The Forgotten Man

Let’s pass on talking about politics today and talk about something I know nothing about:  Economics.
 
My friend Richard, who’s a banker, just sent me a book called The Forgotten Man about the Depression.  Now, normally, I’d run from a book about economics but Ms. Amity Shlaes has written a fascinating story about New Dealers, politics and money.
 
It turns out the 1930’s were a war between two groups – the Public Sector and the Private Sector – who were battling it out for control of the American economy.
 
In 1920 the Private Sector was supreme. When an economic crisis struck – like the post World War I recession – President Calvin Coolidge was actively in favor of the government doing nothing or as close to nothing as possible; that doesn’t sound too appealing but it worked during the post war recession – Coolidge didn’t lift a finger and, sure enough, the economic ship righted itself without his help and the great boom of the 1920’s began.
 
What followed was a hard decade for the intellectuals and college professors who figured, well, intellectuals and college professors ought to be running the economy – as Cabinet Secretaries and under Secretaries. Then the stock market crashed and Herbert Hoover was no Calvin Coolidge. Hoover was an activist. 
 
He went to thrashing, trying to control wages out of the White House and passing tariffs but just about everything he did backfired.  Hoover’s Public Sector charge into the market poured gas on the fire for three years and the Depression deepened – which led to Roosevelt.
 
Which is as far as I’ve gotten in Ms. Shlaes’ book.  It’s 1932 and Roosevelt’s just been elected and the intellectuals and professors who’ve been in exile for a decade are about to become Brain Trusters and Cabinet Secretaries and Supreme Court Justices and the Public Sector’s going to be in the driver’s seat running the economy with, it looks like, a plethora of unintended consequences.
 
One thing you can say for market capitalism is it creates jobs – a mystery State run economies don’t seem to have figured out.  On the other hand (and this is in Ms. Shlaes’ book too) capitalism isn’t a bed of roses and capitalists don’t always come off well – like when they were working children in sweatshops. Plus, there’s no way to blame the 1929 Crash on the Public Sector.  It was free-market capitalism at work.
 
Once Roosevelt gets rolling (I gather from the Introduction  to Ms. Shlaes’ book) big changes are coming fast and the balance of power between the Public Sector and the Private Sector is going to shift – forever.
 
In addition Public Sector economics and Democracy are going to be married because by 1936 the New Dealers had figured out in a Democracy 51% of the people have the power to vote themselves everyone else’s money. Of course, special interests looting the Treasury was a very old story – even in the 1930’s – but by marrying ‘Public Sector Economics’ with buying votes with the public Treasury the New Dealers got Roosevelt reelected in a landslide in 1936 and an American tradition was established that’s been around ever since.
 
Eventually, I’m guessing, the New Dealers and Capitalists are going to figure out they have a few things in common.  The New Dealers (or, maybe, their political heirs) are going to discover that big business is a great source of cash for their campaigns (and most anything else) and the Capitalists are going to figure out having friends in government opens up new ways to get a leg up on their competitors and get their hands on other people’s money.
 
So, it would seem, before all this mischief runs its course we’re going to end up with three genie’s loose on the deck:  A Private Sector. A Public Sector. And a Public Sector – Capitalist partnership. All bent on running the economy.
 
I’ll let you know if it has a happy ending when I finish the book.
 
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The Forgotten Man

Let’s pass on talking about politics today and talk about something I know nothing about:  Economics.
 
My friend Richard, who’s a banker, just sent me a book called The Forgotten Man about the Depression.  Now, normally, I’d run from a book about economics but Ms. Amity Shlaes has written a fascinating story about New Dealers, politics and money.
 
It turns out the 1930’s were a war between two groups – the Public Sector and the Private Sector – who were battling it out for control of the American economy.
 
In 1920 the Private Sector was supreme. When an economic crisis struck – like the post World War I recession – President Calvin Coolidge was actively in favor of the government doing nothing or as close to nothing as possible; that doesn’t sound too appealing but it worked during the post war recession – Coolidge didn’t lift a finger and, sure enough, the economic ship righted itself without his help and the great boom of the 1920’s began.
 
What followed was a hard decade for the intellectuals and college professors who figured, well, intellectuals and college professors ought to be running the economy – as Cabinet Secretaries and under Secretaries. Then the stock market crashed and Herbert Hoover was no Calvin Coolidge. Hoover was an activist. 
 
He went to thrashing, trying to control wages out of the White House and passing tariffs but just about everything he did backfired.  Hoover’s Public Sector charge into the market poured gas on the fire for three years and the Depression deepened – which led to Roosevelt.
 
Which is as far as I’ve gotten in Ms. Shlaes’ book.  It’s 1932 and Roosevelt’s just been elected and the intellectuals and professors who’ve been in exile for a decade are about to become Brain Trusters and Cabinet Secretaries and Supreme Court Justices and the Public Sector’s going to be in the driver’s seat running the economy with, it looks like, a plethora of unintended consequences.
 
One thing you can say for market capitalism is it creates jobs – a mystery State run economies don’t seem to have figured out.  On the other hand (and this is in Ms. Shlaes’ book too) capitalism isn’t a bed of roses and capitalists don’t always come off well – like when they were working children in sweatshops. Plus, there’s no way to blame the 1929 Crash on the Public Sector.  It was free-market capitalism at work.
 
Once Roosevelt gets rolling (I gather from the Introduction  to Ms. Shlaes’ book) big changes are coming fast and the balance of power between the Public Sector and the Private Sector is going to shift – forever.
 
In addition Public Sector economics and Democracy are going to be married because by 1936 the New Dealers had figured out in a Democracy 51% of the people have the power to vote themselves everyone else’s money. Of course, special interests looting the Treasury was a very old story – even in the 1930’s – but by marrying ‘Public Sector Economics’ with buying votes with the public Treasury the New Dealers got Roosevelt reelected in a landslide in 1936 and an American tradition was established that’s been around ever since.
 
Eventually, I’m guessing, the New Dealers and Capitalists are going to figure out they have a few things in common.  The New Dealers (or, maybe, their political heirs) are going to discover that big business is a great source of cash for their campaigns (and most anything else) and the Capitalists are going to figure out having friends in government opens up new ways to get a leg up on their competitors and get their hands on other people’s money.
 
So, it would seem, before all this mischief runs its course we’re going to end up with three genie’s loose on the deck:  A Private Sector. A Public Sector. And a Public Sector – Capitalist partnership. All bent on running the economy.
 
I’ll let you know if it has a happy ending when I finish the book.
 
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Carter Wrenn

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