We need to not only remember, but to understand the past

Charles Koch, Chairman and CEO of Koch Industries, Inc., wrote an article in a recent company newsletter that explains the similarities between today and the early 1930s, and how our present government leaders aren’t following the lessons we should have learned. The article may be read by clicking on Perspective.

One of the myths surrounding the Great Depression is that Hoover did nothing to intervene. It was Roosevelt who swept in, and through massive intervention, ended the depression. Koch dispels that myth: “Hoover launched the most interventionist economic program in U.S. history. Hoover supported record income tax hikes and devastating import tariffs. He also initiated an explosion in government power by creating massive new programs. Far from helping, these programs created a destructive uncertainty that discouraged investment and entrepreneurship and contributed to the decline.”

Koch documents Roosevelt’s massive expansion of government power, regulation, executive orders, and intervention, which didn’t help.

What about the responses our government is making today? It’s making the same mistakes, Koch says. Expansionist monetary policy, bailouts, takeovers, make-work programs, expanding government agencies and regulation — this reliance on government to fix things is not likely to work.

Then, as now, free markets were blamed for our problems, which means that we may not rely on what can get us out of trouble: “It is markets, not government, that can provide the strongest engine for growth, lifting us out of these troubling times. If we are foolish enough to ignore some of the most painful lessons of history, then we will almost certainly make the same mistakes on a devastating scale.”

1 Comment

  • For those of us that are students of history the similarities are too striking to be ignored. Most people don’t know that from Feb-May 1932 the Federal reserve pumped money into the banking system to the tune of $1,8 billion (that sounds a lot like the near $2 trillion they have dumped in, the past 6 months). Lack of confidence in the banking system and fear of job loss forced people to save instead of spend. Low interest rates in the early 20’s allowed for an unprecedented economic expansion that had to stop somewhere. And yes mortgages and derivatives played a huge part in the fall. Rises and falls in the economy are a natural process. Each time the government intervenes there are consequences. Just like throwing a rock into a pool of water. This analogy works to realize the solution to the problem. As long as President Obama and his cabinet keep throwing rocks into the economic pool nobody can see the bottom and there are few businessmen that will risk investing and creating jobs with out being able to see where they are going. President Obama needs to take a page from the Bush’s or President Clinton, do what you need to do, inspire confidence, stay off the TV, let the mud settle. Otherwise we are in for a long Depression again.

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