Thursday, October 18, 2012

Depression and Deals: A Look at the Economics & Politics of the 1930s



When most people think of the Great Depression, black and white images of a dust-covered landscape and scrap shacks swirl in their minds; words like “dust bowl” and “stock market crash” are conjured on our lips. But is that really all the Great Depression was? When you ask someone about Franklin Delano Roosevelt, most people think of the hero who overcame polio to lead a nation against the fascist Reich, not a young Assistant Secretary of the Navy-turned-President of the United States that struggled to pull his country out of the Depression with questionable means. History is written by the victors, but this author will attempt to read between the lines of our history to discover the consequences of the Great Depression, and of President Roosevelt’s “New Deal”.
First, the Great Depression. Most people say the Great Depression began in October 1929, with the stock market collapse, but most economists point out the economy had entered a technical depression as much as six months earlier. (Nelson, 2008) This started a domino effect across the globe, since the U.S. was a major financier and creditor for Europe’s war debts following WWI. Because of this, many nations sought to protect their domestic production by imposing new and raising existing tariffs and setting caps on foreign imports, among other things. All this succeeded in doing was to reducing global trade and its value to almost half of what it was in the 1920s. This angered many nations abroad, especially Great Britain and Germany, two nations who had unemployment as high as 25%. This anti-American sentiment allowed a charismatic young war hero named Adolf Hitler – an Austrian, no less – to become appointed as Chancellor of Germany. Another consequence of the Depression was the shift in public opinion regarding economic prosperity. Americans in the 20s believed, as had their predecessors, that success came not from government intervention, but through the ingenuity of the private businessman. This was thrown out the window as the Depression lingered: Americans began to look to the Federal Reserve Board and the government to fix the problem. With some states like Wyoming, the Dakotas and Arizona receiving as much as $700 per person in so-called ‘federal aid’, and government programs springing up like the Tennessee Valley Authority, people thought we could spend our way out of the Depression. This ideological lunacy was encouraged by our newly-elected president, Franklin Delano Roosevelt, or FDR.
Herbert Hoover, president at the beginning of the Depression, said if the government left the economy alone, it would right itself. But the people of the U.S. were getting impatient, so when a new face came on the scene, claiming that the government was here to solve our problems and Hoover was simply cold and uncaring, people flocked to him in droves. This new face was FDR. Remaining very vague on his campaign, Roosevelt never put a real plan forward, but simply agreed to any plan Congress or his advisors came up with. (Wilkinson, 2008) FDR had little-to-no experience in the economic or business realms, but didn’t seem to have an interest in attempting to amend that. He was more or less a slightly veiled socialist, surrounding himself with Harvard Law School associates, a Columbia professor and Supreme Court justice, and – his most influential economic advisor – was Harold Laski, a London School of Economics professor, and noted Labour Party Marxist. (Engdahl, 2005) FDR’s “New Deal” was actually taken from Stuart Chase’s bestseller by the same name, in which Chase laid out his theory that the capitalist system that pulled Europe out of Feudalism was dead and gone, and we needed to give into the Bolshevik-style “central planning”. This book was highly esteemed by FDR and his advisors, and played a large role in devising his administration’s economic policies. This was quite alarming to America’s businessmen, and when a gutless Congress did nothing but rubber-stamp FDR’s bills through, acts like the National Industrial Recovery Act (NIRA), and the Agriculture Adjustment Act (AAA) destroyed what little progress the American free market had created.
Chase’s New Deal philosophy also led to the formation of Roosevelt’s lasting political legacy: Social Security, and eventually Medicare and Medicaid. We are still dealing with these failed programs to this day, since no one safeguarded the funds that were supposed to pay for them, making them in effect what Texas governor Rick Perry called them: a ponzi scheme.
In short, the Great Depression was the result of a plethora of mistakes, oversights and miscalculations, and FDR’s New Deal nearly destroyed our already-damaged economy. In the words of economist F. William Engdahl, “[h]ad Roosevelt not ended his Presidency as a victorious war President, he would instead be remembered as the President whose policies all but ruined the inherent economic vitality of the American economy for decades after.” (2005)


References
Engdahl, F. William. (2005). Some unconventional reflections on the Great Depression and New Deal. Geopolitics - Geoeconomics. Retrieved November 6, 2011 from http://oilgeopolitics.net/History/New_Deal/new_deal.html
Nelson, Cary. (2008). The Great Depression. Modern American Poetry. Retrieved November 6, 2011 from http://www.english.illinois.edu/maps/depression/about.htm
Wilkinson, Kyle. (2008). The Great Depression and New Deal: 1929-1940s. Retrieved November 6, 2011 from http://iws.collin.edu/kwilkison/Online1302home/20th%20Century/DepressionNewDeal.html

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