Thomas Sowell writes Best Way to Aid Economy? Just Do Nothing in the Investors Business Daily, 9/14/11.

Excerpts:

The grand myth that’s been taught to whole generations is that the government is “forced” to intervene when there is a downturn that leaves millions of people suffering. The classic example is the Great Depression of the 1930s. What most people are unaware of is there was no Great Depression until after politicians started meddling in the economy.

There was a stock market crash in October 1929 and unemployment shot up to 9% — for one month. Then unemployment started drifting back down until it was 6.3% in June 1930, when the first major federal intervention took place. That was the Smoot-Hawley tariff bill, which more than a thousand economists across the country pleaded with Congress and President Hoover not to enact.

But then, as now, politicians decided they had to “do something.” Within 6 months, unemployment hit double digits. Then, as now, when “doing something” made things worse, many felt the answer was to do something more.

Both President Hoover and President Roosevelt did more—and more, and more. Unemployment remained in double digits for the entire remainder of the decade. Indeed, unemployment topped 20% and remained there for 35 months, stretching from the Hoover administration into the Roosevelt administration.

In 1987, when the stock market declined more in one day than it had in any day in 1929, Ronald Reagan did nothing. There were outcries and outrage in the media. But Reagan still did nothing. That downturn not only rebounded, it was followed by 20 years of economic growth, marked by low inflation and low unemployment.

The Obama administration’s policies are very much like those of the Roosevelt administration during the 1930s. FDR not only smothered business with an unending stream of new regulations, he spent unprecedented sums of money, running up record deficits, despite raising taxes on high-income earners to levels that confiscated well more than half their earnings.

Like Obama today, FDR blamed the country’s economic problems on his predecessor, making Hoover a pariah.

Yet, six years after Hoover was gone, and nearly a decade after the stock market crash, unemployment hit 20% again in the spring of 1939.

HKO Comment:

Sowell dispels the narrative that government must save us from the imperfections, or at least the short term dislocations inherent in capitalism. Perhaps the opposite is more true.  The political battle centers on who controls the narrative and which one we accept.

Tips to Gary Meyers.

“These are times in which genius would wish to live. It is not in the still calm of life or in the repose of a pacific station that great characters are formed. The habits of a vigorous mind are formed in contending with difficulties. Great necessities call out great virtues. When a mind is raised and animated by scenes that engage the heart then these qualities which would otherwise lay dormant wake into life and form the character of the hero and the statesman.”

..from a letter to John Quincy Adams from his mother. At the time he was a young boy on his 2^nd trip to Europe with his father.

When Alexis de Tocqueville wrote of America in the early 19^th century in his classicDemocracy in America, he was comparing America’s democracy to the declining norm in Europe: aristocracy.

“Once cherished, history is currently viewed as onerous- unless employed for social engineering. The results are political leaders who cannot weigh the consequences of their actions; journalists who confuse the exciting with the significant; military officers who view their profession through peepholes; and impassioned citizens easily misled. In place of history, we get hysterical headlines.”

“The blood-drunk killer is rarely disarmed by the man who lives in books- or by the eternal adolescent clinging to the lie that all men want peace.”

“Above all, history that adheres to facts inoculates the citizens against lies.   ”

From Endless Wars by Ralph Peters

“The citizens of the United States do not stand apart from history.  We are in it and of it. Many of our ancestors came here hoping to escape it, but history is a pack of bloodhounds.  Desperate to put those persistent dogs off the scent, we embrace fantasies in preference to facts.  When the baying grows too near, we succumb to superstitious rituals, chanting that peace is the natural order of things and behaving as if violence were a spook we might drive away with Ivy-League fetishes and bouts of self-flagellation.”

The opening paragraph of Endless Wars by Ralph Peters