Tuesday, July 5, 2011

Fatalism: It's Been Tried (and failed) Before

Atrios wonders why our elite discourse is incredibly fatalistic. Gone are the days of FDR's "bold experimentation", JFK's call to put a man on the moon, or even Ronald Reagan's City on the Hill. In the face of persistent 9% unemployment (and a much higher U-6), the scope of our policy debate ranges between "cut spending without cutting taxes", and "cut spending while also making a temporary cut in the payroll tax rate". It's not exactly folk song material.

But if you think this situation is unique in American history, think again. Arthur Delaney's twitter feed pointed me to this Washington Post op-ed, which walks through the happenings of the first "Great Depression", in the 1870s (the depression of 1893 was also called a "Great Depression" in its time):
Cooke’s collapse launched the first economic crisis of the Industrial Age. For 65 straight months, the U.S. economy shrank — the longest such stretch in U.S. history. America’s industrial base ground to a near halt: By 1876, half of the nation’s railroads had declared bankruptcy, almost half of the country’s iron furnaces were shut and coal production collapsed. Until the 1930s, it would be known as the Great Depression.

In the face of economic calamity and skyrocketing unemployment, the government did, well, nothing. No federal unemployment insurance eased families’ suffering and kept a floor on demand. No central bank existed to fight deflation. Large-scale government stimulus was a thing of the distant future.


Neither political party offered genuine solutions. As historian Richard Hofstadter put it, political parties during the Gilded Age “divided over spoils, not issues,” and neither Democrats nor Republicans were inclined to challenge their corporate masters.
Two points worth noting. The first is that the scale of both human misery and direct action response as a result of the current downturn are both more muted than in the fast, mostly because overall living standards have risen a lot since the late 19th century. It's one thing to watch the banksters destroy the world and then not get fired while you grind through a year of part time jobs and freelancing work while figuring out which bills you can get away without paying. It's another to watch them destroy the world when you don't know where your next meal is coming from.

The second is that we are once again reminded that FDR's activism in the face of an economic crises is the exception, not the rule. Over the past 150 of democracy in the industrialized world, depressions usually cause a rightward shift in politics. The America of the 1930s was highly unusual in this respect, and even then, it should be noted, the actual FDR of that era (as opposed to our idealized remembrance of the man) was denounced by populists like Huey Long as whatever the word for "neoliberal sellout" was at that time.

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