presidential campaign, Franklin Roosevelt ran against incumbent Herbert
Hoover, who had been unsuccessful with deficit spending to restore the
economy. Roosevelt gave a speech in which he articulated the already-popular
theory of underconsumption. His masterstroke was putting it in the form of a
story inspired by Lewis Carroll’s famous children’s book Alice’s Adventures in
Wonderland. In that book, a bright and inquisitive little girl named Alice meets
many strange creatures that talk in nonsense and self-contradictions. Roosevelt’s
version of this story replaced his opponent Hoover with the Jabberwock, a
speaker of nonsense:
A puzzled, somewhat skeptical Alice asked the Republican leadership some
simple questions.
Will not the printing and selling of more stocks and bonds, the building of
new plants and the increase of efficiency produce more goods than we can
buy? No, shouted the Jabberwock, the more we produce the more we can buy.
What if we produce a surplus? Oh, we can sell it to foreign consumers.
How can the foreigners buy it? Why we will lend them the money.
Of course, these foreigners will pay us back by sending us their goods?
Oh, not at all, says Humpty Dumpty. We sit on a high wall of a Hawley-
Smoot Tariff.
How will the foreigners pay off these loans? That is easy. Did you ever
hear of a moratorium?29
Roosevelt used this story to point out the folly of Republican policy, with its
attempts at economic stimulus, but his campaign did not suggest any solution to
the problem. Instead, in his “Alice” speech, he proposed to install investor
protections. He also promised not to make the overly optimistic statements that
President Hoover had, and he noted that he would not encourage more stock
market speculation. Elected in 1932, Roosevelt signed in 1933 the National
Industrial Recovery Act, creating the National Recovery Administration, which
attempted to enforce fair wages. We discuss the outcome of this experiment in
chapter 17.
On the face of it, underconsumption seemed to explain the high
unemployment of the Great Depression, but academic economists never
seriously embraced the theory, which had never been soundly explained. Often
the theory was presented as an adjunct to technological unemployment:

underconsumption suddenly became a problem in the 1930s because of the
nation’s newfound ability to produce more than it needed. But other accounts of
underconsumption make no mention of technology. For example, in 1934,
Chester C. Davis, administrator of the Agricultural Adjustment Administration,
described how his agency was “redistributing purchasing power to the masses”
so as to help them spend more and thereby deal with underconsumption. He
explained why he thought technological unemployment had suddenly become so
important:
Why does our nation seem to need this supplement to the market mechanism,
after 158 years? You have the answer if you will go back into history and
consider the gradual concentration of business into great corporations, of
farmers into marketing cooperatives, of labor into collective bargaining
associations. These have reduced the area of the free market and have
increased the power of individuals controlling these concentrations.30
In other words, Davis saw the concentration of business as amplifying the
problem of technological unemployment.
The massive unemployment set off serious social problems. For example, in
the United States it caused the forced deportation (then called repatriation) of a
million workers of Mexican origin. The goal was to free up jobs for “real”
Americans.31 The popular narrative supported these deportations, and there was
little public protest. Newspaper reports showed photos of happy Mexican
Americans waving goodbye at the train station on their way back to their
original home to help the Mexican nation.
The dial telephone also played an important part in narratives about
unemployment and the associated underconsumption. The older telephone,
which had no dial, required a caller to pick up the phone receiver and connect to
a telephone operator, who said, “Number please?” The caller had to tell the
operator to make the connection. The dial telephone, which required no contact
with an operator, was not invented during the Great Depression; in fact, the first
patent for a dial telephone dates to 1892. The transition from the non-dial
telephone to the dial telephone took many decades. However, during the Great
Depression, there rose a narrative focus on the loss of telephone operators’ jobs,
and the transition to dial telephones was troubled by moral qualms that by
adopting the dial phone one was complicit in destroying a job. For example, the