Author: Dmytro Danylyuk

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Blog Post #4

Prompt: What was a historical figure, event, or detail that particularly stuck out to you or interested you? How did the author use this figure, event, or detail to support his/her overall argument or interpretation?

Source: Judith Stein, Pivotal Decades, Chapter 11 “Age of Inequality,” Sections “Right Turn” and “What Reagan Wrought: Consumption, High Dollar, and Trade Deficits.” 

Preface: Having covered FDR and the New Deal in my previous post, I will now cover what I see as being in many ways the undoing of the New Deal by Ronald Reagan. Reason I have this view is due to the evident manipulation of currency and consumer spending, as well as the governmental spending and the subsequent debt that ensued, which Stein describes through the first sections of the chapter. I will focus especially on Ronald Reagan in this blog post as I am learning about his administration’s economic policies and practices in depth for the first time, previously having very limited knowledge on the time period. I find the comparison between FDR and Reagan to be especially interesting due to only a few decades separating the two, yet their policies were polar opposites. 

Answer: Beginning the chapter, Stein summarizes the following about Ronald Reagan and his approach to the economy, “A new recipe for economic growth prescribed freeing capital from taxes and unions and liberating markets from government rules.” (Stein, p.262) This is a polar opposite approach to both the FDR agenda and the previous presidential administration of the Democrat Jimmy Carter. For many, the Reagan years are characterized by strong sentiments of conservatism, yet not protectionism. Going over the general characteristics of the Reagan terms, Stein also adds the following, “Reagan reduced taxes on capital, dismantled business regulations, privileged the fight against inflation, tolerated high unemployment, fought unions, promoted an expensive dollar, and championed free trade.” (Stein, p.262) Again, a clear opposite approach to that of the New Deal. To start off, the core purpose of the New Deal was to eliminate unemployment and to promote unions, the government essentially established unions with programs such as the National Recovery Act, and the Tennessee Valley Authority Act. The New Deal also promoted an expensive dollar, but only after inflation proved to be an issue as government spending coupled with the removal of the gold standard devalued the fiat currency. 

Continuing on with the theme of dismantling New Deal ideals, Reagan also held as a core principle that the government has become too large, being in turn burdened unnecessarily, thinking that “The nation’s ills were rooted in a bloated federal government that overtaxed and overregulated and generated inflation by spending too much and printing too much money, which discouraged work, risk- taking, saving, and investment.” (Stein, p.263) Staying true to the modern interpretation of American Republican ideals, Reagan was not for a massive government that was involved in all facets of the economy. Understandably so, if the government imposes itself and its authority and begins to regulate sectors and industries, it also assumes responsibility for the shortcomings of their decisions. One thing to note is that this is also the opposite thinking to Roosevelt, who pushed for widespread taxation which in turn would pay for an individual’s savings and retirement. Here, however, we see a rejection of taxation on the grounds that it hinders saving and investment, simply a different economic philosophy. The return to a more hands-off way of governance was rationalized as “U.S. society was too complex to be managed and markets were so rational that they anticipated and thus annulled government interventions.” (Stein, p.264) This is a fairly logical stance, as free market capitalism prides itself on its ability to adapt to any sort of intervention. What does indeed confuse me, is that although this was the mentality of the Republicans at the time, they nonetheless tried to manage the market not directly, but through influencing taxation and the citizens themselves, which influenced the markets in turn. Backwards in a way. What this then resulted in was the strengthening of the dollar and the eventual outsourcing of manufacturing as the companies did not want to pay wages in the highly prized dollar which gained value in part due to renewed foreign investments. 

Unions were dealt a massive blow, definitely undoing the great push towards workers rights which was seen during the New Deal. In 1981, over “…thirteen thousand members of the Professional Air Traffic Controllers Organization (PATCO) walked off their jobs. Reagan then fired them, and they were replaced by managers and air controllers from the military.” (Stein, p.267) This may seem as a no-nonsense answer to a complex issue, which it was, airports and in turn the nation could not function without such a large portion of airport staff having walked out. The greater effect of Reagan stepping in and firing all those employees, is that “Political morality had changed, and private sector unionization plummeted from 20 percent in 1980 to 12.1 percent in 1990. No longer were consensual agreements between workers and employers necessary.” (Stein, p.267) This was a huge blow for workers rights, a consequence that is unfathomable to have occurred during Roosevelt’s terms. The political morality that Stein describes, is an interesting choice of diction, as in just a few decades the advancements towards workers rights have seemingly been set back with one simple act. Corporations and large institutions who were in the essential public sector, could simply hire replacement workers, regardless of previously made non-contractual union agreements. 

Having covered the economic policies, what were the outcomes? Well, Stein presents the following data, that “Every form of saving—personal, business, and public— fell during the 1980s. Investment did not rise. During the 1970s investment was 18.6 percent of GDP; in the 1980s it was 17.4 percent.” (Stein, p.268) Investment is crucial, it signifies the public’s trust in the economic future of the nation, for it to be so low after the relatively turbulent 1970s shows that a rebound was not widely believed to be coming in the future decade. What is more striking however, is that savings in general fell throughout the 1980s. This can be attributed to consumerism, as well as the ever changing taxation policies of the Reagan terms. Generally speaking, it is worrying for the savings of the population to fall, during Roosevelt’s terms we saw the opposite, a rise in savings as well as overall national economic investment. Another outcome of Reagan’s economic policies was the previously mentioned “high” dollar, whose “…overall value rose 63 percent from 1980 to March 1985—the equivalent of taxing U.S. exports by 63 percent and providing U.S. imports with an equivalent subsidy.” (Stein, p.269) Both of these analogies offered by Stein show that the expensive dollar was not capitalized on as much as it should have been by the government. A very strong currency allows a nation to be comfortable with its relationship between imports and exports, yet the opposite was seen, “Non- oil imports rose from 5.9 percent of GDP in 1979 to 7.5 percent in 1986. On the other hand, exports fell from 9 percent of GDP in 1979 to 7.2 percent in 1986.” (Stein, p.269) The strong dollar also planted the seeds of outsourcing, as the strong value of each dollar having to be paid to workers was also a great value of each dollar that could be saved if the production of a company or industry were to be moved abroad. To go back to the New Deal, Roosevelt in a way had the opposite problem, that after taking the dollar off the gold standard he had to build up its value simultaneously with a seemingly infinite barrage of government spending. 

Overall, Stein brings up many specific statistics to demonstrate her argument in this chapter, that the economic policies during Reagan’s two terms were experimental with massive future implications, similar to those of Roosevelt. I think Stein’s interpretation of this short period of American economic history is quite accurate, especially her numerous comparisons to the post Great Depression and WWII America. My key takeaway is that it is fair to say that Reagan’s economic policies were polar opposite to Roosevelts. Furthermore, I believe that it is Reagan’s two terms which drove the Republican-Democrat divide on the matter of economic policies further than ever before, to this day even.

Blog Post #3

Prompt: How does this reading add to your knowledge of the subject, or challenge or contradict what you previously thought about this aspect of American or global history?

Source: Eric Rauchway, The Great Depression and the New Deal: A Very Short Introduction, Chapter 4, “Reflation and Relief.” 

Preface: Going into this text and keeping the blog post in mind, I wanted to focus on the question of the gold standard and to be critical of it. The question of the gold standard is especially relevant to us all today as we see our federal government in the last few years print more dollars than there have ever been before, devaluing them, no matter what the economists say. Having said that, I will only focus on the question of the gold standard and how Franklin Delano Roosevelt rationalized getting rid of it in 1933. 

Answer: Eric Rauchways chapter “Reflation and Relief,” offered a lot of information on the New Deal, as well as the matter of artificially inflating the currency, which I was especially interested in. The chapter title itself is indicative of the unusual economic approaches taken by Franklin Delano Roosevelt and his New Deal program, to inflate a currency on purpose seems bizarre at a first glance. There is also the second keyword of the title, that of relief. Undoubtedly, Americans saw a great deal of relief during FDRs years in office, all 12 of them, as Roosevelt was elected to a record 4 terms in office, a feat never to be repeated again as afterwards Congress imposed term limits. Although effective, the New Deal was experimental in nature, “The Roosevelt agenda grew by experiment: the parts that worked, stuck, no matter their origin.” (Rauchway, p.1) For the agenda of one of the largest and most powerful nations in the world to be “experimental,” is worrisome, yet such a simple approach was successful and showed itself bets through economic growth; “From the time of their initial implementation in 1933 to the mobilization for war production in 1940, with the sole exception of the recession of 1937–38, the American economy grew at averaged rates of around 8 to 10 percent a year.” (Rauchway, p.1) For the economy of any nation to grow at such rates for multiple years is massive, however much of this growth was brought about by governmental spending and currency manipulation, as well as an unprecedented agreement between the president and the Congress on economic issues. 

Rauchway highlights such a compliance by stating the following about Roosevelt’s control over the banks, 

“Congress would quickly comply, often adding to the bill measures that went further even than Roosevelt originally anticipated—in this case, not only did Congress amend the Trading with the Enemy Act to include peacetime emergencies, it added banking law that drew on preceding state action and on measures legislators had contemplated during the Hoover administration.” (Rauchway, p.2) 

Here, I am more focused on the principle rather than the matter itself. In retrospect, it seems quite worrisome to me that Congress would comply so swiftly, seemingly without any resistance given the way Rauchway puts it. For the president to have the ability to control banks and their operational procedures, to me, is an overstepping of his powers. It is also indicative of the immense power and support that Roosevelt had within the government. Despite being elected four times, it would seem as if the only times of weakness for Roosevelt were leading up to the elections, as the government managed to pass a variety of massive and divisive legislation under him. Legislation of the Social Security Act, the National Industrial Recovery Act, and the Work Progress Administration were all funded by a seemingly infinite supply of federal government dollars. A seemingly infinite supply that was in part achieved by the temporary ending of the gold standard. 

Roosevelt focused on the banks in order to lift the nation out of a depression right away, “Two days after taking office, he declared the nation’s banks must stop transactions in gold, thus shutting them down, and he asked Congress to ratify his action.” (Rauchway, p.1) Continuing with my theme of Roosevelt exhibiting too much power, such an action outside of a state of emergency is unfathomable. Not only is it a case of overstepping of executive power, it may also be viewed as unconstitutional, as you have a federal government directly controlling the actions of the most crucial industry of the nation. Roosevelt also foresaw the effects of uncontrolled and unprecedented spending that his administration and legislation demanded, “The president worried that the government would one day find itself forced to pay out too large a sum for failed banks…” (Rauchway, p.3) I immediately thought of the Global Financial Crisis of 2008, where we all saw the federal government take on the debts of massive banks and financial conglomerates in order to keep the entire economy from collapsing. Such a scenario is bound to repeat itself, as there are banking institutions in this nation that are “too big to fail,” meaning they can do as they please given that their failure would have major implications for the overall wellbeing of the society. Why is this relevant? Well the New Deal, as I see it, is the beginning of this very paternal government from an economic point of view, where the federal government took on more financial responsibility and burdens than it really needed to, resulting in a state that is economically dependent on the wellbeing of individual companies and banks, as they have become too massive and important to go under. 

Taking America off the gold standard in 1933 with Executive Order 6102, Roosevelt in a swift action turned the currency from being backed by gold to being a fiat currency, meaning that it was backed by the common belief in its value, ironically declaring “This currency is not fiat currency…” (Rauchway, p.3) This issue is especially relevant to today, where the dollar is a fiat currency, hence an infinite amount of it can be printed as it is not tied to any sort of tangible object. Rauchway explains the reasoning behind the standard, “Under the gold standard, countries, in theory, agreed to keep their currencies convertible to gold by maintaining only so much money in circulation as their gold reserves warranted.” (Rauchway, p.3) Roosevelt had to get rid of the standard, as it would have been impossible to finance even a fraction of the New Deal otherwise, for better or worse, the governmental spending and in turn debt skyrocketed during Roosevelt’s terms. What I see as a further abuse of executive power can also be seen with the following, 

“The 1933 Emergency Banking Act only temporarily cut the dollar’s tether to gold. But in April, Roosevelt issued an executive order preventing Americans from holding gold, except in small amounts, and required them to turn their gold in to Federal Reserve Banks in return for other currency.” (Rauchway, p.4)

It is quite bizarre to read that an American government was able to do something so controlling and seemingly anti-American, as it goes against the foundational principles of self enterprise and liberty that this nation holds so dear. To make things worse, this limiting of purchase and sale of gold also went on to become a kind of price manipulation, as “Congress allowed the president to fix the price of the dollar in gold. The dollar price of gold rose from its previous rate of $20.67 per ounce to $30 per ounce.” (Rauchway, p.4) This is the exact beginning of America becoming the unofficial home to the world’s gold reserves, as foreign nations, especially the war torn Europeans began to buy gold with dollars and hence helping the American economy on two fronts. However, the shady manipulation of legislature and prices to the detriment of the American citizen should not be forgotten easily, as was beyond un-American in nature. 

Given my pessimistic and critical analysis of Roosevelt’s economic practices relating to the gold standard during the New Deal, a question is then raised, why was the president able to go through with all this legislation? For Rauchway, the answer is simple, “The New Deal Congresses reacted to the widespread belief that the bankers and brokers had caused the crash by giving Roosevelt and his appointees extraordinary discretion to manipulate money and banking…” (Rauchway, p.4) This rationale makes sense to me, however, I see it as a simple changing of hands from the private financial institutions to the federal government, in accordance to who would do as they pleased with the financial sector and in turn the overall economy. From a rational perspective this does make sense, allowing a government to run the economy with a much more hands-on approach than ever before is in theory a great thing, yet as history shows, the worst decisions for humanity and nation are always made by the government. America went through depressions before 1929, and came out stronger than before without the need for the government to do everything in its power to save the economy, including taking on so much debt that the idea of national debt itself has become meaningless for Americans. Overall, I am not pleased or ecstatic about Roosevelt’s handling of the New Deal and the consequences of 1929, Rauchways reading offered me a fair and balanced summary of this period from which I drew my interpretations and thoughts. Perhaps my lack of agreement stems from a seemingly repeating set of events at the moment which can also be likened to being the effects of a depression, that I see the devaluation of the dollar and long for a gold standard which in turn would bring about some sort of security in both the finances and the future of all Americans. 

Prompt: What was the historic transformation, or change over time, that the author is describing in the reading? According to the historian, why and how did this change take place? Did these changes take place gradually or rapidly, and how did they affect some of the people involved?

Source: Richard White, Railroaded, Chapter 11 “Creative Destruction,” section 2 “Dumb Growth.”

Answer: In the 11th chapter of Railroaded, titled “Creative Destruction,” Richard White has a very peculiar and unusual section that is reflective of the entire book’s message. The section, titled “Dumb Growth,” is mainly about two things, the immediate inefectiveness of the railroad at beneffiting the places it served, and the demise of the bison which both went hand in hand. The chapter’s subject of creative destruction also complements the prompt well, indeed showing a historic transformation, but one that is more unfortunate, rather than welcomed and needed. 

The section starts off with two simple questions, which are also the subject of the greater work, “But were the transcontinentals worth their cost? And did their rapid expansion, on balance, yield more benefits than harm?” (White, p.460) White also continues to clarify the immediate criticism of asking such questions, by saying that “The issue was never the choice between railroads and no railroads.” (White, p.460) I found this to be a quite novel and unusual telling of the history of the railroads from this period, being aware of the toll it has taken on animals, environment, and the native population, I haven’t considered that the issue was maybe about too much expansion by the railroads, rather believing that it’s introduction itself brought great harm. Hence, it is a bit of an unusual argument to see on this matter. White says the following about the dumb growth, “The railroads seemed unable to achieve a balance between too much and too little. They enabled farmers and miners to produce far more cattle, wheat, and silver than the world needed.” (White, p.461) This matter of excess and unnecessary production and in turn consumption, is what drove this instance of creative destruction. However, creative destruction is often driven by a need, rather than a desire, and it is desire for profit that railroads wanted to satisfy by expanding into untapped lands, hoping that industry will follow the transportation, an extremely backward plan. 

Such an absurd way by the railroads to stimulate rapid economic growth led to a backfire, “Hauling something, even at a loss, was better than hauling nothing.” (White, p.462) Such a business model led to two unfortunate effects, the first being the destruction of the environment as trains would run for the sake of running while transporting little, benefiting the few entrepreneurs and hunters. While the other effect was the artificial creation of industry that normally would not have sprung up through more natural means of there being a demand and a supply, result being that: “Bison became the first victims of dumb growth.” (White, p.462) The story of the bison is intertwined with the story of the Native Americans, both experiencing a severe decline in population beginning in the 1870s. The argument for the hunting and processing of the bison being an artificial industry, is further supported by the figures White provides: “In the years between 1871 and 1879 the hunters reduced the southern herd effectively to zero. Hide hunters supposedly took 3.5 million bison from the southern plains in the 1870s…” (White, p.465) To fractionally reduce the population of a species is an immoral and selfish act, to reduce a fraction of a species simply for the sake of business and trade, not out of necessity to feed the starving is an even more egregious act. The tremendous nature of the dumb growth is made even more clear when “…at a generous estimate 1.75 million hides reached market over the eight years of the southern hunt…” (White, p.465) These figures show the negative side of creative destruction, as well as the dark side of capitalism and consumption, also showing the stark difference between the reasoning behind hunting the bison by the Native Americans and the hunters. 

Although we saw great historic transformation, the great takeaway from this section and chapter is that in purely economic terms, Joseph Schumpeter’s idea of creative destruction is rational, justifiable even. Yet when put into practice as seen with the railroads in the American west, the real consequences may not be so rational. Forcing the creation of an industry in a place where it is unlikely, is a recipe for destruction, not the creative kind, but the literal kind. And so went the creative destruction of the non-existent economic system of the American west brought about by the railroads, leading to “…the social costs of farm and business failures, the dispossession of Indian peoples, the degradation of the environment and the waste of resources…” (White, p.462)

Prompt: How does this reading add to your knowledge of the subject, or challenge or contradict what you previously thought about this aspect of American or global history?

Source: Daniel Mandell, The Lost Tradition of Economic Equality in America, Chapter 4 “Wealth and Power in the Early Republic.”

Answer: Throughout the fourth chapter of Daniel Mandells The Lost Tradition of Economic Equality in America, an extensive political and economic analysis is offered of the immediate post-revolutionary war period and the important debates of the time pertaining to national organization. The chapter itself, titled “Wealth and Power in the Early Republic,” covers the relationship between power and wealth that the young nation experienced. Specifically, whether estates and property rights should give an individual greater say and power within the government, and whether it should allow for  a “natural aristocracy” to form. I have previously had very limited experience with the American Post-Revolutionary War period, especially the political and economic aspects of it. This chapter greatly added to my understanding of American history and to my appreciation for how exactly the country that I live in today turned out to be the way it is.

Starting off the chapter, there is a great quote about the egalitarian nature of political expression amongst the Americans, it sets the tone well. It notes that a man, irrespective of class, holds the right to get their opinion across, reflective of the active and equal role that politics played in the lives of citizens. This idea of political courage is familiar to me, what is new to me however, is that this seemingly “core” American principle was a topic of debate when it came to who would run the country in the 1780s-1790s. Mandell offers examples of how the landowning elites at this time benefited greatly from the establishment of national institutions and economic independence, and how this growth in power of the few, was simply seen as a return to yet another regime for many ordinary Americans. Those with resources and influence “…sought state charters for banks, canals, roads and manufacturing centers, many Americans protested that such privileges would enable a corrupt aristocracy of wealth.” (Mandell, p.80) A nation indeed needs all such things, they are essential to prosperity, but allowing private citizens the right to own such crucial facets of a developing country, would have given them immense power, more power than a single vote allows a citizen in any democracy. 

On the subject of elections, Mandell quotes a Presbyterian minister, “to maintain the freedom of elections, there should, as much as possible, be an equality among the people of the land.” (Mandell, p.80) Land itself is a symbol of political influence, those who own great amounts of land will always find themselves with a greater voice within society and government than those without it. The way I see it, allowing the elites to form a natural aristocracy would have betrayed the American spirit of sovereignty and equality, rendering the revolution meaningless and once more returning to the European system of rule, which at the time was either that of an aristocracy or a monarchy. 

Although the idea of equality among the citizens at this time was afforded mostly to white property owners, going down the path of forming an aristocracy would have been much more detrimental, as it would have created a ruling class which was very comfortable in their positions of power. Staying true to the belief in a republic, the American common man at this time was the beneficiary of a very important and understated political and social victory. Understated because this to me was a crucial fork in the road, where social elites could have seized power based on their wealth and America would have simply become another wealthy Western nation, without the core principles of personal rights and liberty that are afforded to us today.