Not the way things were
lefty made a comment about the New Deal that I think deserves special attention:
The New Deal regulatory regime worked very well for 60 years. From 1947 to the mid-1970s, this country experienced its greatest period of sustained growth ever. And it was the New Deal system that was the basis of that growth.
Beginning in the 1990s, however, there was intense pressure from Wall Street and elsewhere to loosen these regulatory restrictions. So a lot of them were done away with in the name of “modernization” and “efficiency.” Translation: we need to make more @%@#% money, and these regulations are in our way.
The problem here is with his premise. The premise is that we had unmitigated prosperity for so long in spite of New Deal big government programs as opposed to because of them. There are two main reasons why we had such sustained economic growth in the Postwar period:
- Defense spending, which is the only reason that the Depression ended in the first place, continued to be a large portion of the economy for decades due to the Cold War. Defense spending and war has been the only governmetn program in human history that can bring about an economic turnaround.
- The complete lack of competition in the global marketplace. Face it, the American economic engine and industrial base had a decade long head start on the rest of the world due to the fact that American industry was ramped up from World War II and the fact that the U.S. was the only industrialized nation that did not suffer substantial to total destruction to its industrial capacity. It’s pretty easy to sell products and build industry and prosperity when you are the only game in town, and that made it easy to sustain our lead in industry and technology for as long as we did.
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The New Deal had nothing to do with the success of the Postwar Economy. Nothing whatsoever. It just is not the way things were.
I wrote a while back (as he referenced) about the end of Keynesian economics. But as I have stated before, it was Keynesian economics in the sense of unfettered deficit spending that has gotten us into the mess. And yes, President Bush’s domestic spending has caused a lot of that problem. But you must remember this: we have never had unfettered capitalism. in the U.S. Before the current regulatory environment, we were faced (particularly in the late 19th century) with regulations geared toward preserving oligarchy, not encouraging capitalism.
To be perfectly honest, I don’t know the best solution, and I don’t think anybody really does at this point. I don’t think either candidate for President has an answer either. I certainly know Obama doesn’t, given the fact that he has people like James Johnson, Franklin Raines and Jamie Gorelick (the people who ran Fannie Mae into the ground) as key economic advisers. But I am certain that the proposed bailout and the unnecessary regulations attached to it aren’t it. Keynes is still not the answer.