Review of the Book:

Farewell to Reform
by John Chamberlain

Mason Gaffney, Michael Hudson and Roger Sandilands

[Reprinted from October 2002 comments in response to the distribution of excerpts from Chamberlain's 1932 book, Farewell To Reform]

MASE GAFFNEY

Thanks for this, Ed. Chamberlain surveys the basic material well -- a good introduction to the subject, a kind of text, although somewhat tinged with gratuitous diversions. Sadly, though, he expresses the defeatism and sense of futility that came to characterize the movement in the 1930s, and he seriously understates its political influence, present and potential. Al Smith sponsored the NYC 10-year venture into uptaxing land and downtaxing buildings, then was Dem. candidate for U.S. President. Newton Baker was next in line for the Dem. Presidential nomination in 1932, if FDR had failed. (The very name "New Deal" was originally a play on his names, Newton Diehl Baker, although his idea of a new deal was different from Moley's.)

As for Chamberlain's apotheosis of Wm. G. Sumner and Herbert Spencer, nix! He should have read A Perplexed Philosopher.

BTW, The Freeman was not dormant from 1924-50. There was a brief revival 1930-32 or so, which Vesa Nelson told me of; and a longer one, 1937-43, featuring H.G. Brown, John Dewey, Francis Neilson, Frank Chodorov, and others. It's in the HGSSSNY Library, and mine, too.

Coincidentally I was briefly in Winnetka last weekend and stopped by the mansion of Henry Demarest Lloyd, whom Chamberlain ranks with or near George as a reformer. Lloyd was rich from marrying the boss's daughter at the Trib. Winnetkans have forgiven him his radicalism, it seems, having put his name on a park across Sheridan Road from the old pile of bricks, and also on its side-street. Lloyd had erected a statue, still there on the corner, showing a miserable poor man huddled on a bench, inscribed "Society does not owe every man a living, but a chance to earn one."

P.S. to my earlier response. The very title, "Farewell to Reform," symbolizes the defeatism that I deplore. Imagine writing that in 1932, with the nation crying Hello, Welcome! to massive reforms. If Chamberlain and others had been in there bending the reforms rightly, how much better they might have been. Instead, they let in others, like Moley at first, then Viner, who rather messed up, and then Rockefeller's guy, Beardsley Ruml, who turned the income tax into a payroll tax.

MICHAEL HUDSON

Mason, how the hell did Viner get in there?

Am I making a mistake by thinking of the U/Chicago Jacob Viner who wrote the ultra-free-enterprise history of trade theory? (My own history was colloquially referred to as the "anti-Viner" book.)

I wish you or someone else would elaborate on Moley. I think I've done him in in my 2nd ed. of Super Imperialism to be published next month in London by Pluto. No American did more to bring on World War II, as was widely recognized at the time.

Yet another Colombia University guy . . .

Got to know the Lloyds fairly well in Chicago, as my friend Gavin was dating their daughter. By the time I knew them in the early 1950s they were sponsoring Quaker meetings. They sent me around to debate Stalinists at the internationalist weekends they held.

What I remember is that I'd never seen a mouth so pulled down at the corners. It showed me what Protestantism meant as a psychological profile. I never heard any hard economic or political thought, just a mild sympathy with the underdog.

MASE GAFFNEY

Roger Sandilands' research on Lauchlin Currie includes the observation that Viner, in 1934, brought Currie, Harry D. White, and Alan Sweezy to Washington, where he headed a kind of brain trust. According to his Palgrave bio., Viner was not the hyper-libertarian one now associates with Chicago - Viner favored deficit finance, at least in 1934; discretionary monetary policy; anti-monopoly policy; and greater social equity. His early work anticipated the theory of monopolistic competition, which Knight et al. rejected.

I was surprised to read in Roger's work that Viner's group was called the brain trust, a name associated with Moley's Columbia Univ. group from 1933 (although that was "The Brains Trust" originally). Moley gave us the AAA and the NRA, applications of Quadrigesimo Anno, the 1931 encyclical replicating Rerum Novarum which Fr. Charles Coughlin was popularizing. I wrote Roger of my surprise, and he replied that he had not been aware of Moley's role. Possibly, in Roger's focus on Currie and Allyn Young, Moley escaped his purview. Anyway, he is cc'd above, and may want to comment.

As for Moley, I now have extensive notes on him, and look forward to elaborating sometime. I'll send you the notes. I attach Roger's article on Currie.

ROGER SANDILANDS

Re Viner, he collected together a so-called "freshman brain trust" at the Treasury in 1934 where he was a special adviser to Morgenthau. Currie's role was to write "a most perfect banking system for the United States" with no regard to political feasibility. He advocated 100% reserves, to separate the business of banking (administering the means of payment) from the business of financial intermediation (transferring genuine savings).

His work led to the 1935 Banking Act which established a proper central bank for the US for the first time, with greater powers to control the money supply.

Regarding Viner and deficit finance, I am attaching an article I recently completed with David Laidler (see current issue of History of Political Economy). It concerns a recently unearthed January 1932 Harvard Memorandum written by Lauchlin Currie, Harry Dexter White, and P T Ellsworth. It anticipates what later became known as the "unique" Chicago approach to the depression. Milton Friedman recently conceded that this Memorandum shows that Chicago was not so unique. The work coming out of Harvard by its junior faculty (largely inspired by the recently deceased Allyn Young, and also reflecting Ralph Hawtrey's views) was in many ways superior.

I returned last night from a 3-week lecture tour of 6 universities in Colombia, culminating in a big conference in Bogota last Friday to commemorate Currie's centenary (he was born on Oct 8, 1902). I made a strong plea there that Colombia not repeat the dreadful mistakes of the early 1930s when Hoover tried to restore confidence by trying to balance the budget at a time when depressed incomes were depressing tax revenues. About 4 years ago they dismantled the indexed housing finance system that Currie created in 1972, with predictable results: paralysis of the construction (and related) sectors and 18% urban unemployment (not counting underemployment, nor the widespread disguised unemployment in agriculture). The IMF urges the government to cut the resultant fiscal deficit as a condition for more foreign loans, and this is what they are doing...

Separately, I will send the recent entry on Currie in the American National Biography (by me).

MICHAEL HUDSON

Dear Mason,

Well, you've told me something I don't know. I only know Viner from the trade-theory field, where he censored out everything he didn't believe fit the free-trade canon. I don't remember his trade theory endorsing deficit financing.

I would love to have your notes on Moley. I've taken extensive notes on his two published volumes on his work in Roosevelt's administration. I know that you don't think much of the "Land and its Rent" book he did for Lincoln, and would like to see your critique.