Too Early To Tell

December 17, 2008

Too Early To Tell

In the latest issue of National Review, one finds a laudatory review of a new doorstop biography of Franklin Roosevelt. Among other things, the author of this review credits Roosevelt with reducing the unemployment rate between his first inauguration in 1933 and his reelection in 1936.  On the Conservativenet e-mail list for conservative and libertarian scholars recently, editor Richard Jensen offered a similar appraisal:  Roosevelt was very effective in fighting unemployment through his first-term cornucopia of federal spending programs.

My question: Is the study of logic a relic of a bygone era? “€œPost hoc, ergo propter hoc,”€ anyone? The NR reviewer’s and Prof. Jensen’s assumption is that if unemployment was at a certain level in 1933, if the New Deal was instituted between 1933 and 1936, and if unemployment was lower in 1936 than in 1933, then the New Deal reduced the unemployment rate.

What reason is there to believe their assumption?  Does it make sense to assume that pulling money out of savings for the government to spend actually improved the situation?  Might not one more reasonably conclude that the two-year duration of the typical American economic recession had elapsed between 1933 and 1936?

That seems likely.  Neither author under consideration here provides any reason to doubt it.

I concede that it is possible that in forcibly reallocating money from private use to the Federal Government’s preferred, by definition economically sub-optimal, use, the government reduced short-term unemployment.  By reducing investment, however, it also certainly reduced long-run well-being.  But who cares?  After all, as Keynes said, “€œIn the long run, we”€™ll all be dead.”€  If long-run well-being is reduced, that’s posterity’s problem.

Hello, posterity.

Jensen and the NR reviewer made another pervasive American assumption as well:  that where there is an economic problem, there must be a government solution.  After all, the U.S. Constitution itself was born out of the belief that economic difficulty associated with the American Revolution must be the fault of an inadequate federal government.  Those who said in 1787-89 that those problems were the natural fallout of a grueling war fought on American soil against the greatest military power received scant hearing for their argument among the political elite.

People make this assumption all the time even now. Thus, for example, if American automakers cannot compete with foreign competitors for American custom, it must be because government policy needs to be altered. Federal spending, tariffs, taxes, or subsidies must be the solution. This faith in government says essentially that every problem, be it illegitimacy, abortion, poverty, ignorance, unemployment, race prejudice, or even weather patterns has a government solution.

While I”€™m on the subject of that FDR doorstop, let me also recall to mind one of my favorite historical observations.  As the story goes, when Nixon aide Henry Kissinger asked Chinese statesman Zhou En-lai in 1972 what he thought of the French Revolution, Mr. Zhou replied, “€œIt is too soon to tell.”€

Assuming that the story is not apocryphal, Zhou was a very wise student of history.  What he meant was that an event so significant as the French Revolution hadn”€™t played out in all of its ramifications yet by 1972.

We should bear this in mind when weighing the merits of American statesmen.  So, for example, Richard Nixon’s de-linking of the dollar from gold, and seizure of the power to print money at will, empowered the Federal Reserve to create the economic problem of today.

To take another example, oh, I don”€™t know, at random, we cannot evaluate Franklin Roosevelt’s presidency validly until the coming collapse of the Social Security system has occurred. Only after the $37 Trillion unfunded Social Security obligation proves politically impossible to meet and the consequences of instituting Social Security are finally felt will we know what Roosevelt was worth.

One might add that the constitutional Revolution of 1937, in which the Supreme Court at Roosevelt’s urging embarked on a course of not finding a single congressional statute unconstitutional for 58 years, also has yet to play out.  The era of Big Government weighs upon us, but the final implications of that development are not yet in sight.

Similarly, we cannot judge James K. Polk until we see the ultimate effects of the Mexican Cession, we cannot rank LBJ until we have felt the full effects of 1960s immigration policy, and Ronald Reagan’s legacy was incomplete before his Bush creatures gave us the Iraq War, the Medicare prescription drug benefit, and David Souter. It takes time to say what a statesman or political event means. As my Medieval France professor, Janet Meisel, put it in 1984, “€œAnything since Agincourt is current events.”€

Pay to Play - Put your money where your mouth is and subscribe for an ad-free experience and to join the world famous Takimag comment board.