'Business Week' and the Depression - The Tontine Coffee-House

In the early 20th century, several of America’s most famous popular publications on business and finance were launched. Forbes, Barron’s, Fortune, and Business Week all got their start between 1917 and 1929 and all survive with large circulation to this day. They each covered the events of the Great Depression and any of the magazines could be rich sources for those in search of narratives from business life in that era. However, Business Week is arguably among the best for that purpose and for several reasons. First, it was a weekly magazine rather than a monthly; second, it was relatively rigorous in its reporting; and lastly, it was published with a focus on informing executives and be their aid in making business decisions.

Business Week

Business Week began life in 1929. The new magazine was published by McGraw-Hill, then the largest publisher of industrial and trade publications in America. A copy of the first issue of The Business Week, as the weekly was then named, could be had for just 15 cents. It was born out of another McGraw-Hill business publication, namely System: The Magazine of Business, which the company had acquired the previous year from A.W. Shaw Co. The magazine benefitted from the mountain of expertise already in the possession of its sizeable parent company. Virgil Jordan, the house economist at McGraw-Hill, served on the new publication’s editorial board and helped guide its early reporting on the eve of the Great Depression and the subsequent descent into a prolonged economic slump.

Business Week was McGraw-Hill’s foray into a new approach to business journalism. The company, through mergers and acquisitions, had accumulated a list of specialized titles focused on specific industries, from electrical engineering to mining. In the parlance of the company’s executives, these were called ‘vertical publications’, focusing on a single vertically integrated industry. McGraw-Hill was increasingly looking to leverage the expertise of these many journals to create ‘horizontal publications’, serving all industries and benefiting from the specialized content of its family of vertical magazines. Business Week was able to tap into a knowledge base of twenty-two specialized publications, giving the magazine a reputation for technical rigor that was unmatched.

The first issue dropped into the hands of readers on September 7, 1929. It would soon be joined by Fortune magazine. Fortune produced its prototype issue that same month and, after approval from its parent company, Time Inc., began regular printing in February 1930. Rather than cover the economy, business, and financial markets from an investor or speculator’s point of view, Business Week was focused on informing businessmen and executives. Accordingly, the publication was tightly marketed to corporations, whereas the likes of Forbes and Barron’s, founded in 1917 and 1921 respectively, targeted a much broader reader base. These magazines targeted the ‘average investor’ types who became so much more numerous in the boom years of the 1920s.

Crash and Optimism

It was an eventful start for the staff and editorial board at Business Week; the magazine’s first issue printed just seven weeks before the 1929 market crash. On October 28th, Black Monday, and the following day, Black Tuesday, the Dow Jones Industrial Average fell 13% and 12% respectively. By the following year, the magazine had a circulation of 60,000. This rapidly growing body of readers received coverage of the downturn that was not without early optimism. Business Week reported that “prices, wages and employment will be somewhat, but not much, lower in 1930 than in 1929” on its January 1st, 1930 issue but conceded in a story the following week that “the forecasters cannot yet read the riddle of 1930”. The magazine regularly pointed to a lack of wage cuts in early 1930 as good news for business and the economy.

There were reasons to be optimistic in early 1930. Through the first half of that year, the Federal Reserve cut interest rates. The editorial board at Business Week was encouraged by the central bank’s cuts to its discount rate, which fell to 2.50% by July 1930 after standing as high as 6.0% going into the crash. That month, reporting in Business Week pointed readers to “a fistful of straw that show business winds have turned” including that “so long as this [bank credit] expansion continues, either price levels or the volume of business activity is bound to rise—or both”. The magazine forecasted that an upswing would be clearly underway within a month. However, there was plenty of attention paid to downside scenarios as well, especially the risk that overall prices and wages could follow commodity prices lower.

Editorial Encouragement

Despite its optimism, Business Week persistently argued for interventionist policy from the government through 1930 editorials. The editors encouraged the Federal Reserve and the government to support the economy, disappointed that so little had been done, in its view. The Federal Reserve’s interest rate cuts were not enough. The magazine also took house stances on an array of economic and financial questions of the day. It was fearful of deflation and skeptical of the need for balanced public budgets as the Great Depression got underway. Business Week was also critical of the gold standard and supported higher government infrastructure spending, policy activism that foretold the future.

Perhaps because of its frequent incorrect predictions that year, readers would have begun to doubt that a recovery would come about naturally, without specific action on the part of economic and political leaders. The magazine was likely influenced by Keynesian ideas long before any of the ‘New Deal’ programs were rolled out. Indeed, Business Week was a popularizer of Keynesian ideas to the public, or at least the managerial classes, few among which would have read Mr. Keynes’s books or papers for themselves. The familiarity and openness to Keynes’s ideas may have been the result of Virgil Jordan’s earlier studies at Cambridge as a graduate student.

The magazine maintained a firm pulse on what Keynes called the ‘animal spirits’. Indeed, to some extent, measuring and conveying the position of the animal spirits of business is what business journalism is all about. In any case, Business Week respected their power. In one August 1932 editorial, the magazine declared that “the essential basis of American business is emotion”.

Depression

Despite Business Week’s pleas that further action be taken, the economy continued to worsen. The past optimism of the magazine was steadily evaporating by mid-1931. Interest rate cuts were partially reversed and wages fell sharply in 1931 and 1932. Though it had taken over a year, the Great Depression was firmly setting in after the crash of 1929. The magazine continued to blame a reduction in credit for the economy’s woes. Business Week reported on “a sudden, mysterious, universal shrinkage and shortage of the money and credit medium” in September 1931.

From the May 7th, 1930 issue on, readers could track the progression of the slump through a business indicator index put on every issue’s front page. As the April 12th, 1933 edition above unsurprisingly reveals, business activity was far from levels considered normal. This was just a month into the presidency of Franklin Roosevelt and in time Business Week would become firmly pro-New Deal. Though initially unsure of President Roosevelt’s policies, once the scale of his objectives became known, the magazine appeared mostly enthusiastic in its reporting. Within a year, its business indicator index would rise from a level of 50 to 65.

“The excited rumor goes the rounds in Washington and in Wall Street that inflation is imminent … This is inflation, if you like, in the sense that it is the reverse of deflation…Business recovery we must have, and in that sense, inflation. It must be brought about by government action. There is nothing in this to be terrified about. On the contrary—let’s go!” – “Without Benefit of Greenbacks,” Business Week, April 19th, 1933

Just as the economy was turning the corner and its index rising, the magazine’s circulation was growing as well. Circulation rose to 75,000 in 1933 and continued drifting higher; it would finish the decade at 110,000, planting it firmly among the most popular business publications in America, a status the magazine would continue to hold to today.

Lesson

The stock market crash of 1929 and the subsequent descent of the American economy into the Great Depression can be tracked on the pages, or even just the covers, of Business Week. The market crash, the response of the government and central bank, the election of 1932, and the New Deal legislation of President Roosevelt all kept readers engaged with the magazine and the prognostications of its staff and editorial board.

Of course, their interpretations of business and financial events could be supplemented with more recent views possessing the benefit of more years of research and hindsight. However, unlike the favorite Depression theories of the economists, politicos, and tycoons of today, those of Business Week and other journals of the time actually impacted the thinking of economic actors as events were themselves unfolding. If for no other reason, this would be reason enough to appreciate the importance of publications like Business Week to financial history, particularly in the 20th century when such journalism flourished.

More from the Tontine Coffee-House

Read more about the Great Depression, including some of the policy reactions of the Federal Reserve in the United States, and provincial authorities in Canada and Austria.

‘Business Week’ and the Depression