1933 Redux?

On the stock markets, corporate share prices have fallen precipitously. Unemployment is rising. Housing construction has declined greatly, and home builders are going bankrupt. Many homeowners are losing their homes to foreclosure or tax sale. Many banks and other financial firms are in trouble, and some have already gone under. Loans are harder to get than they used to be, especially for the least creditworthy borrowers. At the Fed, the central bankers are baffled, sensing their powerlessness to prevent further economic contraction. The president is discredited and eager to leave office, passing responsibility for dealing with all the economic problems along to his successor. Congress has earned the public’s hostility, and the legislators’ popularity, like the president’s, has sunk to an extraordinarily low level. Desperately, blindly seeking something, anything, anyone to stop the downward spiral, the electorate has chosen a new president, giving him a wide margin of victory. Awaiting his inauguration, the future chief executive promises to clean house and turn the country around, but the public does not have a clear vision of what is coming.

Yes, in the circumstances just sketched, the year 1932 was drawing to a close, much as the year 2008 is drawing to a close. Should we expect next year’s events to resemble those of 1933? Devoutly may we hope they will not.

If they do, we are all in for a great deal of unnecessary trouble. But when did that bleak prospect ever give pause to a new gang of looters and world-savers? People might act to preclude a repetition of the drawn-out wretchedness after 1932 if they understood what happened then and why, but, sad to say, their understanding of that episode is by and large a tissue of myths and mistaken ideas. In our present fix, then, we may be excused if we conclude with Hegel that “the only thing we learn from history is that we learn nothing from history.”

Little comfort may be drawn from Mark Twain’s observation that “history doesn’t repeat itself, but it does rhyme.” Given what I see on the horizon, I expect that our political and economic future will have more rhyme than reason, and that 2009 will have more similarities with 1933 than a well-informed friend of humanity would wish to see.

Robert Higgs is Senior Fellow in Political Economy at the Independent Institute, author or editor of over fourteen Independent books, and Editor at Large of Independent’s quarterly journal The Independent Review.
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