False Economy - Alan Beattie [12]
How much threat there ever really was to private enterprise as the defining feature of the U.S. economy is debatable. But Franklin Delano Roosevelt, the president elected amid crisis and despair, in 1932, was taking few chances. Roosevelt, scion of an established political dynasty and a distant cousin of Theodore, saw that reform was needed. He confronted the Depression aggressively with a somewhat experimental program of policies distinctly at odds with the hands-off doctrine of the Golden Age—government intervention to shore up the banking system, a campaign of public investment, and a limited federal deficit to let government spending take up some of the slack in the economy. As if to underline that an era was over, the United States also left the gold standard.
Given the tiny size of the national government in the economy at the outset—federal public spending was just 3 percent of national income in 1929—the New Deal, as the package of measures was called, could not return the United States rapidly to full employment, and a premature restoration of balanced budgets in 1937 did not help. Not until the buildup to war in 1939 revived demand for factory output did the economy truly recover. But the political impact of the federal government's efforts was undoubtedly felt. The system proved capable of absorbing new ideas. The system could renew itself. The system did not crash.
Yet achieving even such limited gains was not straightforward. To pass the New Deal, including the creation of Social Security, now considered by most a bedrock entitlement in America, required overcoming the mistaken opposition of those, chiefly in Wall Street and business, who believed that any amendment to the system meant ruin.
There is a remarkably simple observation about how political systems reacted to the Depression, reflecting what happens when an international financial system freezes up. Countries that owed money and were now cut off from more borrowing saw no virtue in continuing to depend on an international system that had let them down and moved toward economic isolationism and political authoritarianism. Countries to whom money was owed sustained smaller economic damage and remained wedded to democracy and the international economy. Even within continents and among neighboring countries this rule held. France, which still held significant assets abroad, remained a democracy even through repeated political crises in the 1930s; its indebted neighbor, Germany, despite the initial success of the interwar Weimar Republic, rapidly succumbed to fascism.
Argentina was no exception. By contrast with America, it suffered a deep crisis that ran throughout its narrow and exclusive political class. The electoral franchise had been extended in 1912 and a new party come to power in Argentina in 1916, but in practice it made little difference. With a pathological dislike of anything that smacked of socialism, Argentina appeared paralyzed by the slump. Exports of beef and wheat, products in which it had an advantage, were particularly hard hit. A crisis in farming and a glut of produce everywhere was compounded by the fact that the consumption of beef, by and large a relative luxury, was the first to be cut. By the end of the 1920s, meat exports to continental Europe had fallen by more than two-thirds from their level in 1924. In 1932 the champion bull at a famous annual livestock show in Palermo, Buenos Aires, fetched the lowest price in twenty-five years.
Only now did the foolishness of betting on the indefinite willingness of foreign capital and foreign companies to produce and sell large quantities of a few exports become so evident. Perhaps without even realizing what it was doing, Argentina had staked its all on red, and not only did black keep coming up, but the roulette wheel itself was about to