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By Root 1689 0

below). This allows businesses to maintain their employment levels even though their goods are selling for less, otherwise (if wages stay artificially high) employers must lay off employees as earnings fall. The result of Hoover’s high wage policies was more jobless people. Raising taxes took money away from consumers who would normally spend the funds for goods, and businesses who could have maintained higher employment levels. The drop in consumer spending, in part because of high taxes, severely affected the business community. High taxes rob funds from private enterprise normally used to create jobs and additional goods. Lowering taxes during economic downturns increases funds available for consumers and businesses. Raising taxes as Hoover and Roosevelt did was the worst possible economic move.

Roosevelt’s interventionist policies created substantial monetary, regulatory, and economic chaos. This led to increasing uncertainty in the business world and accordingly prolonged and deepened the depression. No one knew what was coming next, and new programs constantly came out of Washington that reduced profits and destroyed business flexibility. All these programs imposed massive additional administrative and legal requirements on business; consequently, predicting the future business environment became impossible. Those borrowing or investing large amounts of money need reliable business projections. If tomorrow brings more chaos, higher taxes, fewer markets, more regulation, and the like businesses cannot make reliable projections and avoid investing money or otherwise accepting risks. Fear of unexpected government moves can shut down business as effectively as enormous taxes.[204] As a result, private investment in industry fell to zero percent (that’s right—0%) through most of the depression, and in 1938 it was actually 800 billion less than zero. Investment from private sources went very negative after the crash.[205]

Liberal economist and politicians roundly reject the classical economic theories supported above. They endorse Keynesian economics or outright socialism. (See: FDR’s Folly, Powell, Jim, 2003, Three Rivers Press). Under their analysis of the Great Depression Hoover failed because he refused to do enough, but Roosevelt’s programs succeeded; however, they also contend Roosevelt’s success was tempered by a lack of spending. Keynesians argue that if Roosevelt had spent much more much sooner, like the government did in WWII, the Depression would have ended in two or three years (by 1936).

At least one factor going unanalyzed in the Great Depression is the impact of the great 1919 influenza pandemic. Falling populations can cause economic downturns, and the deaths of 100 million people worldwide could have contributed to the Great Depression. Over 500,000 may have died in the United States, 250,000 in Britain, 400,000 in France, and over 17 million in India. This all took place between 1918 and 1920, and the Great Depression arrived in 1929; thus, most will automatically believe there was no correlation. Still, the deaths of 100 million people (probably 5 percent of the world’s population) should have an economic impact. I know of no studies on this issue.

Economic Theories

There are at least six major economic theories floating around, and each made a difference in how governments approached the crisis.[206] Here is a quick survey of the basic positions:

1. Capitalism: is a system of private ownership of property, including the means of production, coupled with a small amount of government intervention in the economy. Capitalism does not aim for social justice. Unlike other economic ideas, capitalism’s aim has nothing to do with concepts of justice or equality. Capitalism recognizes human selfishness and claims it is good when harnessed correctly. It is a classless theory, where people make money by competing and not by government action. Economic control is by private market competition, where individuals or corporations compete against others to bring goods and services to the market desired by private