He’s a rich, conservative Republican businessman, and the scion of a powerful Mormon family. And four years into a devastating economic crisis, he has come to Washington, D.C., amid cries to balance the budget, to offer a solution.
Mitt Romney? Nope. It’s Marriner S. Eccles. The year was 1933, and the U.S. Senate Finance Committee had invited 46 citizens from various walks of life to testify about ways to slow the downward economic spiral. Eccles, a business owner and banker from Utah, was one of the witnesses, and he had some pretty provocative ideas. In the Oct. 29 edition of High Country News, I write about Eccles’ place in a long history of quasi-socialist collectivism in the Church of Latter-day Saints. But Eccles is more than just a historic figure. His theories resonate just as loudly today as they did eight decades ago.
Eccles, however, shook things up. He had long believed that hard work and thrift were all a person -- and the economy as a whole -- needed to be successful. His father, David Eccles, had built up an empire on those principles, most famously owning the Utah Construction Company, one of six firms that built Hoover Dam and the largest company of its kind in the nation. The senior Eccles died in 1912, leaving everything to his children from two wives, one in Logan, one in Ogden. Though Marriner was in the lesser-endowed Logan branch, he ended up in Ogden, rose to the top of the bunch with his business acumen, and became President of Utah Construction Company, First Security Corporation and several other interests. Then the Depression hit. Though Eccles’ wealth insulated him and his businesses, he noticed all around him people who had toiled and saved their whole lives, and who were now ruined, unemployed, even homeless.
“It is a national disgrace that such suffering should be permitted in this, the wealthiest country in the world,” he said. “The present condition is not the fault of the unemployed, but that of our business, financial, and political leadership.”
Eccles told the lawmakers that it was neither extravagance nor God nor nature that had caused the slump, but maldistribution of wealth. There was plenty of money out there, it had just all ended up in the hands of a small group of the ultra-rich -- the 1 percent, if you will -- leaving the other 99 percent broke. That left the bulk of Americans not only hungry, but also without any of the purchasing power necessary to fuel the economy, and that’s what led to the crash.
The numbers back up Eccles’ theory. Emmanuel Saez, a Berkeley economist, has done a great deal of work on the topic of income inequality, and is credited with being the inspiration for the 99 vs. 1 percent meme that arose after the 2008 crash. He and Thomas Pikkety charted the amount of the nation’s wealth held by the top 1 percent since 1917. Here’s their chart, which shows that, indeed, wealth was ridiculously maldistributed just before the 1929 crash, an inequality not matched until, yes, 2008, just before the most recent crash, when the 1 percent had accumulated nearly 25 percent of all the wealth.
“I see no way of correcting this situation except through Government action,” said Eccles. And balancing the budget is not what he was talking about. He was talking about redistributing the wealth. His five point plan had the federal government allocating another $500 million toward relief for the unemployed and the hungry, and another $2.5 billion stimulus package for public works-type construction to create jobs and build infrastructure. How to pay for it? Raise taxes on the rich, said Eccles, a multimillionaire.
The approach was both compassionate and coldly rational. It would feed the hungry with direct handouts. And it would push a little bit of the wealth back into the hands of the working class, restoring the purchasing power of the masses. That, in turn, would revive consumption and jump-start industry, creating more jobs and more wealth. For as Eccles often said, “Labor is our only source of wealth.” Meanwhile, it would bolster the infrastructure of the nation, providing a foundation for future economic growth.
Trickle down economics simply wouldn’t work. “We now see, after nearly four years of depression, that private capital will not go into public works or self-liquidating projects except through government and that if we leave our ‘rugged individual’ to follow his own interest under these conditions he does precisely the wrong thing. Each corporation for its own protection discharges men, reduces pay rolls, curtails its orders for raw materials...” The federal government needed to step up, stimulate the economy and keep the “rugged individualist” corporations in line with stronger regulations.
From the transcripts, it’s difficult to tell what the senators listening to Eccles thought of his approach. However, his ideas resemble those laid out by John Maynard Keynes in his 1936 work, The General Theory of Employment, Interest and Money, which is the basis for one of the principal schools of modern economic thought (most scholars believe that Keynes and Eccles developed their theories independently of one another). We do know that President Franklin D. Roosevelt was impressed. He appointed Eccles to be an assistant secretary in his Treasury Department, and then Chairman of the Federal Reserve.
Eccles’ ideas helped form the foundation of the New Deal, which helped redistribute the wealth (along with World War II) and set the United States on a prosperous path that lasted for several decades. In 1931, the top tax rate on the richest Americans was 25 percent. By the time FDR died, it was 94 percent, and millionaires continued to be taxed at a rate of at least 70 percent for another four decades. In the 1980s, Eccles was apparently forgotten, tax rates for the wealthy plummeted so that today, the one percent pays, at the very most, 35 percent (but in most cases its much less than that -- Mitt Romney paid just 14 percent on nearly $14 million in income). Wealth has been redistributed back to the one percent. The working class, and the economy, have suffered.
During these tough times, a voice like Marriner S. Eccles’ is sorely needed.
Image credits: Graph by Pikkety and Saez, with historic marker additions by Jonathan Thompson. Photo of Marriner Eccles from the Library of Congress, in the public domain.
Jonathan Thompson is a senior editor for High Country News. His Twitter handle is @jonnypeace.