Thanks for your helpful comments on Glass-Steagall, the Goldman Sachs shareholder referendum, and other reasons we should pay close attention to the events of 1929-33. I could not agree more.
Sorry about your bank's takeover. I, too, live in a tiny town, and every time I walk by our local bank I want to yell, "Merry Christmas, Savings and Loan!" the way Jimmy Stewart does when he's running down main street after having been rescued by Clarence and given a new lease on life. By the way, does anyone else agree that lurid Pottersville, with all its bars and nightclubs, looks a lot more fun than good ol' Bedford Falls? More to the point—why can't I stop referring to It's a Wonderful Life?
I'd like to make a couple historical observations and then turn things over to you for more substantive comments on how the current slump resembles the market contraction of 1929. I can't help feeling dissatisfied with something that just about every historian, including Klein, says about the crash—that it was primarily due to "psychology," or more specifically, the loss of confidence in the market. I accept that that's true—but it's just so vague. Business historians should do a better job explaining to the rest of us why confidence evaporated exactly when it did. To be more blunt, I think we should know which politicians and business leaders committed the errors in judgment that led to the crash, and then afterwards, which ones made the smart moves that launched the recovery.
I know that what I'm asking is not easy—obviously there was a collective evasion of responsibility in the late '20s, and it's not quite right to blame two or three people. But some degree of accountability is important, especially if we want to draw lessons for the current situation.
It strikes me that Hoover deserves the very bad hand that he was dealt by fate. That may seem harsh—he didn't "cause" the crash, of course. But in 1928 he ran hard on the premise that Republicans had created prosperity and that four more years of Republicanism were needed to maintain it. When you promise to deliver something and you fail, you are accountable.
Then, after the crash, he utterly failed to counteract the conditions that led to the Depression. Klein makes a good point—that Hoover tried many more things than we give him credit for. He was, after all, the great engineer, the "wonder boy," as Coolidge says dismissively at one point. But his initiatives failed because they offered too little too late. Hoover was paralyzed by his fear that an enlarged government was dangerous to Americans. More dangerous than starvation?
I don't for a second think that Hoover was a bad human being—but his ideas were inadequate, and many Americans suffered as a consequence. The point I'm working up to, which I hinted at yesterday, is that Franklin D. Roosevelt was a much better leader when the crisis hit. We all know what he did as president, and perhaps that is past the purview of a book focusing on the year 1929. But Klein barely mentions his role as governor of New York, where he began to figure out that government could succeed where business had failed. It took him a while—the better part of a year. But by the end of 1930, his state government was compiling detailed records on the extent of unemployment in New York, proposing new public works projects to fight it, and beginning to work out a strategy for meaningful public relief.
Going back to the 1920s, I also think that there must be more in the way of concrete economic factors that led to the crash than we get in this book. I leafed through a couple hoary classics last night—Arthur Schlesinger's Crisis of the Old Order and William Manchester's The Glory and the Dream, among others. They generally make an important point—that government and business policy in the roaring '20s built up expectations of wealth without giving working people a chance to actually earn it. While corporate profits were immense, wages and purchasing power were abysmally low at the bottom rungs. Government tax and monetary policy tended to exacerbate the divide, with the result that the entire structure was dangerously top-heavy. In 1929, Brookings economists calculated that families needed $2,000 a year to afford a bare minimum of household amenities—and more than 60 percent of American families were making less. I mentioned yesterday that Klein calls the crash an "aberration"—I don't think that's right. It happened for a reason.
Of course, these are things that we still argue about—all the more reason to go back into the past to figure out what worked and what failed. It's a problem that will not be going away soon, despite a war that has drawn considerable attention away from it. I keep thinking about the surfing scene in Apocalypse Now when Robert Duvall's character, Lt. Colonel Kilgore, says wistfully, "Some day this war is gonna end." When that happens, we're all going to have to stare at these problems. We need a real bipartisan economic strategy, and soon. (The "stimulus package" the House Republicans tried to sneak through as the war started struck me as the height of inanity.) I'd love to hear your thoughts on what that ought to be and how 1929 should inform our thinking.
Ted Widmer recently publishedArk of the Liberties: America and the World. He was a speechwriter for President Clinton.