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The course to audit this semester at Berkeley would be Brad DeLong’s Econ 115. He’s been drilling down on the Great Depression and doing his best to extract lessons that are useful for our current circumstances. In particular, DeLong’s October 1 lecture “The Industrial Financial Business Cycle and the Great Depression” (which can be downloaded here) is worth a gander. It includes a review of the attitudes that leading economists of the Depression Era (including von Hayek and Schumpeter) developed in real time, and how this affected the situation.
At its nadir, the Depression was collective insanity. Workers were idle because firms would not hire them to work their machines; firms would
not hire workers to work machines because they saw no market for goods; and there was no market for goods because workers had no incomes to
spend. Orwell’s account of the Depression in Britain, The Road to Wigan Pier, speaks of “several hundred men risk[ing] their lives and several hundred women scrabbl[ing] in the mud for hours… searching eagerly for tiny chips of coal in slagheaps so they could heat their homes.” For them, this arduously-
gained “free” coal was “more important almost than food.” All around them the machinery they had previously used to mine in five minutes more than they could gather in a day stood idle.
DeLong highlights the historical lessons that were unlearned by leading economists of the day. He takes us on an excursion, courtesy E.M. Forster, of Britain’s financial crisis of 1825—peaked, as DeLong highlights, by a series of episodes that parallel America’s rollercoaster ride in the last decade—in which the Bank of England intervened aggressively to avert a catastrophe. DeLong summarizes:
Since 1825, the first rule in a financial crisis has been for the government to rescue the banking system—to try to prevent or moderate or offset the
collapse of risk tolerance. And it was this rule that was broken in the Great Depression. And that is why the Great Depression was so great.
The core of the lecture describes the analyses of leading lights of the Austrian school and applied by President Hoover. The view that prevailed was that of “liquidationists,” like von Hayek, who asserted that the Depression was unavoidable: there was only the choice between Depression now or still harsher Depression later. “Curiously, the Great Depression was pretty much the only time that the ‘liquidationist’ view carried the day.”
DeLong’s piece helps us understand the remarkable consensus that existed among economists in favor of a bailout in the last quarter of the Bush presidency, and it gives us a strong feel for the risks of the “do nothing” attitude of bailout critics on the right. These are high-stakes decisions on which the lives and fortunes of hundreds of millions hang. In the time of tea-bag histrionics, it’s a pleasure to read a calm, literate rehearsal of the major issues and the options available.
More from Scott Horton:
Six Questions — October 18, 2014, 8:00 pm
Nathaniel Raymond on CIA interrogation techniques.
Mark Denbeaux on the NCIS cover-up of three “suicides” at Guantánamo Bay Detention Camp
From the June 2014 issue
For the past three years my dosimeter had sat silently on a narrow shelf just inside the door of a house in Tokyo, upticking its final digit every twenty-four hours by one or two, the increase never failing — for radiation is the ruthless companion of time. Wherever we are, radiation finds and damages us, at best imperceptibly. During those three years, my American neighbors had lost sight of the accident at Fukushima. In March 2011, a tsunami had killed hundreds, or thousands; yes, they remembered that. Several also recollected the earthquake that caused it, but as for the hydrogen explosion and containment breach at Nuclear Plant No. 1, that must have been fixed by now — for its effluents no longer shone forth from our national news. Meanwhile, my dosimeter increased its figure, one or two digits per day, more or less as it would have in San Francisco — well, a trifle more, actually. And in Tokyo, as in San Francisco, people went about their business, except on Friday nights, when the stretch between the Kasumigaseki and Kokkai-Gijido-mae subway stations — half a dozen blocks of sidewalk, which commenced at an antinuclear tent that had already been on this spot for more than 900 days and ended at the prime minister’s lair — became a dim and feeble carnival of pamphleteers and Fukushima refugees peddling handicrafts.
One Friday evening, the refugees’ half of the sidewalk was demarcated by police barriers, and a line of officers slouched at ease in the street, some with yellow bullhorns hanging from their necks. At the very end of the street, where the National Diet glowed white and strange behind other buildings, a policeman set up a microphone, then deployed a small video camera in the direction of the muscular young people in drums against fascists jackets who now, at six-thirty sharp, began chanting: “We don’t need nuclear energy! Stop nuclear power plants! Stop them, stop them, stop them! No restart! No restart!” The police assumed a stiffer stance; the drumming and chanting were almost uncomfortably loud. Commuters hurried past along the open space between the police and the protesters, staring straight ahead, covering their ears. Finally, a fellow in a shabby sweater appeared, and murmured along with the chants as he rounded the corner. He was the only one who seemed to sympathize; few others reacted at all.
Number of U.S. congressional districts in which trade with China has produced more jobs than it has cost:
Young bilingual children who learned one language first are likelier than monolingual children and bilingual children who learned languages simultaneously to say that a dog adopted by owls will hoot.
An Oklahoma legislative committee voted to defund Advanced Placement U.S. History courses, accusing the curriculum of portraying the United States as “a nation of oppressors and exploiters.”
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“He could be one of a million beach-bound, black-socked Florida retirees, not the man who, by some odd happenstance of life, possesses the brain of Albert Einstein — literally cut it out of the dead scientist's head.”