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Recreating a Depression Government?
Posted by: McQ on Saturday, November 29, 2008

Amity Shlaes takes on Paul Krugman and his emphasis on the importance of New Deal-style spending to get us out of the financial crisis we find ourselves in.

Shlaes looks at the unemployment numbers of the Depression era and finds that favoring government spending over private spending did not provide the jobs and therefore the impetus necessary to lift the country out of the Depression.

And she notes that it was a combination of two acts passed by the government which actually hurt the ability of the nation's private sector at that critical period.
  • National Recovery Administration, whose codes forced businesses to pay an above-market minimum wage

  • The Wagner Act, which gave union workers more power
So strong unions (which protected their wage rates) and the requirement to pay above market, combined to drive down profits and thus hiring. Jobs weren't going to be created in that sort of an environment.

Many would argue that unions don't enjoy that power today. But we've seen indications that just isn't true. Eastern airlines no longer exits in part because its unions refused any further cuts in pay or benefits. And recently we've seen the UAW, with the bankruptcy of the Big 3 automakers imminent, refuse to consider any further concessions which might allay that.

Shlaes points out that a) Obama is definitely inclined toward large public works spending and b) the plan, apparently, is to again strengthen the union hand (card check) which would give unions more power over wages, thus setting up the same sort of atmosphere which existed in the '30s. Thus the same sort of economic foolishness that kept us from recovering from the Depression in the '30s may very well be recreated within the next year and slow any chance of a quick recovery from what presently ails us down dramatically.

Read Shlaes article here. There's a good interview with her here as well.
 
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Comments
Is the leftist illuminati thinking of this excessive spending as a band-aid mentality.. or I wonder if they actually think it is the road to recovery for our country.
 
Written By: ew
URL: http://
It’s Shlaes, not Shales. Author of The Forgotten Man, a must read book.
 
Written By: Tom H
URL: http://heardman.blogspot.com
As I understand it, the problem with the NRA was really on the opposite side of the balance sheet—it attempted to inflate prices, or at least keep them at above market levels. This was based on a theory that deflation was A Very Bad Thing and the key to recovery was to instill inflationary pressure into the economy.
In reality, of course, since people would tend to buy less if the prices were high, this acted as a deadening force—destimulating the economy, as it were. [If you’re looking for the source, I’ve been reading Traitor to His Class. Seems a good read, but not having read much about FDR before, can’t really give an informed opinion on its worth.]

Of course, whichever way you look at it, the NRA’s core problem was not that it kept wages or prices too high, but that it existed at all.
 
Written By: kishnevi
URL: http://kishnevi.wordpress.com/
"The Wagner Act, which gave union workers more power"

"High wages hurt corporate profits and therefore hiring."


A little bit of oversimplification here. Some would refer to this ’more power’ as simple justice and protecting the rights of workers to organize. Considering the history of violence and intimidation of organizing efforts by businesses, it was probably overdue.

A short excerpt from the Wagner Act;
http://www.civics-online.org/library/formatted/texts/wagner_act.html

High wages and perks for executives must therefore also hurt hiring, as must high dividends for stockholders. Why no complaints about that? Just think how many hourly workers could be hired for one of those multi-million dollar bonuses.

We could always go back to no wages at all, i.e. slavery, and then profits would be increased.
 
Written By: timactual
URL: http://
A little bit of oversimplification here. Some would refer to this ’more power’ as simple justice and protecting the rights of workers to organize. Considering the history of violence and intimidation of organizing efforts by businesses, it was probably overdue.
Unions are just an effort at creating a labor cartel for low skill labor (think OPEC but replace "oil" with "labor"). The violence is inherent in unions; non-union labor must be kept out by force. The force could be actual violence by labor goons, or else the more subtle violence of government regulation, i.e., the Wagner Act et al.
High wages and perks for executives must therefore also hurt hiring, as must high dividends for stockholders. Why no complaints about that?
Not if the executive is doing a good job and increasing profit. As long as we are talking market wage, I don’t care how high it is. The union is an effort to alter the actual market wage.

If the exec gets higher than he is worth on the market, something is wrong, and likely the company will end up punished for it. Unless the DC dubma**es bail it out . . .
 
Written By: Don
URL: http://
"Unions are just an effort at creating a labor cartel for low skill labor..."

And all vicious rumors of corporate efforts to intimidate and abuse employees are simply that, evil rumors, because we all know how peaceful and benevolent corporations are. Dam uppity workers.

"Not if the executive is doing a good job and increasing profit."

Something which is of course impossible for those grubby proles to do. Really, how could anybody without a suit and country club membership be worth more than a subsistence wage?
 
Written By: timactual
URL: http://
And all vicious rumors of corporate efforts to intimidate and abuse employees are simply that, evil rumors, because we all know how peaceful and benevolent corporations are. Dam uppity workers.
Mostly yes. Or did they reinstitute slavery? Otherwise you are free to go.

Frankly, if the corporation is breaking up unions, good for them.
Something which is of course impossible for those grubby proles to do. Really, how could anybody without a suit and country club membership be worth more than a subsistence wage?
The market determines wages. Want to earn more? Well, increase the value of your labor.



 
Written By: Don
URL: http://
"The market determines wages."

And I suppose the market also determines prices. All those unnecessary anti-trust laws just interfere with the efficient operation of the market, and all those nasty stories about monopolies and trusts (union propaganda, no doubt) are lies. Businessmen are pure as the driven snow. You can tell because they wear white shirts. Union members are all crude, nasty brutes. You can tell because they wear dirty clothes and have grease and dirt under their nails.


"Or did they reinstitute slavery? Otherwise you are free to go."

Ever hear of a company store or company housing? Does the phrase mill town or company town mean anything to you?

 
Written By: timactual
URL: http://
"Does the phrase mill town or company town mean anything to you?

Yeah, the biggest one is Washington D.C.

"And I suppose the market also determines prices."

Yes it does.

"Businessmen are pure as the driven snow."

Businessmen are providing a service for personal profit, yet their business provides a service that YOU enjoy. Profits mean their service is beneficial to the community because others are willing to pay for it.

Businessmen are no different than you are. You are selfish and greedy, and if you think otherwise, you are psychotic. Everything you do is because YOU like it. The food you choose to eat, the clothes you wear, the car you buy, on and on, is because YOU like it and want it.

"Union members are all crude, nasty brutes."

Unions sound like a great idea, but instead of helping workers, they HURT them. The few union workers may have very nice labor contracts, but those same contracts put many others out of work.

For example, if I have two employees who get paid $5 per hour and one of them starts a union and demands $10 per hour for the same work, I can no longer afford to keep two employees and must fire one. The 2nd employee is now forced into unemployment because of his coworker’s demands.

The problems unions create are widespread. There are just too many to list in this comment.
 
Written By: sdasd
URL: http://
And recently we’ve seen the UAW, with the bankruptcy of the Big 3 automakers imminent, refuse to consider any further concessions which might allay that.
Huh?

Here’s Ron Gettelfinger, President of the UAW speaking, under oath, in testimony before Congress...
The truth is that in 2005 the UAW agreed to reopen the contracts mid-term, and accepted cuts in workers’ wages and in health care benefits for retirees. Then, in the general 2007 collective bargaining negotiations, the UAW agreed to what industry analysts have called a “transformational” contract that fundamentally altered labor costs for the Detroit-based auto companies. This contract slashed wages for new hires by 50%. Furthermore, new hires will not be covered under the traditional retiree health care and defined benefit pension plans. In addition, this contract stipulated that beginning January 1, 2010 the liability for health care benefits for existing retirees would be transferred from the companies to an independent fund (a Voluntary Employee Beneficiary Association, or VEBA). This agreement has subsequently been approved by federal courts, which have appointed a majority of the trustees who will be independent of the UAW and responsible for managing the VEBA. Taken together, the changes made by the 2005 and 2007 contracts reduced the companies’ retiree health care liabilities by fifty percent.

As a result of all these painful concessions, the gap in labor costs that had previously existed between the Detroit-based auto companies and the foreign transplant operations will be largely or completely eliminated by the end of the contracts. Indeed, one industry analyst has indicated that labor costs for the Detroit-based auto companies will actually be lower than those for Toyota’s U.S. operations. Thus, the truth is the UAW and our active and retired members have already stepped up to the plate and made the hard changes that were necessary to make our companies competitive in terms of their labor costs.
So what more do you want the unions to do?
 
Written By: CaptinSarcastic
URL: http://
"Businessmen are providing a service for personal profit,..."


True, but it is, as the lawyers say, unresponsive to my comment. As are all your comments. I.e. non sequiturs.

I suppose child labor laws are also an unnecessary and counterproductive imposition on business.

***********************

"So what more do you want the unions to do?"

Disband, obviously. Then all those those nice businessmen could hire everybody and there would be no unemployment and we would all live happily ever after. Except for a few greedy malcontents that wanted to buy clothes for their kids or maybe have a day off once a week to see their families in the daylight.
 
Written By: timactual
URL: http://
I suppose child labor laws are also an unnecessary and counterproductive imposition on business.
They are.

In fact, such laws would be downright criminal, if we were in a situation where child labor made economic sense.

By the time child labor laws were being put into effect, child labor was essentially a thing of the past. Except for farms, which were exempted from the laws.

Most parents don’t want their kids to work in sweatshops. But it’s better than starving to death. And it may be the only option to starvation.
 
Written By: Don
URL: http://
When you are stuck in a situation that requires quick cash and you may not have until your next payday, payday loans can be very useful. During a recession like the one America is currently mired in, it’s good to know they’re available when necessary. But what’s a recession, or a depression, for that matter? It all depends upon whom you ask. I checked out Yahoo Answers recently, and I had to laugh. The “Asker” wanted to know the difference between recession and depression, and she (the avatar is female) wanted the information in “girly terms.” I’m not sure what girly terms are, but the Asker received a very straightforward response. The American economy is analyzed by quarter. When production is high, it’s considered economic growth. Three consecutive quarters (nine months) of decreased production is considered a recession. A depression occurs when a recession is deep and long. Some common characteristics of a depression include long-term unemployment growth, low prices and low levels of trade and investment. So when it comes to recession and depression, understand that one is bad and the other is worse.

If you need a pay day loan when things get rough, don’t be afraid to try. Be responsible and you’ll make it through your short-term financial difficulties. For more info on Payday Loans, click the link.
 
Written By: Payday Loans
URL: http://

 
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