How Rotary survived the Great Depression

 

 

Top: Bernie Lorino with his son (left) and father (right) in 1957. Bottom: lines for employment during the Great Depression.

The current economic recession has begged comparison to former hard times. We consulted our archives and seven Rotarians ages 90 and older who remember the Great Depression. What we are experiencing now is nothing like those days.

On a Sunday last September, a week of meteorically bad economic news began raining down like a hailstorm of gold bricks. Venerated investment bank Lehman Brothers was bankrupt. Stock market bellwether Merrill Lynch was spared a similar fate only because of an eleventh-hour takeover by Bank of America. The world’s largest insurer, American International Group, on the brink of insolvency, had to turn to the U.S. Federal Reserve for an $85 billion rescue package. Financial markets around the world were in turmoil, and we were suddenly in the grip of a global crisis.

Amidst all the confusion and uncertainty, economic experts seemed to be in agreement on something: We were in the throes of the worst financial mess since the Great Depression. But despite the bleak economic landscape – housing foreclosures, the subprime mortgage mess, bankruptcies – there was something else economists seemed to agree on: Regardless of how bad things were, conditions did not compare to the Great Depression.

Just how great was the Great Depression? And what was its impact on Rotary?

The answer to the first question is clear. The answer to the second is far less so and, if considered in the context of the long-term growth and viability of the organization, probably somewhat surprising. We could argue that the Depression had a positive effect on Rotary.

Writer Jonathan Alter observes in The Defining Moment, an account of President Franklin D. Roosevelt’s first 100 days in office, that “anyone who wasn’t alive at the depths of the Great Depression is at an empathetic disadvantage when considering it, like a mentally healthy person trying to imagine what it must feel like to be clinically depressed.”

From 1929 to 1932, the unemployment rate tripled. About 16 million people – one-fourth of the workforce – were unemployed, and a third of those who had jobs were working part time. Factor in that few women held jobs – and that many of those who did, gave them up to men. Nearly half the population of able-bodied adults was out of full-time work. Compare that with the 9.5 percent unemployment rate as of July 2009 – and consider that the safety net of government assistance that we tend to take for granted was only then being constructed – and there is little doubt that the Great Depression was much greater than today’s problems.

According to Alter, images of stock tickers and dust bowls have obscured the most direct cause of the Depression: the culture of U.S. banking. The country had far too many mom-and-pop banks, with low capital requirements. In the United States, more than 10,000 banks failed. But in Canada, where nationwide branch banking was the rule, only one bank went under. In fact, The Rotarian published an article pointing this out in December 1932: “Canada’s Banks Stand Up,” by Robert J.C. Stead.

Throughout the early 1930s, editorials and articles in The Rotarian conveyed a strong sense of the Depression’s impact on Rotary, the United States, Canada, and even Europe to some degree. There is little doubt that many Rotarians experienced serious financial losses and suffered personal hardships during the Depression. In December 1933, a Rotarian editorial mourned the “ex” who had been forced to resign from his Rotary club and encouraged current members to continue to offer “friendly contact” to him and “other ex-es.” But Rotary’s overall membership declined for only two years – 1932 to 1934 – and by 1936, it reached a new high of 162,000. Some of this rebound was attributable to a loosening of classification restrictions, effectively allowing more than one club member in each line of business. During the entire decade, however, fewer than 50 clubs collapsed, and the total number grew from 3,177 clubs in 59 countries to 4,714 in 89 countries.

During the 1920s, when membership in Rotary more than doubled, Rotarians came under attack from prominent writers such as H.L. Mencken and Sinclair Lewis, who viewed them as superficial. (Incidentally, that view did not keep Mencken from writing for The Rotarian in May 1933.) While some of the criticism was heavy-handed, it is probably fair to say that many Rotarians were more interested in the benefits of fellowship than service to their communities. But with the Depression came a renewed commitment to service, even if it arose from necessity. Rotarians were sobering up to the harsh economic reality by trying to be exemplary citizens.

Early in 1932, Rotarians in Urbana, Ill., played a pivotal role in averting a bank panic by organizing local businessmen and restoring public confidence. An editorial in the December 1932 issue of The Rotarian praised the Rotary Club of Cedar City, Utah, for helping to reopen the Bank of Southern Utah, noting that “such instances of service could, from data on file at the Chicago secretariat, be multiplied almost without limit. They show a general understanding of the truth that Rotary clubs should be more than crippled children’s organizations, more than garden clubs, more than just the donors of turkeys at Christmas time.”

Rotary clubs in Easton, Pa., and Maywood, Ill., drew notice for donating land and seed for community gardens. In South Bend, Ind., Rotarians harvested vegetables left to rot in farmers’ fields and opened a soup kitchen. Service projects took place beyond U.S. borders, from Argentina to Poland, Canada to Singapore. In the United Kingdom, more than 80 Rotary clubs took part in the Bristol Scheme, a coordinated “spend for employment” initiative modeled after efforts in Muncie, Ind., and Rochester, N.Y., in which residents who could afford to make home improvements bought their supplies and hired unemployed locals to do the work.

As individuals or through their clubs, Rotarians were no doubt helping in their communities in ways never noted in the pages of The Rotarian. For example, Ramona Lockhart, the daughter of Herbert J. Taylor, who created The Four-Way Test in 1932, recalls that her father and mother started their own soup kitchen in Chicago on weekends.

No matter how earnest their intentions, however, Rotary clubs did not have the resources needed to play more than a local role in the U.S. economic recovery. This may explain why, upon FDR’s inauguration on 4 March 1933, a lot of Rotarians welcomed the progressive programs of the New Deal, even if many of them were wary of government intervention in the economy. The fact that FDR was an honorary Rotarian who had effusively praised the organization may also have gained him some benefit of the doubt.

Many Rotarians also supported the controversial legislation that created the National Recovery Administration (NRA), which, as Alter notes, “extended government further into the private economy than any wage and price controls before or since.” In the fall of 1933, Americans showed their approval for the NRA with the largest public demonstrations that had ever taken place in the United States, including a march of about 250,000 people down Fifth Avenue in New York City. Shopkeepers throughout the country hung the NRA emblem – a blue eagle with the legend “We Do Our Part” – in their store windows. Some Rotarians even wrote songs in support of the NRA and submitted them to The Rotarian.

Shortly after the NRA was created, a December 1933 editorial left little doubt about where many Rotarians stood: “Some say the NRA is too dictatorial … [but] the basic concept is that economic ills are not a visitation from an outraged Providence, but are man-made and can be cured by intelligent social action … All men have an inalienable right to an opportunity to earn a decent living.” Another article in the same issue summed up an important lesson that the NRA seemed destined to preserve: “The Depression taught Uncle Sam that trade, like water, will seek its lowest level, unless the government backs up fair-dealing business men.”

In describing the Depression as if it were already in the past, The Rotarian correctly implied that an economic recovery was already underway. (Abetted by hindsight, economists generally date the start of the rebound to the second quarter of 1933.) In a rapid about-face, many Rotarians quickly became disillusioned with the NRA, seeing in its industry codes a thicket of government regulations that were burdensome to small towns and small businesses. They were not alone. On 27 May 1935, in a unanimous vote, the Supreme Court ruled that the NRA was unconstitutional.

Although the nation would fall back into recession in 1937 and a full economic recovery would not take place until World War II, Rotary was on its own path to recovery well before that. After its brief decline in membership, its phenomenal growth resumed, and its identity as a service organization committed to ethical conduct became more secure. While that gain in stature must have come as a surprise to the many Rotarians who had wondered about their clubs’ future during the first dark days of despair, it likely was not a surprise to one key person among them: Rotary founder Paul Harris.

In February 1932, Harris reflected on “the orgy of 1929” and the real meaning of being wealthy. “There are things even worse for the average man than economic paralysis,” he said. “The habit of worshiping mere things is one of them.” Harris addressed the hypothetical circumstance of a financially strapped businessman who “took inventory of his frozen assets.” Most of them were worthless, “but he found others of astounding value [that] had long been overlooked, almost forgotten in the debauch of business,” Harris continued. “Take a look at the list: neighborliness, friendliness, sympathy, love. … To you and me, if we please, the present crisis may prove to be the most profitable period of our entire lives.”