Edward C. Harwood took the government to task before it was cool.
Edward C. Harwood took the government to task before it was cool.
T he temptation arises to see the American right as a belated reaction to the New Deal with a Year Zero occurring sometime between Harry Truman’s swearing-in and Dwight Eisenhower’s reelection. This obscures a reality of such pre-movement conservatives as Albert Jay Nock, Rose Wilder Lane, John T. Flynn, Garet Garrett, Henry Hazlitt, and Isabel Paterson, who fought a valiant albeit losing fight against the New Deal.
The legacy of one such unheralded figure, Edward C. Harwood, thrives at the American Institute for Economic Research (AIER) and its mansion centerpiece in the Berkshires. A West Point graduate, longtime Army officer, overseer of the widening of the Cape Cod Canal, father of seven, proud goldbug, Massachusetts Institute of Technology professor, and winner of the Bronze Star for his efforts for the Army Corps of Engineers in the Philippines, Harwood devoured economic works on liberty during the time that the military granted him leave and liberty. He founded AIER during the first year of the Roosevelt presidency and became a pest that bureaucrats and members of the president’s “brain trust” attempted to swat. The slingshot he used to battle the New Deal behemoth came in the form of AIER’s weekly Bulletin, bound volumes of which stored on the group’s leafy and bucolic campus prove the questioned supposition that, yes, a right existed prior to the conservative movement.
“In our opinion,” the Bulletin informed in 1935, “an organization of society which utilizes human characteristics instead of denying them is much more likely to become the ideal state.” The New Deal’s denial of human characteristics included the wage and price controls imposed by the National Recovery Administration (“the NRA . . . tried to overcome the natural laws of supply and demand”), Social Security (“unsound from an actuarial point of view”), and, especially, the enormous debt taken on that necessarily meant a looming inflation of the currency.
“During the past two years, the word ‘inflation’ has probably appeared in the headlines more than any other single word of the English language,” AIER’s Bulletin explained. “Yet, it would be safe to say that it is one of the words least understood by those who read it, and least carefully by those who write it.”
For these reasons, Harwood often used the peculiar variant, “inflating,” to emphasize a word that meant not the symptom that results from flooding the market with currency, i.e., higher prices, but rather the pumping out of too many dollars chasing too few goods that caused that symptom.
“Apparently, most of the population fails to realize that the printing press turning out Government bonds can be just as dangerous a weapon in the hands of politicians as the printing press turning out currency,” Harwood’s Bulletin explained. “For all practical purposes, it matters little whether the Government prints bonds and sells them to the commercial banks of the country in return for new demand deposits, or prints currency directly. The interest factor involved in the case of bonds is a distinction which makes virtually no difference, except to increase the ultimate cost to the taxpayer.”
To go from surpluses in every year of the 1920s to a de facto policy of forever deficits that began in the 1930s and never ended, save for a few outlier years since, seemed to be the nightmare scenario that Harwood sounded alarms against. It alarmed the government that Harwood noticed.
Lauchlin Currie, the administration economist perhaps most linked to an enthusiasm for deficit spending, wrote an ominous note quoted by Katy Delay in E.C. Harwood: A Biographical Sketch of the Founder of American Institute for Economic Research. In the margins of an article penned by Harwood appeared the handwritten script: “Investigate and stop this — Lauchlin Currie, the White House.”
Currie lived unpunished abroad after Whittaker Chambers and Elizabeth Bentley implicated him as a Soviet spy, as did intercepted cables. But the government harried and hectored Harwood for writing about economics as a military man to such a degree that he abandoned his career as an Army officer in 1938.
Despite the use of the machinery of state to silence him, the military man kept a civil tone in his continued criticism of the president and his policies.
He highlighted what so many others continue to obfuscate — the New Deal coinciding not with recovery but a prolonged depression — when his newsletter asked in March 1935, “why is not business much better today than it actually is? In the past, recoveries from serious depressions have usually been much more rapid than the recovery from 1932 to date.”
The Bulletin engaged in principles and not personalities and exuded thought and not emotion. Harwood prophetically glimpsed a point of light in the New Deal darkness in Raymond Moley, the primary author of Roosevelt’s first inaugural who later became one of the most prominent free-market voices through his back-page Newsweek column. He counted it as a blessing that rather than one Hitler or one Mussolini, America instead got three demagogues in Huey Long, Father Coughlin, and General Hugh Johnson to cancel each other out.
Harwood’s detached, logical style stands out most conspicuously in the treatment of his bete noire. He neither demonizes Roosevelt nor mistakes his opposition to the New Deal for popular opposition. Harwood’s newsletter conceded in 1934 that “the public is still in favor of New Deal policies.” The following year, the Bulletin noted the popularity of the Social Security, described Franklin Roosevelt as “an outstanding politician,” and matter-of-factly noted that “we do not see how any party with a $4,800,000,000 box of favors to distribute can avoid being in office another four years.”
Harwood disagreed with the New Deal. He did not delude himself into pretending that a majority of his countrymen, as so many do today, shared his every opinion. Standing in the minority or even alone did not bother him.
His clashes with the federal government outlived Franklin Roosevelt. He raised eyebrows by encouraging the investment in South African gold mines as a means of skirting the federal prohibition against “hoarding” gold. Elsewhere, he coaxed rather than cleverly avoided trouble. President Kennedy’s IRS forced AIER’s financial advisory component to split off in 1962. A U.S. Claims Court ruled that AIER “admits the amounts received for the publications giving investment advice are above their actual cost of production,” which, despite those profits going into the nonprofit, gave them “a commercial hue.” The SEC, which Harwood had referred to as the “Swindlers’ Encouragement Commission,” began a lengthy investigation of him and AIER in 1974. The New York Times reported two days before Thanksgiving 1975 of a court-ordered freezing of $200 million in AIER and its for-profit offshoot’s funds for the “crime” of selling gold. Harwood, living abroad at the time, counted just 3,000 available francs. “Everything I could put my hands on ordinarily was blocked,” the colonel reflected to Reason five years later. “They had even sealed my safe deposit box in the Swiss bank.”
Harwood lived to see the legalization of the private ownership of gold investments under Gerald Ford, the deregulation of the airlines under Jimmy Carter, and the election of Ronald Reagan, which signaled massive changes for the tax code and much else. Rather than exhale upon his life’s work suddenly yielding a bountiful harvest, Harwood showed an understanding in his death at 80 that the struggle continues if only for the reason that a political neat freak’s dream of an ordered and organized economy never ends.
“Harwood died on the night of December 16, 1980,” Katy Delay writes in her brief biography. “His executor revealed that Harwood had given instructions to mail a small box of his old socks and underwear to the IRS in a last defiant gesture towards the government bureaucracy.”