Right Thinking From The Left Coast
We didn't lose the game; we just ran out of time. - Vince Lombardi

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Those Who Forget History, etc.

Being a history-manic, I try to keep an eye out for quality texts to add to my library.  About 2 years ago, a blurb from Paul Johnson’s book Modern Times was quoted in a blog called Mean Mr. Mustard (the blog itself is now history, the author having joined the Army as a JAG officer).  I’ve since read this book, along with Intellectuals and A History of the American People.  Johnson is basically the anti-Howard Zinn--he’s staunchly pro-capitalist and small-government, which is a relief in a field dominated by scholars who don’t have a problem with communism if it’s “run by the correct people.” So I have no problem whatsoever pimping the man’s work on this blog.

Anyway, I was recently reading through his analysis on the Great Depression, and it was a little disconcerting as to some of the similarities between what happened then and what has been occuring, really, over the past six years and continues today.  I’ve put some of the passages below the fold with relevant comments as appropriate.  The notion that Hoover was a laissez-faire President in contrast to Roosevelt was largely the work of FDR’s propoganda machine and has been debunked for some time, but Johnson goes into more detail on this.

Now, whether history truly is setting up to repeat itself remains yet to be seen; however, the signs are troubling and being aware of what happened back then may help us recognize how things could play out in the future if similar policies are followed.  Note in particular the last paragraph cited below the fold.

(If you’re interested in checking out this guy’s books, Amazon has a link here. You can always check them out from the local library if you don’t want to spend the money)

“...Hoover’s corporatism, the notion that the state, business, the unions, and other public bodies should work together in gentle, but persistent and continuous manipulation to make life better for all, was the received wisdom of the day among enlightened capitalists, left-wing Republicans, and non-socialist intellectuals, as well as a broad swathe of Democrats and public-spirited academics.”

In modern terms, this sort of policy has come to be known as the “public/private partnership.” Its roots actually go back to the urban boss system of the turn of the 20th century, but it really came into its own during the 1980s when cities began to realize that they needed to harness the financial resources of the private sector for urban development, since they could no longer rely on heavy federal subsidies thanks to cuts by the Reagan administration.  The promotion by Democratic mayors for corporate welfare in the form of new sports stadiums is a good example of this, although it could apply to just about any urban renewal project in the last two decades of the 20th century. 

“From the very start, therefore, Hoover agreed to take on the business cycle and stamp it flat with all the resources of government.  He wrote: ‘No president has ever believed there was a government responsibility in such cases...there we had to pioneer a new field.  He resumed credit inflation, the Federal Reserve adding almost $300 million to credit in the last week of October 1929 alone.  In November, he held a series of conferences with industrial leaders in which he exacted from the solemn promises not to cut wages--even to increase them if possible--promises which on the whole were kept until 1932...Indeed in most respects Hoover did what would later have been called a ‘Keynesian solution.’ He cut taxes heavily.  Those of a family man with an income of $4,000 went down by two-thirds.  He increased government spending.  He deliberately ran up a huge deficit.  It was $2.2 billion in 1931, by which time the government’s share of GNP had increased from 16.4 percent in 1930 to 21.5 percent.

We saw these kinds of policies during the Bush years, and Obama is basically following the same policy, although his “tax cut” is completely bogus voodoo.  At the rate Obama has increased and indeed, wants to increase, government spending, allowing the Bush tax cuts to expire won’t make a damn bit of difference.

More major public works projects were started in Hoover’s four years than in the previous thirty.  They included the San Francisco Bay Bridge, the Los Angeles Aqueduct, and Hoover Dam...When intervention failed to deliver the goods, Hoover doubled and redoubled it.  In July 1932, the RFC’s capital was increased by nearly 100 percent to $3.8 billion and the new emergency Relief and Constructive Act extended its positive role: in 1932 alone it gave credits of $2.3 billion plus $1.6 billion in cash.  The essence of the New Deal was now in place...By this point, however, Hoover had lost control of Congress, which was horrified by the deficit and insisted that the budget had to be brought back into balance after two years of deficit.  The 1932 Revenue Act saw the greatest taxation increase in U.S. history in peacetime, with the rate on high incomes jumping from a quarter to 62 percent.

As I pointed out yesterday, Obama is saying that we are “out of money,” and he’s gone on record saying that we can’t keep borrowing from the Chinese.  The money to pay for all of his programs is going to have to come from somewhere, and I have the feeling he won’t just allow the Bush tax cuts to expire, he’ll jack them up further for good measure.  He promised during the campaign that the 95% would not see their taxes go up “one dime,” but every penny of every person’s income above $250,000 won’t come close to paying for these programs.  Hence the investigation of things like a national sales tax.

The effect of (Hoover’s interventionist) rhetoric was to persuade the financial community that Hoover was pro-labor and anti-business, and this had a further deflationary effect.  It was reinforced by his incessant attacks on the stock exchanges, which he regarded as parasitical, and his demands that they be investigated pushed stocks down still further and discouraged private investors.  His policy of public investments prevented necessary liquidations.  The businesses he hoped thus to save either went bankrupt in the end, after fearful agonies, or were burdened throughout the 1930s by a crushing load of debt.  Hoover undermined property rights by weakening the bankruptcy laws and encouraging states to halt auction-sales for debt, ban foreclosures, or impose debt moratoria… Hoover pushed federal credit into the banks and bullied them into inflating, thus increasing the precariousness of their position."(all bolds my emphasis)

Now, Obama figured out pretty quick that when you demonize the people investing in business, it has a negative effect on the stock market, and in March he (and the press) started talking it up in order to prevent a complete pull-out.  So the stock market has been able to recover pretty quickly thanks to that.  However, unemployment is still high and even the administration believes it’s unlikely to get better before the end of the year.  So either the gains will ultimately be wiped out, or we will have what the media termed during the Bush years a “jobless recovery.” The rest of the activities I bolded in the paragraph above have been nearly a step-by-step recreation of the Obama playbook, and we haven’t even gotten to the Roosevelt years yet.  Obama has instead come up with all-new ways to put pressure on the economy and the government’s debt-load, from cap-and-trade to “healthcare reform,” which haven’t been implemented yet and so their effects won’t be known for some time.

Posted by on 05/29/09 at 09:23 PM in • Permalink


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