WEBVTT NOTE The Sociology of Panics and Crashes in American History 1 00:00:00.000 --> 00:00:10.000 Thank you, Mark. Actually, I can just sit down now because the other speakers have covered all the main points, but I just have questions. 2 00:00:10.000 --> 00:00:20.000 I want to use sociology in the broad sense in which Mises used the word. We're not concerned about what the sociology field does. 3 00:00:20.000 --> 00:00:26.000 They do little things like finding out when there's a depression, if there's more divorces. 4 00:00:26.000 --> 00:00:30.000 This is interesting, but it's not what we're interested in. 5 00:00:30.000 --> 00:00:34.000 We're interested in larger issues of political economy. 6 00:00:34.000 --> 00:00:39.000 In fact, at one point in Mises' career, he was using the term sociology 7 00:00:39.000 --> 00:00:43.000 to mean roughly what he later called praxeology. 8 00:00:43.000 --> 00:00:47.000 So I'm using this in a broad sense, and as you can find in Weber, 9 00:00:47.000 --> 00:00:50.000 Mises and Hans-Hermann Hoppe's writings. 10 00:00:50.000 --> 00:00:55.000 And this means I can take into account a set of what we might call costs 11 00:00:55.000 --> 00:01:01.440 with business cycles or depressions, boom and bust, and I like to think of these costs 12 00:01:01.440 --> 00:01:10.320 as being categorizable into economic, institutional, political costs and ideological costs. 13 00:01:10.320 --> 00:01:13.960 And then I in turn want to concentrate more on the last two. 14 00:01:13.960 --> 00:01:15.800 The economic costs are pretty obvious. 15 00:01:15.800 --> 00:01:21.880 People lose money, stockbrokers jump out the window, people are ruined, they have to rebuild 16 00:01:21.880 --> 00:01:28.600 Older fortunes, migrations, things like this happen which are important to the people involved 17 00:01:28.600 --> 00:01:35.800 and in social history. But the economy tends to correct itself. Left to its own devices, 18 00:01:35.800 --> 00:01:42.860 the market has this wonderful way of overcoming things that central banks and other government 19 00:01:42.860 --> 00:01:50.160 policies throw at it. What's cumulative and what's much harder to fix are the ideological 20 00:01:50.160 --> 00:01:54.000 and Political and Institutional Consequences of These Crises. 21 00:01:54.000 --> 00:01:59.040 This is the whole point of Bob Higgs' book, Crisis and Leviathan. 22 00:01:59.040 --> 00:02:03.160 And this is kind of synergistic, because once there's a crisis, once there's a depression, 23 00:02:03.160 --> 00:02:09.060 a business cycle, then you get a lot of ideas competing for attention, and bad ideas tend 24 00:02:09.060 --> 00:02:14.200 to drive out good ideas for a complex number of reasons. 25 00:02:14.200 --> 00:02:18.360 And then the bad ideas lead to bad policy, arguably. 26 00:02:18.360 --> 00:02:21.920 Bad policies then lead to further bad outcomes down the road, which then lead to further 27 00:02:21.920 --> 00:02:27.360 bad ideas and bad policies to fix those in this big circle which Mises characterized 28 00:02:27.360 --> 00:02:32.440 in his essay, Middle of the Road Policy Leads to Socialism. 29 00:02:32.440 --> 00:02:38.540 And it's much harder to correct these things once one crisis has led to this kind of pattern 30 00:02:38.540 --> 00:02:46.540 of so-called solutions and the next crisis has led to a further broadening of this approach 31 00:02:46.540 --> 00:02:53.220 so that once you've got a Department of Energy to solve this temporary problem of the 1970s, 32 00:02:53.220 --> 00:03:00.620 it's hard to get rid of the Department of Energy even though no one can say that it does anything useful at all. 33 00:03:00.620 --> 00:03:03.900 Okay, well, how do we define, characterize these depressions? 34 00:03:03.900 --> 00:03:06.620 This is actually the other speakers have done this, so I'll be very brief. 35 00:03:06.620 --> 00:03:13.860 Essentially, you would expect to see, unlike droughts and famines and traditional disruptions of economic life, 36 00:03:13.860 --> 00:03:15.740 you'd expect to see something like the following. 37 00:03:15.740 --> 00:03:27.660 and Expectancy, Easy Money, Industrial Expansion, raising of wages, at least in some sectors, 38 00:03:27.660 --> 00:03:33.900 then rising prices, credit contraction, crash, unemployment, liquidation of some of these 39 00:03:33.900 --> 00:03:36.420 enterprises. 40 00:03:36.420 --> 00:03:40.300 And Karl Marx noticed this in Volume 2 of Del Capitale. 41 00:03:40.300 --> 00:03:44.660 He says, well, when there's easy money, certain things happen. 42 00:03:44.660 --> 00:03:47.380 and he kind of lays out this pattern and he doesn't think it's very interesting because 43 00:03:47.380 --> 00:03:51.860 Marx just says, well, there's all sorts of problems built into capitalism, why analyze 44 00:03:51.860 --> 00:03:52.860 this one? 45 00:03:52.860 --> 00:04:00.980 It's his attitude. 46 00:04:00.980 --> 00:04:05.740 So a number of people are aware of the pattern, which I'm going to argue, as you say, is entirely 47 00:04:05.740 --> 00:04:07.540 modern. 48 00:04:07.540 --> 00:04:12.180 How have historians tended to deal with this when they even see this sequence of events? 49 00:04:12.180 --> 00:04:22.180 In some events they say, well it was a speculative mania. Somehow the people doing business were seized with this mania to speculate. That tells you nothing. 50 00:04:22.180 --> 00:04:28.180 I might want to speculate, but somebody's got to make some money available or I'm not going to speculate very far. 51 00:04:28.180 --> 00:04:39.180 I might want to import five tons of tulips into doing a tulip mania, but if no one lends me the money, I doubt I'll get very far with my own funds. 52 00:04:39.180 --> 00:04:57.180 Now, actually I was reading one writer in the 1890s trying to come to grips with the business cycle of the early 1890s and he said, well, part of the problem was too many idiots loaned money to Argentina, but that was only one part of that particular business cycle. 53 00:04:57.180 --> 00:05:10.180 So none of this was theorized in a satisfactory way until Ludwig von Mises published The Theory of Money and Credit in 1912, in which he built on the insights of the early Austrians, Menger and Boehm-Bawerk. 54 00:05:10.180 --> 00:05:23.180 And then this analysis is continued by Hayek, among others in the 30s, and restated by Mises and Human Action in 1949, and by Rothbard and so forth. 55 00:05:23.180 --> 00:05:29.180 and so on and so forth. So finally we have a useful theory. But again, what do historians generally do? 56 00:05:29.180 --> 00:05:36.180 The historical profession generally is made up of people who had one survey course in economics, 57 00:05:36.180 --> 00:05:42.180 which was Keynesian theory, 80 years ago or 20 years ago, and then they write about economic questions. 58 00:05:42.180 --> 00:05:47.180 They have no idea what they're talking about. And then the exception are economic historians, 59 00:05:47.180 --> 00:05:52.180 who actually are trying to study the history of economic life. Sometimes they do good work, 60 00:05:52.180 --> 00:05:59.940 They tend to be undermined by knowing theory, but knowing theories that aren't very good theories, so that's a problem. 61 00:05:59.940 --> 00:06:05.940 So I said a bit earlier that business cycles are entirely modern. 62 00:06:05.940 --> 00:06:13.240 You don't expect to find a business cycle as we've described here in the Middle Ages and so forth. 63 00:06:13.240 --> 00:06:14.800 You might find something analogous. 64 00:06:14.800 --> 00:06:17.140 You might find an inflation or a debasement of coinage, 65 00:06:17.140 --> 00:06:25.140 But you don't find this exact credit mechanism until you've got the invention of the proper central bank. 66 00:06:25.140 --> 00:06:35.140 So I doubt you're going to find precisely this pattern until we have the Bank of England coming into being around 1700. 67 00:06:35.140 --> 00:06:39.140 And then we begin to see this pattern in its fullness. 68 00:06:39.140 --> 00:06:45.140 I mean, there's been a relationship between banks and kings for a couple of hundred years by that time. 69 00:06:45.140 --> 00:07:00.140 But if the king just actually borrows gold from the bankers and then taxes the future taxpayers to pay the bankers back and it's all done in real money, you don't necessarily have, you have a lot of maybe bad consequences, but you don't have the business cycle as we know it. 70 00:07:00.140 --> 00:07:08.140 Now there's an interesting relationship between business cycles and war, and it's not a law of history, because there aren't any really. 71 00:07:08.140 --> 00:07:16.140 But a business cycle will often follow a war, depending on how the war was financed. 72 00:07:16.140 --> 00:07:26.140 On the other hand, when you've got a business cycle, due to other causes, it will give politicians a motivation to maybe see war as a way out. 73 00:07:26.140 --> 00:07:35.140 And there's a number of cases that come to mind. 1893, the Panic of 1893, has some organic relationship to the Spanish-American War. 74 00:07:35.140 --> 00:07:43.140 and the Great Depression of 1929 gave a number of governments an interest in risking war 75 00:07:43.140 --> 00:07:50.140 in the context of this lingering, very lengthy depression. 76 00:07:50.140 --> 00:07:57.140 Now, again, from the literature you find that there's business cycles in the modern sense in Western Europe 77 00:07:57.140 --> 00:08:20.140 1836 and 37, 1839, 1845 through 47, roughly, and then various things in the 70s and the 1890s that are sometimes described as the Great Depression because there's so much of this pattern in those decades, sometimes referred to as the Great Depression by these historians. 78 00:08:20.140 --> 00:08:28.140 But my duty today, my title, is to stick with American history, so I'll have to do that. 79 00:08:28.140 --> 00:08:34.140 Well, it's interesting to try to look at these, do a thumbnail sketch of these in terms of their consequences, 80 00:08:34.140 --> 00:08:38.140 the cumulative sort of political and ideological consequences. 81 00:08:38.140 --> 00:08:45.140 So we find that in the, that the depression of the middle 1780s, 82 00:08:45.140 --> 00:08:49.140 which is a consequence of the way the American Revolution was financed, 83 00:08:49.140 --> 00:09:14.440 We find people suddenly saying, well, a stronger federal government, a different constitution would solve all this and keep these states 84 00:09:14.440 --> 00:09:20.720 19, which was of course studied in Murray Rothbard's book of that title, again has 85 00:09:20.720 --> 00:09:30.000 something to do with the Bank of America, the Central Bank, and the way that the War 86 00:09:30.000 --> 00:09:32.680 of 1812 was financed, among other things. 87 00:09:32.680 --> 00:09:38.280 And this led to a debate, once the panic set in and there was a depression, led to a substantial 88 00:09:38.280 --> 00:09:41.400 debate about economic policy, and for once it was actually constructive. 89 00:09:41.400 --> 00:09:54.400 I remember once you actually got some good ideas in circulation with people like William Goodge and Condé Regé and the hard money Jeffersonians of the period that Scott Trask has written a dissertation on. 90 00:09:54.400 --> 00:10:07.400 And what's interesting is that this debate in which you had the formulation of sort of a sound money theory takes place somewhat before the British debates, the more famous British debates between the banking and currency schools. 91 00:10:07.400 --> 00:10:13.400 and Rothbard found this rather interesting and names all these people in his book. 92 00:10:13.400 --> 00:10:17.400 Now, the Panic of 1837. 93 00:10:17.400 --> 00:10:20.400 Again, sometimes there's a panic and the historians talk about the panic 94 00:10:20.400 --> 00:10:23.400 and then they kind of lose interest in the later depression. 95 00:10:23.400 --> 00:10:27.400 I know one of the earlier speakers mentioned that the, I think it was Dr. Salerno, 96 00:10:27.400 --> 00:10:32.400 mentioned the depression really becoming significant in 1839, 97 00:10:32.400 --> 00:10:42.400 but historians like to talk about 1837 when some banking complications set the thing in motion. 98 00:10:42.400 --> 00:10:48.400 There's an interesting paper, kind of a classic article by Jeffrey Rogers Hummel on this, 99 00:10:48.400 --> 00:10:56.400 in which he tries to disconnect, and I think does disconnect, this business cycle from the idea that it was somehow 100 00:10:56.400 --> 00:11:02.400 and then somehow directly caused by Andrew Jackson's destruction of the central bank 101 00:11:02.400 --> 00:11:05.400 and then sort of putting all the money in the state banks. 102 00:11:05.400 --> 00:11:12.400 Well, that doesn't really quite tell you why the state banks should then be recreating this problem 103 00:11:12.400 --> 00:11:18.400 in enough states to contribute to a major economic cycle. 104 00:11:18.400 --> 00:11:22.400 And Hummel attributes the motivation of the state governments 105 00:11:22.400 --> 00:11:27.400 and the desire to fund these big mercantilist projects of internal improvement like canals and so forth. 106 00:11:27.400 --> 00:11:35.400 So the inflationary credit or credit money, money substitutes are not going to the farmers and the workers and so forth 107 00:11:35.400 --> 00:11:39.400 in these states in which this is taking place. 108 00:11:39.400 --> 00:11:43.400 So again, we'll fast forward. 109 00:11:43.400 --> 00:11:49.400 There's some literature on the Panic of 1857. 110 00:11:49.400 --> 00:11:58.400 A lot of the discussion boils down to a discussion of changes in the silver to gold ratio, arbitrary ratio set by Congress and so forth. 111 00:11:58.400 --> 00:12:10.400 And I guess what I'm saying in effect is that we really lack full-scale studies on a number of these business cycles from an Austrian standpoint. 112 00:12:10.400 --> 00:12:15.400 We have Rothbard studies on 1819 and the 1929 depression. 113 00:12:15.400 --> 00:12:30.400 So there's a whole set of business cycles or depressions that would be good dissertation topics for any scholars in the audience or people who may know scholars who are looking for a topic. 114 00:12:30.400 --> 00:12:36.400 A further point would be that historians often get rather obsessive about what was the content of the money supply. 115 00:12:36.400 --> 00:12:41.400 Was it gold? Was it silver? Was it paper? Was it some combination of all of these? 116 00:12:41.400 --> 00:12:52.400 and ignore the whole fractional reserve mechanism, which seems to me to be the critical thing from our standpoint for how this process gets set in motion. 117 00:12:52.400 --> 00:13:03.400 In a way, it might not matter as much what the reserves are, it matters if you can inflate above a reserve, that would be the crucial thing. 118 00:13:03.400 --> 00:13:25.400 Now, during the late unpleasantness of the 1860s, the U.S., that is, the North, effectively went off the gold standard and you have a new national bank created and the paper money and the green banks and this whole interesting inflationary process associated, among others, with General Sherman's brother. 119 00:13:25.400 --> 00:13:30.100 So, in effect, the U.S. is off the gold standard, except in California. 120 00:13:30.100 --> 00:13:33.400 They tried to pass the paper money in California, and the Californians wouldn't take it. 121 00:13:33.400 --> 00:13:39.000 California, effectively, was a separate country as far as monetary policy went. 122 00:13:39.000 --> 00:13:43.800 There was some violence involved, I think, when they refused the paper money. 123 00:13:43.800 --> 00:13:45.800 It's such an interesting precedent. 124 00:13:45.800 --> 00:13:51.200 Now, so now you have these greenbacks in circulation, and this is fairly complicated, 125 00:13:51.200 --> 00:14:21.200 because they never quite make up their minds to just retire them so there's a sort of a cyclical pattern in which they begin to retire them but then they let some of them go back out and circulate and we won't have time for all that and I have to admit I don't thoroughly understand the sequence yet but nonetheless there's enough inflationary banking practice to set off the panic of 1873 and again this is more interesting to me in terms of the consequence 126 00:14:21.200 --> 00:14:51.200 is because this helps stimulate the populist movement, and while there's a direct line of descent from the Jeffersonians to the Jacksonians to the populists, you have to say by the time you get to the populist movement, they've lost all theoretical rigor, they no longer understand the concept of hard money and you begin to get all these bi-metalist theorists who don't seem to grasp that if there were two metals, the market would set the ratio between them, they want some arbitrary ratio and they want an inflationary ratio, 127 00:14:51.200 --> 00:14:56.320 Coinage of a Lot More Silver, not totally unconnected with the fact that a number of 128 00:14:56.320 --> 00:15:02.000 the spokesmen for coining a lot of silver happen to come from states where silver is 129 00:15:02.000 --> 00:15:08.400 being mined. So there's another sort of moral hazard of the kind Dr. Garrison was just talking 130 00:15:08.400 --> 00:15:16.600 about, whether it's intellectual error or political intrigue. 131 00:15:16.600 --> 00:15:34.600 So we begin to have some ideas put in the public sphere by the populist movement that there should be an income tax, there should be government regulation or ownership of railroads, all sorts of things to correct previous policies which should not cause a crisis or this inflationary coinage of silver. 132 00:15:34.600 --> 00:15:42.600 So this creates part of the backdrop for the next panic in 1893. 133 00:15:42.600 --> 00:15:52.940 And now we've got actual real-life socialists because we have the German immigrants and other immigrant groups and they've brought us a few anarcho-communists and a lot of socialists. 134 00:15:52.940 --> 00:16:05.940 The socialists now add their complaints and their solutions to the proposed remedies the populace and trade unionists already have for this depression. 135 00:16:05.940 --> 00:16:09.940 But what's really interesting are the right-wing Leninists. 136 00:16:09.940 --> 00:16:15.740 Marx, and the right-wing Leninist is a term that Murray Rothbard used to use, and he had 137 00:16:15.740 --> 00:16:19.520 in mind, for instance, people sitting around the Pentagon who would say, well, we have 138 00:16:19.520 --> 00:16:27.520 to control what happens in Vietnam because of natural resources. We just can't possibly 139 00:16:27.520 --> 00:16:32.400 expect to wait and buy them on the market. We have to control them. And this is, of course, 140 00:16:32.400 --> 00:16:35.840 what the Marxists said. The Leninists said, well, the Americans are going to war over 141 00:16:35.840 --> 00:16:39.640 these economic motives, and so they actually were in agreement. They just had a different 142 00:16:39.640 --> 00:16:59.640 The whole thesis of overproduction and under-consumption is formulated by a number of conservative American economists close to the banking industry or Theodor Roosevelt. 143 00:16:59.640 --> 00:17:05.640 and Under-Consumption is formulated by a number of conservative American economists 144 00:17:05.640 --> 00:17:09.640 close to the, oddly enough, to the banking industry or Theodore Roosevelt 145 00:17:09.640 --> 00:17:15.640 and here we could name Conant, Jenks, and Hadley who formed the whole theory 146 00:17:15.640 --> 00:17:20.640 that somehow industrial capitalism is different than earlier capitalism 147 00:17:20.640 --> 00:17:24.640 and there's this overproduction and it can only be solved by finding foreign markets 148 00:17:24.640 --> 00:17:27.640 through an aggressive foreign policy and so on. 149 00:17:27.640 --> 00:17:34.640 And so on. So Lenin doesn't have to invent much. All he has to do is read Hobson, who in effect has borrowed these ideas, 150 00:17:34.640 --> 00:17:40.140 and then just tack on to kind of Marx's corollary that, well, of course, capitalism would be that way, 151 00:17:40.140 --> 00:17:44.640 but then socialism is inevitable. Just add a little footnote. 152 00:17:44.640 --> 00:17:51.140 So this leads us, because these people are very influential and they do get their ideas out, 153 00:17:51.140 --> 00:18:00.140 They, again, participate in forming the Federal Reserve system, which is a point of that article by Rothbard. 154 00:18:00.140 --> 00:18:12.640 But they're also influential in presenting this argument that we have to, by some compulsion, go out and use military persuasion in the broader world to find these foreign markets, 155 00:18:12.640 --> 00:18:23.640 So we can unload these mysteriously overproduced quantities of goods and credit and so forth. 156 00:18:23.640 --> 00:18:32.640 So you have the sort of inverted Marxism of the American neo-mercantilists influencing McKinley. 157 00:18:32.640 --> 00:18:40.640 And again, this is one of the connections between the Panic of 1893 and the Spanish-American War in 1898. 158 00:18:40.640 --> 00:18:46.320 I've had a couple things to say about that in the cost of war book and the 159 00:18:46.320 --> 00:18:56.360 reassessing the presidency book and so on. So, how's my time? Okay. All right, so 160 00:18:56.360 --> 00:19:00.800 let's fast forward and just say that all of this got off to a grand start and in 161 00:19:00.800 --> 00:19:07.120 the name of freeing Cuba from Spanish oppression, we just by some trick of fate 162 00:19:07.120 --> 00:19:15.320 acquired the Philippine Islands and Hawaii in the same couple of months, which then were 163 00:19:15.320 --> 00:19:18.960 the ideal jumping off points to the markets of Asia, which were imagined to be the great 164 00:19:18.960 --> 00:19:24.760 markets that were going to help with all this overproduction, and so forth. 165 00:19:24.760 --> 00:19:30.080 And then we, of course, I suppose a few people actually did do business because of this, 166 00:19:30.080 --> 00:19:35.940 and there was some actual business stimulated, but it's like Bastiat's seen versus the unseen. 167 00:19:35.940 --> 00:19:40.940 and would think other business would have taken place without acquiring the Philippines and so forth. 168 00:19:40.940 --> 00:19:43.940 And it did leave us with two interesting targets. 169 00:19:43.940 --> 00:19:50.940 Should we ever come into conflict with an Asian power that was developing the same philosophy that it had to have markets 170 00:19:50.940 --> 00:19:58.940 and acquire them by political means, so we had these two wonderful vulnerabilities that we acquired this way. 171 00:19:58.940 --> 00:20:26.940 Okay, let's fast-forward then and say that there's a business cycle of some kind around 1907 and this contributes to the debate and our friends like CONET are able to orchestrate the founding of the Federal Reserve System and they can point to this most recent depression as a reason why we have to have this central bank. 172 00:20:26.940 --> 00:20:35.440 And then we'll speculate further that Woodrow Wilson brings the United States into World War I 173 00:20:35.440 --> 00:20:40.440 and I won't say any more about that other than a number of bad precedents were set during World War I 174 00:20:40.440 --> 00:20:43.440 for economic policy through the War Industries Board 175 00:20:43.440 --> 00:20:49.440 and the notion of compulsory cartelization and corporatism becomes a very popular idea 176 00:20:49.440 --> 00:20:52.440 because of the wartime planned economy 177 00:20:52.440 --> 00:20:57.480 and these ideas all come back when the New Dealers come to town many of these 178 00:20:57.480 --> 00:21:02.920 people have served in the War Industries Board people Bernard Baruch and others 179 00:21:02.920 --> 00:21:09.000 okay so let's fast forward and say that the Republican administrations that 180 00:21:09.000 --> 00:21:15.680 succeed Wilson our moderate corporatists they they kind of advocate all this 181 00:21:15.680 --> 00:21:19.000 cooperation in business and that business and trade unions and government 182 00:21:19.000 --> 00:21:24.740 should somehow all get together in the tent and make policy and bypass the old competitive 183 00:21:24.740 --> 00:21:32.160 market which is cruel and unpredictable. And they carry on with a degree of inflation with 184 00:21:32.160 --> 00:21:39.200 this new mechanism, the Federal Reserve system, and Rothbard of course discusses this in considerable 185 00:21:39.200 --> 00:21:45.060 detail in his book, America's Great Depression. So the upshot is that we finally reach this 186 00:21:45.060 --> 00:21:50.580 This tipping point where the contraction has to take place under Hoover, who again is another 187 00:21:50.580 --> 00:21:59.340 corporatist who's kind of caught and takes the political blame for the depression. 188 00:21:59.340 --> 00:22:05.620 Oddly enough, Rothbard thought it interesting that the motivation for the final sort of 189 00:22:05.620 --> 00:22:14.940 The wave of inflation running up to October 1929 seemed to have come at the request of 190 00:22:14.940 --> 00:22:19.140 Sir Monty G. Norman, governor of the Bank of England, who needed some backup for British 191 00:22:19.140 --> 00:22:20.900 inflation, which was going on at the same time. 192 00:22:20.900 --> 00:22:23.620 I don't know, this is an interesting thing. 193 00:22:23.620 --> 00:22:30.340 Nonetheless, the depression sets in and Hoover begins to try to cure the depression with 194 00:22:30.340 --> 00:23:00.340 with various modern progressive Republican corporatist ideas, which then of course, as we might expect, are counterproductive, prolong the Depression, bringing the Democrats to power on a platform that Grover Cleveland could have run on, which they then immediately repudiate and adopt Hoover's policies, extend them, expand upon them, and add some strange policies of their own. And John T. Flynn, in his book, Roosevelt Myth, has a wonderful section called The Dance of a Thousand Crackpots. 195 00:23:00.340 --> 00:23:08.340 referring to what happens when all these planners and theorists and people like Henry Wallace and George Sewell 196 00:23:08.340 --> 00:23:11.840 and all the socialists and corporatists come to town. 197 00:23:11.840 --> 00:23:16.840 And you have to remember that all through the 1920s, The New Republic magazine, 198 00:23:16.840 --> 00:23:23.840 probably the most evil magazine in the English language, was praising Mussolini to the heavens. 199 00:23:23.840 --> 00:23:27.840 The New Republic said, Mussolini is wonderful, he's a pragmatic fellow, he's not sentimental, 200 00:23:27.840 --> 00:23:33.840 He's not deluded by superstitions like natural law or the laws of economics. 201 00:23:33.840 --> 00:23:37.840 He just gets stuff done and he's pioneering this wonderful thing, corporatism, 202 00:23:37.840 --> 00:23:43.840 which is this new economic model that shows you how to avoid the perils of communism and capitalism alike. 203 00:23:43.840 --> 00:23:49.840 So corporatism is definitely part of this atmosphere and so on. 204 00:23:49.840 --> 00:23:51.840 So again, to make a long story. 205 00:23:51.840 --> 00:23:53.840 Oh, here's more costs, though. 206 00:23:53.840 --> 00:24:03.540 I've been talking I guess mostly about the sort of what I'm calling bad ideas leading to bad policies and so forth and then this whole thing kind of feeding on itself. 207 00:24:03.540 --> 00:24:22.240 There's also the decision to go off gold, which is taken by all the major powers in the early 30s, so we go off gold and then the last sort of real restraint to the inflationary processes removed now have to rely on the good sense and goodwill 208 00:24:22.240 --> 00:24:27.240 of someone like Alan Greenspan, or whoever takes his place. 209 00:24:27.240 --> 00:24:34.240 We're kind of dependent on their good sense and good will and their political motivation and so on. 210 00:24:34.240 --> 00:24:39.240 Now with the New Deal, you find the second New Deal running out of steam. 211 00:24:39.240 --> 00:24:48.240 Roosevelt's re-elected even though the unemployment figures are higher than when he first came into power. 212 00:24:48.240 --> 00:24:54.240 He's not cured of depression. In fact, if anything, there's been a sort of secondary depression within the depression. 213 00:24:54.240 --> 00:25:02.240 Things are, in fact, bad. But Roosevelt's a jovial, genial, upper-class sort from the landed gentry of New York. 214 00:25:02.240 --> 00:25:09.240 And he has his cigarette holder and his dog, Fala, and he creates this feeling of confidence, 215 00:25:09.240 --> 00:25:13.240 or so all the conventional historians tell us, and so he buoyed up the people's confidence. 216 00:25:13.240 --> 00:25:43.240 This has been a great deal for the economy, however, and they also begin to run up against, not just the Supreme Court, finding a few of these laws invalid, they also begin to run up against a working coalition of Southern Democrats and Midwestern Republicans who begin to stall some of the New Deal legislation, so the second New Deal begins to run out of steam, and at this point they begin thinking rather characteristically that maybe foreign markets are the only way to get the economy going again, 217 00:25:43.240 --> 00:25:50.240 In 1937 or 1938, there's a conscious decision more or less taken in the New Deal administration 218 00:25:50.240 --> 00:25:57.000 that over the threat of economic competition, and say in South America from Italian and 219 00:25:57.000 --> 00:26:01.240 German business, that we may just have to go to war. And this is before there's even 220 00:26:01.240 --> 00:26:08.400 a war available to be in. They're already, you know, considering this is a real option 221 00:26:08.400 --> 00:26:12.400 that may be the only way out so we can be able to secure foreign markets, which again 222 00:26:12.400 --> 00:26:17.400 are thought of as being one of the keys to prosperity. 223 00:26:17.400 --> 00:26:30.400 Another cost, perhaps, of the Great Depression, of course, might beivid the level of theory where certain ideas are adopted as explanation of the business cycle and have been having a pretty good run ever since. 224 00:26:30.400 --> 00:26:32.400 Time? One minute? 225 00:26:32.400 --> 00:26:34.400 All right, let me summarize this very quickly then. 226 00:26:34.400 --> 00:26:39.400 So then, rhetorically, depressions have been abolished by the New Deal. 227 00:26:39.400 --> 00:26:52.400 and now I have these automatic stabilizers and workers' compensation and on the other hand there's been four or five of these depressions in my lifetime which they'd like to call recessions, possibly it sounds better, I don't know. 228 00:26:52.400 --> 00:27:05.400 There was one in the Reisner which I don't remember particularly well, but then there was the financing of the Vietnam War by LBJ and others that the actual price effects were felt under Nixon. 229 00:27:05.400 --> 00:27:15.400 Something around 1982, something around Bush Sr. inherited or was in office during, helped elect Clinton, now the current one. 230 00:27:15.400 --> 00:27:23.400 So clearly, we do still have business cycles. I think they brought the bottom test, however, I'm not going to argue that an empirical, 231 00:27:23.400 --> 00:27:32.400 it was empirical evidence, not a test, but an interesting empirical confirmation so you can know if you're really at the bottom of a deflation 232 00:27:32.400 --> 00:27:57.400 The final point then would be that the 20th century was a century of organized mass murder, horrific warfare, bureaucratic invasion of the life world, or colonization of the life world, and inflation. 233 00:27:57.400 --> 00:28:11.400 You don't need a weatherman to know what institution it is that provides the explanatory link between all those evil phenomena. 234 00:28:11.400 --> 00:28:23.400 It's the state, it's the unrestrained, unlimited modern state, and particularly in its capacity here, allied and controlling the banking system. 235 00:28:23.400 --> 00:28:33.400 So our task ideally is to help make the 21st century workout somewhat differently by addressing this and related questions.