The Discerning Texan

All that is necessary for evil to triumph, is for good men to do nothing.
-- Edmund Burke
Tuesday, March 03, 2009

This is FDR on Marxist/Leninist Steroids...

The latest Obama whopper--the bald faced lie he fed to the nation last week (i.e. "...not because I believe in Big Government; I don't...")--got George Will's historical juices flowing. From this week's column in Newsweek, Will argues that we've been here before. I am not so sure I completely agree with him--the quadrupling of our budget in ONE YEAR is far worse in my opinion than anything FDR ever did--but I do get the point of his historical reference:

On April 12, 1933, the 40th day of his presidency, Franklin Roosevelt met with reporters and recounted to them "a story that was told to me the other day." The story of what FDR called "a certain little sweater factory in a little town"—"I won't even give you the location of it"—helps to explain why the Depression lingered through the 1930s, and why it is troubling to see the Obama administration auditioning for the role of the New Deal Redux.

The factory, which FDR said was the town's only industry, normally employed about 200 people who "had always been on exceedingly good terms" with the owners. However, "it was difficult to sell enough sweaters to keep them going because there were so many sweater factories" in the nation, all of which had had only about six weeks' worth of work in the past year. The town, FDR said, was "practically starving to death." So the people decided that they all could work if they reduced everyone's wages 33 percent. That would cut the cost of their sweaters and enable them to undersell competitors. FDR said the factory's sales agent went to New York and "in 24 hours" sold "enough sweaters to keep that factory going for six months, 24 hours a day, three shifts."

A heartwarming triumph of community solidarity over adversity? Not as seen through the pince-nez of Roosevelt, who pronounced it "bad business, in all ways." Granted, "they get a good deal of cash into the community." But "they undoubtedly, by taking these orders, put two other sweater factories completely out of business." So:

"That brings up the question as to whether we can work out some kind of plan that will distribute the volume of consumption in a given industry over the whole industry. Instead of trying to concentrate production to meet that consumption into the hands of a small portion of the industry, we want to spread it out … It might be called the regulation of production or, to put it better, the prevention of foolish overproduction."

Well. With the unemployment rate then at 24.9 percent, it was perverse to diagnose the nation's problem as overproduction. But government's confidence in markets and government's confidence in itself vary inversely. FDR's Washington was awash in confidence about government's ability to skillfully engineer a proper allocation of production within each industry. Supposedly the government's knack for economic planning would soon have the nation regulated back to prosperity. This would happen by, among other things, replacing competition with cartelization, the sweater cartel being, presumably, a paradigm.

Note the zero-sum and reactionary assumptions. If one sweater factory prospers, others must fail. And if x number of sweater factories exist, x number should forever exist. Sound familiar?

Read the whole thing.
DiscerningTexan, 3/03/2009 11:41:00 PM |