Evolution or God, depending upon your spiritual persuasions, has given us huge brains and amazing intellects and yet, we lurch from one unforeseen outcome to another. It’s like a carefully planned battle which instantly dissolves into chaos once the first shot is fired. And so it is with the best laid plans, etc.
I am reading, “The Forgotten Man – A New History of The Great Depression” by Amity Schlaes. Born in 1933, I have some childhood memories from the 30’s, but I had no idea how bad everything was because my Dad was smart and ambitious enough to stay gainfully employed through it all and took pains to shield his family from feeling the impact of what was happening.
As a youngster, I recall riding in the back seat of the car on one of our 40 mile trips to visit grandad’s farm when I saw a field filled with tents for as far as I could see. The answer to my ‘what’s that’ query was, “that’s a CCC (Civilian Conservation Corp) camp”, which was one of many make-work depression era projects to provide food and shelter for the millions of unemployed.
It is a notable and timely book with parallels to today’s events and the thought processes and ideas which permeate our electronic ether. “Forgotten Man” prepares the reader with backgrounds of all the players from the coming of age of the intellectual left, the inventors driving the industrialization of America, the politicians (they haven’t changed) and the “forgotten man” (that’s us).
In September, 1929 the Dow Jones hit an all-time high of 381. By the end of October, it had lost 40% of its value closing at 230.07. By March of 1933 it had reached 54.
Cut taxes or raise taxes, raise or lower interest rates, create public works projects and more were all questions of public discussion in 1930. Eventually a little bit of everything was tried to no positive effect. The author begins, however, with Calvin Coolidge’s response to the 1920 recession which was to do nothing because the economy will take care of itself. By 1923, the country had returned to full employment.
Hoover, Commerce Department secretary under Coolidge, was elected president in 1928, was a do something kind of guy. For example, after the economy slowed following the 1929 stock market crash, he diagnosed the problem as inflation and set about to restrict the money supply. In retrospect it became clear that the problem was deflation and government actions only deepened the crisis.
In Utah, businesses, banks and government all ran out of money fostering barter as a method of exchanging goods and services. A haircut might be had for a dozen eggs and a loaf of bread. The situation became so critical that the state of Utah began to print scrip called Vallars to facilitate the most basic commerce. Some other states followed suit as Washington’s anti-inflation posture dried up the money supply.
Franklin Roosevelt defeated Hoover in 1932 for president and brought his own set of notions to the office which only served to prolong the economic drought until World War II. As it turned out, the only one who had it right was a ‘do-nothing’ Coolidge in 1920.
Today we have an economy which has been faltering for the better part of 10 years. GDP growth is measured in the one percent range while the Dow is setting all-time highs in the 18 thousands. Interest rates are near zero with a Fed discount rate revolving around 1.5%. The situation is being brought to a head now in 2016 by an election featuring candidates with diametrically opposed views of the economy, each blaming the opposition.
To most people, it feels as if we are at the precipice of a very large plateau we have been stuck on much too long. Economist Art Laffer says, “We are having the single worst recovery the U.S. has had since the Great Depression. I don’t care how you measure it. The East Coast knows it. The West Coast knows it. North, South, old, young, everyone knows it’s the worst recovery since the Great Depression.”
There is no shortage of proposed ‘cures’ during the campaign season. Milton Friedman said, “The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.”
One does not need to be an economist or historian to answer questions like what happens to jobs and the economy when taxes are raised? What is the effect on business when trade is restricted? What is the effect of government regulations on business? Political debate about questions like these is for the historically ignorant. They have all been tried before and the results are in.
Is forgotten history destined to repeat itself – again?