In late October, 1929, after a period of what seemed to be incredible
economic expansion, the economic bubble burst, triggered by the collapse of US Stock prices. The United States
in 1929 was self sufficient in oil, raw materials and all other fuels, had more railroad track
than the rest of the industrialized world, a huge labor force and had been
relatively untouched by WWI, which had devastated economies and populations in
Europe. Unfortunately, the US also had
essentially no regulation of financial markets, little control of giant
corporations, and the control of 90% of the nation's wealth in the hands of 5%
of its population. Acting on the principal
(still taught in Business curricula today) that the overriding purpose of the
corporation is to maximize profits for shareholders, corporations were free from either conscience or restraint.
Through
the 1920s Warren Harding and then Calvin
Coolidge were essentially sycophants for
American business ("The business of
America is business" -C. Coolidge, Jan 27, 1925). The previous quote does not
mean Coolidge was simply a shameless cheerleader for business, as this quote,
usually taken out of context seems to imply. The real meaning is more troubling, in that it
reflects the honest opinion held by essentially
every President from Lincoln on, regardless of party, that it was ok
for government to foster and
provide an environment which allowed the rich to gain power and wealth, but not
to hinder business unless its abuses had become so egregious that popular
opinion demanded it. Such efforts as The Sherman Anti-trust act and the
creation of the Interstate Commerce Commission had been used only in the breach
by Roosevelt, Taft, and Wilson because
the visible abuses of business were so heinous that public outcry demanded some
attention or faith in government would be lost.
The
election of Herbert Hoover, yet another pro-business Republican, in 1928 promised more of the same. After all, Coolidge on the way out the door had said
"Stocks are Cheap at current prices!"
When , finally, some investors began to
realize just how overvalued many stocks were and that just because the government said
markets were sound didn't make it true, the market collapsed. In a world
already beset by financial woes, the failure of what had been viewed as the
world's strongest economy, had a worsening effect worldwide. Since now-President Hoover believed, like
most of his predecessors, that the government had no business helping the poor
directly, he resisted for several years pumping any government funds into direct
relief. Since like many, then and now, Hoover believed in the "trickle
down*"
theory of economics. This is the concept
(now largely discredited except by Mitt Romney and Reagan's former economic
advisors) that any action, such as cutting
taxes on the wealthy , which puts more money in the hands of the
wealthy will cause some of that wealth wealth to "trickle down" to
the rest of society. Thus, Hoover signed the Reconstruction Finance Corporation
into law. Unfortunately for the poor it
lent money only to financial, industrial, and agricultural institutions, where
the great bulk of it stayed.
* trickle down theory: 1: In the 1992 presidential election, Independent candidate Ross Perot called
trickle-down economics "political voodoo." 2: In New Zealand, Labor Party MP Damien
O'Connor has, in the Labor Party campaign launch video for the 2011 general
election, called trickle-down economics "the rich pissing on the
poor". 3: A 2012 study by the Tax Justice Network indicates that wealth of
the super-rich does not trickle down to improve the economy, but tends to be
amassed and sheltered in tax havens with a negative effect on the tax bases of
the home economy.
In the
Presidential election of 1932 Hoover was turned out of office, Franklin D.
Roosevelt receiving 57% of the popular
vote, and gaining 472 electoral votes to Hoover's 59, which did not even include his own,
conservative, home state of Iowa. To
recap, Roosevelt became President during the worst economic conditions since
the panic of 1893. He carried into
office with him huge majorities in both the House and the Senate, which meant
that essentially only the Supreme Court could limit any actions he cared to
take to combat the Great Depression. He also governed a nation, as previously
mentioned , which was energy independent and had sufficient supplies of
essentially every raw material needed for industrial production. And yet.......
The
misery of the Great Depression lasted well into Roosevelt's second term, no
matter how hard he and a compliant
Congress tried to reverse the economic downturn. The end of the Depression was,
finally, not caused by presidential action, but by Adolph Hitler. War
production, first to supply Europeans (Britain
primarily: Roosevelt "We
shall become the great arsenal of Democracy") and then, after Pearl Harbor,
building weapons for our own forces
finally increased employment to pre-depression levels.
Why
have I gone to the trouble to write this down? Well, unfortunately, one of my former students,
who knows far better, wrote a post today excoriating President Obama because he
hadn't, as of yet, reversed the conditions of the current
economic downturn, which is recognized by all real economists as the worst
since the Great Depression. Why hasn't this downturn seen the level of human misery
of 1929-1939? Social Security and
Medicare (two of the tea partiers and Romney/Ryan's favorite targets) are a large
part of the answer.
Let's review:
we are now a nation dependent on others
for fuel and most metallic ores, flooded
with Chinese cheap goods (Thanks Bain Capital and Walmart), an obstructionist Congress headed by John Boehner and the Tea party
imbeciles, and the deficits caused by Bush's Iraq war which turned the Clinton
surplus into a deficit overnight. So let's unelect President Obama because he
hasn't done in 3 1/2
years what FDR couldn't do in ten? Sound
stupid now? It is. That loud sucking sound is your head being pulled out of
your butt. By the way (she knows who she is) I still love ya.
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