Thursday, May 24, 2012

How We Got Out of the Depression and Why US Poverty Rates Are At Historic Highs And Are Likely To Stay There

World War II.

No, our friend Franklin Delano Roosevelt was no great Keynesian when it came down to brass tacks as they say. He was more of a Hooverite. And during the 1932 campaign, Roosevelt ran to Hoover's right on economic matters. "Balanced budgets" were just as much of a fetish then as they are now. This was typical Democratic dogma at the time, and it never really changed, despite the fact that the Rooseveltian approach to Hooverite economic ideology was more flexible, shall we say, than Hoover's was, and to put a finer twist on it, Roosevelt was somewhat more interested in calming and managing the masses (using the hope of reward "one day" -- ie: Futurism) than was Hoover, whose sole economic interest was taking care of the upper-uppers.

World War II changed everything in ways that could neither be anticipated nor initially controlled.

The first noticeable big change was that it put everybody to work -- either in the military or in civilian employment supporting the military. Hiring began in 1940, before the United States entered the conflict, and the pace of hiring and drafting Americans increased through the end of 1945.

The second big change was that though pretty much every American who could work and wanted to was put to work during WWII and was paid for their work at a reasonable though hardly lavish standard, there was little for them to buy with their earnings, and necessities were rigidly price controlled.

In other words, though everyone was working, employment didn't at the time translate into a civilian consumer economy because there were so few consumer products available. Most of what was being spent was being spent by the government in pursuit of victory in war, thus most production was being promptly destroyed and replaced in warfare. For civilians and military alike, this was a situation that enforced savings. Troops and civilian workers were encouraged to buy War Bonds and hold them for the duration which they did. This meant that at the end of the war, many Americans had much more money in their pockets than they ever imagined and could not have possibly earned during the Depression.

A consumer economy was born out of these savings, particularly a post-war housing boom and an automobile boom, both of which essentially continued with only mild and occasional set backs until recently.

The War provided the twin factors of full employment and enforced savings that pulled the United States out of Depression. The unfortunate lesson learned from this experience by Our High and Our Mighty was that the way to prevent Depression in the future was to engage in perpetual war -- even if it was only Cold War.

The point of engaging in universal service and perpetual warfare, however, started getting lost during the 1970's in the aftermath of the Vietnam debacle.

Soon enough, the entire premise of the Cold War era would evaporate along with Our Bounden Enemy, the Soviet Empire. There are many reasons the Soviet Union collapsed; Ronald Reagan's "Brilliant Strategy" was probably the least important of a multiplicity of internal factors that were essentially built in to the Soviet system. In the Soviet collapse, Americans unknowingly got a preview of the coming collapse/transformation of their own rotting economic and political system.

The principal error after WWII was the rather dumb assumption that "war prevents economic depression." That's what experience showed to The Powers That Be, and so perpetual war was established as policy after WWII, carried out on the open battle field in Korea and Vietnam among other places. But the Cold War with the Soviets -- and to a much lesser degree with the Chinese and the Cubans -- was the endeavor that was meant to keep the wolves from the door.

One wonders what would have happened if the lesson learned had focused entirely on the civilian aspects of full employment and enforced savings instead of being diverted into perpetual warfare?

For we are now living with the consequences of that diversion, the apparent "victory" over the Soviets notwithstanding.

Having "won" the Cold War, the US had to have another Existential Enemy to fight in perpetuity, or there apparently would be no point in going on... Depression would return...

The Existential Enemy was found, of course, in the nefarious terrorist threat that stalks the land, but even with throwing in a few Imperial Wars of Aggression, Fighting the Terrorists doesn't provide nearly the economic boost that WWII and the Cold War did. These current wars are more of an economic drag instead.

They are a drag on the economy because they don't lead to full employment and they don't enforce savings.

It appears that Our Leaders have never learned that full employment and enforced savings are what pulls us out of economic depressions, and they are the major factors in preventing them, not warfar for its own sake.

Instead, they are practicing just the opposite -- conducting overseas wars and expanding the US National Security State with the least employment levels possible while preserving a consumer economy through ever higher levels of household debt -- or its contrast, forcing ever more millions of Americans into bankruptcy and poverty.

Not only is the United States back in Depression, we are in an economic Depression that there may be no rational/peaceful way out of if it goes on much longer.

This is a Depression that is enriching a handful of hyper-billionaires in ways most of us never dream possible primarily through gambling and financial hocus pocus in a rigged house, a casino that's rigged against the People. Even when they lose the bet, the hyper-rich get paid off by the rest of us.

It's the most amazing thing.

The more impoverished the rest of us become, the richer the handful at the top grow.

Unemployment rates remain at historic levels; poverty rates are growing to post-WWII highs. This is not due to some accident of the market, it's due to policy. As of late last year, half of Americans were classified as very poor or near poor, and more were being pushed into their ranks day by day as unemployment and the reduction of wages and benefits, with no concomitant reduction in cost of living, take their toll.

Meanwhile, public services and the public infrastructure deteriorate at an alarming rate.

Not only are the People falling into poverty, so is the public sector in general. The fall out from this Endless Recession and the contraction forced onto local and state governments will have a lasting effect, even if, eventually, someone who can do something about it gets the bright idea that it doesn't have to be this way, and the course can be reversed in a twinkling.

The longer we wait for that reversal, however, the harder it will be, and the more dangerous it might become for children and other living things.

There is the potential to make lemonade out of these lemons, however.

By adopting principles of voluntary poverty, for example, and by decoupling from the consumer economy that is still sputtering along, Americans have the opportunity to explore and reclaim the Better Future on their own terms rather than on terms set by Masters of the Universe and by a system of exploitation and destruction.

[To Be Continued...]

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