The financial crash of 2008 made historians and economists draw immediate comparisons to the Great Depression. A year after the crash, the reasons and complexities of why the crash occurred were easy to find. Documentaries, books, and an endless amount of media delved into the Great Recession. However, while there were tons of problems on “why” the crash occurred, there were very few books and analysis that explained how to fix the problems. Lately, historians and economists have gone back into the archives and libraries to find ways that America overcame the devastation of the 1930’s. One person keeps coming up in this search—Marriner Eccles, the American Federal Reserve Chairman from 1934 to 1948. The ideas that created the most peaceful and stable American economy from 1945-1980 were directly influenced by the philosophy and knowledge of Utah’s greatest public servant.
Early Life and Business Career
When Marriner Eccles was born in 1890, America was at the tail end of the Gilded Age. In many ways his life was an example of those who were in the upper one percent of all Americans. The oldest son of “Utah’s richest man” David Eccles, Marriner enjoyed a life very few people in America enjoyed. It was a life filled with Ivy Leagues Schools, golf, and huge mansions. Prior to 1931, Marriner was an avowed laissez-faire capitalist. On the other hand, Marriner, who was born to David’s second wife Ellen in Logan, Utah experienced the difficulties that many Mormon children felt during this unique time in Mormon history.
To understand Marriner, it’s important to have some knowledge of his father David Eccles. Three things defined David Eccles—his Mormonism, his Scottish heritage, and the poverty he experienced as a child. Yet, like most second and third generation Mormons, David Eccles life was contradictory. He was definitely a man of his time—on the other hand the values and Mormon upbringing separated him from other industrial capitalist of the same time. Perhaps, famed Mormon historian Leonard Arrington said it best:
There is much complexity, even paradox, in the man David Eccles. He was “close” with his Money, but he might buy his twin girls new hats or pay off a destitute couple’s mortgage. He disdained social status, but he was proud of his profits he had earned. He was not particularly active in his church nor meticulous in heeding all its precepts—a glass of forbidden champagne seemed not to bother him—but he paid a full tithe and volunteered on several occasions to help the church in a business way. He loved his wives and children, but his life revolved around his business way. He was honest and straightforward in all his business dealings, yet most of his fortune was made by taking advantage of situations arising out of legislative and administrative loopholes in the use of forest lands (Arrington, 1975).
When David Eccles suddenly died of a heart attack at the Salt Lake City train station in 1912, Marriners life was thrown into turmoil. David hadn’t left a will, causing great contention within the family. On top of that, the anti-polygamous laws of the 1880s, made it impossible for David’s second wife to gather any inheritance. When it was finally settled, David’s first wife Bertha and her family (referred to as the “Ogden Eccles”) received the bulk of the family fortune. Marriner’s mother was left nothing—while the children were left with around $600,000 in comparison to fifteen million dollars left to the Ogden Eccles.
Instead, Marriner went to work protecting and building up his side of the family fortune. He shrewdly invested money into the Utah Condensed Milk company. The business later changed their name to Sego Milk. Within a few years, Eccles had quadrupled the fortune of the Logan Eccles family.
Meanwhile, havoc was being wrecked to the “Ogden Eccles” fortune. Because of mismanagement, poor business decision, and outright fraud, the business empire of David Eccles was ready to collapse. Many of David’s business partners approached Marriner and requested his leadership. He was willing, on the condition that his two older half-brothers were kept out of the business affairs. From that time forward, Marriner who was in his mid-twenties rebuilt many of the companies that were vital to the lives of many Mormons and Utahns (Hyman, 1976).
Chief among these businesses was the banking and construction company. First Security Bank and Utah Construction Company would play an important part in the economy in Utah during the 1900’s. The Utah Construction Company, during the 1930’s, was the chief construction company that built many of the roads, bridges, and dams (including the famous Boulder Dam) that dot the landscape of the West.
The Great Depression
Up to the Great Depression, it seemed like Marriner’s life was following in the footsteps of his father. He was an intelligent, diligent private entrepreneur, who exemplified the very best in intermountain and Mormon culture. As noted before, Marriner was a true believer in laissez-faire capitalism. His economic philosophy was similar to most businessmen during the 1920’s. The Great Depression changed all of this. Following the Crash of 1929, Eccles believed that the economy would sooner or later correct itself. He soon realized, after most of his banks and businesses were close to imploding, that the Great Depression was a different matter. As he noted in his biography:
I saw for the first time that thought I’d been active in the world of finance and production for seventeen years and knew it techniques, I knew less than nothing about its economic and social effects. Friends whose estates I managed, my family, whose interests I represented, and the community at large, in whose economic life I played a sensitive role, all expected me to find a way out of the economic trap that we were all in. Yet all I could find within myself was despair. Having been reared by my father to accept the responsibilities of wealth and having been placed by circumstances at the helm of many enterprises, there were times when I felt the whole depression was a personal affront. Wherein had I been at fault? Night after night following my head splitting awakening, I would return home exhausted by the pretensions of knowledge I was forced to wear in a daytime masquerade. I would slump forward on a table and pray that the answers I was groping for would somehow be revealed. As an individual I felt myself helpless to do anything (Eccles, 1951).
The Great Depression was especially devastating in Utah. In Ogden, unemployment rates reached over 50% at certain times during the 1930’s. Even the LDS Church, which played a vital role in the economic and religious lives of most Utahans, was financially in trouble. Reed Smoot, a Mormon Apostle and Senator from Utah, didn’t have answers to the throngs of parishioners who were pleading for answers to the great national calamity. As Sidney Hyman noted, “Marriner had approached the senator to say, in his trip-hammer style, that private or local governmental sources of support for relief work in Utah were exhausted; that the Mormon Church, in common with other religious institutions, could not “take care of its own”; that Church funds depended on contributing members, and the members were in a desperate condition along with everyone else; that the federal government alone was in a position to provide funds for relief on a scale needed by distressed Utahans, and by people elsewhere. Smoot, however, looked at Marriner ‘with cold eyes that received light but no images. It was clear the he was either blind to the fact of the case, or was too old and too tired to be stirred by them. (Eccles, 1951)’”
As with today’s economic situation, many politicians and economists had differing views on how to cure the nation of the Great Depression. For Marriner, his previous views on economics had changed. No longer did he believe that “depressions were due to God-made economic laws.” Instead, he realized that the only way out of the economic mess was through government intervention. As he wrote in his biography:
I saw at the time that men with great economic power had an undue influence in making the rules of the economic game, in shaping the actions of government that enforce those rules, and in conditioning public attitudes towards those rules. I did not want to politicize every aspect of economics. I wanted the widest latitude left to the individual to make his own economic decisions, whether they might be wise or foolish. But I no longer believed that the rules of the market place were Holy Writ. The rules were made by men who had special interests of their own to serve or protect. If this was true, then my own reason said that all the people, and not just a favored few, had an equal right to share in the political process by which economic rules are not only made but changed (Eccles, 1951).
As with today, many conservatives and Republicans argued for austerity during a time of depression—Eccles argued against this option. Predating John Millard Keynes, Eccles formulated an idea that would become the thesis of Keynesian economic. In the opinion of Marriner, “A policy of adequate government outlays at a time when private enterprise is curtailing its expenditures does reflect a preference for an unbalanced budget. It merely reflects a desire and the need to put idle men, money, and material to work. As they are put to work, and as private enterprise is stimulated to absorb the unemployed, the budget can and should be brought into balance, to offset the danger of a boom on the upswing, just as an unbalanced budget could help counteract a depression on a downswing. Timing and method are the essence of the problem in either case.”
As the Great Depression continued, and the Hoover Administration came to an end, Eccles became more vocal about his views. Among the elite, he was starting to make the elite and the bankers feel uneasy. Before the Utah State Bankers Convention, he stated:
Our difficulties are not material; they are due, in my opinion, to the failure of financial and political leadership in the world, and particularly in America. They are due to a failure to be able to use the superabundance of wealth which we have been able to produce. We have failed, in the development of our political and financial system, to keep pace with our economic and scientific development……..
The theory of hard work and thrift as a means of pulling us out of the depression is unsound economically. True hard work means more production, but thrift and economy means less consumption. Now reconcile those two forces, will you?
There is only one agency in my opinion that can turn the cycle upward and that is the government. The government, if it is worthy of the support, the loyalty, and the patriotism of its citizens, must so regulate, through its power of taxation, through its power over control of money and credit, and hence its volume and use, the economic structure as to give men who are able, worthy and willing to work the opportunity to work, and to guarantee to them sustenance for their families and protection of want and destitution (Arrington, A History of the First Security Corporation, 1976).
The Roosevelt Administration
When Eccles was first asked by Franklin D. Roosevelt to work in Washington D.C. as a right hand man to Treasury Secretary Henry Morgenthau, he planned on staying for three years. Instead, his career in public service ended up being a total of twenty years, spanning across three decades, into the Second World War, and concluding with the Truman Administration. Eccles forever changed how the economy and Federal Reserve worked in the United States.
During his first three years on the Roosevelt economic team, Eccles invented many innovative ideas that have remained with us to this day. For instance, the FHA (Federal Housing Administration) was thought of and planned by Eccles. While in Ogden, he realized that housing had been devastated by the Depression. Only two houses had been built from 1930-1935. Mortgage delinquencies were out of control. Most people had either foreclosed or had left their homes. Not only this, many companies had been devastated because they manufactured building materials. Lumber, steel, bricks, furniture, cement, and appliances were a few industries that were ruined by the Great Depression (Hyman, 1976).
To fix the problem, Eccles proposed a plan that helped alleviate the problems that Americans were going through during this time. He proposed that the government insure houses that were applied for under the FHA. People who otherwise weren’t able to buy houses because of new or poor credit were able to purchase a new home. He also made sure that the interest rate on those houses was low. Those who had work during the Great Depression were soon able to afford the payments for the new homes.
While many conservatives contend that Roosevelt prolonged the Great Depression, many current analysts have blamed the extension on conservative ideas. Roosevelt favored many austerity measures during this time. He believed that the federal government was required to balance a budget no matter what the current economic issues were. Many conservatives believed that by enforcing austerity measures on the government, it would somehow influence businessmen to spend money. The same conservative senators and critics believed that by spending money, the American government was quickly sliding into Socialism. Eccles adamantly opposed this theory. He brazenly called it “bogus” to many of the staunchest senators and government officials that proposed this theory. Eccles ideas, which predated Keynesian economics, proposed that the government spend money during depressions, and save money while the economy is sound.
In many ways, Roosevelt followed the advice of officials that advocated austerity measures. This in turn prolonged a depression that could have been solved years earlier if they would have followed the advice of Marriner Eccles. It wasn’t until World War II, when the government had no choice but to spend large amounts of money that America finally recovered from the Great Depression.
As the current economic calamity has shown, in many ways Eccles was right. Those countries such as the United Kingdom and Ireland, who have followed austerity measures, have suffered more in the depression than those who have reverted back to ideas that were originally thought of by Eccles and Keynes. Unfortunately, many conservative politicians have held firm to these failed beliefs. It’s strange, because Ronald Reagan, who led a conservative revolution, in many ways followed Keynesian economics. The humongous amounts of money spent on defense helped America out of the 1980’s recession.
The Federal Reserve
Though Morgenthau and Roosevelt might have had their disagreements with Eccles, one thing was certain, there were no doubt about the knowledge, experience, and wisdom behind many of the decisions that Eccles made. They were so impressed with Eccles that when it came time to nominate a new Federal Reserve Chairman, Marriner was the first choice. He took the position on the promise that changes within the Federal Reserve System would be dramatically changed.
During this time the Federal Reserve System was deeply influenced by Wall Street and politicians. Eccles wanted to create a system that was independent from the two institutions. His belief was that politicians and Wall Street were influencing the Federal Reserve for personal financial benefits. When he stepped into office, he eliminated all meetings and committees between the Senators and governors of the Federal Reserve. He also moved the Federal Reserve from New York, where it was basically controlled by Wall Street, to Washington DC. This greatly influenced the governors to propose decisions that were beneficial to Americans (Nelson, 2012).
During his time, Eccles became as well known to Americans as Greenspan and Bernake are today. He changed the System for the better—creating an institution that was beneficial, independent, and provided sound economic advice for America during the post World War II era. Though there were many lapses of judgment away from Eccles beliefs (especially during the Greenspan era), many of his ideas are being reevaluated and studies.
After his career in Washington D.C., Eccles came home to Utah. For many years he shared the same apartment building as President David O McKay (he lived directly below him). When Presidents from the United States would come to Utah in the 50’s and 60’s, it was a tradition to stop at President McKay’s apartment for breakfast, and then to Marriner Eccles apartment for coffee or tea. He continued to provide influence, wisdom, and advice for the top leaders of our country—with the exception of Richard Nixon who he found appalling.
Eccles was especially an outspoken critic of the Vietnam War—even before it was popular to do so. He foresaw the calamity and disaster that it would become. He expressed his opinion to both Kennedy and Johnson during visits. Despite his warnings, America would have to suffer through this tragic and preventable war.
In his last speech Eccles stated:
World trade and world friendship go hand in hand. Neither self-isolation nor aggression can solve the acute problems that each nation shares with the rest of the world. It is one world—or no world. The raw materials of the world belong to the people of the world and must be shared through international trade and finance.
One thing is certain; we have learned some important truths about ourselves in these difficult years. We have learned that we can be influenced erroneously: that our judgment and sense of fair play can be distorted. We can be fooled and confused and made uncertain.
Deep down in our hearts we know we have strayed far afield from the ideals on which this country was founded. We know that killing and carnage do not bring us honor. We know the quiet of a shattered country is not peace. We know that the prestige of the presidency and the honor of our country are enhanced in the world by integrity and stability, and we are appalled at the savagery we have unleashed on a small Asian country which has in no way offended us (Eccles, Marriner Eccles Last Speech, 1973).
In the end, Eccles spoke with conviction, courage, and truthfulness. Though there were many who might disagree with him, very few would question the integrity of the man. For a small, Utah, Mormon boy who grew up in the luxuries of the Gilded Age, he represented everything that was fair and right about the Intermountain and Mormon culture.
Arrington, L. (1975). David Eccles: Pioneer Western Industrialist. Logan, UT: Utah State University.
Arrington, L. (1976). A History of the First Security Corporation. Logan, Utah: Utah State University Special Collections.
Eccles, M. (1951). Beckoning Frontiers. New York: Alfred A Knopf.
Eccles, M. (1973). Marriner Eccles Last Speech. 1973. Utah: University of Utah Special Collections (vol. 3).
Hyman, S. (1976). Marriner S. Eccles: Private Entrepreneur and Public Servant. Stanford, California: Graduate School of Business: Stanford University.
Nelson, M. (2012, December 27). Jumping the Abyss: Marriner S. Eccles and the New Deal, 1933-1940. Retrieved from New Economic Perspectives: http://neweconomicperspectives.org/2012/12/jumping-the-abyss-marriner-s-eccles-and-the-new-deal-1933-1940.html