My talk today is on the similarities and differences between the Great Depression and the current
depression. And I'm writing a paper with my good friend and many times co-author, Bill
Barnett. Speaking of co-authorships, I remember Tom Woods was once at an Austrian Scholars
Conference and there was a room of about 200 or 300 people and he said, well, I'm the only
one in the room who's never co-authored an article with Walter Block. Happily that's
That's changed. Tom and I are now one of my co-authors. My email address is wblock.loino.edu.
If you didn't get it now, I'll mention it later. And you can get my email address through
the Mises Institute web. The reason I'm mentioning it is that this paper is sort of a work in
progress and we need all the help we can get. So if you've got any ideas to help us with
of this paper. There was a young lady who was talking about demographics and that was
very helpful. Hi. So if other people have other suggestions as to how we can improve
this, that would be very welcome.
Before I get into it, two more introductory kinds of things. First, we have to figure
out what to call this modern depression. I mean, if we can't call it something, then
You know, we're in trouble. We already have the Great Depression, so what is the one that we now have?
I've got some notes here and I need a lot of help. Should it be the Greenspan-Bernanke Depression?
Should it be the Bush-Obama Depression? Should it be the Grand Kahuna Depression?
How about the gigantic depression, the mother of all depressions?
You can see that Bill Barnett and I have been working hard to try to figure out this very important, crucial question.
How about the financial panic? How about the yes, we can depression?
Or the change depression? I think we've got to work with this and we need all the help we can get.
So please get those cards and letters or emails in to me if you can come up with a better idea
because we must have a good name for this depression. Otherwise, I don't know.
The other preliminary thing I wanted to say before I get into the parallels and some dissimilarities is to just sort of go over a little bit about the us guys and them guys.
Us guys are the Austro-libertarians and them guys are I guess the Keynesians or the ignorant economists or I don't know what.
Oh, another name. You've all heard about girls gone wild. Well, how about economists gone wild depression?
or another one is all economists accept austral libertarians gone wild depression
it's a little long but you know we have to work with that well in in the view of
the bad guys the Keynesians and these other people that what causes
depression is either it sort of hits like a bolt from the blue or it's due to
capitalism you know capitalism is evil and it's just intrinsically a part of
Capitalism that have depressions or it's animal spirits and you people aren't
spending enough and you know go out and spend by the way you could go out and
spend and buy this book that that's a different issue I think that that would
be an exception we're all Keynesians now so I hereby say that the way to get us
out of this depression is to buy this book don't buy 20 copies now this will
run out but buy one copy each and then order 20 copies to give to 19 of your
So that's their view. Our view is that it's due to central banking and fiat currency and the fractional reserve banking system and the lack of the gold standard, namely, it's due to the violation of free enterprise.
Nowadays, the latest thing is the reason we have this depression is because of a failure of capitalism. Nonsense. We don't have capitalism now. We have a mixed economy.
and the part of the mixed economy that's most responsible for creating this is the Federal Reserve System or the Central Bank in general, which lowers interest rates, artificially encourages earlier stages of production investment, namely in heavy industry and in machinery and housing and cars, which are now in trouble and the recession or the depression is the cleansing of these malinvestments that have been made before and if the government just
This just keeps its bloody mitts out and maybe lowers taxes and gets back on the gold standard and other good things, gets rid of unemployment insurance.
We can get out of this depression in a matter of, I don't know, months, weeks? Maybe that's a little too optimistic.
But if we had laissez-faire capitalism now, if Ron Paul had won and the speakers at this meeting were the head of the Fed, the Fed would be gone in a week.
If Tom DiLorenzo was the head of the Council of Economic Advisers, we'd get some good economic advice along these lines, I'm sure.
So, with those preliminary remarks, I now want to talk a little bit about the similarities, the great similarities and some differences between the two events.
In both cases, the earlier case and the present case, there was a Republican president followed by a Democratic president. In the earlier time it was Hoover followed by Roosevelt, now it's Bush followed by Obama.
That's a parallel. In both cases, especially the earlier case, Hoover was seen as a free enterprise capitalist maniac, you know, laissez-faire, and the reason we had the depression is Hoover didn't do enough.
That's the usual view. And Roosevelt was a good guy because he got the government involved and he made us get out of the depression.
That's the view that you get from the New York Times and other such reliable sources of information.
And in the present you have an ominous parallel to use the title of a book in a different sense.
And that is that Bush was no free enterpriser and neither was Reagan while I'm on the subject.
And Reagan was great on rhetoric, a lot better than Bush, but you know, when he was governor
of California, budgets rose, when he was president, budgets rose, you know, if this is laissez-faire
capitalism, we're all socialists now, but you know, we're against that.
In both cases, there was a prior boom, followed by an inevitable depression, and we're now
in the depression.
Let me read you a quote from Lew Rockwell who says,
All Obama has done is extend the corporate fascist policies of George Bush the same way
that FDR extended the corporate fascist policies of Hoover.
You couldn't say it better than that.
Hoover and Bush were no free enterprises.
They were Republicans.
They were supposed conservatives, but we all know what that means given how Ron Paul was
treated in the Republican recent run up to the presidency.
Here is a quote from Murray Rothbard.
Hoover's role as the founder of a revolutionary program of government planning to combat depression
has been unjustly neglected by historians.
Franklin D. Roosevelt in large part merely elaborated the policies laid down by his predecessor.
To scoff at Hoover's tragic failure to cure the depression as a typical example of laissez-faire
is drastically to misread the historical record.
The Hoover route must be set down as a failure of government planning and not of the free
market.
To portray the interventionist efforts of the Hoover administration to cure the depression,
we made, quote, Hoover's own summary of his own program during his presidential campaign
of 32. And now what I'm going to do is read what Hoover himself said about his program.
Quote, from Hoover, We might have done nothing. That would have been utter ruin. Instead,
we met the situation with proposals to private business and the Congress of the most gigantic
A program of economic defense and counter-attack ever evolved in the history of the republic.
We put it into action. No government in Washington has hitherto considered that it held so broad
a responsibility for leadership at such times. For the first time in the history of depression,
dividends, profits and the cost of living have been reduced before wages have suffered.
They were maintained until the cost of living had decreased and the profits had practically
vanished. They are now the highest real wages in the world, propping up wages. What Roosevelt
What was given credit for, credit in quotes, Hoover was doing, continuing the quote from
Hoover, creating new jobs and giving to the whole system a new breath of life.
Nothing has ever been devised in our history which is done more for the common run of men
and women.
Some of the reactionary economists urged that we should allow the liquidation to take its
course until we had found bottom, that is allow bankruptcies.
But we determined that we would not follow the advice of either the bidder and liquidationist
and see the whole body of debtors the United States brought to bankruptcy and the savings
of our people brought to destruction.
So this is I think a clear statement that Hoover was no free enterpriser and I think
it's very clear that Bush was no free enterpriser either.
Even nowadays there are conservatives that are not that happy with Bush because he spent
like a drunken sailor.
So it's hard to say free enterpriser Bush.
I mean, if even Reagan wasn't a free enterprise, the Bush certainly wasn't.
And now we have Roosevelt and Franklin Delano Obama, who's now in charge.
And there are many, many parallels.
Take international trade as one area where there can be parallels.
Well, we have the Smoot-Hawley tariff in the, I guess that was in the 30s, early 30s, which
just put the kibosh on free trade.
You see, the idea is, if you want to have the depression cure the previous prior misallocative boom,
the last thing that you want to do is create problems, because it's a big adjustment.
And look, the market doesn't work perfectly, it doesn't work instantaneously.
We're not people who believe we're always at equilibrium, namely we're Austrian economists, we're not mainstream economists.
Economists. So it would take time and the last thing you want to do is to put the
kibosh on the economy and mess it up in another way. In other words, the natural
tendency of the economy is to move back toward where it should be. That's the
impetus of laissez-faire capitalism. But every time you set up a roadblock, you
slow down that process and the Smoot-Hawley tariff was a gigantic roadblock.
It just put the kibosh on international trade. There was much more unemployment
that you had to overcome because of the Smoot-Hawley Tariff, then there would have been had there
not been a Smoot-Hawley Tariff. Well, what have we got today? We got Barack Obama saying
that the Mexican trucks can't come here. Why? Because they're not safe. Okay. Well, if that's
really true, then what he would have done is said, okay, Mexican trucks and truckers,
whatever, you have to pass the more stringent US safety regulations. Not that I'm in favor
of that. I have a book coming out about how we should privatize roads and all. I won't
The United States, the truck has to pass and the driver has to pass our more stringent requirements.
And then any Mexican is free to come or whatever the NAFTA rules are.
But no, he didn't say anything like that.
Instead he's saying that we should keep the Mexicans out and as a result the Mexicans are now putting tariffs on our things.
And this is carrying on the Bush thing, the Bush had tariffs on steel.
So we're moving in a smooth, holy direction. We haven't got there, but a lot of his bailout proposals have this extra little twist that if you export jobs, you know, we penalize you.
So he's a real buy local kind of person. I mean, he's even putting in, what is it, corn and beans in the White House lawn so that he can eat local.
I mean, it's the sort of this lefty craze, you know, against transportation and, you know, where that is heading, if you take that to its logical conclusion, is total self-sufficiency.
Namely, we each produce everything that we need. We don't trade with anyone else because trade is necessarily exploitative, you know.
If I trade you a wristwatch for a tie, you know, I give you this tie for the wristwatch.
It's not true that you value the time more than the wristwatch and it's not true that I value the wristwatch more than the tie, rather it's mutual exploitation.
That's the way these people think, that trade is inherently exploitative and what you should do is grow your own and be local.
Well, the point is that the reason that this earth can now support six billion people is because we can trade.
If we had to be self-sufficient, if we had to produce everything we needed for ourselves,
95% of the population in the world would die, maybe 98%,
which would be good because, you know, the environment and, you know,
and people are the enemy of the environment. I'm just kidding on that.
I don't want people to quote me and say Block comes out in favor of murdering 98% of the people.
That's those other guys. I'm just, I'm sort of putting myself in their position to
So Mexico retaliated by raising tariffs on some 90 U.S. exports, and according to the Wall Street Journal, which I sometimes think of as the War Street Journal, W.A.R., although they're somewhat good on economics sometimes, as the U.S. and the U.K. press the case for greater government stimulus to lift the global economy, they have encountered stiff resistance from European leaders, forcing U.S. officials to downplay the targets, the 20 nations that have been targeted by the U.S.
where Obama is now messing with while promoting free trade have also had to
face their own perchance for protectionism with many recently moving to
guard their own economies and companies from the downturn so this is just one
more roadblock so here's the situation first the government messes up and
misallocates resources then the market is trying to fix things and then they're
interfering with the markets fixing of things by setting up new roadblocks to
To Create New Unemployment. Taxation. How do we compare the earlier days and the present
days? Well, Hoover's Revenue Act of 32 included huge increases in the income tax and by adding
additional brackets to the upper end made it all more progressive. You know, there are
some people that hate progressive taxes. They think progressive taxes are the enemy of everything.
And, you know, I sort of agree progressive taxes aren't good. But, you know, which would
It would be better to have a progressive tax of two, four and six percent for the poor, the middle class and the rich.
Or a flat tax of fifty percent.
Obviously, you know, progressivity isn't the only thing that we have to worry about taxes,
although when you get up the highest bracket is ninety percent.
I understand in Sweden that one time the highest bracket was like a hundred and ten percent.
That means if you earn an extra hundred thousand you would pay taxes of a hundred and ten thousand.
I mean, you have to be a genius to think of that. I mean, you know, the ordinary bureaucrat can't do that.
And I think as a result, Bjorn Borg, who was a Swedish tennis player, very wealthy guy, moved to Monaco,
because, you know, who wants to pay 110% marginal taxes?
Well, our man Obama is also into this.
Notice he's going to lower taxes for all the good people and raise them for the bad guys.
Well, who are the bad guys? The bad guys are the ones that are creating the wealth in the country. The bad guys are the Randian heroes, the businessmen, the people who are creating the engines of creation, and he's going to get them.
Well, that's not going to help us. So my view is that progressive taxes aren't the only thing that we have to worry about, but I'm not in favor of progressive taxes, and they're both doing that.
Okay, how do we compare them both on Keynesianism? How do we compare Hoover Roosevelt on the
one hand and Bush Obama on the other hand with the Keynesianism business? Well, what
the Keynesians are trying to do is to uphold wages. Roosevelt was big into this. We can't
allow wages to fall. And yet, when you have unemployment, it means that the supply of
If labor is greater than the demand for labor, anyone who has the, what do you call it, the supply and demand, who's taken basic economics, knows that if you have massive unemployment, as they did in the Great Depression,
wages have to come down if you want to cure the unemployment. So if you keep wages up, like take the minimum wage, the minimum wage unemploys people who have a productivity lower than the minimum wage, and they keep wanting to raise it.
What they think is that the higher the wage goes the more rich people get or the higher the wage people will actually get but this is just, this is just silly.
Rather it's like a barrier over which you have to jump in order to get a job in the first place and the higher you raise it the harder it is to get a job.
Look, if we had a minimum wage law of $100 an hour, we'd have a lot more unemployment than we do now.
Yet, according to their logic, we'd all be making a hundred dollars an hour, which is just excruciatingly silly.
There's this guy, Stiglitz, who won a Nobel Prize at Columbia University.
And in his textbook, he's got this. He's got it clear.
And yet, he signed this, him and 600 other people signed this thing about getting the minimum wage going.
And he was asked about, well, how do you reconcile signing this petition to raise the minimum wage with what you say in your textbook?
and he talked and he said words and I understood each of the individual words
but I couldn't understand what he was saying. It was the most amazing thing
and he's sort of deprecating the value of my PhD. I got one at Columbia and I might have to sue him.
Any lawyers in the group here will see me afterward. We'll have to sue this guy.
Well, what is Obama doing? He's not doing that explicitly but he's doing it implicitly.
How is he doing it implicitly? By encouraging unionism.
Unionism is the par excellence way of raising wages above productivity levels.
I mean, we need not look any further than the Rust Belt.
I used to teach at the College of Holy Cross in Worcester, Mass.
And there were these factories, you know, six, eight stories high, a quarter of a mile by a quarter of a mile, gigantic things, all empty.
They didn't make steel, but they made ball bearings and ball peen hammers and things made out of metal.
And the unions just raised wages above productivity levels and the companies either went broke or they went down south.
They went down to Alabama, Mississippi, Louisiana, South Carolina, places like that, that are a little rougher on unions.
Well, what is Obama doing?
What he wants to do now is right now in order to get a new union certified what you have to do is get some percentage I think it's 50% but I'm not sure of all the workers in the group and they all have to sign and then you have a secret ballot election and all the workers are intimidated so they all sign it and then when they vote they all vote against the union because they're not stupid they realize the rust belt and they realize they're gonna lose their jobs so what's Obama gonna do is say well once you get 50% that's it
You don't have to have a secret ballot. So now there'll be very great intimidation and the man is supposed to be in favor of democracy.
Well, how is it democratic? Not that I'm a big fan of democracy. One of the great books on this is Hans Hoppe's The God That Failed.
Democracy, I forget the exact title, but something like that. The God That Failed. It's an attack on democracy.
So I'm not a big fan of democracy, but Obama is, and he's being hypocritical here. If he's supposed to be supporting democracy and he's just giving over the entire working class to the tender mercies of the unions.
At one time unionized labor force was some 30-35% of the labor force and now it's down, at least the private labor force, down a single digit, eight or nine percent.
What do you call it? Unions that are organized who are working for government is a different thing.
And the whole idea is that those unions shouldn't even exist because the ethos of this is that capitalists will exploit workers.
Fair enough. Okay, capitalists exploit workers. We need unions. Remember, I'm just kidding. I'm not saying this.
I'm trying to get into the minds of our friends on the left.
Okay, but the public, the municipality, they're not capitalist pigs, they're not greed mongers, you know.
So how can you justify civil servants unions? The whole thing is preposterous and that's the big growth in unions.
Okay, so right now to get back to the private sector unions, it's eight or nine percent.
Well, with this Obama thing, it's going to start shooting up toward 20, 30, 40 percent, which means wages are higher,
which means that it's more difficult to solve the unemployment problem than it
would be had they not set up this one more barrier. So we have an international
trade barrier, we have wage raise barriers, things like that. The next thing
is the bailouts. Well there was plenty of that stuff in the early days and we've
got our share now. I mean they're bailing out everything of above a certain size
and all these massive balance which all they're doing now is taking capital away from companies that are viable and giving it to these GUL, G-H-O-U-L kinds of companies.
And how is that helping the reconstitution of the economy?
Remember what we want to do is to get back to where we would have been had the government not misallocated resources in the first place.
and the way to get there is to get rid of the bad companies and allow the good
companies to get the capital and if they're going to support the bad
companies it's at the cost of the good companies. So again they're setting up
barriers. Now the argument that they use is well they're too big to fail. We've
heard this and the idea is well if General Motors goes belly up then
all the people who were in General Motors are now going to stop spending on
on groceries, on bicycles, on piano lessons for their kids and on shoes and then all the
people who had piano lessons and shoes and bicycles and groceries will stop spending
and will get into a depression. Well, that's the lefty view. Totally wrong. I mean, Studebaker,
where is Studebaker? There was no depression because of Studebaker or Pan Am or you look
at the Fortune 500 every 10 years back from now and the last 10 years there are familiar
The point is that we have this turnover in companies. There's nothing that says that a company has to exist. Just because it exists, it has to exist forever.
Here's an example I usually give my students. I say, look, suppose I now discover a cure for tooth decay. I'll tell you what it is. It's one part aspirin, one part salt, and you mix in rubber bands. That's it.
That's it. You take that and you never have tooth decay.
Am I an enemy or am I a friend of the economy?
Well, according to Keynesians, I'm an enemy because right away all the dentists lose their jobs.
I don't know how many dentists there are in the country, but, you know, a couple of tens of thousands of dentists in the whole country.
And they lose their jobs and their nurses lose their jobs and the equipment that, you know, those drills and stuff, the people that make that lose their jobs
And then you have the secondary depression because all the things that the dentists used to buy and all the things that the nurses used to buy and all the things that these manufacturers of drills, etc. used to buy will stop buying all these other things and we'll have a depression.
That's silly. I mean, that's absolutely lunacy to think that I'd be the enemy of the economy if I invented a cure for tooth decay.
Rather, the correct way to look at it is, at any given time, we have a wish list. We all want things.
How far down the wish list can we get depends upon how hard and how smart and how much capital we work with,
and how well we cooperate with each other, which can only be done through the price system.
Well, if I now free up 30,000 dentists, we can now have more things than we could have had before,
before, because we no longer need these very bright people to produce dental services.
Now they can be, I don't know what, doctors or, I don't know, sculptors or whatever it
is that they can do. In other words, we freed up this labor. Let me give you another example.
The Swiss family Robinson, they're on this island and they have a lot of things to get.
They have to get a fence to keep them away from wild animals. They have to get a fishing
and now you have this bright kid who was told to fish and he would hang a fish with a worm
at the end of a string and he'd get one fish a day and the kid made a net and now he gets
ten fish a day.
Did the parents say, you rotten kid, you know, you're ruining our economy?
No, they say, thank God we got a bright kid and now instead of just fishing, he can do something else.
We can get a little further down on our wish list.
So this idea that it's too big to fail and we have to prop them up, as Tom Woods says in his book,
we've got to, you know, let every bankruptcy occur.
To put it in Uncle Mao terms, let a thousand flowers bloom, let a thousand bankruptcies bloom.
Bankruptcies are good for the economy. It's like getting rid of the dead cells in the in the body. If you don't get rid of the dead cells, you don't make room for more live ones.
Okay, what else do we have here? Hoover pushed for and got the bankruptcy laws changed to provide more favorable treatment for debtors at the expense of creditors.
The US government provided loans to state governments for what they called relief programs. The current bailout provides the same sort of loans.
However, some governors are even turning them down.
Hoover restricted immigration to save American jobs for Americans,
pressure is being put on firms to reduce or eliminate outsourcing.
You know, I outsource a lot of stuff to Walmart.
My balance of payments with Walmart is horrible, you know.
I don't get any money from them, I just give them money.
And also McDonald's and other places.
It's just sort of economic lunacy after economic lunacy.
Hoover started the Home Loan Bank to spur the housing industry.
Well, we've got the CRA, we've got Fannie, we've got Freddie.
The parallels are just all over the place there.
Hoover allowed a wider variety of types of firms to discount at the fractional reserve banks.
Well, the same thing is occurring now.
Hoover started Reconstruction Finance and we're doing the same thing with regards to the bailouts.
There is one difference. The government is now taking an ownership role in these banks, which is very ominous.
I mean, if you define socialism as government ownership at the means of production and fascism as government control,
you don't have to have a swastika to be a fascist. You can do economic fascism, which is heavy government control.
Well, what we've got is fascism and socialism with a little bit of free enterprise.
Okay, there are many other parallels, but I'm running out of time, so let me talk about something else, and that is, these are the external things that I've just been going over.
What about the internal? How are we, the Austro-libertarian people, the free enterprises, how are we situated to combat all this stuff compared to how we were situated to combat all this stuff in the earlier period?
Everyone get what I'm getting at? Namely, what weapons do we now have compared to what weapons we had then?
Well, the weapons we had then were Garrett Garrett, Benjamin Morton Anderson, Lionel Robbins, Gottfried Habler, Friedrich Hayek, Ludwig von Mises, Henry Hazlitt.
There were others and if you could send me other names that I'm leaving out, please help me out. Who were the good guys then?
Well, who are the good guys now? Well, high up on my list of good guys is the Mises Institute and Jeff Tucker will tell you about how, maybe not at this session, but he has another one where he talks about just how well they're doing, how many books are getting out, how many hundreds and thousands of people are reading this stuff, how well the Mises blog is doing compared to other blogs like the UN blog or, I don't know, the Council of Economics blog or other competing places like that.
So the Mises Institute has to be one of the weapons that we now have that we didn't have then.
So that's one point for the present.
What else do we have? Well, we have Ron Paul.
We didn't have a Ron Paul then.
I mean, we talked about Burt Blumen passing away.
Well, Ron Paul wrote this beautiful elegy to Burt Blumen and he put in the Congressional record.
I don't think we had a congressman or a senator in the 30s who we had some better ones than and worse ones.
But we didn't have a Ron Paul. We also have a Tom Woods. We have this book, which is one
of the most magnificent books that's ever been written. I was going to read a long quote
from it, but I'm running out of time. The long quote I was going to read on the parallels
are on page 106. So if you've got the book, look at page 106, and he's got a lot of parallels
there.
What else do we have? Well, Patrick Buchanan wrote a nice piece on lewrockwell.com, and
If you people aren't reading lewrockwell.com every day, I'm going to take Brownie points away from you.
Read that. He had a very nice article talking about Tom Woods' book.
If that's all we had, I'm not sure which way the thing goes.
I mean, Mises and Hayek are pretty tough to meet.
I have to sort of maybe vote for the earlier session.
Notice I didn't mention Rothbard. When I first met Murray Rothbard in 1966, he knew every libertarian on the earth, on the planet, and I was an intimate of his, it was an amazing story, and there must have been 25 in the whole world, maybe 30.
What happened is I made a trip all across the country from New York out to California and each city he would give me two or three names and the people didn't know each other.
It was, I mean it was amazing, like somebody would be in Columbus, Ohio, three different people in Columbus, they never heard of each other.
So I was sort of like a Johnny Appleseed getting people together.
But nowadays the Mises Institute does that, the fact is that you know each other here, you'll be sitting at tables with like-minded people, you'll trade cards, you'll trade business cards, you'll make new friends, that's one of the benefits of a session like this.
Well, my thought is that we're in better shape than that because we stand on the shoulders of those guys.
So it's not that we have to compare what we have now with Mises and Hayek and these other people and say, well, you know, they sort of get the nod.
Rather, we have Mises and Hayek to stand on the shoulders of and we can see further and do more thanks to them and also, obviously, Murray Rothbard.
It's true the bad guys stand on the shoulders of bad guys. Obama can stand on the
shoulders of Keynes, but those shoulders are mushy, they'll fall through, it's not
going to help much.
I'm out of time. I just wanted to say it's an honor and a privilege to be here
among
friendly people. I've had a lot of trouble with Tom DiLorenzo inviting me
to Baltimore, where it wasn't such a friendly audience.
I was accused of racism and sexism.
It's also on the Mises web. Everything worthwhile knowing is on the Mises web, so
So if you're interested in that, look it up. Thanks for your attention.