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No. 53 "Which Road To Take?" Speech of J. Howard Pew, President of the Sun Oil Company, July 12, 1935. American Liberty League. 400dpi TIFF G4 page images Digital Library Services, University of Kentucky Libraries Lexington, Kentucky Am_Lib_Leag_53 These pages may freely searched and displayed. Permission must be received for subsequent distribution in print or electronically. No. 53 "Which Road To Take?" Speech of J. Howard Pew, President of the Sun Oil Company, July 12, 1935. American Liberty League. American Liberty League. Washington, D.C. 1935. This electronic text file was created by Optical Character Recognition (OCR). No corrections have been made to the OCR-ed text and no editing has been done to the content of the original document. Encoding has been done through an automated process using the recommendations for Level 1 of the TEI in Libraries Guidelines. Digital page images are linked to the text file. Pamphlets Available â˜… Copies of the following pamphlets and other League literature may be obtained upon application to the League's national headquarters: Statement of Principles and Purposes American Liberty League Its Platform An Analysis of the President's Budget Message Analysis of the $4,880,000,000 Emergency Relief Appropriation Act Economic Security The Bonus Inflation The Thirty Hour Week The Pending Banking Bill The Holding Company Bill Where Are We Going ? Speech by James W. Wadsworth Price Control Yesterday, Today and Tomorrow The Labor Relations Bill How Inflation Affects the Average Family Speech by Dr. Ray Bert Westerfield Political Banking Speech by Dr. Walter E. Spahr The Bituminous Coal Bill Regimenting the Farmers Speech by Dr. G. W. Dyer Extension of the NRA Human Rights and the Constitution Speech by R. E. Desvernine The Farmers' Home Bill The TVA Amendments The New Deal, Its Unsound Theories and Irreconcilable Policies Speech by Ralph M. Shaw Is the Constitution for Sale? Speech by Capt. William H. Stayton How to Meet the Issue Speech by William E. Borah The Supreme Court and the New Deal The Duty of the Church to the Social Order Speech by S. Wells Utley An Open Letter to the President By Dr. Neil Carothers The Revised AAA Amendments The Return to Democracy Speech by Jouett Shouse The President's Tax Program The American Bar The Trustee of American Institutions Speech by Albert C. Ritchie Fabian Socialism In the New Deal Speech by Demarest Lloyd The People's Money Speech by Dr. Walter E. Spahr The Principles of Constitutional Democracy and the New Deal Speech by R. E. Desvernine â˜… AMERICAN LIBERTY LEAGUE NATIONAL PRESS BUILDING WASHINGTON, D. C. â˜… â˜… Which Road To Take? â˜… â˜… â˜… Speech of J. HOWARD PEW President of the Sun Oil Company, Philadelphia, Pennsylvania, and Member of the Executive Committee of the American Liberty League in Round Table Discussion of "The Constitution and the New Deal" Institute of Public Affairs University of Virginia July 12, 1935 AMERICAN LIBERTY LEAGUE National Headquarters NATIONAL PRESS BUILDING WASHINGTON, D. C. â˜… Document No. 53 Which Road To Take? â˜… Our country plainly faces a decision whether it will adopt a Planned Economy or will continue on the course of individualism, equal opportunity, liberty of initiative, and constitutional democracy. It is amazing that such an issue should be pressed upon a people who have so prospered under economic freedom and constitutional institutions; but it is no more startling than to find that Planned Economy is presented to us as if it were something new, inspired, annointed and certain to open our way to Utopia. In recent time the "economic interpretation of history" has been something of a fad. Many writers have strained to make their points, and as I have read them I have felt that a more satisfactory formula would be "the historical interpretation of economics." I hope my remarks will somewhat clarify the distinction. Three thousand years of human records have given us largely the history of unsuccessful attempts to make planned economies work. Most of the race's progress in material betterment, in democratization of opportunity and in the dissemination of educational and spiritual benefits, has been made in the few brief generations since men learned what freedom meant, how it might be attained, and how jealously it must be guarded. The masses of men made less progress in the first 4,000 years of recorded history toward realizing the highest human aspirations, than in the last century and a half under the regime of economic freedom. PLANNED economy is necessarily dictated economy. That has always been true, whether the dictator was an oriental despot of three thousand years ago, a Roman emperor of 1,500 years ago, a Tudor king of four centuries ago, or a Mussolini, a Stalin or a Hitler of today. And wherever you find it, under whatever name fascism, nazism, communism or socialism 3 it is essentially the same thing. There is no room in it for the mere individual for personal effort, initiative, enterprise, originality, invention, progress. Whatever of these elements enters into it must come from the top from the dictator; and he will be too busy to bother about such things; too well entrenched in power and plenty to think them worth-while. Beneath him will be just a deadly universality of dull and regimented drudgery. All the roads into dictated economy come out at the same place; some may appear a bit smoother than others but they are all down-hill roads, and they bring up at lower living standards, national decay and the sacrifice of liberty. That is equally true whether the dictator is a usurper by force or is elected under the forms of popular government. If our economic planners had read their Bibles more carefully they might have taken warning from the stories of Egypt in the time of Joseph. As prime minister, he took control of grain and cattle just as our A.A.A. has done; then he gathered all the money in the land "and brought the money into Pharaoh's house" â– just as our economic planners gathered the gold into the Treasury; and when the people complained that they had nothing left "but our bodies and our land," Pharaoh took their land in exchange for food. A little later I will show you how far our economic planners have gone toward taking over the land. Having taken the land, Pharaoh made a free seed distribution to the people, and sent them back to cultivate that same land. He exacted one-fifth of all their produce; in which regard Pharaoh was rather easier than our economic overlords, for they are making Government cost us one-third of the national income. Finally, a public works administration was set up, under which a starving people reared the monumental piles that have been the wonder of the world ever since. The tombs of the Pharaohs became the burial place of Egyptian civilization a civilization that was a perfect type of a Planned Economy. The story of planned economy in the China of Confucius is equally illuminating. The Chinese dictators were strong for price-fixing, seeking to maintain an unchanging level of prices fair to both producer and consumer. One ancient writer says every shop had a superintendent set over it, and for every twenty shops there was a master merchant, to fix prices. It was decreed that even when crop failure caused famine, corn prices must not rise; and during the epidemic which followed, coffins must sell at their regular prices! An army of bureaucrats enforced all these decrees, and a Government bank was set up to buy and hold the surpluses, when such existed, very much as certain financial agencies under NRA have operated. The police guarded the gates to market places, and watched over the shops; and then there was so much corruption that a detective was assigned for every five shops, to see that the police and the various functionaires were kept as honest as possible. The scheme was supposed to protect the people against extortion, but the rich always got the better of it. They bought up the grain immediately after harvest at low prices, and later distributed it at high prices. The Government warehouses took in the surplus after the merchants had bought enough to control the market; the Government always paying high prices, and always losing money on the operation. In the end the plan failed either to keep prices reasonable or to insure against famine; and the system completely collapsed. Dropping down a thousand years nearer to our own time, let us consider economic dictatorship under the Roman Empire. Many historians believe the Empire's ruin was due to the persistent efforts to enforce a planned economy. Certain it is that there is a suggestive parallel between the futile efforts of the Roman rulers to control their economic establishment, and the economic dictatorships which various occidental countries have lately attempted among them our own country under the New Deal. The Roman Emperors commanded the armies and controlled the state's revenues; the Senate gradually surrendered its authority, though not so rapidly as our Congress has done. Thus everything was increasingly centralized in the Emperor. The Provinces became more and more dependent on Rome, just as our States have increasingly leaned on Washington. The Emperors unwisely intruded into Provincial affairs, and the states' rights issue got to be a very live one in Rome; but unfortunately for the Empire, it didn't have a Supreme Court to call a halt. I HAVE lately pawed over rather more of ancient and medieval history than is perhaps good for a plain business man. I find that during the years of Rome's decadence industry and agriculture were organized under administrations quite like our NRA codes; that the central Government distributed relief to the needy Provinces, just as Washington does today; that the Emperor Domitian ordered half the vineyards destroyed, just as we saw our cotton plowed under; that this caused a shortage of wine, just as our birth-control for the pigs made pork a luxury. These measures brought the small farmers of Rome to ruin under their burden of mortgages, and the lands fell into the hands of capitalists who farmed them on the tenant system all exactly paralleled in our own recent experience. I read of how the Emperor Nerva set up a Federal Farm Loan system to provide cheap money for the farmers. But the money had to come through taxes on the rest of the people they didn't call them processing taxes, though they doubtless would have done so had they been as clever as our Brain Trusters and it got so burdensome that agriculture only went from bad to much worse. It would be possible to go on indefinitely, developing a business man's crude interpretation of Roman history; but time doesn't permit. What the Empire needed was to give natural economic law a chance to allow competition, uncontrolled price, and free initiative to try 6 their hand. Unfortunately for Rome, only one of the great Emperors seems to have thought of this. He was Augustus; and I cannot break away from Rome without a word about him. Augustus didn't believe in economic planning. He didn't wish to encourage that spirit of intense nationalism that always develops under economic dictatorship, and paves the way to wars. He thought the empire was plenty big enough, and wanted no conquests. He was a democratic emperor, if you can get the idea. He believed natural forces, encouraging competition and enterprise, would get the best results. He stuck to these simple ideas, and under him Rome dug out from the ruins that the civil wars had wrought, into a prosperity that has made his name a connotation of the highest human satisfactions. ^NOTHER honorable exception to the rule of economic despotism and social decline in the ancient world, was Pericles of Athens. Historians have lauded the Age of Pericles chiefly for its intellectual, artistic and literary achievements; but a modern business man may be pardoned for noting that in fact the Athens of Pericles was a shipping, trading and industrial metropolis; a community of merchants and enterprisers, whose commerce reached about all of the then known world. The Periclean Greeks developed manufacture as never before, even getting well beyond the beginnings of mass production. They skillfully adapted their products to the needs and tastes of their customers. Their merchant marine and traders won for Greece a place in the ancient world similar to that of Britain in the nineteenth century: they made it general headquarters of industry and commerce. Under Pericles the glory that was Greece flowered from institutions of political and economic freedom. But, I repeat, Pericles and Augustus were exceptions among ancient potentates. Most rulers made the blunder of setting themselves up as economic as well as political authorities. Neither peoples nor rulers had any real conception of democracy. The little group in control of a state had things all its own way; and the economic despotism they imposed not only failed but finally pulled down the state with it. Much more certainly, then, would economic dictatorship fail under a democracy where all interests insist on a hearing, where debate is perpetual, and laws and policies are the results of compromise. Economic dictatorship and political democracy cannot live side by side. Once set afoot, economic dictatorship must reach to every detail of human activity. It is bound to destroy democracy; and after that, all experience proves that it is bound to be itself overwhelmed in the ruins of the structures it has attempted to rear. Leaving Rome and coming down another thousand years nearer to our own time, we find further illustration of our thesis in the mercantilist economy of the later middle ages. The mercantilists assumed that each state ought to be as nearly self-sufficient as possible. The rulers wanted the largest possible amount of precious metals; some of them believing that these were the only worth-while forms of wealth. The merchants wanted to expand their foreign trade but wanted to do it without surrendering to foreigners any correspondent share in their domestic market. So Governments granted all manner of special privileges, monopolies, rights and exemptions, to individuals, groups, corporations and municipalities. Laws were passed fixing wages, prohibiting luxury, standardizing prices. One Tudor king enacted that no proprietor should have over 2,000 sheep, setting forth that some had as many as 24,000. His decree declared that the great increase in the number of sheep had made the price of mutton go up, rather than down; because the business had fallen into a very few hands, and those who controlled it exacted monopoly prices. Monopoly, in some form or other, has always been the foundation of planned economies. Henry the Eighth granted endless 8 monopolies, some of them giving to certain towns exclusive rights to manufacture or deal in particular articles. There was great British trade into Barbary but so many ships entered the traffic that Queen Elizabeth required aU to take out licenses; then, by refusing licenses to any except a favored few, she established a fine monopoly. I recently hunted out this decree and found it so similar to the licensing provision of NIRA that I couldn't help suspecting that Queen Bess had been the real inspiration of some important parts in our New Deal. Another striking parallel between Tudor mercantilism and our New Deal was the decree of Henry the Eighth devaluing the British coinage. It set forth that the French and Dutch monies had been so reduced in value that English traders were at a great disadvantage; therefore he ordered the gold and silver content of English coins reduced, and that English money should be kept just as cheap as any money of competing countries. If you will look up that old decree and compare it with the provision of law under which the New Deal lopped off 40 per cent of the gold content of our coinage, you will see that the two measures, and the arguments in support of them, are as much alike as two peas in the same pod. This debasement of the English coinage resulted, as always, in the better money being driven out by the poorer; there was competition between countries in cheapening their monies, just as in recent years; and presently the English discovered that their gold and silver were going abroad. So Henry's successor, Edward the Sixth, enacted a measure prohibiting export of British coins; his measure being precisely parallel to the New Deal Act prohibiting gold exports! Talk about a New Deal! I have diligently sought for some phase of it that was less than 300 years old. I have found fragments of it scattered all down the corridors of time from three thousand years ago to three hundred years ago; I have found in every case that these ancient measures all failed in their time, and caused suffering and disaster. But I have found 9 nothing new, or even modern, in the so-called New Deal. Now these blunders by ancient and medieval dictators were not exclusively the doings of wicked or misguided rulers. They were partly the result of ignorance, and probably in greater degree the result of selfishness on the part of men "who had a pull" and expected to profit. The man who nowadays wants his prices fixed, and fixed high enough to insure him a profit whether he deserves it or not, wants it for exactly the same reason that the price fixers of ancient China, or ancient Egypt, or Imperial Rome or medieval England wanted their prices fixed; they were looking for the best of it. The man who today wants a license for his business but wants his competitor denied a license, is actuated by exactly the same motives as were Elizabeth's traders into Barbary. The man who nowadays holds a franchise to render some public service, wants it exclusive, exactly as he did three hundred or three thousand years ago. He wants a monopoly; bigger profits for less service. Economic planners have never understood that Government and business can't be mixed without harming both. The line between them ought to be sharply drawn, and each ought to stay on its side. When business crowds over onto the Government side it does so because it wants some special privileges that it ought not to have. When Government crowds over to the business side it interferes with natural processes that Government doesn't understand and is not equipped to deal with. The two will not mix, any more than you can mix pure water with contaminated water and get anything but contaminated water. DURING the Constitutional Convention of 1787, this question of the Federal Government's authority over business was endlessly discussed. One element would have sharply limited the "General Government's" authority over commerce; and made a strenuous fight to include 10 in the Constitution a provision that it should place no restriction on trade or navigation except by a two-thirds vote of both houses of Congress. Supporting this view, George Clymer, of Pennsylvania, declared that "the diversity of commercial interests, of necessity, creates difficulties which ought not to be increased by unnecessary restrictions." The other side would have given the Federal Government complete authority over commerce intrastate, interstate and foreign. In the end a compromise was reached, which has proved one of the most beneficent provisions of the great document. But even thus, some delegates felt that the "General Government" had been given too much power over commerce, and Elbridge Gerry of Massachusetts, in refusing to sign the Constitution, states as one of his reasons "that under the power over commerce, monopolies may be established." QUR New Dealers have taken the view of the extreme Federalists who wanted to lodge all authority over commerce and industry in the "General Government." That has been, plainly, the real objective of New Deal legislation. Had it succeeded it would have set up a complete economic dictatorship under which the Federal Government could have perpetrated anew the whole series of blunders that were committed in the ancient and medieval world. Fortunately, the Supreme Court has emphatically forbidden this. I am convinced that whoever will study the debates in the Constitutional Convention will agree that the Schechter decision was the salvation of one of the most important and necessary provisions of the Constitution. But despite this decision, the New Dealers still persist in their program of complete Federalization, and of establishing authority for economic dictatorship. Some would amend the Constitution; others seek ways to circumvent Constitution and Court. Should they succeed wc could only expect a continuation of projects aiming at such a complete Government control over business, industry and enterprise as they have in 11 Italy; and contemplating an ultimate socialization of wealth, business, industry on the precious model of Russian communism. In the last three or four years we have heard much prophecy that the capitalistic regime is nearing its close; that democracy has failed and that some new form, whether derived from Italy, or Germany, or Russia, or based on Marxian socialism, lay just around the corner. Most of us here in America have regarded this discussion as academic. We have observed what is happening in Europe with a certain mild wonderment, not suspecting that such things could happen here. I have talked with people who had studied the corporative and totalitarian states in Europe, without at all realizing how closely they resembled the organization which the New Deal has sought to impose. In MY view, state socialization is even now developing on a scale so great and at a tempo so rapid as to warrant grave concern. The Government has invaded countless fields that only a few years ago were entirely without its sphere. Private business and enterprise are rapidly becoming terrorized at the Frankenstein of Governmental competition and control. As these fears move to increased caution, initiative becomes paralyzed, enterprise stagnates, and the task of economic restoration is more and more shouldered over on the Government. It is a load that Government cannot carry and should not attempt unless it is proposed completely to recast our social forms and go in for a socialistic state. I propose now to suggest some of the evidence that we are already well started in that direction. Let me begin with some reflections on the New Deal and the farmer. The English Labor Party is demanding nationalization of England's land, which strikes Americans as about the last word in radicalism; yet we in America have gone a long way toward that end. For the Federal land banks and other agencies have loaned roundly $3,000,000,000 on farm mortgages or in advances to agricultural credit banks, coopera-12 tives, etc., at low interest and for long terms. Little of this will ever be paid off; the farmer's interest becomes practically rent. Yet this is mild compared to the Bankhead bill, which creates the Farmers Home Corporation to sell bonds and buy land for tenant farmers. Starting with a billion dollar issue, the measure obviously contemplates more loans, more purchases in the future; straightaway nationalization! This bill has passed the Senate and is being pressed in the House. AMENDMENTS to the A.A.A. are urged, giving the Secretary of Agriculture sweeping powers over marketing farm products; power to fix prices, determine to whom and in what quantities sales should be made, etc. This measure has passed the House. Again, the Government is rapidly becoming landlord to town and city homeowners. In one year the Home Owners Loan Corporation made over 840,000 loans, aggregating $2,539,000,000. The Government has invested heavily in stocks of banks and investment companies, has loaned enormous sums to these and other financial institutions, and has in short become the greatest hanking power in the land. Beyond all this, the Administration's banking bill plans complete control over all banking credit, whereby to fix the economic dictator's grip on national business. Along with all this the New Deal has invaded the public utility field. The Tennessee Valley Authority expended nearly $35,000,000 in a year, and has $29,000,000 more to spend. Boulder Canyon has cost over $42,000,000 and has about $23,000,000 yet to be spent. Nearly $400,000,000 is outstanding in loans to railroads; while subsistence homesteads, emergency housing, resettlement of farmers, colonization of Alaska, the great plains forest belt, have demanded other uncounted millions. The A.A.A. has been authorized to spend more than a billion and a half subsidizing the wheat farmers, plowing cotton under, killing off the pigs and raising the cost of living. The electrical and irrigation projects in the Upper Missouri and Columbia Valleys will produce power nobody can use and put water on land nobody wants to farm. Three billions have been squandered on merchant marine; and our economic planners, oblivious of the ancient fable of King Canute, are about to regiment the Passamaquoddy tides in order to get more power that nobody wants. But too much detail will only hide the forest behind a too dense growth of trees. What I would emphasize is that with all these activities the cost of government is now absorbing about one-third of the national income; and these are activities which Government is not competent to carry on efficiently, and for which there is no need. They are merely the beginning of a grand program for centering all authority, credit, financial resources and economic direction in the Government at Washington. And the end is not in sight. The Administration demands the Guffey coal control bill, to nationalize this essential industry; to enable our economic planners to decree where and how much coal shall be mined, where and at what prices it shall be sold. It is the baldest project of its sort yet brought forward; but it is only a forerunner to the Thomas bill, for dictatorship over the oil industry. Here, I may say with some assurance, is the most efficiently organized, the most competitive, the best able to take care of itself, of all our great industries. With $12,-000,000,000 capital, it is second only to agriculture. For years it has supplied a persistently increasing demand for its products, at constantly decreasing prices. Through gasoline and other taxes it has been the greatest contributor to public revenues. It cannot be accused of extorting high prices, for its price index figure is at the bottom of the list; nor of earning excessive returns, for over 12 years average return on capital was only 1.66 per cent per annum. It has not asked for and doesn't want Government control. The only reason for proposing such a thing is that it strikes our economic planners as an inviting field for experimentation. Whose business, then, will come next? I warn my friends of the lumber, the steel, the cement and the textile industries, to beware; the eye of economic dictatorship is on them. And after they have been gathered into the fold, the rest will be progressively easier. The railroads are already well on the way into the Government bag, and so are the banks. Uncle Sam has become the world's greatest landlord outside of Russia; the A.A.A. has practically taken over direction of farming and farm marketing; the T.V.A. and like projects are driving private enterprise out of the electrical field; and Government funds are being urged upon municipalities to provide public utilities in competition with those already in existence. In a word, we have already traveled a long sector of the road toward socialization. We stand today at a critical junction. To the left, marked with gaudy and alluring guideposts, lies the road of adventure into socialization and communism. Straight ahead lies the road by which we have come thus far. Its signboards are weather-beaten and homely, but their directions are dictated by reason, wisdom and experience. Which road to take?