ACCUMULATING PERIPHERALS


We won the Vietnam War, FDR caused the Depression, and other useful historical fictions by mattsteinglass
November 17, 2008, 9:20 am
Filed under: Economics, United States

In the USSR, when they wanted to change history for political purposes, they had to employ entire art departments full of airbrush wizards. In today’s America, all you have to do is have a “counterintuitive” idea. The deployment of the conservative meme that FDR caused the Great Depression has become so widespread that Paul Krugman now finds himself shooting it down when George Will tosses it up on “This Week”. (Via Brad DeLong.)

Back in mid-2005, with things gone miserably sour in Iraq and the analogy to Vietnam becoming all but undeniable, conservatives began to aggressively deploy a new meme. It wasn’t that Iraq was entirely unlike Vietnam, they said; the Iraq War was similar to the Vietnam War in many ways, but the US won the Vietnam War. The strategy had two parts. First, right-leaning academics like Lewis Sorley and Mark Moyar wrote books making tendentious cases that the US had, in various ways, done far better than most historians believe we did, and that the war could have been won if only those pessimistic, unpatriotic liberals hadn’t stopped  us from continuing the brilliant counterinsurgency strategies of Creighton Abrams, or from supporting the South Vietnamese government with airstrikes in 1975, or (in Moyar’s case, amazingly) from continuing to back the brilliant Southern dictator Ngo Dinh Diem (whom every other historian considers an incompetent with an untenably narrow power base). Then, conservatives in the media boil these books down into soundbites and create a new “consensus” view that the US actually won the Vietnam War, only to have liberals hand the Communists the keys to Saigon. Hence, we will win in Iraq if only we can keep those damn liberals from giving away the store. Or, as President Bush so amazingly put it during a state visit to Vietnam in November 2006, “The lesson of the Vietnam War is that if we stay, we win.”

The same game plan is being pursued for the new anti-FDR offensive. First, Amity Shlaes wrote a book “arguing” that FDR’s policies exacerbated the Depression, rather than ameliorating it. Some of Shlaes’s evidence for this point apparently cuts in a radical Keynesian direction rather than a conservative direction — she seems to embrace the Friedmanite argument that FDR’s monetary policy was far too stingy, which is hardly a conservative talking point in the current political moment — but that point seems to be lost on conservatives who trumpet her book. Anyway, in the next phase, conservatives in the media take up her book and a few of its points to argue that FDR caused the Great Depression. If the goal of arguing that the US won the Vietnam War was to fight off Democratic attacks over Iraq, the goal of arguing that FDR caused the Depression is to fight off Democratic government-led interventions to cope with the global financial crisis.

The brilliance of these strategies is a Rovian brilliance. Americans have a deep-seated cultural affinity for counterintuitive arguments, for the upending of the conventional wisdom. Americans had to retrospectively invent the myth that Columbus had proved to a skeptical Europe that the world was round; in fact everyone knew that already, but for Americans, America itself must be the counterintuitive answer that disproves an old and deeply inaccurate convention. What makes these Rovian offensives work is that for Americans, the truth must be revolutionary. It is not enough, in this vein, to argue that Creighton Abrams’s counterinsurgency strategy after the Tet Offensive was a great improvement over Westmoreland’s attrition strategy (true), or that FDR’s regulation of markets and public-works programs were flawed and insufficient (true). You have to argue that the US won the war, that FDR caused the Depression.

In early 2006, I started to worry that the new “the US won the Vietnam War” meme might be taking hold amongst impressionable youngsters who had not, like me, grown up watching M*A*S*H. So I started asking American college students, whenever I ran into them, whether they believed these arguments that perhaps the US actually won, or could have won, or was right to fight, the Vietnam War. They all looked at me like they had no idea what I was talking about. “I think everybody pretty much thinks that war was a bad idea,” one Harvard senior said.

What about the new “FDR caused the Great Depression” meme? I’m afraid this one may gain more traction, in part because it seems to have more centrally placed advocates in academia to lend it respectability. But it seems to me to be extremely important to fight back aggressively on this front. When you argue about history, you’re also arguing about the future.

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We did win the Vietnam war, just not in the way you state.

The whole war was a feint, a mis-direction. The purpose, was to contain Chinese communism, by aiding the local governments along Chinas borders. The war provided an excuse to move resources into the area.

“Losing” the war was neccessary, to avoid a direct conflict with China. We wanted to contain China, not have a war with it!

Verdict: Complete Victory!

Comment by Xiaoding

I do enjoy the way you have framed this specific issue plus it does indeed supply me some fodder for thought. Nonetheless, because of everything that I have experienced, I simply wish when the commentary pack on that people continue to be on point and don’t get started on a tirade involving some other news of the day. Yet, thank you for this excellent piece and though I can not really agree with the idea in totality, I value the viewpoint.

Comment by Removalists Armadale

I have not heard “FDR caused the depression”, but rather that attempts at easing hardships of the great depression in hindsight were counter-productive according to the Hayek/Mises/Austrian over-investment theory of the trade cycle. In short, bad money created through credit expansion under normal circumstances would put a bank out of business. The central bank is able to “prevent” this insolvency. More money appears to be on the market than then there really is causing artificially low interest rates and for businesses to mis-allocate resources due to artificially low risk assessment of long term investments. This is “not a problem” until people figure out that the investments were bad. At that point there is a rush for people to get out of those bad investments and move to short term and proportionately lower risk investments to make up for losses. This is evidenced by how disproportionately various industries were hit.

I think where people disagree is whether or not artificial credit expansion led to the problem, or was the problem itself. Effectively what FDR did was give people the money (through further credit expansion) to hold onto their bad investments and not worry about them.

So if you side with Hayek in that the problem would have and did eventually fix itself and FDR not only threw fuel on the fire and possibly more than the original problem in attempt to fix it, it would not wrong to say “FDR caused the great depression”, but it would be a gross over-simplification. In context of the stimulus it is basically people yelling “Again?!?”, so for all intents and purposes they are right.

Comment by Keith

I don’t understand what you mean by “more money appears to be on the market than there really is.” Specifically, I don’t understand the use of the phrase “really is” here, and I think that in fact it may be meaningless, and that you may want to reflect on whether you are falling into a mystical philosophical illusion. When the Fed increases the money supply, there simply is more money. If that extra money does not produce inflation (as, in the Depression, it did not), then what that means is that before it was created, there was too little money, and the economy was stuck in a classic paradox-of-thrift liquidity trap.

If you think that concepts such as “the velocity of money” and “the propensity to save” are meaningless, or irrelevant to the advent of severe recessions, you need to take them up and argue that case. If you are unfamiliar with these concepts and the dominant understanding that they, and not marginal Austrian ideas, explain severe recessions, then you need to read Keynes or someone who explicates his ideas.

Comment by Matt Steinglass

The purpose of money in its uniqueness is economic calculation. The success of a business can be calculated to a high level of precision by comparing profit and loss on goods exchanged in the market. Without money the ability to justify transformation of the factors of production into goods would become exceedingly difficult even for a lone producer as soon as the idea of trade is introduced. A “man on an island” would not produce more than necessary for his personal consumption and security. Introducing trade into this situation creates an incentive to produce beyond substance because that which is worth less can be traded for that which is worth more (same being true for the person they are trading with).

“paradox of thrift liquidity trap” is a fancy term for the paradox of making profitable that which is not profitable. It is only a paradox in the sense that it is necessary to make profitable the transformation of resources in a particular way. This paradox is properly resolved by considering a different allocation of the resources employed for the production of something more useful, often things that can not be produced because the resources are tied up in the production of something useless.

An increase in the money supply is always inflation directly proportional to the increase. The “stabilisation of prices” literally describes a situation where the money supply was increased at the rate of falling prices. This is well and dandy for maintaining the status quo, and when prices appear to stay the same investors are temporary blind to their impending doom (radical shifts in consumer demand). The next problem is much more difficult to fix: when people realise, and compensate for, what is going on with the money. In this case the fed can only attempt to compensate for the correction to the market. Further spread out the loss by decelerating the increasing money supply and letting the market “lull” in the common understanding of the term, or accelerate the increase in the money supply at a rate they believe will out pace the ability for people to realise what is going on.

The velocity of money is based on the illusion that economic health can be measured by the aggregate movement of goods. While I would agree that in general areas that move more goods have greater prosperity than places that do not move as many goods, I would not agree that you can improve an economy simply by making goods move. Stable CPI, high GDP, and low unemployment can be indicators of a good economy, but they can not and must not be goals unto themselves without extreme and perverse consequences.

I would fully agree that an increased propensity to save is the cause of the “recession”. I would find it difficult to argue that they are not synonymous other than that the term has derogatory connotation. Recession could as easily be called “capital conservation”, or even say that the economy is going through a “progressive period” as people shy away from luxury production and want to improve how scarce factors of production are employed. Unfortunately a lot of people do not like this because useless jobs go away, investors don’t want to throw money away making it harder to get credit, and in aggregate unemployment is high and GDP is down, all signs seeming in popular theory to point to a bad economy necessitating intervention.

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Comment by outdoor furniture

Militarily we did win Vietnam; we never lost a battle, we suffered far fewer casualties and we could have destroyed Vietnam if we were allowed to go on the offensive. But China loomed there just as in the Korean War, and nobody wanted to provoke China yet again.
Unltimately Vietnam was a military victory but a political defeat as after we left the North licked its wounds, went in for the kill, and finally conquered the South. It is unknown how the Cold War or life today would be different if we had let the North conquer the South without intervening, but I would think i would have been a negative. It would have greatly reduced American influence for one, and in a time where American influence was very and sometimes the only force confronting Communism and the Soviets it mot likely would have been bad. How bad? We’ll never know, frankly it’s nice not knowing. Maybe emboldened by their sucess the Soviets and Chinese would move onto more countries and thrown their weight and resources in there instead of the now unoccuring Vietnam War. They could have seen this as proof that America was weak. They could have attacked in a very hot war instead of a cold one.
Of course this is all speculation and mainly worst case senarios, but there was so much chance of worst case senarios that almost occured the speculation i really not so far fetched. Maybe US non itervention would have had no other effect than a quicker conquering of he South and the raping of its people. Maybe it would have had a large ineffect on the Cold War as a whole. Maybe. Afterwards it’s always maybe and what if’s….
But anyways, to say the US completely lost the Vietnam War is simply untrue. We lost at home, but not on the battlefield. To say we lost disgraces the brave soldiers who laid down their lives to defend a people they had little to no knowledge about, people they had never met before and had no bonds with. Many went unwillingly, but they still went, and they still died defending innocents. Nothing about death is glorious, it is brutal, painful, senseless, and crude. But if I could save countless lives by fighting and killing and even dying, I would. The strong exist to protect the weak, and often the strong abuse their power, and it is our duty as human beings to do our best to stop those abuses with as little death as possible.

Comment by DMB




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