The 1930s Sure Sound Familiar
by JOE NOCERA
October 14, 2011
Not long ago, someone suggested that I read “Since Yesterday,” a book by Frederick Lewis Allen, a popular historian of the 1930s and 1940s. Published in 1940, it turned out to be a shrewd, concise, wonderfully written account of America in the ’30s.
It also turned out to be something else: a reminder of why history matters. It is impossible to read “Since Yesterday” without reflecting, again and again, on the parallels between then and now. The Great Depression, of course, dominates the book — and is far worse than anything we’ve been through. Still, when Allen writes about Ivar Kreuger, the industrialist who built an empire that some considered a Ponzi scheme, you instantly think of Bernie Madoff. The country’s fixation with the Lindbergh kidnapping seems strikingly similar to the country’s fixation with Casey Anthony.
And when Allen describes “Hooverville” — a large encampment of war veterans demanding promised bonus payments — Occupy Wall Street springs to mind. The veterans, who had gathered in a park near the Capitol, were treated well at first, but were eventually routed by the Army in a brutal show of force.
In “Since Yesterday,” bankers are vilified; homes are foreclosed on; people desperately search for work — just like today. Businessmen speak of the need for “confidence,” a word that “enters the vocabulary only when confidence is lacking.” Elsewhere Allen writes, “No longer were vital economic decisions made at international conferences of bankers; now they were made only by the political leaders of states.”
Allen makes the surprising point that, while small business suffered terribly during the Great Depression, big corporations did well. When large companies needed to lay off workers to maintain profitability, they did so ruthlessly. Bursts of economic growth, however, were rarely accompanied by an increase in employment. Why? Because new technology allowed companies to increase productivity at the expense of workers. Just like today.
What dominates “Since Yesterday” — as it must dominate any history of the Great Depression — is the government’s responses to the crisis. Herbert Hoover was “leery of any direct governmental offensive against the Depression,” writes Allen. “So he stood aside and waited for the healing process to assert itself, as according to the hallowed principles of laissez-faire economics it should.” Sticking to his convictions, Hoover allowed the country to sink deeper and deeper into Depression, becoming in the process one of its victims — “along with the traditional economic theories of which he was the obstinate and tragic spokesman.”
Then came Roosevelt, untethered to any economic theory and willing to try anything to get people back to work. Allen describes the alphabet soup of agencies he created, the deficits he generated, the regulations he enacted. The economy, which bottomed out in 1932, steadied and then began to grow until, by 1937, it appeared that the Great Depression had ended.
Allen then takes us through the terrible days of late 1937, when the economy collapsed again. “Roosevelt’s Depression,” businessmen called it, blaming it on a business tax they particularly loathed. In fact, Allen makes the convincing case that the real problem was that Roosevelt had tried to do something business wanted: balance the budget. Shrinking government spending dried up demand. And not until the following spring, when he reversed course and decided to “go in for heavy spending again,” did conditions begin to improve.
The tragedy of Washington today, as the supercommittee begins its task of finding $1.2 trillion in cuts, is that nobody seems to remember the lessons of “Since Yesterday” — and most other books about the Great Depression.
Cutting deficits always sounds good. Certainly, nobody wants the inflation that runaway deficits can produce. But in a depressed economy, cutting spending can lead to deflation, which is every bit as ruinous. To read “Since Yesterday” at this particular moment — with the economy hanging in the balance, with President Obama’s jobs program already voted down in the Senate, with fiscal policy so stubbornly focused on the wrong things — is to fear that we are headed for worse times ahead, not better times.
Toward the end of his book, Allen sums up the mood of the country. By 1939, people were weary of hard economic times, but they were also weary of Roosevelt’s endless experiments. Many modern historians believe that Roosevelt’s biggest problem was not that he’d done too much, but that he’d done too little — that the Depression required a response bigger than even Roosevelt’s New Deal. Implicitly, Allen agrees with that.
Still, he writes, “Despite all the miseries of the Depression and the recurrent fears of new economic decline and of war, the bulk of the American people had not yet quite lost their basic asset of hopefulness.”
He concludes: “A nation tried in a long ordeal had not yet lost heart.” When our current long ordeal finally ends, will we be able to say the same?