Posted on 06/27/2007 5:10:50 AM PDT by Kaslin
To paraphrase a guy named Santayana, those who are ignorant of the mistakes of the past are destined to repeat them.
As Aquinasfan posted, Milton Friedman saw the bank failures and the Depression itself as a monetary failure. Add to that the tariff, which further cut of monetary flows, and it’s rather obvious how the Crash turned into a depression.
I’d add one key element that is often overlooked, especially, regards the late 1932/ early 1933 bottoming out. There was a five month lag between the national election of ‘32 and the launch of the government (Admin and Congress) in March of ‘33. During this time — and by design — nothing happened. There was complete political atrophy at all levels.
FDR used this period as his excuse to radicalize his agenda, so he overturned his campaign promises and set up the “100 days” scheme.
My Grandparents survived the depression. Obviously not fun, but it was very different back then. They always said, “We had no money, but we did eat good.” Why? Well they were able to grow their own food and everyone did that. Some may not have been able to grow their own food, but someone in their family did so food was never a problem. Today if we had a depression, it would be a disaster as no one would even have food.
Are you thinking of the commoditization of mortgages as investment instruments, driven by Fannie Mae and Freddie Mac?
No, that produced the stock market crash of 1929. The Depression was another issue entirely.
I would add that to the list. I think the most important change in this country was the captital gains exemption for homeowners that went into effect in 1997. There are other events and policies I would put on the list. One would also have to consider that the real estate boom affected other markets around the world.
Jimmy Carter. 1976-1980.
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."
That's why the gold standard worked so well, because it stopped the government from messing with the dollar. LOL!
At least you could get a good suit and a pair of shoes with an ounce of the yellow metal back then.
All during Germany’s hyperinflation of the 1920’s their currency was backed by gold. Of course, they kept adjusting the exchange rate, but that didn’t stop them from bragging about it.
Tag for reference.
You would have gotten relief programs, fireside chats, and rhetoric about government action in any case. That was part of what the country wanted and what governments do in time of crisis. That was also enough to make a lot of us hate FDR.
But the particular experiments, the "the counterproductive attempts at centralized planning and the relentless scapegoating of business" weren't necessary and "helped keep unemployment well above ten percent until World War II intervened."
When people talk about these things a lot of the time they aren't so focused on the details. It's just a left-right thing, and we love or hate politicians based on where they are on the political spectrum, not on the specific details of their policies.
But the point isn't so much to slam FDR for being a liberal or Reagan for being a conservative -- that's not going to change now -- but to ask whether changes in their policies might have brought better results.
That some or even much of the New Deal was inconsequential or beneficial in some way does not mitigate its overall negative impact. Conversely, its failures do not invalidate its successes. So, great post at the Ross Douthat blog.
To my mind, the worst of the New Deal was its price/wage controls and other economic interventions (the Blue Eagle in all its forms). So, too, were the Wilson, Truman, and Nixon price controls. But none of those others are much blamed for the horrible legacies of those policies. None of them should escape it.
By ranting about Social Security we miss the real failure of the New Deal in its price/wage controls. Similarly, by calling Truman “brave” for Hiroshima or the ‘48 election, we excuse his own back-ass abuse of price/wage controls, which ruined so much innovation and competitive force in the American economy of the Forties, Fifties, and beyond. In damning Wilson’s League of Nations we forget the horrible impact of his nationalization of the economy during WWI. In elevating Nixon’s China policies, or blaming all things on Watergate, we lose sight of his role in the energy “crisis” and general economic retardation of the 1970s.
With these confused and mixed legacies, the good and bad of an Administration get mixed as well, and the particulars go bland. There should be no — zero — excuse for any central fixing of prices. None. And no “good” achieved by way of some corollary policy can excuse it. The worst of the 20th century comes of these malicious attempts to control markets through some central order as to how much something should cost or who much someone should get paid.
We might also recognize those Presidents who avoid or crush movements for such interventions. For starters, we must thank our current President for squashing all talk of price control over gasoline. Hillary called for it in ‘05. Another person in office might have taken it on. The negative can be just as strong as the positive act.
There's more discussion of Shlaes's book at Greg Mankiw's blog. That's right, the former Chairman of the President's Council of Economic Advisors has a blog. The world has changed.
John Updike's review of Shlaes's book is here.
I didn't realize before how similar Updike and Garrison Keillor are. They're both small town boys who grew up idolizing the New Yorker magazine and building their lives around it. They're also both sentimental and nostalgic yellow dog Democrats.
To be facetious I could say that for Updike, and Keillor, and probably Dan Rather and Bill Moyers waiting around with your neighbors for government cheese builds character and community.
All the more so if there's only one variety available and it's produced by a cooperative of Norwegian bachelor farmers and lovingly approved by a federal inspector.
Waiting in line they feel solidarity, connectedness, brotherhood, peace. If there's dirt or sweat in the cheese, that makes it all the more authentic and human.
To nip into the supermarket and choose between forty varieties of cheese -- or to send one's assistant to do it, which is what I suspect they do -- is alienating and artificial.
Well, it's a trade-off. One of the blog posters supports the New Deal as a trading of well-being for "more democracy."
I like the response of one of Douthat's correspondents:
I was taken by Updike's claim that:
"Business, of which Shlaes is so solicitous, is basically merciless, geared to maximize profit. Government is ultimately a human transaction..."
This resonated with me because every time I go to Starbucks they mercilessly beat me and take all my cash, while at the DMV there's no wait in the line for hugs.
In a lot of ways it's a generational thing. Updike reflects the Depression-era mentality pretty well.
War, specifically WW II wiped out the depression. All the new deal efforts were for naught.
The economy was rebuilt from scratch during the war.
FDR was a diehard communist. He believed the federal government should control all things and his actions proved it.
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