Deja vu all over again: the New Deal and today's economy

Friday, March 27, 2009 Comments

I started doing some research on FDR and the New Deal a few weeks ago. I expected to see some similarities to what we're experiencing now, but was stunned at the feeling of deja vu as I read the details. We've been down this road before. It didn't go so well, and not just the prolonged Depression but the lasting effects of the New Deal that still impact us today, decades later. I hope this isn't a blueprint for where we're headed.

One of the things I found was an essay called, "The Revolution Was," written in 1938 by Garet Garrett, a journalist and writer. This is an amazing essay and well worth the time to read in its entirety. I'd like to summarize and discuss here though.

He begins with this:

There are those who still think they are holding the pass against a revolution that may be coming up the road. But they are gazing in the wrong direction. The revolution is behind them. It went by in the Night of Depression, singing songs to freedom.

Garrett's argument is that the administration of FDR was a revolution from within, a peaceful revolution that created a paradigm shift in the government and in the relationship between the people and the government, all within the existing laws and new laws created through existing processes.

He talks about how certain steps were necessary, in a certain order, in order to seize power from the people and he discusses how the New Deal went about accomplishing that. This line was especially chilling, given what we are experiencing now:

The effect was to keep people excited about one thing at a time, and divided, while steadily through all the uproar of outrage and confusion a certain end, held constantly in view, was pursued by main intention. The end held constantly in view was power. (emphasis added)

He goes on to say,

In a revolutionary situation mistakes and failures are not what they seem. They are scaffolding. Error is not repealed. It is compounded by a longer law, by more decrees and regulations, by further extensions of the administrative hand. As deLawd said in The Green Pastures, that when you have passed a miracle you have to pass another one to take care of it, so it was with the New Deal. Every miracle it passed, whether it went right or wrong, had one result. Executive power over the social and economic life of the nation was increased. Draw a curve to represent the rise of executive power and look there for the mistakes. You will not find them. The curve is consistent. (emphasis added)

Does this not bear some resemblance to what we are seeing today? The initial bank bailouts last year were a mistake, but rather than undo them the government compounds them with more bailouts, with special provisions to protect executive bonuses and then a special retroactive tax law to take those bonuses away, after they have riled up the public anger against the "greedy executives," thus deflecting anger away from themselves and their own incompetence and power grabs. And now they're talking about regulating all executive pay, whether the companies have taken federal money or not. What's next, regulating everyone's pay? Where does it end?

While the economic downturn was already well underway, I believe that Obama's stated plans during the campaign to increase businesses taxes and "spread the wealth around" played a role in driving the economy further downward, as evidenced by the precipitous drop in the stock market as it became more likely that he would be elected, and then following his election.

Who is going to invest, hire, or try to grow a business in a climate with a government hostile to business? Instead, sane people will try to batten down the hatches and preserve cash at the expense of growth. The result is reduced productivity and increased unemployment.

And so the administration took a bad situation and made it worse. In addition to the bailouts, they passed an unprecedented $800 billion "stimulus" package, purportedly to stimulate economic growth. However, there was nothing in that bill for small businesses, the backbone of our economy. Well, to be fair, Joe Biden assures us that if a small business relies on a bridge, the "stimulus" package will make sure that bridge is still there. Whew, what a relief!

Instead of promoting business growth, what they "stimulated" was more government growth and control. They expanded existing programs, created new programs, and even included requirements that states taking stimulus money will be required to increase their budgets to cover associated costs when the federal money has been used (because while the federal money is said to be temporary, the programs they put in place are more or less permanent).

Garrett goes on to talk about the elements that made America susceptible to a revolutionary.

The basic ingredients of opportunity are few; nearly always it is how they are mixed that matters. But the one indispensable ingredient is economic distress, and if there is enough of that the mixture will take care of itself. (emphasis added)
He then describes what he calls the "revolutionary elite" in more detail.

What it represented was a quantity of bitter intellectual radicalism infiltrated from the top downward as a doctorhood of professors, writers, critics, analysts, advisers, administrators, directors of research, and so on -- a prepared revoluationary intelligence in spectacles. There was no plan to begin with. But there was a shibboleth that united them all: "Capitalism is finished." There was one idea in which all differences could be resolved, namely, the idea of a transfer of power.
"Capitalism is finished." "Capitalism has failed." "Failed economic policies of the past." Is any of this sounding familiar? The truly failed policies of the past are the bailouts that started under the Bush administration, but obviously that's not what the Obama administration has in mind when they say that, because they are not only continuing with the bailouts, they are taking the bailouts and rampant spending to unprecedented levels.

Garrett goes on to describe the obstacles that the "revolutionary elite" would face. In summary:

1. capture the seat of government
2. seize economic power
3. mobilize by propaganda the forces of hatred
4. reconcile & attach to the revolution the two great classes (in the New Deal: the wage-earners and the farmers)
5. choose whether to liquidate or shackle business
6. make the individual more dependent on government
7. systematic reduction of all forms of rival authority
8. sustain popular faith in an unlimited public debt
9. make government itself the great capitalist and enterpriser

Each one of these problems would have two sides, like a coin. One side only would represent the revolutionary intention. The other side in each case would represent Recovery -- and that was the side the New Deal constantly held up to view.
Similarly, look how much has been done in the name of "stimulating the economy" just in the last two months. The amount of spending, the trampling of states' rights and individual autonomy, all in the name of getting the economy back on track.

I have a lot of faith in the American people and in our capitalist system. I believe we will make it through this, but it will be in spite of rather than because of the relentless government interference.

I'll try to write another post that goes into more detail, this one is getting a bit long already but I found Garrett's writing pretty interesting.

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