In 1931, while running for an office he would later hold until his death in 1945, Franklin D. Roosevelt blamed the Great Depression on a “lack of honour of men in high places.”
Roosevelt applied a moralizing approach to government policy. The result was plenty of ill-matched “solutions” that had no grounding in clear-headed economic policy and little understanding of business or the importance of incentives.
The mistakes of the 1930s are being repeated south of the border. Roosevelt, a patrician, had little understanding of business or how wealth and jobs could be created, because his money was inherited. U.S. President Barack Obama is also thin on such experience, because his career background was that of a lawyer and a “community organizer” interested in splitting the wealth, not in creating it.
So Obama wanted and received the levels of power with little exposure to a world outside the Chicago political environment where brass-knuckle tactics, harsh partisanship and political survival are the keys to electoral success. Moreover, in a city and state where left-leaning Democrats backed up by strong unions almost always win, the moderation usually needed to win local political office became unnecessary.
Skilfully, Obama did leave a political and policy record with as little accomplishment as possible. That allowed him to run for the presidency without having too many defined policy positions that might have cost him either the Democratic nomination or the White House.
The rest, as they say, is history. But even before Obama won the American presidency, there were indications he was more ideological than had been assumed – an anti-business ideology that has displayed itself more prominently since he took office.
In that he replicates Roosevelt, whose tendency for moralizing and punitive anti-business tendencies were best detailed in Amity Shlaes’ 2007 book, The Forgotten Man – A New History of the Great Depression.
For example, as Shlaes notes, Roosevelt’s first great project was the National Industrial Recovery Act. Roosevelt and Harold Ickes, head of the newly created Public Works Administration, both made clear their view that massive government spending would save the economy. Also, the explicit purpose of the act was to drive prices up. In league with the latter aim, the act also created new labour rights they thought would help boost workers’ pay.
Roosevelt’s National Industrial Recovery Act also prohibited price cutting. Supplies of everything from oil to chickens were curtailed. To reduce supply, many agricultural goods and animals were disposed of rather than being allowed to come to market. Food was dumped even though in the depths of the Depression many Americans had trouble finding sustenance for themselves and their children at an affordable price.
Where supplies could not be curtailed enough to keep prices high or drive them higher, price controls were imposed. The prices of everything from macaroni to gold were controlled from Washington, regardless of previous contracts.
Obama’s administration has not gone to the extent of setting the price tags on feathered fowl, but there are enough similarities between the 1930s agenda of Roosevelt and Obama to explain why the United States is still in a funk, and why Obama’s policies have and will prolong it.
On labour policy, Obama’s Chicago origins showed through in the attempt to make unionization easier, even if it comes at the expense of democratic norms like a mandatory vote. The Obama administration wants to do away with votes for unionization if enough employees sign a union card. If the Republicans win some congressional seats in November, this won’t pass but it’s telling that Obama and his congressional allies tried.
Similar to the Roosevelt White House, Obama’s belief in stimulus spending was all the rage at beginning of his term and tentatively halted only by his now-nervous Democratic allies in Congress. That’s because it’s clear the previous $787 billion stimulus program produced meagre results.
In some cases, all the American attempt did was pull consumption ahead. That’s true of housing, where an $8,000 tax credit spurred some sales and stole from future closings; similarly, the cash-for-clunkers program artificially boosted auto sales, but they have predictably slumped again given the lack of an underlying healthy economy.
And then there is Obama’s interference in contracts. When the Obama White House undercut General Motors and Chrysler bondholders in the bankruptcy process in 2009 and put unions ahead of creditors, it was a clear signal that Obama’s team hadn’t left its Chicago style of politics – thuggery – behind. None of that was good for business or investor confidence. That, and Obama’s other mistakes, will only prolong the state of stagnation south of the border, another similarity to 1930s policy from FDR.