Posted on 12/22/2008 9:07:58 PM PST by jazusamo
With both Barack Obama's supporters and the media looking forward to the new administration's policies being similar to President Franklin D. Roosevelt's policies during the 1930s depression, it may be useful to look at just what those policies were and-- more important-- what their consequences were.
The prevailing view in many quarters is that the stock market crash of 1929 was a failure of the free market that led to massive unemployment in the 1930s-- and that it was intervention of Roosevelt's New Deal policies that rescued the economy.
It is such a good story that it seems a pity to spoil it with facts. Yet there is something to be said for not repeating the catastrophes of the past.
Let's start at square one, with the stock market crash in October 1929. Was this what led to massive unemployment?
Official government statistics suggest otherwise. So do new statistics on unemployment by two current scholars, Richard Vedder and Lowell Gallaway, in their book "Out of Work."
The Vedder and Gallaway statistics allow us to follow unemployment month by month. They put the unemployment rate at 5 percent in November 1929, a month after the stock market crash. It hit 9 percent in December-- but then began a generally downward trend, subsiding to 6.3 percent in June 1930.
That was when the Smoot-Hawley tariffs were passed, against the advice of economists across the country, who warned of dire consequences.
Five months after the Smoot-Hawley tariffs, the unemployment rate hit double digits for the first time in the 1930s.
This was more than a year after the stock market crash. Moreover, the unemployment rate rose to even higher levels under both Presidents Herbert Hoover and Franklin D. Roosevelt, both of whom intervened in the economy on an unprecedented scale.
Before the Great Depression, it was not considered to be the business of the federal government to try to get the economy out of a depression. But the Smoot-Hawley tariff-- designed to save American jobs by restricting imports-- was one of Hoover's interventions, followed by even bigger interventions by FDR.
The rise in unemployment after the stock market crash of 1929 was a blip on the screen compared to the soaring unemployment rates reached later, after a series of government interventions.
For nearly three consecutive years, beginning in February 1932, the unemployment rate never fell below 20 percent for any month before January 1935, when it fell to 19.3 percent, according to the Vedder and Gallaway statistics.
In other words, the evidence suggests that it was not the "problem" of the financial crisis in 1929 that caused massive unemployment but politicians' attempted "solutions." Is that the history that we seem to be ready to repeat?
The stock market crash, which has been blamed for the widespread suffering during the Great Depression of the 1930s, created no unemployment rate that was even half of what was created in the wake of the government interventions of Hoover and FDR.
Politically, however, Franklin D. Roosevelt could not have been more successful. After all, he was the only President of the United States elected four times in a row. He was a master of political rhetoric.
If Barack Obama wants political success, following in the footsteps of FDR looks like the way to go. But people who are concerned about the economy need to take a closer look at history. We deserve something better than repeating the 1930s disasters.
There is yet another factor that provides a parallel to what happened during the Great Depression. No matter how much worse things got after government intervention under Roosevelt's New Deal policies, the party line was that he had to "do something" to get us out of the disaster created by the failure of the unregulated market and Hoover's "do nothing" policies.
Today, increasing numbers of scholars recognize that FDR's own policies were a further extension of interventions begun under Hoover. Moreover, the temporary rise in unemployment after the stock market crash was nowhere near the massive and long-lasting unemployment after government interventions.
Barack Obama already has his Herbert Hoover to blame for any and all disasters that his policies create: George W. Bush.
I also see parallels with the huge inflation and unemployment of Germany during the Weimar Republic.Wait! There's even more parallels. Bertelsmann, the biggest single producer of Nazi propaganda, substantially contributed to creating the phenomenon that has come to be known as "Obamamania". And the largest single segment of Obama votes arguably came from German-Americans with a proclivity for socialism.
Afghanistan.
Gonna need a bigger war than Afghanistan to lift a country this size out of a depression. Provided we win.
Depression ping
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marker
From article: But the Smoot-Hawley tariff-- designed to save American jobs by restricting imports-- was one of Hoover's interventions,
Perhaps America's isolationists might reconsider their stance. Not likely. But it's always a hope...
Thanks for posting the article.
You had tens of millions of workers and soldiers with pay checks building up in their bank accounts and nothing to spend it on. Finally when the war ended and the boys came marching home, they had fat bank accounts and an appetite for Chevrolet's, washing machines, and a home in the country.Why do we think Roosevelt's spending on the economy worsened the depression, but the war spending helped lift us out? What's the difference between spending on roads and spending on planes and bombs when they both create jobs and are paid for by the government? I'm under the impression that we weren't paid a lot of money by other countries even with lend/lease, etc, so wasn't the money coming out of our coffers?
. . . after the war, we were really the only industrialized nation whose industry was still intact. If any one in the world needed anything made or supplies for reconstruction, they came to Uncle Sam.
I happened to catch a C-Span Booknotes program years ago in which Brian Lamb interviewed Thomas Fleming, author of The New Dealers' War: FDR and the War Within World War II. I read the book, which was very informative about the FDR era; I highly recommend it. One point about WW II was that it forced the socialists to get serious about wartime production - meaning, they had to back off somewhat on their hatred of evil capitalists and allow rational management decisions to override political correctness.IOW, WW II forced the "progressives" to end the "progressiveness" of the New Deal in order and allow actual progress. Which would explain why WW II ended the Depression. Not that people were any better off during the war, obviously they were much worse off during it. It was only the end of WW II which allowed the recovery of the civil economy.
Lest we forget, tho, there were wage/price controls and rationing during the war which were continued for some time after it. And I think we have to assume the resurrection of wage/price controls are in our future.
One other factor was the sense of commitment by the civil population. Everyone worked hard and productively because of the sense that what they were doing would help end the war.
Most were motivated. A sometimes hard to measure thing.
Barack Obama already has his Herbert Hoover to blame for any and all disasters that his policies create: George W. Bush.
That fact screams out at me, too. FDR had one all-purpose get-out-of-jail-free card: blame Hoover. And Bush has allowed the Democrats to demonize him for 8 years without really standing up to their fatuous criticisms. Now with the financial meltdown it appears that they actually have something on him - even if it is actually the fault of Barney Frank, Chris Dodd, et al.
Detroit’s unemployment rate is already over 10%.
You are correct, and BO has a very good reason to re-deploy more of our troops to Afghanistan.
He fears their return to the U.S. with no job opportunity. And they will “fight” what he plans to do here.
I agree with your observations.
But I will caution you about Thomas Fleming. I read his magazine Chronicles for several years, until I figured out they found Monarchy an acceptable (almost desireable) form of government.
Fleming has a very good grasp of history, but this country fought a bloody revolution to be free of a Monarchy. Totalitarianism is plain evil, in any form.
America had fascist policies before President Bush took office. He got double whammied with a war, a shattered military (via Clinton/Dem years), and non-stopbashing from friends and foes alike. He had to pick his battles. Media certainly wasn’t going to play fair. Liberals don’t play fair. Conservatives all began intra-fighting. Who, I often ask myself, was President Bush supposed to be standing up to? And how?
History is a fine teacher, but only to those who bother to read and understand it.
Congressman Billybob
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Obama will use adherence to his eco-religion as his Smoot-Hawley tariff act. Except I think it will be even more destructive to the economy.
The word “great” means “big,” “large,” “massive,” etc. It has connotations of “important” and “very influential.” Among teenagers it means “wonderful!” but most of us here are not teenagers.
The major problem with going thru a major economic depression today is that most inter-cities (Obamanistas) have no Idea what being civilized really means. (You see the truth of this statement each night on the evening news) We can expect these freeloader types to go progressively more nuts when the social services checks food stamps they get each month stop or inflation makes them all but worthless. Christmas 2009 may see these dregs Christmas shopping in our front room.
and more of it starts flooding back from China and Europe as those governments find they have to raise useful capital by converting it into their own currencies for use by their own pliticians and crooks.
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