Economics and the Public Welfare. Benjamin M. Anderson

65. Governmental Coercion and the Value of Money 66. The Business Rally of 1935-37 and the Major Crisis of 1937 67. The Causes of the Crisis of 1937 68. The Stock Market Crash of 1937—A Major Cause of Business Crisis 69. A Verdict on the SEC 70. The Severe Depression, 1937-38, and the Mild Rally, 1938-39 71. The Turn in the Political Tide, 1938 72. International Political Relations in the Decade of the Thirties 73. The Effect of Government Economic Planning upon Employment and the Utilization of Our National Productive Powers 74. Alternative Explanations of the Great Depression of 1930-39 PART V: WORLD WAR II 75. The Outbreak of World War II 76. Our War Economic Policy [print edition page 8] 77. War Taxation and Expenditures 78. Government Borrowing in World War II 79. Price Fixing in World War II 80. Government Versus Private Financing of War Production in World War II 81. Lend-Lease, Bretton Woods, and the British Loan—England’s Postwar Position Index

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Foreword by Arthur Kemp

      “May you live in interesting times,” is said to be an ancient Chinese curse. Whether so to live is truly a curse may be debatable, but there is little doubt that Benjamin M. Anderson, Jr., did indeed live in very interesting times—his adult life spanned two world wars, a decade of unprecedented prosperity, a decade of equally unprecedented depression and deflation, culminating in a postwar period that provided the groundwork for the most prolonged period of inflation the United States, and the world, has ever seen. More than that, his chosen profession—that of economist—experienced during that time a major revolution, now generally called the “Keynesian revolution,” within that part of economics—monetary economics—which Anderson chose to make his own specialty.

      Benjamin M. Anderson, Jr. received his Ph.D. from Columbia University in 1911. His doctoral dissertation, entitled Social Value, was an expansion and elaboration of an earlier monograph bearing the same title for which he had received a Hart, Schaffner, and Marx prize of $400—a monetary reward far greater then than such a dollar amount conjures up in one’s mind today, to say nothing of the far more important prestige such an award carried with it at the time. Understandably, he turned first to employment in the academic world at Columbia University, which fitted well with his proclivities for intellectual pursuits. He served as assistant professor of economics at Harvard from 1914 to 1918, publishing in 1917 his best known theoretical work, The Value of Money, which has enjoyed several reprintings over the years.

      With the advantage of hindsight, it now seems clear that he was torn between the intellectual enjoyments of academic life on the one hand and, on the other, the excitement of participating in the day to day political and economic decisions of the financial world. In 1918 he became economist for the National Bank of Commerce and editor of its publication, Commerce Monthly. This lasted less than two years, until he was enticed away by

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      that prestigious institution, the Chase Manhattan Bank, where he remained until 1937 as chief economist and editor of the Chase Economic Bulletin. It is only fair to express the judgment that these were his most active years, observing and participating in decisions involving the most important of financial and banking problems, domestically and internationally. Although he never completely relinquished his connections with the financial community, he returned to academia in 1939 as professor of economics at the University of California at Los Angeles, where he remained until his death a decade later, in January 1949.

      As the subtitle of this volume indicates, Economics and the Public Welfare is an economic and financial history of the United States over a period of time in which the author was not only an astute observer of, but also a frequent participant in, important events. Unlike many volumes of memoirs, however, the main thrust of this book is toward not the simple recording of events but an integrating of those events with the underlying principles. Anderson was no shrinking violet, however, so far as his own opinions, advice, and participation in decisions are concerned. He certainly does not hesitate to quote extensively from his own writings, both published and unpublished, and he frequently emphasizes his own high-level connections. Clearly he possessed a place of importance and from it endeavored to employ his own superb understanding, not only of the American banking system, but those of the major European nations as well. In this history, Anderson touches upon practically every aspect of commercial banking and, in almost every instance, he takes a position that might be called, for lack of a better name, “sound banking principles,” which means he regarded the banking business as a regulated but private enterprise, not as an instrument for economic, social, and political experimentation by government. His views are, therefore, controversial.

      It is only fair, both to Anderson and to his present-day readers, that one should keep clearly in mind when, and for whom, it was written. His intended audience of American readers had not yet experienced the post-World War II inflation, or much of any other inflation for that matter. Rather, most of them had lived through the rather severe deflation of the thirties. Since the book’s publication in 1949, this nation has experienced an inflation completely unlike, either in intensity or duration, any of the three prior decades. Indeed, Anderson shows exceptional foresight in anticipating much of the ensuing inflationary onslaught. The reader should be cautious, however, in judging the numerical examples. Anderson intended them to shock the reader, to reinforce and emphasize the verbal argument. That they do not do so at the present time means only that the inflation we have experienced has so numbed our senses that nominal monetary comparisons involving interest rates, price levels, stock price indices, and exchange rates have been rendered almost meaningless.

      Most monetary economists would agree that the Keynesian “revolution”

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      has passed its peak; the revolution has been more or less successfully challenged by at least two counter-revolutions: one, that of the loosely labeled monetarist or Chicago school; the other, the equally