German
Chancellor Heinrich Brüning and President
Franklin
Delano Roosevelt: Germany's approach to
the
Depression, as painful as it was, succeeded more
quickly
than the New Deal, but it also resulted in the
emergence
of Adolph Hitler. Is there a lesson here
for
today's policy makers?
Izvestia, Russia
Lack of a 'New
Deal' Led Germany to Hitler
"While it's true that firm
economic orthodoxy may be a formula for a fast recovery from today's crisis, it
would also result in a painful shock and create the conditions for another Fuehrer-chancellor - just as it did in Germany, which
so quickly recovered from the crisis of the 1930s."
By Maksim Sokolov
Translated By Yekaterina Blinova
February 10, 2009
Izvestia,
Russia - Original Article (Russian)
A grief-stricken Anatoly
Chubais [photo, right] just returned
from Davos, where men of fame and power confessed to him: “We don't know what's
going on.” And his grief is likely to get worse if one recalls that to this
day, there is still no great understanding of the Great Depression of 1929-33 -
at least not in terms of what should have been done about it.
Then, after World
War II, everything was eventually written off and a new set of problems were on
the agenda. But repeating this method of recovery isn’t desirable, and as of yet, no
opinion has been formed about how to escape this depression without paying just
as high a price. Everyone is pulling in different directions. And this, despite
the fact that three-quarters of a century have passed and there are no
classified documents left to reveal. The conundrum remains.
Here in Russia we
have examined these issues quite deliberately. Two years ago on the 125th
anniversary of Franklin D. Roosevelt’s birth, a conference was held called,
“Lessons of the New Deal for Contemporary Russia and the World.” The lessons
were dubbed very useful, if only we could apply them. The event passed as
though it never happened.
This inaudibility, however,
is excusable. Roosevelt himself admitted that to a large extent, the New Deal
was based on trial and error - “maybe this will work, if not, we'll try
something else.” Such opportunism turned out to be genius in its results. [Quoting
Tolstoy] “It seems so deep … can this be a hole? … but here look: we're in
Paris” etc.
But the great
problem of seizing on such opportunism is that it isn't susceptible to
replication. Or in other words, the lessons of the New Deal are there, but what
we can do with them isn't completely clear. Even those who consider the idea of
seizing on Roosevelt's strategy note its unreliability.
Posted by WORLDMEETS.US
During
Roosevelt’s term, the Depression dragged on until World War II. Perhaps things
were more difficult before the New Deal, but according to the principle of the
“first to leave is the first to arrive,” the economy could have recovered much
more quickly without it. In economic terms, both sides of the debate are
correct - the 1930s were an extremely hapless period for the United States.
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A 1923-issue 50
million mark banknote [click for larger version]. Worth approximately $1
when printed, this sum would have been worth approximately $12 million,
nine years earlier. The note was practically worthless a few weeks later
due to continued inflation.
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In contrast, there's
an example of another economic policy that laid the foundation for a recovery
from the crisis. Chancellor Heinrich
Brüning of Germany, who
led the cabinet during the most difficult years of 1930-32, refused to yield to
socialist experiments, but instead remained unshakably firm in his
anti-inflation policies and stayed the course of keeping a balanced budget,
raising taxes and cutting government spending - pensions, salaries for public
employees, etc. This firm adherence to financial discipline earned Brüning the
nickname “Chancellor Famine.” But one can hardly even describe that fearful
monster of the time - inflation - the memory of which was still so fresh that
no one around "Chancellor Famine" could have discounted it [see photo
box, left].
But the chancellor’s firmness
reaped its reward. After passing through the worst period in 1933, the German
economy was already improving. Little is remembered of Brüning, because the
post-crisis momentum he put in place was put to use by another chancellor -
Adolph Hitler. In all fairness, let us note that the new chancellor did add a
few "New Deal” policies. But they brought no harm to the already growing
economy - and perhaps even spurred it.
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Would allowing market forces to run their course
without New Deal-style intervention result in a new Hitler?
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On the one hand, the
anti-crisis battle of Chancellor Brüning confirms the accuracy of Bismarck’s statement that
politics are akin to forestry - the harvest isn't reaped by the one who sows.
On the other hand, given the unfortunate "harvest" reaped by the
entire world from the orthodox and firm policy of the German government of
1931-32, it would have been better to have in place a politician more prone to
extreme opportunism [like Roosevelt] than the brave and manly officer Bruening.
Yes, with such a politician Germany would probably have been buried in
depression for an entire decade, and the rewards wouldn't have been reaped by the
Fuehrer-chancellor
[Hitler].
Posted by WORLDMEETS.US
Observing how governments
have been torn between the New Deal of Roosevelt and orthodoxies of Brüning,
one must truly empathize. Roosevelt’s imitators know as well as his
ultra-liberal critics that opportunistic measures will offer little benefit and
that taking such a turn is unlikely to lead to a solution [By ultra-liberal,
the author refers to those who believe in complete trust in market forces]. But
they also know one other small detail normally unnoticed by ultra-liberals:
While it's true that firm economic orthodoxy may be a formula for a fast
recovery from today's crisis, it would also result in a painful shock and
create the conditions for another Fuehrer-chancellor
- just as it did in Germany, which so quickly recovered from the crisis of the
1930s.
CLICK HERE FOR RUSSIAN
VERSION
[Posted by WORLDMEETS.US
February 14, 3:27pm]
