What or Who caused the financial crises of the 1920's?
"That man is the cause of the present economic depression--at least he is the one who started it in America."
Mr. Laramee, the chief engineer of the American Steel Corporation pointed to one of the shop foremen, an old Bohemian peasant type. I know for a certainty that my chin dropped and for several seconds I looked alternately at Mr. Laramee and the foreman.
The foreman I had never seen before. And if I had, I did not remember him, for he was like any number of his class, except that he was more stupid looking than the average foreman. Mr. Laramee, however, I had known for years. He was a man who said so little that it was almost impossible to hold a conversation with him. As chief engineer of the American Steel, he was in the habit of releasing only enough words to make himself clear, and when Mr. Laramee spoke no one ever misunderstood him. Not for a moment did I doubt him. But I did feel that he would have to do some tall explaining to fix upon a stupid-looking Bohemian foreman the blame for the failure of hundreds of banks, the dumping of food products, the stupendous crash of Wall Street, the closing of countless firms, the starving of millions, the frightful unemployment, the complete consternation of Congress, and the unparalleled sadness of Mr. Hoover! No, as I looked at the old overseer in overalls, amidst his long ladles, smudged, tired, and undeniably dull, I felt that it would take at least a more important looking individual to precipitate the greatest crisis of the twentieth century.
Mr. Laramee smiled faintly, and I felt that I was on the path of something strange. He led me to the bridge from which one can watch the pouring of steel with comparative safety. And there, amidst the gushing of white hot streams of molten lead, the meteorizing of millions of sparks that leap and shoot madly into space, the screaming of winches and rattling of giant cranes and tiny donkey engines, amidst the burning inferno of the steel furnaces where temperatures run to 2,000 degrees fahrenheit. I listened to Mr. Laramee’s tale and decided that the gods of romance still rule the bewildering affairs of men.
"Do you remember way back in the early 19OO's, when chickens were eighteen cents a piece, and a man had who fifteen dollars in an envelope every Saturday was a salaried official. Well, at that time there were steel and bridge companies operating independently all over the country. Cotton was king, wheat was king. The industrialisation process was still rooted in the country and cities were a focus of trade rather than construction. Bessamer and the open hearth were yet in the lap of time.” Mr. Laramee paused as steel sparks enveloped us. I felt my face smart under the hail. It was like the fall of Satan. We both wore the cobalt-blue glasses, without which it is impossible to look directly at the molten steel. I saw the Bohemian foreman further along the bridge, directing this breath-taking process as calmly as though it were a matter of pouring milk from a jug. But I knew that one flaw in the construction of the immense furnaces, which are bigger than a house, would mean the flooding of the whole floor with the fatal liquid that glowed intolerably bright as it slewed out in gigantic streams to the containers below. There is no industrial process that is filled with more beauty, more unexpected grandeur, and more unlooked for danger than the first pouring of molten steel.
Mr. Laramee laughed in my ear as he beat off the sparks. "Swell, isn’t it?" he shouted as a donkey engine screamed past. I was almost as much amazed at Mr. Laramee as at the foreman whose impossible story he was telling. The noise subsided a little.
"Well," he went on in the comparative quiet of the overhead trains, "about that time engineers were beginning to discover that steel held together pretty well by the use of rivets and that was the solution to long-span bridges and sky scrapers. Somebody conceived the idea of organising all those small steel mills and bridge shops under the name of American Steel. It was the most important event in America since the cotton gin and the discovery of oil. It was destined to put steel at the head of the market. But in the beginning it was hard, as all such things are. Money was hard to raise. There was diffidence and one or two panics — just the process of getting readjusted to new industrial standards. The American Steel Company stuck it out, however, and insisted on selling stock. Of course, everybody predicted that the new company would break. So the shares had very little market. The Company chose an easier method of disposing of the stock. A bloc of their steel shares was unloaded on the employees — shop employees. It was buy or get out. Excuses could always be found to fire a labourer, and the workers were in no position to lose their jobs. Workers never are. They bought stock. Don’t give that statement to the papers, it's strictly confidential. At any rate, selling the stocks to the employees was like feeding castor oil to children. They didn't like it. But in the end it was the best thing for them, as history proved.”
"Now there was a young foreman of Bohemian extract in charge of one of the fabricating shops. He was simple, and in shops in those days work practices were also simple, it was no great wonder that he held the job of foreman. High speed drills, multiple punches and the like were undreamed of in those days. Rivets were driven with a hammer, and steel shears were the size of a modern paper cutter. Since then matters have become more complicated, but Joe Drezci, the Bohemian foreman, had learnt them only because they were hammered into him. He has the supreme of calmness. That is why he’s here today. As for his business ability——" Mr. Laramee made an eloquent gesture with his hands, and I saw that my picture of the stupid Bohemian was justified.
"You know," continued Mr. Laramee, digressing, "I've often wondered about the probability curves of good and bad luck. I've made graphs of the luck of my friends, but I can't find anything to plot against. I’ve run the gamut from disappointed love to ingrown toe-nails, but can’t find a constant. But I digress. I mention this because Joe Drezci's luck seems to defy all the laws of reason or even the laws of chance. There isn't any sense to his sort of luck, even in this curious country of ours, where almost anything may happen while a man’s back is turned.”
"To get back, Joe Dresci’s wife happened to inherit thirty-thousand dollars. Now that was a lot of money in those days. To a labourer it was little short of the wealth of Croesus. Joe had a slow methodical mind. He regarded work as the natural lot of man, and money as providential manna from heaven as a reward for conscientious behaviour. It did not occur to him to get into a better world, or to loaf, to try to buy a small business, to go to another city and try for a better job. He wanted the money put away safely against the future, for the Dezcis were even then planning on a little multiplication of their own images. Joe, therefore, went to the vice-president of the Company and asked for advice.”
"The vice-president, knowing the state of the treasury, and feeling a bit shaky in his own chair, had every reason to be loyal to the Company. He urged Drezci to buy Steel shares. He demonstrated how Joe would double his money in twenty years, and he gave the foreman the calculation sheet to examine. Joe, whose mind was never very strong on anything, let alone the intricacies of ordinary arithmetic, was utterly bewildered. From bewilderment to awe is one step. The vice-president knew his psychology as well as mathematics. In twenty years Joe would have sixty-thousand dollars, which represented to him the end of the rainbow.”
"The vice-president could not sell Joe the shares direct. But he knew that the credit would rebound to his good, and he was eager to increase his standing with the Company. However, he reckoned without the dissenters. These were the labourers who bought shares unwillingly, and who regarded the investment as a total loss. They were eager to get rid of the stock before it went down further and carried with it their hard earned money. They complained of being swindled. They muttered against the Company. You will find such men in every forced enterprise. They regarded themselves as martyrs.”
"Joe’s mind was set on getting all the shares he could for his money, and he proceeded to do so in the simplest manner possible. The Company sold stock to the employees at six dollars a share, and Joe bought it from the dissenters and grumblers at five dollars. He bought six thousand shares. The labourers from whom he bought congratulated themselves on escaping from a worse hole, and Joe congratulated himself on acquiring the riches of a Rockefeller. He salted the shares away in a bank deposit vault and proceeded to forget about them.”
“Well, 1929 rolled around. It was the big year. I needn't remind you of it. There will probably never be another 1929. By this time Joe Drezci, the foreman, had begotten 10 children, and each of his shares had begotten something like eight. In value they had risen from five dollars to two hundred and fifty each. That gave him a profit of two thousand on each original share. If you multiply that by six thousand shares, you get twelve million. We won’t count dividends. Think of it, twelve million in the bank, and he still got up by the whistle and carried his lunch pail to work every day.
To all appearances Joe had forgotten about his shares. I know the rest of the town had. He probably had no idea of their value.
"But the tides of human affairs are never governed by the logical. As it happened in this case, the fact that Joe's eldest daughter was grown up and answering the sweetest words in the world with a bashful nod, this had more consequence upon the last months of 1929 than all the predictions that ever came out of the economy bureaus. Now Joe still stuck to the peasant customs that required every father to give his daughter a handsome dowry - the bigger the dowry, the happier the father. He had no ready cash. He had no houses, no land, no costly possessions, no rare objects of art, no pull anywhere, nothing, except those forgotten shares. He gave his son-in-law a tenth part of the shares to help him start out in life as a family man. And then the young couple went honeymooning. Two weeks later Joe and the rest of the small townsfolk got the biggest surprise of their lives. The newlyweds drew up to the door in Deusenberg sedan. Now steel-workers children do not drive Deusenbergs. A second hand Chevrolet is more than suitable. The young couple came into the house. I would give anything to have been in the room when Joe Drezci got the news. His son-in-law discovered that the shares of steel stock which Joe had given them as a wedding gift was convertible into a million. I wonder what Joe’s face looked like at the time. Such things happen once in a century if that often. To me it is the supreme fairy-tale.”
"But to continue. You know that in 1929 Steel was king. It topped the market. Everything else was more or less influenced by the fluctuations of the steel board. I suppose it accounted for only by our weird and unreasonable economic system. At any rate, Joe had aged considerably since 1900. His younger daughters suddenly became important matrimonial bait. His sons were abruptly conscious of the world beyond a steel town. The entire family felt the urge to expand, to live. Joe was cautious as ever. He stayed at his job and never came late. His lunch box still contained brown bread and hard cheese. There are some men whom nothing can change. But he was hounded by his family into converting all those shares into ready cash. These people felt that money in a box was worth all the stock in the world. Money is real, tangible. Stock is abstract, artificial, something their practical minds could not conceive. So Joe dumped.”
"And what a dump that was. He took his forty-thousand shares and dumped them on the market within a month. A block of forty-thousand coming from an unknown source at the time when prosperity was almost a malignant disease, created a furore. Everybody was brave — everybody bought. Steel went up for a week and reached two hundred and sixty."
Mr. Laramee stopped and cleared his throat, but words were drowned out in the roar of the overhead trains that came travelling along the aerial rails. The steel slewed out in molten wonder. It was strange to me, standing in the midst of this battering shrieking, the intense heat and intolerable glare. The foreman’s back was towards us. He had no time for fanciful speculations. The heat of steel must be caught without mishap, or he as the foreman would be responsible to the Company. His heavy peasant face was intent upon the men about the furnace. Mr. Laramee gazed at the spectacle and continued, almost shouting in my ear.
"There isn’t much else," he said. "Steel was high. It was bursting, swollen. It looked ominous. You can understand the feelings of Wall Street. Something was bound to happen. Things had been sledding along treacherously enough with millions made and lost in an hour. Up, still further up, had been the trend, and when the unknown bloc came, matters were at a boiling point. It is useless to speculate on what might have been had not Joe come along at this moment of affairs. Perhaps something else would have broken the market. But Joe did come along, so we must put the blame upon him.”
"Steel was two-sixty. And the shivering presentiment went through the Street that it couldn’t stay that way much longer. Then all the little fellows in the offices, the draftsmen, the shopmen, the millwrights, everyone who had from ten to one hundred shares began to dump. They were terrified, because having less money they had more to lose. They followed the market more closely than Joe. They believed that Wall Street was unloading--so they dumped. That broke steel.”
"You know the rest. Steel tottered, there was consternation, speculation, rash confusion. Steel tottered and fell. When the king falls the subjects grovel. After steel came others. The market bounced like a rubber ball, flung about by fluctuation of personal terror. There was no logic, no effort to do things systematically. What can you expect of Wall Street? And by the beginning of 1930 we were in the middle of the prettiest panic America had ever seen. That’s all there is to the story. Joe bought a new lunch pail last week, and his daughters have married some blue blood since 1929. He won't leave yet. Afraid to eat into his millions. He still can’t realise how much a million dollars is. And he sees no difference between one million and ten million. A little characteristic of his peasant mind. Want to meet him?"
I was so full of the story that I almost forgot to answer Mr. Laramee, and came to myself a moment later to find Joe Drezci bowing and scraping as the chief engineer introduced us. I confess that his servility shocked me, for such is the inherent snobbishness of man, that I could not help a certain feeling of reverence for a man who owned millions. The owner of the fortune was stupid, uneducated, untutored, uncomprehending, but my voice became involuntarily polite as I acknowledged the introduction.
As we walked away I asked my first question.
"But why does he continue to work, Mr. Laramee? He's very old!"
Mr. Laramee chuckled. "Next month he gets his pension money. He’s afraid to retire without it — thinks that poverty might overtake him in his old age!"
circa 1933
Maurice Lubin
223 Second Avenue
New York City
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