Repeating Past Economic Mistakes
Recently I read a pamphlet entitled “Great Myths of the Great Depression” by Lawrence W. Reed of the Foundation for Economic Education (FEE). This article discusses the history of government actions that caused and perpetuated the Great Depression which lasted from 1929 until the middle of World War II. Yes, it was not the free market that caused the stock market to crash and the untenable rise in unemployment and depression, it was governmental policies! And we are increasingly repeating those mistaken policies today. Franklin Delano Roosevelt won the 1932 presidential election in a landslide by condemning incumbent President Hoover’s increasing of tariffs, subsidies and relief schemes. In one year alone under Hoover, from 1930 to 1931, the government’s share of our GNP increased from 16.4 percent to 21.5! Hoover’s agricultural bureaucracy doled out hundreds of millions of dollars to wheat and cotton farmers even as the new tariffs wiped out their markets, and Hoover also pushed for and implemented the largest tax increases in peacetime history.
Roosevelt’s political approach as a candidate was completely successful but, when he became president, Roosevelt not only adopted Hoover’s policies, he expanded them. Since space is limited here I can only address a few of these actions. But, among other things, Roosevelt seized people’s gold holdings and devalued the dollar by 40 percent. He also raised taxes “on the wealthy” to a height of 90 percent. Of course, the truth is that when you tax productive people that reduces their incentives to invest and produce which, in turn, negatively affects the economy for everyone. Roosevelt also promoted minimum wage laws, which directly priced many inexperienced, young and unskilled workers out of the labor market (for example, in 1933 just one of these laws put an estimated 500,000 Black workers out of a job.) Roosevelt also promoted and then signed legislation that created agencies like the Civil Works Administration that paid public money to people to perform all kinds of needless work (CWA Director Harry Hopkins was once quoted as saying that “I’ve got four million at work but, for God’s sake, don’t ask me what they are doing.”)
Roosevelt also prohibited banks from having branch offices so that they could diversify, which caused thousands of our banks to go out of business. (In the meantime, Canada, which permitted branch banking, did not have a single failure.) The article goes on and on about these government-caused calamities. But the two lessons we simply must learn today from those failures are that it is the free market that creates wealth, while government restrictions reduce it, and inflation, which is an economic killer, is caused by easy money and easy credit being delivered by government for people who are “entitled.” The old saying is that “He who does not remember the mistakes from the past are often going to repeat them,” and that is what we the voters must keep in mind when we choose our elected officials to “lead” us in the future. This article is a reprint of an original post published on Judge Jim Gray's site. The views expressed in it are those of the author and not necessarily the views of the Libertarian Party of Orange County.
James P. Gray is a retired judge of the Orange County Superior Court, and presently works as a private mediator and arbitrator for ADR Services, Inc. He was also the 2012 vice presidential nominee for the Libertarian Party, and can be contacted at JimPGray@sbcglobal.net, or through his website at www.JudgeJimGray.com.