I take it all back. Obama is the second-coming of FDR, not only emulating the New Deal’s counter-productive economic policies, but also FDR’s complete indifference, bordering on hostility, toward the problem of business confidence. Keynes was on to something about the role of “animal spirits” in the economy, but his remedy—lots of government spending—does little to restore the risk-taking bravado of entrepreneurs and businesses.
Thus it comes as a bit of déjà vu all over again to read the last chapter of Raymond Moley’s memoir of disillusionment with FDR and the New Deal in After Seven Years. Moley had been one of FDR’s chief speechwriters during the first term, but left shortly into the second term, and delivered this bracing account of how it all went wrong in 1939. It us uncanny how many of Moley’s passages apply to The One we have today:
The first [of FDR’s mistakes] centered in a failure to understand what is called, for lack of a better term, business confidence. Confidence consists, on the one side, of belief in the prospect of profits and, on the other, in the willingness to take risks, to venture money. . .
This Roosevelt refused to recognize. In fact, the term “confidence” became, as time went on, the most irritating of all symbols to him. He had the habit of repelling the suggestion that he was impairing confidence the public had lost in business leadership . . . For one thing, the confusion of the administration’s utility, shipping, railroad, and housing policies had discouraged the small individual investor. For another, the administration’s taxes on corporate surpluses and capital gains, suggesting, as they did, the belief that a recovery based upon capital investment is unsound, discouraged the expansion of producers’ capital equipment.
For another, the administration’s failure to see the narrow margin of profit on which business success rests—a failure expressed in an emphasis on prices while the effects of increases in operating costs were overlooked—laid a heavy hand upon business prospects. For another, the calling of names in political speeches and the vague, veiled threats of punitive action all tore the fragile texture of credit and confidence upon which the very existence of business depends.
There’s much more of this kind of relevant historical parallel to be found in After Seven Years, which is long out of print but available on the used book market. Reading it does reinforce the notion that the best thing Obama could do to restore the economy in tonight’s speech is announce his immediate resignation.
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