Economics/Class Relations

Wealthy bankers and businessmen plotted to overthrow FDR. A retired general foiled it.

The scenario described in this story is not particularly analogous to where we are today. Political conflict in the 1930s was genuinely class-based. Class conflict exists today and continues to increase, but it is tertiary in relation to the intra-elite conflict (see Pareto on elites and counter-elites) pitting various sectors of the capitalist and managerial classes against each other, and the wider existential/quasi-religious conflict on the ground level. And the primary class conflict is not the workers vs. bosses model of the historic labor movement (although that is increasing as well) but the growing mass of lumpenproletarians (and what might be called lumpen adjacents like the lower proletariat, sinking upper proletariat, and lower petite bourgeoisie), and the “system” generally, which is what the most intense aspects of the riots last year were about.

This gets back to my Iraq analogy. If the Red Tribe is analogous to the Sunni (formerly dominant now losing power) and the Blue Tribe to the Shia (formerly subordinated now rising), the lower classes would be more like the Kurds (the outgroup that no one else likes). A lot of the more severe rioting last year came from these sectors. The most serious riots were immediately after the killing of George Floyd, and involved serious looting as well as attacks on cops and government buildings and all that. That was when the real lumpenproletariat struck. The middle-class liberal and young leftist protestors, statue vandalism enthusiasts, etc. were more like hangers-on and an afterthought except for in hot leftist enclaves like Portland and Seattle.

By Gillian Brockell, Washington Post

The consternation had been growing in the months between Franklin D. Roosevelt’s election and his inauguration, but his elimination of the gold standard in April 1933 infuriated some of the country’s wealthiest men.

Titans of banking and business worried that if U.S. currency wasn’t backed by gold, inflation could skyrocket and make their millions worthless. Why, they could end up as poor as most everyone else was during the Great Depression.

So, according to the sworn congressional testimony of a retired general, they decided to overthrow the government and install a dictator who was more business friendly. After all, they reasoned, that had been working well in Italy.

How close this fascist cabal got, and who exactly was in on it, are still subjects of historical debate. But as the dust settles after the pro-Trump attack on the U.S. Capitol, and as it becomes clearer how close lawmakers came to catastrophe, the similarities to the Business Plot are hard to ignore.

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  1. In 2004, Researchers Cole and Ohanian determined that FDR’s “New Deal” had actually delayed America’s recovery from the Great Depression from 1936 to 1943. Google ‘ “Cole” “Ohanian” “new deal” ‘

    https://www.journals.uchicago.edu/doi/abs/10.1086/421169 AND

    https://reason.org/commentary/fdr-policies-doubled-the-lengt/

    “Many saw Franklin Delano Roosevelt’s (FDR) presidency and the New Deal as the salvation of the American economy. In fact, recent empirical evidence by UCLA economists Harold Cole and Lee Ohanian suggests that FDR’s economic policy added 7 years to the Great Depression. More importantly, much of that extended depressed state can be traced directly to the earliest years, when FDR explicitly implemented policies that allowed companies to fix prices at high levels to keep wages up. Lee Ohanian was interviewed by Reason.tv and asked about the implications for addressing the current financial crisis. The press release from UCLA summarizes their research this way:”

    “In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933. “President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services,” said Cole, also a UCLA professor of economics. “So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies.” Using data collected in 1929 by the Conference Board and the Bureau of Labor Statistics, Cole and Ohanian were able to establish average wages and prices across a range of industries just prior to the Depression. By adjusting for annual increases in productivity, they were able to use the 1929 benchmark to figure out what prices and wages would have been during every year of the Depression had Roosevelt’s policies not gone into effect. They then compared those figures with actual prices and wages as reflected in the Conference Board data. In the three years following the implementation of Roosevelt’s policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity. Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.”
    [end of quote]

    Jim Bell’s comment follows:

    Naturally, supporters of FDR and the New Deal will object. I claim that his supporters simply ‘decided to decide’ during and after WWII that ‘FDR succeeded’. What else would they say? But how did they actually come to that conclusion without hard facts? After all, no doubt the Great Depression generated a huge volume of paper records, which I liken to the ending scene of Raiders of the Lost Ark: A huge warehouse full of boxes.

    https://www.youtube.com/watch?v=i5pd1U6yXe0 At 1:24.

    Computers did not exist to do this analysis, as well. Even the computers of the 1970’s probably didn’t have the power, or at least the tape or disk storage, to download this mass of data. And somebody had to digitize the millions of pages of data before the analysis could be done. That work was presumably eventually done.

    It is very likely that only in the late 1990’s did PCs exist that enabled the analysis on which Cole and Ohanian’s research depended. Around 2000, a typical PC hard disk had 2-4 gigabytes of data storage, which was 20-40 x the size of a cake-sized ‘disk pack’ of the mid-1970’s era.

    I think the answer is obvious: Nobody could realistically have come to the conclusion that ‘FDR had succeeded’. Nobody actually knew.

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