Ideas: March 2009 Archives
What is the role of government? It might depend on what’s needed. Obama, during his inaugural address, recast the debate not in terms of size but utility.
But it’s an argument going way back to the 1930s when capitalism was untenable and marketplace forces threatened to tear the country apart.
Given our crisis, I’m struck by the similarities between now and then. Reading William E. Leuchtenburg’s new biography of Herbert Hoover is like reading today’s newspaper. In this New Haven Review piece, I say it’s nothing short of breathtaking:
In 1932, the country was facing a credit crisis the likes of which had never been seen. Americans were losing their jobs, their houses, and their life savings as the stock market crashed and banks collapsed.
To stymie a plunge that could last years, Hoover OK’d the renewal of the Reconstruction Finance Corporation to recapitalize the financial sector, infusing $2 billion—a “staggering amount” at that time, Leuchtenburg reminds us—into banks, insurance firms, railroad companies, and other finance institutions. Will Rogers wrote that the bankers had “the honor of bring the first group to go on the ‘dole’ in America.”
But efforts to save the banks and stimulate the economy from the top down backfired. Banks were still closing, though at a slower rate, and instead of loosening up credit markets, as the bailout was intended to do, banks found a way to use the millions to shore up their own holdings.
New York Senator Robert Wagner, a progressive critic of the Hoover administration, responded to this blank-check strategy by zeroing in on the fatal flaw of Hoover’s economic ideology: Even in extraordinary times, even in the face of starvation, Hoover believed welfare would impair the character of the needy and rob benefactors of the opportunity to exercise voluntarism and civic duty. Wagner, like many others, was stunned by Hoover’s decision to bail out banks. “We did not preach to them rugged individualism,” he said:
We did not sanctimoniously roll out sentences rich with synonyms of self-reliance. We were not carried away with apprehension over what would happen to their independence if we extended them a helping hand…. Must [the individual] alone carry the cross of individual responsibility?
I don’t think Leuchtenburg intended his biography to reflect so acutely our current hardships. His aim was to paint a not unsympathetic portrait of a hard man to have sympathy for. But as I zipped through this lucid book, I kept trying to think of a good word to describe the feeling of my frequently being taken aback. History repeats itself, sure, but how often does it do so with such vengeance?