The Crisis of 2008 and the Return of New Deal Economics.

The “Great Recession” of the 2000s and since has inspired a certain interest in the “Great Depression” of the 1930s.[1]

The New Deal’s economic policies were grounded in historical precedents.  On the one hand, various forms of relief and public works projects put people to work, while the Agricultural Adjustment Act shored up the situation of farm-owners—at the expense of tenant farmers and share-croppers.  Like the Medieval three-field system, these policies put a floor under the economic collapse.  Thank God for that.

On the other hand, the New Deal tried to come to terms with the modern industrial corporation.[2]  This would be one engine of real recovery.  The Democrats along with some Republicans were divided on this subject.  For some, big business was inherently bad.  Businesses grew by swallowing up smaller firms; then they produced monopoly effects—higher prices, lower quality, a slowing of innovation.  This analysis was rooted in the “Populist” attack on railroads and other big corporations in the “Gilded Age.”  Subsequently, Democratic “Progressives” led by Woodrow Wilson had embraced a version of this policy.  They rejected big interest groups and wanted a strong national government to break-up or prevent their formation.  This strand of the New Deal pursued various anti-monopoly initiatives.

Others, however, accepted big interest groups (Big Labor as well as Big Business) and wanted a strong national government to hold the ring between them in the national interest.  This strand of thought pushed European-style “cartelization” to prevent the competitive price cutting that led to mass business failures, and downward pressure on both wages and demand; and promote efficiency through cooperation between big corporations and the government.  This strand sprang from the government directed economies of the First World War.  Allied with this strand of thought were intellectuals who had been deeply impressed by the Soviet “achievement” (although they sometimes shuddered at the human cost) and who favored “planning.”

The two strands struggled all through the New Deal.  Most often, anti-monopoly policy lost out because the efficiency and production advantages of big corporations far outweighed the gains from limiting the logical effects of competition.

Now the anti-trust arguments have reared their head again.[3]  Business concentration seems to be increasing.  Democrats focus on the real or imagined malign effects.  Bernie Sanders has called for the big banks to be broken up; Elizabeth Warren has called for an anti-trust assault on the big companies of Silicon Valley; and Hillary Clinton argues that big business uses its power “to raise prices, limit choices for consumers, lower wages for workers and hold-back competition from start-ups and small business.”

The New Deal analogy suggests that there is something to be said on the other side.  The New Deal’s first effort at “cartelization,” the National Recovery Administration (NRA) ended because the Supreme Court ruled against it in 1935, not because it had (yet) failed.  Later, with American entry into the Second World War, the New Deal abandoned its anti-business stance to get the massive increase in production needed for victory.  Both production and working-class incomes rose sharply.  That settled that question.  From then on, American liberalism rejected both government planning and attacks on monopoly.  Until now.

[1] See Amity Schlaes, The Forgotten Man, and Paul Krugman, The Return of Depression Economics and the Crisis of 2008, as examples.

[2] Ellis Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (1966).

[3] Eduardo Porter, “With Competition in Tatters, The Rip of Inequality Widens,” NYT, 13 July 2016.

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Nostalgia.

“Compared with 50 years ago [i.e. 1966], life for people like you in America is worse.”  Agree or Disagree.[1]

 

Almost half (46 percent) of voters agreed with this statement.  The distribution was pretty much balanced between men (45 percent) and women (46 percent).  Fifty years into Women’s Lib and almost half of women think that life for people like them is worse?  Maybe the half of guys who think that life is not worse are married to the women who think life is worse, while the half of women who think life is not worse are married to the guys who think that life is worse.  Or perhaps gender isn’t the salient identity for men and women.  Maybe race or social class is more important.

Thereafter, the distribution breaks down in interesting ways.

While a majority of whites (54 percent) think that life is worse, only 17 percent of blacks think that life is worse.  Despite all our failings and short-comings, the Civil Rights movement and the government policies which it compelled is a huge success.  Do whites feel worse off because blacks don’t feel worse off?  Not likely: too few people lost anything from the formal end of white supremacy.  America remains largely segregated; and black people remain at a lower income than do whites.

Better than half of people who actually were alive 50 years ago think that their condition is worse: 55 percent of people aged 65 or older and 53 percent of people aged 50 to 64.  Presumably they know what they’re talking about.  The first group was born before 1952; the second group between 1952 and 1966.  Then the sense that things are worse is higher for those with only some college (49 percent) and high school or less (51 percent) than for those with a BA (39 percent) or post-graduate education (37 percent).[2]

The sense of decline is much stronger among Republicans than among Democrats. Some 70 percent of self-identified Conservative Republicans and 58 percent of Liberal/Moderate Republicans think that life is worse.  In contrast, only 20 percent of self-identified Liberal Democrats and 35 percent of Conservative/Moderate Democrats think that life is worse.

American real incomes, life span, and medical care are much better than 50 years ago, so it is likely to be something else that gives them the sense of decline.  It is more than likely that the discontent among older people/white people/Republicans springs from factors like the impact of economic globalization and the advance of information technology, but also from the long string of domestic and international reverses.[3]  Perhaps this is an artifact of the Republican Party having progressively captured the heart of the old New Deal coalition (Southerners, the Northern working class) over the last 50 years.

Is it possible that the next election(s) will be a struggle between those who have lost from the big changes that have overtaken America and those who have at least survived them unscathed?  Will it be a struggle between Nostalgia for a by-gone age and Complacency about the new age?  That seems a poor basis for deciding the fate of young people in the face of what looks to be several decades of grave challenges at home and abroad.

[1] Charles M. Blow, “A Trump-Sanders Coalition?  Nah,” NYT, 2 May 2016.  OK, it’s Charles Blow.  Still…

[2] Still, better than a third of people with a post-graduate degree think that life is worse?  They can’t all be college professors.

[3] I just finished Gregg Herken, The Georgetown Set, and now I’m listening to Thomas Friedman and Michael Mandelbaum, That Used to Be Us.  So, those books probably are shaping my interpretation.

In re: Donald Trump as Crazy Person Redux.

In a January 2013 Gallup poll, 47 percent of people identified as Democrats or Democrat-leaning Independents, while 42 percent identified as Republicans or Republican-leaning Independents.[1] How does that apply to other issues?

First, a large share (40 percent) of Americans and almost half (49 percent) of Republicans would support registering Muslims in America.[2]

Back of the envelope, if 49 percent of Republicans favor registering Muslims, that comes to about 21 percent of the electorate.[3] The other 19 percent come out of people who identify as Democrats or as Democrat-leaning Independents. That’s about 40 percent of the Democrat voter base who agree with Donald Trump on this issue. Basically, there are only marginally more Republicans opposed to registering Muslims than there are Democrats who favor it.

Second, in 2011, 47 percent of Americans thought that Islam’s values were “at odds” with America’s values. By November 2015, 56 percent of Americans thought that Islam’s values were “at odds” with America’s values.[4] In late November 2015, 56 percent of Americans were against allowing Syrian refugees into the United States. In contrast, 41 percent favored accepting Syrian refugees.[5] That leaves only 3 percent who “aren’t sure.”

Back of the envelope, if 42 percent of voters are Republicans and 56 percent of people think that Islamic values are incompatible with American values, then 14 percent are not Republicans. That 14 percent amounts to almost one-third of the people who self-identify as Democrats. Bernie Sanders isn’t going to tack into the wind to capture this share of the vote, but Hillary Clinton well might.

Third, opinion polls in October 2015 revealed that almost half of Americans (46 percent) supported building a wall along the border between the United States and Mexico.[6] A slightly larger share (48 percent) opposed building a wall.

Back of the envelope, if 46 percent of Americans favor building a wall, and 42 percent of Americans self-identify as Republicans, then 4 percent of Democrats and Democrat-leaning favor building a wall. Even so, the previous statistics suggest that almost half of Republicans (about 21 percent) aren’t drinking Donald Trump’s Kool-Aid. But that means that a lot of Democrats (21 + 4 percent = 25 percent) are drinking the Kool-Aid.

So, Trump can be stopped pretty easily in a general election. Why don’t we think about the issues that unite us, rather than about the party labels that divide us? Unless, of course, what you want is the warm, gooey, chocolate-chip-cookie-fresh-out-of-the-oven feeling of moral superiority. Even if it means a disaster for the Republic.

[1] http://abcnews.go.com/ABC_Univision/Politics/poll-americans-lean-democratic-republican/story?id=18180336

[2] “Poll Watch,” The Week, 11 December 2015, p. 17.

[3] 40 percent (all Americans who favor registering Muslim)s – 21 percent (Republicans who favor registering Muslims) = 19 percent (who are NOT Republicans who favor registering Muslims). “If a train leaves Dubuque heading eastward at 30 mph and another train leaves Rock Island heading westward at 40 miles an hour, how much will the lawyers eventually make?”

[4] “Poll Watch,” The Week, 27 November 2015, p. 17.

[5] “Poll Watch,” The Week, 4 December 2015, p. 19.

[6] This is a separate question from who should pay for such a wall.