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The Great Depression, the current recession, and the importance of your vote

If voting changed anything, they’d make it illegal. —Emma Goldman

Many comparisons have been made, at least by Austro-libertarian economists, of the Great Depression to the current inflationary recession. The reason the two periods are compared is that both recessions were caused by the same things: the Federal Reserve and its inflation of the money supply, and its subsequent attempts to delay, mitigate, or even prevent any economic downturn by further interfering in the economy. In the 1930’s, attempts by the Congress, president, and Federal Reserve to forestall the post-inflation correction for as long as possible were what prolonged the Depression for so many years. As Christopher Westley explains,

These corrections were called panics prior to the 1930s, and they were short-lived affairs, lasting an average of three months.

Today they are called recessions, and they last longer, because of state interventions in the price system. In the 1930s, a run-of-the-mill correction grew into the Depression because the government intervened in massive and unprecedented ways to stop prices from falling. It set prices as much as the Supreme Court would allow. It forced the destruction of new output that would add to the existing downward pressure on prices. And it demonized businesses that didn’t cooperate with this lunacy, first with symbols such as the NRA’s Blue Eagle, then with Roosevelt and his Brain Trust’s attacks on the private sector and private capital.

When prices in the goods market (or wages in the labor market, or interest rates in the money market) aren’t allowed to fall, the correction process can be extended indefinitely. This is the central lesson of the economic calamity known as the Great Depression. It is why, first for Hoover, then for Roosevelt, good times were always just around the corner.

It probably makes much more sense, especially to non-economists like me, in the context of the whole article, so I encourage you to read the whole thing. It’s probably less than a thousand words.

Lew Rockwell wrote an equally important article about current attitudes towards the Fed and inflation in this current recession and the 2008 election season. Some excerpts:

Despite all the complications, the fundamental cause is the Fed itself, which purports to be the great savior of the money system but in fact is its destroyer. By flooding the economy with ever more paper money, it reduces the value of our money—an insidious tax that the governing elites levy in ways that keep the people in the dark.
[...]
The problems the Fed faces today are eerily similar to those of 1930 and following. The boom was caused by a loose money policy by the Fed, and the inevitable bust has come. But now everyone looks to the Fed to provide the answer. In the early 1930s, the Fed tried very hard to inflate the currency, but it could not manage to accomplish it through the credit markets alone. When bankers are reluctant to lend to shaky enterprises, and worried businessmen are reluctant to borrow, there is no other way to flood the markets. Today’s Fed has been exceedingly reckless in trying to forestall this program. It has engaged in direct bailouts of investment banks, and it is offering super-subsidized loans to banks by the tens of billions. This is Ben Bernanke’s little trick to use the banking sector more fully in his inflationary schemes.

If Bernanke loses, we all lose. But if Bernanke wins, we lose even more. More inflationary finance can only make the present situation worse.

You probably don’t care so much about economic theory you don’t understand and past Fed actions you can’t affect in any way. You care more about what will be done to save us and which presidential candidates offer the most pragmatic solution to the constant boom–bust cycle our economy experiences—or, at least, to the current recession we’re experiencing.

Which presidential candidate even mentions the Fed, or inflation, or monetary policy at all? Do they even dare mention the recession we’re in? I am quite confident the answer to the first question is No, but I really don’t know about the second. I stopped paying attention after the lone minarchist in the race, Ron Paul, dropped out. I assume they talk about our struggling economy and all their New Deal–type plans to fix it by regulating the economy even more so that it doesn’t happen again, or as often, or as severely as the current recession.

Which brings me to what was ultimately the point of this blag post: FDR and the Great Depression. In the 2008 election, we have no free-market presidential candidates nor any free-market economic options; that is fine with most Americans because they want nothing to do with free-market economics. But what about in 1932? When Roosevelt defeated Herbert Hoover, did the American populace bring the scourge of New-Deal socialism on themselves the same way they brought the scourge of LBJ’s Great Society and George W. Bush’s terrible second term on themselves? Are they to blame for electing the socialist who would not eliminate but increase the central government’s role in the economy, thereby voting to prolong the Depression because of their own economic ignorance and short-sightedness?

No, as you might have read before (I have), Franklin Roosevelt ran on a platform of non-interventionism and fiscal conservatism. Jesse Walker at Reason details FDR’s and the Democrats’ platform in the 1932 election campaign:

The Democratic platform of that year is a remarkable document, considering the way the party’s candidate went on to govern. It isn’t a libertarian manifesto—it endorses several subsidies and regulations—but it hardly embraces the enormous expansion in federal power that FDR would achieve. The very first plank calls for “an immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus, and eliminating extravagance to accomplish a saving of not less than twenty-five per cent in the cost of the Federal Government.” (It also asks “the states to make a zealous effort to achieve a proportionate result.”) Subsequent planks demand a balanced budget, a low tariff, the repeal of Prohibition, “a sound currency to be preserved at all hazards,” “no interference in the internal affairs of other nations,” and “the removal of government from all fields of private enterprise except where necessary to develop public works and natural resources in the common interest.” The document concludes with a quote from Andrew Jackson: “equal rights to all; special privilege to none.” It sounds more like Ron Paul than Pelosi.

The point is that they got exactly the opposite of what they voted for. Herbert Hoover was an economic interventionist of the most dirigiste variety, and whether Americans voted for FDR because he championed laissez faire non-interventionism or simply because he was the yankee running against Hoover, they got more of the same, which was exactly the opposite of what Roosevelt promised. This is reminiscent of President Bush’s promises of actual conservatism and a “humble foreign policy” in 2000, which he never had any intention of implementing (see here and here, for instance).

Are current voters aware of the complete and utter irrelevance of their votes? Are they aware of the extreme similarity of policies among the three remaining presidential candidates? Do they really think there is a big difference in either the policies they propose, the implementation methods they plan, or the result we will suffer? The only important difference I see is foreign policy—though it is unlikely there will be any substantial change in our overall foreign policy.

The elected criminals change, and the other professional criminals (bureaucrats) change, and their specific policies morph a little from decade to decade, but the trend we can observe throughout history is clear and undeniable: the State will grow in its size, scope, power, and drain on the economy. It is the nature of the State to grow. (”The natural progress of things is for liberty to yield and government to gain ground.” —Thomas Jefferson) It is the scourge of mankind that government grows while liberty shrinks, regardless of what the majority or the minority or the individual want—and it is a further lament that this is usually what the majority wants. As we can see from the election of Franklin Roosevelt in 1932 and of George W. Bush in 2000, this is what happens even when voters, participating in our vaunted Constitutional and universal electoral system, vote specifically against it. Libertarians contend that this is a problem intrinsic to the Statist system, not to certain politicians or temporary societal trends. Non-libertarians think this is a great thing and continue to endorse more of it, even those who so recently claimed (or still claim) to want less of it.

Even back before the government got so big, when the income tax and Federal Reserve were recent outrages and not irrevocable atrocities, when lobbyists and corporate interests didn’t influence executive and legislative policy so strongly, when the United States didn’t have military bases in 130+ countries, voting for specific candidates with specific promises did no good to affect actual policy as implemented by those politicians. The lesson the libertarian takes from this and other events is that regardless of what anyone wants, politicians and the power elite will grow government to their benefit and to society’s detriment. It sounds like conspiracy theories or vague and ill-thought-out bitching to speak of “power elite” and “corporate interests” and so forth, but look at what the Fed does. Look at what the military and Dept. of Defense do. Look at what Congress and the federal bureaucracy do for large corporations who lobby for certain legislation, spend millions in federal courts, and bribe (legally or illegally) the authorities for special privileges or tax breaks or cheap loans or any other benefit they can garner. It happens, regardless of how kooky or radical it sounds when libertarians bring attention to it.

Franklin Roosevelt was completely unaccountable for his outright lies and broken promises. He was certainly unaccountable for the financial harm he did to Americans and citizens across the world whose economies were affected by ours. Herbert Hoover lost the election but his socialist ideas blossomed into official policy to an extent he hardly dared to dream about. The important question is: What could the Americans of 1932 have done? Vote for more obvious socialism (Hoover), or be tricked into even worse socialism (Roosevelt). What can the Americans of 2008 do? Vote for an insane, psychopathic, barbaric warmonger who is not averse to any regulation (McCain); an evil, megalomaniacal, relentless economic and social busybody, with a thoroughly interventionist foreign policy (Hillary); or a new New Deal from someone who is unlikely to change the status quo on foreign policy (Obama). All will most likely give us socialized medicine with the help (or insistence) of Congress, and all will make our economic situation worse. Maybe the difference this year is that those things are exactly what Americans want. If only it could be like 1932 and we would get the exact opposite of what we were promised.