Sure, we’ve a major economic problem on our hands. Caused, obviously enough, by the coronavirus and reactions to it, the attempted mitigation of it. This is not an indictment of our current economic model because it’s entirely outside our current economic model. The effects upon each country are not varying as a result of their position on the spectrum from rampant free marketism, stout capitalism, through varying shades of social democracy and into Stalinist socialism. Even the anarchocapitalism of parts of Somalia isn’t changing effect. Therefore no one nor t’other of these models is the solution.
However, we will be bombarded by claims that actually, one of t’other of them is. One we can already see is that the Great Depression led to an expansion of government therefore we should have an expansion of government. This is an error. Because not everywhere did react to the GD with an expansion of government.
While America was expanding the reach of government, the UK cut state spending and put the budget into surplus. At the same time it devalued the pound. This is known as “expansionary austerity” – and it worked pretty well.
FDR boosted the role of the federal government in many ways. One big reform, the arrival of a social security system, was just following what the UK had done in 1911, or what Bismarck had done in Germany much earlier in creating a perfectly reasonable safety net.
Much less reasonable was the National Recovery Administration, which was a disastrous attempt at managing prices. Fair, not fierce, competition, minimum wages by industry, minimum sales prices, the sort of economic controls that would make John McDonnell whimper with pleasure. The legal growth in union power and the imposition of cartels upon both business and agriculture. This suite of ill-advised measures delayed the recovery so much that it’s generally agreed the US economy didn’t get back to where it should be until the War.
The grand tell here will be – as it already is in the commentary pages – people talking about FDR and the US. Without, that is, talking about the contrary policies and contrary outcome in the UK.
Sure, this still leaves open the idea that the crisis will lead to, should lead to, changes in economic policy and or structure. But which changes should be informed by history, not by ideological selectivity in which evidence to consider.
It really is true that FDR’s messing with the economy prolonged the pain. We should take note.