With layoffs being reported every day, this is shaping up to be one of the biggest economic downturns since the Great Depression. Although I would prefer not be part of the media hysteria that contributed to the current recession, the economy’s accelerating downward spiral makes the topic difficult to avoid.
Given the enormous effect the Great Depression had on 20th century history, a look at the events that caused it and the government’s reaction to it are important to take into consideration when looking at the current downturn.
The Great Depression, along with the rise of fascism, militant nationalism and empire building, was a major cause of World War II. Surely no one wants another 10 years of massive unemployment and poverty followed by six years of the bloodiest war mankind has known. The failed panacea agendas of the Depression-era government must not be repeated.
Obama and many American economists have been promoting a Keynesian cure to the current recession. But is this really in the best interests of the average American? This downturn is global and may well be impossible for the Federal Reserve and the U.S Treasury to reverse – no matter how much currency they add to the money supply through deficit spending.
Just dumping dollars into an economy does not always work, as the estimated $152 billion Economic Stimulus Act of 2008 demonstrated. It is also difficult to assess whether that act (aka “the bailout”) has actually done much to stem the tide flowing out to sea. Of course, the reason for these failures, some economists claim, is the spending was just not enough.
But let’s take a look at the consequences of the massive wealth redistribution and government spending programs of the 1930s.
Many New Deal programs sought to organize sections of the economy through government regulation and oversight. Roosevelt-era entitlement programs, Social Security most prominently, leave a legacy of crippling debt due to bureaucratic mismanagement and false premises. Also, the Supreme Court later declared two of these New Deal programs unconstitutional.
The Obama stimulus plan contains many New Deal-like programs likely to leave a similar legacy of permanent debt and increased government interventionism.
Rampant inflation is a major consequence of massive government deficit spending. The Federal Reserve simply prints money when the government asks for it, thereby increasing the paper money supply and decreasing the actual value of each dollar in your pocket.
Massive deficit spending on the war effort in WWII led to inflation rates of 18.13 percent in 1946 and 8.84 percent in 1947. Unless the central bank system is reformed or replaced with a market-based system, we are sure to see rates this high or higher again if current and proposed spending stays on course.
The most significant outcome of the Great Depression was the growth of executive power. The ascendancy of leaders like Franco, Hitler, Stalin, Mussolini and FDR ushered in an era of authoritarian response to economic woes. Each leader took his own approach to the economic crisis of the 1930s, with the U.S. leaning toward a socialist approach under FDR. Many new government-mandated programs were proposed to and passed by Congress in the first 100 days of Roosevelt’s administration all in the name of the New Deal. This practice also marked a remarkable shift in the proposal of legislation; suddenly Congress became complacent to executive mandates, unquestioningly passing every request Roosevelt made.
Contrary to what you may hear in the mainstream media, the time has come to return to the free market economy that made this nation prosper in its first century. The growth of government interventionism that permeated the 20th and beginning of the 21st century will lead to a catastrophic tipping point if not stopped by a revolutionary reversion in policy. Just as an enormous public outcry stopped FDR from altering the Supreme Court for his own political reasons, we must now stop the new regime from building a new order of authoritarianism and nation building. History shows authoritarian empires inevitably fail while capitalist republics grow and prosper. Don’t buy into the hype. Do your own research. It’s time to make a stand for sound policy.
Colin McKim is an environmental management and protection junior and a Mustang Daily political columnist.