- Reviewed by David M. Kinchen
As promised in my first installment of my review of David A. Stockman’s “The Great Deformation: The Corruption of Capitalism in America” (PublicAffairs Books) (link: http://www.huntingtonnews.net/61557) I’m reviewing the book in installments. Consider this my “Ring” review, a nod at Richard Wagner’s four-part opera cycle that ends with “Gotterdammerung” (The Twilight of the Gods). By the way, the year 2013 is the bicentennial of Wagner, born in 1813.
Let’s pick up with my penultimate paragraph:
“When the dust finally settled,” Stockman writes on page 73 about Cap Weinberger and his warfare spending, the fiscal 1982 defense budget stood at $222 billion — a figure nearly nearly 60 percent larger than the $142 billion piñata that had been so roundly attacked during the campaign. Yet it was from this vastly elevated prospective budget for 1982, not the allegedly deficient actual 1980 spending level, that the annual growth rate calculation was applied.”
Stockman’s book is roughly chronological, with FDR’s election coming after a solid recovery from the crash of 1929 occurring during through September 1932 as Hoover did what he did best: Nothing. Stockman writes (Page 150) that the Hoover recovery has been neglected by historians mesmerized by FDR. By September 1932 fully 50 percent of the huge collapse of industrial production since the Crash had been recovered. The steel mills of Youngstown, Pittsburgh, Gary, Cleveland, Wheeling, etc. were humming and farmers found a ready market for their exports. Remember, 80 years ago, the U.S. was a gigantic exporter of commodities and finished products. American cars and typewriters — just to name two products — were desired the world over. Look at a movie set in, say, China in the 1930s and you’ll see Buicks and Plymouths and Corona and Remington typewriters and other American products.
What about all the bank failures, beginning in the 1920s under GOP administrations? Stockman says 12,000 banks failed from 1920-1933, but fully 10,000 of them were tiny rural banks, of the kind pictured in the movie “Bonnie and Clyde.” The big banks weren’t affected and on page 151 Stockman notes that losses from the failed banks amounted to a minuscule 2-3 percent of deposits.
The Hoover administration couldn’t stop the Smoot-Hawley Tariff bill of June 1930, which had the effect of harming America’s exporters as foreigners retaliated by raising barriers of their own. The stupidity of the human race shouldn’t surprise me after almost 75 years of living on this planet, but it never fails to do so!
Flash forward to LBJ’s attempt to fight a war in Southeast Asia with his “guns and butter” program, which Stockman calls the “turning point” (Page 112) in his “assault on sound money.” Stockman said that LBJ not only steadfastly refused to raise taxes to fight the war, he literally manhandled a Fed chairman that Stockman clearly admires, William McChesney Martin, who urged Johnson to raise taxes. I’m personally grateful for a program that Johnson pushed through in 1965, Medicare, but that’s another story.
Stockman is not happy with Richard Nixon’s economic schemes, with the author considers to be unmitigated disasters, from the naming of policies NEP: New Economic Policy, failing to realize that NEP was what Lenin called his limited attempt at capitalism in the Soviet Union in the early 1920s, to a meeting at Camp David on Aug. 15, 1971, which led to what might be called a “Gotterdammerung” — the “final destruction of sound money” (page 122). During the first 24 months after Camp David the dollar lost almost 20 percent of its value. The Fed Chairman in NIxon’s administration was a man Stockman clearly considers inadequate, Arthur Burns, a man not up to the high standards of Martin.
Read this and weep: crude oil was selling for $1.40 a barrel in August 1971! It rose to $13 a barrel four years later and reached $40 in the last year of the Carter administration, 1980. The reason for the skyrocketing price of oil wasn’t a shortage of oil, but rather a flood of money and inflated demand, Stockman writes.
Gerald Ford gets a pat on the back for trying to be true to his fiscally orthodox Midwestern Republicanism, and was well served by Treasury Secretary Bill Simon, a man Stockman praises for his opposition to bailouts and support of free trade. This was the era of the headline “Ford to NYC: Drop Dead” as Ford and Simon refused to bailout the financially troubled Big Apple. Ford gave it the good old college try, but his and Simon’s efforts were doomed by the “economic wreckage” left behind by Nixon.
Apres Moi, le Deluge, AKA Jimmy Carter. The less said about his disastrous one term the better.
But Stockman isn’t gentle in his treatment of Reagan, as I’ve noted above and in the first part of this review with Cap Weinberger. From the start, Reagan was susceptible to being subverted, if indeed he was a fiscal conservative. After all, he started out as a liberal Democrat! On pages 95 to 107 Stockman chronicles Reagan’s fiscal Waterloo, Consider the mid-chapter heading on page 95: “The 1981 Tax Bidding War: Coalition of the Bought.”
All right, I’m at Page 152, just on the verge of Stockman writing about the errors of the New Deal, programs that not only interrupted the recovery described above in the last days of the Hoover Administrtion, but prolonged the Great Depression. I’ll stop here for now. Really, this book could serve as a textbook for a two-semester economics course!
We’ll pick up with FDR’s administration next time.
Publisher’s website: www.publicaffairsbooks.com