The Great Depression is being invoked a lot these days, and I understand there’s a reasonable real fear of a total meltdown out there. But some points are worth making. Even if we entered a serious depression, we will not experience time travel. America is a different place than it was in the 1930s. As Lawrence Lindey notes:
“In 1929, Americans had the per capita GDP of people now living in the Balkans. Today it is five times higher. So even if we have a depression, there won’t be any Hoovervilles or soup lines. There may be a massive increase in demands for public assistance and rental housing, but this is hardship, not the privations of the 1930s.”
I don’t know how to quantify some of the improvements, but it’s also worth keeping in mind much of the increased prosperity cannot be repealed. Our medical technology won’t get worse. Our agricultural skills will not unravel (and, unless you believe Al Gore, there’s no dust bowl heading our way). The internet will not vanish, forcing us to sit around the radio like they did in the 1930s (or around the TV if you believe Joe Biden).
But the real point I wanted to make is that we shouldn’t let invocation of the Great Depression — and our fear of it — justify all of this New Deal talk. Say it with me: The New Deal prolonged the Great Depression. In fact, if anything it was the New Deal itself that made the Great Depression “Great.” By 1938 one in six Americans were still without jobs. It wasn’t until WWII, when FDR started describing himself as “Dr. Win the War” instead of “Dr. New Deal” that America finally started to lift itself out of its state-imposed economic stupor.
But don’t tell that to Lawrence Summers, who is an adviser to Barack Obama and as such seems to be losing some of his heralded intellectual honesty. On NPR last week he said “You know, it’s very tempting to always think that the government should just stand back and let the private sector sort these problems out. That’s the kind of thinking that made the Depression ‘Great.’” [And shame on NPR for not informing listeners that Summers is an adviser to Obama]
Then Cokie Roberts on ABC’s This Week had this gem of a Pauline Kaelism. Discussing McCain’s admittedly shaky reaction to the Wall Street meltdown she said:
“…He’s a Republican and whenever Republicans get into this kind of mess, everybody, even people who were not born or close to being born, the specter of Herbert Hoover comes out to, to haunt them.”
I understand that there are lots of arguments about the New Deal and the causes of the Great Depression, but come on. Outside the dismaying consensus among “everybody” Cokie Roberts knows, few informed people continue to claim that Herbert Hoover was laissez-faire in response to the stock market crash of 1929 and even fewer argue that the Great Depression became “Great” because of Washington’s refusal to do anything. Someone send these people a copy of Amity Shlaes’ The Forgotten Man.
After the Crash, Hoover browbeat business leaders to keep wages and prices high. He invested heavily in Public Works projects (which may have been a good idea, but wasn’t an example of do-nothingism). In 1930, he signed the Smoot-Hawley tariff bill, which threw a wet blanket on international trade and probably did more to entrench the Depression than almost anything else. In other words, he did the opposite of what Summers and Roberts suggest.
Liberals love the New Deal in no small part because it is a Sorellian myth of government effectiveness (as I argued here). We may — indeed, almost certainly — need government intervention in response to the Wall Street meltdown, but this is no time for the “new New Deal” liberals demand in response to every calamity.
Update: Yes, yes: To the readers who blame — or partially blame — the Federal Reserve’s tight money policy for the Great Depression, I agree that was a big factor. I wasn’t trying to say otherwise.