Well, I'm going to start this discussion by saying a few words about the Great Depression itself and what is a reasonable explanation for why it occurred.
First of all, we typically date, obviously, we tend to date the beginning of the Great Depression as being October 1929 because of the stock market crash.
But the really bad, appallingly bad economic conditions really settle in around 1931.
That's why Benjamin Anderson calls 1931 the tragic year.
But people associate it in their minds with 1929.
Now the 1920s, of course, had been a very prosperous time.
I believe that by 1926 the unemployment rate had been reduced to 1%.
is unheard of, unbelievable, but there were difficulties.
There were problems with the economy that were deep-seated and perhaps not evident on the surface.
Now obviously various explanations have been advanced for what caused the tremendous downturn
that occurred basically, particularly in 1931, but beginning in 1929,
because it's a very substantial downturn.
Real GNP per capita fell by 30% between 1929 and 1933.
Unemployment reached over a quarter of the labor force.
And it has been said that if we lined up all the unemployed in a line, a yard apart,
The line would stretch from New York to Seattle to Los Angeles and all the way back to New York
and would still leave 280,000 people out of the line.
It seems to me somebody who is himself out of work must have taken the time to calculate that statistic,
but there you have it.
Corporate profits after taxes were actually negative in 1931, 32 and 33.
Net private investment during the 1930s was also negative.
It may first seem odd, how can you have negative investment?
Well, that is to say that plant and equipment depreciated and wore out faster than they were being replaced.
So given these figures, naturally, natural human curiosity wants to know what is the explanation for this.
Or at least, what initiated the downturn?
And then we'll look at what kept it so sustained.
But what was the precipitating factor that initiated the downturn?
Well, I'm going to propose the explanation that Rothbard advances in America's Great Depression.
And I don't have to defend his position with great precision simply because Joe Salerno did that in his seminar.
I believe it was election number seven.
Joe Salerno looked at some of the criticisms that have been advanced
against Rothbard's book, America's Great Depression from 1963 and I think is in a fifth edition now.
I remember reading years ago some of Joe's defenses of that book and I was very glad that he made that the subject of one of his talks.
So you can get a lot of the meat there. I'm going to speak more broadly here.
Now I'm a little uncomfortable because there are economists in the room and here I am going to speak on the Austrian business cycle theory.
Do please correct me if I misstate something, although, you know, try to keep the scoffing to a minimum and the, you know, fidgeting in your chair and, you know, the obscene gestures, if you can just try and restrain yourselves on that, we'd much appreciate it.
But I do this because not everybody who's a historian knows about the Austrian cycle theory.
Not everybody who's a historian knows there is such a thing as a cycle, business cycle theory.
And, you know, who knows who the audience for this is and people could be hearing this for the first time
and I happen to think this is one of the greatest contributions the Austrian School makes
because the business cycle theory I find so persuasive that it sort of answers the question,
why are you interested in economics?
Well, I'm interested in it because it has such explanatory power as this.
Well, a good introduction to the theory comes in the,
There's a little book of essays that the Institute puts out on the Austrian theory of the trade cycle.
Rothbard has one in there from the late 60s called Economic Depressions, Their Cause and Cure.
In that essay, Rothbard argued that if you're going to have a theory of the business cycle to explain why it is that the economy appears to move in a boom-bust pattern,
There are two empirical facts that your theory must be able to account for.
And he says that one such fact comes from the very definition of a depression.
When you have a depression and you have a depressed business sector
and obviously you've had tremendous entrepreneurial misjudgments taking place all at the same time,
the question arises, why is this happening simultaneously?
Why, to use Rothbard's phrase, why is there this cluster of entrepreneurial error?
Given that the market system has built within it a natural tendency to weed out the good entrepreneurs from the bad,
to weed out people who have superior forecasting ability from those who have poor forecasting ability,
those who are good at meeting the anticipated desires of consumers from those who are very poor at it,
given that the market has this natural sifting process,
Why would all the people the market has in effect chosen to endow with capital goods?
Why would so many of them simultaneously have made terrible errors?
Why is that?
Secondly, he says, we must account for an empirical fact that seems to characterize one business cycle after another.
And that is that they tend to hit capital goods industries much more heavily than they do consumer goods industries.
And this is going to be true, clearly and verifiably true, of America's Great Depression, this empirical fact.
So capital or producer goods industries are hit harder than consumer goods industries.
This empirical fact in and of itself poses a radical challenge to those who would claim that depressions are caused by underconsumption.
People are just not consuming enough or they're not able to consume enough and that causes problems.
Well, if the problem were in consumer goods, then why is it that depressions are actually characterized by bigger downturns in industries that produce goods consumers don't buy?
Like, I don't buy a steel plant, you know, right, typically. So why would the depression be hit so hard there?
Well, in effect, the Austrian view suggests that there is an explanatory factor that can account for both of these facts that characterize depressions.
Now, in the unhampered market economy, the interest rate declines when people save more.
So that is to say, put your money in a savings account.
Banks lend these saved funds out to borrowers, and the more people save, the more the banks have available to lend,
The more the banks have available to lend, the lower the interest rate will be.
This stands to reason because as something comes into greater and greater abundance, its price tends to fall lower and lower.
And so in this case, the amount of loanable funds increases.
So its price, the price of borrowing or the interest rate correspondingly falls.
Moreover, the Austrian theory introduces the concepts of higher and lower order stages of production.
Higher order stages of production are stages of the production process that are further away from finished consumer goods,
things like mining and refining, or the construction of a factory or production facility.
These are sometimes called producer goods industries since they involve things that are produced not for immediate use,
but are themselves used to produce final consumer goods.
Grain production, for instance, is a higher order stage than is the bakery that sells the final consumption goods.
Higher order stages of production tend to be the most sensitive to interest rate fluctuations.
Building a new plant or expanding mining capacity might turn a profit only in the relatively distant future.
If interest rates are high, this means higher costs year after year.
But if the interest rate should come down, projects that once looked unprofitable suddenly become potentially profitable.
In an unhampered market with a commodity money, everything works out smoothly.
By saving more of their money, consumers have indicated that they are prepared to spend less in the present.
Investors make note of this in the form of a lower interest rate.
Lower interest rate encourages them to begin investing, investing in particular in more time-consuming stages of production
that they can now afford thanks to the lower interest rate
and thanks to the fact that consumers have indicated a relatively decreased desire to consume in the present.
So, in effect, consumers are willing to wait, as they've demonstrated by saving.
So this is the time for investment to take place.
But consider what happens when the central bank, or the Federal Reserve in our case, intervenes in the economy.
Fed has a variety of mechanisms at its disposal to increase the availability of credit and lower interest rates.
Whether the rate is lowered by voluntary saving on the part of the public,
or whether it is lowered by these actions of the Federal Reserve,
the result in both cases is that businesses see that interest rates have come down.
So they tend to borrow more, and this borrowing tends to be concentrated in higher order stages of production, which are more interest rate sensitive.
In this case, there is a problem. This time the lower interest rate does not reflect an increased willingness on the part of consumers to defer purchases and consume less in the present.
This time the lower interest rate is created by entirely artificial means.
Investors are thus misled into directing resources into higher order, time consuming stages of production,
while in the meantime, consumers continue to follow their old consumption patterns.
Now we can either have more investment and less consumption in the present,
or less investment and more consumption in the present.
But the Fed generated boom attempts to do both simultaneously,
more investment and more sustained consumption at the same time.
Something has to give, the economy is being pushed in two mutually exclusive directions at once.
In a genuine boom, fueled by additional savings,
People's abstention from consumption makes resources available to investors.
The Fed-driven boom, on the other hand, makes no additional resources available.
People's time preferences have not changed.
So as Roger Garrison notes, in the absence of an actual change in time preferences, that
is people's willingness to defer purchases, no additional resources for sustaining the
policy-induced boom are freed up.
In fact, facing a lower interest rate, people will save less and spend more on current consumables.
The central bank's credit expansion then results in an incompatible mix of market forces.
So people are consuming more but yet more investment is taking place.
The Fed's intervention has therefore created systematic discoordination throughout the economy.
Resources have been malinvested.
That is to say, resources have been invested not in accordance with consumer desires but
in response to false signals.
have been wasted. Some of them can be recovered, since some building and equipment can be transferred
to lines of production more in conformity with consumer desires, but even this transition
process takes time and resources to accomplish. When lower interest rates are caused by increased
saving on the part of the public rather than by Fed manipulation, then the boom is sustainable.
People's deferred consumption provides the means for investors to engage in long-term
The interest rate coordinates investment in accordance with people's time preferences.
When people save more, the interest rate goes down, signalling to investors that the requisite funds are available
and that people are willing to defer their purchases to this degree.
But when the lower interest rate is the result of Fed manipulation, the boom is built on sand.
It is built not on authentic savings, the only sound source of investment funds,
but on artificial credit creation.
It is built not on real money, the only sound source of investment funds,
is a well-known source of investment funds, but on artificial credit creation.
As one expert explains, with seemingly favorable credit conditions,
long-term investment projects are being initiated at the same time
that the resources needed to see them through to completion are being consumed.
As the market guides these projects into their intermediate and late stages,
the underlying economic realities become increasingly clear.
Not all of the investment undertakings can be profitably completed,
and thus the bust is inevitable.
At this point, capital goods that are complementary to these production processes still unfinished
are in unexpectedly short supply, with investors enticed by cheap credit now competing for
resources with established firms and competitive entrepreneurial bidding for them begins to
drive up their prices.
These increased prices, largely unanticipated by the investors who embarked on these projects
in the first place, naturally leads to a greater demand for credit to cover them, which in
in turn raises interest rates back up.
It now becomes clear that the boom has been built on sand
and that enough resources do not exist in the economy
for all of these investment projects to be completed.
Some portion of the invested capital is irretrievably lost
and provides physical evidence of the waste
and destruction of wealth caused by the artificial boom.
While the price system works at this point
to bid resources away from earlier stages of production
and toward later ones,
this process is not without difficulties
Thanks to the Austrian theory it becomes possible to understand both the sudden cluster of entrepreneurial error and its concentration in the capital goods industries.
The cluster occurs because entrepreneurs are misled by a distorted signal to which any substantial economic actor must be attentive, the interest rate.
The concentration of this error in capital goods industries, and particularly in the higher order stages of production, can be explained with reference to the same fact.
The further away in time a particular stage of production is from finished consumer goods,
the more sensitive will it be to fluctuations in the interest rate.
Thus, the malinvestment will tend to be concentrated in higher order capital goods,
and the inevitable liquidation will necessarily be concentrated there.
Now, that's a summary that I included in my Church in the Market book.
So what's useful about Rothbard's study is that he's going to begin his book, America's Great Depression, by looking at alternative explanations of the cycle, then giving an overview of the Austrian theory, and then going and looking at empirical evidence, I mean actually looking to see was there in fact an inflationary boom in the 1920s that sowed the seeds for the Austrian cycle.
to take place, and he does argue this, and as I say, Joe Salerno defends Rothbard's methodology in that.
It's an absolutely indispensable book because it then goes into the presidency of Herbert Hoover
and shows that, in fact, it is Hoover's policy decisions that help to make the depression prolonged.
I mean, we understand what brings on the depression, but no reason that it has to go on year after year after year.
Government policy tends to be the explanatory factor as to why the downturn just seems to remain...
the economy remains depressed for so long, and Rothbard helped to show that Hoover was, at least in some degree, responsible for that.
Now, if you go to Amazon to buy Rothbard's book, America's Great Depression, you look at the reviews there, you'll see something very interesting.
You'll see some five-star reviews saying this is just a book that,
if you want to be a member of the human race, you've got to read this book.
And then you see some one-star reviews from people saying,
I couldn't understand a word of this book. I wanted to read a book.
People bought this book because they were thinking
it was going to be like a social history of the Depression,
a story of people eating ketchup sandwiches, and how did they get by,
and they had to split a head of lettuce among the whole family.
By the way, I don't mean to be flippant about that,
but that's the type of story people are looking for.
and they get Rothbard's book and it's this wonderful magisterial treatise
on the market economy and on this particular historical episode
they don't know what to make there are no ketchup sandwiches in the whole book
so they go on amazon and instead of just saying to themselves well you know what
it's my fault i didn't really research this book it's not the kind of book i was
looking for they blame the book for not being what they want and they say well
this is just terrible and part of me feels like i should post a review just
saying you know pearls before swine people you know this is pearls before
What's the matter with you?
But I thought probably Amazon is already filled with enough acrimony without my wise guy comments.
Anyway, let's carry on.
I also mentioned the Austrian cycle theory because I really wanted to include it in my politically incorrect guide.
I was all set to put it in there, wrote the whole thing up.
And it's just another one of these things where there's just no space for it.
So all I could do is have a sentence in there saying,
I am begging you people to read Rothbard's book, and I thought, well, that's good enough. That will pique people's interest.
Okay. Well, it used to be the conventional wisdom that Herbert Hoover...
If I had a board, I'd probably try to... I can actually draw Herbert Hoover pretty...
It was like the only thing I can draw, like Herbert Hoover and like a carrot, two things I can draw.
Or actually, I can also draw Woodrow Wilson, because if you ever look at Woodrow Wilson,
you ever seen that painting, The Scream, with that guy going like this?
I always felt like you put glasses on that guy. It could be Woodrow Wilson.
Anyway, well, Herbert Hoover, the myth used to be that Herbert Hoover just sat there
and, you know, people are eating the ketchup sandwiches and he's just sitting there, sitting there,
you know, sort of big chubby guy, you know, he doesn't have to worry.
He can eat ketchup sandwiches for a long time and he'll still be okay.
But the point is that people had this sense, historians and students of history,
that Hoover was just doing nothing at all.
He just didn't think that he was a big supporter of laissez-faire, a big supporter of the free market.
And because he was such a fool and he had such outdated Neanderthal economic ideas, the Depression got worse and worse.
But to the contrary, in fact, if only he had just sat there.
We could only wish that he had just sat there.
But instead, he engaged in what he later described as the greatest episode of economic reconstruction engaged in by the federal government in American history.
Now, Rexford Tugwell, who was an important figure in Franklin Roosevelt's New Deal programs in the 30s,
later acknowledged, we didn't admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.
Well, Hoover's program of intervention both prefigured
the New Deal programs of Franklin Roosevelt that would follow his administration
and also ensured that the downturn,
this economic downturn, would not be the limited one of 1920 to 21
but would instead be indefinitely prolonged.
In 1920 and 21, when Warren Harding was elected in 1921,
economic conditions were quite poor, there was a severe contraction.
Harding came into office and in the first six months he just cut the government budget.
So he did exactly the opposite of what later economists would suggest and then everything turned out okay.
So historians hate that, the fact that Harding's a bumbling idiot and he's not as smart as they think presidents should be
and he was fairly modest in the things he did and yet he has a much better economic record
than every president who tries to manipulate the economy.
That drives them crazy, so they always put poor Warren Harding at the bottom of the list
of presidents.
I mean, it doesn't help that he was an adulterer and, you know, kind of a scuzzy guy, but still,
one of the things I think they resent about him was that he didn't really do anything
and yet things seemed to work okay.
Well, a month after the stock market crash, Hoover summoned major business leaders to
In the early twentieth century, during his days as a mining consultant, Hoover had informed Australians that he had put their mining on a sounder footing by securing higher wages for miners.
By the way, M-I-N-E-R-S, I don't know, maybe they are miners working in the mines, I don't know, but higher wages for miners because higher wages create prosperity.
I always wondered if that were the case, why don't we just impose a global minimum wage of $100 an hour?
Because then that would give everybody a lot of purchasing power, but no one I know has actually seriously proposed that,
although probably somebody has and I just haven't had the misfortune of coming across it.
Well, certainly Hoover's philosophy is superficially plausible, and virtually every American history textbook dutifully adopts it.
The economic downturn was caused by underconsumption.
There are other theories of the Depression, but this is one that American historians seem to find the simplest to explain, so they focus on it.
But, as I say, for one thing, we would expect the hardest hit segments of the economy to be the consumer goods industries.
But that's not true, as Gary Dean Best points out.
Gary Dean Best, by the way, wrote a very good book on the New Deal, not the best title in the world, but it's called Pride, Prejudice and Politics.
Roosevelt v. Recovery, 1933-1938.
Best points out that it was industries that produced durable goods and capital goods,
in other words that are most remote from the consumer, that suffered the most,
and consumer goods industries did relatively better.
And Best says this, he says,
Increased consumer spending would largely assist the consumer goods industries,
where the volume of business showed the least decline from pre-depression levels.
It did little or nothing for the heavy industries that had been most affected by the Depression
and where the bulk of unemployment was concentrated.
Now, if you read, much of this is going to be filled with reading suggestions.
When I was going through this sort of cycle of stuff and I was at the Mises University and that sort of thing,
veteran Galloway had just come out with their book, Out of Work, which is now, I think, at least a second edition.
But Richard Vetter and Lowell Galloway, economists at Ohio University, have written the absolutely indispensable book basically on the 20th century in terms of economic history and accounting for unemployment.
And their discussion of Hoover and the New Deal is just outstanding. It's indispensable. And the interesting thing is that nobody you're going to be debating with will have read it.
See, when you're in college, you have to read all their stuff.
But then, you know, when you debate with them, like, you've read their stuff, but they haven't read your stuff.
They haven't read veteran Galloway. So you can just trounce them in a debate.
They've never heard any of this stuff before.
Anyway, so to me, I've been having a great time talking to people about this because they honestly haven't, they don't know any of this stuff.
So it's good fun. But you should read veteran Galloway.
in Galloway. What they are pointing out consistently in that book is that they're trying to look
and to actually look at experience. They actually are doing, they're looking at the way things
actually turned out to try to verify a theory. All right, now I understand the epistemological
problems with this, but what they are trying to discuss is whether it makes both theoretical
and empirical sense to claim that wages, in fact, just simply increase purchasing power
or whether artificially increasing wages simply increases unemployment
by making it more difficult for people to hire workers.
Well, this is in effect what veteran Galloway conclude,
that these measures to prop up wages are in fact responsible,
in at least large measure, for prolonging the depression.
Now Hoover, of course, is not at this point, or even at this point,
point, or even later, it's not till FDR that this is forced on people.
He's simply using persuasion, please, please keep wages up.
And that can work only so long, until economic reality becomes so overwhelming
that wages simply have to be cut. But for a couple years, big business more or
less did comply with the president's wishes
and basically kept wages up or prevented,
tried to avoid wage cuts.
Now, as the years go on, though, given that the price level is declining, 10% one year, 15% another year,
if you keep wages at the same nominal level, of course, in effect what you're doing is giving people a raise during the Depression,
because the prices of the goods they have to buy are declining and their wages are staying the same.
So this is in fact a major ingredient in sustained unemployment according to the analysis of veteran Galloway and others.
Now Hoover's agricultural policy also anticipates that of Franklin Roosevelt.
Now farmers had complained since the end of World War I of the need for special governmental assistance of one kind or another,
including government intervention, whatever, to prop up farm prices.
Which is another way of saying they wanted the government to make food and clothing more expensive for everyone else in order to benefit themselves.
Now let me pause here for a moment. I have nothing in particular against farmers per se.
We do need them. At the same time though, it is hard for a student of history not to have at least a slight sympathy for H.L. Mencken's assessment of farmers.
Anybody familiar with what Mencken had to say on farmers?
Well, you're in for a treat here.
Mencken said,
Let the farmer, so far as I'm concerned, be damned forevermore.
To hell with him and bad luck to him.
He is a tedious fraud and ignoramus, a cheap rogue and hypocrite, the eternal jack of the human pack.
He deserves all that he ever suffers under our economic system and more.
Any city man not insane who sheds tears for him is shedding tears of the crocodile.
And he goes on to describe the farmer as grasping, selfish and dishonest.
He says, when the going is good for him, he robs the rest of us up to the extreme limit of our endurance.
When the going is bad, he comes bawling for help out of the public till.
Has anyone ever heard of a farmer making any sacrifice of his own interests, however slight to the common good?
Has anyone ever heard of a farmer practicing or advocating any political idea that was not absolutely self-seeking,
that was not in fact deliberately designed to loot the rest of us to his gain?
Greenbackism, free silver, the government guarantee of prices, bonuses, and on and on,
these are the contributions of the virtuous husbandmen to American political theory.
There has never been a time in good seasons or bad when his hands were not itching for more.
There has never been a time when he was not ready to support any charlatan, however grotesque,
who promised to get it for him.
Only one issue ever fetches him, and that is the issue of his own profit.
He must be promised something definite and valuable to be paid to him alone, or he is
off after some other mountebank.
He simply cannot imagine himself as a citizen of a commonwealth, in duty bound to give as
well as take.
He can imagine himself only as getting all and giving nothing.
Yet we are asked to venerate this prehensile moron as the ur burger, the citizen par excellence, the foundation stone of the state.
And why? Because he produces something that all of us must have, that we must get somehow on penalty of death.
And how do we get it from him? By submitting helplessly to his unconscionable blackmailing,
by paying him, not under any rule of reason, but in proportion to his roguery and incompetence, and hence to the direness of our need.
I doubt that the human race as a whole would submit to that sort of hijacking year in and year out from any other necessary class of men.
All right, let's just let that settle for a moment.
All right, well, I'm going to get a lot of angry mail over that one.
But look, it's just Mencken, and just for historical interest, I read it to people, so I don't know what the problem is.
Well, a major reason, as you might expect, that the farmers were having such difficulty making a living
is that there were just too many of them, far more than made any economic sense.
And normally, when people have difficulty making a living, they choose to abandon their current occupation and pursue another one.
But given that farming is in some certain way, I think, qualitatively different from a lot of different other lifestyles,
because it is a whole way of living, it's a whole way of looking at the world, it's a whole philosophy behind it.
Plus there's this sense that the farmers used to be the backbone of the country so there's this reluctance to really ask them to change their occupation.
So instead it becomes government policy to try to keep them where they are.
Well, the American agricultural sector had actually expanded fairly dramatically during World War I because of disruption in production in Europe.
But that emergency is now over, of course, by the 1920s.
So it was, to say the least, unreasonable to pretend that America's bloated agricultural
sector could simply remain the same size, as if circumstances had not changed. People
and resources needed to be shifted out of agriculture and into some other line of production
that the American population needed more urgently. That, of course, was not done. Instead, during
Hoover's administration, a federal farm board was established, whose activities were supposed
In particular, the Federal Farm Board stood ready to make loans to farm cooperatives to make it possible for farmers to keep their crops, particularly wheat and cotton, off the market until their prices rose.
But whenever they managed to get prices up, the result was to encourage farmers to produce still more the following year, thereby making the surplus problem even worse.
Eventually, the farm board authorized through its Grain Stabilization Corporation massive purchases of wheat from American farmers at prices well above the world price. Farmers sold their wheat to the Grain Stabilization Corporation instead of exporting it.
Government farm bureaucrats were sure that by keeping American wheat off the world market, a world shortage of wheat would ensue and foreigners would be begging for American wheat.
and wheat. Instead, Canadian and Argentinian wheat producers simply grabbed America's share
of the world market. Federal bureaucrats were in fact able to raise the grain price for
a brief period, but again the result was that farmers responding to these higher prices
increased their acreage and produced more the following year, again aggravating the
surplus problem. These huge surpluses bought up by government agencies served to depress
The Grandiose Buying Organizations by which Hoover tried to maintain agricultural prices had the effect of demoralizing markets altogether by the accumulation of stocks and the creation of uncertainty.
Well, given this problem, some government officials were honest enough to admit that for a program like this to work, strict limits would have to be imposed on how much farmers would be allowed to produce.
So requests that farmers voluntarily cut back their acreage of both wheat and cotton were ignored. Why should we?
Why should we?
Desperate to increase prices, the chairman of the Federal Farm Board actually went so far as to call upon state governors,
quote, to induce immediate plowing under of every third row of cotton now growing.
So in order to increase farm prices, it was being proposed that farmers destroy already existing crops.
The New York Times called this, quote, one of the maddest things that ever came from an official body.
It would become official farm policy under Franklin Roosevelt.
So in an all too typical pattern, one government intervention leads to another.
As the government now intervened yet again in order to solve the problems caused by the first intervention.
So you've created total chaos in the agricultural sector.
So instead of just stopping your intervention, you have to come up with another intervention.
Given that American agriculture was a complete shambles, we now get the notorious Smoot-Hawley tariff being proposed and signed in 1930.
It was originally intended to provide tariff protection for American agricultural commodities.
But it turned out there was no politically feasible way to limit that protection to agricultural commodities.
Pressure groups from countless industries descended upon Washington to argue for tariff protection for themselves as well.
Now, virtually all American economists urged Hoover to veto the Smoot-Hawley tariff, but he ignored their advice and signed it into law in June 1930.
It raised tariffs an average of 59% on more than 25,000 items.
Now, the tariff hit American export industries hard.
by the way, this would be the case for two reasons
anytime you have a protective tariff, or really any kind of tariff
it's going to hurt American export industries
for one thing, if you export to the rest of the world
and you have to buy your inputs
you have to either buy them from your fellow Americans
who are now able to raise their prices because they have tariff protection
from foreign competition
or you have to buy them from foreigners and pay the tariff
...pay the tariff, whatever, you're at a competitive disadvantage as a result of the tariffs,
because you either have to buy your inputs from tariff-protected stuff overseas,
or you have to pay higher prices made possible by the tariffs.
So this is going to put your export industries at a disadvantage,
vis-à-vis businesses in other countries that are not at this type of disadvantage,
or don't have to pay artificially inflated prices for their inputs.
But then there's the fact of tariff retaliation that occurs.
Because obviously when you increase tariffs,
Americans are going to buy fewer goods from foreigners
because they want to avoid the tariff.
So American trading partners are going to retaliate against this.
When they see that their products are increasingly being shut out of the American market,
they're going to retaliate, keep American products out of theirs.
So given that the tariff affected Italy's major exports to the United States,
The Italian government doubled its tariffs on American cars.
American automobile sales in Italy fell by 90 percent.
The French practically shut American products out of their country altogether.
Spain retaliated by raising tariffs on American cars to a level
practically guaranteed no American cars would be sold there.
And you could just go on and on and on in this connection.
And in fact, there are a great many examples of this in Jim Powell's book, FDR's Folly,
which, of course, this is before FDR, but he gives example after example of the consequences of Smoot-Hawley Tariff.
Well, this wasn't the only tax increase that occurred under Hoover.
During the 1920s, Andrew Mellon, who had been Secretary of the Treasury, had advocated lowering income tax rates
because he, basically for laffer curve reasons, he had sort of suspected that the extremely high top rates
The top rates that have been imposed during WWI were tending to discourage investment and expansion of business and so we had to cut them for that reason and so that had been done, although of course in Robert Higgs, as if to confirm what Robert Higgs would say about the ratcheting effect, the top rate never went down to the level it was before WWI but it still came down to about 25% and then it was increased again under Hoover. The top rate went back up to 63%.
Andrew Mellon had been behind advocating this increase.
Here he was the one who in the 20s had said we've got to cut rates, cut them back down.
Now he's saying we've got to increase them. So the top rate goes back to 63% as part of the Revenue Act of 1932.
So therefore, in the midst of the Depression, you know, you need people investing, and now, of course, you've made that much less attractive.
Corporate and estate taxes were raised. The gift tax was revived.
Sales taxes were imposed on a great many items including cars, tires, gasoline, toiletries, toiletries people.
I don't know what kind of incentive that produces. Interesting thing.
Toiletries are increased, have their taxes increased, people buy less of them. I don't know what happens.
Electric energy, luxury items, other taxes were imposed on bank checks as well as telephone, telegraph and radio messages.
So if you're trying to send a telegraph message saying, hey, we've got some jerk as president, it's going to cost you a little bit more as a result of that.
The one area in which Hoover most differed from FDR and which has been totally exaggerated is that Hoover was hesitant to provide direct federal relief,
Preferring instead to rely on voluntary organizations and eventually to make loans to the states for the purpose.
He believed that voluntary organizations as well as state and local government were the appropriate instruments for dispensing aid.
In 1931, the Red Cross actually turned down a proposed federal grant of $25 million, arguing that it had all the money it needed,
and that such government grants to private charities would, quote,
to a large extent destroy voluntary giving.
Hoover also vastly increased expenditures on public works projects.
More money was spent on public works projects in the four years of Hoover
than had been spent in the previous 30.
He also subsidized the shipbuilding industry.
Now that would always be a silly thing to do,
When you consider that this is after the Smoot-Hawley Tariff
and your shipbuilding industry has much less need to expand it
because there's much less trade going on, he's going to subsidize it.
Hoover's Reconstruction Finance Corporation supplied failing businesses,
mainly railroads and banks, with emergency low-interest loans.
Rothbard's discussion of this is great because they always denied
that the Reconstruction Finance Corporation was in any way motivated by politics.
We're giving emergency loans to the most deserving banks and businesses.
It just so happens that Charles Dawes, who was a bigwig in the Republican Party
and had a big bank, happened to get a $95 million loan
from the Reconstruction Finance Corporation
for a bank that was about $90 million capital as a bizarre loan.
And that the treasurer of the Republican National Committee
by some coincidence happened to get a big loan from the Reconstruction Finance Corporation
so you wonder what the heck is going on here.
By the later part of 1932, the Reconstruction Finance Corporation was no longer doing
what you might call just defensive measures of trying to prop up businesses that were already in big trouble
but now was beginning to initiate projects, lending money to the states for unemployment relief
and to fund public works projects.
Now, Gary Dean Best points out the businesses he hoped thus to save either went bankrupt in the end after fearful agonies or were burdened throughout the 1930s by a crushing load of debt.
Well, Hoover congratulated himself, looking back on his record, and said, we might have done nothing. That would have been utter ruin.
Instead, we met the situation with proposals to private business and to Congress
of the most gigantic program of economic defense and counter-attack
ever evolved in the history of the Republic.
Counter-attack, such a funny word in this context.
Now, the result was a complete catastrophe.
Hoover drew no lessons from this experience, apparently.
Now, Franklin Roosevelt will be elected.
Franklin Roosevelt, the Democrat, although what on earth is the difference between them then as now is a good question.
But Franklin Roosevelt will now be elected and initiate his so-called New Deal programs.
Now, I became sort of naive after years of reading about the New Deal and reading both the mainstream literature and libertarian-type literature.
And it's more and more common now that you see, even in mainstream journals,
you see articles being written that acknowledge that, you know, in retrospect,
maybe Franklin Roosevelt's programs did prolong the Depression.
Maybe they were not, in fact, particularly well-designed to lift the country out of it.
It's now becoming more common to hear that.
That's not just something that we would say, it's something that more and more people would say.
But I came to the conclusion that everybody knew this.
You know, I sort of figured that everyone was sort of quietly conceding to us
The New Deal was that we're right about Franklin Roosevelt and that obviously the New Deal did damage, I just thought that.
Apparently it's not so. Apparently it's not so because when I argued this, the response I got from some people on the left online was to say,
well, I mean, was he crazy? I mean, the New Deal, what would we have done without, my father worked for the WPA as if an anecdote can overturn a whole body of evidence.
So that's why I chose this topic to go over, because I figured if this myth about the New Deal getting the country out of the Depression isn't dead yet, then I'd like to just do whatever my small part is in just repeatedly bludgeoning it.
So that's what today and this morning and this afternoon are all about.
Well, Franklin Roosevelt defeated Hoover fairly dramatically.
He's routinely listed as one of the great presidents in these lists of great presidents that come out periodically.
Now, during this past semester, there was a poll that came out, not of American historians, but of ordinary Americans,
about who they thought the great presidents were.
The Great Presidents
I'm not saying that's how historians make this decision, but there does seem to be a weird correlation between the two.
And I think Ronald Reagan is on his way toward near-great status.
I mean, I think when he died last year, we saw that no one was saying a single unkind word about it.
When he died last year, we saw that no one was saying a single unkind word about him.
I couldn't believe what was happening. It's like when you die, you become part of the pantheon of gods.
It's incredible.
In fact, I remember, I can't say who, but I was talking to a radio personality during the commercial.
I said, when I was a kid, I liked and admired Ronald Reagan.
But even I felt a little bizarre, this weird, almost blasphemous spiritual pretensions of the funeral.
And I said, you know, the whole presidency has got this bizarre aura around it now.
And he said, yeah, I'm wondering what are they going to do when Gerald Ford dies?
Are we going to do the same thing for Gerald Ford?
We're all going to say, oh my gosh, what a giant among men Gerald Ford was.
Anyway, all right, I don't know, maybe Chevy Chase can talk about Gerald Ford.
That's me. I don't mean to be mean to Gerald Ford. He's basically a harmless bumbler, more or less.
Anyway, so you always get these polls, but a few years ago, no, actually this past semester, they did a poll of the American population.
And I believe President George Bush, the current President George Bush, came in like at number seven.
Did anybody see this? The seventh greatest president in American history, George W. Bush.
Okay. I forget where Reagan came in, but like right up there, because it was right around the time of the funeral, and everybody was being told he was the greatest, so they voted for him.
But gosh, I guess just don't listen to these presidential rankings, unless you'd like to be tortured.
So, Franklin Roosevelt is always listed as one of the greats, because he... why?
Because he engaged in these tremendous programs, both foreign and domestic.
Well, the fact is, though, that during Franklin Roosevelt's tenure,
I mean, unemployment remained a major problem.
Up until you get to World War II, then you ship 11 million people overseas,
and voila, the unemployment problem goes away.
But, sorry, I'm not giving him credit for that, because I think anyone could have done that
to solve the unemployment problem.
If you want to just line people up in front of a firing squad, we could solve unemployment, but there's a hierarchy of moral pursuits in getting rid of unemployment, I think.
But from 1933 to 1940, the average unemployment rate is 18%. I mean, how does this constitute getting the country out of the Depression?
Well, sometimes you'll get historians who concede, all right, the New Deal did not lift the country out of the Depression. World War II did.
Well, we'll talk about that. I want to address that claim as well.
John T. Flynn is a notorious biographer of Franklin Roosevelt.
And he said that basically there was no one on earth more ignorant of economics than Franklin Roosevelt.
Did not at all understand how wealth was created.
And I recommend Flynn's book. It's called The Roosevelt Myth.
This book is out in a 50th anniversary edition from 1998 with an introduction by Ralph Reiko, which is great, which is actually better than the book, I think, Ralph Reiko's introduction.
But John T. Flynn was basically a good guy, but it's not a perfect book because Flynn is basically pro-Hoover.
So in the book he's sort of arguing, well, if only we had done more things that Hoover had done, continued in the line of Hoover.
I think, well, all right, we'll let him get away with that because he is very anti-Roosevelt and you can forgive a lot of someone who is anti-Roosevelt.
It's a wonderful book because it's got some good economic argumentation, but it's also got tremendously entertaining anecdotal evidence about some of the weirdos who were surrounding Franklin Roosevelt.
It's just wonderful and very much worth reading.
So I would recommend that book, FDR's Folly and the veteran Galloway book, Out of Work, as being the three absolutely indispensable starting points for this.
And then the Gary Dean Best book is also worth reading, Pride, Prejudice and Politics.
All right, well, what I want to do is to talk about the National Industrial Recovery Act.
But in order to do that, I want to go back in time to look at the antecedents,
both basically the intellectual antecedents of the National Industrial Recovery Act,
because we're going to see that in that piece of legislation from 1933,
We're going to see that various industries were permitted and indeed encouraged
to draw up production codes for their industries
in which each firm in that industry would be bound by the terms of the production code.
They would be bound by certain hours of operation.
You cannot carry out production before or after these set hours or for a longer duration.
You have to sell at least at this minimum price.
In the National Industrial Recovery Act, this does not just come out of thin air.
Businesses have been agitating for something like this for decades because they didn't like, frankly, the rigors of free market competition.
So they wanted to be sheltered from the rigors of free market competition.
And they've been sheltered from the rigors of free market competition for decades.
In 1933, they wanted to be sheltered from the rigors of free market competition and they had been trying for years to come up with a mechanism for doing that.
None of them had been terribly successful.
They needed to have government backing for it and they're going to get it in 1933.
But from the end of World War I, you already have businesses that are quite taken by the idea of economic planning
and the idea of economic coordination and rationalizing production
and cutting down on anarchic competition and laissez-faire.
This is another reason that, although I have to admit,
I very much enjoy some of Ayn Rand's essays
because I like her polemical style and her combative nature.
At the same time, I think she tends to romanticize business so much
In fact, we forget that these are actually mortal men involved in these undertakings
and they, as much as anyone else, have sort of the disutility of labor and an attraction
for gaining at the expense of their fellows using the machinery of the state, and we begin
to see that already at the end of World War I, because during World War I there had been
a tremendous government involvement in production, and a lot of businessmen thought that this
could be a model for the future, sort of joint cooperation between government and business
and a kind of flattening out of competition.
In this context, it's worth recalling a very famous statement
that some of you, I'm sure, are anticipating by Adam Smith.
In the 18th century, Adam Smith said,
people of the same trade seldom meet together,
even for merriment and diversion, but the conversation
ends in a conspiracy against the public
or in some contrivance to raise prices.
Well, that is very much operative here.
Now typically we have this consensus, we have this, I think, myth that in the early 19th
century, pardon me, in the early 20th century, in the late 19th, that there wasn't that
much, very vigorous competition, that in fact you had a very stagnant situation where you
had just a few firms dominating each industry, which, by the way, there's no non-arbitrary
way of saying that that's in some way objectively bad or wrong or not optimal or something,
But there are people who would look at it in terms of sheer numbers.
There are just a few major firms and they dominate these industries and there's not
much competition because that's the way they think of competition.
There is no competition unless you have 500 different firms.
The fact is that when you look at it, at any definition that you can think of, of competition,
whether it's an Austrian one or a non-Austrian one, it turns out that competition was incredibly
intense in the early 20th century and this is becoming more and more clear.
This is one of the points that Gabriel Kolko makes in his book, The Triumph of Conservatism.
Kolko wrote this revisionist history of the early 20th century, basically looking at the years roughly 1900 to 1916 or so,
and showing that there was intense competition and that this is precisely why you see big business so anxious
to use the machinery of government to in some way inhibit the intensity, to limit the intensity of this competition.
Historian Robert Wiebe actually said that businessmen after World War I were not looking toward
quote, a neutralization of the government. They wanted a powerful government but one whose authority stood at their disposal.
A strong responsive government through which they could manage their own affairs in their own way.
Now, a very much overlooked book on this subject, on the efforts by business to use first voluntary means, and then in the 30s, coercive means, to secure some kind of agreement among firms, not to undersell each other, not to use so-called unfair business practices, and by the way, when businessmen define what constitutes an unfair business practice, it almost always means a business practice that we have difficulty responding to,
The classic study of this, I think already, even though it's only about 8 years old,
is written by Butler Schaeffer, whose work you may be familiar with reading him on lewrockwell.com.
Butler Schaeffer wrote a book called In Restraint of Trade, and I believe the subtitle is The
Business Campaign Against Competition, 1918 and 1938.
This book is excellent and deserves much more attention than its receipt, and I know Bob
Murphy did a review of it some time ago.
It's very much worth looking at because he explores this phenomenon.
It's been totally overlooked because so many historians have just assumed that big business is always in favor of the untrammeled market.
Nothing could be further from the truth.
What began to happen already in 1919 and had already begun, and then certainly through the 20s,
was the development of various trade associations where firms of a particular industry would join together voluntarily
and try to hammer out some kind of voluntary code to which they would all exceed.
And Professor Schaeffer points out that one trade association executive
condemned the businessman who operated his business
in entire disregard of the effects on his competitor and the rest of the industry.
That's the mainstream view, really, in the 1920s.
And you see this in business publications, in Business Week, everywhere,
This idea that we have to move beyond the old days.
For example, one businessman said,
instead of being the individualistic merchant of the old days,
the modern businessman must believe in the new spirit of cooperation.
Again, bear in mind that quotation from Adam Smith.
Another businessman said,
our profits are absolutely unprotected.
He said that we need business ethics legislation that would make it possible for fair practices to become a law in any industry
when 80 or 90 percent of that industry, together with governmental supervision, agree on a policy.
The president of the Denison Manufacturing Company said this,
We must manage ourselves if we are to gain on the past.
No laissez-faire, no unchanneled and unimpeded course of nature, no invisible hand will do it for us.
We now find ourselves in a period of growing social self-control.
I love that social self-control.
It's not just each of us will control ourselves.
We'll have social self-control, which is a little more ominous sounding, I think.
So these people are speaking of the end of laissez-faire,
or either voluntary regulation on the part of business, self-regulation,
or if necessary, using the coercive power of the state if the voluntary means don't work.
Herbert Hoover was a huge supporter of this, huge supporter of this so-called associationism in the 1920s.
He thought this was the answer to untrammeled competition.
So here he is hilariously referred to as the supporter of the absolutely untrammeled market
against any attempt to modify the market, but nothing could be further from the truth.
It's exactly the opposite.
In the 1920s, the American bottlers of carbonated beverages, as did many different industries, developed a code of ethics.
Some industries developed codes of fair competition to which they proposed that the firms in their industry would adhere.
And one of the points in their code was,
was, my desire shall not be to undersell my fellow bottlers,
but to contend with them for first place
in the quality of my products and the service
I render my patrons.
And I think Professor Schaeffer gets right
to the heart of the significance of this when he says this.
The established firms would, quite understandably,
find such competitive restrictions
particularly beneficial.
For a newer firm would, in order to attract customers away
from the older firms have to offer significant inducements.
This is a problem always faced by a newcomer.
The existing firms enjoy an immense advantage by virtue of their goodwill and established
positions, a situation that can be overcome only by recourse to the most effective competitive
methods.
But if competitive methods become fairly standardized and the newer firm is required to adhere to
the same patterns as the established firm, the newcomer will find itself at an even greater
It will have been deprived of the means of offering the necessary inducements to attract customers away from the established firms.
I think that's it, exactly.
Now, one of the points that Schaeffer notes about the 1920s was that you got the Federal Trade Commission
occasionally calling in various firms to help them hammer out some kind of code
and to determine what these firms themselves consider to be unfair business practices.
And very often, one of the unfair business practices is selling below cost.
And that's an unfair business practice.
Now, what these businesses were hoping for was that if they meet with the Federal Trade Commission
and the vast bulk of them agree on what would constitute an unfair business practice,
This widespread consensus would then filter its way into the common law, which would become a factor that would inform judges when they adjudicate disputes in business or using antitrust legislation, that, look, this is just a reasonable rule that 90% of reasonable businessmen agree on.
So there was this hope that this could translate in some way into some kind of coercive measure to keep competition at bay.
Now these voluntary agreements though have this problem that since they're voluntary, you'll never get everybody agreeing to them.
There'll always be some firms who will say this is idiotic and I'm going to keep selling at whatever price I want and pursuing whatever business practice I want.
And, even if you did manage to get all the firms to agree to it, who will not limit wheat or cotton production, the individual manufacturer will in all likelihood bleat and bluster when he is asked to follow a given plan.
The answer to this is the same answer that our forefathers probably gave to a citizen in a New England town when he objected to a town meeting's action.
Do your hollering and your arguing in due order in time when you exercise your prerogative as a free citizen by coming to the meeting and debate and vote, and then, when the matter is decided by majority vote, obey the mandate.
By this test, the plan for logical government in industry is in no sense a contravention of liberty, nor an interference by government in business.
Business merely uses the government's aid in governing itself.
Again, along these lines from the Swope Plan,
How can coercion be considerate and fair?
Only when the fullest technical opinion within a given industry agrees
that it knows the interests of the moderately small producer better than he does.
Isn't that funny how they all know his interests better than he does?
A man's peers can pass upon a man's needs more fairly than any others.
By the way, the man's peers happen to be his competitors. You might point that out.
But we know your needs.
Coercion in the coerced one's own best interests is no less considerate
than a measure of coercion applied to an adolescent when all moral suasion has failed.
Absolute contempt for this small businessman.
Senator Robert Wagner, who is responsible for the Wagner Act, which involves labor unions,
we're going to talk about tomorrow, that's one of the features of the new deal that we're going to postpone until we talk about labor unions.
But he looked at the National Industrial Recovery Act of Franklin Roosevelt, which in effect put these features into effect finally,
that said that industries will be encouraged to drop these codes
and they will be codes that regulate hours of production, minimum prices again,
sometimes quality regulations, but also in order to get organized labor on board,
minimum wages that will be paid in the various industries
and will suspend the antitrust laws so that businesses can get away with doing this.
Robert Wagner said this,
I think this bill is important as the first step toward that which the liberals of this country have been preparing for years.
So already the word liberal has been destroyed.
It was a part of the platform of the 1912 Progressive Party, namely the necessity of a national planned economy.
Until we have that, I venture to say that we are not going to have an orderly, organized economic system.
A good deal of the chaos and disorganization from which we are suffering now is due to this lack of planning.
All right, well, say a little bit about this and then probably just open for questions and continue after lunch.
But the man who headed the National Recovery Administration, which was created by the National Industrial Recovery Act,
which in effect coordinated these codes and gave the force of law to them,
once referred to this whole plan, the National Recovery Administration, as a holy thing,
the greatest social advance since the days of Jesus Christ.
I mean, some people might think that's kind of an exaggeration.
He said, I think industry can both run itself and govern itself
and that the coercive power of political government will be necessary only to discipline units within an industry which depart from practices which the overwhelming bulk of that industry regard as unfair and destructive.
Is this regimentation? If it is, it is regimentation by the majority itself through the peculiarly American doctrine of majority rule.
That is no more regimentation than any form of government
which any community elects to impose upon itself for the common good.
Yeah, I know what I mean. You're just left speechless.
Well, as the National Industrial Recovery Act and its offshoot,
the National Recovery Administration goes on for a couple of years,
there are a lot of complaints about it. Small business complain,
The thinking behind it, by the way, is not only that business wants to regulate itself, but there's this thinking that, you know, we're in this depressed condition, there's only a limited amount of demand out there, so we have to parcel it out among the businesses, and we need coordination between the two, and that's what we're trying to do.
The thinking behind it, by the way, is not only that business wants to regulate itself,
but there's this thinking that, you know, we're in this depressed condition,
there's only a limited amount of demand out there.
So we have to parcel it out among the businesses and we need coordination to do this.
And there is this belief that big business itself became really disconcerted,
disillusioned with the National Recovery Administration and the whole plan.
But that's kind of a misleading statement, because by 1935, when the Supreme Court found this act to be unconstitutional,
this is back when the Supreme Court used to actually find things unconstitutional, other than state laws,
it's not true that big business was saying, oh, well, that's a relief.
It's true that they had some administrative disagreements with the way the thing was being run,
But Butler Schaeffer makes an indispensable point that their so-called opposition was just in the way the thing was being run.
It wasn't the basic principle of the thing whereby businesses would have these codes governing them.
They still liked that. In fact, he managed to dig up this useful bit of information.
The US Chamber of Commerce had a referendum in 1935 of its members.
And they asked them these poll questions.
The first one was, are you for enactment of new legislation prior to the expiration of the National Industrial Recovery Act?
And 78.1% were for, 21.9% against.
Do you believe that industry should be permitted to formulate its own rules of fair competition subject to government approval?
In favor of that statement? Yes. 95.2%, 4.8% against.
How do you feel about having rules of fair competition enforceable against all concerns in the industry?
91.8% in favor, 8.2% against.
So to say that they were relieved that this thing was over is, I think, a misreading of the data.
So, anyway, I say to you, you should read Professor Schaeffer's book, because it's one of these books that is a huge contribution to an absolute gap in the literature covering essential material, but it's one of these books that's easily overlooked, and it should be studied, because it's extremely well done.
How does Mr. Hoover get the businesses to keep wages high? Did he convince them on economic grounds or did they want to stand on their side?
I mean, you would think that as a businessman, you would see from your own, I don't know, bookkeeping or something, that we just can't afford to pay these wages, but some of them do actually seem to have believed that it was good for industry as a whole, if we keep wages up because then they can buy products and then other people keep wages up, they can buy our products. This just seemed to have swept the board as the fashionable way of thinking. But secondly,
They do, I think, want to stay on the good side of the president.
I mean, think of Bill Gates when the government was going after him.
You know, I remember seeing on the news, there he is playing golf with Bill Clinton.
And I thought, isn't this disgusting?
You know, when you live in a society where you have to play golf with this jerk,
just to try to hope that, you know, would you please not shut me down?
Good. You know?
So I think some of that was this desire that the president urges you to do something, you do it.
Now, smaller business that wasn't as much in the limelight, wasn't really as much on display as it were, did manage to get away with cutting wages a little bit, with it not being as noticeable.
But eventually even big business had to say, well, this is just not sustainable for us as an individual firm, we just can't keep it up, and eventually they did cut the wages.
Everything you've been talking about with the NRA is pure marketalism or even fascism.
What else can we talk about?
In some way this isn't fair, but in some ways, look, they said it, so I'm going to use these quotations.
I have a couple of quotations from Mussolini and Hitler, explaining their admiration for the New Deal.
So I'm going to read those in the next talk after lunch.
That's actually something that's hard to hear after lunch, actually.
Right? My gosh, Hitler saying, I love Franklin Roosevelt, but he did actually more or less say that.
I thought the NRA also was not just big business, but I kept thought of going down the whole areas of business.
I recall one guy who got put in jail because he cut the price of pressing trousers.
Right, right, right. Oh, that's true. Oh no, it would apply to everybody, but the code drafting tend to be dominated by the biggest.
But yeah, you're right. That's an anecdote that you can find in John T. Flynn's book, where he gives examples of people
People who are found violating the codes of production.
So he gives the example of a gentleman in New Jersey who's hemming a pair of pants at night.
Or he's hemming them for 35 cents and he's supposed to hem them for 40 cents.
Or there are people in the garment industry who are producing things at night instead of during the day,
and you're not supposed to do that.
And so people are, you know, there are thousands of enforcement officials whose job it is to storm into your business
Are marketing orders for now in agriculture the same kind of activity?
I used to work for USA for 13 years and I was hauled by all these marketing orders that were going on.
And you wonder, how can it still go on?
I mean, to one extent, you have the public choice explanation.
You know, that the agricultural interests are small and concentrated.
It's in their interests and it's easy for them to organize and lobby 24 hours a day.
Our interests are more dispersed.
It doesn't matter to me, you know, if sugar is 25 cents more than it would otherwise be.
Well, I'll have to live with it.
So they're going to tend to win.
But I mean, this is just so outrageous when you consider how much some of these big agricultural concerns are getting from the government.
in these programs, and so I tell this to my students and they're just, because they laugh when they hear about Hoover and FDR with agriculture, they say, oh, gosh, people were just really silly in those days, and I say, well, this stuff still goes on, they just can't, how is this happening in a democracy, because they all think that in a democracy nothing can go wrong, like most of us don't produce lemons, so why is there this program for lemons, so I have to explain to them, and they leave just very confused, well, what do we do, I just don't know, but yeah, the fact that it's still going on,
going on is absolutely stunning. It's stunning. Yes.
I mean, I think it goes beyond the first thing though, because there are a lot of people who are not farmers, but yet they're really in favor of these things.
Maybe they just haven't really looked at it, really thought about it, but they'll say things like, oh, we need to protect the family farm when in fact the subsidies are going to these huge corporations.
I think that's true to an extent, but I also think your other statement is true that they probably haven't thought the whole thing through because they realize that the consequences of this are that poor people have more trouble getting food now.
Maybe they might think, well then there's got to be some other way of helping the family farm.
And you know, one program that I've sort of favored, it's not a government program and I wrote briefly about it once.
There is something, I mean it is hard to be a farmer. I mean I know I made fun of them reading that Mencken thing and whatever,
but I mean it's hard to be a farmer because so much can go wrong from year to year.
And so it's very easy for farmers to become indebted because they go into debt at the beginning of the year, they plant their crops,
and then it turns out badly and then sometimes it's hard for them to pay the debt
and they've got to go into the next year and the debt can multiply
and so it's very difficult.
So one thing that has been done since the 1980s
is something called community-supported agriculture.
I know you hear community and you think, ah, but that's not bad.
It's not a bad thing because the idea is that
some of us do like to have our food grown locally.
I don't need to have a head of lettuce shipped to me from Australia, probably.
Maybe that is the most economically sensible way to do it.
I just like to be able to buy locally grown stuff, but the farmers have a difficult time.
So what people do in community-supported agriculture is they voluntarily pay the farmer a few hundred dollars at the beginning of the year.
They give him his capital, and then he uses that for what he needs.
And then when he begins growing, you get free stuff the whole year, or you get all his production.
You get to go there and pick out, well, I guess I'll get some fennel and whatever and you just stock up on stuff.
You get fresh produce all year, at least during his growing season.
But you get the produce in proportion to how well the farmer does that year.
If he's having a great year, then you get a whole bunch of fennel.
I'm not even sure what fennel is, actually. I don't know why I use that.
But if he has not so good a year, then you have not so good a year.
I have friends who have been involved in this for years who tell me that
the farmer would have to have an event of biblical proportions
for you not to get a lot of produce.
And so that to me, that's a great example of how voluntary means can actually satisfy everybody.
I get to get my locally produced stuff.
The farmer isn't going to Congress to get special privileges, whatever.
It's just people who value these things, put a price tag on it, put their money where their mouth is.
It seems to me that's a nice way forward.
Yes?
You read a quote about our profits are highly affected by the businessmen and others.
There are just two ways of reading it.
One is that our profits are in a narrow sense of us, the small people, the businessmen, or whatever it might be.
or could mean just some general rate of properties in the danger of pre-competition.
And I'm just wondering if there's a second reading of the gospel,
if there's what intellectual roots of that error are,
or thinking that pre-competition is in danger.
Right, right, right.
I'm just looking at it again just to see if I can figure out the context
on the basis of the small quotation that I have here.
Is that a quotation or a general idea?
I think that unchecked competition is just simply too destructive and in the long run it's going to hurt everybody because it's the argument that they're trying to make
because sometimes these codes or these comments in business magazines are being made to the guy who is cutting prices very low and they're saying to him, you know, this isn't in your interest either.
Let the producer find that out for himself, but there is this thinking that businessmen who are engaged in these types of practices are just too short-sighted and that the only way that you can really look to the long-term is through collective action, where you get the best minds in the industry and they think in terms of what's good.
are just too short-sighted, and that the only way that you can really look to the long term
is through collective action where you get the best minds in the industry
and they think in terms of what's good.
But they have no confidence in individual business mavericks.
They think that this can throw the entire industry into disarray.
And an intellectual historian more skilled than I can try to trace out
where this line of thinking ultimately originates,
I have a question about the historiography of this period. I guess, like most people, my education included this fiction about people kicking back and advocating when they could bear, although it's something that I admire, but I've come to find out it's not true. When and where did this idea come from?
Other than from pro-Roosevelt historians who want Roosevelt to look good by comparison,
they want to show that he's the originator of all kinds of radically new ideas as opposed
to the old, tired laissez-faire of the past.
But I can't put actual names and faces to that.
But if anybody in the room can help me here, I'd love to know the answer because it seems
to me that it's quite clear as Butler Schaeffer has shown and Rothbard has shown and others
I'm just going to say right now, a lot of us can look at Fern Bush policies with regard to Iraq and see the truth, but the majority either doesn't see it or doesn't want to see it.
Isn't it part of human nature, the herd mentality, that they swim with the crowd and even though they're all going off the cliff, at the same time they don't want to look at the actual truth.
Apparently, years later, it makes sense. They can now collectively sit there and go, yeah, we were wrong.
But at the time, individually, no, they don't want to step out of the ranks of the herd.
There's this kind of herd mentality that sees what it wants to see, in the same way that
today people are repeating propaganda about the Middle East that is demonstrably false.
We don't understand how is it possible that you can think these things when they're demonstrably
false, but sometimes you're so committed to see one thing that that is, in fact, what
you wind up seeing.
Yes?
I think the other thing that happens often is that anything that goes bad is always said,
well, it's a market failure.
It's a market failure.
It's a market failure and usually if you look at what's happening, it is precisely where the government has come in and interfered the most.
I give two examples, healthcare and education, most of which for the last 40 years have been increasingly involving the government,
but since the expenses are going out of the ceiling, it's a market failure.
You know, I think that's a good point because I think people today think, well, we've got this free market in healthcare and it's producing all these distortions,
The same kind of person who would say that Herbert Hoover was free market would probably say that right now we've got a free market in health care and that's, you know, there are a million distortions in the market for health care.
Yes.
Well, another thing, especially considering the different things you say about Hoover and Roosevelt has a lot to do with just the partisan nature of politics.
You know, I mean, it's in the Democrats' interest to say that, you know, he's different from this Republican.
Right.
It's in the Republicans' interest to say he's different from this Democrat.
Like you were saying, John D. Flynn even likes Hoover.
Right.
Even though they're doing the same thing.
Right.
Going back to the thing about Bush and Iraq, Clinton was the one who actually put into law that it was the policy of the United States to go and overthrow Saddam Hussein. No Democrat would ever want to talk about that.
my reaction to that is to say in my naive way, well shouldn't professional historians though be above this type of bias?
Shouldn't they just be disinterested seekers of the truth?
Kevin? I think that's the last one.
I'll put in another plug for the Roosevelt Minute. It's kind of like a real Lincoln written 50 years ago.
But one of the best things in it is just it's actually not just that his son likely murdered some boy when he got him off the road.
Or that Elmer Roosevelt was sent directly to keep Communists in the Democratic Party.
I mean it's not just records of buffoonery, it's malice and evil and darkness.
Okay, well, I think that statement is worth repeating for the whole internet broadcast audience.
So I'll just say that Kevin is suggesting, once again, putting another plug in for The Roosevelt Myth,
a book you should go get. Let's all watch the Amazon rank of The Roosevelt Myth and see if anybody cares about what we say here.
But it's not just a book with interesting anecdotes, as I pointed out.
It's a book that also, that really catalogs just, how did you put it, just malice and evil and darkness and everything in the, in the, you know, in the Roosevelt circle.
So that makes it eminently worth, eminently worth, yeah, the whole, this like, this like disturbing people in the family and they do weirdo and bizarre and evil things.
Well, I mean, I came away from that. Remembering how like, there was a period of time when the Clintons were trying to float this comparison of them with the Roosevelts?
The comparison may be more apt than you realize, but not in the way you're thinking.
There's really a lot more similarity between Eleanor Roosevelt and Hillary Clinton.
I didn't believe in reincarnation until just in this one case.
I know in Hebrews it says it is given to man once to die and then the judgment.
But for heaven's sake, this is the closest challenge I've ever had to that doctrine.
That's right. Okay, I think we're all finished, so thank you ladies and gentlemen.