Back in 1941, when I was assigned with Eunice Clark, the granddaughter of economist John Bates Clark, to do a story on American war preparedness for Fortune, publisher Harry Luce suggested that we might take counsel from Bernard Baruch, the old chairman of the World War I War Industries Board. The experience of talking with Baruch was both fascinating and hair-raising. He threw himself into the story as if it were his own. But when the article appeared he called up to express his disappointment. “Did Harry Luce lose his nerve?” he asked.
What had actually happened was not Luce’s fault. Baruch’s projections of the cost of the coming war had seemed so huge to us that we had, for publication purposes, cut them down to what we considered a “reasonable” figure. We were, of course, wrong. The war itself made Baruch’s outside figures seem all too conservative. Nevertheless, the old Wall Street veteran, who was used to keeping a wet finger to the wind, had a more certain sense of the future than anyone else at the time. Harry Luce used to quote Baruch’s ruling admonition, “Keep your face toward the sound of the guns.”
James Grant, formerly of Barron’s magazine, gets to the essence of Baruch’s seemingly equivocal character in a spirited and well-written biography, Bernard Baruch: The Adventures of a Wall Street Legend (New York: Simon and Schuster, 376 pp., $19.95). Baruch, the son of a South Carolina doctor who had come to America to escape the Prussian draft, distrusted the power of the state. He believed in free markets. As a governor of the New York Stock Exchange in the pre-World War I period, he opposed government regulation. A southerner transplanted to New York, he was a Democrat with a capital D, which meant, at the time, that he followed Andrew Jackson in his preference for hard money and free trade. “His lifelong approach to economic problems,” says Grant, “was the fundamental notion that people must work and save.” When asked about foreign lending, Baruch said he would use it sparingly, and only on condition that recipient governments would establish free trade in return.
A Market Operator
As a market operator, however, Baruch knew that governments would always be vulnerable to special interests. Baruch’s first great market killing was in sugar. With his eye on Washington he had a gut feeling that the sugar beet politicos of Colorado and Utah would win out in a log- rolling deal with Louisiana cane sugar raisers to keep the sugar tariff high. The year was 1897, and Wall Street was betting the other way. Baruch put $300 into the market, and kept parlaying it (with canny stop-loss-order protection) until he had a profit of some $60,000. He promised his intended wife that he would hang on to the money, and on the basis of that promise she married him. As a matter of record, Baruch bestowed two-thirds of his profits on his family, buying a seat on the Stock Exchange for his brother Harty on condition that his brother would give up acting.
Grant’s story of Baruch’s vicissitudes as a market speculator is dispassionate. Baruch was no superman, and he had to learn the hard way that tips, even when supposedly well-authenticated, could lead to disaster. Baruch lost money in coffee when he failed to outguess the nature of Brazilian growing seasons. But he was in his element in dealing with metals. Cultivating the Guggenheims, he amassed an encyclopedic knowledge of world metal resources. He was also in on the ground floor in sulphur. He was as much an investor as he was a speculator when it came to buying metal stocks.
In the period after the 1929 crash Baruch made mistakes like everybody else, but he never got extended on margin. Where he had been worth some 22-to-25 million dollars in 1929, he came out of the Hoover years with some $16 million intact. It was not a brilliant performance, but it was nothing to cry about. Baruch would have done better for himself if Roosevelt had not forced him to turn in his gold. But he made money in gold mining stocks, which continued to pay dividends at a time when capitalists such as Ivar Kreuger and George Eastman were killing them selves.
Power, Party, Friendship
Good libertarian though he was in theory, Baruch was always willing to sacrifice philosophic consistency to considerations of power, party and friendship. His desire to be of help to his hero Woodrow Wilson moved him deeply into a wartime socialism as head of the War Industries Board. Thereafter Baruch was always ready to support such dubious measures as price-fixing even in domestic crises. He was against inflation, but when the Supreme Court invalidated the gold clause he wired his congratulations to Roosevelt in the White House. His inconsistencies made it impossible for anyone to predict where he would next turn up on the ideological compass. In 1937 he predicted to Winston Churchill that “all the ‘managed currency nonsense’ would soon disappear.” But World War II intervened, and Baruch, as the World War I War Industries Board czar, was back in the business of advocating total centralized control of the economy.
Grant speaks of Baruch’s later years as an “industrial statesman” as offering a “masterpiece of irony.” Asked to make a speech at Johns Hopkins University, Baruch delivered a lecture on the evils of statism and the inviolability of natural laws. “We barter away our birthright,” he said, “in such an extension of federal power that the earth, air and water are all, in some sense, regulated by bureaus. Local government is a vanishing function. Privacy in business relations is practically gone. Personal conduct is largely under federal supervision. There is scarcely one of the guarantees of the Bill of Rights that has not been impaired. The cost of all this folly is reflected in a four billion dollar government no better in many respects than the pre-war establishment which spent one-sixth as much . . . We simply cannot afford this sterile luxury.”
It was a great speech, worthy of the honorary degree that it earned. But as the Roosevelt revolution went its way Baruch’s reaction to measures that he could not approve was mild. To Senator Key Pittman he remarked that he did not want to be put into the “position of saying any thing to commit sabotage.”
Grant makes no effort to reconcile Baruch’s opinions with his behavior. It is a thoroughly instructive book on the perils of being first of all a party man.