Comparative History

Comparative History
By David Glenn Cox

Huddled in the dark corridors, fed with the finest of food and drink and sophistry now comes a shadow of fear, a pall of realization. That those of us outside the Washington corridors of power, outside the Wall Street offices have known about for months, it is no well kept secret to America working class or perhaps I should revise that to the non working class or maybe the over working class.

The fantasies and phallic stroking insisting that the sub prime credit crises would not bleed over into the general economy. Begs the question, how long have you been smoking crack? 2 million homes foreclosed in 2007, 2 million more predicted for 2008 a home construction industry frozen over as hard as a New England puddle but still they think that maybe this won’t bleed over?

Last weeks job report came as a wake up call to the money addicted crack heads, the baggie was empty, no more, little rocks of pleasure. 18,000 new jobs added in December in an economy that requires 150,000 new jobs just to tread water. When subtracting government added jobs the numbers actually contracted. But there is some good news according to the pundits. The good news was that there wasn’t any more bad news. The warehouse of lies and good tidings were out of stock and their lies were on back order.

The mountains of empirical evidence of the damage caused by unregulated free trade have overtaken the Wall Street crack heads with the suddenness of a police raid. So profound has been their undoing that they have now abandoned their Washington messiah. When the stock indexes began to erode Friday the President spoke to calm the markets. The fed had announced it would double the amount of credit available at the short-term window giving the market a bump that lasted only 45 minutes. But after the President gave his somber, subdued, dare I say it, inebriated speech the market returned to its swan dive mode.

Let me give you a stark example, "The magnificent working of the Federal Reserve System and the inherently sound condition of the banks have already brought about a decrease in interest rates and an assurance of abundant capital—the first time such a result has been so speedily achieved under similar circumstances.

"In market booms we develop over optimism with a corresponding reverse into over pessimism. They are equally unjustified but the sad thing is that many unfortunate people are drawn into the vortex of these movements with tragic loss of savings and reserves. Any lack of confidence in the economic future or the basic strength of business in the United States is foolish. Our national capacity for hard work and intelligent cooperation is ample guaranty of the future.

"My own experience has been, however, that words are not of any great importance in times of economic disturbance. It is action that counts. The establishment of credit stability and ample capital through the Federal Reserve System and the demonstration of the confidence of the administration by undertaking tax reduction with the cooperation of both political parties, speak more than words.

"The next practical step is the organizing and coordinating of a forward movement of business through the revival of construction activities, the stimulation of exports and of other legitimate business expansion, especially to take such action in concert with the use of our new powers to assist agriculture. Fortunately, the sound sense, the capacity and readiness for cooperation of our business leaders and governmental agencies give assurance of action."

(Herbert Hoover) Statement Announcing a Series of Conferences with Representatives of Business, Industry, Agriculture, and Labor. November 15th 1929

“I had quite a fascinating and productive meeting with the President’s Working Group on Financial Markets, chaired by Secretary Paulson. I want to thank the members for working diligently to monitor our capital market system, our financial system. And while there is some uncertainty, the report is, is that the financial markets are strong and solid. And I want to thank you for being diligent

This economy of ours is on a solid foundation, but we can’t take economic growth for granted. And there are signs that will cause us to be ever more diligent and to make sure that good policies come out of Washington. For example, we’ve had 52 straight months of job creation, but job growth slowed last month. The core inflation is low, but U.S. consumers are paying more for gasoline and for food.

Consumer spending is strong, yet the values on many of the homes in America are beginning to decline, which leads me to say to the American people: For those of you who are paying more and are worried about your home, we understand that. That’s why we have an aggressive policy to help credit-worthy people stay in their homes. The Congress and the President have got to work together when they come back to, one, make sure taxes remain low. If there are — if the foundation is strong, yet indicators are mixed, the worst thing the Congress could do is raise taxes on the American people and on American businesses. Secondly, we have got to understand that if we are worried about gasoline prices, we ought to expand refineries here in the United States, and we ought to explore for oil and gas in environmentally friendly ways in the United States.

As I mentioned, the Secretary and Secretary Jackson are leading an initiative on housing, called HOPE NOW, but there’s legislation that can be passed to make it easier for people to refinance their homes.

And so when Congress comes back, I look forward to working with them to deal with the economic realities of the moment, and to assure the American people that we will do everything we can to make sure we remain a prosperous country.
(George W. Bush) President Meets With Working Group On Financial Markets
Roosevelt Room, January 5th 2008.

Twin sons of different mothers, their answers are the same, as is their lack of understanding of the problem. Both men believe that to rescue the economy they must make more credit available for business and industry. In 1932 when Henry Ford shut down the world’s largest automobile factory it wasn’t because he didn’t have credit it was because his customers didn’t have jobs.

In the physical world there are universal constants, minerals expand when heated and contract when chilled. Water is the exception, water expands when frozen and evaporates when heated. Every thing runs down hill, everything that is, except money, money is the exception, money runs uphill. If you give tax cuts to the working class they will buy home improvements, pay bills and maybe take a vacation. But the money will sift through the economy by way of Home Depot, Wal Mart and Piggly Wiggly ending up in the pockets of the same corporations the President is so fond of issuing tax cuts to.

Our economy is bled out, our currency is debased, the constant loss of good paying jobs replaced by low wages and short hours has reached critical mass. 21st century wages and 20th century debt. People without wages buy nothing, the pundits once predicted that the consumer would save America from recession. That same consumer that is now so emaciated that they can no longer afford Wendy’s hamburgers. It is no wonder then that the Wall Street crack heads have lost faith in the President. His lone solitary message of more and more and more tax cuts when it is tax cuts that has brought us here. Taxes cut at the top stay at the top, people without discretionary income cannot save the economy.

When I was a child in Chicago the Schwinn Bicycle Company operated one of the largest bicycle factories in the world. Hundreds of workers making union wages with healthcare and retirement benefits. The company had hundreds of local vendors, steel, rubber, ball bearings all delivered on trucks daily. The success of Schwinn reverberated throughout the local economy. But when the government made it more cost effective to import bicycles from Taiwan or China they made American workers compete with Asian pay scales. Not only that they forced every vendor to do the same.

The Republicans counter that it was the unions with their high wages that drove the industry off shore. But even today 25 years later the Chinese replacements for the Schwinn employees make $5.00 dollars a day. Henry Ford’s wage for industrial workers in 1925, so was it unions they were running from or slave wages that they were running toward? Of course executive compensation has remained the same but more to the point the money no longer flows through the economy. The supply chain is now a container ship and a truck to the warehouse.

The money flows out of the economy rather than through the economy. The race to the bottom is almost completed. The bankers now find themselves begging hat in had on Asian doorsteps just to keep their doors open. How bad is it? The President is paying attention so it must be bad. Soon, very soon, they will bug out just as they bugged out in 1932. The bumbling Bernacke left holding the bag from the snipe hunt will take the fall for 25 years of Republican imagineering and we the people will use the rest of the days of our lives to pick up the pieces. Just as before unregulated predatory capitalism and radical trade policy will tear the economic engine to shards just as it did in 1929.

(From FDR’s First Inaugural Address 1932)

“I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our people impel. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.”

“In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.”

“More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.”

“Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. “

“True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.”

“The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit. Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.”

“Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live.”

Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now. Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.

Hand in hand with this we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in a redistribution, endeavor to provide a better use of the land for those best fitted for the land. The task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities. It can be helped by preventing realistically the tragedy of the growing loss through foreclosure of our small homes and our farms. It can be helped by insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced. It can be helped by the unifying of relief activities which today are often scattered, uneconomical, and unequal. It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character. There are many ways in which it can be helped, but it can never be helped merely by talking about it. We must act and act quickly. Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people’s money, and there must be provision for an adequate but sound currency.

There are the lines of attack. I shall presently urge upon a new Congress in special session detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States. Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.

(FDR’s First Inaugural Address 1932)