Wednesday, September 24, 2008

A History Lesson

As the politicians and media gurus debate ways to salvage our financial system, I believe it might be of some interest to show how it all came about. In the interest of brevity, I will of necessity not elaborate too deeply into each item but rather give this the broad brush treatment. I will leave it to you to fill in the voids.
Let us start during the depression. This followed closely on the heels of the flapper years where everyone had fun. Prosperity was here for all. Let the good times roll. The problem was that everyone thought they were betting on a sure thing. They bought stocks with high leverage, similar to today, with the idea that someone else would pay for bad guesses. It didn’t work out that way. When the market started down, there was nothing to stop it and everyone lost, even those not in the market, as credit dried up banks defaulted with ordinary people losing their life savings. The government policy under President Hoover was to just sit back and wait, assuming it would correct itself. It didn’t and couldn’t because there was nothing to stop the downward cycle. Desperate times for our citizens.
The people overwhelmingly turned to F.D.R. and the recovery began. He was ready on day one and sent a flurry of bills to the majority Democratic Congress. In my book review of his life I enumerated many of them. I will not repeat except to state that his philosophy was to try something, anything, to kick start the recovery. Most programs worked, but some didn’t. These he discarded. His overriding thought was that as people received a boost that they not be idle as they received it. He did not want a welfare state just a temporary fix until order could be restored. All of his programs were resisted fiercely by big business but he rejected their advice. Many of his programs clamped tight control on the big money men to keep them from taking control and repeating the cycle.
As the “New Deal” was winding down, along came WWII. This created a boost to industry that provided full employment. As the men became soldiers the women filled in admirably doing work that previously had been considered for men only.
After the war President Roosevelt in his continuing wisdom created the GI Bill of Rights which was made available to all veterans. There were loose guidelines. They could go to college, a trade school, take flying lessons or whatever. In my case tuition and books were paid for. I was also given
$75/ month in living expenses. When I graduated I had a minimal debt to pay. While this was going on, the need to find immediate employment for the millions of veterans was reduced, and an orderly restart ensued. For the next 16 years during the Presidencies of Truman, Eisenhower and Kennedy prosperity was enjoyed by all. As a government, there were surpluses created all the while great programs of assistance were enacted such as The Marshall Plan which saved Europe from going communist and planning the trip to the moon.
All of this stable progress was under Democratic controlled government. Eisenhower was not a true Republican, as were those that followed later, In fact he was courted by the Democratic Party to be on their ticket. He kept things under control. He was called a do nothing president. Sometimes, in my opinion, just letting the process work is the best course of action. We do, of course have him to thank for the interstate highway system. Also, he kept the military industrial types under control.
Lyndon Johnson the successor to Kennedy, with the Vietnam War and his Great Society Programs took the country deep in debt from which we have never recovered.
The Republican Party has done everything it could over the decades to wipe out all vestiges of New Deal programs, particularly those that kept controls on Corporations. They finally succeeded. The only programs left are federal deposit insurance and Social Security. If they are successful in privatizing Social Security, then this too will be gone for future generations.
In the interest of fairness I need to discuss government under President Carter. How it happened or why has always been a mystery to me. Unions were powerful and they were pushing their agendas. Regardless, this was the beginning of the downward cycle of manufacturing in America. We were treated as enemies of the people and many programs were enacted which made life intolerable for those of us on the line. We could no longer devote our full attention to making quality products at a price acceptable to the consumer. Unnecessary cost burdens were added all the while the resurgence of products from the new Europe were being unloaded on the docks at an ever increasing rate. Then came OPEC and the bottom fell out.
If you have read my political journey you can follow my flip flopping from one party to another. During these times I was as stanch a Republican as anyone could be as I resisted a government seemingly dedicated to destroying manufacturing in America.
This was when Reagan came to power with my full support and vote. He told us government was the problem and we agreed. What we didn’t know was how swiftly he dismantled financial controls starting the trend to bigger and bigger companies with their strong influence on the market. I guess we didn’t care as the Soviet Union was brought down and prosperity was abundant. There used to be programs to keep companies from having monopoly power. The definition, I guess, kept changing, as they have grown exponentially.
All of the administrations to follow both Republican and Democrat kept following this same course in effect allowing markets to operate as they saw fit without oversight. In addition American markets were opened to many other nations, which continued the demise of industry here at home. Legislation was enacted that provided incentive to ship jobs overseas without regard to American workers. Retail giants like Wal-Mart put pressure on industry to relocate in China or other low cost countries.
I want to pause to make a statement. The two decades after WWII were times of unparalled prosperity. I use Firestone as the litmus test. All through those years we expanded on a fast tract basis. This was the reason someone like me could advance as quickly as I did. It seemed to start about the time I joined Firestone in 1954. Prior to then the plants had been monolific, solid unchanging, stable. The plant managers all had grey hair and had 30 or more years of service. Wages and benefits improved steadily. Factory workers owned their homes. Some had fishing boats and lake cabins or travel trailers. Nothing fancy, but satisfactory. A good life for them and a solid future for their children were possible. Farmers still lived on their land and worked their acreage. Those who were not of the white race were pulled along with high paying jobs becoming available. Under union contracts there was equal pay for equal work. They were still discriminated against and so were denied other of life’s pleasures. That didn’t start to change until passage of civil rights legislation in the 60’s.
Without unions’ health insurance, life insurance, pensions, good wages and vacation time would never have been possible. Even as a plant manager much of the benefits I received were built on the success of union bargaining. The problem of union demands starting in the mid 70’s was that they could not or would not accept the reality that our cozy little club had been upset by boatloads of tires being shipped from Europe and Japan and sold in retail stores all across America. By the time they did it was too late. OPEC had already devastated the tire industry worldwide forcing all manufacturers to cut and cut deep. Chaos resulted. In the end American tire manufacturing was reduced by over 50%.
I find myself digressing. The point I want to make is that before the 70’s life was good for working people on or off the farm. We were living in nice homes. We as men earned enough to allow mothers to stay at home providing solid support for our children. We were entering a phase that should have kept improving our life style with every passing decade. It didn’t continue. Wages and salaries stagnated. Women were forced into the workforce not because they wanted to but because their income was required to maintain the life style we had come to enjoy. For decades now income for average Americans has stagnated. Consumer debt has been relied upon to fill the void that even working mothers could no longer fill. In desperation lottery tickets and gambling of other kinds were tried to provide instant relief, to no avail. Money spent this way only aggravated the situation. Gambling with stocks placed in 401K accounts proved disastrous when severe corrections have occurred including the current crisis. If the money is needed at those times then it was just tough luck.
Our government worships at the altar of bigness. Tax policies encourage huge farms driving average farmers off of their land. Deregulation has created huge conglomerates which lose touch with the basic premise of their mission with profit the only measure of success.
Where we go from here is anyone’s guess. I am a pessimist. The money to be made is just more than patriotism can counter. Because of the outrageous request for a trillion dollar payout, the people responsible for creating this mess will still be in control being rescued by taxpayers when justice would have them behind bars after paying full restitution.
F.D.R. would be starting employment programs getting money directly into hands of people willing to work. I guess that is just too simple a concept in today’s mega buck world. The fact that his programs worked is just not clear enough for Congress to understand.
I conclude this letter with the title of Lee Iacocca’s latest book,” Where have all the Leaders gone”.

Jack B. Walters
3961 N. Hillwood Circle
Tucson, AZ 85750
(520) 722-2958
September 23, 2008

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