For the past week I’ve been rushing home every night to catch The Roosevelts: An Intimate History by Ken Burns. I’m not really a big Ken Burns fan. And yes, it’s the fiddle music. But this one is worth a watch. (And the music is not so incessant.)
The episode on the Great Depression made me wonder about our Not-So-Great Recession. We complained bitterly about our losses during that time, but seeing those lines of people winding down the street just to get a free lunch makes me think we might be a little ungrateful for what we do have.
Hoover was president during the stock market crash of 1929, and he did little to help stimulate the economy due to his conservative economic philosophy. He was not insensitive to the struggles people were going through; he sincerely believed he was doing the right thing in keeping government out.
F.D.R.’s New Deal seemed to be the remedy, but we must remember the economy still took a very long time to recover. Then came WWII, which boosted productivity as scores of people were employed in wartime efforts.
I got into a discussion about Hoover’s perspective with my husband, who knows a lot more about economics than I do (which still leaves us both at the level of amateurs). He told me the idea behind doing nothing in times of economic crisis is that the market has a natural cycle of ups and downs and will eventually even out—in time. He said to think of the economy as a human body. “Hooverites” say let it heal itself—medicines and artificial means of healing will only make it worse.
To which I responded, “Yes, but how many lives are to be lost in the meantime? How many people ruined?”
A response which shows my tendencies to be on the side of government intervention. During the controversial bailouts of businesses “too big to fail,” I had a great deal of sympathy with the Obama administration in making such a difficult decision. But I ask myself why. And what would have happened if the government had done nothing?
And then there’s the issue of spending money you don’t have…which I can’t even wrap my mind around because I know that personal accounting may not be analogous to international accounting. What does it mean to owe trillions of dollars to China?
Unfortunately, I don’t think hindsight is 20/20 in this issue. There are so many factors at play. How do we know for sure what policies worked in the past and how much of the recovery was simply ‘natural healing’? What can history tell us?
Perhaps economic historians can make a better contribution by ensuring the past is not abused in debates about modern-day crises. For instance, putting all the blame on Wall Street for the Great Depression—or on bankers in the current crisis—does not stand up to historical scrutiny. The responsibility may more properly lie in a complex combination of factors, like how global financial systems are structured. But this still needs be interpreted from modern day evidence rather than in over-simplistic “lessons” from the past.—C.R., The Economist
My question to you is this: Did we avoid a Great Depression? What can history teach us?
I’d love to hear your thoughts.