Economic History Association
Political Shocks and Investment: Some Evidence from the 1930s
Author(s): Thomas Mayer and Monojit Chatterji
Source: The Journal of Economic History, Vol. 45, No. 4 (Dec., 1985), pp. 913-924
Published by: Cambridge University Press on behalf of the Economic History Association
Stable URL: http://www.jstor.org/stable/2121886
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Political Shocks and Investment: Some
Evidence from the 1930s
THOMAS MAYER AND MONOJITCHATTERJI
There has been some dispute about the impact of New Deal policies on the
business climate. Some historians have argued that the New Deal frightened
business, and others that it encouragedbusiness. This paperanalyzes the impact
of the New Deal on business investmentby lookingat the response of investment
to the outcome of the 1934, 1936, and 1938 elections, as well as the passage of
certain New Deal legislation. The data reject the hypothesis that the New Deal
frightenedoff business investment.
ONE
explanationfor the low level of investment duringthe 1930sis
that business was frightenedby New Deal legislation and rhetoric.
This hypothesis, which received much credence duringthe 1930s, has
been recently accepted by some economic historians but rejected by
others.'
On one side of the dispute there is Herman Krooss' view that:
The businessmen,who had at firstwelcomedRoosevelt's iconoclasticpragmatism,soon
came to regardit as at best infra-dig,and at worst as a sin against eternal truth....
Business leaders found much of the first New Deal to their liking;they were not happy
with the second one, and they thoroughlydetested the third.2
Similarly,Arthur Schlesinger, Jr. writes that the mania against Roosevelt "was a disease of the rentier class. . . . They were frightenedas
new forces boiled up from the lower depth. Everything they stood for
seemed under mortal attack."3 Frederick Allen states that "the financial community ... had become an almost solid anti-Roosevelt phalanx.... [In the] winter 1933-34 ... what wild schemes, they asked
one another, would this man hatch next?"4 George Wolfskill and John
Hudson assert that " 'standing behind Roosevelt' was a position in
Journal of Economic History, Vol. XLV, No. 4 (Dec. 1985). ? The Economic History
Association.All rightsreserved. ISSN 0022-0507.
Thomas Mayer is Professor of Economics, University of California,Davis, California95616;
MonojitChatterjiis Lecturerin Economics, Universityof Essex, WivenhoePark,Colchester,C04
SQ, England. At the time this paper was written Monojit Chatterjiwas a Visiting Associate
Professorof Economics at the Universityof California,Davis.
We are indebtedfor excellent commentsto PeterLindertandto two anonymousrefereesfor this
JOURNAL, as well as to participantsin the All-U.C. Group in Economic History, and for able
researchassistance to Ray Pfingstenand Adil Taha.
' See Herbert Stein,. The Fiscal Revolution in America (Chicago, 1969), p. 89; Herman Krooss,
ExecutiveOpinion(New York, 1970),pp. 189-90 and 199.
2 HermanKrooss, Executive Opinion, pp. 161-62, 183.
ArthurSchlesinger,Jr., The Coming of the New Deal (New York, 1959), p. 569.
4 FrederickAllen, Since Yesterday(New York, 1940),pp. 166-67.
913
914
Mayer and Chatterji
which businessmen and the well-to-do were rarely found."5 William
Leuchtenbergprovides a similarpicture:
Terrifiedby the prospect of confiscatory taxation, the wealthy viewed Roosevelt as a
reckless leveler . .. Many businessmenwere openly defiant.ArthurYoung, U.S. Steel
vice-presidentin chargeof industrialrelations,told the AmericanManagementAssociation that ratherthan obey the Wagnerbill he would "go to jail or be convicted as a
felon."6
This view has become incorporatedin textbooks, such as that by Gary
Walton and Ross Robertson, who contend that "distrust of New Deal
reformsin general and of tax policies in particularmay have weakened
individualincentives to carry out real investment and thus contributed
to the downturnof 1937 to 1938."7
But this view has not gone unchallenged. Thus Stephen DeCanio
concluded from an econometric study of expectational effects that the
New Deal helped restore business confidence.8This belief is also found
in some textbooks. Thus Harry Schreiber, Harold Vatter, and Harold
Faulknerwrite that the improvementin the economy at the start of the
second quarterof 1933 was due in part to "the improvementof morale
and the restorationof confidence inspired by the President's quick and
able handling of the bank crisis and his activity in attacking the
depression on many fronts."9 Similarly, W. Elliot Brownlee points out
that the U.S. Chamberof Commerce and the National Association of
Manufacturers (N.A.M.) supported the National Recovery Act
(N. R. A.). 10
Macroeconomists, not only economic historians, have discussed the
issue of business confidence during the Depression. Thus Milton
Friedmanand Anna J. Schwartz argue that:
Business confidence ... was weakened still furtherby these and other measures:some
regulatingbusiness (such as the SecuritiesAct of 1933and the SecuritiesExchangeAct
of 1934,the divorce of investmentbankingfromcommercialbanking. .. restrictionson
publicutility holdingscompanies . . ) others expandedgovernmentactivitiesinto areas
up to then reserved mostly for private enterprise . .. ; still others seeming to threaten
the sanctity of private contracts and property .
.
. The effects of these measures were
exacerbated by the deliberate maintenanceof an unbalancedbudget, by attacks on
"economic royalists" and "monopoly"
...
and by the President's proposal to
reorganizethe SupremeCourt."
s George Wolfskilland John Hudson, All But the People (New York, 1969),pp. 144, 146, 157.
WilliamLeuchtenburg,Franklin D. Roosevelt and the New Deal (New York, 1963),pp. 17677.
7 Gary Waltonand Ross Robertson, History of the AmericanEconomy (New York, 1983),p.
926.
8 StephenDeCanio, "Expectationsand Business ConfidenceDuringthe Great Depression,"in
BarrySiegel, Money in Crisis (Cambridge,Mass., 1984),pp. 157-76.
9 Harry Schreiber, Harold Vatter, and Harold Faulkner,American Economic History (New
York, 1976),p. 367.
6
10 W. Elliot Brownlee, The Dynamics of Ascent: A History of the American Economy (New
York, 1977),p. 300.
" Milton Friedman and Anna J. Schwartz, A Monetary History of the United States (Princeton,
1963),pp. 495-96.
Political Shocks and Investment
915
Allan Meltzer expressed a similar opinion:
the taxation of undistributed profits, higher income taxes, the Wagner Act, the
regulationof wages and hours of work, growingregulationof business, rhetoricabout
"economic royalists" . . . are among the government actions reducingincentives to
invest or contributingto uncertaintyabout the future. Jacob VinerwarnedRoosevelt at
the time thathis criticismsof businessmenand his policies towardsbusiness reducedthe
effect of his spendingpolicies on investment.'2
The focus in this article is on the actions, ratherthan the rhetoric, of
the business community. Our central concern is: Did the New Deal's
political and psychological shocks to business reduce investment?
THE PROCEDURE
A simple way to test the political-shock hypothesis is to regress a
measure of investment activity on appropriate dummy variables for
these shocks, holding other variables constant. The appropriatemeasure of investment must be closer in time to the investment decision
than the "value put in place" that enters the nationalincome accounts.
Due to lags in the investment process value put in place at one time
reflects an investment climate aggregatedacross the past and is hardto
correlatewith specific shocks in time. To overcome this problemwe use
construction contracts let for nonresidentialbuildings, as well as new
orders and the dollar value of unfilled orders for certain types of
industrial equipment. Unfilled orders are a better measure in one
respect than new orders because they take into account the cancellation
of old orders that might occur as a result of political shocks.'3 But
unfilledorders are also an inferiormeasure because they depend on the
speed with which previously-placed orders are filled which, in turn,
depends on the extent of excess capacity. But it will not be necessary to
choose between the two series because they lead to the same conclusion
as we later show.
The specified types of investment covered are nonresidentialbuildings (measuredin dollar value and square feet), machine tools, electric
overhead cranes, electric motors, foundry equipment, and woodworking machines. The period covered is 1925to 1938, except for the dollar
value of nonresidentialbuildingcontracts and electric motors for which
the data start in 1926, and for unfilled orders for electric overhead
cranes for which the data commence only in the following year.'4 The
12
Allan Meltzer, "Commentson 'MonetaristInterpretationsof the GreatDepression' " in Karl
Brunner, ed., The Great Depression Revisited (Boston, 1981), p. 151.
13
Moreover, unfilledorders also take into account the possibility that supplyingfirms, afraid
that the political shock will cause the cancellation of previously-placedorders, speed up their
shipments.
14 For electricalmotors no data on unfilledorders are available;hence data on shipmentswere
used instead.For machinetools only new orderscould be used. Since as discussedbelow, in some
regressions one lagged dependent variable and in other regressions three lagged dependent
variableswere used, the actualperiodfor which the regressionswere runstartseitherone quarter
or three quarterslater.
Mayer and Chatterji
916
Departmentof Commerce data used are monthly, but to reduce erratic
fluctuationsthey were aggregatedinto quarterlydata.'5
The standard procedure to test the shock hypothesis would be to
select one or several investmentfunctions and add dummiesfor political
shocks. Three major investment theories-the accelerator theory, the
cost-of-capitaltheory and the neoclassical theory, which integratesthe
other two-can be used to generate an investment function.
The accelerator theory is not applicable to the 1930s. It is most
directly a theory of investment for the individualfirm.Applyingit to the
whole economy raises an aggregationproblem; the response of investment to increases in demand depends upon the distributionof demand
between firmswith and without excess capacity because the accelerator
theorem is not applicable if there is excess capacity. In normal times,
when excess capacity is relatively low, the aggregationproblemcan be
ignored, this is hardly the case for the 1930s. Second, expected future
demand (not current demand) determines investment. During normal
periods this problem can be overcome by using an adaptive expectations model or a rational expectations model. But for the disturbed
conditions of the 1930s, such models are less plausible. Given the
unprecedentedseverity of the Depression, firms are not likely to have
projected past conditions mechanically. Nor are they likely to have
relied on a relatively simple implicit model that explained demand in a
previous period.
A cost-of-capital approach to investment in the 1930s is not feasible
either because the expected real rate of interest is difficultto measure.
The GNP deflatorfell by 22 percent from 1929to 1933and by 1939had
risen again by 10 percent. With rapidly fluctuatingprice changes the
expected inflation rate was probably a major determinant of the
expected real interest rate, but it is hard to imagine how an accurate
estimate of price expectations could have been developed. 6 Moreover,
at a time of massive business failures the cost of capital is hard to
measure.The interest rate understatesthe cost of borrowingby omitting
the increased risk of failure from higher leverage and is therefore not a
good measure of the cost of capital.
Various conventional investment equations based on these theories
have been fitted and reviewed in an excellent dissertation by Pauline
1s The
data come from U.S. Departmentof Commerce, Commerce Yearbook,(Washington,
D.C., 1932); and Survey of Current Business; Supplement (Washington, D.C., 1936, 1938, 1942).
There is, of course, a dangerof too much aggregation.However given our autogressiveapproach
monthlydata are not practicable.To generatelaggedvariablescoveringone year, we would need
12 lagged(monthly)variables,and this could producetoo much multicollinearity.Aggregationof
quarterlydata is simpleway of reducingsevere multicollinearity.Furthermorethe use of quarterly
data allows for short (3 months)lags in the effect of politicalshocks should they exist.
16 Thereis no reason to assume that a regressionthat explainsprice expectationsin the postwar
period also explains price expectations in the 1930s. See Peter Temin's largely qualitative
discussion of price expectations in his Did Monetary Forces Cause the Great Depression? (New
York, 1976),pp. 160-64.
Political Shocks and Investment
917
Andrews.17 Such equations have to be employed if one wants to explain
investment econometrically despite the problemsjust discussed. However, our task is not to explain investment, but merely to investigate the
impact of political shocks. For this we can proxy the effect of all other
variablesby the lagged dependentvariable.'8Hence we employ a thirdorder autoregressive equation.'9
The justifications for autoregressive procedures (or a time-series
model) are first that autoregressive equations generally predict at least
as well as structuralequations do, and second, that one avoids havingto
make specific assumptionsabout structuralrelationships.20The case for
using autoregressiveequations is thereforemost compellingwhen, as in
the case here, there is considerableuncertaintyabout the true structural
model. The autoregressive equation can then be thought of as an
approximationto the reduced form.
For example, let
Yt=
ax,
(1)
be the "true" structuralmodel and assume one is unsure about what x,
is. It may be plausible to model the exogenous variablesx, as:
x, =
p1Xt1
+ P2Xt-2
(2)
The reduced form of equations I and 2 is:
Yt = PlYt-i + P2Yt-2
(3)
The argumentis easily generalized to higher dimensions.
The assumption-that the unmeasured factors determining investment in one period also do so in the next period-is plausible because
the data used are quarterly, and, as shown below, such autoregressive
equations provide good fits. There is the danger that due to sheer
coincidence, innovations in the variables that drive investment (which
are not caught by the autoregressiveterms) mightbe correlatedwith the
political-shock dummies. If so, the dummies would not provide an
adequatetest of the political-shockhypothesis. We reduce the chance of
a coincidence by using six dummies.
17 PaulineAndrews, "Manufacturing
Fixed Investmentand the GreatDepression"(Ph.D. diss.,
Universityof California,Berkeley, 1982).
18 The coefficientsof the laggeddependentvariablespick up the impactsof those variablesthat
affect investmentfor more than one period. The impact of those that affect investmentin only
a single quarterbecomes partof the errorterm.
19The choice of third-orderequations is arbitrary,but the results are similar if first-order
equationsare used instead.
20 An excellent discussion of the properuse of time-seriesmodels is in 0. D. Anderson, Time
Series Analysisand Forecasting(Borough,Green, Kent, England,1977).Morerecentlythe use of
time series methods has been given prominencein macroeconomicmodeling.Thus Christopher
Sims in "Macroeconomics and Reality," Econometrica, 48 (Jan. 1980), pp. 1-49 says " . . . one
can obtain macroeconomicmodels with useful descriptivecharacteristics,within which tests of
economicallymeaningfulhypothesescan be executed, withoutas muchof a burdenof maintained
hypotheses as is usually imposed in such modeling."
918
Mayer and Chatterji
A more serious problem is that investment was so low in the 1930s
that much of it presumablyconsisted of replacingworn-out equipment
to keep factories running. Such investment is less likely to be sensitive
to political shocks than is, say, the construction of an entirely new
plant. But surely not all investment was replacement for existing
equipment.
THE POLITICAL SHOCKS
Not all political shocks provide a suitable test.2' To do so they must
meet four criteria. First, they must be important, so that one can
reasonably expect them to show up in the investment data. Second,
they must be genuine shocks, that is unanticipatedevents. Third, the
direction of their effect on investment must be clear. For example, the
passage of the N.R.A. does not qualify because it is unclear whether
business treated it as favorable or unfavorablenews. Fourth, the shock
must have occurred at a distinct date. The fact that many shocks
occurredalmost simultaneouslycreates a problem. Because it is impossible to disentangle the effects of any particularshock, they must be
treated as a unit.
One set of events that meets the above criteriais the election results
in 1934, 1936, and 1938. Even the 1934mid-termelection was important
because it affected the extent to which the President could get his
program through Congress; despite a large Democratic majority a
strengthened alliance between Republicans and Southern Democrats
could weaken the President's control.
Moreover, at least in 1934 and 1936, the election results were
unexpected. While, with hindsight, one might have expected the
Democrats to do well, the extent of their victory was unanticipated.
According to Time, before the 1934 election "it was generally agreed
that the Republicanswould probablylose anywhere up to five or more
seats in the Senate and could consider themselves most lucky if they
maintained their present piffling strength in the House."22 But what
actually happened was "the first time in [American] history that the
increased its Congressional strength in an off-year
party in power .
election.'"23 The 1936election results were also a surprisebecause prior
to the election public opinion polls were split.24Roosevelt's victory was
overwhelming,and Timecalled it "the greatest landslide since 1820."25
21 Since there were many shocks during the 1930s there is a danger that the political-shock
hypothesiscould be force-fittedby experimentingwith enoughsets of shocks untilone set happens
to fit. To avoid this the politicalshocks used were selected withoutlookingat the data and before
runningany of the regressions. The only regressionsthat were run are those shown, except for
some runs that containederrors.
22
Nov. 5, 1934, p. 12.
23
Newsweek, Nov. 17, 1934, p. 7.
24
ArchibaldCrossley, "Straw Polls in 1936," Public OpinionQuarterly,1 (Jan. 1937),pp. 2435.
25 Nov. 9, 1936, p. 24.
Political Shocks and Investment
919
In the 1938election the Republicansnetted 81 House seats and 8 seats
in the Senate as well as 13 governorships, polling 47 percent of the
House vote as compared to 40 percent in the previous election.
Althoughthe Democrats continuedto hold a comfortablemajorityin the
House and two-thirds of the. Senate, the consequences were "disastrous" for the New Deal owing to a coalition of Southern Democrats
and Republicans.26The extent to which these results were anticipatedis
unclear, but given the poor record of election forecasts in 1934and 1936
the actual results in 1938must surely have provided some new information. Accordingly, all three elections are treated as shocks, and dummy
variablesare assigned to the last quartersof 1934, 1936, and 1938.27The
shock hypothesis requires that the first two dummies have negative
coefficients and the third one a positive coefficient.
To obtain the other shocks we selected three events described by
historians as particularly severe blows to business. The selection of
certain events as majorpolitical shocks is inevitably subjective. Those
who believe we have not selected the correct shocks may therefore
want to look only at the results obtained for the three elections.
The first of the other three shocks is a compound of several events
that occurred in the period March to June 1933. In March 1933 the
United States left the gold standard.In April 1933President Roosevelt
sent the Tennessee Valley Authority (TVA) bill to Congress which
passed it in May. The President also sent the AgriculturalAdjustment
Act to Congress in April, and it too was passed in May. This act
included the Thomas Amendment authorizingthe issue of $3 billion of
additionalcurrencywithout gold backing, a measurebitterlydenounced
as inflationaryand extremely dangerous.The N.R.A. was introducedin
Congress in May 1933 and was passed the following month. A dummy
shock variablewas therefore allocated to the second and thirdquarters
of 1933.
The next shock consists of several events between May and August
1935, and a dummy variable was assigned to the second and third
quartersof 1935. One was the passage in May of the WagnerAct which
greatly furtheredunionization and which Leuchtenburgcalled "one of
the most dramaticlegislative innovations of the decade."28John Major
termed the President's supportof the WagnerAct "a slap in the face of
business," and Dexter Perkins reportedthat "no legislation of the New
Deal period met with more determined opposition....
It is safe to say
that large elements of the business classes, hitherto critical, but not
violently hostile to the Administration,were alienated by the law."29
26
27
William Leuchtenburg, Franklin D. Roosevelt and the New Deal, p. 273.
Because the dummyvariableswere used only for the quarterin which the election occured,
the shocks tested are the immediateshocks.
28
William Leuchtenburg, Franklin D. Roosevelt and the New Deal, p. 151.
29
JohnMajor,The New Deal (London, 1968),p. 196;Dexter Perkins,The New Age of Franklin
Roosevelt 1932-45 (Chicago, 1957), p. 39.
920
Mayer and Chatterji
The next month "Roosevelt jolted conservatives by firingat Congress a
radicaltax message which aimed to redistributewealth and power. . "
Roosevelt's tax proposal, which Herbert Stein called a "big step in the
escalation of conflict between the administrationand business," raised,
according to Leuchtenburg, "an outcry from business and the press
such as had greeted none of the President's previous recommendations."30The President also sent to Congress a bill to phase out public
utility holding companies, and this too must have shaken business
confidence, even though the House watered it down somewhat before
passing it in August. The only victory for business in the period was the
Supreme Court's invalidation of the N.R.A., a fact which "most
industrialistscheered.",31
Another shock occurred in January 1937 when workers at General
Motors went on a sit-down strike. On February 11, 1937, General
Motors surrendered,and less than a month afterwardsU.S. Steel also
surrenderedto a sit-down strike. According to Leuchtenburg:
Althoughemployerswere outraged,PresidentRoosevelt would not use force to oust the
sit-downers .
.
. Foes of the sit-down strike believed that Roosevelt, in refusing to
employ force, was condoningan assault on propertyrightsby lower-classrebels at the
very moment he was attackingthe sacred institutionof the SupremeCourt.32
Thus there are six dummy variables, two of them extendingover two
quarters.33Three of the six are election results, and one of these, the
1938election, provides the only favorable shock. While one or more of
the shocks used can be questioned, our results do not requirethat each
event was actually a shock.
RESULTS
The results in Table 1 fail to supportthe political-shockhypothesis.34
Considerfirst all the unfavorableshocks, that is the firstfive. Instead of
30 HerbertStein, 1969,The Fiscal Revolution in America, p. 81; WilliamLeuchtenburg,Franklin
D. Roosevelt and the New Deal, p. 152.
31 Newsweek, June 8, 1935, p. 5.
32
WilliamLeuchtenburg,Franklin D. Roosevelt and the New Deal, pp. 242-43.
33 In principlenot all six shocks are independent.Suppose a negative shock in, say 1936-IV,
reduces investmentfor that quarteronly. In the followingquarter,in the absence of new shocks,
investment returns to its previous level but the autoregressivemethod used here predicts that
investmentwill be lower. Suppose furtherthat there is anothernegative shock in 1937-I,which
does affect investmentin that quarter.Since investmentis underpredictedby the autoregressive
terms, the coefficientof the dummyvariablefor the 1937-Ishock is then biased. Fortunatelythis is
not a problemhere since it turnsout thatnone of the shocks-with the possibleexceptionof the last
one-had any effect on investment.
34 In a previoustest of the political-shockhypothesisArthurSmithies,"The AmericanEconomy
in the Thirties,"AmericanEconomic Review, 36 (May 1964),pp. 11-27, looked at the residuals
fromregressionsfor plantandequipmentinvestmentandfromresidentialconstructionregressions.
He too concludedthat these residualsgive no supportto the shock hypothesis.However, such an
approachis model-specific,and the models used by Smithiesin 1946are now outdated.
Political Shocks and Investment
3
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Mayer and Chatterji
being negative, as the political-shockhypothesis implies, the majorityof
the coefficients are positive. The sixth shock, the Republicansuccess in
the 1938 mid-term elections, presents a somewhat different picture.
Here all ten coefficients have the correct sign and two are significantat
the 1 percent level, though the significancelevels are overstated by the
inclusion in the regressions of the lagged dependent variable.35Even
ignoring the bias caused by the inclusion of the lagged dependent
variable, two significantcoefficients out of the eleven is hardlya strong
showing. In any case, the 1938 election is only one of the six shocks
considered. The political-shock hypothesis can hardlyclaim credibility
because it is consistent with the data in one of six cases.
Is it reasonable to argue that while the other shocks had no effect on
investment, the 1938election did so? And can one go furtherand argue
that the New Deal shocks to confidence were significant because a
weakened New Deal in 1938did affect investment?Such an argumentis
hard to accept for two reasons. First, while the 1938 election shows a
more favorableresult for the shock hypothesis thando the other shocks,
even this result does not support the shock hypothesis strongly. Few
coefficients are significant,and five are less than their standarderrors.
Second, if elections were so importantbecause they portendedshocks
yet to come, then the political-shock hypothesis must be rejected
because it fails in the other two elections.36
ROBUSTNESS
TESTS
The results shown in Table I come from regressions fitted to data
from the 1920s as well as the 1930s. Because the underlyingimplicit
structuralequations may well have differedin the 1920sand 1930s, it is
useful to see if similarresults are obtained if these regressionsare fitted
only for the 1930s. As Table 2 shows, this is so.
In the regressions of both Tables I and 2 the choice of using three
autoregressive terms was arbitrary.Hence, we ran alternative regressions using only a single autoregressiveterm. The results, available on
request, are similarto those in Table 1. However, given the low values
of the Durbin-Watsonstatistics when only a single autoregressiveterm
is used, we suggest that the third-orderautoregressiveprocess captures
the complexity of the investment process more accurately.
35 Both significantresults are for nonresidentialbuildingcontracts,and may be due to a special
situationin the nonresidentialbuildingindustry.
36 Since our results reject the null hypothesis, we are not subject to a standardcriticism of
econometric results; the improperuse of significancetests whereby failure to reject the null
hypothesisis seen as acceptingthe null hypothesisas true. Of course in alternativespecifications
the test outcome could have been different. However, our procedureis sufficientlygeneral to
encompass a wide variety of alternative specifications. This problem, known as Duhem's
irrefutabilitythesis is unavoidablein scientificwork. See MarkBlaugh,Methodologyin Economics
(Cambridge,1980),pp. 17-18.
923
Political Shocks and Investment
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Mayer and Chatterji
CONCLUSIONS
We have tested the hypothesis that political shocks were significant
factors in generating the low level of investment in the 1930s. The
hypothesis is rejectedusing a fairlygeneralmethod, althoughour results
do not rule out the possibility that political shocks in other periods or
other countries could affect investment adversely.