Like most ‘evil free market people’ I hold that collectivist (i.e. big government) ideas taught at schools and universities give the media a built in bias in favour of big government and against liberty. I am sometimes asked to give a specific example of what I am talking about and I will now do so.
A recent edition of Newsweek magazine attracted my attention because it had Europe at 50 in big letters on the front cover.
It turned out that the cover indicated a story about the European Economic Community – European Union (50 years old this year). This story being the normal nonsense, crediting the EU (rather than NATO) with peace in Europe, and crediting it with the economic recovery after World War II. Something that was actually achieved by the policy of deregulation, such as the scrapping of price controls, and tax reduction followed by finance minister Ludwig Erhard in Germany from 1948, and by political leaders in some other European countries.
However, it was a story in China that really interested me. New government spending increases in China were justified on the basis that they were in the spirit of “FDR’s depression busting” policies in the 1930’s which countered the “blows of the free market”.
In fact President Roosevelt’s spending schemes and regulations helped prolong the depression. And the depression was not caused by the ‘free market’ , it was caused by the boom and bust monetary policy of the Federal Reserve System.
In 1921 a previous government credit-money bubble, that of World War I, had burst, and the government of President Harding did nothing much, other than cut government spending, and the economy was well on the road to recovery within six months.
In 1929 another government credit-money bubble bust, that of the late 1920’s – caused by Governor B. Stong’s, of the New York Federal Reserve Bank, policy of trying to support the overvalued exchange rate of the British Pound by a loose credit money policy with the American Dollar.
The administration of President Hoover (contrary to the ‘did nothing’ myth) went in to overdrive – doing all the wrong things. Trying to hold up wages (in order to protect “spending power – demand”), by rigging agreements with industry, agreeing to more government spending, and agreeing eventually to a large increase in both domestic taxes and, in 1931, in the tax on imports.
The administration of President Roosevelt carried on the interventionist policies of President Hoover and, in some ways, deepened them. Thus making the depression the longest in American history.
Why do the good people at Newsweek not know any of the above? Why do they, instead, write of FDR’s “depression busting” schemes, and the “blows of the free market?
It is because of what they were taught at school and university – as simple as that.
People can not be expected to understand current events (such as the government schemes in China) if they have been taught a false view of the past.
Be interesting to see what their explanation is when it happens this time round…
You should mention that Roosevelt raised the top tax rate to 63% when he took office. Thus the government sucked most of the capital of out of the economy and that made economic expansion impossible.
From an e-mail in my box the day before yesterday:
Of course, nothing about this is news to me, but the person who wrote it is still amazed.
I’m with Mencken:
(Trenton, N. J., “Sunday Times”, April 3, 1927, in an article regarding a wave of student suicides that year.)
Can anyone point to more material on Paul’s point about government action causing and deepening the 1930s recession? I would like to learn more about it.
Robert,
I would go here and type in depression in the “search mises” block.
Getting “news” out of Newsweek magazine is like getting news out of Pravda.
You will get much opinion from its hardy staff of left wing stringers, but news is conspicuous by its absence.
Some time around 1982, Newsweek printed a cover titled “And the Poor Get Poorer”. That was the headline of a story on Reagan’s economic policy. It was so badly written I decided I would never again buy another copy of Newsweek. Weaknews apparently had failed to notice that in the Great Inflation of the 1970’s, the poor had been getting poorer for quite a while. It was government which had been getting richer since the income tax rates were not indexed for inflation. When Reagan took office, the average American worker hadn’t had a real raise in ten years.
Hence, I’m not surprised to hear that Newsweek prints myths about the Depression or anything else. They can’t even print a story about the handling of Korans at Guantanamo and get it right.
This is much the same as the reports that anti-war protests “ended” the Vietnam war in 1974. In reality, 1974 was the beginning of what was to become, by far the most intense period of warfare, with major conflicts between Vietnam, and Laos, Vietnam and Cambodia, Vietnam and China, and Vietnamese and Cambodians fighting between themselves.
I would be shocked if Newsweek reported that the Great Depression did not, in fact, end until the start of WWII, and that this event was the proximate reason.
I may have leafed through a copy of the magzine briefly in a Doctor’s waiting area, but I certainly haven’t paid for one in a number of years.
One disadvantage of driving a newspaper van is I have to work Friday nights to make ends meet.
The Silver Lining is I get free copies of the Weekend FT.
This week’s FT magazine was not the usual load of left-leaning editorialising cobblers, but an actually interesting and original take on fifty years of European integration, concentrating on the two ‘hyphen’ territories of the old European conflicts.
These were Alsace-Lorraine and Poland, and the articles were just plainly reporting journalism, which made a refreshing change.
I’d recommend Saturday’s FT to anybody.
Sorry I couldn’t say this Saturday, but I’ve been both ill and insanely busy all week.
It is a curious convention to punch holes through the straw-men that are America’s newsweeklies. Yes, they are not good or accurate. Most Americans of a certain nous understand that any magazine that puts Jesus Christ on the cover at least once a year and calls it news is probably lacking somehow. If you are stupid enough to cite them in an academic paper, as I did as a college freshman, you will quickly be disabused of the idea that they are publications meriting a place in the debate.
You know what that means? That means Newsweek et al is a great source to debate for people still in high school or at a high school level of understanding of politics/history/society. For what it is worth, I have not progressed much beyond what I learned as a kid in chemistry. There is no shame in it. But you will not see me on the Chemizdata blog trotting out my thoughts on why Popular Mechanics is no good. Or worse yet, blaming MIT and Cal Tech.
It is also a huge stroke of ignorance to believe that: A) Every topic on this blog is related to US 1930s macroeconomic policy; B) Every American who does not know Herbert Hoover’s inseam in inches (if you answer metric you hate America) is a moron; C) major universities are responsible for the like of US News & World Report, Time Magazine, and Newsweek. As Jeff Goldblum’s character in the Big Chill said of People Magazine: the length of each article is dictated by how long it takes an average American to take an average crap. Does anybody here really think something different about Newsweek?
Would it kill us to discuss something worthwhile? How about this:
The latest Economist (3-17-07) features a special report on the EU. On its last page, it ponders what the EU’s centenary will mean. It also mentions an impending collapse of the US dollar. Does anybody believe there will be an EU in 2107? Or will it merely be something to explain on old globes, like the United Arab Republic or Stalingrad? Is anybody long in US T-notes?
Here’s another possible topic: For all the politicians’ and MSM’s hand-wringing about Darfur, has anybody noticed that France is blasting away at Khartoum’s allies to the west fomenting revolution in the Republique Centrafricaine? Can we all now safely dip our freedom fries in Grey Poupon? Anybody know why Fox News and Bill O’Reilly, or Al Franken for that matter, have declined to discuss this story? Is it because Tom Friedman has not written a boring book about it or Nicholas Kristof has not rescued a kitten in a tree in Bangui and then written a dozen articles about his heroism?
Anybody want to discuss that type of thing or is it back to the straw topics and obscurantism hereby referred to as the Maury Povich and Metternich show? By the way, if you are willing to discuss the Economist or the west actually doing something in Africa, please refrain from raising the fact that all dimes with FDR’s image actually cause cancer or that Hoover’s name once had a third O in it before John Maynard Keynes seduced it into leaving. Those were both in your last comment on the corrupt world that is international curling.
I do not really follow all of Michiganny’s article. So I will simply repeat that the people on Newsweek are comming out with what they were taught at school and at college (and it is still being taught).
To say that history “does not matter” is a point of view, but it is a point of view that I do not share – as people who have a false view of the past are likely to have a false view of the present as well.
As for the Sudan – the very people demanding that “something must be done”, would be the people denoucing the whole thing as a “war for oil” (Sudan has oil to – big supplyer of China) if the American military went in. No other military would have any hope of defeating the locals (there are a lot of them these days and they are well armed).
“Sanctions”. Like the sanctions that “murdered 600,000 Iraqi children” (Robert Fisk, before the opertation of 2003 to date, of the death-to-the-West “Independent” newspaper). Of course this was nonsense, but the propaganda against sanctions was very strong (even thought they never touched food or medical supplies) so the whole system of sancations was falling apart in relation to Iraq – just as they would with Sudan (China is not going to stop buying oil).
Even Bill O’Reilly has said (more than once) that whilst the West must win in Iraq now, he was wrong to support the project – in that it would have been better (horrible though it sounds) to just let Saddam carry on.
But then O’Reilly is looking at the internal effects of the Iraq war on the United States (the huge boost for the left that it has provided). A war in Sudan (even one asked for by the Hollywood crowd and the academics) would soon be exploited in the same way – more American flags and effigies of American soldiers burned by chanting scum in demonstations the mainstream media describe as “family friendly”.
Let us face the truth. About half the United States population are not in favour of war with Iran – even if it gets an atomic bomb and is about to use it on Israel. So the United States is not going to war over the Sudan.
I apologize for downplaying the role of F.D.R. For example it is true that he increased the top rate of income tax even more than it had already been increased. And there was the confiscation of private gold and the voiding of gold clauses in private contracts (upheld by the Supreme Court – thus showing the folly of entrusting a Constitution to a bunch of government appointed judges). And the effort to build an Mussolini style corportate state via the National Industrial Recovery Act and its National Recovery Administration (this was too much for the judges – although the principle of administrators making “law” is now considered normal). All this is a bit more than the “macro economic policy of the 1930’s” – it is about whether a country is under the principle of limited government or not.
And in the long term such things as the creation of the Social Security system (1935 – 1937) have had terrible consequences (and will have far worse consequences when the welfare state eventually collapses and the tens of millions who now depend on its schemes find themselves with no other means of support). But the costs of the Social Security program were tiny in the 1930’s – it has proved a slow growing cancer.
Oddly enough the people at Newsweek are making a mistake – at least if one follows the doctrine of Lord Keynes.
J.M. Keynes argued for more government spending in the 1930’s because (he falsely claimed) the decline of output could be countered by deficit spending (supported by credit money creation) as this would increase “demand”.
China is not in recession (far from it) so arguing for more government spending in China by pointing at the Depression in America is wrong headed even according to the doctrines of Lord Keynes.
However, J.M. Keynes also asked for more government spending when the ecomomy was not in recession. His “economic theory” of the 1936 “General Theory…” book and the various New York Times articles (yes the New York Times – it was also busy in the 1930’s denying that millions of people were being murdered in the Soviet Union) was just his latest excuse.
To be fair Henry Hazlitt (a fine economist who, as far as I know, never studied a day in any university) wrote for the New York Times back in the 1930’s. Later he wrote for Newsweek – after Henry Hazlitt retired (1966 I think) they had Milton Friedman (not as good in some ways, but still always interesting).
I doubt that Newsweek has any nonstatists writing for it these days.
I should point out that Ludwig Erhard did not hold the position of “finance minister” in 1948 (the Federal Republic not even being in formal existance till 1949). In 1948 Erhard was technically working for the Allies – even though he went against their policy. He got rid of price controls (and so on) on a weekend, because the American, British and French administrators would not be at their desks to block him.