attained in the objectives it is seeking, without removing one whit of the essential progress it has accomplished—do all the things suggested above. I do not propose a retreat of government. I propose a great forward step in government. Modification of existing laws— keeping their major objectives intact—will suffice to encourage business much. The start made in that direction has been most heartening to me as I know it has been to all of you. It would also encourage business and capital both if government would adopt a resolute decision to return to the Congress the powers which rightfully belong to it, thus proclaiming to all the end of emergency and the return to confidence in the future so vitally needed at this time. And above all, it would be most helpful at present if government adopted a fixed policy of encouraging enterprise to move forward, rather than attempting to tinker with the machinery of enterprise or substitute for it enterprise under government auspices.

I do not propose a policy of do nothing which government must and does abhor, but I do propose that everything done be first tested honestly and forthrightly against the practical question of whether it truly gives impetus to enterprise capital and enterprising men. Business would quickly do its part, I am sure, if government adhered to such a policy and prosecuted it as vigorously as government has prosecuted its program of reform. And again let me quote:

"If we study the question of confidence closely—not merely business confidence but confidence in general—we see at once it is a state of mind—a mode of behavior—a psychological condition affecting our conduct and actions. . . . The perils of a familiar world can be met with confidence, even though they may be far greater than the perils of a strange world. Habit and confidence make us unafraid and enable us to overcome the new difficulties that are the normal processes of a changing world."

In recent years the only habit men of business have been encouraged to acquire is the habit of thinking that tomorrow will certainly bring further changes and experiments—political, social and economic. That has been the only consistent promise of government for a period of several years. Given an equally consistent policy of encouragement of enterprise capital and enterprising business—adhered to without variation for an adequate period of time—and this elusive psychological element of confidence will quickly reappear.

Indeed I have great confidence that the dammed up energies of the American people, the inevitable surge of an enterprising country whose enterprise has been dormant for ten years, the rebirth of the spirit of self-reliance which has so long rested under the shadow of reliance on government for everything—these forces are at work today in spite of all that business and government both have done to discourage them in the past twenty years. In the trying times of the early nineteen thirties, the American people were bewildered. But the prolonged period of reflection afforded by the state of our national affairs in more recent years has brought about a growing unity of American thought and purpose. This unity arises in the belief that our Democracy must be preserved. And inherent in that belief is the conviction that ourenterprise must be encouraged. It is only to show these convictions are inescapable that I have taken the liberty of quoting these recent statements of men high in the New Deal. That they must be carried into action no man in public life can afford to deny.

The essential point I would like to emphasize is that I do not think it requires any elaborate or involved "program" of activity on the part of government or of business to release these forces. Nor is what I have said intended to be a plea for cooperation between business and government. If business in its sphere and government in its sphere will do each what it should and can do to remove barriers to the enterprise of capital and of men, we will need no elaborate programs or gestures to start enterprise on its way.

Hence, I have made no attempt to offer suggestions covering the whole field of business and government, but I have attempted to touch only on those actions and attitudes of both which might release the bonds of doubt which still hold our people in check. Industry has stored up in recent years new knowledge and new potential means of comfort and well being for the people. The unemployed have stored up the longing to go back to work and wages. Labor, unless I am mistaken in the feeling of the great body of laboring people, has stored up the desire for uninterrupted peace. Capital is straining to find new channels of employment. Only that subtle air of confidence is lacking. So if I may sum up in one thought my comments to business and government both, it is this: If you will today be guided by the knowledge that greater confidence and greater faith are the needs of the hour, the natural vigor and force of our American system will assert itself with a speed and power which will startle the most optimistic of us.

And now let me make one last suggestion to our people as a whole_to the intelligent leaders of our society in the pulpit, in cap and gown, in business, in the professions, and in government. The road we now travel toward an ideal society, when men will all be secure and all men will be unselfishly interested in the welfare of others, is a long and arduous road. It is not a road that will be traveled to its end in our generation, or the next, or the next. It is not a road that permits a sudden triumphant achievement of the "citadel of security and goodwill" which lies at its end. To assume as much—to indulge in earnest wishing for the perfect society—is only human. But some of the great disasters of all history, the blackest pages of suppression, brutality, and human meanness, have been written in those days in which the grand ideal was attempted in one great leap. We see the consequences of such efforts throughout the world today. The sad truth of all such efforts is that they lose greatly while perhaps winning little or not at all in terms of the sum of human history.

It behooves us as a people—and especially our leaders of thought—to recognize this fact. We must realize that the ideal society which we all crave cannot be seized upon forthwith and made ours, without first of all casting into eternity the reality of the society we now possess. If America were the darkest continent on earth and its people the least secure and happy, that would still be a great price to pay. But America today possesses the priceless reality of the most secure society and the most free society of all history; and if we would keep all that we now possess, we must rally to the defense of our American enterprise which has given security and freedom their strongest foothold on earth.