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Sunday, June 3, 2012

The Great Depression

BOOK REVIEW - Murray Rothbard's The Great Depression

Here's the tale we're told: "Herbert Hoover was a free market enthusiast, and his capitalist, Republican Party principles were ineffective against the crash of 1929.  Only the election of Franklin Delano Roosevelt, a good Democrat, saved the US economically.  FDR came in and he saved the country from the Great Depression via the New Deal, and, eventually, World War II".

The above myth is the classical story taught to students in the school systems today.  Hoover was a hands off, somewhat evil man, and FDR was a cuddly and wholesome 'traitor to his class' and helped the little guy and the country rise up out of the ashes of the Great Depression.  What Murray Rothbard does in his book The Great Depression is totally destroy this completely fabricated story.  If the old adage 'history is written by the victors' is true, then the Hoover / FDR era is certainly proof.  Rothbard leaves no stone unturned in his analysis of the run up to the Hoover presidency, and the Hoover term itself.  The Austrian economists correctly state that the economic errors of the business cycle are present during the boom - and Rothbard shows this to be true in his analysis of the years 1921 - 1932.  Not only was there government intervention in the economy during the 'Roaring 20's', but there was massive government intervention during Hoover's presidential term.  The idea that Hoover was a laissez - faire free market capitalist is absurd, and The Great Depression proves it conclusively.

Notes from The Great Depression

- "Since the government and its controlled banking system are wholly responsible for the boom and since government is largely responsible for aggravating the depression, we must necessarily concentrate on these acts of government intervention in the economy." (82) The first third of the book is devoted to competing economic theories and how they explain the business cycle.  Our economy, since the advent of Central Banking, has gone through ups and downs.  This 'business cycle' has been explained by various schools of economic thought.  Rothbard analyzes the cycle itself, and then the manner in which the theories explain it.  As the other theories are found wanting, Rothbard, with his analysis and evidence, uses the Austrian theory of the business cycle to walk the reader through the many government interventions (currency manipulation / bank credit meddling etc.) during the boom of the '20's.

- With regard to intervention in the agricultural sector of the economy: "With the Federal Farm Board (FFB) generally acknowledged as a failure, President Hoover began to pursue the inexorable logic of government intervention to the next step: recommending that productive land be withdrawn from cultivation, that crops be plowed under and that immature farm animals be slaughtered - all to reduce the very surpluses that government's prior intervention had brought into being." (209)  Rothbard explains the absurdities of the Hoover administration with regard to agriculture.  In his ham fisted attempts to control and 'manage' the supply and demand of commodities, Hoover, when faced with failure, suggests asinine policies such as these.  The level of irony goes even higher, and is the part of the story that you are NEVER told - the FFB was chaired by the president of International Harvester Co. - Alexander Legge.  Yes, big business was in the process of cartellization and attempted control of the American economy, through their friends in government.  Not only did Hoover interfere, it was the Big Corporation that handled the details.  This brings us to possibly the most shrouded and sinister story behind both the Hoover New Deal and FDR's New Deal.

- The Swope Plan: "In September 1932, Gerard Swope, head of General Electric, far surpassed the radicalism of his old public works proposal by presenting the Swope Plan to a convention of the National Electrical Manufacturers Association.  The Plan, which garnered a great deal of publicity, amounted to a call for compulsory cartellization of American business - an industry was to be forcibly mobilized into trade associations, under Federal control, to regulate and stabilize prices and production, and to prescribe trade practices." This would "... coordinate production and consumption". (245)  This Big Business cartel, became what you and I know as the New Deal's National Recovery Administration.  While the NRA was struck down as unconstitutional by the Scheckter case, the principles were pushed continuously to the point that we, in 2012, have a cartel of 6 banks controlling 70% of the nation's banking.  It was Big Business' desire to stifle competition and limit new competition that was the impetus behind the New Deal.  The fairy tale you get in school is absurd to the point of being intellectually criminal.  Hoover, to his credit, was horrified by the Swope Plan, and refused to back it.  He was told that if he backed it, he'd be reelected, and if he rejected it, he'd lose.  For more information on this, see Hoover's memoirs.

This is just a minuscule representation of the amount of unsound meddling by government during the boom of the '20's, and the new departure from laissez faire by Hoover post 1929.  Prior to Hoover, governments had done nothing to interfere with the government, and the business cycle corrected itself, as it always does, and it did in 1921.  We've been taught, through the fallacy of authority, that we need a 'leader', a 'manager', to steer us through the hard times.  Nothing could be further from the truth.

Rothbard on recessions - he explains how the philosophy of government intervention changed:

Here is Tom Woods giving you the details of how government NON INTERVENTION works.  This is a story from American history hidden from you.  You're to think of government as the thing that will solve all problems:

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