Archive for April, 2009

Book Review: The Forgotten Man

Wednesday, April 29th, 2009
There’s pretty much a consensus that we are living in “the worst economy since the Great Depression,” so it seemed appropriate, even important, to read Amity Shlaes’ The Forgotten Man: A New History of the Great Depression.  Since the copy I read belongs to the school library, I’m going to have to buy my own copy and read it again this summer so that I can mark it up.  With all of the names, events, and dates in the book, it will repay a second reading.

She does ask (but doesn’t answer) the traditional question about whether it was FDR’s policies or World War II that pulled America out of the Depression, but she maintains that the bigger question is why the Depression lasted until that war.

What caused the Depression in the first place?  For Shlaes, it was a perfect storm of political, economic, social, and even natural factors: the stock market crash of 1929, the missteps of the Federal Reserve, the loss of international trade, the challenge of transition from an agricultural to a manufacuring economy, and even freakish weather (floods and drought – think Dust Bowl).

Given these conditions, perhaps a depression was inevitable.  Shlaes maintains, however, that it was mismanagement at the presidential level – first Hoover, then Roosevelt – that made the downturn longer and deeper than it would have had to be.  In other words, presidential policies turned a severe but normal market correction into what will forever be etched into the American memory as the Great Depression.

Hoover’s sins were fundamentally three: intervening in business, signing into law a destructive tariff, and weakening confidence in the stock market.

FDR’s sins were also legion: errant money policy, prosecution of businessmen as enemies of the state, doling out government monies to create voting constituencies beholding to, even dependent upon, the federal government (think Social Security), and promoting Keynesian economics that makes government an equal partner with the private sector in stimulating economic growth.  (These last two have transformed American politics to this day.)

The bottom line is that both men, in their sincere desire to promote economic recovery, actually delayed it.

There were some heroes: the Schechter brothers, who ran a family-owned kosher butcher business, and who fought the big, bad NRA (no, not the National Rifle Association, but the National Recovery Administration, the strong-arm bureau of the New Deal) all the way to the Supreme Court – and won! 
One enjoyable feature of this volume is the quotes from the luminaries of the day – a time when men thought deeply and spoke elegantly.  Here are a few that are instructive to us today:

Theodore Roosevelt: “To preach hatred of the rich man as such is to mislead and inflame to madness honest men.”

John Maynard Keynes: “It is a mistake to think businessmen are more immoral than politicians.”

Oliver Wendell Holmes: “A good catchword can obscure analysis for fifty years.”

To that last quote: FDR actually found a good “catchword” in the “forgotten man,” which became his excuse during those crisis years for collecting for government what he himself called “unimaginable power.”  The interesting thing is that FDR changed the meaning of the phrase from its original context and stood it on its head for his own purposes. 
Shlaes clarifies the mistake by juxtaposing the original context and FDR’s:

William Graham Sumner, Yale University, 1883: “As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X.  Their law always proposes to determine what C shall do for X, or in the better case, what A, B, sand C shall do for X.  …What I want to do is to look up C.  I want to show yu what manner of man he is.  I call him the Forgotten Man.  Perhaps the appellation is not strictly correct.  He is the man who is never thought of.  …He works, he votes, generally he prays – but he always pays…”

New York Gov. Franklin D. Roosevelt, Radio Address in Albany, April 7, 1932: “These unhappy times call for the building of plans that rest upon the forgotten, the unorganized but the indispensable units of economic power, for plans like those of 1917 that build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.”

It appears to me that the Hoover/FDR-esque spirit in government interventionism and class warfare ideology lives on today in Presidents Bush (think TARP) and Obama, who rails against the greed and selfishness of those who reside “at the commanding heights of our economy.”

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We can’t drink ourselves sober…

Monday, April 13th, 2009

…and we can’t spend ourselves to prosperity, either.

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Christ is risen!

Sunday, April 12th, 2009

He is risen, indeed!

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The Road to Serfdom

Wednesday, April 8th, 2009
When I read read F.A. Hayek’s The Road to Serfdom, I thought I was reading the op-ed pages of today’s newspapers.  I kept calling through the house, “Cindy, Cindy, this sounds like President Obama!  …This sounds like what Congress almost did to AIG executives!  …This sounds like the Democrats/Republicans!  …This sounds like Timothy Geithner!  …This sounds like American voters/taxpayers!”
If you want to get behind the headlines to the ideologies that are driving them, then read this book.  If you want a preview into America’s political and economic and social future, then read this book.  If you are going to read one difficult book this year, then read this book.  I wore out two highlighters on this little paperback.
Rahm Emanuel, the president’s chief of staff, uttered the now famous quote, “Never waste a good crisis.”  Milton Friedman’s 1994 introduction names the various “crises” that liberal politicians use as excuses to expand government control of our economy, and thus of our lives: “the urban crisis…the environmental crisis…the consumer crisis…the welfare crisis…the poverty crisis…” (x).  Today he would undoubtedly add: “the banking crisis…the credit crisis…the mortgage foreclosure crisis…”
Most people are so busy just trying to pay their bills, raise their kids, etc., that they don’t think long and hard about where the government’s actions come from (their worldviews) or what they will lead to (their consequences).  Friedman tells why: “The argument for collectivism is simple if false; it is an immediate emotional argument.  The argument for individualism is subtle and sophisticated; it is an indirect rational argument” (xii).  The former sounds like this: “Let’s get those dirty fat cats at AIG!”  On the latter, how often, when asked to explain the government bailouts, have those involved said, condescendingly, “It’s complicated.”  (Translated: “Unlike me and the rest of the anointed elite class, you commoners are too stupid to understand.”)
Friedman describes how, with the 20th-century failure of Fascism and Socialism, collectivists merely diverted their efforts to “…indirect regulation of supposedly private enterprises and even more governmental transfer programs, involving extricating taxes from some in order to to make grants to others…of subsidies to special interest groups” (xiii).  Sound familiar?
He goes on: “In the world of ideas…coordination of men’s activities through central direction and through voluntary cooperation are roads going in very different directions: the first to serfdom, the second to freedom” (xiv).
In his 1976 preface, Hayek warns: “…unless we mend the principles of policy, some very unpleasant consequences will follow which most of those who advocate these policies do not want” (xxiv).  The entire book outlines these unintended consequences in the clearest and most ominous terms.
On “the general welfare” in the preamble to the U.S. Constitution: “The welfare of a people, like the happiness of a man, depends on a great many things that can be provided in an infinite variety of combinations” (64).  “It is impossible for any man to survey more than a limited field, to be aware of the urgency of more than a limited number of needs.  …The ends about which he can be concerned will always be only an infinitesimal fraction of the needs of all men” (66).  The basic point is that we would need an omniscient dictator to be able to direct the resources of society to provide the greatest happiness for the greatest number of people.  Dictators the world has aplenty; omniscient ones are in very short supply.
“Once the…state controls all the means, exceeds a proportion of the whole, the effects of its actions dominate the whole system…the effects of its decisions on the remaining part of the economic system become so great that indirectly it controls almost everything.  …There is, then, scarcely an individual end which is not dependent…on the action of the state” (68).
“It is inevitable that [the government] should impose their scale of preferences on the [business] for which they plan” (73).  Do we really want government bureaucrats deciding: which cars to build?  Which loans to make?  Which salaries to raise?  Which people to hire/fire?
The central chapter in the book is “Planning and the Rule of Law.”  Basically, this means that the government sets – in advance – the legal framework for human activity, and then leaves it up to each individual to pursue life, liberty, and happiness according to his own conscience within that framework.  The difference between collectivism and individualism is “the same as that between laying down a Rule of the Road…and ordering people where to go” (82).
The next chapter, “Economic Control and Totalitarianism,” gives the lie to the idea that government is just “protecting the taxpayers” when they take control of larger and larger portions of the economy, because our economic activities cannot be separated from the rest of our lives.  If government controls our economic activities, they will have to control the rest as well.  “Our freedom of choice in a competitive society rests on the fact that, if one person refuses to satisfy our wishes, we can turn to another.  But if we face a monopolist we are at his mercy” (102).  The individual becomes “a mere means, to be used by the authority in the service of such abstractions as the ’social welfare’ or the ‘good of the community’” (106).
This next passage is chilling; does it sound like the American citizen/voter/taxpayer?  “In a society used to freedom it is unlikely that many people would be ready deliberately to purchase security at this price.  But the polities which are now followed everywhere, which hand out the privilege of security, now to this group and to that, are nevertheless rapidly creating conditions in which the striving for security tends to become stronger than the love of freedom” (141).
“Economic power…centralized as an instrument of political power…creates a degree of dependence scarcely distinguishable from slavery” (161).
“Once you admit that the individual is merely a means to serve the ends of the higher entity called society or the nation, most of those features of totalitarian regimes which horrify us follow of necessity” (164).
In the chapter, “The End of Truth,” Hayek asserts that one way to calm the fears of a freedom-loving people and herd them into serfdom is to make them believe that the government’s goals are really theirs, too.  “And the most efficient technique to this end is to use the old words but change their meaning” (172).  “Investment” used to mean private economic activitiy; now “investment” means government spending on programs selected by the leaders, most notably, the current administration’s mantra: “healthcare, education, and energy.”  Over time, this propaganda leads to “a stagnation of thought and a decline of reason” (181).
“There is scarcely a leaf out of Hitler’s book which somebody or other in England or America has not recommended us to take and use for our own purposes” (202).

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