Friday, July 29, 2011
Memory of Herbert Clark Hoover
I was five years old when Mr. Hoover was elected. I was not paying attention to politics then and I have no memory of the 1928 election. All I know about it comes from reading and watching television. I once read that Mr. Hoover had some plans for easing the misery of the Great Depression. The Democrats controlled the Senate - or at least they could use the 2/3 vote to end a filibuster rule then in effect - and refused to enact any of Mr. Hoover's plans. It was left for the next President, Franklin Delano Roosevelt, to use some of Mr. Hoover's ideas and enjoy the credit for trying to ease the pain of the depression.
Poor Hoover! For two generations the public blamed him for the depression and for not doing anything about it. We now accept as fact that Hoover did not cause the depression. The blame has to be assigned mostly to his immediate Republican predecessors, Calvin Coolidge and Warren Harding. Of course they weren't totally at fault, either. Mostly the depression just happened because of the bursting of a bubble of speculation about eleven months after Hoover was elected. People didn't know then how to prevent such speculative bubbles. We don't know how to today, although there are valuable lessons from the history of the 1929 crash and the following world-wide recession that we should study today.
Are the Republicans in Congress hoping to do to President Obama what the Democrats did to President Hoover eighty years ago? There are some similarities. Both men inherited situations that were largely the fault of their predecessors. Both men had proposals for shortening ans easing the recession/depression that were stymied by one of the Houses of Congress. The opposing party was more eager in winning the next Presidential election than in doing anything effective about the economy.
I think this is a good analogy. What do you think?
Poor Hoover! For two generations the public blamed him for the depression and for not doing anything about it. We now accept as fact that Hoover did not cause the depression. The blame has to be assigned mostly to his immediate Republican predecessors, Calvin Coolidge and Warren Harding. Of course they weren't totally at fault, either. Mostly the depression just happened because of the bursting of a bubble of speculation about eleven months after Hoover was elected. People didn't know then how to prevent such speculative bubbles. We don't know how to today, although there are valuable lessons from the history of the 1929 crash and the following world-wide recession that we should study today.
Are the Republicans in Congress hoping to do to President Obama what the Democrats did to President Hoover eighty years ago? There are some similarities. Both men inherited situations that were largely the fault of their predecessors. Both men had proposals for shortening ans easing the recession/depression that were stymied by one of the Houses of Congress. The opposing party was more eager in winning the next Presidential election than in doing anything effective about the economy.
I think this is a good analogy. What do you think?
Labels: great depression of 1929, Herbert Hoover, speculative bubble
Sunday, May 01, 2011
Refusing to Learn
There are different ways of refusing to learn from experience or from experiment. In general, the phrase "refusing to learn" applies to a serious problem that requires some unusual action to solve. Typical problems that we Americans face are depressions. As long as there was "vacant" land to the west, whenever you had lost everything in a depression you could go west, claim a tract of land and become a farmer. After1910 (or so) when the frontier was declared closed, that option was no longer available. The great depression of 1929 was especially hard because there was no longer any vacant land to to to.
Several things were tried in 1929 to 1939. At first the federal government did nothing. President Hoover took the advice of his Treasury Secretary to let all the poison in the stock market burn itself out. That is, let the last buyers of inflated stock shares eat their losses. Doing nothing didn't work. The big losers simply shared their losses with everyone else and millions of workers were without jobs and without income. The next President took the advice of an economist and spent government money to create jobs. Enough of the unemployed workers found temporary work and were able to buy things so that the economy began to recover. The government had to go into debt to raise the money to provide the jobs. After a while the economy recovered and there was enough revenue to begin paying down the debt.
We are again in a recession or depression caused by the ability of the Wall Street gamblers to make us all share their losses. You would think that, having gone through the Great Depression of 1929-1939 our leaders and our more responsible politicians would draw on the experience of those years to frame policies for the present. For some reason nearly all of them choose to ignore or to forget the failures and successes of that time seventy-five years ago. Instead of using borrowed money to create temporary jobs, our leaders talk about reducing the deficit. We seem doomed to follow the path of Herbert Hoover rather than that of Franklin Roosevelt.
Several things were tried in 1929 to 1939. At first the federal government did nothing. President Hoover took the advice of his Treasury Secretary to let all the poison in the stock market burn itself out. That is, let the last buyers of inflated stock shares eat their losses. Doing nothing didn't work. The big losers simply shared their losses with everyone else and millions of workers were without jobs and without income. The next President took the advice of an economist and spent government money to create jobs. Enough of the unemployed workers found temporary work and were able to buy things so that the economy began to recover. The government had to go into debt to raise the money to provide the jobs. After a while the economy recovered and there was enough revenue to begin paying down the debt.
We are again in a recession or depression caused by the ability of the Wall Street gamblers to make us all share their losses. You would think that, having gone through the Great Depression of 1929-1939 our leaders and our more responsible politicians would draw on the experience of those years to frame policies for the present. For some reason nearly all of them choose to ignore or to forget the failures and successes of that time seventy-five years ago. Instead of using borrowed money to create temporary jobs, our leaders talk about reducing the deficit. We seem doomed to follow the path of Herbert Hoover rather than that of Franklin Roosevelt.
Labels: Demand side economics; Franklin Roosevelt; deficit reduction rather than job creation, Herbert Hoover
