It was one of the sorest political points in early United States history, with populists against it, but eventually they bowed to reality. This is the reality they bowed to:
Teaconomists please note: in a low-debt, no regulation, small gubmint environment, the economy failed to grow, it crashed every seven years and it did not rapidly recover if left to itsself.
America was caught up in an industrial revolution that its banking system couldn’t sustain, as the letter from Gleason emphasizes. Glass and his Senate partner on the bill, Robert Latham Owen Jr. -- a lifelong friend and Oklahoma Democrat who, like Glass, was born in Lynchburg -- would watch the banking system trip the economy time and again.
Between 1890 and 1914, there were eight recessions lasting an average of 18 months, including banking crises in 1893 and 1907. Shopkeepers, factory owners, farmers and even bankers had identified the U.S. financial system as a matter of national importance.
After the New Deal, the economy grew steadily, it never crashed. That's why I'm a New Dealer. The New Deal made capitalism work.
Quite apart from the conspiracy theorists (who when examined under a lens often turn out to be Jew-haters) who think the Federal Reserve and other reserve banks are private enterprises secretly controlling the world, the only slightly less eccentric Teac nomists for some reason want to go back to the pre-1913 condition.
And they pretty much have the Republican Party in a headlock.
I sometimes hear it said that there is no impersonal "market," only real people running businesses and households. True enough so far as it goes. But if you insist on looking at it that way, it puts a dfferent light on Andy Mellon's advice to Herbert Hoover in 1930 to "liquidate labor" etc.
Few if any 21st century rightwingers are as honest as Andy Mellon was, but that's what they were advocating in lae 2008 and 2009.
To pick the dates in the post...
ReplyDeleteReal GDP 1890: $200 billion
Real GDP 1914: $560 billion
All numbers 2005 dollars.
Average real gdp growth rate during that period: 4.4%
In other words, the economy grew and recovered quite well on its own. Nice try though Harry. Unfortunately, your narrative only works if you ignore all of the numbers.
That was 4.4% real GDP growth per year in my previous comment in case that wasn't clear.
ReplyDeleteNot so hot if you were a worker, though.
ReplyDeleteIf you were a twenty-year-old worker in 1890, being (on average) two-and-one-half times as wealthy in 1914 was bad because why?
ReplyDeleteThere's an excellent possibility you'd have died during one of the downturns. Ricardo's Iron Law was in effect for a large fraction of workers and their families. See Morton Mintz for a description of real food intake for the laboring poor. Or Mayhew.
ReplyDeleteWhen I say that if the market figures you are worth more dead than alive, I mean it, based on real deaths.
Few workers saw their incomes rise so much. If Mellon was seeing his capital increase 48%/year in this period (that was the dividend of his Union Trust), then some other people were doing rather less well.
Many workers did not see their wealth increase at all.
Other than the usual old age, accidents, and disease, it was a very small possibility that someone died during the downturns in the United States.
ReplyDeleteDisease is it.
ReplyDeletePeople who were seriously underfed at the best of times died of famine diseases. I suggest you read Mayhew's accounts of starvation in London.
There isn't (to my knowledge) a similarly magisterial account for America, but conditions were similar.
If on one of your nicer vacations you come to Manhattan, don't miss the Lower East Side Tenement Museum. Best museum in the country, so far as education is concerned.
People were certainly starving in the Great Depression. My great-aunt used to extort food and clothes from merchants (because she had social clout) to feed them.
Bill Spong demonstrated starvation in eastern NC in 1966.