Tuesday, November 8, 2011
The Forgotten/Compressed Recession
People tend to forget. This country also had a depression in 1920 and 21. And, while, no, it wasn't quite as devastating as the Great Depression of a decade later, it wasn't exactly a walk in the park, either.......................................................................................................Here are some of the numbers, people. The unemployment rate crested at 11.7% in 1921. GNP declined by 6.9%. There was an 18% DEflation rate and a 36.8% drop in wholesale prices. The stock market plummeted by whopping 47% and profits decreased by 75%. Add to that the fact that there was a near tripling of business failures and, yeah, all in all, it was a pretty nasty economic downturn........................................................................................................So, what, pray tell, did the government do in response to it? Well, it basically did two things. a) The Harding administration/Congress slashed Federal spending by a humongous 65%. And b) the Fed RAISED its discount rate to a then record high of 7%. They basically did the exact opposite of FDR, Bush 2, and Obama, in other words.........................................................................................................So, just how successful was this approach? Well, at least according to the unemployment figures, it was extremely successful. The unemployment rates of 1922 and 1923 were 6.7% and 2.4% respectively. Quite a bit different from the rates of the 1930s and today, no?
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23 comments:
So there.
"So, what, pray tell, did the government do in response to it? Well, it basically did two things. a) The Harding administration/Congress slashed Federal spending by a humongous 65%. And b) the Fed RAISED its discount rate to a then record high of 7%. They basically did the exact opposite of FDR, Bush 2, and Obama, in other words.."
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That's freaking #boomsauce in the cannon.
I just got back from my walk, John, and, just to be fair, one cannot say with certainty that the government's response to this downturn created the recovery FROM IT (that whole thing about correlational analysis again). What one COULD say, however, is that the response apparently didn't hamper the recovery.
It's at the very least interesting, ecc102.
Will,
I so stole this and posted it at my blog, with proper credit and linkage, of course.
I got the data from wikipedia and the Mises Institute.
BAD NIGHT for the Koch Brothers, republican party and extreme right wing;
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Kentucky Gov. Steve Beshear has won re-election by over 21 points.
Polls throughout the race showed Beshear heavily favored to win re-election. During the final week of the campaign, Williams mounted a series of attacks against Beshear for having taken part in a Hindu religious ceremony, at the groundbreaking for a factory owned by an Indian company.
In Arizona Russel Pierce, the author of the states papers please anti-hispanic law is being recalled.
Early results indicate political newcomer Jerry Lewis has taken the lead for the Legislative District 18 recall election against Senate President Russell Pearce. As of 8 p.m., the results from the Maricopa County Recorder's office indicate Jerry Lewis had a 53 percent to 45 percent lead over Pearce, with nearly 14,000 ballots counted.
The people have spoken, wanna bet the GOP/tea party still won't listen.
Will: What one COULD say, however, is that the response apparently didn't hamper the recovery.
That is what I would say. What caused the recession was a collapse in farm prices after the end of WWI when "agricultural production in Europe recovered much faster than most observers had anticipated", and what brought about the recovery was the industrialization of America.
According to an article titled "The U.S. Economy in the 1920s" on the Economic History Association's website, the primary factors that lead to the recovery were...
...The widening use of electricity in production and the growing adoption of the moving assembly line in manufacturing [that] combined to bring on a continuing rise in the productivity of labor and capital. This prompted a "rapid extensive economic growth in the nonagricultural sectors of the economy".
In addition to the increase in availability of electricity "the petroleum industry was growing... the production of crude petroleum increased sharply between 1920 and 1930, while real petroleum prices, though highly variable, tended to decline". During this time "America became a motorized society" which lead to an increase in good paying jobs.
Another factor was a shrinking labor pool that drove up wages. According to the article, "from an annual rate of increase of 1.85 and 1.93 percent in 1920 and 1921, respectively, population growth rates fell to 1.23 percent in 1928 and 1.04 percent in 1929".
These, I would say, are the factors that lead to the recover, IN SPITE of the Harding administration's actions.
Will: So, just how successful was this approach?
The only thing this approach succeeded in doing is setting up the stock market crash and Great Depression that followed. This is when the bubble known as "the roaring 20's" began.
On 8/8/2011 you wrote, "Here's an interesting statistic, folks. Total direct revenue to the Federal government in 2003 was 1.78 trillion. By 2007, that number had grown to 2.57 trillion, a nearly 800 billion dollar increase... Those on the Republican side will no doubt say that this increase (the largest 4 year increase in American history, according to the Treasury department) was largely brought about by President Bush's tax-cuts".
Then you concluded that, "The Democrats, on the other hand - they would no doubt dispute this by saying that these increases would have been even greater without the tax-cuts".
No, that would not be the Democrat's answer. The Democrats would say that the tax cuts DID cause the revenue increase... because the tax cuts created a bubble. And after a bubble runs its course you get a crash. Democrats favor slow and sustained growth... the kind of growth you get with a tax rate of 50 percent or more on wealthy individuals (and strict regulation).
Also, this "largest 4 year increase in American history" (as I pointed out in my response to your original post) was because of a huge increase in corporate profits, and not because the incomes of middle class workers went up. Middle class incomes have largely been stagnant for the past 30 years.
This is what Conservative economics gets you... bubbles and busts, the wealthy getting wealthier, and the middle class getting screwed. We need to move away from this type of thinking and embrace what works... the Progressive economic policies of the Left.
ecc102: That's freaking #boomsauce in the cannon.
Exactly. ecc102 said it a lot more succinctly than I just did.
maybe wd can learn?
wd, would you please, just this once, put your thinking cap on. Maybe (I, unlike you, do not make absolute declarative statements when I can't) one of the reasons that a lot of these innovations were able to take place in the 20s was because Harding and Coolidge (as opposed to Hoover and FDR) freed up money from Washington and allowed to be used in the private sector instead.............And, really, the fact that you give Harding ZERO credit for the good economy in the 20s and FDR ZERO blame for the crappy economy in the 30s is simply ridiculous (not to mention yet another example of what an abject partisan fool you are). I, mean, come come on, dude, open up your mind, for Christ sakes.
Oh, and just for the record, that article that you've cited, it was written by a fellow named Gene Smiley, a conservative, who's also written a book entitled, "Rethinking the Great Depression", a book that underscores the flat-out buffoonishness of many aspects of the New Deal. You probably didn't know that, either, huh?
And, also, for the record, the Depression didn't really get all that nasty until a) Hoover and the Congress passed Smoot-Hawley and b) Hoover raised the top income tax rates from 25% to 63% - 2 things that you obviously would have approved of, wd.
As for this whole "the rich getting richer in the 1920s" bullshit, that's exactly what it is, bullshit. In 1921, the top 5% of the population earned 25.47% of the nations income. By 1929, this number had only grown to 26.09%, a 62 one hundredths of a percent increase. That's all. Add to that the fact that corporate profits remained at roughly 8% THROUGHOUT the 20s and it really is hard to say that this was a decade of massive greed.............Oh, and, just to let you know, employee wages actually ROSE in the 20s from 55 to 60% of corporate income. Yeah, that's right, wd, employees were actually securing a LARGER share of corporate dollars during the 20s.............My source for these numbers are Thomas Silver's book, "Coolidge and the Historians" and Burton Fulsom's "New Deal or Raw Deal".
Oh, and, Volt, save your time, this individual doesn't want to learn. Everything that he needs to know, he already thinks that he knows.
Everything that he needs to know, he already thinks that he knows.
said the pot ........
Will: ...one of the reasons that a lot of these innovations were able to take place in the 20s was because Harding and Coolidge... freed up money from Washington which allowed it to be used in the private sector instead.
The "job creators" argument? This is utter nonsense... I mean look at how well this strategy is NOT working out today! Harding and Coolidge "freed up" money for the wealthy to speculate and create a bubble.
Will: ...that article that you've cited, it was written by a fellow named Gene Smiley, a conservative...
So what? Conservatives often have their facts right but get the conclusions all wrong. I cited the facts and not the incorrect conclusions.
Will: And, also, for the record, the Depression didn't really get all that nasty until...
For the record, what you just said (using an absolute declarative statement) is total bullshit. Neither one of the things you listed were factors in the depression getting nasty.
Will: ..."the rich getting richer in the 1920s" bullshit, that's exactly what it is, bullshit.
I call bullshit on your bullshit...
From Wikipedia/Causes of the Great Depression: "Two economists of the 1920s, Waddill Catchings and William Trufant Foster, popularized a theory that [said] the economy produced more than it consumed, because the consumers did not have enough income. Thus the unequal distribution of wealth throughout the 1920s caused the Great Depression.
...According to this view, wages increased at a rate lower than productivity increases. Most of the benefit of the increased productivity went into profits, which went into the stock market bubble rather than into consumer purchases".
In other words... the rich got richer and used that money to speculate in the stock market... which created a bubble that crashed the economy.
Will: Everything that he needs to know, he already thinks that he knows.
I do not believe any such thing.
Fuck you, 37927.
The rich did NOT get appreciably richer. Corporate profits stayed approximately the same throughout the the 20s and the income of the top 5% went up less than 1%!! This while wages went up throughout the decade. Your argument (the highly debunked underconsumption one) is bullshit (2 economists from the 20s).............And what I said wasn't an absolute declarative statement. It was a fact. Unemployment DIDN'T get bad until Smoot-Hawley (it was still relatively normal - according to Wikipedia - even after the stock market crashed). And it DIDN'T get really bad until Hoover's massive tax hikes. I didn't say that there was an absolute causation but it certainly represents a credible theory (I notice how you didn't include the Wikipedia section which states how most economists think that Smoot-Hawley DID play a role in the Great Depression - hm, let me see here, John A. Garraty, one of the finest historians of the 20th Century or fucking wd, yeah, that's a real tough one, not!).
Why do you attack me, unprovoked? I give yo your say and I consider it. What in the hell more do you want?
Will: Unemployment DIDN'T get bad until Smoot-Hawley.
Will, that is complete and utter nonsense! According to a Firedoglake article (a source YOU have used in the past) titled, "The Smoot-Hawley Tariff Fairy Tale", "The Smoot-Hawley Tariff did not cause the Great Depression, nor did it worsen it or extend it. Claims to the contrary are not only false, but easily refutable".
Using official government figures from the US Bureau of Economic Analysis (BEA), the FDL article proves that "the document-able 'loss' from the Smoot-Hawley Tariff (the net export loss) contributed less than ½ of 1% of our -46% GDP decline. Overall, the Smoot Hawley Tariff caused almost 0 damage to our economy during the Depression".
Will: I notice how you didn't include the Wikipedia section which states how most economists think that Smoot-Hawley DID play a role in the Great Depression.
Why would I include it... it isn't true (see above debunking).
Will: hm, let me see here, John A. Garraty, one of the finest historians of the 20th Century or fucking wd..."
Clearly he isn't that "fine" if he thinks Smoot-Hawley contributed to the Depression.
YouTube Video: "Smoot Hawley May Be Shedding its Tarnished Reputation". The video says that Smoot-Hawley being responsible for prolonging and deepening the Great Depression is a "misconception", and cites prominent Cambridge economics professor Ha-Joon Chang, who advocates a system of international trade that pragmatically mixes free trade and protectionism.
It is not John A. Garrity versus w-dervish. This is a lie you've used before... that I'm presenting myself as a historian or economist. I'm not, and I have NEVER suggested that I am.
Why do you attack me, unprovoked?
Attack??????
Really will: ... attack, ... how badly did it Hurt?
What real or imagined "injury" to your person or ego did you sustain?
Will if you consider the fact that you are just as guilty as WD of what you "ATTACK" wd relentlessly for, if guilty is even the correct term; or "attack" for that matter: then you simply need a slightly thicker skin.
Because you of all people you "attack" are as partisan in your moderate the middle is the best position you stake out here regularly. And your attacks on bloggers do have a decidedly right wing bent, IE your history of being more virulent, nasty and even hateful; at anybody left of center who has ever posted here is MUCH worse then anytreatment of ant right leaning bloggers. For some reason you seem to give right leaning bloggers a much larger allowance for what they say then you do those who approach life politics or your blog from any position left of what you claim to be pushing.
Same for trying to equate every instance of right wing malfeasance with something you claim as equal from the left. Seems to be part of your very partisan all is equal meme when in real life things are quite different.
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