Brief excerpts from Lawrence Reed’s classic 1981 article on the Great Depression, published in The Freeman and now republished by the Mackinac Center for Public Policy (which I just received in the mail)…

Reed divides the GD into four phases:

To properly understand the events of the time, it is appropriate to view the Great Depression as not one, but four consecutive depressions rolled into one. Professor Hans Sennholz has labeled these four “phases” as follows: the business cycle; the disintegration of the world economy; the New Deal; and the Wagner Act. The first phase explains why the crash of 1929 happened in the first place; the other three show how government intervention kept the economy in a stupor for over a decade.

Then, Reed deals with myths about Hoover as laissez-faire and Roosevelt delivering what he promised…

Did Hoover really subscribe to a “hands off the economy,” free-market philosophy? His opponent in the 1932 election, Franklin Roosevelt, didn’t think so. During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions of people on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.” Contrary to the modern myth about Hoover, Roosevelt and Garner were absolutely right.

Can any serious scholar observe the Hoover administration’s massive economic intervention and, with a straight face, pronounce the inevitably deleterious effects as the fault of free markets?…

Franklin Delano Roosevelt won the 1932 presidential election in a landslide, collecting 472 electoral votes to just 59 for the incumbent Herbert Hoover. The platform of the Democratic Party whose ticket Roosevelt headed…called for a 25 percent reduction in federal spending, a balanced federal budget, a sound gold currency “to be preserved at all hazards,” the removal of government from areas that belonged more appropriately to private enterprise, and an end to the “extravagance” of Hoover’s farm programs. This is what candidate Roosevelt promised, but it bears no resemblance to what President Roosevelt actually delivered….

Reed’s wrap-up:

The genesis of the Great Depression lay in the inflationary monetary policies of the U.S. government in the 1920s. It was prolonged and exacerbated by a litany of political missteps: trade-crushing tariffs, incentive-sapping taxes, mind-numbing controls on production and competition, senseless destruction of crops and cattle, and coercive labor laws, to recount just a few. It was not the free market that produced twelve years of agony; rather, it was political bungling on a scale as grand as there ever was.

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A little more than a year ago, I wrote a really nice piece on this topic– on the occasion of the 100th anniversary of the nation’s first eugenics law (in Indiana).

Now, more historical context from Jesse Walker at Reason

In 1888, a social reformer named Oscar McCulloch delivered a speech in Buffalo titled “The Tribe of Ishmael: A Study in Social Degradation.” Indianapolis, McCulloch declared, had been infected by a “pauper ganglion,” a depraved clan that survived “by stealing, begging, ash-gathering”…They also received “almost unlimited public and private aid,” which merely “encourag[ed] them in this idle, wandering life, and in the propagation of similarly disposed children.”

The speech had lasting implications for both the poor people of Indiana and the budding pseudoscience of eugenics. It also was largely untrue, reports the historian Nathaniel Deutsch in Inventing America’s “Worst” Family (University of California Press), an insightful new study of the Ishmaels and their interpreters….

McCulloch was an early advocate of both eugenics and the social gospel, a toxic combination that foreshadowed the pending Progressive Era….a self-proclaimed socialist—even as he increased his contempt for, and willingness to use the law against, paupers who preferred to remain outside the wage economy….

But his most influential contention was not that the Ishmaels were a social evil. It was that they were a social evil with a biological basis…

Such ideas had consequences. In 1905 Indiana restricted marriages by former inmates “of any county asylum or home for indigent persons.” In 1907, influenced by McCulloch’s studies, the state adopted what may be the world’s first compulsory sterilization law….

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Blog author: eschansberg
posted by on Wednesday, February 18, 2009

A staggering piece by Stephen Baskerville in Touchstone…

I’ve written at length that marriage has been damaged much moreso by divorce than by calls for (or movements toward) “same-sex” marriage. Baskerville expands on that and discusses the initial “grand experiment” on marriage– the policies behind the move toward easier divorce.

G. K. Chesterton once observed that the family serves as the principal check on government power, and he suggested that someday the family and the state would confront one another. That day has arrived.

Chesterton was writing about divorce, and despite extensive public attention to almost every other threat to the family, divorce remains the most direct and serious. Michael McManus of Marriage Savers writes that “divorce is a far more grievous blow to marriage than today’s challenge by gays.”

Most Americans would be deeply shocked if they knew what goes on today under the name of divorce. Indeed, many are devastated to discover that they can be forced into divorce by procedures entirely beyond their control. Divorce licenses unprecedented government intrusion into family life, including the power to sunder families, seize children, loot family wealth, and incarcerate parents without trial. Comprised of family courts and vast, federally funded social services bureaucracies that wield what amount to police powers, the divorce machinery has become the most predatory and repressive sector of government ever created in the United States and is today’s greatest threat to constitutional freedom.

Some four decades ago, while few were paying attention, the Western world embarked on the boldest social experiment in its history. With no public discussion of the possible consequences, laws were enacted in virtually every jurisdiction that effectively ended marriage as a legal contract. Today it is not possible to form a binding agreement to create a family. The government can now, at the request of one spouse, simply dissolve a marriage over the objection of the other….

This startling fact has been ignored by politicians, journalists, academics, and even family advocates. “Opposing gay marriage or gays in the military is for Republicans an easy, juicy, risk-free issue,” wrote Gallagher. “The message [is] that at all costs we should keep divorce off the political agenda.” No American politician of national stature has ever challenged involuntary divorce….

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In this week’s Acton Commentary, Anthony Bradley exposes the “legislative incantations” designed to artificially create consumer demand (where none exists) via the stimulus bill. “Real needs must be permitted to create real demand, and thus truly sustainable jobs,” he writes.

Read the commentary at the Acton Institute website and share your feedback here.

Blog author: rnothstine
posted by on Tuesday, February 17, 2009

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

One of the gravest moral issues related to the American Recovery and Reinvestment Act is the matter of dangerous deficit spending. Anybody plugged into our nation’s financial crisis is likely aware of the unsustainable spending path of not just the federal government, but individual states as well. Because many states have balanced budget amendments, they are not entitled to run deficits, so the federal government proposes bailouts, which comes at an even greater cost to taxpayers from fiscally responsible states. One can easily see how policies like these only encourages irresponsible government spending policies.

Dr. Samuel Gregg, who is the director of research at the Acton Institute, touched on this subject and a number of important topics concerning the financial crisis in his recent address “America’s Economic Crisis: Looking Back, Looking Forward.” Offering a scathing critique of Keynesian economic policies, Dr. Gregg directly addressed the moral aspect of deficit spending:

We have every reason to believe that deficit spending on the scale being contemplated is addictive and difficult to stop. Because once we see that the various ways of ‘jump-starting’ the economy do not spark an economic revival, we will undoubtedly be told that the stimulus was not big enough, and that more deficit spending is required. More and more capital will thus be placed in unproductive spending.

The cost of deficit spending is often passed on to future generations. In other words, we force future generations to pay for the sins of the present.

Deficit spending can imply the adoption of inflationary policies. Inflation is like cancer. It acts slowly but is deadly. It attacks the weaker parts of the body, and destroys the economic well-being of the poor, such as those on pensions or other fixed incomes. But I also think that inflationary policies are morally wrong. Why? Because when you inflate the currency, the value of people’s assets is reduced. In other words, once a government introduces inflationary policies, it reduces the value of the assets that people already own. People who work hard to build up the value of their business or property suddenly find that the government has diluted the value of their asset.

In talking to my pastor about these issues a few weeks ago he reminded me of the inscription on the Liberty Bell from Leviticus, “Proclaim liberty throughout all the Land unto all the Inhabitants thereof…” My pastor also reminded me of the meaning of the verse saying, “The passage speaks about the Jubilee year when the Lord forgave people of their debts and sins and allowed for a new beginning of freedom from the slavery debt brought.” And that is a reminder of a subject Dr. Gregg also spoke so well about during his lecture, and that is the moral failings of those on Main Street and Wall Street. If we are going to see fundamental reform of spending in the nation’s capital and beyond, we need to as families and individuals have a moral aspect to our own spending and budgets.

Blog author: kschmiesing
posted by on Tuesday, February 17, 2009

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

The ARRA makes clear that we have not learned one great moral lesson: You can’t have something for nothing. Or, among economists, there’s no such thing as a free lunch.

I’m not even sure that anybody is seriously arguing that most of the items contained in this bill constitute “stimulus.” Congress can genuinely stimulate the economy in two ways: decreasing taxes and decreasing regulation. In other words, by putting fewer hindrances in the way of those who wish to produce and consume. Everything else is smoke and mirrors. Government puts money into one person’s hands only by taking it out of someone else’s; or by creating it ex nihilo, which amounts to the same thing (moralists have been condemning the debasement of currency at least since the Late Scholastics).

If the bill has any positive impact, it will be psychological, making people believe that the economy will improve and therefore generating positive economic activity. This possibility seems doubtful at this point. It appears instead that the measure’s most significant effect will be to increase the cynicism with which the American people view their government. I’m undecided yet as to whether that is a favorable development.

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.

The American Recovery and Reinvestment Act (ARRA) is poised to be signed into law after weeks of wrangling. Since we know that “budgets are moral documents,” then spending and stimulus bills must be as well.

So this week’s PowerBlog Ramblings question is: “What are the moral lessons of the American Recovery and Reinvestment Act (ARRA)?”

Ramble on…

Ramblings:

Blog author: mvandermaas
posted by on Friday, February 13, 2009

Washington is all atwitter about the “Stimulus,” which is currently being pushed through Congress (without being read by most members). Acton’s own Michelle Muccio has come up with a plan of her own, and did a bit of independent research to see if her proposal would find any support:

Blog author: jballor
posted by on Friday, February 13, 2009

In response to the question, “What is the future of the faith-based initiative?”

Under the Obama administration, the faith-based initiative will increasingly become a means to bailout flagging mainline and liberal denominations and ministries, who will have no problem accommodating their religious practices to secular standards. And in this we will see even clearer manifestation of the theocratic hopes of the religious left.