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We know we are in an economic quagmire. We know what causes such quagmires and we know what we have done in the past to break out of economic ruin. Thanks to the boom and bust cycles inherent in capitalism we have great experience in trying to mitigate the human costs to our society during these bust times as we are experiencing now. We actually did a fairly good job of creating a stable system of protecting our society from predatory investment and lending practices, monopolies and the resulting harms to the vulnerable in our society. We chose to dismantle those protections that were mostly instituted during and after the Great Depression resulting in a society that is not sustainable.

More after the jump:

We have been reminded repeatedly that the President is unable to create every policy decision because the President is simply the captain of the ship of state. The winds of populism, the tides of Congress and, the storms of capitalism have much more of an effect on the direction the country takes.

With the economy grinding this country’s potential to a halt we are in need of a captain willing to risk some popularity in an effort to turn the ship of state away from the reef of economic destruction. There are ways that have been tried in the most familiar economic depression some of them worked and some of them failed miserably.

One of those that worked was the restriction on monopolies. Even during the midst of the Great Depression there was an attempt to make businesses too big to fail. For this example I look to Meg Sullivans August !0, 2004 article FDR’s policies prolonged depression by 7 years, UCLA economists calculate.
Here is the link to the full Newsroom article.

"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."

From this example I speculate that allowing the FED to sustain high interest rates is stagnating our economy instead of allowing the natural readjustment necessary to return to stability. I would also speculate that allowing wages to be increased to compensate for the stress rampant profiteering has caused our economy will do nothing more than reduce the value of the dollar in the longest terms possible and hinder the return to sustainable market policy. Yes, it will hurt but it will be a pain borne mostly by those that speculated our financial system into un-sustainability. The short-term stresses on individuals could be mitigated through a combination of stringent foreclosure restrictions, a return to consumer friendly bankruptcy laws, and the subsidizing of essential commodities. It should be noted that the high wages sustained by the Roosevelt policy was not across the board and only further stagnated wages for most workers.

One of our largest problems is the consolidation our economy has experienced. I refer further to the Meg Sullivan article.

"This is exciting and valuable research," said Robert E. Lucas Jr., the 1995 Nobel Laureate in economics, and the John Dewey Distinguished Service Professor of Economics at the University of Chicago. "The prevention and cure of depressions is a central mission of macroeconomics, and if we can't understand what happened in the 1930s, how can we be sure it won't happen again?"
NIRA's role in prolonging the Depression has not been more closely scrutinized because the Supreme Court declared the act unconstitutional within two years of its passage.
"Historians have assumed that the policies didn't have an impact because they were too short-lived, but the proof is in the pudding," Ohanian said. "We show that they really did artificially inflate wages and prices."
Even after being deemed unconstitutional, Roosevelt's anti-competition policies persisted — albeit under a different guise, the scholars found. Ohanian and Cole painstakingly documented the extent to which the Roosevelt administration looked the other way as industries once protected by NIRA continued to engage in price-fixing practices for four more years.

With the current size and structure of the current business model monopolies are the norm as opposed to the exception. Too big to fail is a tree that is in need of pruning. Diversification should be allowed but with controls preventing controlling interest in any given sector to be carried out in a select manner. Our essential services such as banking, investment, commodities and health care should not be held hostage by a few mega-corporations that are unwilling to cede to market forces in an effort to maintain unsustainable profit margins.

The January 7, 2008 article by Aaron D. Pendell, Herbert Hoovers Legacy: Great Depression Goat Inherited Laissez Faire Economic Policy. This was on the site americanhistory suite 101 (dot) com

Laissez-Faire economic policy allowed for rapid industrialization to take place without government regulation, and marketplace competition suffered as a result. Competition was hindered further by previous periods of economic contraction, such as the depression of 1893. Only the larger companies survived periods of economic contraction, and the larger companies began to structure themselves differently in order to consolidate their operations. Large companies sought to control all processes in production, or vertical integration, in order to increase efficiency and protect themselves from future economic shocks. Other companies sought to monopolize their markets. These structures allowed for the lowering of prices that smaller companies could not match.

We can see the damage to our economy on a local scale using one corporation
and it’s practices in relation to it’s ability to ruin markets that were previously sustainable. Municipality after municipality can relate to the tales told in the film Wal-Mart the high cost of low prices by filmed by Robert Grenwald. If you have not seen this film I recommend it.

What has worked has been taken away by the vested interests that were only concerned with expanding profits at the expense of this country’s economic stability. What should be done is return to the sustainable models while increasing spending to stimulate the economy back into life. By halting spending you are falling into the trap that held the country under the thumb of economic doldrums for more years than needed during the Great Depression. This spending should be financed through the future tax revenue that should be extracted from the top percentage incomes through returning to sound tax policies that were gutted in the last administration. This should produce a curve similar but not as dramatic as the tax increases implemented during World War II on profits.

We can fix this but we need your leadership to be the guiding light of reason.

Originally posted to pantherq on Mon Jan 25, 2010 at 08:36 PM PST.


Should we make the same mistakes and expect different results?

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55%11 votes
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Comment Preferences

  •  Tip Jar (2+ / 0-)
    Recommended by:
    jackl, AllisonInSeattle

    "Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all" Andrew Carnegie

    by pantherq on Mon Jan 25, 2010 at 08:36:59 PM PST

    •  UCLA study (1+ / 0-)
      Recommended by:

      I have not read it yet, however the summaries I have read indicate that the authors make a case that FDR's spending programs, as well as the lack of downward flexibility in wages and prices, caused the Depression to be longer and deeper than had free market forces been allowed to act without restraints. They were particularly critical of the public service jobs programs and the deficit spending to fund them. As I said, I have not read the research so I don't yet have an opinion on its merits. However, if one agreed with its conclusions, Obama's budget action would be in line with the UCLA author's views.

      "let's talk about that"

      by VClib on Mon Jan 25, 2010 at 08:48:46 PM PST

      [ Parent ]

      •  Yes, but the actions taken can be interpreted (0+ / 0-)

        in more than one manner.

        I can see these and many more policies failed to create the needed recovery.

        Why return to the same mistakes?

        "Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all" Andrew Carnegie

        by pantherq on Mon Jan 25, 2010 at 08:51:27 PM PST

        [ Parent ]

      •  did this UCLA study look at (1+ / 0-)
        Recommended by:

        the human cost of doing nothing in 1933-34?  Did it consider the possibility of armed revolt?  (Look at the veterans bonus march and encampment in Washington)

        Did it consider that if there were 40% unemployed who was going to buy goods to spur a recovery?

        The idea that doing nothing in 1933-34 would have been "better" is a discredited right wing talking point.  

        •  I'm not advocating doing nothing (0+ / 0-)

          I'm advocating doing what worked then and continued to improve our society.

          "Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all" Andrew Carnegie

          by pantherq on Mon Jan 25, 2010 at 08:59:18 PM PST

          [ Parent ]

          •  agreed. I am wondering about the study. (1+ / 0-)
            Recommended by:

            When a study reaches such a "conclusion" about "what worked" it is often useful to look at the assumptions and methodology of the study, in order to validate its conclusions.

            Otherwise I have no way of knowing "what worked".

            •  That is why I used it. (0+ / 0-)

              To show that the same results can be looked at through different lenses to show the policy still was not viable.

              "Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all" Andrew Carnegie

              by pantherq on Mon Jan 25, 2010 at 09:04:01 PM PST

              [ Parent ]

            •  Putting the controls back on the market... (0+ / 0-)

              ... would be a good start.

              Otherwise I have no way of knowing "what worked".

              "Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all" Andrew Carnegie

              by pantherq on Mon Jan 25, 2010 at 09:10:52 PM PST

              [ Parent ]

        •  As I said I have not read it yet (1+ / 0-)
          Recommended by:

          And therefore don't have an opinion. The diary author referenced the study and I wasn't sure if he understood the basic findings of the study authors.

          "let's talk about that"

          by VClib on Mon Jan 25, 2010 at 09:03:54 PM PST

          [ Parent ]

  •  Thoughtful diary (1+ / 0-)
    Recommended by:

    hilarious subject line

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