In this video, Peter Temin, a highly respected expert on the Great Depression*, discusses some of the revealing parallels between that era and our current financial and economic plight with Marshall Auerback. Don’t be deceived by the leisurely pacing of this conversation and Temin’s soft-spoken manner. Temin in his measured way sets the stage for discussing how the trajectory we are on, which is undoing more and more social safety nets and job security, which are fundamental to trust, does not merely lead to lower productivity and hence hurts everyone, including the wealthy, but also puts us on a trajectory towards a dystopian future.
From the overview at INET:
Peter Temin, currently Gray Professor Emeritus of Economics, MIT, and former head of their Economics Department, has written extensively about the Great Depression. He argued persuasively in that book that the cause, spread and recovery from the Depression must be found in the monetary and fiscal policy regimes amongst the authorities of Great Britain, the US, France and Germany. The Great Depression, according to Temin, was the result of a shock to the system produced by World War I, coupled with an ideologically constrained response that exacerbated a bad situation and turned it into a crisis.
Does this sound familiar?
In the 1930s, governments practiced austerity to try and preserve the gold standard. And what they did was turn a recession into the Great Depression. And that seems to be what everybody is doing now with austerity. The Eurozone is still struggling with deflationary pressures because of an intensely austerian philosophy promoted by the Germans. In the US, the GOP also appears wedded to cutting government spending (except, it seems, when it applies to the military). The United Kingdom, which has no particular debt problems, is doing austerity because the Conservatives are in power.
In other words, governments which have other choices are making the choice for austerity. In the 1930s, they were doing austerity because they were adhering to the ideology of the gold standard. In their minds, austerity was the only way to preserve the gold standard, which would eventually restore prosperity. Today the justification for it is debt. But debt for the United States is de minimus; our debt service is a minor part of our government spending. So you have to believe that there’s another motive, and that appears to be attack on the very foundations of the modern day social welfare state via class warfare.
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* Temin’s short 1991 book, Lessons of the Great Depression, contains one of the most cogent analyses of why the Depression happened. Temin and Tom Ferguson also have written, hands down, the single best analysis of the collapse of Credit Anstalt: Made in Germany: The German Currency Crisis of July, 1931.
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The parallels are ominous indeed… and I’m glad to hear again about Saul (sp?) because I remember reading, some years back in the NYTimes (surprisingly), about his findings – that economies which support a strong and egalitarian “safety net” (using the Social Democracies of Northern Europe for his data) actually create a more vibrant capitalism. But he seemed to disappear from Big Media almost entirely.
I wonder if anyone would speculate about the big swings in the markets over the past several days – down 200+, up 150+ and on friday down again, 300+ ( It reminds me how happy I am not to be invested, regardless of the massive up side since the crash in 2008, when I sold everything). I wonder if it is related at all to the spending bill and can see several angles where that might be the case. If the TBTF banks have been buying and propping up stocks since the bailout, might they have decided instead to start playing the derivatives again, assuming they would get the tax payer safety net reinstated? Or maybe independent and institutional investors, seeing the legislation as a response to the TBTF getting in hot water again, have decided not to get caught out a second time?
Understand that I know nothing about investing, really – nothing. I owned only mutual funds through TIAA-Cref and have never bought a stock in my life outside that. Please do not hesitate to tell me I am way off with the above speculations. But I haven’t seen much comment on the big market swings of the last several days and that focuses my curiosity.
… or maybe the markets are responding to the oil plunge?
sorry for a third comment but I just read this: http://www.counterpunch.org/2014/12/12/will-falling-oil-prices-crash-the-markets/
hmmm…
Has anyone else thought this could be the reason behind the big “push” (in the spending bill) to put the banks’ potential losses (for credit swaps like these) back in the Fed govt ledger? Cuz to this non-economist, that’s how it looks.
John Ralston Saul’s wife, Adrienne Clarkson, was Governor General of Canada from 1999 to 2005 and he was off the radar during that period. Either he himself realized that it wouldn’t do for the GG Consort to be his usual snarky, pithy self, or someone realized it for him.
Since stumbling onto Voltaire’s Bastards in a Manhattan bookstore in the early 90s I’ve read all of his non-fiction that I could get my hands on. As for his fiction, the only novel I’ve read is The Paradise Eater. It’s insightful, but quite dark. For example, here’s an excerpt I captured at that time:
Bingo. As best i can tell, a national safety net is must more valuable to serious startup than the VC froth.
This because it allows someone to go “screw your exploitive ways, i’ll start on my own over here!” and not worry about things like the loss of corporate provided health insurance etc.
This is freedom in the original republican sense, not the libertarian sense that is better described as systemic sociopathy.
Bingo is right. There is some empirical research on entrepreneurship in countries with different safety nets and the stronger safety nets provide for far more entrepreneurship. And the US does not show up well in comparisons.
“So you have to believe that there’s another motive, and that appears to be attack on the very foundations of the modern day social welfare state via class warfare.” Yves Smith
So where is the corresponding counter-attack on welfare for the rich, ie. government backing for private credit creation? Since that welfare has led to the need for welfare for everyone else? Root causes anyone?
And, btw, a large social welfare state is implicit blame for the victims and was never a proper solution to begin with. Justice was/is the solution, not some pragmatic tricks to keep the banking cartel going such as FDR’s government deposit insurance.
Lessons of the Great Depression is available from MIT Press (let’s try to avoid Amazon, shall we?):
http://mitpress.mit.edu/books/lessons-great-depression
http://www.alibris.com/Lessons-from-the-Great-Depression-Peter-Temin/book/3887497?matches=37
You can get a lot of books from this site, which aggregates booksellers as well as people who want to sell movies, books of their own, or run a small hobby business.
For .99 you can get Temin’s Lessons From the Great Depression, used, of course. But, hey it’s .99! And it’s not Amazon. Abe Books, similar to Alibris, is owned by Amazon.
You can also get Lessons from the Great Depression, used or new from Better World Books: http://www.betterworldbooks.com/lessons-from-the-great-depression-id-9780262700443.aspx
Albeit, not for 99 cents. But BWB sellers ship free, and BWB donates a portion of profits to world literacy programs. I’ve been very happy with them.
In the 1930s govts tried to preserve the gold standard.
Today the economic standard seems to be based, not on gold, but on computer algorithms that pretend to predict and stabilize risk, allowing risk free trades, derivatives, bets of all sorts. These algorithms, run by TBTF banks, are seen as the controlling and self-stabilizing financial force. It’s all hooey, of course, but the politicians are sheep when it comes to challenging the TBTFs. The algorithms aren’t only wrong (see repeated economic failure), they are not even neutral. They are used for private enrichment of Wall St at the expense of everyone else.
Today’s economic standard seems to be based, not on gold, but on computer algorithms that pretend to predict and stabilize risk, allowing risk free trades, derivatives, bets of all sorts. Algorithms designed by quants, run by TBTF banks, are seen as the controlling and self-stabilizing financial force. It’s all hooey. See LTCM or 2008 – ‘no one saw it coming’, ‘who could have predicted’. Shorter: the computer model didn’t work.
Most intriguing. His views on the Gold Standard, the War Debt (etc.), and all raise ideas mostly hidden in the clutter of economic narratives extolling the Wisdom of The Serious People. That aside, towards the end (at around 16:00), he makes what is, to me, the seminal point of the ultimate value of cooperation and its long-term implications. (Diptherio will be pleased, I suspect).
I don’t know what you are taking about. The orange date and time stamp under the name of each commentor in a comment IS a link and you can link to any comment.
‘In the 1930s, governments practiced austerity to try and preserve the gold standard.’
This conflates two policies, balanced budgets and gold-backed money, which were both conventional wisdom at the time. Austerity was pursued because it was believed to be beneficial, not because it was needed to preserve the gold standard.
The US had plenty of unused borrowing capacity when it was still under the gold standard, as demonstrated by its enormous borrowing for WW II, with the dollar pegged at $35/oz. No problema!
Layna Mosley points out that a credible currency actually facilitates borrowing by peripheral nations, a process which was repeated (to excess) when southern Europe joined the euro:
http://www.unc.edu/~lmosley/mosleygoldstandardapril2003.pdf
Mosley points out that a credible currency actually facilitates borrowing by peripheral nations, a process which was repeated (to excess) when southern Europe joined the euro
And what exactly makes gold more credible than beads, shells, feathers, or dollar bills? For that matter who decides what is or isn’t credible in terms of currency?
Really, Jim, when will you stop worshipping a shiny metal? It’s government that gives value to gold or anything else declared as fiat. Nor do monetary sovereigns need to pay interest on their “borrowings.” So why do you advocate continued welfare for special interests and the the rich?
Of course the MMT crowd needs to concede the need for genuine private money supplies too lest we continue this ridiculous oscillation over who controls a single, government-enforced monopoly money supply for ALL debts.
Ahh, so national debts don’t matter and social safety nets are sacrosanct, when what needs to happen is public pensions need to be reduced.
There are too many things that can and will go wrong that will overwhelm the sentiment expressed in this video.
Where to start naming them, where to start? Maybe with $200T in unfunded federal liabilities, or the derivatives bubble. One can only wonder how the Professor Emeritus might respond to these issues, which put in context render the safety net rather insignificant. Paying people not to work surprisingly results in the low employment rates we’re experiencing today, never mind the fact that multinationals have an escape clause for murder being beholden to the interest of the the stock holder. It’s quite the legal safety net, albeit morally and ethically bankrupt and bereft of human compassion.
Let’s deal with the real issues of exporting our jobs to a police state employing slave labor, than worrying about safety nets. When people work, they can care for themselves and don’t need a net.