Many in the conservative community today still contend that World War II, not Roosevelt’s New Deal, brought us out of the Great Depression. But like so much other right-wing mythology, this has little basis in fact.
Our unemployment rate was a paralyzing 25% when FDR took office in 1933, the highest ever in modern times. After restoring the health of the banking system with his “Bank Holiday” and reopening only the banks with federally insured accounts (FDIC), employment began a steady rise along with a restored faith in the economy.
Still despised today by many Republicans, Roosevelt literally saved capitalism and restored America’s hope. Employment growth continued until a brief interruption in 1938 when FDR’s attempt to balance the federal budget too soon backfired. But unemployment resumed its decline the following year and was at 14% in 1939 when war preparations began and 9% in 1941 when we entered World War II. That’s an employment growth of 14% over 8 years.
Today many financial safeguards, New Deal and otherwise, designed to prevent another catastrophic financial collapse have been repealed or watered down by the conservative establishment (and with the consent of some Democratic presidents, I might add). A meltdown almost occurred in the 2008 Great Recession when the financial and real estate markets bottomed out. Had President Obama not acted quickly and decisively it would have been 1929 all over again. And all is not completely well today despite the current business boom and Wall Street surge.
Economists and historians generally agree that the Stock Market Crash of 1929 was caused by overexuberant investor speculation and overborrowing. Due to a lack of restraints and limits many banks went under when the market crashed. To prevent a recurrence, in 1933 FDR sponsored the Glass-Steagall Act that prevented private banks where you and I keep our money from speculating in the volatile securities markets like investment banks. Despite conservatives chipping away at Glass-Steagall and finally repealing it in 1999, we haven’t had a major bank failure since 1933 — yet, that is.
Another boondoggle that is making the very rich very much richer while further widening the nation’s wealth disparity is the formerly illegal corporate buyback of its own stock with corporate profits. By this financial slight-of-hand the total amount of outstanding stock in a given corporation is reduced by buying it up and removing it from the market. This, of course, raises the per-share price of the remaining stock. Thus, the shareholders are magically enriched without exerting themselves financially or otherwise. And much corporate profit goes untaxed while workers asking for a raise are told there is no money available. Between 2003 and 2012 major U.S. corporations spent 54 percent of their profits on corporate buybacks. In 2014 alone they spent $700 billion. Over the past ten years Walmart has averaged $6.5 billion a year on repurchasing its own stock. Legendary lawyer, politician and writer Charles Peters calculates that this would have been enough to give each of Walmart’s 1.4 million employees a $4,642 raise for every one of those profitable years. Peters emphasizes that buybacks only increase the wealth of the stockholders; they do not increase the company’s net worth, sales, market share or help to improve products or services.
To rebalance our nation’s financial and regulatory health we might not need to enact any new legislation. We might accomplish enough by simply reinstating some tried-and-true regulatory measures that have been slowly and furtively stolen away.
George B. Reed Jr., who lives in Rossville, can be reached by email at firstname.lastname@example.org.