When politicians ratchet up airy optimism, we snicker, even sneer. Remember Herbert Hoover’s “prosperity is just around the corner”? Gerald Ford’s WIN buttons? Laughable in their day, they remain so now.
But, for some reason, “Happy days are here again” rarely gets mocked by historians, even though FDR’s campaign song proved the very opposite of prophetic. The Great Depression dragged on, longer than any other economic downturn in American history.
Maybe it’s only right-wing optimism that receives sneers.
No matter. From left, right, or rear, when we hear optimistic yammerings from on high, today, we have every reason to be suspicious.
After all, we know what’s going on. Politicians realize something: Every now and then the Self-Fulfilling Prophecy works in their favor. Their notion is, if they can manage to encourage investors and consumers and others to think that things are getting better, those participants in markets might increase their investments and purchases, thereby, the theory goes, giving the economy a jump start.
Trouble is, saying cheerful things, alone, is not enough.
Behind the scenes, Herbert Hoover, the old social engineer, did his darndest to keep prices up. And that was the furthest thing from helpful.
In an economic downturn, prices need to go down, to find a new, lower level of that mysterious thing economists call “equilibrium.” By scuttling that process, Hoover and his big business cronies ensured that unemployment would increase, and last longer.
The reason for this need isn’t mysterious. The process has been described numerous times by economists. And still, politicians act as if propping up prices during a downturn makes sense. Our current set of experts has attempted similar things in the last half-year, propping up (as best they can) the prices of bundled investments, many of them mortgages.
Franklin Delano Roosevelt was far better at making people feel good than Hoover was. But he also openly engaged in a lot more interventions into the market than old Hoover did. No matter how good he was at the fireside, his actual programs were often so anti-business that many, many people with wealth prudentially withheld their capital, and the Depression worsened.
What the Lord of the Economy gave from one side of his mouth, he took away with the other, all the while sneering about evil businessmen. (Farming businesses were exempted from his critique, of course, and he strove mightily to prop up prices of foodstuffs, making the depression harder on those with the least.)