Posted on 06/27/2007 5:10:50 AM PDT by Kaslin
In her vital and fascinating new book, "The Forgotten Man: A New History of the Great Depression," Amity Shlaes tells a story about national icon President Franklin Delano Roosevelt. Shortly after FDR took office, Shlaes explains, he began arbitrarily tinkering with the price of gold. "One day he would move the price up several cents; another, a few more," writes Shlaes.
One particular morning, Shlaes relates, FDR informed his "brain trust" that he was considering raising the price of gold by 21 cents. His advisers asked why 21 cents was the appropriate figure. "It's a lucky number," stated Roosevelt, "because it's three times seven." Henry Morgenthau, a member of the "brain trust," later wrote: "If anybody knew how we really set the gold price through a combination of lucky numbers, etc., I think they would be frightened."
Ignorance of basic economics -- and the concurrent attempt to obfuscate that ignorance by employing class-conscious demagoguery -- remains the staple of the Democratic Party. For over 60 years, Democrats and their allies in the media and public school system have taught that the Great Depression was an inevitable result of laissez-faire economic policies, and that only the Keynesian policies of the FDR government allowed America to emerge from the ashes. The Great Depression, for the left, provides conclusive proof that when it comes to economics, government works better than business.
This point of view has a sterling reputation. That reputation, unsurprisingly, was created by FDR himself. FDR turned the Great Depression into a morality play -- a morality play in which those in favor of individual initiative were the sinners, while those who relied on government were the saints. "We have always known that heedless self-interest was bad morals," Roosevelt intoned in 1937. "We know now that it is bad economics."
This, as Shlaes convincingly shows, is hogwash. The Depression lasted nearly a decade longer than it should have, due almost entirely to governmental meddling under both Herbert Hoover and FDR. High tariffs and government-sponsored deflation followed by enormous taxation and unthinkable government expenditures turned a stock market stumble into a decade-long nightmare. Only the devastation of World War II lifted America out of the mire, solving the drastic unemployment problem and providing a legitimate medium for FDR's pre-war wartime policies.
Nonetheless, the myth of a grinning FDR leading America forth from the soup kitchens remains potent. And today's Democrats rely desperately on that fading falsehood, hoping to bolster their bad economics with worse history. Hillary Clinton routinely hijacks Rooseveltian language, most recently disparaging the "on your own society" in favor of a "we're all in it together society." John Edwards' "two Americas" nonsense drips of FDR's class warfare. Never mind that Keynesian economics does not work. Never mind that it promotes unemployment, discourages investment and quashes entrepreneurship. For Democrats, the image of government-as-friend is more important than a government that actually protects the rights that breed prosperity.
"The impression of recovery -- the impression that a President was bending the old rules and, drawing upon his own courage and flamboyance in adversity and illness, stirring things up on behalf of the down-and-out -- mattered more than any miscalculations in the moot mathematics of economics," novelist-cum-economist John Updike recently wrote, defending FDR from Shlaes' critique. "Business, of which Shlaes is so solicitous, is basically merciless, geared to maximize profit. Government is ultimately a human transaction, and Roosevelt put a cheerful, defiant, caring face on government at a time when faith in democracy was ebbing throughout the Western world. For this inspirational feat he is the twentieth century's greatest President, to rank with Lincoln and Washington as symbolic figures for a nation to live by."
For Updike and his allies, image trumps reality. The supposed harshness of the business world matters more for Updike than the fact that profit incentives promote economic growth, efficiency and creativity. The "caring face" of government is more important for Updike than creating a framework that produces jobs and affordable commodities. Updike's sporadically employed father liked FDR because FDR made him feel "less alone." No doubt Updike's father would have felt less alone if he had been steadily employed by a private enterprise -- the kind of enterprise stifled by Roosevelt.
"We are beginning to wipe out the line that divides the practical from the ideal," FDR announced in 1937, as unemployment stood at 15 percent, "and in so doing we are fashioning an instrument of unimagined power for the establishment of a morally better world." Today's Democrats continue to embrace the vision, even at the cost of a prosperous reality.
My favorite part is when they mention the unprecedented growth after the war. It’s worth mentioning that the end of the war (and the start of the unprecedented growth) came just after the death of FDR.
The point is to educate people who don't know about those mistakes and their consequences, and are trying to make them all over again. IMO.
Got my masters degree in The Dismal Science. The Great Depression had its roots in the trade war that began in Europe in the late 1920s. Our very own Congress got into the trade war with the Smoot-Hawley Tariff Act. World trade fell by 90%!!! Would Texas become poorer if we tried to produce everything within our own borders? Prices would rise, quality would drop, and everyone’s standard of living would suck. The Crash of ‘29 was followed by the idiotic policy of cutting the money supply. This, coupled with the drastic decrease in the velocity of money, was a disaster. Raising taxes on productive people, misallocating resources through government programs, new regulations....Its just too bad that Milton Friedman was not there to tell them how to fix it. BTW, I recently read the biography of Bernard Baruch. He was a financial genius when it came to making his own fortune and a complete moron when prescribing national policies.
I disagree. That led to the stock market crash of 1929 but not the Great Depression.
What caused the Great Depression was the passage of the Smoot-Hartley Tariff Act of 1930, which arguably encouraged other countries to retaliate with tariffs of their own. At virtually the same time, Congress unwittingly passed the largest peacetime tax increase in the history of the United States. The combination of these two events caused, not just the United States, but also the entire world to sink into a deep depression.
When a downturn has happened in the past, the liberals have broken every rule and told any lie to try to use the downturn to convince the populace to lean toward a further expansion of the federal bureaucracy. When I say liberal, I point toward those in both parties.
Ironically, it was World War II as started by Adolf Hitler that brought America back from the Depression.
In September 1939, right after the war began, Roosevelt went to Congress to modify the Neutrality Act to allow Britain and France to buy weapons on a “cash and carry” basis.
British and French money poured into our country and factories geared up to build weapons for them.
In 1940, the U.S. defense buildup began and the unemployment rates tumbled even further.
Then let's try to put it into some kind of constructive context, like the coming debate on socializing health care, rather than engage in speculative bitching about the reason it was brought up.
That looked critical of even bringing it up, as being a waste of time. Apologies if I misunderstood.
***It is a very good thing that FDR is fading into history.***
Ah, but my dear sir, it isn’t. It’s still kept alive by the communist professors who teach people like my neighbor who points to FDR as the greatest president this country has ever known.
That’s understandable. I don’t always translate my thoughts to the keyboard as I well as I would like.
***Do you REALLY think that over 10 years of the “Great Depression” was an accident?***
I agree with every word you said.
The Democrats are famous for keeping people down and in need of government help. That’s how they get votes.
What percentage of market capital was a margin loan?
Nope. Conservatives will get the blame.
I don't think the author is denying the cause of the Depression, but pointing out that FDR's leftist policies made it worse and made it last much longer.
If he had kept the government's meddling fingers out of it, the market would have smacked down the margin-buying Ponzi scheme and then recovered, much as the Dot Com bubble smacked a few people really hard, but didn't tank the whole market for a decade.
Thank you, NavyCanDo, for an excellent post!
FDR did more to permanently damage the republic than any other single person in this nation’s history.
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