The other day my wife Eleanor was reading a book on the psychology of decision making. The author rather gratuitously threw in the remark that Roosevelt's New Deal did not end the Great Depression. World War 2 did. We all hear this remark, usually from those who prefer governance by corporations rather than governments of, by, and for the people. This remark is both true and deceptively false.
It is true that Roosevelt's policies did not bring the economy back to the exceptionally high levels preceding the 1929 crash. We should be grateful that it did not because that economy was based on the speculation that led to the depression in the first place..The other day my wife Eleanor was reading a book on the psychology of decision making. The author rather gratuitously threw in the remark that Roosevelt's New Deal did not end the Great Depression. World War 2 did. We all hear this remark, usually from those who prefer governance by corporations rather than governments of, by, and for the people. This remark is both true and deceptively false.
It is true that Roosevelt's policies did not bring the economy back to the exceptionally high levels preceding the 1929 crash. We should be grateful that it did not because that economy was based on the speculation that led to the depression in the first place. However, his policies did bring the economy back about half way by 1935.
The argument is deceptively false because it is meant to imply that government did not bring back the economy. The economy of World War 2 was a government economy, par excellence and vitiates this old conservative argument completely.
The interesting question is, "Why does one form of government spending (war) work so much better than another (peace)?
Examining major economies victimized by the Great Depression, which was world wide, we find that war and the preparation for war, was the effective antidote to the depression. The German economy, which was far worse than ours due in part to the continuing reparations the World War 1 allies imposed, was brought back by Hitler's militarization program. The English by the need to rearm, the United States by the need to rearm, Japan came out of the Great Depression in 1932, perhaps, bcause it had been militarizing since militarism became a dominant feature of Japanese development with the Meiji Restoration of 1869. Its 1905 victory over Russia greatly enhanced its prestige, and culminated in Japan's aggressive colonialism, a hallmark of world powers at the time.
But why is war so much more effective than other efforts to reconvert from major economic downturns? Some would say that war affects everybody. This is to say that, short of war, not everybody is affected seriously by a depression. And this is to say that those least affected, the wealthy, are unwilling and not required to contribute to fight this kind of national calamity to the extent they are in war. I ask why not? The answer to that question, I believe, can be found in American economic mythology, namely, that anyone can be an economic success and if they are not it must be their own fault. My own father, a mechanic who was able to hold on to his job throughout the depression, although at meager pay, looked down on WPA workers who, by his definition, had gone on the dole. The rich have this myth working for them day and night. Poor people will blame each other for their economic plight rather than the wealthy who have caused the situation and continue to profit from it. This is the sad tale of American economic naiveté.
This line of reasoning is, I believe, prima facie evidence that it is the wealthy that insure that this level of societal effort is not launched against depressions. If we now look at some facts surrounding World War 2 that made it effective in finally ending the Great Depression the substance of this argument will be further vindicated.
For one, the federal tax rate on the wealthiest was 94%. It had even been 77% under Herbert Hover. Ronald Reagan dropped it from 70% to 28%. It is now 35% and Obama's effort to raise it to 40% is being labeled "socialist" by Republicans. One of the major reasons the 2nd World War brought back full employment was that the wealthy were required to pay their fair share of the cost of that war. This along with government planning and rationing of resources is the real meaning of World War 2 as an end to the depression. Everyone had to contribute their fair share. This is the democratic method of dealing with economic downturns once under way. Preventing or minimizing those downturns inherent in the capitalist system is a matter of vigilant, continuous regulation so that capitalism's ever present excesses are not allowed to create economic havoc.
One of the best metaphors for capitalism is fire. Capitalism should be viewed as a hazard similar to fire and should be controlled with the same diligence. Capitalism, like fire, can be useful, but also like fire it is very destructive when out of control. Like fire, it must be kept away from combustible fuel, i.e. excess profits that feed a frenzy of speculation; we must have mechanisms at hand when it bursts into flame, i.e. legal fire hoses; it must be subject to constant vigilance and checked on frequently by competent watchdogs. Capitalism is not good or bad, it simply is. We need a population not subject to the blandishments of speculation, but capable of placing capitalism in a place where it can do no harm. Children have been taught the need to protect our environment and it is paying off. Similarly they need to be taught the destructiveness of uncontrolled capitalism and the need and mechanisms for controlling it.
Bob Newhard
However, his policies did bring the economy back about half way by 1935.
The argument is deceptively false because it is meant to imply that government did not bring back the economy. The economy of World War 2 was a government economy, par excellence and vitiates this old conservative argument completely.
The interesting question is, "Why does one form of government spending (war) work so much better than another (peace)?
Examining major economies victimized by the Great Depression, which was world wide, we find that war and the preparation for war, was the effective antidote to the depression. The German economy, which was far worse than ours due in part to the continuing reparations the World War 1 allies imposed, was brought back by Hitler's militarization program. The English by the need to rearm, the United States by the need to rearm, Japan came out of the Great Depression in 1932, perhaps, bcause it had been militarizing since militarism became a dominant feature of Japanese development with the Meiji Restoration of 1869. Its 1905 victory over Russia greatly enhanced its prestige, and culminated in Japan's aggressive colonialism, a hallmark of world powers at the time.
But why is war so much more effective than other efforts to reconvert from major economic downturns? Some would say that war affects everybody. This is to say that, short of war, not everybody is affected seriously by a depression. And this is to say that those least affected, the wealthy, are unwilling and not required to contribute to fight this kind of national calamity to the extent they are in war. I ask why not? The answer to that question, I believe, can be found in American economic mythology, namely, that anyone can be an economic success and if they are not it must be their own fault. My own father, a mechanic who was able to hold on to his job throughout the depression, although at meager pay, looked down on WPA workers who, by his definition, had gone on the dole. The rich have this myth working for them day and night. Poor people will blame each other for their economic plight rather than the wealthy who have caused the situation and continue to profit from it. This is the sad tale of American economic naiveté.
This line of reasoning is, I believe, prima facie evidence that it is the wealthy that insure that this level of societal effort is not launched against depressions. If we now look at some facts surrounding World War 2 that made it effective in finally ending the Great Depression the substance of this argument will be further vindicated.
For one, the federal tax rate on the wealthiest was 94%. It had even been 77% under Herbert Hover. Ronald Reagan dropped it from 70% to 28%. It is now 35% and Obama's effort to raise it to 40% is being labeled "socialist" by Republicans. One of the major reasons the 2nd World War brought back full employment was that the wealthy were required to pay their fair share of the cost of that war. This along with government planning and rationing of resources is the real meaning of World War 2 as an end to the depression. Everyone had to contribute their fair share. This is the democratic method of dealing with economic downturns once under way. Preventing or minimizing those downturns inherent in the capitalist system is a matter of vigilant, continuous regulation so that capitalism's ever present excesses are not allowed to create economic havoc.
One of the best metaphors for capitalism is fire. Capitalism should be viewed as a hazard similar to fire and should be controlled with the same diligence. Capitalism, like fire, can be useful, but also like fire it is very destructive when out of control. Like fire, it must be kept away from combustible fuel, i.e. excess profits that feed a frenzy of speculation; we must have mechanisms at hand when it bursts into flame, i.e. legal fire hoses; it must be subject to constant vigilance and checked on frequently by competent watchdogs. Capitalism is not good or bad, it simply is. We need a population not subject to the blandishments of speculation, but capable of placing capitalism in a place where it can do no harm. Children have been taught the need to protect our environment and it is paying off. Similarly they need to be taught the destructiveness of uncontrolled capitalism and the need and mechanisms for controlling it.
Bob Newhard
Sunday, November 28, 2010
Saturday, November 13, 2010
What Have We Learned from This
The political debacle of our recent election is and will be the subject of many explanations. That the American people could, after two short years of indecisive efforts to mitigate the damage, return to considerable power the very people responsible for the worst economic disaster since the Great Depression, will elicit many explanations. I want to try to put some pieces together that may offer some insight into what happened.
Politically, I found the fact that Harry Reid, a powerful and rewarding Senate Majority Leader from the small state of Nevada, was nonetheless in great jeopardy from a political unknown and a new small party. What populace would trade the benefits flowing from a powerful politician for a political unknown? The salient fact in this anomaly is that Reid never the less won, but only because of the Black and Latino vote. He got a minority of the white vote.
Another relevant observation can be found in a report by MIT economist David Autor in which he looked at the shifting employment landscape in America. He found that automation has had a far deeper impact on employment than is commonly understood, especially on the middle class. He argues that it is a prime factor in the shrinking middle class in America because the jobs it primarily eliminates are those that have traditionally been held by the middle class, e.g. manufacturing, which he notes is about as productive as it has always been except it uses robots rather than humans. Service jobs, another major category of middle class employment also are shrinking, e.g. grocery clerks replaced by automatic check-out machines. The middle class has been subject to increasing economic stress since the beginning of automation in the 1950s according to Autor.
Putting the political phenomena we have recently been experiencing together with this economic impact on the middle class suggests that white people increasingly sense a diminution of economic and political power and are in a crazy kind of rebellion. The Tea Party, predominantly middle class whites, attacks Wall Street on the one hand and big federal government, which is the only power that could possibly control Wall Street, on the other hand. The fact that the populism that usually accompanies a major economic downturn is conservative this time instead of its usual liberal expression further validates this connection between job loss and the nature of the current political chaos. In this connection Autor argues that outsourcing is a precursor to automation and will be increasingly vulnerable to automation.
The middle class has been generally regarded as the social prerequisite for democracy. In this country the middle class has, since its emergence, been predominantly white. Autor describes a hollowing out process in which professional, e.g. lawyer and managerial jobs are at the high end and low wage jobs such as gardening at the low end and the declining middle class between these two.
These two factors, Reid's political survival courtesy of two minority groups, hence the increasing importance of minorities, and an automation-driven shrinking of the middle class, may be salient factors in the political craziness we are witnessing. A socio-political craziness of this kind, rooted in the fear caused by a relentless economic process can be a very dangerous phenomenon. Think of Germany in the depths of the depression following World War I and paying its former adversaries reparations at the same time. As you see the Far Right, including the Religious Right, emphasize "tradition," i.e. family values, at the expense of the Bill of Rights, think of white retention of power.
But, unfortunately, that is not all. Autor makes it clear that we have not yet seen the full impact of automation. He describes a manufacturing plant in Japan. The plant uses robots to make robots. The plant runs in the dark 24 hours a day. Obviously "the job" is going to have to be vastly reinterpreted or a substitute found. The job has been more than a source of income for most Americans. It is and has been an easily available source of human significance. The psychological trauma of being unemployed, especially long term, will be a source of deep discontent. I read recently of a man's utter despair as he packed up the company tools he had used for 15 years, to be shipped to his company's replacement plant in China.
It is, in my judgment, incumbent on progressives to develop and vigorously promote antidotes to this impending disaster. We must not be dissuaded by accusations of socialism or social planning, generally from those who have no idea of what they are talking about. I was struck by FDR's inclusion of the word "planning" in his 1932 nomination acceptance speech. We have been so heavily indoctrinated by the Right, especially since Ronald Reagan, that many view the term as subversive.
The impact of technology on humanity, of which automation is an instance, needs to be a major focus in the development of a progressive perspective.
As I finished this article I stumbled upon an excellent article by Chris Hedges on his analysis of the fundamental message of the recent election, which sees fascism at work in the political craziness. I strongly recommend reading Chris' article titled "A Recipe for Fascism", which can be found at http://www.truthdig.com/report/item/a_recipe_for_fascism_20101108/
Bob Newhard
Politically, I found the fact that Harry Reid, a powerful and rewarding Senate Majority Leader from the small state of Nevada, was nonetheless in great jeopardy from a political unknown and a new small party. What populace would trade the benefits flowing from a powerful politician for a political unknown? The salient fact in this anomaly is that Reid never the less won, but only because of the Black and Latino vote. He got a minority of the white vote.
Another relevant observation can be found in a report by MIT economist David Autor in which he looked at the shifting employment landscape in America. He found that automation has had a far deeper impact on employment than is commonly understood, especially on the middle class. He argues that it is a prime factor in the shrinking middle class in America because the jobs it primarily eliminates are those that have traditionally been held by the middle class, e.g. manufacturing, which he notes is about as productive as it has always been except it uses robots rather than humans. Service jobs, another major category of middle class employment also are shrinking, e.g. grocery clerks replaced by automatic check-out machines. The middle class has been subject to increasing economic stress since the beginning of automation in the 1950s according to Autor.
Putting the political phenomena we have recently been experiencing together with this economic impact on the middle class suggests that white people increasingly sense a diminution of economic and political power and are in a crazy kind of rebellion. The Tea Party, predominantly middle class whites, attacks Wall Street on the one hand and big federal government, which is the only power that could possibly control Wall Street, on the other hand. The fact that the populism that usually accompanies a major economic downturn is conservative this time instead of its usual liberal expression further validates this connection between job loss and the nature of the current political chaos. In this connection Autor argues that outsourcing is a precursor to automation and will be increasingly vulnerable to automation.
The middle class has been generally regarded as the social prerequisite for democracy. In this country the middle class has, since its emergence, been predominantly white. Autor describes a hollowing out process in which professional, e.g. lawyer and managerial jobs are at the high end and low wage jobs such as gardening at the low end and the declining middle class between these two.
These two factors, Reid's political survival courtesy of two minority groups, hence the increasing importance of minorities, and an automation-driven shrinking of the middle class, may be salient factors in the political craziness we are witnessing. A socio-political craziness of this kind, rooted in the fear caused by a relentless economic process can be a very dangerous phenomenon. Think of Germany in the depths of the depression following World War I and paying its former adversaries reparations at the same time. As you see the Far Right, including the Religious Right, emphasize "tradition," i.e. family values, at the expense of the Bill of Rights, think of white retention of power.
But, unfortunately, that is not all. Autor makes it clear that we have not yet seen the full impact of automation. He describes a manufacturing plant in Japan. The plant uses robots to make robots. The plant runs in the dark 24 hours a day. Obviously "the job" is going to have to be vastly reinterpreted or a substitute found. The job has been more than a source of income for most Americans. It is and has been an easily available source of human significance. The psychological trauma of being unemployed, especially long term, will be a source of deep discontent. I read recently of a man's utter despair as he packed up the company tools he had used for 15 years, to be shipped to his company's replacement plant in China.
It is, in my judgment, incumbent on progressives to develop and vigorously promote antidotes to this impending disaster. We must not be dissuaded by accusations of socialism or social planning, generally from those who have no idea of what they are talking about. I was struck by FDR's inclusion of the word "planning" in his 1932 nomination acceptance speech. We have been so heavily indoctrinated by the Right, especially since Ronald Reagan, that many view the term as subversive.
The impact of technology on humanity, of which automation is an instance, needs to be a major focus in the development of a progressive perspective.
As I finished this article I stumbled upon an excellent article by Chris Hedges on his analysis of the fundamental message of the recent election, which sees fascism at work in the political craziness. I strongly recommend reading Chris' article titled "A Recipe for Fascism", which can be found at http://www.truthdig.com/report/item/a_recipe_for_fascism_20101108/
Bob Newhard
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