Chapters from "TIME TRIALS"
• 1 •
In the Beginning
​
The 1930s was a good decade to come into the world, although it didn’t appear so at the time. As the calendar turned over to begin a new year, the United States and much of the world was on the edge of a gloomy period, when businesses faltered and with many people out of work. By 1932, nearly one-quarter of the U.S. workforce would be unemployed with many more experiencing lean times learning to live frugally with less.
​
The previous era, “Roaring Twenties” had been a decade of indulgence and “irrational exuberance.” Jobs were plentiful, financial markets deregulated, speculation rampant, scandals rocked the administration of President Warren Harding, bootleggers prevailed, and Americans thought the good times would continue. This was not unlike what we witnessed during the first decade of the twenty-first century.
​
In 1928, Herbert Hoover, a respected mining engineer and U.S. Secretary of Commerce, was the Republican Party’s choice to be the next President. He won decisively over Democrat Al Smith, a Catholic. But Hoover inherited an unsustainable economic boom, and his response was too little. He seemed torn between advice from those who said the market would self-correct and wanting to do something to help. He did initiate public works projects and got the Hoover Dam, on the Colorado River at the border of Nevada and Arizona, under construction.
​
Shortly after taking office, the United States witnessed a devastating stock market crash in late October 1929, where many investors found their treasured assets and life savings dwindled virtually to nothing. Investing in corporate securities and bonds now was not just for wealthy people. As the common family witnessed a surging stock market, investors included shopkeepers, tradespeople, factory workers, store clerks, and the hotel lobby shoeshine guy.
​
Banks had loosened borrowing requirements, and many were lured into the market buying on the margin—with just ten cents down on the dollar. This easy money fueled a growth in share prices, and people saw it as the avenue to becoming rich without having to work hard.
​
It seemed a golden opportunity with stock prices increasing daily, until they suddenly didn’t. First wary investors began to sell, and the market weakened. This affected the well-off along with wage-earners, who had invested the family savings. Stock prices fell, the downturn accelerated, and panic set in. Borrowers had no way to pay back their lenders. The U.S. economy was imploding.
​
For a few, however, it offered an opportunity to prosper from the misfortune of the many, when buying securities, land, and properties at discounted prices. Most people, however, didn’t have the wherewithal to do so.
​
Such was true for my dad, who departed his factory job, but this led to learning the plumbing trade with my mother’s dad, my grandfather, Fred MaGill.
​
MaGill Plumbing in downtown Elkhorn, Wisconsin (population 2,400 in 1930) was a storefront with an apartment on the second floor, where mom and dad initially lived. This resulted in a measure of economic security during harsh times with my parents soon owning a modest home on nearby N. Washington Street thanks to help from my MaGill grandparents.
​
Thomas J. Watson, founder of International Business Machines (IBM), was said to have remarked that surviving The Great Depression financially was “to keep one’s losses on paper.” Don’t panic but allow investments to rebound. Good advice that investors did not heed. A few even responded, so it’s reported, by jumping out of high-rise windows in moments of despair. For those with little to invest in corporate stocks, their downfall came with the economic depression that followed and loss of jobs.
​
Perry MaGill, my uncle, had a few years earlier started a steel processing plant in suburban Chicago, when the economic depression set in, and his business prospects collapsed. As my mother (his sister) tells it, he, with wife and maid, moved to southern Wisconsin to live with my grandparents. In time, they moved back, and he resumed what became a very successful business. Uncle Perry benefited considerably, as the resource needs of a rebounding economy, buttressed by New Deal programs and later government war spending, created a huge demand for steel.
​​​​​​​​
The United States and other industrial nations seemed conceptually incapable of responding to the economic crisis. The British economist, John Maynard Keynes (also known as Lord Keynes) had not yet published The Grand Theory of Employment, Interest and Money (1936). This seminal work created a framework for macroeconomics with its design for fiscal and monetary policy.
​
The Keynesian Revolution provided the theoretical framework for timely government intervention with deficit spending, interest rate adjustments, and other counter-cyclical measures. This it did along with recognizing imperfections within free markets. Recall the Federal Reserve System (1913), or bankers’ bank, had been established two decades earlier in the aftermath of financial panics, particularly that of 1907. In time, this would provide monetary tools to counter recessions—and inflation–while promoting full employment, but the markets were not sufficiently understood in 1930.
During the run-up of the value of stocks during the 1920s, the Federal Reserve had made credit too easy leading to the inflated value of stocks. Then during the downturn a few years later, the FED tightened credit when it should have been easing some to stimulate the economy.
​
When consumers lack spending power and businesses are not inclined to invest in plants, equipment, and workers, only the government is in a position to fill the void. Such reasoning tends to be misunderstood by the public given the counterintuitive logic of fiscal policy.
​
To the layperson, government spending in the face of declining revenue and increasing deficits made little sense. The FDR (Franklin Delano Roosevelt) administration embarked on National Recovery Act of 1933 (NRA) and Congress passed a host of New Deal legislation—Civilian Conservation Corp (CCC), Public Works Administration (PWA), Civil Works Administration (CWA), National Industrial Recovery Act (NIRA), Federal Housing Administration (FHA)—the list is astonishing.
​
The NRA was a labor and consumer law regulating industry for fair wages and prices to stimulate economic recovery. The PWA was expansive in scope, constructing urban rail systems, airports, and even works of arts. It created jobs in Elkhorn to build the post office on the corner of Walworth and Washington Streets in 1936, then construct a state-of-the-art high school, two years later and two blocks away on Jackson Street.
Then with the Fair Labor Standards Act of 1938, the relationship among business, labor, and families was transformed. It created the right to a minimum wage, and "time-and-a-half" overtime pay when people work over forty hours a week. It also prohibited employment of minors in "oppressive child labor." Earlier the Norris-LaGuardia Act (1932) had removed barriers to organized labor and gave workers the right to bargain collectively with business management. 

Had I been aware of economic history when arriving near the end of the 1930s, I’d have realized that it was a grand time to be born.
The “Great Recession” near the end of George W. Bush Presidency was reversed though easing monetary policy (lower interest rates) and fiscal policy (Economic Stimulus Act of 2008). Incoming President Barack Obama also prompted Congress to enact a $787 billion American Recovery and Reinvestment Act early in 2009 that put the economy on the path to recovery.
If Congress had been willing to pass a larger spending stimulus, the recovery might have been stronger. Politics too often trumps sound economic policy. Even then, the efforts of Hank Paulson (Treasury Secretary under Bush), Tim Geithner (Obama Treasury Secretary, and Ben Bernanke (Federal Reserve Chair) led to a sustained recovery over the next decade.
What is prudent for businesses and households in depressed times is counterproductive for the national economy. Government is the only institution inclined to stimulate the economy through deficit spending. In time, Keynes explained, the economy will strengthen, businesses prosper, workers find jobs, federal tax revenues increase, and deficits decline.
So it happened, as I made my way through grade school in the 1940s, still austere times to be sure. It also was government spending to finance World War II that put men and women to work as prosperity returned. I entered high school in the 1950s described as an “age of affluence” and “happy days” to take from the popular sitcom by the same name and in the same general area, Milwaukee, where I grew up in southeast Wisconsin.