From 1997-11-05: Largely forgotten lessons of 1931: how economic missteps fueled global conflict, & how danerous a historical pattern economic chaos and political extremism can rapidly become…
Anyone who reads this or knows about it should deeply appreciate, once again, what Bernanke and Co accomplished during the Great Recession, even though the political consequences weren't as beneficial. One may argue that the political consequences might have been worse if Ben and Co had not acted. But we'll never know. Ditto for Mario Draghi during the European sovereign debt crisis. My fear is that the "grievance culture front" may have moved on from multilateral agencies. Their focus may now be the central banks. And naturally, the fear is that they may use the mistakes outlined in this history as an operations manual. Fingers crossed.
The United States now presents a different situation from Germany in the 1930s. But it is also in a crisis of democratic collapse. The transition of the Republican Party to becoming an extreme right-wing insurgency took decades. As far back as the New Deal, the Republicans opposed FDR's policies as socialism. Some of the wealthy were even ready to support a coup to overthrow democracy in the so-called "Bankers' Putsch." See the link:
The 1930s were a time of antisemitism in America (Henry Ford, Father Coughlin) and would-be strongmen like Huey Long. Sheer desperation forced migrations famously depicted in Steinbeck's novel "The Grapes of Wrath" and the country seemed ready for a dictator from the left or right. FDR made the difference with his pragmatism and mastery of communications, with a team of advisers willing to experiment. His presidency seemed to build pillars for American society in the long-term such as social security, stronger labor unions, and regulations for stability.
By the 1960s, Republicans opposed the establishment of Medicare as socialism, and LBJ's Great Society as transfers from (white) tax-payers to undeserving (black) minority voters recently allowed to vote by the Civil Rights reforms. The extension of equal rights to various groups provoked a growing and powerful reaction, on which Nixon capitalized in his Southern Strategy, just as Reagan later and Bush, Sr. Government regulations were rolled back, along with progressive tax rates on the rich and corporations. The new anti-government trend became widespread with more right-wing think-tanks and lobbies, and the steady consolidation of financial and economic power. By the mid-1990s, the "Gingrich Revolution" made the Republicans a party of abuse, blackmail, shut-downs, scandals, and falsehoods to win at any cost; the 2000 election brought the first riot (the so-called "Brooks Brothers riot" to stop counting of votes in Florida and get the presidency awarded to Bush, Jr. through litigation.
It was clear by 2008-2009, that the Republicans (although in power) could not govern responsibly, In response to the financial crisis and possible melt-down of the world economy, the Republicans had to rely on the Democrats in Congress to get measures approved. The election of Obama reinforced the most violent racist push-back yet, ably exploited by Donald Trump, who took the Birther scandal from Russia TV and had laundered Russian mafia money since the 1980s The open American society was clearly vulnerable to manipulation by interested enemies of democracy, such as Putin's Russia, and domestic proponents of a right-wing authoritarian regime, in this new era of social media, "fake news", and trashing of experts and the so-called establishment (including legacy newspapers). Laundered Russian mafia funds and dark money from American millionaires and corporations swept through American business and politics. A number of Republicans such as Mitch McConnell (since 1998) took donations from Russian sources and were opposed to denouncing Russia's massive intervention in the 2016 election to support the Republican candidate,
Donald Trump. From there, it was a straight and logical progression to the failed insurrection of January 2021 and the successful capture of the state by Donald Trump and his party as represented by a few billionaires in their own interests and those of Russia, Israel, Saudi Arabia, and other
partners in Trump's presidency.
The decay of America's political and social system was greatly accelerated by the take-over, as the explicit agenda (Project 2025) was to destroy democracy and social democracy in any form (e.g. social security, Medicare, Medicaid), along with government capacity to raise taxes. Another part of the agenda is to shut America off through import tariffs while attacking and coercing other countries, even taking over their territories through force. So despite centuries of democratic institutions and pillars of the economy, society, and global order which had lasted eighty years, America now jumped off a cliff. This is a rare case of a great power committing suicide. Since it has been the guarantor of world financial and economic stability since WW2, the world is also entering a perilous phase like in the 1930s. No scenario is now beyond possibility in America or the world.
"By the 1960s, Republicans opposed the establishment of Medicare as socialism."
From ChatGPT: "When Medicare was enacted in 1965, government projections estimated that the program would cost about $9 billion per year by 1990 (adjusted for inflation, that's roughly $66 billion in today's dollars). However, actual Medicare spending in 1990 was approximately $110 billion — more than 12 times the original projection when adjusted for inflation."
We need to hope that the dollar remains the world's reserve currency. That's the only way we can continue deficit spending, and making the interest payments on the national debt.
Thanks for the comment. Instability in the US economy (arbitrary changes such as import tariffs, slashing of revenue collection capacity of the IRS, or marginal tax rates) won't reassure foreign creditors. The central banks of Europe, the UK, Japan, and China are big holders of US treasury bonds. It's counterproductive to threaten them with economic warfare and still expect them to hold large reserves of a hostile country's currency. Most of all, reductions of the tax base in marginal tax rates on corporations and the wealthy, and massive tax evasion by them, have shrunk revenues and will shrink them more. The US tax/GDP ratio is among the lowest of OECD economies. Cutting Medicare, Medicaid, and Social Security or defense expenditures will have consequences for the stability and security of the US. Meanwhile, the political economy of the U.S poses constraints., specifically the power of the billionaires and corporations, through donations and lobbies, to prevent measures they oppose and promote others in their favor, as well as the electoral college system and the built-in bias towards less densely populated states.
Thank you for putting this together and then reposting it. That period of history is fascinating. You cannot help but think about the incompetents and arsonists in charge now. We can only hope that a major economic or political shock doesn't hit over the next four years.
This is an excellent article but it focuses too much on Europe and the West. Global warming and excessive population growth in the third world are likely to make economic progress far more difficult in the the 21st century than it was in the 20th.
Our host left one point out. There is one entity that does the job of stemming international panics. It has done a pretty good job of it since the 1960's, when it assumed this role. It is called "The Federal Reserve Bank of New York," under the instruction of the Board of Governors and the Treasury. Unfortunately, this triumvirate is self-appointed, has no formal international mandate, is losing domestic legitimacy, and only cares about internationally important currencies.
Anyone who reads this or knows about it should deeply appreciate, once again, what Bernanke and Co accomplished during the Great Recession, even though the political consequences weren't as beneficial. One may argue that the political consequences might have been worse if Ben and Co had not acted. But we'll never know. Ditto for Mario Draghi during the European sovereign debt crisis. My fear is that the "grievance culture front" may have moved on from multilateral agencies. Their focus may now be the central banks. And naturally, the fear is that they may use the mistakes outlined in this history as an operations manual. Fingers crossed.
The United States now presents a different situation from Germany in the 1930s. But it is also in a crisis of democratic collapse. The transition of the Republican Party to becoming an extreme right-wing insurgency took decades. As far back as the New Deal, the Republicans opposed FDR's policies as socialism. Some of the wealthy were even ready to support a coup to overthrow democracy in the so-called "Bankers' Putsch." See the link:
https://www.npr.org/2012/02/12/145472726/when-the-bankers-plotted-to-overthrow-fdr
The 1930s were a time of antisemitism in America (Henry Ford, Father Coughlin) and would-be strongmen like Huey Long. Sheer desperation forced migrations famously depicted in Steinbeck's novel "The Grapes of Wrath" and the country seemed ready for a dictator from the left or right. FDR made the difference with his pragmatism and mastery of communications, with a team of advisers willing to experiment. His presidency seemed to build pillars for American society in the long-term such as social security, stronger labor unions, and regulations for stability.
By the 1960s, Republicans opposed the establishment of Medicare as socialism, and LBJ's Great Society as transfers from (white) tax-payers to undeserving (black) minority voters recently allowed to vote by the Civil Rights reforms. The extension of equal rights to various groups provoked a growing and powerful reaction, on which Nixon capitalized in his Southern Strategy, just as Reagan later and Bush, Sr. Government regulations were rolled back, along with progressive tax rates on the rich and corporations. The new anti-government trend became widespread with more right-wing think-tanks and lobbies, and the steady consolidation of financial and economic power. By the mid-1990s, the "Gingrich Revolution" made the Republicans a party of abuse, blackmail, shut-downs, scandals, and falsehoods to win at any cost; the 2000 election brought the first riot (the so-called "Brooks Brothers riot" to stop counting of votes in Florida and get the presidency awarded to Bush, Jr. through litigation.
It was clear by 2008-2009, that the Republicans (although in power) could not govern responsibly, In response to the financial crisis and possible melt-down of the world economy, the Republicans had to rely on the Democrats in Congress to get measures approved. The election of Obama reinforced the most violent racist push-back yet, ably exploited by Donald Trump, who took the Birther scandal from Russia TV and had laundered Russian mafia money since the 1980s The open American society was clearly vulnerable to manipulation by interested enemies of democracy, such as Putin's Russia, and domestic proponents of a right-wing authoritarian regime, in this new era of social media, "fake news", and trashing of experts and the so-called establishment (including legacy newspapers). Laundered Russian mafia funds and dark money from American millionaires and corporations swept through American business and politics. A number of Republicans such as Mitch McConnell (since 1998) took donations from Russian sources and were opposed to denouncing Russia's massive intervention in the 2016 election to support the Republican candidate,
Donald Trump. From there, it was a straight and logical progression to the failed insurrection of January 2021 and the successful capture of the state by Donald Trump and his party as represented by a few billionaires in their own interests and those of Russia, Israel, Saudi Arabia, and other
partners in Trump's presidency.
The decay of America's political and social system was greatly accelerated by the take-over, as the explicit agenda (Project 2025) was to destroy democracy and social democracy in any form (e.g. social security, Medicare, Medicaid), along with government capacity to raise taxes. Another part of the agenda is to shut America off through import tariffs while attacking and coercing other countries, even taking over their territories through force. So despite centuries of democratic institutions and pillars of the economy, society, and global order which had lasted eighty years, America now jumped off a cliff. This is a rare case of a great power committing suicide. Since it has been the guarantor of world financial and economic stability since WW2, the world is also entering a perilous phase like in the 1930s. No scenario is now beyond possibility in America or the world.
"By the 1960s, Republicans opposed the establishment of Medicare as socialism."
From ChatGPT: "When Medicare was enacted in 1965, government projections estimated that the program would cost about $9 billion per year by 1990 (adjusted for inflation, that's roughly $66 billion in today's dollars). However, actual Medicare spending in 1990 was approximately $110 billion — more than 12 times the original projection when adjusted for inflation."
We need to hope that the dollar remains the world's reserve currency. That's the only way we can continue deficit spending, and making the interest payments on the national debt.
Thanks for the comment. Instability in the US economy (arbitrary changes such as import tariffs, slashing of revenue collection capacity of the IRS, or marginal tax rates) won't reassure foreign creditors. The central banks of Europe, the UK, Japan, and China are big holders of US treasury bonds. It's counterproductive to threaten them with economic warfare and still expect them to hold large reserves of a hostile country's currency. Most of all, reductions of the tax base in marginal tax rates on corporations and the wealthy, and massive tax evasion by them, have shrunk revenues and will shrink them more. The US tax/GDP ratio is among the lowest of OECD economies. Cutting Medicare, Medicaid, and Social Security or defense expenditures will have consequences for the stability and security of the US. Meanwhile, the political economy of the U.S poses constraints., specifically the power of the billionaires and corporations, through donations and lobbies, to prevent measures they oppose and promote others in their favor, as well as the electoral college system and the built-in bias towards less densely populated states.
Did that book say anything about post war hyperinflation in Germany, and the unfairness of the reparations payments?
That may have left more a damaged psyche in the Germans that probably continues to this day.
Thank you for putting this together and then reposting it. That period of history is fascinating. You cannot help but think about the incompetents and arsonists in charge now. We can only hope that a major economic or political shock doesn't hit over the next four years.
Pierre Laval. A French tDrumpf?
This is an excellent article but it focuses too much on Europe and the West. Global warming and excessive population growth in the third world are likely to make economic progress far more difficult in the the 21st century than it was in the 20th.
Our host left one point out. There is one entity that does the job of stemming international panics. It has done a pretty good job of it since the 1960's, when it assumed this role. It is called "The Federal Reserve Bank of New York," under the instruction of the Board of Governors and the Treasury. Unfortunately, this triumvirate is self-appointed, has no formal international mandate, is losing domestic legitimacy, and only cares about internationally important currencies.