WEBVTT

NOTE The Great Depression, World War II, and American Prosperity, Part I

1
00:00:00.000 --> 00:00:12.000
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.

2
00:00:12.000 --> 00:00:27.000
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.

3
00:00:27.000 --> 00:00:35.000
But the really bad, appallingly bad economic conditions really settle in around 1931.

4
00:00:35.000 --> 00:00:39.000
That's why Benjamin Anderson calls 1931 the tragic year.

5
00:00:39.000 --> 00:00:43.000
But people associate it in their minds with 1929.

6
00:00:43.000 --> 00:00:48.000
Now the 1920s, of course, had been a very prosperous time.

7
00:00:48.000 --> 00:00:54.000
I believe that by 1926 the unemployment rate had been reduced to 1%.

8
00:00:54.000 --> 00:01:00.000
is unheard of, unbelievable, but there were difficulties.

9
00:01:00.000 --> 00:01:09.000
There were problems with the economy that were deep-seated and perhaps not evident on the surface.

10
00:01:09.000 --> 00:01:17.000
Now obviously various explanations have been advanced for what caused the tremendous downturn

11
00:01:17.000 --> 00:01:24.640
that occurred basically, particularly in 1931, but beginning in 1929,

12
00:01:24.640 --> 00:01:26.920
because it's a very substantial downturn.

13
00:01:26.920 --> 00:01:32.840
Real GNP per capita fell by 30% between 1929 and 1933.

14
00:01:32.840 --> 00:01:37.200
Unemployment reached over a quarter of the labor force.

15
00:01:37.200 --> 00:01:45.720
And it has been said that if we lined up all the unemployed in a line, a yard apart,

16
00:01:45.720 --> 00:01:50.640
The line would stretch from New York to Seattle to Los Angeles and all the way back to New York

17
00:01:50.640 --> 00:01:54.880
and would still leave 280,000 people out of the line.

18
00:01:54.880 --> 00:01:59.920
It seems to me somebody who is himself out of work must have taken the time to calculate that statistic,

19
00:01:59.920 --> 00:02:03.560
but there you have it.

20
00:02:03.560 --> 00:02:09.960
Corporate profits after taxes were actually negative in 1931, 32 and 33.

21
00:02:09.960 --> 00:02:14.400
Net private investment during the 1930s was also negative.

22
00:02:14.400 --> 00:02:17.400
It may first seem odd, how can you have negative investment?

23
00:02:17.400 --> 00:02:23.400
Well, that is to say that plant and equipment depreciated and wore out faster than they were being replaced.

24
00:02:23.400 --> 00:02:33.400
So given these figures, naturally, natural human curiosity wants to know what is the explanation for this.

25
00:02:33.400 --> 00:02:36.400
Or at least, what initiated the downturn?

26
00:02:36.400 --> 00:02:40.400
And then we'll look at what kept it so sustained.

27
00:02:40.400 --> 00:02:44.400
But what was the precipitating factor that initiated the downturn?

28
00:02:44.400 --> 00:02:52.400
Well, I'm going to propose the explanation that Rothbard advances in America's Great Depression.

29
00:02:52.400 --> 00:02:59.400
And I don't have to defend his position with great precision simply because Joe Salerno did that in his seminar.

30
00:02:59.400 --> 00:03:02.400
I believe it was election number seven.

31
00:03:02.400 --> 00:03:06.400
Joe Salerno looked at some of the criticisms that have been advanced

32
00:03:06.400 --> 00:03:12.400
against Rothbard's book, America's Great Depression from 1963 and I think is in a fifth edition now.

33
00:03:12.400 --> 00:03:20.400
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.

34
00:03:20.400 --> 00:03:25.400
So you can get a lot of the meat there. I'm going to speak more broadly here.

35
00:03:25.400 --> 00:03:32.400
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.

36
00:03:32.400 --> 00:03:46.400
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.

37
00:03:46.400 --> 00:03:53.400
But I do this because not everybody who's a historian knows about the Austrian cycle theory.

38
00:03:53.400 --> 00:03:58.400
Not everybody who's a historian knows there is such a thing as a cycle, business cycle theory.

39
00:03:58.400 --> 00:04:03.400
And, you know, who knows who the audience for this is and people could be hearing this for the first time

40
00:04:03.400 --> 00:04:07.400
and I happen to think this is one of the greatest contributions the Austrian School makes

41
00:04:07.400 --> 00:04:13.400
because the business cycle theory I find so persuasive that it sort of answers the question,

42
00:04:13.400 --> 00:04:15.400
why are you interested in economics?

43
00:04:15.400 --> 00:04:21.400
Well, I'm interested in it because it has such explanatory power as this.

44
00:04:21.400 --> 00:04:24.400
Well, a good introduction to the theory comes in the,

45
00:04:24.400 --> 00:04:31.400
There's a little book of essays that the Institute puts out on the Austrian theory of the trade cycle.

46
00:04:31.400 --> 00:04:37.400
Rothbard has one in there from the late 60s called Economic Depressions, Their Cause and Cure.

47
00:04:37.400 --> 00:04:49.400
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,

48
00:04:49.400 --> 00:04:54.400
There are two empirical facts that your theory must be able to account for.

49
00:04:54.400 --> 00:05:01.400
And he says that one such fact comes from the very definition of a depression.

50
00:05:01.400 --> 00:05:07.400
When you have a depression and you have a depressed business sector

51
00:05:07.400 --> 00:05:14.400
and obviously you've had tremendous entrepreneurial misjudgments taking place all at the same time,

52
00:05:14.400 --> 00:05:17.400
the question arises, why is this happening simultaneously?

53
00:05:17.400 --> 00:05:22.400
Why, to use Rothbard's phrase, why is there this cluster of entrepreneurial error?

54
00:05:22.400 --> 00:05:29.400
Given that the market system has built within it a natural tendency to weed out the good entrepreneurs from the bad,

55
00:05:29.400 --> 00:05:35.400
to weed out people who have superior forecasting ability from those who have poor forecasting ability,

56
00:05:35.400 --> 00:05:41.400
those who are good at meeting the anticipated desires of consumers from those who are very poor at it,

57
00:05:41.400 --> 00:05:44.400
given that the market has this natural sifting process,

58
00:05:44.400 --> 00:05:50.400
Why would all the people the market has in effect chosen to endow with capital goods?

59
00:05:50.400 --> 00:05:55.400
Why would so many of them simultaneously have made terrible errors?

60
00:05:55.400 --> 00:05:58.400
Why is that?

61
00:05:58.400 --> 00:06:06.400
Secondly, he says, we must account for an empirical fact that seems to characterize one business cycle after another.

62
00:06:06.400 --> 00:06:12.400
And that is that they tend to hit capital goods industries much more heavily than they do consumer goods industries.

63
00:06:12.400 --> 00:06:20.400
And this is going to be true, clearly and verifiably true, of America's Great Depression, this empirical fact.

64
00:06:20.400 --> 00:06:26.400
So capital or producer goods industries are hit harder than consumer goods industries.

65
00:06:26.400 --> 00:06:35.400
This empirical fact in and of itself poses a radical challenge to those who would claim that depressions are caused by underconsumption.

66
00:06:35.400 --> 00:06:39.900
People are just not consuming enough or they're not able to consume enough and that causes problems.

67
00:06:39.900 --> 00:06:50.900
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?

68
00:06:50.900 --> 00:06:59.900
Like, I don't buy a steel plant, you know, right, typically. So why would the depression be hit so hard there?

69
00:06:59.900 --> 00:07:10.900
Well, in effect, the Austrian view suggests that there is an explanatory factor that can account for both of these facts that characterize depressions.

70
00:07:10.900 --> 00:07:17.900
Now, in the unhampered market economy, the interest rate declines when people save more.

71
00:07:17.900 --> 00:07:20.900
So that is to say, put your money in a savings account.

72
00:07:20.900 --> 00:07:28.900
Banks lend these saved funds out to borrowers, and the more people save, the more the banks have available to lend,

73
00:07:28.900 --> 00:07:32.900
The more the banks have available to lend, the lower the interest rate will be.

74
00:07:32.900 --> 00:07:39.900
This stands to reason because as something comes into greater and greater abundance, its price tends to fall lower and lower.

75
00:07:39.900 --> 00:07:43.900
And so in this case, the amount of loanable funds increases.

76
00:07:43.900 --> 00:07:48.900
So its price, the price of borrowing or the interest rate correspondingly falls.

77
00:07:48.900 --> 00:07:54.900
Moreover, the Austrian theory introduces the concepts of higher and lower order stages of production.

78
00:07:54.900 --> 00:08:00.900
Higher order stages of production are stages of the production process that are further away from finished consumer goods,

79
00:08:00.900 --> 00:08:05.900
things like mining and refining, or the construction of a factory or production facility.

80
00:08:05.900 --> 00:08:10.900
These are sometimes called producer goods industries since they involve things that are produced not for immediate use,

81
00:08:10.900 --> 00:08:14.900
but are themselves used to produce final consumer goods.

82
00:08:14.900 --> 00:08:21.900
Grain production, for instance, is a higher order stage than is the bakery that sells the final consumption goods.

83
00:08:21.900 --> 00:08:26.900
Higher order stages of production tend to be the most sensitive to interest rate fluctuations.

84
00:08:26.900 --> 00:08:32.900
Building a new plant or expanding mining capacity might turn a profit only in the relatively distant future.

85
00:08:32.900 --> 00:08:36.900
If interest rates are high, this means higher costs year after year.

86
00:08:36.900 --> 00:08:42.900
But if the interest rate should come down, projects that once looked unprofitable suddenly become potentially profitable.

87
00:08:42.900 --> 00:08:47.900
In an unhampered market with a commodity money, everything works out smoothly.

88
00:08:47.900 --> 00:08:52.900
By saving more of their money, consumers have indicated that they are prepared to spend less in the present.

89
00:08:52.900 --> 00:08:56.900
Investors make note of this in the form of a lower interest rate.

90
00:08:56.900 --> 00:09:03.900
Lower interest rate encourages them to begin investing, investing in particular in more time-consuming stages of production

91
00:09:03.900 --> 00:09:06.900
that they can now afford thanks to the lower interest rate

92
00:09:06.900 --> 00:09:11.900
and thanks to the fact that consumers have indicated a relatively decreased desire to consume in the present.

93
00:09:11.900 --> 00:09:16.900
So, in effect, consumers are willing to wait, as they've demonstrated by saving.

94
00:09:16.900 --> 00:09:19.900
So this is the time for investment to take place.

95
00:09:19.900 --> 00:09:24.900
But consider what happens when the central bank, or the Federal Reserve in our case, intervenes in the economy.

96
00:09:24.900 --> 00:09:30.900
Fed has a variety of mechanisms at its disposal to increase the availability of credit and lower interest rates.

97
00:09:30.900 --> 00:09:34.900
Whether the rate is lowered by voluntary saving on the part of the public,

98
00:09:34.900 --> 00:09:37.900
or whether it is lowered by these actions of the Federal Reserve,

99
00:09:37.900 --> 00:09:41.900
the result in both cases is that businesses see that interest rates have come down.

100
00:09:41.900 --> 00:09:49.900
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.

101
00:09:49.900 --> 00:09:58.900
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.

102
00:09:58.900 --> 00:10:03.900
This time the lower interest rate is created by entirely artificial means.

103
00:10:03.900 --> 00:10:09.900
Investors are thus misled into directing resources into higher order, time consuming stages of production,

104
00:10:09.900 --> 00:10:14.900
while in the meantime, consumers continue to follow their old consumption patterns.

105
00:10:14.900 --> 00:10:18.900
Now we can either have more investment and less consumption in the present,

106
00:10:18.900 --> 00:10:21.900
or less investment and more consumption in the present.

107
00:10:21.900 --> 00:10:25.900
But the Fed generated boom attempts to do both simultaneously,

108
00:10:25.900 --> 00:10:29.900
more investment and more sustained consumption at the same time.

109
00:10:29.900 --> 00:10:34.900
Something has to give, the economy is being pushed in two mutually exclusive directions at once.

110
00:10:34.900 --> 00:10:38.900
In a genuine boom, fueled by additional savings,

111
00:10:38.900 --> 00:10:43.740
People's abstention from consumption makes resources available to investors.

112
00:10:43.740 --> 00:10:48.060
The Fed-driven boom, on the other hand, makes no additional resources available.

113
00:10:48.060 --> 00:10:50.960
People's time preferences have not changed.

114
00:10:50.960 --> 00:10:56.220
So as Roger Garrison notes, in the absence of an actual change in time preferences, that

115
00:10:56.220 --> 00:11:02.080
is people's willingness to defer purchases, no additional resources for sustaining the

116
00:11:02.080 --> 00:11:04.760
policy-induced boom are freed up.

117
00:11:04.760 --> 00:11:10.560
In fact, facing a lower interest rate, people will save less and spend more on current consumables.

118
00:11:10.560 --> 00:11:16.100
The central bank's credit expansion then results in an incompatible mix of market forces.

119
00:11:16.100 --> 00:11:19.800
So people are consuming more but yet more investment is taking place.

120
00:11:19.800 --> 00:11:24.640
The Fed's intervention has therefore created systematic discoordination throughout the economy.

121
00:11:24.640 --> 00:11:26.640
Resources have been malinvested.

122
00:11:26.640 --> 00:11:30.800
That is to say, resources have been invested not in accordance with consumer desires but

123
00:11:30.800 --> 00:11:33.340
in response to false signals.

124
00:11:33.340 --> 00:11:38.460
have been wasted. Some of them can be recovered, since some building and equipment can be transferred

125
00:11:38.460 --> 00:11:42.940
to lines of production more in conformity with consumer desires, but even this transition

126
00:11:42.940 --> 00:11:48.540
process takes time and resources to accomplish. When lower interest rates are caused by increased

127
00:11:48.540 --> 00:11:53.980
saving on the part of the public rather than by Fed manipulation, then the boom is sustainable.

128
00:11:53.980 --> 00:11:58.020
People's deferred consumption provides the means for investors to engage in long-term

129
00:11:58.020 --> 00:12:02.020
The interest rate coordinates investment in accordance with people's time preferences.

130
00:12:02.020 --> 00:12:07.020
When people save more, the interest rate goes down, signalling to investors that the requisite funds are available

131
00:12:07.020 --> 00:12:10.020
and that people are willing to defer their purchases to this degree.

132
00:12:10.020 --> 00:12:15.020
But when the lower interest rate is the result of Fed manipulation, the boom is built on sand.

133
00:12:15.020 --> 00:12:19.020
It is built not on authentic savings, the only sound source of investment funds,

134
00:12:19.020 --> 00:12:21.020
but on artificial credit creation.

135
00:12:21.020 --> 00:12:25.020
It is built not on real money, the only sound source of investment funds,

136
00:12:25.020 --> 00:12:30.020
is a well-known source of investment funds, but on artificial credit creation.

137
00:12:30.020 --> 00:12:35.020
As one expert explains, with seemingly favorable credit conditions,

138
00:12:35.020 --> 00:12:38.020
long-term investment projects are being initiated at the same time

139
00:12:38.020 --> 00:12:42.020
that the resources needed to see them through to completion are being consumed.

140
00:12:42.020 --> 00:12:46.020
As the market guides these projects into their intermediate and late stages,

141
00:12:46.020 --> 00:12:49.020
the underlying economic realities become increasingly clear.

142
00:12:49.020 --> 00:12:53.020
Not all of the investment undertakings can be profitably completed,

143
00:12:53.020 --> 00:12:55.520
and thus the bust is inevitable.

144
00:12:55.520 --> 00:12:59.980
At this point, capital goods that are complementary to these production processes still unfinished

145
00:12:59.980 --> 00:13:05.140
are in unexpectedly short supply, with investors enticed by cheap credit now competing for

146
00:13:05.140 --> 00:13:09.780
resources with established firms and competitive entrepreneurial bidding for them begins to

147
00:13:09.780 --> 00:13:11.860
drive up their prices.

148
00:13:11.860 --> 00:13:16.380
These increased prices, largely unanticipated by the investors who embarked on these projects

149
00:13:16.380 --> 00:13:20.740
in the first place, naturally leads to a greater demand for credit to cover them, which in

150
00:13:20.740 --> 00:13:23.380
in turn raises interest rates back up.

151
00:13:23.380 --> 00:13:26.200
It now becomes clear that the boom has been built on sand

152
00:13:26.200 --> 00:13:28.560
and that enough resources do not exist in the economy

153
00:13:28.560 --> 00:13:31.540
for all of these investment projects to be completed.

154
00:13:31.540 --> 00:13:34.980
Some portion of the invested capital is irretrievably lost

155
00:13:34.980 --> 00:13:36.980
and provides physical evidence of the waste

156
00:13:36.980 --> 00:13:40.420
and destruction of wealth caused by the artificial boom.

157
00:13:40.420 --> 00:13:42.180
While the price system works at this point

158
00:13:42.180 --> 00:13:45.140
to bid resources away from earlier stages of production

159
00:13:45.140 --> 00:13:46.180
and toward later ones,

160
00:13:46.180 --> 00:13:48.900
this process is not without difficulties

161
00:13:48.900 --> 00:13:59.900
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.

162
00:13:59.900 --> 00:14:07.900
The cluster occurs because entrepreneurs are misled by a distorted signal to which any substantial economic actor must be attentive, the interest rate.

163
00:14:07.900 --> 00:14:15.900
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.

164
00:14:15.900 --> 00:14:20.400
The further away in time a particular stage of production is from finished consumer goods,

165
00:14:20.400 --> 00:14:23.400
the more sensitive will it be to fluctuations in the interest rate.

166
00:14:23.400 --> 00:14:27.400
Thus, the malinvestment will tend to be concentrated in higher order capital goods,

167
00:14:27.400 --> 00:14:31.900
and the inevitable liquidation will necessarily be concentrated there.

168
00:14:31.900 --> 00:14:38.400
Now, that's a summary that I included in my Church in the Market book.

169
00:14:38.400 --> 00:15:08.400
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.

170
00:15:08.400 --> 00:15:17.400
to take place, and he does argue this, and as I say, Joe Salerno defends Rothbard's methodology in that.

171
00:15:17.400 --> 00:15:22.400
It's an absolutely indispensable book because it then goes into the presidency of Herbert Hoover

172
00:15:22.400 --> 00:15:28.400
and shows that, in fact, it is Hoover's policy decisions that help to make the depression prolonged.

173
00:15:28.400 --> 00:15:34.400
I mean, we understand what brings on the depression, but no reason that it has to go on year after year after year.

174
00:15:34.400 --> 00:15:41.880
Government policy tends to be the explanatory factor as to why the downturn just seems to remain...

175
00:15:41.880 --> 00:15:51.760
the economy remains depressed for so long, and Rothbard helped to show that Hoover was, at least in some degree, responsible for that.

176
00:15:51.760 --> 00:15:58.760
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.

177
00:15:58.760 --> 00:16:02.920
You'll see some five-star reviews saying this is just a book that,

178
00:16:03.000 --> 00:16:06.480
if you want to be a member of the human race, you've got to read this book.

179
00:16:06.560 --> 00:16:09.080
And then you see some one-star reviews from people saying,

180
00:16:09.160 --> 00:16:11.920
I couldn't understand a word of this book. I wanted to read a book.

181
00:16:12.000 --> 00:16:14.040
People bought this book because they were thinking

182
00:16:14.120 --> 00:16:16.640
it was going to be like a social history of the Depression,

183
00:16:16.720 --> 00:16:19.840
a story of people eating ketchup sandwiches, and how did they get by,

184
00:16:19.920 --> 00:16:22.200
and they had to split a head of lettuce among the whole family.

185
00:16:22.280 --> 00:16:24.080
By the way, I don't mean to be flippant about that,

186
00:16:24.160 --> 00:16:27.000
but that's the type of story people are looking for.

187
00:16:27.000 --> 00:16:30.680
and they get Rothbard's book and it's this wonderful magisterial treatise

188
00:16:30.680 --> 00:16:34.520
on the market economy and on this particular historical episode

189
00:16:34.520 --> 00:16:37.080
they don't know what to make there are no ketchup sandwiches in the whole book

190
00:16:37.080 --> 00:16:40.520
so they go on amazon and instead of just saying to themselves well you know what

191
00:16:40.520 --> 00:16:43.560
it's my fault i didn't really research this book it's not the kind of book i was

192
00:16:43.560 --> 00:16:47.320
looking for they blame the book for not being what they want and they say well

193
00:16:47.320 --> 00:16:50.520
this is just terrible and part of me feels like i should post a review just

194
00:16:50.520 --> 00:16:55.080
saying you know pearls before swine people you know this is pearls before

195
00:16:55.080 --> 00:16:56.080
What's the matter with you?

196
00:16:56.080 --> 00:17:05.080
But I thought probably Amazon is already filled with enough acrimony without my wise guy comments.

197
00:17:05.080 --> 00:17:08.080
Anyway, let's carry on.

198
00:17:08.080 --> 00:17:14.080
I also mentioned the Austrian cycle theory because I really wanted to include it in my politically incorrect guide.

199
00:17:14.080 --> 00:17:17.080
I was all set to put it in there, wrote the whole thing up.

200
00:17:17.080 --> 00:17:20.080
And it's just another one of these things where there's just no space for it.

201
00:17:20.080 --> 00:17:23.080
So all I could do is have a sentence in there saying,

202
00:17:23.080 --> 00:17:30.080
I am begging you people to read Rothbard's book, and I thought, well, that's good enough. That will pique people's interest.

203
00:17:30.080 --> 00:17:39.080
Okay. Well, it used to be the conventional wisdom that Herbert Hoover...

204
00:17:39.080 --> 00:17:44.080
If I had a board, I'd probably try to... I can actually draw Herbert Hoover pretty...

205
00:17:44.080 --> 00:17:50.080
It was like the only thing I can draw, like Herbert Hoover and like a carrot, two things I can draw.

206
00:17:50.080 --> 00:17:54.080
Or actually, I can also draw Woodrow Wilson, because if you ever look at Woodrow Wilson,

207
00:17:54.080 --> 00:17:58.080
you ever seen that painting, The Scream, with that guy going like this?

208
00:17:58.080 --> 00:18:02.080
I always felt like you put glasses on that guy. It could be Woodrow Wilson.

209
00:18:02.080 --> 00:18:08.080
Anyway, well, Herbert Hoover, the myth used to be that Herbert Hoover just sat there

210
00:18:08.080 --> 00:18:13.080
and, you know, people are eating the ketchup sandwiches and he's just sitting there, sitting there,

211
00:18:13.080 --> 00:18:16.080
you know, sort of big chubby guy, you know, he doesn't have to worry.

212
00:18:16.080 --> 00:18:19.080
He can eat ketchup sandwiches for a long time and he'll still be okay.

213
00:18:19.080 --> 00:18:25.080
But the point is that people had this sense, historians and students of history,

214
00:18:25.080 --> 00:18:28.080
that Hoover was just doing nothing at all.

215
00:18:28.080 --> 00:18:34.080
He just didn't think that he was a big supporter of laissez-faire, a big supporter of the free market.

216
00:18:34.080 --> 00:18:41.080
And because he was such a fool and he had such outdated Neanderthal economic ideas, the Depression got worse and worse.

217
00:18:41.080 --> 00:18:45.080
But to the contrary, in fact, if only he had just sat there.

218
00:18:45.080 --> 00:18:48.080
We could only wish that he had just sat there.

219
00:18:48.080 --> 00:19:00.080
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.

220
00:19:00.080 --> 00:19:06.080
Now, Rexford Tugwell, who was an important figure in Franklin Roosevelt's New Deal programs in the 30s,

221
00:19:06.080 --> 00:19:17.080
later acknowledged, we didn't admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.

222
00:19:17.080 --> 00:19:21.240
Well, Hoover's program of intervention both prefigured

223
00:19:21.400 --> 00:19:25.880
the New Deal programs of Franklin Roosevelt that would follow his administration

224
00:19:26.040 --> 00:19:28.840
and also ensured that the downturn,

225
00:19:29.000 --> 00:19:33.480
this economic downturn, would not be the limited one of 1920 to 21

226
00:19:33.640 --> 00:19:36.320
but would instead be indefinitely prolonged.

227
00:19:36.480 --> 00:19:40.600
In 1920 and 21, when Warren Harding was elected in 1921,

228
00:19:40.760 --> 00:19:46.520
economic conditions were quite poor, there was a severe contraction.

229
00:19:46.520 --> 00:19:50.520
Harding came into office and in the first six months he just cut the government budget.

230
00:19:50.520 --> 00:19:57.520
So he did exactly the opposite of what later economists would suggest and then everything turned out okay.

231
00:19:57.520 --> 00:20:03.520
So historians hate that, the fact that Harding's a bumbling idiot and he's not as smart as they think presidents should be

232
00:20:03.520 --> 00:20:08.520
and he was fairly modest in the things he did and yet he has a much better economic record

233
00:20:08.520 --> 00:20:12.520
than every president who tries to manipulate the economy.

234
00:20:12.520 --> 00:20:16.540
That drives them crazy, so they always put poor Warren Harding at the bottom of the list

235
00:20:16.540 --> 00:20:17.540
of presidents.

236
00:20:17.540 --> 00:20:24.380
I mean, it doesn't help that he was an adulterer and, you know, kind of a scuzzy guy, but still,

237
00:20:24.380 --> 00:20:27.900
one of the things I think they resent about him was that he didn't really do anything

238
00:20:27.900 --> 00:20:30.440
and yet things seemed to work okay.

239
00:20:30.440 --> 00:20:37.120
Well, a month after the stock market crash, Hoover summoned major business leaders to

240
00:21:07.120 --> 00:21:21.120
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.

241
00:21:21.120 --> 00:21:31.120
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.

242
00:21:31.120 --> 00:21:37.120
I always wondered if that were the case, why don't we just impose a global minimum wage of $100 an hour?

243
00:21:37.120 --> 00:21:42.120
Because then that would give everybody a lot of purchasing power, but no one I know has actually seriously proposed that,

244
00:21:42.120 --> 00:21:47.120
although probably somebody has and I just haven't had the misfortune of coming across it.

245
00:21:47.120 --> 00:21:56.120
Well, certainly Hoover's philosophy is superficially plausible, and virtually every American history textbook dutifully adopts it.

246
00:21:56.120 --> 00:21:59.120
The economic downturn was caused by underconsumption.

247
00:21:59.120 --> 00:22:07.120
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.

248
00:22:07.120 --> 00:22:14.120
But, as I say, for one thing, we would expect the hardest hit segments of the economy to be the consumer goods industries.

249
00:22:14.120 --> 00:22:17.120
But that's not true, as Gary Dean Best points out.

250
00:22:17.120 --> 00:22:26.120
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.

251
00:22:26.120 --> 00:22:30.120
Roosevelt v. Recovery, 1933-1938.

252
00:22:30.120 --> 00:22:35.120
Best points out that it was industries that produced durable goods and capital goods,

253
00:22:35.120 --> 00:22:38.120
in other words that are most remote from the consumer, that suffered the most,

254
00:22:38.120 --> 00:22:41.120
and consumer goods industries did relatively better.

255
00:22:41.120 --> 00:22:43.120
And Best says this, he says,

256
00:22:43.120 --> 00:22:48.120
Increased consumer spending would largely assist the consumer goods industries,

257
00:22:48.120 --> 00:22:52.120
where the volume of business showed the least decline from pre-depression levels.

258
00:22:52.120 --> 00:22:57.120
It did little or nothing for the heavy industries that had been most affected by the Depression

259
00:22:57.120 --> 00:23:00.120
and where the bulk of unemployment was concentrated.

260
00:23:00.120 --> 00:23:07.120
Now, if you read, much of this is going to be filled with reading suggestions.

261
00:23:07.120 --> 00:23:13.120
When I was going through this sort of cycle of stuff and I was at the Mises University and that sort of thing,

262
00:23:13.120 --> 00:23:18.120
veteran Galloway had just come out with their book, Out of Work, which is now, I think, at least a second edition.

263
00:23:18.120 --> 00:23:30.120
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.

264
00:23:30.120 --> 00:23:41.120
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.

265
00:23:41.120 --> 00:23:44.120
See, when you're in college, you have to read all their stuff.

266
00:23:44.120 --> 00:23:50.120
But then, you know, when you debate with them, like, you've read their stuff, but they haven't read your stuff.

267
00:23:50.120 --> 00:23:54.120
They haven't read veteran Galloway. So you can just trounce them in a debate.

268
00:23:54.120 --> 00:23:56.120
They've never heard any of this stuff before.

269
00:23:56.120 --> 00:24:04.120
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.

270
00:24:04.120 --> 00:24:09.120
So it's good fun. But you should read veteran Galloway.

271
00:24:09.120 --> 00:24:13.880
in Galloway. What they are pointing out consistently in that book is that they're trying to look

272
00:24:13.880 --> 00:24:17.800
and to actually look at experience. They actually are doing, they're looking at the way things

273
00:24:17.800 --> 00:24:23.000
actually turned out to try to verify a theory. All right, now I understand the epistemological

274
00:24:23.000 --> 00:24:29.280
problems with this, but what they are trying to discuss is whether it makes both theoretical

275
00:24:29.280 --> 00:24:34.880
and empirical sense to claim that wages, in fact, just simply increase purchasing power

276
00:24:34.880 --> 00:24:39.880
or whether artificially increasing wages simply increases unemployment

277
00:24:39.880 --> 00:24:43.880
by making it more difficult for people to hire workers.

278
00:24:45.880 --> 00:24:50.880
Well, this is in effect what veteran Galloway conclude,

279
00:24:50.880 --> 00:24:55.880
that these measures to prop up wages are in fact responsible,

280
00:24:55.880 --> 00:24:58.880
in at least large measure, for prolonging the depression.

281
00:24:58.880 --> 00:25:03.880
Now Hoover, of course, is not at this point, or even at this point,

282
00:25:03.880 --> 00:25:08.000
point, or even later, it's not till FDR that this is forced on people.

283
00:25:08.000 --> 00:25:12.040
He's simply using persuasion, please, please keep wages up.

284
00:25:12.040 --> 00:25:16.880
And that can work only so long, until economic reality becomes so overwhelming

285
00:25:16.880 --> 00:25:21.000
that wages simply have to be cut. But for a couple years, big business more or

286
00:25:21.000 --> 00:25:24.600
less did comply with the president's wishes

287
00:25:24.600 --> 00:25:28.240
and basically kept wages up or prevented,

288
00:25:28.240 --> 00:25:30.720
tried to avoid wage cuts.

289
00:25:30.720 --> 00:25:39.720
Now, as the years go on, though, given that the price level is declining, 10% one year, 15% another year,

290
00:25:39.720 --> 00:25:46.220
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,

291
00:25:46.220 --> 00:25:52.720
because the prices of the goods they have to buy are declining and their wages are staying the same.

292
00:25:52.720 --> 00:26:01.720
So this is in fact a major ingredient in sustained unemployment according to the analysis of veteran Galloway and others.

293
00:26:01.720 --> 00:26:08.720
Now Hoover's agricultural policy also anticipates that of Franklin Roosevelt.

294
00:26:08.720 --> 00:26:15.720
Now farmers had complained since the end of World War I of the need for special governmental assistance of one kind or another,

295
00:26:15.720 --> 00:26:21.720
including government intervention, whatever, to prop up farm prices.

296
00:26:21.720 --> 00:26:28.720
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.

297
00:26:28.720 --> 00:26:33.720
Now let me pause here for a moment. I have nothing in particular against farmers per se.

298
00:26:33.720 --> 00:26:44.720
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.

299
00:26:44.720 --> 00:26:47.720
Anybody familiar with what Mencken had to say on farmers?

300
00:26:47.720 --> 00:26:50.720
Well, you're in for a treat here.

301
00:26:50.720 --> 00:26:51.720
Mencken said,

302
00:26:51.720 --> 00:26:57.720
Let the farmer, so far as I'm concerned, be damned forevermore.

303
00:26:57.720 --> 00:27:00.720
To hell with him and bad luck to him.

304
00:27:00.720 --> 00:27:06.720
He is a tedious fraud and ignoramus, a cheap rogue and hypocrite, the eternal jack of the human pack.

305
00:27:06.720 --> 00:27:11.720
He deserves all that he ever suffers under our economic system and more.

306
00:27:11.720 --> 00:27:17.720
Any city man not insane who sheds tears for him is shedding tears of the crocodile.

307
00:27:17.720 --> 00:27:21.720
And he goes on to describe the farmer as grasping, selfish and dishonest.

308
00:27:21.720 --> 00:27:27.720
He says, when the going is good for him, he robs the rest of us up to the extreme limit of our endurance.

309
00:27:27.720 --> 00:27:31.720
When the going is bad, he comes bawling for help out of the public till.

310
00:27:31.720 --> 00:27:36.720
Has anyone ever heard of a farmer making any sacrifice of his own interests, however slight to the common good?

311
00:27:36.720 --> 00:27:43.720
Has anyone ever heard of a farmer practicing or advocating any political idea that was not absolutely self-seeking,

312
00:27:43.720 --> 00:27:48.720
that was not in fact deliberately designed to loot the rest of us to his gain?

313
00:27:48.720 --> 00:27:54.720
Greenbackism, free silver, the government guarantee of prices, bonuses, and on and on,

314
00:27:54.720 --> 00:27:59.720
these are the contributions of the virtuous husbandmen to American political theory.

315
00:27:59.720 --> 00:28:04.720
There has never been a time in good seasons or bad when his hands were not itching for more.

316
00:28:04.720 --> 00:28:09.420
There has never been a time when he was not ready to support any charlatan, however grotesque,

317
00:28:09.420 --> 00:28:11.600
who promised to get it for him.

318
00:28:11.600 --> 00:28:15.340
Only one issue ever fetches him, and that is the issue of his own profit.

319
00:28:15.340 --> 00:28:19.520
He must be promised something definite and valuable to be paid to him alone, or he is

320
00:28:19.520 --> 00:28:21.820
off after some other mountebank.

321
00:28:21.820 --> 00:28:26.400
He simply cannot imagine himself as a citizen of a commonwealth, in duty bound to give as

322
00:28:26.400 --> 00:28:27.400
well as take.

323
00:28:27.400 --> 00:28:30.800
He can imagine himself only as getting all and giving nothing.

324
00:28:30.800 --> 00:28:39.800
Yet we are asked to venerate this prehensile moron as the ur burger, the citizen par excellence, the foundation stone of the state.

325
00:28:39.800 --> 00:28:45.800
And why? Because he produces something that all of us must have, that we must get somehow on penalty of death.

326
00:28:45.800 --> 00:28:50.800
And how do we get it from him? By submitting helplessly to his unconscionable blackmailing,

327
00:28:50.800 --> 00:28:57.800
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.

328
00:28:57.800 --> 00:29:05.800
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.

329
00:29:05.800 --> 00:29:10.800
All right, let's just let that settle for a moment.

330
00:29:10.800 --> 00:29:13.800
All right, well, I'm going to get a lot of angry mail over that one.

331
00:29:13.800 --> 00:29:19.800
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.

332
00:29:19.800 --> 00:29:26.800
Well, a major reason, as you might expect, that the farmers were having such difficulty making a living

333
00:29:26.800 --> 00:29:31.800
is that there were just too many of them, far more than made any economic sense.

334
00:29:31.800 --> 00:29:39.800
And normally, when people have difficulty making a living, they choose to abandon their current occupation and pursue another one.

335
00:29:39.800 --> 00:29:44.800
But given that farming is in some certain way, I think, qualitatively different from a lot of different other lifestyles,

336
00:29:44.800 --> 00:29:50.800
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.

337
00:29:50.800 --> 00:29:59.800
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.

338
00:29:59.800 --> 00:30:04.800
So instead it becomes government policy to try to keep them where they are.

339
00:30:04.800 --> 00:30:13.800
Well, the American agricultural sector had actually expanded fairly dramatically during World War I because of disruption in production in Europe.

340
00:30:13.800 --> 00:30:17.800
But that emergency is now over, of course, by the 1920s.

341
00:30:17.800 --> 00:30:22.380
So it was, to say the least, unreasonable to pretend that America's bloated agricultural

342
00:30:22.380 --> 00:30:28.380
sector could simply remain the same size, as if circumstances had not changed. People

343
00:30:28.380 --> 00:30:32.380
and resources needed to be shifted out of agriculture and into some other line of production

344
00:30:32.380 --> 00:30:38.360
that the American population needed more urgently. That, of course, was not done. Instead, during

345
00:30:38.360 --> 00:30:43.340
Hoover's administration, a federal farm board was established, whose activities were supposed

346
00:30:43.340 --> 00:30:58.340
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.

347
00:30:58.340 --> 00:31:08.340
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.

348
00:31:08.340 --> 00:31:25.340
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.

349
00:31:25.340 --> 00:31:35.340
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.

350
00:31:35.340 --> 00:31:41.100
and wheat. Instead, Canadian and Argentinian wheat producers simply grabbed America's share

351
00:31:41.100 --> 00:31:46.500
of the world market. Federal bureaucrats were in fact able to raise the grain price for

352
00:31:46.500 --> 00:31:51.060
a brief period, but again the result was that farmers responding to these higher prices

353
00:31:51.060 --> 00:31:56.200
increased their acreage and produced more the following year, again aggravating the

354
00:31:56.200 --> 00:32:02.600
surplus problem. These huge surpluses bought up by government agencies served to depress

355
00:32:02.600 --> 00:32:25.600
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.

356
00:32:25.600 --> 00:32:37.600
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.

357
00:32:37.600 --> 00:32:45.600
So requests that farmers voluntarily cut back their acreage of both wheat and cotton were ignored. Why should we?

358
00:32:45.600 --> 00:32:47.200
Why should we?

359
00:32:47.200 --> 00:32:53.600
Desperate to increase prices, the chairman of the Federal Farm Board actually went so far as to call upon state governors,

360
00:32:53.600 --> 00:32:59.900
quote, to induce immediate plowing under of every third row of cotton now growing.

361
00:32:59.900 --> 00:33:06.400
So in order to increase farm prices, it was being proposed that farmers destroy already existing crops.

362
00:33:06.400 --> 00:33:13.000
The New York Times called this, quote, one of the maddest things that ever came from an official body.

363
00:33:13.000 --> 00:33:17.000
It would become official farm policy under Franklin Roosevelt.

364
00:33:17.000 --> 00:33:22.000
So in an all too typical pattern, one government intervention leads to another.

365
00:33:22.000 --> 00:33:27.000
As the government now intervened yet again in order to solve the problems caused by the first intervention.

366
00:33:27.000 --> 00:33:31.000
So you've created total chaos in the agricultural sector.

367
00:33:31.000 --> 00:33:36.000
So instead of just stopping your intervention, you have to come up with another intervention.

368
00:33:36.000 --> 00:33:46.000
Given that American agriculture was a complete shambles, we now get the notorious Smoot-Hawley tariff being proposed and signed in 1930.

369
00:33:46.000 --> 00:33:52.000
It was originally intended to provide tariff protection for American agricultural commodities.

370
00:33:52.000 --> 00:33:58.000
But it turned out there was no politically feasible way to limit that protection to agricultural commodities.

371
00:33:58.000 --> 00:34:05.000
Pressure groups from countless industries descended upon Washington to argue for tariff protection for themselves as well.

372
00:34:05.000 --> 00:34:16.000
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.

373
00:34:16.000 --> 00:34:23.000
It raised tariffs an average of 59% on more than 25,000 items.

374
00:34:23.000 --> 00:34:29.000
Now, the tariff hit American export industries hard.

375
00:34:29.000 --> 00:34:33.000
by the way, this would be the case for two reasons

376
00:34:33.000 --> 00:34:36.000
anytime you have a protective tariff, or really any kind of tariff

377
00:34:36.000 --> 00:34:38.000
it's going to hurt American export industries

378
00:34:38.000 --> 00:34:41.000
for one thing, if you export to the rest of the world

379
00:34:41.000 --> 00:34:44.000
and you have to buy your inputs

380
00:34:44.000 --> 00:34:48.000
you have to either buy them from your fellow Americans

381
00:34:48.000 --> 00:34:52.000
who are now able to raise their prices because they have tariff protection

382
00:34:52.000 --> 00:34:54.000
from foreign competition

383
00:34:54.000 --> 00:34:56.000
or you have to buy them from foreigners and pay the tariff

384
00:34:56.000 --> 00:35:00.400
...pay the tariff, whatever, you're at a competitive disadvantage as a result of the tariffs,

385
00:35:00.400 --> 00:35:04.500
because you either have to buy your inputs from tariff-protected stuff overseas,

386
00:35:04.500 --> 00:35:09.800
or you have to pay higher prices made possible by the tariffs.

387
00:35:09.800 --> 00:35:13.400
So this is going to put your export industries at a disadvantage,

388
00:35:13.400 --> 00:35:18.200
vis-à-vis businesses in other countries that are not at this type of disadvantage,

389
00:35:18.200 --> 00:35:22.300
or don't have to pay artificially inflated prices for their inputs.

390
00:35:22.300 --> 00:35:26.180
But then there's the fact of tariff retaliation that occurs.

391
00:35:26.180 --> 00:35:28.820
Because obviously when you increase tariffs,

392
00:35:28.820 --> 00:35:31.180
Americans are going to buy fewer goods from foreigners

393
00:35:31.180 --> 00:35:33.980
because they want to avoid the tariff.

394
00:35:33.980 --> 00:35:37.980
So American trading partners are going to retaliate against this.

395
00:35:37.980 --> 00:35:41.660
When they see that their products are increasingly being shut out of the American market,

396
00:35:41.660 --> 00:35:45.300
they're going to retaliate, keep American products out of theirs.

397
00:35:45.300 --> 00:35:49.500
So given that the tariff affected Italy's major exports to the United States,

398
00:35:49.500 --> 00:35:53.340
The Italian government doubled its tariffs on American cars.

399
00:35:53.340 --> 00:35:57.420
American automobile sales in Italy fell by 90 percent.

400
00:35:57.420 --> 00:36:02.260
The French practically shut American products out of their country altogether.

401
00:36:02.260 --> 00:36:06.540
Spain retaliated by raising tariffs on American cars to a level

402
00:36:06.540 --> 00:36:09.140
practically guaranteed no American cars would be sold there.

403
00:36:09.140 --> 00:36:11.660
And you could just go on and on and on in this connection.

404
00:36:11.660 --> 00:36:17.660
And in fact, there are a great many examples of this in Jim Powell's book, FDR's Folly,

405
00:36:17.660 --> 00:36:24.660
which, of course, this is before FDR, but he gives example after example of the consequences of Smoot-Hawley Tariff.

406
00:36:24.660 --> 00:36:28.660
Well, this wasn't the only tax increase that occurred under Hoover.

407
00:36:31.660 --> 00:36:39.660
During the 1920s, Andrew Mellon, who had been Secretary of the Treasury, had advocated lowering income tax rates

408
00:36:39.660 --> 00:36:46.660
because he, basically for laffer curve reasons, he had sort of suspected that the extremely high top rates

409
00:36:46.660 --> 00:37:16.660
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%.

410
00:37:16.660 --> 00:37:21.160
Andrew Mellon had been behind advocating this increase.

411
00:37:21.160 --> 00:37:25.660
Here he was the one who in the 20s had said we've got to cut rates, cut them back down.

412
00:37:25.660 --> 00:37:33.660
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.

413
00:37:33.660 --> 00:37:40.660
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.

414
00:37:40.660 --> 00:37:46.660
Corporate and estate taxes were raised. The gift tax was revived.

415
00:37:46.660 --> 00:38:01.660
Sales taxes were imposed on a great many items including cars, tires, gasoline, toiletries, toiletries people.

416
00:38:01.660 --> 00:38:04.660
I don't know what kind of incentive that produces. Interesting thing.

417
00:38:04.660 --> 00:38:09.660
Toiletries are increased, have their taxes increased, people buy less of them. I don't know what happens.

418
00:38:09.660 --> 00:38:18.660
Electric energy, luxury items, other taxes were imposed on bank checks as well as telephone, telegraph and radio messages.

419
00:38:18.660 --> 00:38:25.660
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.

420
00:38:25.660 --> 00:38:34.660
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,

421
00:38:34.660 --> 00:38:42.660
Preferring instead to rely on voluntary organizations and eventually to make loans to the states for the purpose.

422
00:38:42.660 --> 00:38:50.660
He believed that voluntary organizations as well as state and local government were the appropriate instruments for dispensing aid.

423
00:38:50.660 --> 00:38:59.660
In 1931, the Red Cross actually turned down a proposed federal grant of $25 million, arguing that it had all the money it needed,

424
00:38:59.660 --> 00:39:02.660
and that such government grants to private charities would, quote,

425
00:39:02.660 --> 00:39:06.660
to a large extent destroy voluntary giving.

426
00:39:06.660 --> 00:39:13.660
Hoover also vastly increased expenditures on public works projects.

427
00:39:13.660 --> 00:39:17.660
More money was spent on public works projects in the four years of Hoover

428
00:39:17.660 --> 00:39:20.660
than had been spent in the previous 30.

429
00:39:20.660 --> 00:39:24.660
He also subsidized the shipbuilding industry.

430
00:39:24.660 --> 00:39:27.660
Now that would always be a silly thing to do,

431
00:39:27.660 --> 00:39:30.660
When you consider that this is after the Smoot-Hawley Tariff

432
00:39:30.660 --> 00:39:34.660
and your shipbuilding industry has much less need to expand it

433
00:39:34.660 --> 00:39:38.660
because there's much less trade going on, he's going to subsidize it.

434
00:39:38.660 --> 00:39:43.660
Hoover's Reconstruction Finance Corporation supplied failing businesses,

435
00:39:43.660 --> 00:39:47.660
mainly railroads and banks, with emergency low-interest loans.

436
00:39:47.660 --> 00:39:50.660
Rothbard's discussion of this is great because they always denied

437
00:39:50.660 --> 00:39:54.660
that the Reconstruction Finance Corporation was in any way motivated by politics.

438
00:39:54.660 --> 00:39:59.860
We're giving emergency loans to the most deserving banks and businesses.

439
00:39:59.980 --> 00:40:06.140
It just so happens that Charles Dawes, who was a bigwig in the Republican Party

440
00:40:06.260 --> 00:40:10.580
and had a big bank, happened to get a $95 million loan

441
00:40:10.700 --> 00:40:13.940
from the Reconstruction Finance Corporation

442
00:40:14.060 --> 00:40:20.060
for a bank that was about $90 million capital as a bizarre loan.

443
00:40:20.180 --> 00:40:23.220
And that the treasurer of the Republican National Committee

444
00:40:23.220 --> 00:40:29.220
by some coincidence happened to get a big loan from the Reconstruction Finance Corporation

445
00:40:29.220 --> 00:40:31.220
so you wonder what the heck is going on here.

446
00:40:31.220 --> 00:40:37.220
By the later part of 1932, the Reconstruction Finance Corporation was no longer doing

447
00:40:37.220 --> 00:40:43.220
what you might call just defensive measures of trying to prop up businesses that were already in big trouble

448
00:40:43.220 --> 00:40:49.220
but now was beginning to initiate projects, lending money to the states for unemployment relief

449
00:40:49.220 --> 00:40:51.220
and to fund public works projects.

450
00:40:51.220 --> 00:41:04.220
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.

451
00:41:04.220 --> 00:41:15.220
Well, Hoover congratulated himself, looking back on his record, and said, we might have done nothing. That would have been utter ruin.

452
00:41:15.220 --> 00:41:20.220
Instead, we met the situation with proposals to private business and to Congress

453
00:41:20.220 --> 00:41:25.220
of the most gigantic program of economic defense and counter-attack

454
00:41:25.220 --> 00:41:28.220
ever evolved in the history of the Republic.

455
00:41:28.220 --> 00:41:31.220
Counter-attack, such a funny word in this context.

456
00:41:31.220 --> 00:41:34.220
Now, the result was a complete catastrophe.

457
00:41:34.220 --> 00:41:38.220
Hoover drew no lessons from this experience, apparently.

458
00:41:38.220 --> 00:41:41.220
Now, Franklin Roosevelt will be elected.

459
00:41:41.220 --> 00:41:48.220
Franklin Roosevelt, the Democrat, although what on earth is the difference between them then as now is a good question.

460
00:41:48.220 --> 00:41:56.220
But Franklin Roosevelt will now be elected and initiate his so-called New Deal programs.

461
00:41:56.220 --> 00:42:06.220
Now, I became sort of naive after years of reading about the New Deal and reading both the mainstream literature and libertarian-type literature.

462
00:42:06.220 --> 00:42:09.940
And it's more and more common now that you see, even in mainstream journals,

463
00:42:09.940 --> 00:42:13.660
you see articles being written that acknowledge that, you know, in retrospect,

464
00:42:13.660 --> 00:42:17.140
maybe Franklin Roosevelt's programs did prolong the Depression.

465
00:42:17.140 --> 00:42:22.820
Maybe they were not, in fact, particularly well-designed to lift the country out of it.

466
00:42:22.820 --> 00:42:24.940
It's now becoming more common to hear that.

467
00:42:24.940 --> 00:42:28.060
That's not just something that we would say, it's something that more and more people would say.

468
00:42:28.060 --> 00:42:32.340
But I came to the conclusion that everybody knew this.

469
00:42:32.340 --> 00:42:35.980
You know, I sort of figured that everyone was sort of quietly conceding to us

470
00:42:35.980 --> 00:42:42.980
The New Deal was that we're right about Franklin Roosevelt and that obviously the New Deal did damage, I just thought that.

471
00:42:42.980 --> 00:42:52.980
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,

472
00:42:52.980 --> 00:43:04.980
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.

473
00:43:04.980 --> 00:43:18.980
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.

474
00:43:18.980 --> 00:43:22.980
So that's what today and this morning and this afternoon are all about.

475
00:43:22.980 --> 00:43:27.980
Well, Franklin Roosevelt defeated Hoover fairly dramatically.

476
00:43:27.980 --> 00:43:36.980
He's routinely listed as one of the great presidents in these lists of great presidents that come out periodically.

477
00:43:36.980 --> 00:43:43.980
Now, during this past semester, there was a poll that came out, not of American historians, but of ordinary Americans,

478
00:43:43.980 --> 00:43:45.980
about who they thought the great presidents were.

479
00:43:45.980 --> 00:43:47.980
The Great Presidents

480
00:44:15.980 --> 00:44:22.980
I'm not saying that's how historians make this decision, but there does seem to be a weird correlation between the two.

481
00:44:22.980 --> 00:44:27.980
And I think Ronald Reagan is on his way toward near-great status.

482
00:44:27.980 --> 00:44:36.980
I mean, I think when he died last year, we saw that no one was saying a single unkind word about it.

483
00:44:36.980 --> 00:44:45.980
When he died last year, we saw that no one was saying a single unkind word about him.

484
00:44:45.980 --> 00:44:50.980
I couldn't believe what was happening. It's like when you die, you become part of the pantheon of gods.

485
00:44:50.980 --> 00:44:52.980
It's incredible.

486
00:44:52.980 --> 00:44:57.980
In fact, I remember, I can't say who, but I was talking to a radio personality during the commercial.

487
00:44:57.980 --> 00:45:02.980
I said, when I was a kid, I liked and admired Ronald Reagan.

488
00:45:02.980 --> 00:45:14.980
But even I felt a little bizarre, this weird, almost blasphemous spiritual pretensions of the funeral.

489
00:45:14.980 --> 00:45:19.980
And I said, you know, the whole presidency has got this bizarre aura around it now.

490
00:45:19.980 --> 00:45:24.980
And he said, yeah, I'm wondering what are they going to do when Gerald Ford dies?

491
00:45:24.980 --> 00:45:26.980
Are we going to do the same thing for Gerald Ford?

492
00:45:26.980 --> 00:45:31.980
We're all going to say, oh my gosh, what a giant among men Gerald Ford was.

493
00:45:31.980 --> 00:45:37.980
Anyway, all right, I don't know, maybe Chevy Chase can talk about Gerald Ford.

494
00:45:37.980 --> 00:45:44.980
That's me. I don't mean to be mean to Gerald Ford. He's basically a harmless bumbler, more or less.

495
00:45:44.980 --> 00:45:52.980
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.

496
00:45:52.980 --> 00:45:58.980
And I believe President George Bush, the current President George Bush, came in like at number seven.

497
00:45:58.980 --> 00:46:06.980
Did anybody see this? The seventh greatest president in American history, George W. Bush.

498
00:46:06.980 --> 00:46:15.980
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.

499
00:46:15.980 --> 00:46:22.980
But gosh, I guess just don't listen to these presidential rankings, unless you'd like to be tortured.

500
00:46:22.980 --> 00:46:26.980
So, Franklin Roosevelt is always listed as one of the greats, because he... why?

501
00:46:26.980 --> 00:46:31.980
Because he engaged in these tremendous programs, both foreign and domestic.

502
00:46:31.980 --> 00:46:35.980
Well, the fact is, though, that during Franklin Roosevelt's tenure,

503
00:46:35.980 --> 00:46:38.980
I mean, unemployment remained a major problem.

504
00:46:38.980 --> 00:46:42.980
Up until you get to World War II, then you ship 11 million people overseas,

505
00:46:42.980 --> 00:46:44.980
and voila, the unemployment problem goes away.

506
00:46:44.980 --> 00:46:49.980
But, sorry, I'm not giving him credit for that, because I think anyone could have done that

507
00:46:49.980 --> 00:46:51.980
to solve the unemployment problem.

508
00:46:51.980 --> 00:47:04.980
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.

509
00:47:04.980 --> 00:47:13.980
But from 1933 to 1940, the average unemployment rate is 18%. I mean, how does this constitute getting the country out of the Depression?

510
00:47:13.980 --> 00:47:19.980
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.

511
00:47:19.980 --> 00:47:23.980
Well, we'll talk about that. I want to address that claim as well.

512
00:47:23.980 --> 00:47:29.980
John T. Flynn is a notorious biographer of Franklin Roosevelt.

513
00:47:29.980 --> 00:47:35.980
And he said that basically there was no one on earth more ignorant of economics than Franklin Roosevelt.

514
00:47:35.980 --> 00:47:39.980
Did not at all understand how wealth was created.

515
00:47:39.980 --> 00:47:43.980
And I recommend Flynn's book. It's called The Roosevelt Myth.

516
00:47:43.980 --> 00:47:53.980
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.

517
00:47:53.980 --> 00:47:58.980
But John T. Flynn was basically a good guy, but it's not a perfect book because Flynn is basically pro-Hoover.

518
00:47:58.980 --> 00:48:03.980
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.

519
00:48:03.980 --> 00:48:10.980
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.

520
00:48:10.980 --> 00:48:23.980
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.

521
00:48:23.980 --> 00:48:26.980
It's just wonderful and very much worth reading.

522
00:48:26.980 --> 00:48:36.980
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.

523
00:48:36.980 --> 00:48:41.980
And then the Gary Dean Best book is also worth reading, Pride, Prejudice and Politics.

524
00:48:42.980 --> 00:48:48.980
All right, well, what I want to do is to talk about the National Industrial Recovery Act.

525
00:48:48.980 --> 00:48:54.980
But in order to do that, I want to go back in time to look at the antecedents,

526
00:48:54.980 --> 00:48:58.980
both basically the intellectual antecedents of the National Industrial Recovery Act,

527
00:48:58.980 --> 00:49:02.980
because we're going to see that in that piece of legislation from 1933,

528
00:49:02.980 --> 00:49:07.980
We're going to see that various industries were permitted and indeed encouraged

529
00:49:07.980 --> 00:49:11.980
to draw up production codes for their industries

530
00:49:11.980 --> 00:49:16.980
in which each firm in that industry would be bound by the terms of the production code.

531
00:49:16.980 --> 00:49:19.980
They would be bound by certain hours of operation.

532
00:49:19.980 --> 00:49:25.980
You cannot carry out production before or after these set hours or for a longer duration.

533
00:49:25.980 --> 00:49:28.980
You have to sell at least at this minimum price.

534
00:49:28.980 --> 00:49:33.980
In the National Industrial Recovery Act, this does not just come out of thin air.

535
00:49:33.980 --> 00:49:42.980
Businesses have been agitating for something like this for decades because they didn't like, frankly, the rigors of free market competition.

536
00:49:42.980 --> 00:49:45.980
So they wanted to be sheltered from the rigors of free market competition.

537
00:49:45.980 --> 00:49:48.980
And they've been sheltered from the rigors of free market competition for decades.

538
00:49:48.980 --> 00:49:51.980
And they've been sheltered from the rigors of free market competition for decades.

539
00:49:51.980 --> 00:50:01.980
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.

540
00:50:01.980 --> 00:50:03.980
None of them had been terribly successful.

541
00:50:03.980 --> 00:50:07.980
They needed to have government backing for it and they're going to get it in 1933.

542
00:50:07.980 --> 00:50:17.980
But from the end of World War I, you already have businesses that are quite taken by the idea of economic planning

543
00:50:17.980 --> 00:50:21.980
and the idea of economic coordination and rationalizing production

544
00:50:21.980 --> 00:50:26.980
and cutting down on anarchic competition and laissez-faire.

545
00:50:26.980 --> 00:50:31.980
This is another reason that, although I have to admit,

546
00:50:31.980 --> 00:50:36.980
I very much enjoy some of Ayn Rand's essays

547
00:50:36.980 --> 00:50:40.980
because I like her polemical style and her combative nature.

548
00:50:40.980 --> 00:50:46.980
At the same time, I think she tends to romanticize business so much

549
00:50:46.980 --> 00:50:51.220
In fact, we forget that these are actually mortal men involved in these undertakings

550
00:50:51.220 --> 00:50:56.700
and they, as much as anyone else, have sort of the disutility of labor and an attraction

551
00:50:56.700 --> 00:51:00.540
for gaining at the expense of their fellows using the machinery of the state, and we begin

552
00:51:00.540 --> 00:51:05.540
to see that already at the end of World War I, because during World War I there had been

553
00:51:05.540 --> 00:51:10.940
a tremendous government involvement in production, and a lot of businessmen thought that this

554
00:51:10.940 --> 00:51:15.700
could be a model for the future, sort of joint cooperation between government and business

555
00:51:15.700 --> 00:51:19.300
and a kind of flattening out of competition.

556
00:51:19.300 --> 00:51:22.860
In this context, it's worth recalling a very famous statement

557
00:51:22.860 --> 00:51:27.820
that some of you, I'm sure, are anticipating by Adam Smith.

558
00:51:27.820 --> 00:51:30.020
In the 18th century, Adam Smith said,

559
00:51:30.020 --> 00:51:32.700
people of the same trade seldom meet together,

560
00:51:32.700 --> 00:51:35.740
even for merriment and diversion, but the conversation

561
00:51:35.740 --> 00:51:38.100
ends in a conspiracy against the public

562
00:51:38.100 --> 00:51:41.420
or in some contrivance to raise prices.

563
00:51:41.420 --> 00:51:45.460
Well, that is very much operative here.

564
00:51:45.460 --> 00:51:52.020
Now typically we have this consensus, we have this, I think, myth that in the early 19th

565
00:51:52.020 --> 00:51:56.500
century, pardon me, in the early 20th century, in the late 19th, that there wasn't that

566
00:51:56.500 --> 00:52:02.220
much, very vigorous competition, that in fact you had a very stagnant situation where you

567
00:52:02.220 --> 00:52:07.580
had just a few firms dominating each industry, which, by the way, there's no non-arbitrary

568
00:52:07.580 --> 00:52:14.460
way of saying that that's in some way objectively bad or wrong or not optimal or something,

569
00:52:14.460 --> 00:52:16.660
But there are people who would look at it in terms of sheer numbers.

570
00:52:16.660 --> 00:52:20.140
There are just a few major firms and they dominate these industries and there's not

571
00:52:20.140 --> 00:52:23.620
much competition because that's the way they think of competition.

572
00:52:23.620 --> 00:52:27.460
There is no competition unless you have 500 different firms.

573
00:52:27.460 --> 00:52:32.380
The fact is that when you look at it, at any definition that you can think of, of competition,

574
00:52:32.380 --> 00:52:36.740
whether it's an Austrian one or a non-Austrian one, it turns out that competition was incredibly

575
00:52:36.740 --> 00:52:40.860
intense in the early 20th century and this is becoming more and more clear.

576
00:52:40.860 --> 00:52:44.860
This is one of the points that Gabriel Kolko makes in his book, The Triumph of Conservatism.

577
00:52:44.860 --> 00:52:52.860
Kolko wrote this revisionist history of the early 20th century, basically looking at the years roughly 1900 to 1916 or so,

578
00:52:52.860 --> 00:52:58.860
and showing that there was intense competition and that this is precisely why you see big business so anxious

579
00:52:58.860 --> 00:53:05.860
to use the machinery of government to in some way inhibit the intensity, to limit the intensity of this competition.

580
00:53:05.860 --> 00:53:14.860
Historian Robert Wiebe actually said that businessmen after World War I were not looking toward

581
00:53:14.860 --> 00:53:21.860
quote, a neutralization of the government. They wanted a powerful government but one whose authority stood at their disposal.

582
00:53:21.860 --> 00:53:27.860
A strong responsive government through which they could manage their own affairs in their own way.

583
00:53:27.860 --> 00:53:57.860
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,

584
00:53:57.860 --> 00:54:02.160
The classic study of this, I think already, even though it's only about 8 years old,

585
00:54:02.160 --> 00:54:08.960
is written by Butler Schaeffer, whose work you may be familiar with reading him on lewrockwell.com.

586
00:54:08.960 --> 00:54:12.920
Butler Schaeffer wrote a book called In Restraint of Trade, and I believe the subtitle is The

587
00:54:12.920 --> 00:54:17.300
Business Campaign Against Competition, 1918 and 1938.

588
00:54:17.300 --> 00:54:21.240
This book is excellent and deserves much more attention than its receipt, and I know Bob

589
00:54:21.240 --> 00:54:24.160
Murphy did a review of it some time ago.

590
00:54:24.160 --> 00:54:28.160
It's very much worth looking at because he explores this phenomenon.

591
00:54:28.160 --> 00:54:35.160
It's been totally overlooked because so many historians have just assumed that big business is always in favor of the untrammeled market.

592
00:54:35.160 --> 00:54:38.160
Nothing could be further from the truth.

593
00:54:38.160 --> 00:54:45.160
What began to happen already in 1919 and had already begun, and then certainly through the 20s,

594
00:54:45.160 --> 00:54:50.160
was the development of various trade associations where firms of a particular industry would join together voluntarily

595
00:54:50.160 --> 00:54:56.160
and try to hammer out some kind of voluntary code to which they would all exceed.

596
00:54:56.160 --> 00:55:01.160
And Professor Schaeffer points out that one trade association executive

597
00:55:01.160 --> 00:55:05.160
condemned the businessman who operated his business

598
00:55:05.160 --> 00:55:10.160
in entire disregard of the effects on his competitor and the rest of the industry.

599
00:55:10.160 --> 00:55:13.160
That's the mainstream view, really, in the 1920s.

600
00:55:13.160 --> 00:55:17.160
And you see this in business publications, in Business Week, everywhere,

601
00:55:17.160 --> 00:55:24.160
This idea that we have to move beyond the old days.

602
00:55:24.160 --> 00:55:26.160
For example, one businessman said,

603
00:55:26.160 --> 00:55:29.160
instead of being the individualistic merchant of the old days,

604
00:55:29.160 --> 00:55:35.160
the modern businessman must believe in the new spirit of cooperation.

605
00:55:35.160 --> 00:55:38.160
Again, bear in mind that quotation from Adam Smith.

606
00:55:38.160 --> 00:55:40.160
Another businessman said,

607
00:55:40.160 --> 00:55:46.160
our profits are absolutely unprotected.

608
00:55:46.160 --> 00:55:54.160
He said that we need business ethics legislation that would make it possible for fair practices to become a law in any industry

609
00:55:54.160 --> 00:56:00.160
when 80 or 90 percent of that industry, together with governmental supervision, agree on a policy.

610
00:56:00.160 --> 00:56:03.160
The president of the Denison Manufacturing Company said this,

611
00:56:03.160 --> 00:56:08.160
We must manage ourselves if we are to gain on the past.

612
00:56:08.160 --> 00:56:13.160
No laissez-faire, no unchanneled and unimpeded course of nature, no invisible hand will do it for us.

613
00:56:13.160 --> 00:56:18.160
We now find ourselves in a period of growing social self-control.

614
00:56:18.160 --> 00:56:20.160
I love that social self-control.

615
00:56:20.160 --> 00:56:22.160
It's not just each of us will control ourselves.

616
00:56:22.160 --> 00:56:28.160
We'll have social self-control, which is a little more ominous sounding, I think.

617
00:56:28.160 --> 00:56:31.160
So these people are speaking of the end of laissez-faire,

618
00:56:31.160 --> 00:56:36.160
or either voluntary regulation on the part of business, self-regulation,

619
00:56:36.160 --> 00:56:40.160
or if necessary, using the coercive power of the state if the voluntary means don't work.

620
00:56:40.160 --> 00:56:49.160
Herbert Hoover was a huge supporter of this, huge supporter of this so-called associationism in the 1920s.

621
00:56:49.160 --> 00:56:52.160
He thought this was the answer to untrammeled competition.

622
00:56:52.160 --> 00:56:58.160
So here he is hilariously referred to as the supporter of the absolutely untrammeled market

623
00:56:58.160 --> 00:57:05.160
against any attempt to modify the market, but nothing could be further from the truth.

624
00:57:05.160 --> 00:57:08.160
It's exactly the opposite.

625
00:57:08.160 --> 00:57:17.160
In the 1920s, the American bottlers of carbonated beverages, as did many different industries, developed a code of ethics.

626
00:57:17.160 --> 00:57:26.160
Some industries developed codes of fair competition to which they proposed that the firms in their industry would adhere.

627
00:57:26.160 --> 00:57:29.160
And one of the points in their code was,

628
00:57:29.160 --> 00:57:34.160
was, my desire shall not be to undersell my fellow bottlers,

629
00:57:34.160 --> 00:57:36.240
but to contend with them for first place

630
00:57:36.240 --> 00:57:38.480
in the quality of my products and the service

631
00:57:38.480 --> 00:57:41.240
I render my patrons.

632
00:57:41.240 --> 00:57:43.640
And I think Professor Schaeffer gets right

633
00:57:43.640 --> 00:57:47.200
to the heart of the significance of this when he says this.

634
00:57:47.200 --> 00:57:50.320
The established firms would, quite understandably,

635
00:57:50.320 --> 00:57:52.320
find such competitive restrictions

636
00:57:52.320 --> 00:57:54.500
particularly beneficial.

637
00:57:54.500 --> 00:57:57.520
For a newer firm would, in order to attract customers away

638
00:57:57.520 --> 00:58:01.680
from the older firms have to offer significant inducements.

639
00:58:01.680 --> 00:58:04.120
This is a problem always faced by a newcomer.

640
00:58:04.120 --> 00:58:09.080
The existing firms enjoy an immense advantage by virtue of their goodwill and established

641
00:58:09.080 --> 00:58:14.080
positions, a situation that can be overcome only by recourse to the most effective competitive

642
00:58:14.080 --> 00:58:15.240
methods.

643
00:58:15.240 --> 00:58:20.680
But if competitive methods become fairly standardized and the newer firm is required to adhere to

644
00:58:20.680 --> 00:58:26.440
the same patterns as the established firm, the newcomer will find itself at an even greater

645
00:58:26.440 --> 00:58:33.440
It will have been deprived of the means of offering the necessary inducements to attract customers away from the established firms.

646
00:58:33.440 --> 00:58:35.440
I think that's it, exactly.

647
00:58:35.440 --> 00:58:43.440
Now, one of the points that Schaeffer notes about the 1920s was that you got the Federal Trade Commission

648
00:58:43.440 --> 00:58:49.440
occasionally calling in various firms to help them hammer out some kind of code

649
00:58:49.440 --> 00:58:56.440
and to determine what these firms themselves consider to be unfair business practices.

650
00:58:56.440 --> 00:59:00.440
And very often, one of the unfair business practices is selling below cost.

651
00:59:00.440 --> 00:59:03.440
And that's an unfair business practice.

652
00:59:03.440 --> 00:59:09.440
Now, what these businesses were hoping for was that if they meet with the Federal Trade Commission

653
00:59:09.440 --> 00:59:15.440
and the vast bulk of them agree on what would constitute an unfair business practice,

654
00:59:15.440 --> 00:59:38.440
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.

655
00:59:38.440 --> 00:59:46.440
So there was this hope that this could translate in some way into some kind of coercive measure to keep competition at bay.

656
00:59:46.440 --> 00:59:55.440
Now these voluntary agreements though have this problem that since they're voluntary, you'll never get everybody agreeing to them.

657
00:59:55.440 --> 01:00:03.440
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.

658
01:00:03.440 --> 01:00:17.440
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.

659
01:00:17.440 --> 01:00:26.440
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.

660
01:00:26.440 --> 01:00:41.440
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.

661
01:00:41.440 --> 01:00:51.440
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.

662
01:00:51.440 --> 01:00:57.440
Business merely uses the government's aid in governing itself.

663
01:00:57.440 --> 01:01:01.440
Again, along these lines from the Swope Plan,

664
01:01:01.440 --> 01:01:05.440
How can coercion be considerate and fair?

665
01:01:05.440 --> 01:01:09.440
Only when the fullest technical opinion within a given industry agrees

666
01:01:09.440 --> 01:01:14.440
that it knows the interests of the moderately small producer better than he does.

667
01:01:14.440 --> 01:01:17.440
Isn't that funny how they all know his interests better than he does?

668
01:01:17.440 --> 01:01:23.440
A man's peers can pass upon a man's needs more fairly than any others.

669
01:01:23.440 --> 01:01:27.440
By the way, the man's peers happen to be his competitors. You might point that out.

670
01:01:27.440 --> 01:01:28.440
But we know your needs.

671
01:01:28.440 --> 01:01:33.440
Coercion in the coerced one's own best interests is no less considerate

672
01:01:33.440 --> 01:01:40.440
than a measure of coercion applied to an adolescent when all moral suasion has failed.

673
01:01:40.440 --> 01:01:44.440
Absolute contempt for this small businessman.

674
01:01:44.440 --> 01:01:50.440
Senator Robert Wagner, who is responsible for the Wagner Act, which involves labor unions,

675
01:01:50.440 --> 01:01:55.440
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.

676
01:01:55.440 --> 01:02:05.440
But he looked at the National Industrial Recovery Act of Franklin Roosevelt, which in effect put these features into effect finally,

677
01:02:05.440 --> 01:02:10.940
that said that industries will be encouraged to drop these codes

678
01:02:10.940 --> 01:02:17.940
and they will be codes that regulate hours of production, minimum prices again,

679
01:02:17.940 --> 01:02:23.940
sometimes quality regulations, but also in order to get organized labor on board,

680
01:02:23.940 --> 01:02:29.440
minimum wages that will be paid in the various industries

681
01:02:29.440 --> 01:02:34.940
and will suspend the antitrust laws so that businesses can get away with doing this.

682
01:02:34.940 --> 01:02:36.440
Robert Wagner said this,

683
01:02:36.440 --> 01:02:42.440
I think this bill is important as the first step toward that which the liberals of this country have been preparing for years.

684
01:02:42.440 --> 01:02:45.440
So already the word liberal has been destroyed.

685
01:02:45.440 --> 01:02:51.940
It was a part of the platform of the 1912 Progressive Party, namely the necessity of a national planned economy.

686
01:02:51.940 --> 01:02:57.440
Until we have that, I venture to say that we are not going to have an orderly, organized economic system.

687
01:02:57.440 --> 01:03:05.440
A good deal of the chaos and disorganization from which we are suffering now is due to this lack of planning.

688
01:03:06.440 --> 01:03:12.440
All right, well, say a little bit about this and then probably just open for questions and continue after lunch.

689
01:03:12.440 --> 01:03:20.440
But the man who headed the National Recovery Administration, which was created by the National Industrial Recovery Act,

690
01:03:20.440 --> 01:03:25.440
which in effect coordinated these codes and gave the force of law to them,

691
01:03:25.440 --> 01:03:33.440
once referred to this whole plan, the National Recovery Administration, as a holy thing,

692
01:03:33.440 --> 01:03:42.440
the greatest social advance since the days of Jesus Christ.

693
01:03:42.440 --> 01:03:47.440
I mean, some people might think that's kind of an exaggeration.

694
01:03:47.440 --> 01:03:52.440
He said, I think industry can both run itself and govern itself

695
01:03:52.440 --> 01:04:05.440
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.

696
01:04:05.440 --> 01:04:15.440
Is this regimentation? If it is, it is regimentation by the majority itself through the peculiarly American doctrine of majority rule.

697
01:04:15.440 --> 01:04:20.440
That is no more regimentation than any form of government

698
01:04:20.440 --> 01:04:26.440
which any community elects to impose upon itself for the common good.

699
01:04:26.440 --> 01:04:30.440
Yeah, I know what I mean. You're just left speechless.

700
01:04:30.440 --> 01:04:35.440
Well, as the National Industrial Recovery Act and its offshoot,

701
01:04:35.440 --> 01:04:39.440
the National Recovery Administration goes on for a couple of years,

702
01:04:39.440 --> 01:04:42.440
there are a lot of complaints about it. Small business complain,

703
01:04:42.440 --> 01:04:58.440
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.

704
01:04:58.440 --> 01:05:03.440
The thinking behind it, by the way, is not only that business wants to regulate itself,

705
01:05:03.440 --> 01:05:06.440
but there's this thinking that, you know, we're in this depressed condition,

706
01:05:06.440 --> 01:05:09.440
there's only a limited amount of demand out there.

707
01:05:09.440 --> 01:05:14.440
So we have to parcel it out among the businesses and we need coordination to do this.

708
01:05:14.440 --> 01:05:21.440
And there is this belief that big business itself became really disconcerted,

709
01:05:21.440 --> 01:05:27.440
disillusioned with the National Recovery Administration and the whole plan.

710
01:05:27.440 --> 01:05:36.440
But that's kind of a misleading statement, because by 1935, when the Supreme Court found this act to be unconstitutional,

711
01:05:36.440 --> 01:05:41.440
this is back when the Supreme Court used to actually find things unconstitutional, other than state laws,

712
01:05:41.440 --> 01:05:47.440
it's not true that big business was saying, oh, well, that's a relief.

713
01:05:47.440 --> 01:05:53.440
It's true that they had some administrative disagreements with the way the thing was being run,

714
01:05:53.440 --> 01:06:03.440
But Butler Schaeffer makes an indispensable point that their so-called opposition was just in the way the thing was being run.

715
01:06:03.440 --> 01:06:08.440
It wasn't the basic principle of the thing whereby businesses would have these codes governing them.

716
01:06:08.440 --> 01:06:15.440
They still liked that. In fact, he managed to dig up this useful bit of information.

717
01:06:15.440 --> 01:06:22.440
The US Chamber of Commerce had a referendum in 1935 of its members.

718
01:06:22.440 --> 01:06:25.440
And they asked them these poll questions.

719
01:06:25.440 --> 01:06:34.440
The first one was, are you for enactment of new legislation prior to the expiration of the National Industrial Recovery Act?

720
01:06:34.440 --> 01:06:39.440
And 78.1% were for, 21.9% against.

721
01:06:39.440 --> 01:06:47.440
Do you believe that industry should be permitted to formulate its own rules of fair competition subject to government approval?

722
01:06:47.440 --> 01:06:53.440
In favor of that statement? Yes. 95.2%, 4.8% against.

723
01:06:53.440 --> 01:06:59.440
How do you feel about having rules of fair competition enforceable against all concerns in the industry?

724
01:06:59.440 --> 01:07:03.440
91.8% in favor, 8.2% against.

725
01:07:03.440 --> 01:07:09.440
So to say that they were relieved that this thing was over is, I think, a misreading of the data.

726
01:07:09.440 --> 01:07:29.440
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.

727
01:07:29.440 --> 01:07:54.440
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?

728
01:07:59.440 --> 01:08:29.440
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,

729
01:08:29.440 --> 01:08:32.440
They do, I think, want to stay on the good side of the president.

730
01:08:32.440 --> 01:08:37.440
I mean, think of Bill Gates when the government was going after him.

731
01:08:37.440 --> 01:08:41.440
You know, I remember seeing on the news, there he is playing golf with Bill Clinton.

732
01:08:41.440 --> 01:08:43.440
And I thought, isn't this disgusting?

733
01:08:43.440 --> 01:08:47.440
You know, when you live in a society where you have to play golf with this jerk,

734
01:08:47.440 --> 01:08:51.440
just to try to hope that, you know, would you please not shut me down?

735
01:08:51.440 --> 01:08:52.440
Good. You know?

736
01:08:52.440 --> 01:08:57.440
So I think some of that was this desire that the president urges you to do something, you do it.

737
01:08:57.440 --> 01:09:13.440
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.

738
01:09:13.440 --> 01:09:23.440
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.

739
01:09:23.440 --> 01:09:46.440
Everything you've been talking about with the NRA is pure marketalism or even fascism.

740
01:09:46.440 --> 01:09:49.440
What else can we talk about?

741
01:09:53.440 --> 01:10:00.440
In some way this isn't fair, but in some ways, look, they said it, so I'm going to use these quotations.

742
01:10:00.440 --> 01:10:05.440
I have a couple of quotations from Mussolini and Hitler, explaining their admiration for the New Deal.

743
01:10:05.440 --> 01:10:10.440
So I'm going to read those in the next talk after lunch.

744
01:10:10.440 --> 01:10:15.440
That's actually something that's hard to hear after lunch, actually.

745
01:10:15.440 --> 01:10:21.440
Right? My gosh, Hitler saying, I love Franklin Roosevelt, but he did actually more or less say that.

746
01:10:21.440 --> 01:10:28.440
I thought the NRA also was not just big business, but I kept thought of going down the whole areas of business.

747
01:10:28.440 --> 01:10:34.440
I recall one guy who got put in jail because he cut the price of pressing trousers.

748
01:10:34.440 --> 01:10:41.440
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.

749
01:10:41.440 --> 01:10:47.440
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

750
01:10:47.440 --> 01:10:51.440
People who are found violating the codes of production.

751
01:10:51.440 --> 01:10:56.440
So he gives the example of a gentleman in New Jersey who's hemming a pair of pants at night.

752
01:10:56.440 --> 01:11:00.440
Or he's hemming them for 35 cents and he's supposed to hem them for 40 cents.

753
01:11:00.440 --> 01:11:06.440
Or there are people in the garment industry who are producing things at night instead of during the day,

754
01:11:06.440 --> 01:11:08.440
and you're not supposed to do that.

755
01:11:08.440 --> 01:11:13.440
And so people are, you know, there are thousands of enforcement officials whose job it is to storm into your business

756
01:11:13.440 --> 01:11:27.440
Are marketing orders for now in agriculture the same kind of activity?

757
01:11:27.440 --> 01:11:34.440
I used to work for USA for 13 years and I was hauled by all these marketing orders that were going on.

758
01:11:43.440 --> 01:11:46.920
And you wonder, how can it still go on?

759
01:11:46.920 --> 01:11:50.240
I mean, to one extent, you have the public choice explanation.

760
01:11:50.240 --> 01:11:53.560
You know, that the agricultural interests are small and concentrated.

761
01:11:53.560 --> 01:11:58.360
It's in their interests and it's easy for them to organize and lobby 24 hours a day.

762
01:11:58.360 --> 01:11:59.600
Our interests are more dispersed.

763
01:11:59.600 --> 01:12:03.640
It doesn't matter to me, you know, if sugar is 25 cents more than it would otherwise be.

764
01:12:03.640 --> 01:12:05.080
Well, I'll have to live with it.

765
01:12:05.080 --> 01:12:06.720
So they're going to tend to win.

766
01:12:06.720 --> 01:12:13.400
But I mean, this is just so outrageous when you consider how much some of these big agricultural concerns are getting from the government.

767
01:12:13.400 --> 01:12:43.400
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,

768
01:12:43.400 --> 01:12:47.400
going on is absolutely stunning. It's stunning. Yes.

769
01:12:47.400 --> 01:12:58.400
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.

770
01:12:58.400 --> 01:13:09.400
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.

771
01:13:09.400 --> 01:13:28.400
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.

772
01:13:28.400 --> 01:13:32.400
Maybe they might think, well then there's got to be some other way of helping the family farm.

773
01:13:32.400 --> 01:13:39.400
And you know, one program that I've sort of favored, it's not a government program and I wrote briefly about it once.

774
01:13:39.400 --> 01:13:45.400
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,

775
01:13:45.400 --> 01:13:51.400
but I mean it's hard to be a farmer because so much can go wrong from year to year.

776
01:13:51.400 --> 01:13:59.400
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,

777
01:13:59.400 --> 01:14:02.400
and then it turns out badly and then sometimes it's hard for them to pay the debt

778
01:14:02.400 --> 01:14:05.400
and they've got to go into the next year and the debt can multiply

779
01:14:05.400 --> 01:14:07.400
and so it's very difficult.

780
01:14:07.400 --> 01:14:10.400
So one thing that has been done since the 1980s

781
01:14:10.400 --> 01:14:13.400
is something called community-supported agriculture.

782
01:14:13.400 --> 01:14:16.400
I know you hear community and you think, ah, but that's not bad.

783
01:14:16.400 --> 01:14:18.400
It's not a bad thing because the idea is that

784
01:14:18.400 --> 01:14:21.400
some of us do like to have our food grown locally.

785
01:14:21.400 --> 01:14:24.400
I don't need to have a head of lettuce shipped to me from Australia, probably.

786
01:14:24.400 --> 01:14:27.400
Maybe that is the most economically sensible way to do it.

787
01:14:27.400 --> 01:14:37.400
I just like to be able to buy locally grown stuff, but the farmers have a difficult time.

788
01:14:37.400 --> 01:14:44.400
So what people do in community-supported agriculture is they voluntarily pay the farmer a few hundred dollars at the beginning of the year.

789
01:14:44.400 --> 01:14:48.400
They give him his capital, and then he uses that for what he needs.

790
01:14:48.400 --> 01:14:55.400
And then when he begins growing, you get free stuff the whole year, or you get all his production.

791
01:14:55.400 --> 01:15:00.900
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.

792
01:15:00.900 --> 01:15:04.400
You get fresh produce all year, at least during his growing season.

793
01:15:04.400 --> 01:15:08.400
But you get the produce in proportion to how well the farmer does that year.

794
01:15:08.400 --> 01:15:12.400
If he's having a great year, then you get a whole bunch of fennel.

795
01:15:12.400 --> 01:15:18.400
I'm not even sure what fennel is, actually. I don't know why I use that.

796
01:15:18.400 --> 01:15:22.400
But if he has not so good a year, then you have not so good a year.

797
01:15:22.400 --> 01:15:25.400
I have friends who have been involved in this for years who tell me that

798
01:15:25.400 --> 01:15:29.400
the farmer would have to have an event of biblical proportions

799
01:15:29.400 --> 01:15:32.400
for you not to get a lot of produce.

800
01:15:32.400 --> 01:15:38.400
And so that to me, that's a great example of how voluntary means can actually satisfy everybody.

801
01:15:38.400 --> 01:15:40.400
I get to get my locally produced stuff.

802
01:15:40.400 --> 01:15:44.400
The farmer isn't going to Congress to get special privileges, whatever.

803
01:15:44.400 --> 01:15:49.400
It's just people who value these things, put a price tag on it, put their money where their mouth is.

804
01:15:49.400 --> 01:15:52.400
It seems to me that's a nice way forward.

805
01:15:52.400 --> 01:15:54.400
Yes?

806
01:15:54.400 --> 01:16:00.400
You read a quote about our profits are highly affected by the businessmen and others.

807
01:16:00.400 --> 01:16:04.400
There are just two ways of reading it.

808
01:16:04.400 --> 01:16:11.400
One is that our profits are in a narrow sense of us, the small people, the businessmen, or whatever it might be.

809
01:16:11.400 --> 01:16:19.020
or could mean just some general rate of properties in the danger of pre-competition.

810
01:16:19.020 --> 01:16:23.900
And I'm just wondering if there's a second reading of the gospel,

811
01:16:23.900 --> 01:16:27.900
if there's what intellectual roots of that error are,

812
01:16:27.900 --> 01:16:31.400
or thinking that pre-competition is in danger.

813
01:16:31.400 --> 01:16:33.400
Right, right, right.

814
01:16:33.400 --> 01:16:36.400
I'm just looking at it again just to see if I can figure out the context

815
01:16:36.400 --> 01:16:39.400
on the basis of the small quotation that I have here.

816
01:16:39.400 --> 01:16:42.400
Is that a quotation or a general idea?

817
01:17:09.400 --> 01:17:21.400
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

818
01:17:21.400 --> 01:17:33.400
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.

819
01:17:33.400 --> 01:17:48.400
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.

820
01:17:48.400 --> 01:17:53.400
are just too short-sighted, and that the only way that you can really look to the long term

821
01:17:53.400 --> 01:17:56.400
is through collective action where you get the best minds in the industry

822
01:17:56.400 --> 01:17:58.400
and they think in terms of what's good.

823
01:17:58.400 --> 01:18:04.400
But they have no confidence in individual business mavericks.

824
01:18:04.400 --> 01:18:08.400
They think that this can throw the entire industry into disarray.

825
01:18:08.400 --> 01:18:13.400
And an intellectual historian more skilled than I can try to trace out

826
01:18:13.400 --> 01:18:16.400
where this line of thinking ultimately originates,

827
01:18:16.400 --> 01:18:39.400
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?

828
01:18:46.400 --> 01:18:52.600
Other than from pro-Roosevelt historians who want Roosevelt to look good by comparison,

829
01:18:52.600 --> 01:18:57.320
they want to show that he's the originator of all kinds of radically new ideas as opposed

830
01:18:57.320 --> 01:19:00.800
to the old, tired laissez-faire of the past.

831
01:19:00.800 --> 01:19:04.240
But I can't put actual names and faces to that.

832
01:19:04.240 --> 01:19:08.440
But if anybody in the room can help me here, I'd love to know the answer because it seems

833
01:19:08.440 --> 01:19:14.400
to me that it's quite clear as Butler Schaeffer has shown and Rothbard has shown and others

834
01:19:14.400 --> 01:19:21.400
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.

835
01:19:44.400 --> 01:19:57.400
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.

836
01:19:57.400 --> 01:20:04.400
Apparently, years later, it makes sense. They can now collectively sit there and go, yeah, we were wrong.

837
01:20:04.400 --> 01:20:09.400
But at the time, individually, no, they don't want to step out of the ranks of the herd.

838
01:20:14.400 --> 01:20:18.800
There's this kind of herd mentality that sees what it wants to see, in the same way that

839
01:20:18.800 --> 01:20:24.440
today people are repeating propaganda about the Middle East that is demonstrably false.

840
01:20:24.440 --> 01:20:28.040
We don't understand how is it possible that you can think these things when they're demonstrably

841
01:20:28.040 --> 01:20:32.720
false, but sometimes you're so committed to see one thing that that is, in fact, what

842
01:20:32.720 --> 01:20:33.720
you wind up seeing.

843
01:20:33.720 --> 01:20:34.720
Yes?

844
01:20:34.720 --> 01:20:39.040
I think the other thing that happens often is that anything that goes bad is always said,

845
01:20:39.040 --> 01:20:40.040
well, it's a market failure.

846
01:20:40.040 --> 01:20:41.040
It's a market failure.

847
01:20:41.040 --> 01:20:48.040
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.

848
01:20:48.040 --> 01:20:56.040
I give two examples, healthcare and education, most of which for the last 40 years have been increasingly involving the government,

849
01:20:56.040 --> 01:21:01.040
but since the expenses are going out of the ceiling, it's a market failure.

850
01:21:01.040 --> 01:21:08.040
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,

851
01:21:08.040 --> 01:21:23.040
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.

852
01:21:23.040 --> 01:21:24.040
Yes.

853
01:21:24.040 --> 01:21:33.040
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.

854
01:21:33.040 --> 01:21:40.040
You know, I mean, it's in the Democrats' interest to say that, you know, he's different from this Republican.

855
01:21:40.040 --> 01:21:41.040
Right.

856
01:21:41.040 --> 01:21:43.040
It's in the Republicans' interest to say he's different from this Democrat.

857
01:21:43.040 --> 01:21:46.040
Like you were saying, John D. Flynn even likes Hoover.

858
01:21:46.040 --> 01:21:47.040
Right.

859
01:21:47.040 --> 01:21:49.040
Even though they're doing the same thing.

860
01:21:49.040 --> 01:21:50.040
Right.

861
01:21:50.040 --> 01:22:04.040
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.

862
01:22:20.040 --> 01:22:28.040
my reaction to that is to say in my naive way, well shouldn't professional historians though be above this type of bias?

863
01:22:28.040 --> 01:22:31.040
Shouldn't they just be disinterested seekers of the truth?

864
01:22:31.040 --> 01:22:35.040
Kevin? I think that's the last one.

865
01:22:35.040 --> 01:22:41.040
I'll put in another plug for the Roosevelt Minute. It's kind of like a real Lincoln written 50 years ago.

866
01:22:41.040 --> 01:22:52.040
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.

867
01:22:52.040 --> 01:22:57.040
Or that Elmer Roosevelt was sent directly to keep Communists in the Democratic Party.

868
01:22:57.040 --> 01:23:05.040
I mean it's not just records of buffoonery, it's malice and evil and darkness.

869
01:23:05.040 --> 01:23:10.040
Okay, well, I think that statement is worth repeating for the whole internet broadcast audience.

870
01:23:10.040 --> 01:23:18.040
So I'll just say that Kevin is suggesting, once again, putting another plug in for The Roosevelt Myth,

871
01:23:18.040 --> 01:23:24.040
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.

872
01:23:24.040 --> 01:23:28.040
But it's not just a book with interesting anecdotes, as I pointed out.

873
01:23:28.040 --> 01:23:39.040
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.

874
01:23:39.040 --> 01:23:49.040
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.

875
01:23:49.040 --> 01:23:56.040
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?

876
01:23:56.040 --> 01:24:02.040
The comparison may be more apt than you realize, but not in the way you're thinking.

877
01:24:02.040 --> 01:24:07.040
There's really a lot more similarity between Eleanor Roosevelt and Hillary Clinton.

878
01:24:07.040 --> 01:24:14.040
I didn't believe in reincarnation until just in this one case.

879
01:24:14.040 --> 01:24:18.040
I know in Hebrews it says it is given to man once to die and then the judgment.

880
01:24:18.040 --> 01:24:23.040
But for heaven's sake, this is the closest challenge I've ever had to that doctrine.

881
01:24:23.040 --> 01:24:26.040
That's right. Okay, I think we're all finished, so thank you ladies and gentlemen.