Tuesday, November 25, 2008

FDR's NRA, Mussolini, and FDR's Depression

Bet you didn't know this.

Tugwell (who outlined them retrospectively for my Wharton class in 1974), designed several New Deal statist “reforms.” He had gone to Rome to interview a man early New Deal theorists thought was the man to copy in this country. His name: Benito Mussolini. Sitting down at Mussolini’s desk, Tugwell perfected the concept of the NRA (the National Recovery Administration) which he copied as a virtual stenographer taking notes dictated by Mussolini himself.

Tugwell was a member of the New Deal brain trust; Roeser knew him and they talked occasionally.

Il Duce... was hugely admired by New Deal statists in the early `30s. Tugwell was fascinated by the intellectual amalgam Mussolini was-part nationalist, corporatist, syndicalist, master of state propaganda and lord prosecutor of “subversives.”

As to the Depression's economic picture, Roeser relates

What Hoover and Roosevelt never understood…and economists of the day missed until Milton Friedman… was that the U. S. was in deflation, a money drought. The Fed was very young (having been formed in 1913) and the concept of open market economics, where government buys bond and sells bonds to soak up money from the economy was virtually unknown at the time

FDR failed spectacularly--but the crowd he attracted to Washington to help him were adjudged as brilliant, liberal, witty…and the more flops they created, the more the supine mainstream media loved him. Then an interesting thing happened-which just may repeat itself today.

The Depression went on so long…with joblessness averaging in the mid-teens …that people decided the condition would stay in perpetuity. Thus the American people accepted it as de rigeur and cheered his “innovations” as experiments no matter that they didn’t work. They wanted FDR to succeed. His ideas were so intricate, so cerebral, so exciting. John Maynard Keynes’ ideas were paramount: they were so more persuasive than old-hat economics. And Keynes’ ideas are back again…front and center…with Obama. We’re in for it, folks. Another round of failures ballooned into triumphs by the media fawning over an exciting presidential figure

The real possibility of deflation has been mentioned about these days, too.

How much a flop WAS Roosevelt? Look for yourself (numbers provided by A. Schlaes):

1929 the year of the stock market crash under Hoover, unemployment stood at 5%.

By 1931 under Hoover: 17.4%. Then the glory days of Franklin Roosevelt. 1933, the first year of FDR 22.9%...1934 under of FDR 21.2%...1935 FDR 21.3%...1936 FDR’s reelection 15.3% ...1937 FDR 15%...1938 FDR 17.4%...1940 FDR 14.6%..

Then FDR managed to get the Japanese to attack Pearl. Unemployment disappeared into uniforms...

How'd he manage to screw up that badly? Let us count the ways.

--Ordered the Fed to exchange all its gold with the Treasury for certificates, devaluing the dollar by 59%, hiking gold price to $35 an ounce which increased domestic prices;

--Rammed though Congress a new tax on business’ retained earnings in addition to hiking top individual income taxes at 79% prompting the rich to seek off-shore tax shelters, causing revenue which had started to rise in 1936 to plummet in 1937

--Mandated Treasury and the Fed to hike their reserves to guard against inflation, prompting commercial banks to do the same, cutting back on bank deposits and loans, forcing businesses to slash production and lay off workers

--Vowed to veto Social Security if businesses were allowed to individually give better than government benefits for their workers. He insisted his Social Security principle be not voluntary but government- mandated

(The above is particularly interesting in light of Obama's "health-insurance" machinations--especially coupled with the Lefties' 401(k)-jiggering proposal.)

--Applied Mussolini’s codes regulating business-the Tugwell brainstorm copied from Mussolini. The NRA, symbolized by a blue eagle affixed to all store windows with the slogan “We Do Our Part,” run by a crusty retired general negotiated 557 industrial codes ordering businesses to set minimum wages, maximum hours, child labor restrictions and occupational health and safety rules. (Interesting little bit of history here...) then: the Supreme Court invalidated the entire NRA…in retaliation for which Roosevelt vowed to pack the Court

--…Forced farmers to plow under their crops notwithstanding there was hunger abroad in the land-a favorite Tugwell scheme taken from Il Duce. Roosevelt sought to reverse a decade-long depression by forcing farmers to reduce their acreage under production, imposing taxes on food processors and paying subsidies to farmers who plowed under their crops and slaughtered their livestock and poultry. During its first three year farm income increased by 50% but all the increase resulted from the subsidy payments. The farm program is still with us.

You never waste a minute by reading Roeser's blog.

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