The Great Depression: A Diary, Benjamin Roth; edited by James Ledbetter and son Daniel B. Roth.
When the current two-years-old crisis came to an initial head in September of last year, I was of a pessimistic bent. I did not see a quick recovery or an easy or prosperous time for us over the next few years. While it’s certainly possible that actions by government, industry and individuals may end up preventing a depression, our economy began collapsing from heights it had reached only due to speculation and greed. This is a cycle that repeats itself semi-regularly, to greater or lesser extents depending the heights reached and the level of government regulation in force at the time. While human greed and willingness to gamble for a piece of record profits will never change, it is shameful that, the lessons of the past forgotten, a significant part of the blame for the current crisis can be placed on 1990s-era deregulation.
What makes this book important is its clear similarities to the events of today. (While the editors admit to the release of the book being spurred by the current economic crisis, the cyclical nature of this type of event means the book would actually have been just as important in 1999 or 2006 as it is today.) In fact, it’s hard to read the book and not get the two eras a little confused. Bank closings? Check. Recovery Act bills and government spending? Check. Bankruptcy? Check. Foreclosures and federal foreclosure prevention programs? Check. Partial and full takeovers of industry? Check. Smaller paychecks every year? Yep.
Beginning in June 1931, Benjamin Roth recorded in a series of notebooks his observations on the events in Youngstown, Ohio. Highlighted are the sad state of his legal practice throughout the depression years, bank closings and reopenings, steel production levels, growth in the ranks of the unemployed, and extreme deflation in the early years of the depression. Though having no investments of his own, Roth recorded stock prices and dividend payments, and much of the discussion surrounds the best way to have invested if he had been able. Roth worries most about a period of strong inflation spurred by the policies of the Roosevelt administration and about middle-class professionals such as him being bypassed by the growing recovery, but also about the anti-Semitism of the campaign by Republican Alfred M. Landon in the 1936 presidential election, Hitler’s takeover of Europe, government control, socialism, losing the gold standard and the rise of organized labor, especially when it led to strikes and violent confrontation in Youngstown. He worries, too, about collecting what is due his practice without causing hardship.
I know little about investing, but Roth’s progression through the years of the depression is evident. At first, he believes that government bonds would have been the only safe strategy; later fears of inflation push him toward stocks, preferred and common. When the recovery stumbled greatly in mid 1937, he comes to believe that only having a pot of cash available and shifting among different strategies the follow the curve of boom and bust is prudent. In the end, he aligns himself somewhere between the speculators who he blames for the crash and the long-term, bonds-only investor he would have been earlier in the crisis.
Roth’s theorizing about investment strategy is nothing more, because he is too short on cash to do anything with his ideas. (While the book offers few details, the late 1940s and following decades were more profitable for Roth and his law office, which is still in operation with his son and editor at the helm. Roth and his wife also left behind the Benjamin W. and Marion B. Roth Foundation, a charitable organization.) What he offers in addition to his hypothetical musings on where to allocate non-existent savings is a picture of depression-era concern and struggle among the middle, professional class — not the union workers, not the migrant fruit pickers and not the stockbrokers driven to despair by losing everything. It is an important perspective.
The parallels to today are rampant, despite the obvious changes over the years. I find it hard to sympathize when Roth complains that only the working class is getting the benefits of the recovery, this due to federal requirements for shorter work days, increased pay and recognition of unions; it’s more likely that our own, forthcoming recovery will be felt first and most profoundly by the wealthiest 1% of our population, yet the middle class will still be bypassed as were Roth and his peers. The fear of socialism because of government spending I do not share, but many do today; bold government spending is what ended the Great Depression, though only when war gave the administration full license to do so. What I do share with Roth is resentment of those who play with the market as speculators, not as investors. He makes that distinction clear, and the blame is just as evident. Along with deregulation, those speculating in real estate, bad real estate loans and petroleum futures share a great deal of the responsibility for the fact that millions of us now make less money than we did two years ago, and that college graduates cannot find jobs, and that many formerly employed no longer have any job or are working well beneath their abilities. Yet he leaves room in his view of the market for a person not to hide his savings away but to invest it in growing business and government bonds, putting it to work while reaping the benefits — but in a way that is both responsible and prudent.
I read this book in 24 hours. The format of short diary entries combined with the thrill of following the ups and downs of Roth’s community and the country in light of today’s situation made it easy. I’d recommend you pick it up and do the same.
Note: I accepted a reviewer’s copy of this book but no other consideration from the publisher and am under no obligation to write a positive review. I write what I think and believe, nothing else, and the publisher has no effect on nor responsibility for what I write about this book. I request and write about books that appear interesting to me, and you should know when I get them for free.