A couple of weeks ago Time magazine asked, “What can Barack Obama learn from FDR?” That got me thinking about the Great Depression. It’s an event I’ve studied a lot over the past three years. There’s one major problem with the Obama as FDR idea though; it doesn’t fit. This idea obviously fits the left’s romantic idea of FDR and Obama, but from a historic perspective it’s a little puzzling. A better question would be, “What can Barack Obama learn from Hoover?” When Roosevelt was sworn into office on March 4, 1933, the depression had been going on for three and half years. Hoover had been president for just seven months when the stock market crashed in October 1929.
Herbert Hoover was an extremely popular guy. It was the reason he elected president. Hoover’s exploits as a mining engineer and a humanitarian had made him an obvious choice for president when Coolidge refused to run for another term. To be sure, no reasonable person would blame Hoover for the stock market crash seven months into his term. This is the same problem Obama faces.
When the crash happened Hoover used every tool at his disposal to mitigate the effects of the downturn. Hoover didn’t have a “hands off” reaction; in fact, many of his policies were later copied by FDR. It is my belief (and I’m not alone) that Hoover’s policies after the crash (followed by FDR) turned a great recession into the Great Depression. This is the lesson Obama must learn. Unprecedented government intervention could make the economy much worse. After three years of meddling Hoover was unable to turn things around and paid the price at the polls. If the economy doesn’t turn around Obama will be viewed as Hoover, not FDR.
During the campaign season Barack Obama’s souring rhetoric offered hope to all Americans. Since being sworn in the new president has become the commander and chief of gloom. The fact is that Obama’s rhetoric isn’t warranted. The nation isn’t facing the Great Depression right now. What the nation needs to hear is that this is a slowdown, they’re common, and it doesn’t require uncommon action. Instead Obama is using the slowdown for partisan political advantage. Let’s face it. The monstrosity that was just passed by Congress could have never been passed without the horrible press coverage of the economy and president’s never-ending gloomy statements. Bradley Schiller has an op-ed in the Wall Street Journal that hits the nail on the head.
Mr. Obama’s analogies to the Great Depression are not only historically inaccurate, they’re also dangerous. Repeated warnings from the White House about a coming economic apocalypse aren’t likely to raise consumer and investor expectations for the future. In fact, they have contributed to the continuing decline in consumer confidence that is restraining a spending pickup. Beyond that, fearmongering can trigger a political stampede to embrace a “recovery” package that delivers a lot less than it promises. A more cool-headed assessment of the economy’s woes might produce better policies.
Obama’s policies seem more like Hoover than FDR. When the stock market crashed in 1929 Hoover took an uncommon approach to a common problem. The economy normally contracts around every ten years. Unfortunately Hoover decided government intervention was necessary. Hoover’s policies of higher tariffs, taxes, and interests rates ended up turning a recession into an depression. When FDR became president he basically adopted many of the same politics. Is it any wonder why the depression lasted until the war?
The only thing we have to fear is the government itself. The nation has been on the road to bankruptcy ever since FDR. LBJ’s Great Society pushed us faster towards the brink and no politician has been able to change the course. Now the nation is facing a recession and the current leadership is using it as an excuse to pass the single most expensive project in the history of the nation. The stimulus package costs more (adjusted for inflation), than the Marshall Plan, the Louisiana Purchase, the race to the moon, the Korean War, the New Deal, and the invasion of Iraq. If you throw in the cost of TARP (and the glorious sequel coming soon) the US government will authorize more spending than all of those events combined plus World War II, and the Vietnam War. In other words this is the largest increase in government spending in the history of the Republic. Keep in mind unemployment is still in single digits. What is the justification for this drastic action?
Amity Shlaes’ The Forgotten Man is easily the most fascinating look back at the Great Depression I have ever read. The book is a breeze to read and serves as a refreshing look at the well intentioned policies that help prolong and strengthen the severity of the depression. The book starts in the twenties and reevaluates the myth of the “reckless twenties” that became the embodiment of the thirties propaganda. The center of the economic policy of that period was Treasury Secretary Andrew Mellon who served the post for three presidents. The twenties were a boom period for business, much like this decade and the nineties.
President Coolidge’s pro-business policies fueled the economic growth of that period. The immensely popular Coolidge decided not to seek a third term and was replaced by Herbert Hoover. Hoover’s idea of economics were at odds with Mellon and the previous administration and when the stock market finally corrected in 1929 after inflated growth the President did everything wrong. Hoover raised taxes, tariffs, interest rates and turned a normal recession into the Great Depression.
Political change was inevitable in 1932 and once Roosevelt became President the poor economic policies continued. It’s easy to point the blame on Roosevelt, but I’m not sure there was any rational alternative. The Republicans at the time didn’t have any better ideas. They were far too prone to support the kind of isolationist policies that were helping compound the problem. The only decent candidate to run against Roosevelt was Wendell Willkie who ran in 1940. By that time the war was the number one issue and there’s no doubt that Roosevelt was a tremendous leader.
President Roosevelt’s administration also spent a great deal of time going after businesses and Wall Street. This war against the private sector ultimately made the Depression worse as well, eventually leading to Black Tuesday in 1938. The administration’s overzealous attack on Wall Street quelled investment and stopped growth. One example of the cluelessness of the administration was the price of Gold. When FDR was asked why he had sat the price of gold to twenty-one cents he replied “it’s a lucky number, because it’s three times seven.” This kind of daily meddling wasn’t uncommon and is an amazing insight into why the Depression is the greatest government blunder in our nation’s history.
Despite the gloom of the period the book is an inspirational look at the truly “forgotten men and women” of the depression. These heroes overcame one of the most difficult periods in our history despite the incompetence of government intervention. For too long people have debated why the Great Depression happened and ignored why it lasted so long. The answer to the last question is the answer to both. The differences between Hoover and Roosevelt were slight; however, Roosevelt helped calm the public. Ultimately the start of World War II ended the Depression and the anti-business and anti-trade policies of the thirties faded after 1940. It’s important for Americans to remember the mistakes made by the government during that period because they’re too easy to make again. On the Right, Isolationism in trade and in immigration policy is damaging. On the Left anti-big business and class warfare are equally disturbing. The Forgotten Man is a stark reminder of how both out dated ideologies got it wrong.
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