Posts tagged with: great depression

[Part 1 is here.]

Jonah Goldberg’s Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning, details how the growth of government-corporate cronyism during the past 120 or so years has been largely a phenomenon of the socialist left. Wendell Berry misses this crucial historical insight in his running critique of capitalism, and his missing it draws him into flatly inaccurate claims, as when he asserts that “the United States government’s agricultural policy, or non-policy, since 1952 has merely consented to the farmer’s predicament of high costs and low prices; it has never envisioned or advocated in particular the prosperity of farmers or of farmland …”

This makes it sounds as if the government is largely uninvolved in agricultural markets, letting the winds of the free market blow wherever they wish. It’s true that the U.S. government has moved away from buying and destroying food as it did under FDR in the Great Depression, a statist attempt to prop up commodity prices while countless Americans went hungry. But even since 1952, and in a dizzying number of ways, the American government has been busy erecting all manner of protections for American agriculture, from fat subsidies on rice and other grains to import quotas on sugar, price supports on milk, and a long-running policy of paying farmers and ranchers to idle parts of their land. (more…)

Blog author: sstanley
posted by on Wednesday, May 28, 2014

indexActon’s Director of Research, Samuel Gregg, recently wrote an article at Aleteia about the recent Great Recession and Former president of the Federal Reserve Bank of New York and Treasury Secretary Timothy Geithner’s book, Stress Test: Reflections on Financial Crises. Gregg begins by noting that economists and historians are still speculating about the causes of the Great Depression and doesn’t doubt that similar debates will occur about more recent economic decline. He says, “it’s not surprising that some of those who were closets to the policy epicenter of the maelstrom are anxious to get their version of events on the record” and it’s hardly surprising that now Geithner is talking about it. Gregg continues:

Stress Test is written in the regrettably chatty, forced-informality manner of too many memoirs by politicians and public officials in our age of excessive casualness, selfies, and perpetual adolescence. For all that, however, Geithner does make a sincere effort to explain himself and his actions — even if his account won’t convince everyone.

Judging from this text (but also from other books written on the financial crisis by other players), Geithner comes across as an intelligent, decent man who found himself dealing with incredibly difficult problems in an environment full of Zeus-sized egos inside the self-referential bubble of Washington, D.C. “I wasn’t,” he writes, “a banker, an economist, a politician, or even a Democrat” (1). Indeed Geithner stresses over and over again his independence. The Left, according to Geithner, saw him as “Wall Street’s wingmen” while Wall Street thought he and others were “Che Guevaras in suits” (20). (more…)

fdr cartoonSheila D. Collins is wistful for the days of the Great Depression. Sure, times were tough, but at least people were more sensitive and caring. And our government was much better at taking care of people. Not like now when people are losing government hand-outs left and right. No, the days of the Great Depression were good.

There was a time in our history when the poor and unemployed experienced a more compassionate government. During the Great Depression the federal government not only provided safety nets in the form of relief, food aid, public housing, mortgage assistance, unemployment insurance, and farm aid, but more significantly, it undertook a series of job-creation programs that gave back to millions of unemployed workers and their families precisely what the Depression had taken from them—the opportunity to support themselves with dignity.

Now, it’s a harsh, cruel world. Collins calls our era one of “cruel indifference.”

What? Where? Huh? (more…)

Blog author: mvandermaas
posted by on Friday, March 21, 2014
Amity Shlaes

Amity Shlaes – Graphic Novelized!

In November of last year, we had the privilege of welcoming bestselling author Amity Shlaes for a visit here at the Acton Building while she was in Grand Rapids to speak about Calvin Coolidge at Grand Valley State University’s Hauenstein Center for Presidential Studies. Aside from being a fine author of some very thought provoking books on history and economics, she’s a delightful lady, and it was a pleasure to have an opportunity to make her acquaintance personally. At the time, she was very excited about a project that she had been working on which was soon to be released to the public – a graphic novel adaptation of her best-selling book, The Forgotten Man. Her enthusiasm for the project was infectious, and I’ve been looking forward to its release ever since. (You can pre-order a copy of the book, which is set to be released on May 27.)

But how does one take a nearly 500 page hardcover book that revisits the economic history of the Great Depression and translate it into a visual presentation on the printed page? It wasn’t a simple process. Paul Rivoche is the artist who worked with Shlaes on the project; in this interview at Graphic Novel Reporter, he describes how the original book was reworked in order to create a compelling visual story:

The original book was nonfiction and of course not at all structured to be a graphic novel. It’s an economic history of the New Deal/Great Depression era, described from an alternative viewpoint. It has a huge cast of characters — all real people — and discusses many abstract ideas. To make it work as a graphic novel, we had to find a new structure for the same material; we couldn’t follow the exact arrangement in the print book. For example, there are many jumps in location in the real-life story we tell, and all these characters coming and going. In prose, it worked because you imagine it in your head, stitching it together, following the steady guidance of the author’s voice. In comics form, the same thing was disorienting. We learned that if the visuals change too fast, without enough explanation, the reader easily becomes confused when dealing with such complex events, all these different scenes and faces. To solve this, we decided to introduce a “framing story” using a narrator, Wendell Willkie. In telling the story, he guides us — at times directly, and in other scenes we hear his voiceover narration in captions. Also, we had to make the story as visual as possible, not all “talking heads,” which make for dull comics. Instead, we highlighted interesting locales: the Hoover Dam, the great flood of 1927, Willkie’s famous debate, and many others. In every scene we aimed to introduce as much movement, action, and characterization as possible.

The full interview has more detail on the project; After the jump, you can listen to an August 2012 Radio Free Acton interview with Amity Shlaes on her then-forthcoming biography on Calvin Coolidge.

Paul_Rivoche_The_Forgotten_Man

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Blog author: johnteevan
posted by on Wednesday, January 8, 2014

I was reading an essay that I found in an old book I bought in Vermont. Dr H.J. Laski (Oxford and Yale) wrote, “The less obvious the differences between men in the gain of living, the greater the bond of fellowship between them.” In other words the less we talk about differences between the rich and poor, the better we will all like each other and get along. In the Depression which began as he was writing, nearly everyone was poor.

Those more cheerful days of fellowship ended with Michael Harrington’s The Other America written in 1962. Harrington described and defined the poor in America not as the lower working class (think coal miners back then) or as ghetto dwellers, but as The Poor. We declared a $7 trillion War on Poverty during 1960s, apparently with no adequate outcome as we still have 48 million people poor enough to be on food stamps.

The “bond of fellowship” has little chance today as it faces a daily reminder that the rich are very rich and that they are a sort of enemy of the poor. If the rich, the argument goes, would give up a small fraction of their immense profits or wealth then the poor would all be earning a “living wage.” That’s the energy behind the talk now of the $15/hr minimum wage.

Blog author: jcouretas
posted by on Friday, October 29, 2010

As America and Europe continue to wrestle with the question of how best to address their respective economic crises, many are looking back to the lessons of history and how they might be applicable to today. Scholars, public intellectuals, and policy analysts are paying particular attention to the economic debates of the 1930s, during which much intellectual wrestling — not all of it pretty — occurred over the causes of the Great Depression and how to best alleviate its destructive effects. Not surprisingly, the writings of John Maynard Keynes and Friedrich von Hayek are among the most heavily referenced by contemporary figures.

Another scholar who wrote extensively on the causes of, and possible solutions to, protected recessions was the German economist Wilhelm Röpke. His thinking was shaped not only by his lengthy formal studies of business cycles, but also the fact that he was extensively consulted by German governments in the late 1920s and early 1930s as the Weimar Republic struggled to stave off political and economic disaster amidst the collapse of banks and skyrocketing unemployment that fed the extremes of left and right. These consultations came to an end in 1933 after the fiercely anti-Nazi (and anti-Communist) Röpke became of the first academics to be purged from the universities by the new National Socialist government.

In his 2010 book, Wilhelm Röpke’s Political Economy (described by one reviewer in Economic Affairs as “the most comprehensive in its analysis of this important thinker’s political economy” and another reviewer in The American Spectator as “mandatory reading for every student of political economy”) Acton’s Research Director Samuel Gregg included an analysis of Röpke’s thinking about business cycles and recessions as the world remained stuck in an economic quagmire throughout the 1930s. Gregg compares Röpke’s position to that of Hayek and Keynes, illustrating how Röpke moved ever closer to Hayek’s analysis and prescriptions and ever more skeptical (and outspokenly so) of Keynes’s views.

Those interested in this subject, but who also wonder what Röpke might have thought of our current economic predicaments might be interested in an address delivered by Dr. Gregg in Buenos Aires, Argentina, in March 2010. The English-language lecture—“Wilhelm Röpke, The Depression and the 2008 Crisis: Reflections from the Past, Lessons for Today”—has just been published in the May 2010 edition of the Argentine journal Revista de Instituciones, Ideas y Mercados, the flagship journal of ESEADE, one of Argentina’s leading market-oriented universities.

It’s especially interesting to observe that while Röpke was initially willing to contemplate some mild interventions (mainly of the type that removed obstacles to a market-driven recovery), Gregg shows that Röpke soon concluded that most interventionist programs were counterproductive and/or ineffectual. Here Röpke was especially influenced by what he regarded as the failure of the New Deal (a failure beautifully documented by the economic historian Amity Shlaes in her 2008 book, The Forgotten Man) to reignite the American economy. As Röpke wrote in 1942:

It turned out that the original calculation that the Government’s boost of purchasing power would set off the private investment drive that was due, was wrong. Every time the Government’s injections were withheld, it was as if there was no private initiative which could take the place of public initiative.

Sound familiar? In his lecture, Gregg notes:

Most interwar active business-cycle policies aimed at combating the Depression, Röpke argued, had failed . . . . Instead [citing Röpke] ‘only an artificially continued prosperity developed which was bound to come to an end the moment the state injections of purchasing power upon which it depended, ceased.’ Bad investments had driven out good investments, meaning that governments were not only bound to keep injecting purchasing power, but to increase them. Such, Röpke wrote, was ‘the slippery slope of collectivism.’

How little we have learned from the past.

This week’s reappointment vote for Fed Chairman Ben Bernanke has created some strange bedfellows in Washington. A muddled middle of Republicans and Democrats supports the Keynesian’s reappointment, but the real odd couples are among the opposition. For different if overlapping reasons, free market proponents and far-left figures such as democratic-socialist Bernie Sanders of Vermont are both convinced that Bernanke has done much to hurt our economy, particularly those in the bottom half of our economy.

Desmond Lachman of The Enterprise Blog observes:

Throughout 2006, when the worst of the sub-prime lending was taking place, Bernanke was conspicuously silent in sounding the alarm about the dangers of the U.S. housing bubble. Similarly, he was painfully slow in recognizing how severe the fallout from the bursting of the housing bubble would be….

If there is one more item that should sink Bernanke’s bid for a second term it has to be his recent statement that the Federal Reserve’s extraordinarily low interest rate policy between 2001 and 2004 contributed little to the creation of the largest U.S. housing market bubble on record. The Senate would do well to ask itself whether the economy’s interests would be best served by again choosing a Fed chairman who seems to have learned so very little from the Federal Reserve’s past monumental mistakes.

A sign that Bernanke’s reappointment really may be doomed: John McCain, whom many would characterize as a member of the muddled middle, also has come out against Bernanke. Political calculations may lead others to follow. For instance, if the new senator from Massachusetts, Scott Brown, wants to reinforce his strong crossover appeal, opposition to Bernanke offers an uncommon opportunity: Both working class Democrats and limited government conservatives reject Bernanke’s vision of Uncle Sam playing wet nurse to Wall Street.

As I wrote recently, our economy would be best served by a Fed Chairman who will let the market of lenders and borrowers guide interest rates, and who understands that unproductive companies should be allowed to go bankrupt. What’s useful in those companies doesn’t disappear in a bankruptcy. The valuable assets are purchased and put to better use by more productive companies. And when interest rates are allowed to float upward to reflect the scarcity of current savings, people will be more careful what they borrow for, while others will be enticed to save more, attracted by the higher interest rates paid for bonds. This, in turn, will boost available capital for longer-term business ventures aimed at enhancing our productivity.

Consider the short depression of 1920. A decade before the Great Depression, World War I had just ended and a flood of American soldiers returned home in search of work. Meanwhile, the Federal Reserve, having roughly doubled the money supply during the war, now put the brakes on the easy money by moving interest rates closer to where they might sit if simply left to market forces. The government also largely refrained from bailing out failed businesses or trying to juice the economy with big stimulus packages.

All of this is the opposite of what the Keynesians recommend in an economic slowdown. It’s the opposite of the Keynesian strategy pursued by both FDR and Hoover during the Great Depression. And it’s the opposite of what Chairman Bernanke has sought to do.

So how did the depression of 1920 play out? The readjustment to a peacetime economy was severe. Production fell by some 20%. Unemployment shot past 11%. But then the depression quickly reversed itself.

Many companies had gone broke, but their useful assets were sold to well-run companies. During the early phase of the contraction, goods and savings were tight, but the higher interest rates signaled to people, “Hey, if you want to borrow money, you’d better have a good, productive use for the money because you’re going to have pay a premium for it” — not because of a bunch of mean old capitalists but because there wasn’t a lot of savings to loan out right then. People got the message. Money got loaned to the most productive enterprises, and before long, the economy was humming again. The unemployment rate dropped below 7% in 1922, and below 3% in 1923. The government allowed the free market to readjust itself, and it quickly did.

This is the strategy recommended by the Austrian school of economics (which incidentally has more adherents in the United States than in Austria). The Austrian school is the polar opposite of the Keynesian school. The Austrian school predicted the Great Depression when others were preaching permanent prosperity. And it predicted our current recession when Bernanke the Keynesian was saying everything was right as rain.

All of this should give the Senate pause.

Blog author: jwitt
posted by on Monday, December 7, 2009

My essay in today’s American Spectator Online looks at why Ben Bernanke should not be confirmed to a second term as Chairman of the Federal Reserve:

Two planks in Bernanke’s recovery strategy: Expand the money supply like a banana republic dictator and throw sackfuls of cash at failed companies with a proven track record of mismanaging their assets. The justification? According to the late John Maynard Keynes, this is supposed to restore the “animal spirits” of the cowed consumer, the benighted creature who foolishly imagines that after a period of prodigality and mismanagement, maybe a country should rediscover its inner Dave Ramsey.

The full essay is here.

Blog author: jwitt
posted by on Monday, February 16, 2009

In response to the question, “What are the moral lessons of the American Recovery and Reinvestment Act (ARRA)?”

Perhaps the most effective historical trope in pushing through the massive stimulus package on Capitol Hill has been the notion that if only the New Deal of the 1930s hadn’t had to wait more than three years for the election of FDR, the Great Depression might have been avoided.

But have you ever wondered why the Great Depression persisted for so long? Why didn’t we bounce out of it after two, three, or four years as we did from previous economic downturns? Hillsdale’s Burt Folsom suggests an answer. Whether it was paying farmers not to farm until we had to import millions of bushels of grain, or throttling job-creating enterprise by raising the highest marginal tax rate to 90 percent, the many tentacles of the New Deal stimulus package choked rather than stimulated the American economy.

The common theme of all of the New Deal’s misguided policies was to remove decision-making power and cash from the free market and move it to Washington. As Folsom goes on to note, such policies not only extended the economic downturn, they set interest groups against each other, stimulating rather than alleviating human envy: “The New Deal divided and politicized the country in tragic ways. Those who lobbied most effectively won subsidies and bailouts even if their cause was weak. Others, who had greater needs, received nothing.”

There is a cure for human envy, of course, but it lies with a civil rather than a government institution, and with a power higher than Capitol Hill.