Arthur M Schlesinger Jr. wrote one of the definitive histories of the FDR years from 1919 to 1936, inclusive. I always felt disappointed that he left out the years to 1944 or at least ot 1942. But as histories go he focused more on the political action rather than the economic consequences of that age. John Kenneth Galbraith wrote The Great Crash and got it half right, Amity Shlaes wrote The Forgotten Man and came a little close to the truth. Fact is, many books have been written about the causes of the depression and each has its author’s particular frame of reference. Economic history like political history is subject to a good deal of interpretation. Searching for the truth is never an easy task, sort of like Hercules being charged with cleaning the Augean Stables for the Greek Gods. Indeed, the number of books written on that era are impressive.
Now some economists and pundits attribute to John Maynard Keynes the fiscal policies put into place by FDR. But Keynes had not written his opus until much later and even his expertise had not been sought until the Bretton Woods Conference. In the book, The Panic Of 1907, Robert F Bruner and Sean D Carr make the point that there was the possibility of a depression in 1907 was deflected by the judicious use of budget cuts and allowing businesses to fail. Rather than an expansion of monetary policy, it was reined in. One of the basic problems we have with those economists trained in the Keynesian school is the though that somehow we can spend our way to wealth. This carries over to the political side of the house when those of a more liberal and progressive bent seem to believe that very adage. Somehow few ever stop to wonder where the money comes from. These same folk believe that government has unlimited amounts of money. This was not always true if we bother to read The Federalist. Hamilton argued that in order to attract trade America must not only have a central bank but must guarantee the debts of the individual states. He was advocating for a system that would organize American credit in international trade. At that time current accounts were settled by shipping gold or its equivalent back and forth between countries. It should be noted that at this time John Law was running the French treasury and what started as a sound plan quickly became a fiasco, leading to the French revolution. One must pay attention to economics or else lose one’s head. The soundness of the French monetary policy came into question and the government’s line of credit was imperiled.
Many who study the FDR years seem to ignore that the president interfered with the free market structure to the detriment of the economy. One classic example was the farm production price support. Dairy farmers complained that they needed control over prices. Yet at that time the poverty level had increased and a great many families could not afford the price of a gallon of milk. The solution was to destroy excess production in order to keep prices high enough to assure the farmers a profit. A great many children went without milk as a result. FDR also allowed businesses to get together to set prices, thus assuring high profits. Labor unions had federal government help in organizing and striking for higher wages, yet the unemployment rate was officially twenty five percent. FDR though it more important that labor rates stay the same or increase rather than decline. It does not take a genius to understand that when one interferes with supply and demand one skews the markets. But the college educated progressive liberal was here to tell us how to run the show. The “Roaring Twenties” had been an age of excess. That is, excessive credit that led to excessive debt. And when debt cannot be repaid people jump out of high rise windows while giving no though about whom they may land on.
One of the problems with the depression era was that there were few measures by which an economy could be guided. Communism proudly proclaimed its five year plans but these meant little. Centrally planed economies have almost no means to measure its progress. One might boast of producing more and more tractors and bags of fertilizer, but at what cost? In a planned economy what does a tractor cost to manufacturer? Without a market that is able to set price and satisfy demand one has literally no idea that what one produces will be in demand. Planned economies mean a great deal of waste since there is no feed back mechanism to tell us just how well we are doing. So we set a minimum wage and think we have provided a living wage for all of those people on the bottom. In World War Two the British fighter aircraft, the Spitfire, as well as the Mosquito, were hand built by craftsmen. The American B-17, the fighter, the P-51, were produced by assembly line using semi-skilled labor. Needless to say that all the war machines produced by American were assembly line produced in numbers never thought possible. Liberty Ships were produced by the thousands and only took two days to build. The German U-Boat couldn’t sink them fast enough. Do you start to understand about economic measurement?
The hardest part about living in a consumer economy, as we do in the modern world and even the underdeveloped countries, is that there are limits to consumption. That is, one can only buy so much stuff. And if that is true, then one can only manufacture so much stuff, the excess being difficult to sell when saturation sets in. If my house had ten rooms I could buy ten large screen television sets and put them in every room. But I can only watch one screen at a time, so what good are the other nine television sets? Conspicuous consumption? Can we really buy our way to wealth? One begins to suspect there are limits. But we see more and more individuals who are convinced that we can do away with poverty, with hunger, with inequality, with all of those social ills as defined by western culture. Perhaps not everyone agrees with the program. Not everyone wants two cars in every garage or needs houses that measure greater than 2500 square feet in size. Bigger is not always better, and sometimes it is worse. The problem with progressive liberalism is that is becomes fascist in its implementation. Listen to me, you will obey, I know best for you, you will do it my way. Perhaps, perhaps not. If we invoke the agency of Free Will, we break the spell of those who advocate the rightness of their programs. \
Do you start to understand that free will is an important part of human culture? We may dress alike and act alike but we still retain our individuality regardless of the occasion. So why do we try to divert those individuals into our way of thought? Perhaps it is the security of everyone acting the same, being the same, never deviating from the norm. Little houses made of ticky-tacky and they all look the same. So we continue, trying to mask our motives in the collectivist form. We are here to tell you what your must do to show obedience to king and country. Not bloody likely, is it? Then we have those who assume an air of moral superiority while dictating that the national minimum wage must be fifteen dollars an hour, it must be a “Living Wage” so that those who are unskilled in almost every kind of work can live in areas of low employment for unskilled labor and that are also area of high living expense. In San Francisco an unskilled worker needs a minimum “Living Wage” of fifty dollars an hour just to pay the rent. So small business must bear the brunt of supporting unskilled labor simply because such individuals do not wish to move to areas where unskilled jobs are more plentiful. Time to employ more robots.
Meanwhile the Federal Reserve pours money into the economy in the belief that the consumer will lead this country into great growth years. But the consumer is already tapped out. Consumer debt is at the highest point in a century and still rising as more banks, credit card companies, and consumer goods manufacturers issue more subprime loans. No money down, long term payment schedules, no payments for a year, buy buy buy now. All of this is financed by the Fed. The money never went to the consumers, it went to too big to fail banks, investment houses, and other corporations. It has promoted bubbles in commodities, housing, and a great many other assets. Back in FDR’s time this inflation would be seen as the start of hyperinflation where money lost its value as soon as it was printed. So many economist never saw that hyperinflation is in the asset bubbles, and when they burst all hell breaks loose. The NAFTA trade agreement was suppose to bring more jobs and great prosperity to America and to our trade partners. The truth was, lower trade barriers with China, the willingness of China to become the worlds minimum wage manufacturer, and the willingness of American and multinational corporations to pour capital into projects over which they could exercise little control sent all those promised jobs out of America and Mexico. Now a new trade agreement is coming to a vote, one that promises more of the same. More jobs for Americans, more prosperity, more, more, more. But the reality is that the sovereignty of each country that signs that agreement is greatly compromised. Imagine then that other countries who are party to that trade agreement declare that your minimum wage demands are damaging their economies and a world court rules that all minimum wage laws are invalid. Just as the ACA has increased the cost of medical care while reducing the insurance coverage and increasing its cost so too will the secret trade agreement do the same for the economies of those who sign that pact. In the end, that trade agreement may be good for the one percent but it will be hell for the rest of us.
Yes, everyone has some horse it wants to ride, some cause it deems the most important to humanity. Save the starving children, save the starving cats, in the end you are a little poorer and all you have accomplished is to help increase the populations more more starving children and more starving cats. They have the propensity to reproduce even if it is against their better interests. You good intentions have merely made the situation worse. But what do you care? You feel good because you did something.