The Great Depression

What was it like during the Great Depression? The first interview talks about economic policy, the rest of the interviews talk about the economic and social conditions:

• Interview with Gardner C. Means, an economic advisor, on the New Deal and the difference between the Hoover and Roosevelt administrations. [terkel-a0a0p2-b.rm]
• Interview with Peggy Terry, a migrant farm worker, on being unemployed, bread lines, soup kitchens, and homeless camps. [terkel-a0a0l6-b.rm]
  
• Interview with Virginia Durr on shame and the fact that people blamed themselves and not the system. [terkel-a0a0r3-b.rm]
• Interview with Ed Paulsen, a dayworker, on unemployment and the search for jobs (part 1). [terkel-a0a0k3-b.rm]
• Interview with Emma Tiller, a cook who discusses how African Americans fed tramps when white people didn’t. [terkel-a0a0k8-b.rm]
• Interview with Pauline Kael, a film critic, on anger, violence, and the general strike in San Francisco. [terkel-a0a0k5-b.rm]
• Interview with Mary Owsley on company stores. [terkel-a0a0o3-b.rm]

More here.

Comments

[Blissex]

«people blamed themselves and not the system.»

«African Americans fed tramps when white people didn’t.»

This is part of American culture: winners will be winners, and losers will be (and maybe feed) losers.

The Mankiw/Gramm style argument is that even during the depression there were dozens of millions of people with good assets and good jobs and doing pretty well out of low prices.

Why wasn't everybody else in the same position?

Well, that's where you see who is a winner and who is a loser: the winners positioned themselves right, the losers did not.

The argument is that as long as there are *some* winners, there must be *some* reason why a particular loser is personally responsible for not being one of those winners.

And in American culture the devil takes the hindmost: nobody cares about losers (except perhaps dark skinned losers), even the losers.

[James Kroeger]

Well, if you want to bring up the topic of the Great Depression, Mark, I hope you'll take the time to emphasize the under-appreciated fact that the Great Depression continued on as long as it did for only one reason: the Federal Government did not increase its spending enough to eliminate unemployment until World War II began. When it finally did start spending money in a big way (on armaments, soldiers' training, etc.) unemployment dried up almost over night and the Great Depression was finally over.

Roosevelt's Congress did not authorize enough spending because too many members of the Republican opposition (and 'respected' members of the banking community and economics profession) warned that the consequences of 'inflating' the economy would be disastrous. It's too bad Congress listened to them. Millions of people suffered terribly for no good reason.

And while you're ignoring this aspect of the discussion, Mark, you might also want to ignore---once again---the lesson of the Balanced Budget Multiplier. (Raise taxes to increase output?!! What would the Republicans say about such heresy?)

[Patricia Shannon]

I don't have the program on my work computer to listen to the recordings, but I'm not surprised about the title "Interview with Emma Tiller, a cook who discusses how African Americans fed tramps when white people didn’t." I'm Caucasian, and when I've had a car breakdown on the road, it was usually an African-American who stopped to help. And by the looks of their car, they weren't well off themselves.

[fura]

could you link to the sw we´re supposed to use to listen to .rm files?
thanx

[Patricia Shannon]

If you click on the "more here" link above, it will take you to the main site, which has a link to the software download.

[More]

"..unemployment dried up almost over night and the Great Depression was finally over."

Yet the Great Depression did not return when spending wound down after the war was over. There is more going on here.

[Blissex]

«The argument is that as long as there are *some* winners, there must be *some* reason why a particular loser is personally responsible for not being one of those winners.»

Well, to illustrate this point, here is a dialogue between one of the drowned passengers of the Titanic and St. Milton when the passenger soul appears before the gates of Winner Haven...

Q When can I get in?
A Well, I am not so sure. You look likely to be going to Loser Hell.

Q But why? I always behaved virtuously...
A You are personally responsible for leaving behind a family who are now traumatized and destitute because of your death, a grave sin!

Q How is it my personal responsibility for a freak iceberg accident?
A Well, you chose to drown and leave your family in trouble.

Q But I didn't choose to drown! I couldn't get on a lifeboat!
A Well some passengers did get on a lifeboat so why did you choose not to do that too?

Q But there weren't enough lifeboats!
A Well, the rating agencies gave the Titanic an AAA buoyancy rating, and every extra lifeboat would have reduced the profits of the owner. Still, you could have boarded one of the existing lifeboats.

Q But they would not let me board one of the few because I did not have a first class ticket!
A Well, it was your free choice to buy a cheaper but less safe third class one. Nobody forbid you from buying a first class ticket.

Q But I could not afford to buy a first class ticket!
A Then you should have stayed home and not travelled without a ticket that guaranteed your safety if you cared about your family.

Q But The company should have provided enough lifeboats for everybody!
A Well, the rating agencies gave the Titanic an AAA buoyancy rating, and every extra lifeboat would have reduced the profits of the owner.

Q How is that my fault? I didn't know any of this!
A You could have researched the issue and if you disagreed with the rating, or found that there were lifeboats only for the upper class passengers, you should have chosen to not travel, travel on another ship, or save until you could buy a first class ticket. You have been negligent, not just reckless, and your recklessness and negligence is going to cost your family their happiness. Loser Hell for you then.

The argument here is pretty clear. If you can find the obvious flaw or two, perhaps you are not a Republican :-).

[Blissex]

«the Great Depression did not return when spending wound down after the war was over. There is more going on here.»

You just discovered that Neoclassical Economics is pure propaganda, and path dependency and multiple equilibria are a fact of life.

[James Kroeger]

Yet the Great Depression did not return when spending wound down after the war was over. There is more going on here.There are no mysteries involved here. The economy's performance at/near capacity is all driven by SPENDING. During WWII in the US, households were collecting a lot of dollars that they could not spend, because factories were not producing consumer goods, but only/mostly war goods. When the war was over, there was plenty of PENT UP DEMAND that households could express in the marketplace.

That's the 'more' that you are looking for...

[Farrar]

I first read Studs Terkel's "Hard Times" more than 50 years ago, and it made a profound impression. That's probably why I've been a radical left winger ever since. this book was the transcription of the recordings, which seem even more moving when you hear them. I am delighted that they have survived and are available now for all to hear them.

I grew up during the depression, and altho our budgets were always tight - often in debt for medical expenses - we didn't really suffer because my father had a steady job with the State of California. So Terkel's book was my first realization of what it was really like.

[Patricia Shannon]

More says...

"..unemployment dried up almost over night and the Great Depression was finally over."

Yet the Great Depression did not return when spending wound down after the war was over. There is more going on here.

If something cures a problem, it doesn't necessarily mean that the problem was caused by lack of the cure, and or that the cure needs to be continued forever. Eg., fire and water, fever and aspirin, infection and antibiotics.

[Blissex]

«During WWII in the US, households were collecting a lot of dollars that they could not spend, because factories were not producing consumer goods, but only/mostly war goods. When the war was over, there was plenty of PENT UP DEMAND»

Ahhhhhhhrghhhhh. There was some of that, but the main difference was that the economy had moved from one equilibrium where fewer people worked and spent and capital was underused to one where more people worked and spent and capital was better used. It was a self-sustaining new equilibrium.

Then the butter-and-guns policy of Johnson and Nixon created a situation where capital was overused (scarce) and that created the Great Stagflation.

[ken melvin]

Come on folks, a little imagination please.

[Blissex]

«we didn't really suffer because my father had a steady job with the State of California.»

Winners. Your father made the right decision, and won.

«So Terkel's book was my first realization of what it was really like.»

Sure, it was harsh on the losers, but they brought it on themselves: the losers chose not to get a "steady job with the State".

It is anti-american to pity losers -- True Americans despise them and take advantage of them. It is immoral to leave a loser money that should belong to a winner.

:-)

[Blissex]

«It was a self-sustaining new equilibrium.»

I feel very ashamed. I should have written "disequilibrium" as I reckon that talking of "equilibrium" is completely fatuous and misleading. Unless one is talking about accounting identities.

[bob mcmanus]

Kroeger, blissex

Not just increased spending, but where the money was spent, e.g., not on crony's investment banks

Command economy, industrial policy

[Sarah]

Studs Terkel is a national treasure. Thank you for reminding me that we still have a few gems like him. I note from wikipedia that at 96 he's as clear-headed as ever-- in 2006, a year after undergoing openheart surgery, he was part of a class action suit to prevent AT&T from turning over customer records to the NSA without a court order.

[Dickeylee]

Sarah, yes indeed, Studs is a treasure.
As to the post-war economy, the GI bill that took 9 million able bodied soldiers out of the work force and gave them college educations is paying dividends still to this day.

[donna]

It takes a lot of money to raise a civic generation, but it's worth it. ;^)

That's why I support Obama -- he gets that.

Let's hope we don't send this upcoming civic generation off into a big war. I'm not sure it's unavoidable, but we'll see.

[BJ Feng]

Humm, sounds a little like supply side economics to me. You create jobs, which allow people to work, which provides people money to spend, which leads to more jobs. There is no question that private sector jobs are more desirable from a macroeconomic standpoint, the US government took the debt to more than 100% of GDP by the end of WWII creating enough jobs to maintain full employment. The private sector can do that without adding to the debt, and thanks to increased tax revenue per additional enterprise, the debt might even shrink. Besides, a government run command economy can only go so far, sort of like third gear in a five gear sports car.

Don't forget the importance of lend-lease and international trade which also provided jobs before the US actually entered the war.

The framework for success is eerily similar for modern emerging and emerged nations. Export driven growth works because they create jobs for the populace, which then receives wages that allow domestic industries to pop up to serve the needs of people who now have money to spend. I guess the lesson is that we should encourage investment that will create jobs, it would be incredibly stupid to discourage job creation in a time of crisis, or probably at any time.

[Gene O'Grady]

For what it's worth, I understand that my (ancestors on Mayflower) grandmother made a point of feeding tramps that showed up in her small Midwestern town -- but that she also once chased a traveling salesman down the street with a broom because he was selling Hoover vacuum cleaners.

[Multiple Causes]

The Great Depression had multiple causes that reinforced each other.

1) The US ramped up production to export to war ravaged Europe, then Europe rebuilt and didn't need the extra goods any more. Tariffs were then raised, further destroying export related jobs.

2) Europe borrowed a lot of money from US banks, and then defaulted. The stock market related leverage defaults on top of this toppled the banking system.

3) A lot of people farmed at the time. Once Europe was able to grow their own food, exports slowed. On top of this, widespread use of tractors and such allowed a few large corporate farms to inexpensively feed the entire nation. The farmers had no job, and many didn't want to leave the family farm until WWII forced them to leave. With banks not loaning money to start new businesses, new jobs couldn't materialize to replace the lost farming jobs.

In short, rapid changes were needed in the mix of products we produced, but lack of new business start up capital prevented it.

[bob mcmanus]

...maintain full employment. The private sector can do that without adding to the debt

No, it can't.

[ken melvin]

My father, who turned 17 in 1929, road the rails when 21 one maybe two years to harvest(peas, hay, etc. work in the western states such as Idaho, Oregon, and Washington.. There just wasn't any other jobs available. Basically, he sent all his earnings home and lived of room and board from working. He said that almost anyone would give you food in those times. That sharing was common. He told of hopping into a boxcar at night and discovering it was occupied by a group of blacks who turned out to be armed, and how scare ha was during the ride. He never road the rails in the south, so as to southern hospitality, ...?

[bob]

Farrar: "I first read Studs Terkel's "Hard Times" more than 50 years ago, and it made a profound impression."
I like Studs's book too, but for the sake of accuracy I must point out that it was published in 1970.

[Bruce Wilder]

Multiple Causes, indeed.

Blissex and James Kroeger have constructed the essential narrative of how we got out of the Great Depression: WWII occasioned four sets of policies that would lay the foundation for post-War prosperity and a high employment, high-growth (disequilibrium-)equilibrium.
1. Was increased aggregate demand from war spending;
2. Was forced "savings" in the form of financial securities (e.g. savings bonds)
3. The Great Compression increasing the egalitarianism of income and wealth; increased unionization, and the transfer of population out of low-paying rural small-farm agriculture and into manufacturing, services and cities;
4. the GI Bill and a willingness to use the government to "invest" in infrastructure, research & development, etc.

Three and four were elements of the New Deal, which simply scaled up during the War. The Keynesianism of 1 and 2 were missing.

And, to be truthful, 2 and 3 and, even 4, were pretty much missing from the Keynesianism of Keynes. Keynes was all in favor of emergency measures to restore the economy; reform could wait, he thought. FDR found it easier, in the event, to continue to press experiment and reform. Only in the shadow of war, though, was FDR able to get the big spending.

And, although FDR was able to raise unionization and industrial wages throughout the Depression, it was only in the context of near total command control of the economy as well as full employment, that he could initiate the Great Compression.

In the midst of the present banking crisis, I have some concerns that we don't really have a compelling narrative in economics that highlights the importance of financial capital.

We've taken up Miller-Modigliani, a great and fundamental result -- but like all the foundations of modern finance theory, a null result. It basically says that capital structure cannot change the value of the underlying expected cash flow. So, what are financial machinations all about, and why do they absorb so much talent and effort, if they don't -- can't -- add value? It makes it seem as if banking and finance are not doing anything.

Basic Keynesian doctrine has been reduced to a bumpersticker of fiscal and monetary policy, where aggregate demand is managed by a combination of government expenditures net of taxes, on the one hand, and interest rates on the other.

This austere, bumpersticker Keynesianism does not allow for vital narratives, like the one Blissex introduces:
the main difference was that the economy had moved from one equilibrium where fewer people worked and spent and capital was underused to one where more people worked and spent and capital was better used. It was a self-sustaining new equilibrium.

Then the butter-and-guns policy of Johnson and Nixon created a situation where capital was overused (scarce) and that created the Great Stagflation.

The critical role of financial capital gets lost in the mainstream economics story. And, when a crisis, like the present one, comes along, explaining exactly why it is an emergency, and designing policies to cope sensibly, can be very difficult.

And, the effects of inequality tend to get lost. I have had serious discussion with serious academic economists, who just cannot seem to wrap their heads around the idea that excessive wealth concentration might be a problem for macroeconomic performance and stability -- getting to and remaining at a desirable (disequilibrium-)equilibrium.

It does worry me a bit that we don't have a popular, consensus view of what finance capital does in the economy, and about what the effect of a deflation from de-leveraging is likely to be. It worries me a bit more, since this is now an acute problem.

The causes of the Great Depression do act as a distant mirror for us, in the present circumstances. And, the professional consensus of economists -- as I perceive it -- that the Great Depression was triggered by a technically mistaken Fed policy, resulting in a massive monetary deflation from bank failures, leaves me uneasy. My impression of Bernanke is that he subscribes to the view that an inflationary Fed policy could have saved the 1920's plutocracy, and that would have been a "good result" -- that is, that there were no fundamental, structural shortcomings in the real economy driving events, only a technical error in monetary policy.

I don't think you have to become an Austrian to think that recessions, sometimes, are more than technical errors, and unreflective attempts to rescue the status quo ante, are unwise.

I'd like to think we are wiser than were our ancestors in 1930. But, evidence is scant. Even if we might be technically more astute, we are not kinder.

[bob mcmanus]

BW:And, the effects of inequality tend to get lost. I have had serious discussion with serious academic economists, who just cannot seem to wrap their heads around the idea that excessive wealth concentration might be a problem for macroeconomic performance and stability --

"Keynes’s ‘fundamental psychological law’, according to
which the marginal propensity to consume out of additional income is less than one (Keynes 1936, p. 96)." ...Mark Satterfield, "Effective Demand" Edward Elgar Companion to Post-Keynesian Economics ...seems like this could carry a lot of weight, and does in P-K economics

Don't think I've ever read a Post-Keynesian I didn't like.

[bob mcmanus]

My comment of 3:01 comes out of Keynes, Minsky and P-K. Seems like an economic law to me.

"The general approach to policy could be seen to be derived from the basic
insight of Kalecki and Keynes for the workings of industrialized market
economies, namely that a laissez-faire market economy will not usually gen-
erate full employment. The essential cause of that failure to create full
employment is not some rigidities or ‘imperfections’ of monopolistic com-
petition, trade unions and so on which could potentially be removed
through government action. It is rather that a laissez-faire market economy
would exhibit elements of instability with booms and busts, and periods
of crisis. Further, a market economy would not usually generate a level of
aggregate demand consistent with full employment." ...Malcolm Sawyer, "Economic Policy" op cit

[Farrar]

Bob,

"I like Studs's book too, but for the sake of accuracy I must point out that it was published in 1970."

Right, thanks for helping sort out mixed memories.

[postroad]

We are today hearing the same arguements from both sides: the free market will take care of things; the govt must intervene.
during the Great Depression, when after a time, things got better, we were told afterward by those on the right that it was the war (WWII) that fixed things because so much manufacturing had to be done.
Today, we need a massive infusion of money for what we call the bailout--even the most ardent free marketers now count on what is essentially a socialistic (govt control) to help out "the free market."

But then we have to ask whether it might have been the :"free market"--ie, no restraints after removing those put in place under FDR, that has led to the present mess.