"We are now in just the first stages of a global financial crisis that can all too easily become an economy-wide-global-wide disaster; and is likely to do so. Why? Because we were taken here by governments, the leaders and participants of which accept the same mode of reasoning (and greed) as their 1920s predecessors."

Today’s ongoing financial shake-up has many similarities and many differences with the “Crash of 1929” and what followed. There is much to learn from the similarities, and much to fear from the differences. I begin with that “crash,” and a quote from one of the more useful studies of the 1920s:

“In the fall of 1929 a panic on the New York stock market caused the greatest destruction of security values and the largest capital losses to individuals that had ever occurred in time of peace…. The story of this collapse and of the events that led up to it sounds so fantastic in retrospect that it seems… it must have been the product of the imagination of a writer of romances….. [But] the course of affairs was a logical and natural development of what had gone before; …; the delusions that prevailed were shared by the leaders of finance, business, government, and even many academic experts in economics. [1]

The “capital losses” noted above were those immediately associated with Wall Street; but what ensued for the “real economy” after that financial collapse was of much greater significance then, as it is likely to be for us in the next few years. So: what happened in the 1920s, and why?

The U.S. economy of the 1920s was seen by virtually all economists, journalists, and politicians of those years as “the prosperity decade.” Given that the ensuing decade came to be called “the depression decade,” and that there were surely functional connections between the two periods, the question arises: “What were those cheerleaders looking at and what were they ignoring?” Later, the same questions will be asked of our ongoing situation.

The ‘Twenties began buoyantly, continuing an expansion created by the substantial economic stimuli handed to the U.S. by World War I, stimuli which reversed what in 1913-14 had been a tendency toward recession. Those stimuli took their direct and secondary effects into the early 20s, providing the basis for what were seen as the good years to follow. To the experts of the day, those years constituted a period not just of “boom” but of an expansion that would never cease. Thus Irving Fisher – the Alan Greenspan of the 20s – proclaimed in 1928 that “the economy has solved the problem of the business cycle, and it is settled on a high plateau of endless prosperity.” Not quite a “high plateau,” Irv; more like a cliff: from 1929 to 1933, GNP (now called GDP) fell almost by half: from $104 billion to $56 billion. [2]

Of even greater relevance, between 1929 and 1933 per capita disposable income fell from $678 to $360, the income of farm proprietors fell from $5.7 billion to $1.7 billion, and unemployment rose from 1.5 million to 12.8 million: 25% of the labor force. Worse, really; for then as now, the official unemployment figure seriously understates the reality: it counts as unemployed only those who are known to be seeking a job; it does not count those who have been jobless so long they have given up looking. That disgustingly deceptive trick continues to this day, as discussed by the International Herald Tribune’s main reporter on economic affairs, Floyd Norris in his article ‘Not employed vs. “unemployed”’ (4-12/13-2008). Some excerpts:

The U.S unemployment rate is low. The U.S. jobless rate is high. These two seemingly contradictory statements are especially true for American men in what should be the prime of their working lives [ages 25—54]… [They] are now less likely to have jobs than they were during all but one recession in the past 60 years…. Their [official] unemployment rate is now 4.1 percent; not especially low, but well below the peak in all but one post-World War II recession. In the Labor Department’s latest report [for March, 2008] it was 13.1 percent for men in that group; only once before did it reach that high.

So: what is officially seen as about 5% unemployment for all adults, when you add in those who are unwillingly jobless, comes to about 10%. [3] (And much the same hocus-pocus is true for the measurement of poverty. See below.

Then there is what happened to the rate of use of productive capacities, as businesses responded to weakening sales. In a healthy economy, although rates of use vary with technologies, the rate of usage in a strong economy will fluctuate around 85 percent. Capacity utilization rates were lower than that already in 1928, before the crash. By 1933, the rate had fallen to 52 percent, along with that understated unemployment rate of 25 percent.

More revealing and damaging among the statistics for that “prosperous” decade are the figures for the poor: In what is the most reliable study of poverty in the 1920s, it was estimated that 51% of the U.S. population were poor; and even that is at best an understatement, for, like the official unemployment rate, so it is with the official definition of poverty: it severely understates what a family needs to live safely, not to say decently. Indeed, believe it or not, the present official rate, set up in 1963, was based on a “deficiency diet” after a nuclear attack – and even with that cruelly nonsensical basis, 35 million people in the U.S. (1/5 of the population) were deemed to have been in poverty in the “good times” of 1962. [4]

A clear similarity between then and now is that both in the 20s and now, as speculation took over the financial world, and Wall St. became a gambling casino, government at all levels became stinkpots of corruption. It would be going too far to say that the speculative fever and corrupted politics of the 20s were kids’ stuff compared with their look-alikes today; indeed they were, but everything being relative, in their time their joined consequences were substantial enough to create a madhouse financial world and a government of, by, and for a handful of scumbags.

As suggested above, the economics profession gave its silent approval (or even cheers) to the wild speculation of those times. But at least one economist was sufficiently awakened by what had happened to change his mind: J.M. Keynes. He was the leading conventional British economist of that period. By 1936, the depression had opened his eyes and his brain to provide an explanation of what had previously not been understood (and by Greenspanians and Friedmanites is still not); namely, the overall functioning of the economy: “macroeconomics.” In, doing so, Keynes also came down hard on speculation in a way that is even more relevant today than it was then:

Speculators may do no harm as bubbles on a stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done. [5]

In what follows, it will be seen that along with many other reforms, legislation to curb speculation and to prevent it from dominating the world of finance was provided during and after the depression of the 1930s. More to the point is that from the 1970s on, all of that progress was callously reversed.

Worse still, Keynes’s warnings were issued for an era whose “casino” technologies, compared to the geographic scope, speed, frequency, and volume of today’s speculative world, is like kids playing marbles compared with what goes on in Las Vegas.

Enough said about the crash and what followed; except to recall what President Hoover in 1930 famously announced: “Prosperity is just around the corner.” Although nobody would dare use those same words today, we are and will be hearing similar songs many times in the months and years to come. Why it was wrong then and will be now, was similar in some ways and different in others. It will be argued below that the differences are scarily more important than the similarities, worrisome though the latter may be.

First, this very big difference – that which has to do with today’s starkly different world of globalization and financialization. Although the “crash” and the U.S. depression that followed in the 30s caused some problems in the U.K. and Europe, 1) they had other major political problems on their hands, and 2) in those years, neither foreign trade nor financial institutions had the depth, spread, or tight interactions of today. One reason for that was that today’s technologies were yet to be born; more important was that (and among other problems), although the 20s and 30s for Britain and Europe were not economically “healthy” (as that term is used in the capitalist world), they also confronted these giant problems:

1. Already before World War I, Britain was well on its way toward losing its status as Numero Uno in the world, for the industrialization of both Germany and the U.S. had left it behind. By the 1920s Britain’s economic wellbeing was critically dependent upon its “earnings” from being the world’s main lender, even as its production status was rusting away. In striking contrast, since the 1980s the U.S. has become history’s main borrower (as our production status also falls): a somewhat more precarious type of global leadership, nezpa?

2. Also, in the early 20s, the British economy was settling into an economic depression. Despite all of that, in 1926, one of the UK’s leading economic historians derisively described the U.S. economy as “but an agricultural economy.” Pride goeth before a fall.

The “fall” for us will be when the dollar ceases to be the currency of world trade, something already peeping around that corner. My guess is that it will take us even longer than Britain to cease flexing our oratorical muscles (if such there be).

3. And, of course, in the interval between the two world wars, Italy, Germany, Russia, and Spain (among other countries in and outside of Europe; e.g., Japan) were going through revolutionary and counter-revolutionary struggles and developments and, consciously or not, getting ready for an offensive, defensive, and/or civil war; so a stock market crash would have been lost in the shuffle.

The most important set of differences between that past and our present is that the closest thing to our “globalization” was the interwar period’s weakening “imperialism.” Also, as will be discussed at length, the “speculative frenzy” of that era, when compared to the present, was participated in both directly and indirectly by only a tiny percentage of the economy and its people. Moreover, the dangerous insanities of “derivatives,” “hedge funds,” and, inter alia, “subprime mortgages” were non-existent, for they required a large bucketful of economic, political, social, and technological changes. For better and for worse, they were forthcoming, and here we are, standing dizzily at the edge of a precipice; fingers crossed. (See below.)

Before going into the ongoing mess systematically, and just to whet your appetite a bit, here’s an aperitif from the news of three days in mid-April (2008). (All but one are from the International Herald Tribune). Note the locations. There could be many more such items, from Asia, the Middle East, etc.; and by the time you read this it is more than likely that such news will have become our daily bread; but worse.

Paris: “Dollar hits record low as Inflation Quickens: Inflation shows no signs of slowing in Europe or the United States…, as the euro continues to rise against the dollar…” (Just since 2002, the $ has done down more than 50%.)

London: “Britain considers plan to ease credit woes: The Bank of England and British government are considering actions that would mirror steps taken by the U.S. Federal Reserve, in an unprecedented effort to restore liquidity to the money markets by taking over mortgage-backed assets from banks…”

Milan: (la Repubblica, translated): “Merrill Lynch crisis deepens; $14 billion lost in 9 months… They have fired 1,100 of their staff in the year’s first three months and have said another 3,000 will be reduced soon.

New York: “Citigroup posts loss of $5 billion in quarter: A further toll on the financial industry…; [Also] Royal Bank of Scotland, in a major turnabout, was trying to raise cash from it shareholders.”

New York: Same day, same page as above: “Optimism on credit spurs rebound. U.S. and European stocks surged [where have I seen that word ‘surge’ before?] and the dollar strengthened on hopes that quarterly results at Citigroup marked a turnabout in a global credit crunch…”

Same day, same page:

Reykjavik: [Where in Hell is Reykjavik? Oh yeah]: “Iceland’s hot economy can’t escape downturn.” [“But Mommy, you said that Iceland is safe!” “Don’t worry, son; our wise and honest President and his wise and honest advisors will handle it.”]

Note not only the geography, but that both inflation and layoffs made the news the same day. In the 1970s that happened for the first time; it came to be called “stagflation”: rising prices and rising unemployment; it was thought to be unique to that decade (but it wasn’t: see below). That duo means real difficulties for policy makers: if you try to stop prices from rising, can you do it without causing jobs to fall? Indeed that can be done; but not by a government deaf to all voices but those of biz (especially financial biz).

Now some relevant comparisons between the imperialism of the past and the globalization of the present; thence to the nature and rising dangers of today’s financialization.

Imperialism was practiced on all continents by all capitalist nations, most fully and successfully by the U.S.; but, anticipating today’s “spin”, we called it “westward expansion” as we took over all of the rich and easily “fenced in” lands of North America (gracefully leaving Canada to the Brits).

Globalization, on the other hand, has as its essence that there will be NO “fences;” that (in principle), all economies, everywhere, are to be easily accessible to all comers. Moreover, and this is most relevant for present purposes, the principle is that connections between all geographic and economic areas will be free and easy: the world becomes one economy, and let the devil take the hindmost. In its selling, of course, there was no “devil” to worry about; natch.

There has been a devil for the once-well-paid industrial workers of, especially, the U.S. (and increasingly of other top countries); namely, the loss of good jobs (and their benefits) due to the “downsizing and outsourcing” inherent to globalization.

Be all that as it may, the main meaning of globalization for present purposes is not only that “there’s no place to hide,” but that there’s no way to hide; most especially is that true because of fianancialization. Of course, the cheerleaders for globalization would add that there is no need to hide. Tell it to the Marines.

Globalization as doctrine and policy has as its main focus the several realms of trade and production (and their relevant investments). But, as we now turn to the globalized world economy, it becomes clear that financialization inexorably and naturally spreads over and into every nook and cranny of all societies. That is, it needs understanding that to globalize is irrevocably to open the gates of all the participants’ economies to the financial activities of all other economies. For the good of all, OK? Well, now that almost all of those gates were opened (or made to open) it is already apparent that “good” is the wrong four-letter word.

We are now in just the first stages of a global financial crisis that can all too easily become an economy-wide-global-wide disaster; and is likely to do so. Why? Because we were taken here by governments, the leaders and participants of which accept the same mode of reasoning (and greed) as their 1920s predecessors.

Put differently, it is just as though a) the crash of ‘29 and what followed either didn’t happen, and/or b) if it did, it had little or nothing to do with the nature and functioning of “it’s each for himself and God for all” capitalism; rather (as Milton Friedman/Alan Greenspan still insist) if there’s a problem it was caused by governmental interference with “free markets.”

And it needs adding, sadly and dangerously, that the politics and political “education” of the past 30+ years, plus the druggie-like habits of consumerism, plus the widespread notion that “greed is good” have successfully bewitched and bewildered all too many of our (and others’) people. [6]

So, finally, let’s take a closer look at financialization. As suggested above, it (and many related horrors) began to re-tighten their grip on the U.S.A. as the 70s opened and by the 80s – with the eager help of Ronald Reagan – that grip became a stranglehold.

The process didn’t take hold by chance; far from it. The depression of the 30s and the associated rise in unions, workers’ power, and reform legislation – taken together with the scarcity of labor power in the years of war – had made it impossible for business to hold back the numerous reforms of the New Deal – including those of the financial sector. A key example of the latter has to do with the function of savings and loans banks “S&Ls”; and with their destruction (they were small neighborhood banks for home mortgages manageable by families of modest incomes). They were closely regulated, and their earnings were modest. With the help of the buoyant post-World War II economy, the result hoped for was achieved: By 1970, two-thirds of all U.S. families (mine included) had financed their homes through S&Ls.

Enter (right), the 80s, and Ronald Reagan: racist, war-lover, bower and scraper to big business. One of his first triumphs was in 1982, when he “presided” over the legislative de-regulation of the S&Ls (along with much else). The “neighborhood banks” were swiftly taken over by, among others, gangsters, opportunistic fools, and just plain greedy financiers. [7] Among the many achievements of that undoing of financial safety rules was what has become the “subprime” crisis. Of which, more below.

They didn’t do so by chance, but by an always strengthening and well-directed movement to rid the U.S. of the reforms (not least those of the financial world) put into being from the mid-1930s up into to the early 70s.

It is important to understand why the Right (let’s call it by its “right” name) was able to come back from its critical loss of power from the mid-1930s through the 60s. The setting against which that “counter-reformation” took place had these vital elements: Firstly, Stagflation dominated the entire decade. What was it? (And now that it’s happening again, what is it?)

It is the simultaneous existence of a weak economy and rising prices (stagnation + inflation); which, according to economists, can’t happen. But it did and has, twice. [8]

Factor in that the stagflation of the 70s was accompanied by (and helped to bring about) the severe weakening of the political power of workers’ unions and thus the unchallenged rule of big business (with the support of gun-lovers/militarists and racists), and the basis for unfettered globalization/financialization had been laid.

So what’s “financialization”? And anyway, haven’t we always been financialized to some degree? Right, but today’s different, and insanely so.

Just how different is clarified by the following two quotations, the first from the annual Economic Report of the President (1993), the second from Phillips (1994) [9]

In 1949, corporate profits (of non-financial corporations) were ten times as high as interest (for financial companies); in 1959, ten years later, the ratio was five to one; in 1969 that had dropped to two-and-a-half times; by 1979, it was less than double; and since 1989, corporate profits have always been less than interest.

Now, Phillips:

In the early 1970s, the financial sector was subordinate to Congress and the White House, and the total of financial trades conducted by American firms or on American exchanges over an entire year was a dollar amount less than gross national product. By the 1990s, however, through a 24-hour-a-day cascade of electronic hedging and speculation, the financial sector had swollen to an annual volume of trading thirty or forty times greater than the dollar turnover of the “real economy…” Each month, several dozen huge domestic financial firms and exchanges electronically trade a sum in currencies, futures, derivative instruments, stocks, and bonds that exceed the entire gross national product of the United States! (His emphases and exclamation point.)

To all of that, add what Phillips didn’t see the need to note; namely, the expansion of the financial sector to the interacting set of stimuli from various money, equity, and pension funds, the enormous increase of debt (household, business, and governmental), the strengthening of insurance companies and their mergers with other financial companies, the expansion of both individual and professional financial speculators and, not least, the dazzling growth of international speculation in the vast and explosive “derivative” markets.

Put all of that together, friends, and that’s “financialization!” (My exclamation point.) But there is something to be added that has multiplied the dangers of an economy so much under the thrall of speculation; namely, what effect the always greater political powers of the financial world have had in getting rid of any and all regulations; those regulations, that is, put into effect from the mid-30s on meant to insure us that there would not, could not be, a repetition of the financial disasters of 1929 et seq. Now such a repetition is well underway, but with dire consequences going beyond those of the past.

A good place to begin is to remind that the almost all of the wild-eyed speculators of the 1920s were, perforce, those of the “upper middle class,” the rich, and the professionals. Not only have their successors today forgotten (or don’t know of ‘29) but, more importantly, those now up to their eyeballs in bad bets are spread through all sectors and levels of income and wealth. Some examples:

“Subprime mortgages” by their very name reveal that the borrowers wouldn’t have qualified for the traditional mortgage of so much down, interest payable from the start, etc. As today’s panic spreads and deepens we are discovering the madness associated with them: No down payment, no interest paid for several years; then, when one starts paying, it’s higher than the norm. And so on.

Moreover #1, because of such provisions, a large number of what could have been “prime borrowers” also jumped on the horse’s back for speculative, not housing, reasons.

Moreover #2, today’s financial world’s globalization has meant that those “subprimes” are held all over the globe, wittingly or not (in Iceland, e.g., remember?); and, directly or indirectly, by smarty pants like Citigroup (USA), Blackstone and Carlyle (UK) and…

Moreover #3: In the 80s and 90s, some wise guys (including two Nobel Prize Economics winners) invented “derivatives” and “hedge funds.” The Nobel hotshots great achievement was Long Term Capital Management (LTCM). They guessed wrong in 1998 and LTCM took a nose-dive which could have cost a lot of millionaires a lotta $$$; but voila! Mr. Greenspan talked the government into bailing them out with some billions (which our taxes will pay for over the years).

The lesson should have been, make those thingies illegal or, at least, regulate them. Instead, given the generosity of Messrs. Greenspan and their Uncle Sam, such games have now become common. At first, one had to be a millionaire to get into those games; now, you don’t have to be a millionaire to get into “derivs” or “hedges,” you just have to be a greedy fool. Item: In 1999, there were 8 hedge funds; now there are 8,000. Welcome aboard, suckers.

Moral: If you have a pension fund you are counting on for your laid-back future, cross your fingers: almost all of those funds, private or public, big or little, university or state, have been earning interest for you by investing in one thing or another that is involved directly or directly in the subprime crisis, or derivatives, or hedge funds, or…

So, having crossed your fingers, you might as well kneel and pray, too. Doesn’t cost anything, and who knows? And don’t read the financial news; it’ll just drive you to the wall, and you can’t do anything about it anyway except take to drink.

So, the high probability is that the ongoing financial troubles will grow into something more than “troubles”; something deeper affecting the whole economy, and spreading over the entire world. The signs of all of that are already whispering in the news every day; they are likely to be screaming by next year.

What can we do? Not much to stop those processes. But what we must do is to become more involved politically than is our custom (no matter what our custom has been). We cannot make our economy safer, sounder, or more decent without a strong movement. So?

As things now stand, it seems unlikely that we can create even a weak movement working toward a decent society. In my lifetime it seemed just like that in 1934, the year I was awakened to politics in San Francisco by the general strike led by the longshore workers. It was a time of gloom and desperation. Ah! You might say, but it was when FDR was president, too. So it was, but his campaign and his true position when elected were worse than conservative. The policies he backed in 1933 were those of big business; exemplified by the NRA (the National Recovery Act). It is worth a warning look:

Its essence was to give business (especially big business) the right and the obligation to organize as, in effect, groups of de facto cartels: that is, all companies in a given industry would function within a compulsory framework of agreed upon prices, wages, markets, etc. Accompanying that set of new laws was a propaganda program which had all companies living up to that program (first put forth by Gerard Swope, head of GE) doing so with much publicity and hoopla (flagged symbols on the products, in the shops, etc.) and critical publicity of those who did not. Its nature was such that in its first year Hitler sent a delegation from Germany to study it. Two years later it was – finally! – declared unconstitutional by the Supreme Court.

During those two years, noise had begun to be heard from the bottom up (a good deal of it inspired by the longshore strike), in cars, rubber, steel, etc. As the congressional elections of 1934 loomed, FDR’s advisors (and his liberal wife Eleanor) urged a marked change of direction by FDR; and he took it. From then on, it was one “reform” or another: the birth of Social Security (1935), wages and hours regulations for workers, the WPA (which provided what have come to be called “employer of last resort” jobs – in education, culture, roadworks, etc.), the NYA (National Youth Admin., jobs for students in schools, helping teachers, etc. [I had one of those]) and, neither last nor least, laws legalizing unions and their strikes. Meanwhile, the social outlook, the spirit, the demands, the behavior of young and old, poor and getting by, came to be politicized. Thus it was that FDR won easily in the presidential elections of 1936, 1940, and 1944 – leading the GOP to get a constitutional limit of two terms (which they came to rue when their rightwing cheerleader, Reagan, had to step down after his two terms). [10]

The foregoing is not meant to suggest that in our time, with our troubles and threats, we can expect to bring about such a transformation again. We cannot expect it (nor did anyone in 1933-4 or for years later); what we can do is to understand that what seems to be impossible may well not be: the social process is so complicated, with so many interacting dimensions, that it is literally impossible to predict, the future.

That’s the “good news.” Unfortunately, the changes in what we like to call “our country” since World War II, and especially since the 1970s, have been imposingly negative; most especially those having to do with the daunting effects of consumerism, a powerful and acquiescent media, globalization, etc., etc., etc. Taken together they have crated a socio-economic-political mix that seems to have steel walls.

In response to that realistic reasoning, I say only this: Although different in many important details, it sure as hell looked that way in the 1930s, a decade in which the word “daunting” would have been an understatement. So?

So, what all of us must understand: 1) that we are not the only ones who are angry, scared, worried, pissed off; 2) that who knows how many thousands/millions out there are just waiting and hoping that some others will get to building a movement they/we would just love to join; 3) that nobody knows what the highly unstable societies of today – ours not least – will undergo over the oncoming years: economically, militarily, socially, nationally, internationally...; and 4) anyone who has participated in political efforts from and for the bottom up knows that, “win or lose,” and usually we have lost, it was damned well worth the effort, if only because you meet some good folks along the way (if also some jerks). And, as Tom Paine (or someone) said, long ago: It’s better to go down on your feet than on your knees.

So, once more: what’s to do, what’s to work for? My answer is this: Go back to something we have done and won with once, already. I mean what after 1935 came to be called “the Second New Deal.” I insert here, that as a leftie for 60+ years, I was never satisfied with what was created from 1935 into the 60s. But it was a good start, and friends, we need very badly to get started.

The way in which I will begin my suggestion as to what we might well do now, is to repeat here the essence of FDR’s 1944 (and last) “State of the Union Address” (shortly before he died). Here a summary of it that will end this long discourse. This is what FDR proposed:

“A Second Bill of Rights, under which a new basis of security and prosperity can be established for all – regardless of station, race, or creed. including:

The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.

The right to earn enough to provide adequate food and clothing and recreation.

The right of every farmer to raise and sell his products at a return which will give him and his family a decent living.

The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home and abroad.

The right of every family to a decent home.

The right to adequate medical care and the opportunity to achieve good health.

The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment.

The right to a good education.”

That sounded great in 1944; in 2008 it sounds like a fairy story. But with a lot of never-ending work, it could become the heart of a movement that would include all sane and decent people, no matter what they call their politics. Sure. Line forms to the Left.

Doug Dowd was born in San Francisco (1919). He began to teach at Berkeley in 1950; and then at Cornell until 1971. He returned to San Francisco for university teaching until 1992, while, at the same time, teaching "free community classes" (which continue). For about 15 years, he has taught every other semester in Italy (presently at the University of Modena). Among his books, most recent are Blues for America: A Critique, a Lament and some Stories, Capitalism and its Economics: A Critical History and The Broken Promises of America at Home and Abroad, Past and Present: an Encyclopaedia for our Times.

Endnotes

1. George Soule, Prosperity Decade (1947).

2. These and immediately following data are taken from Historical Statistics of the United States and from the annual Economic Report(s) of the President. In these and later data, the amounts are adjusted for changes in the value of the dollar. GDP (gross domestic product) is the current measure taking the place of GNP (gross national product); that is, GNP less net receipts of factor income from the rest of the world. For the causes of that “prosperity,” and in addition to Soule (noted earlier), see John Kenneth Galbraith, The Great Crash (1955).

3. In remarking that what we see as, e.g., 5% unemployment in the U.S. would be seen as twice that in Western Europe, the question arises: How come that difference between us and them? The answer is in politics. After World War II the workers’ and socialist movements were understandably strong, given that they realistically saw that their capitalist rulers had provided Hell for all. Thus, for about 20 years there was significant political power in the legislatures of Western Europe; and one of the things they achieved, and which still lasts, was a realistic measure of unemployment (and poverty).

4. See Herman P. Miller, Rich Man, Poor Man (1971); Miller worked with the U.S. Census Bureau for 30 years before his retirement and the writing of this book. For confirmation, also see Richard Du Boff, Accumulation and Power: An Economic History of the United States (1989). He shows that in 1929, 40 per cent of the U.S. population had incomes below $1,500, when $2000 was deemed “sufficient to supply basic necessities.” For the “emergency diet” scandal, see C. Wilcox, Toward Social Welfare (1969).

5. J. M. Keynes, The General Theory of Employment, Interest, and Money (1936).

6. I won’t resist the temptation to tell this story: In the 80s, one of the most famous fast money makers (whose name my memory has suppressed) was the main speaker at the graduation ceremonies for the UCLA business school students. The title of his speech to the hustling graduates was, honest, “Greed is Good.” He was subsequently found to have committed a crime or two in his “work,” and got a brief jail sentence, at a very comfortable “prison” on the California coast. I have always thought there was a misprint in the news story; I think he meant to say “Greed is God.”

7. See Stephen Pizzo, et al., Inside Job: The Looting of America’s Savings and Loans (1989); Also, for a probing study of the Reagan period see Garry Wills, Reagan’s America (1988).

8. My modesty does not keep me from suggesting that if you wish an explanation of the whys and wherefores of “stagflation” it can be found in my Capitalism and Its Economics (2000, 2004).

9. That long quote from Kevin. Phillips is worthwhile in itself; but it is also useful to understand that this strong critic of the ongoing political economy of the U.S. sees himself as a “conservative.” What he has wished to “conserve” is his vision of a truly competitive capitalism; the capitalism, so to speak, of Adam Smith. Phillips was an active participant in the efforts which, from the 70s on, got rid of Democratic governments and their “New Deal-ish” policies; an active advisor – for a while – of the Reaganites (the birthplace of the “neoconservatives”). But he is an honest, decent, and very well-informed guy, who has worked hard and well to expose the misdeeds of the past twenty years or more. The quotation here was taken from his 1994 book, Arrogant Capital which, among other things digs deeply into the deep corruption now ruling over the country. But see also, preceding that his The Politics of Rich and Poor (1991), and his more recent and very useful Wealth and Democracy: A Political History of the American Rich (2002). Phillips is a strong example of the notion: “Beware the disappointed lover!”

10. See Broadus Mitchell’s excellent history, Depression Decade (1947).