I have made many posts featuring economists who offer opinions about economic policy and its impact on resolving the Great Depression. I asked Mike Campenni, who teaches government at McLennan Community College, and is trained as a political scientist for some thoughts about the Roosevelt administration and its policies. Mike comments are expressed below.
Economics is a science. Its subject matter consists of proven theories, theories in various stages of development and testing and the search for better understanding. And just as economics is far removed from economic punditry, politics is also both a topic of study and the domain of pundits. Luckily for economists their subject seems too complex for superficial discussion. If only political scientists were so lucky!
To the dismay of all the US, and indeed the entire world, we are falling into a severe economic downturn. Economists would point out that it is a well proven point that markets constantly enter periods of adjustments. In simpler times, the adjustments were shorter and often passed below the radar screen of most people. Today, we live in an increasingly complex world with ever greater economic interdependency. Subsequently, market adjustments take longer and are usually more painful for wider swaths of society. Our present situation is just one such adjustment.
But today we live in a far different world. Governments who allow too much pain to fall on their citizens often fall politically in a democracy, and by revolution in more authoritarian societies. Subsequently, it has become the norm for governments to intervene and attempt to mitigate economic pain.
So here we are today in the midst of one of the most severe economic downturns in recent history. By most accounts it is the worst downturn since the Great Depression. Popular history would say that the Great Depression was cured by the heroic efforts of FDR with his New Deal legislation. Economists studying the New Deal would probably say that the New Deal at best had a mixed record. They would probably point out the Great Depression was only cured by the huge stimulus package known as World War II. Maybe the New Deal didn’t end the Great Depression and it did take a war, but people only remember FDR and his policies. They say that he saved the country. And maybe he did.
It is hard to make people understand today about the Great Depression. Imagine 25% un-employment rates and 30% under-employment rates. Imagine banks going bankrupt where customers lose all their savings overnight. And imagine a time when people didn’t have any safety nets like social security, welfare or un-employment compensation. Imagine betting on a local church group setting up a soup line to feed your family. It was just these kinds of things that made FDR and his New Deal Legislation successful. It really saved the US from potentially system changing political dynamics.
Did the New Deal work in terms of economics? Perhaps it did not. But widespread news coverage of hundreds of thousands of Americans working on dams and roads, and more still building parks and buildings and electrifying the countryside made people think that things were getting better. Retirees getting a check from social security helped take the edge off because they mostly still lived with the family—and any income helped. Mothers getting welfare to feed their kids helped and a new thing called unemployment compensation gave people a chance to get on their feet. And regulating Wall Street made people get their faith back in the financial institutions of the country. And just as hope keeps people from despair, confidence is something to build upon.
That’s the real message that needs to come from Obama and his team. We are doing the things that need to be done to give people hope and to restore confidence in our economic system. It really doesn’t matter too much if they are the right prescriptions economically—they key is that they need to be politically correct. And that’s why we need to put politics aside. We need to build confidence…and hope. That’s what politics is all about.
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Okay, it may not have anything to do with this blog, but your mention of "economic interdependency" reminded me of it. The invention of "world banks" is scaring me half to death. I don't know why, but I have an inkling that it has something to do with it being unprecedented. Not only that, but the banks/bankers involved in the Great Depression were so new and ignorant (meaning didn't know, not stupid, for clarification) that I feel more economic struggle could be in our future because it's probably going to sour quick.
ReplyDeleteWe learned about the Great Depression in my history class last year (go figure), and my teacher(s) mentioned all three of your reasons of the economic upturn (1. war, 2. New Deal, 3. technology). However, I didn't really understand how technology helped the economy since nobody actually had to money to go to school and specialize in new fields. I guess it was a start to more job opportunities, though.
Jen Lavallee
This article shed new light on the Great Depression and on the present state of our economy for me. I knew things were extremely bad then and increasingly bad now; but I was unaware of some of the actual factors involved with each. I agree that, in order for our economy to get back on its feet, hope and confidence must be restored to the members of our society. I also think that, if our economy is to be restored, people must learn to prioritize, live within their means (learning to live with just the necesseties of life), and need to charge less on credit. If people can learn to spend less and only buy goods and services vital to living, our economy would be well on the road to reconstruction. I feel that it is a joint effort and the people involved in our economy will have to work with Obama and politics alike if we will ever find common ground and travel down that road to recovery.
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