If anybody doubts the genius of Franklin Roosevelt, consider this: the Works Progress Administration (later renamed Works Projects Administration) was formed in 1935. John Maynard Keynes’ The General Theory of Employment, Interest and Money, which explained why we needed the WPA, wasn’t published until 1936.
Actually Keynes did get his word in ahead of publication. On June 18, 1931, in a speech at the New School for Social Research in New York, Keynes proposed a solution for the Depression that relied on government financed building programs, reduced interests rates and restoration of confidence. His recommendation for reduced interests rates focused on lower rates paid for deposit accounts, and an overall lowering of liquidity, which would increase investments in long term assets such as bonds.
While his recommendations were based on his perceptions of the causes of The Great Depression, Keynes and later Roosevelt focused on building long-term solutions. The New York Times, reporting on Keynes speech, quoted him as saying “There is nothing President Hoover can do that an earthquake could not do better.” Although the WPA is best known for commissioning murals for Post Office walls, it was also responsible for slum clearance and road building. While later economists have said that Roosevelt’s programs alone were inadequate to bring the nation out of the Depression, and that it took the mobilization of World War II to restore the economy, Roosevelt had the right idea. The WPA and CCC focused on creating jobs, regular paychecks, a sense of security.
Perhaps in contrast, James Mooney, who, at the time of the Great Depression was president of General Motors Export Corporation, wrote a book, Wages and the Road Ahead, which had the answer to everything—in fact it had the answer in one paragraph:
“In our present crises the real road out is through the individual decisions by individual Americans who will make up their own minds to get their own personal business and their own personal affairs in order. This means getting costs down, getting expenses within income, getting the prices of products down so that business can move forward on the new levels that are being established.”
Mr. Mooney had something there—except that he wanted the workers to go first by accepting lower wages, and they couldn’t, because they were already unemployed. Still, his approach, which was uniform deflation, might be applicable today, if the investors who offered mortgages with teaser rates would agree to extend those rates for another 20 or 30 years. The current economic crises was triggered not by lending to people who couldn’t afford to pay the initial rates, but to lending to people who couldn’t read the fine print in the 18th paragraph where it says that after two years, the interest rate jumps to something that would make a loan shark gasp.
The current financial situation isn’t like the Great Depression—it’s worse. Through the first half of the 20th century, debt was an abnormal condition. Banks were resistant to offering loans to any but the most credit-worthy borrowers. The government pretty much lived on its income. This meant limited economic growth and considerable poverty, but while people might have nothing, it was hard to go below zero. Thanks to the Reagan Revolution, with a particular assist from the Bush-Cheney administration, the United States and the people therein, are already way below zero.
With the next president inheriting a deficit of $482 billion, and a national debt in numbers that can only be understood by astronomers and chemists, the idea of stimulating the economy by overspending seems as quaint as an antimacassar. This estimate doesn’t factor in the costs of Mr. Bush’s War, or the anticipated drop in revenues as falling incomes lead to less taxes being paid in, or the cost of another economic stimulus package. It doesn’t include the effects of cutbacks in state and local services because of reduced tax revenues. Oh yes, Lord Keynes, who seems to have understood this stuff pretty well, also wrote that the worst thing you can do in a situation like this is to start firing people to cut costs.
Not that there’s an answer to this mess, but if there is one, it’s going to be in a real Progressive agenda, a real National Health Service and a new form of WPA to repair the infrastructure and develop wind, tidal and geothermal energy sources. The way out is going to be on the left, not down the middle—and politically that’s going to take a lot of reeducation. Telling the truth is a lot more difficult than telling people what they want to hear, and it has been out of fashion since George McGovern tried it. If you’re running for office, the middle of the road is the easy way in, but if you’re looking at the economy, it’s no way out.
Sam Uretsky is a writer and pharmacist living on Long Island, N.Y.
From The Progressive Populist, Sept. 1, 2008
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