Economic Transformations

Last updated on: May 3, 2014 at 8:21 am by Jane the Actuary

Economic Transformations 2014-05-03T08:21:00-06:00 Jane the Actuary

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I never claim to be an economist, just an armchair economist, but this is what I’m thinking about (in a thoroughly unresearched fashion — this is more of an agenda than anything, and I want to get ideas written down without internet searches):

Right now, we’re in the middle of an economic transformation, and can’t really see our way to the outcome, or the right way to get to the best outcome. Yes, our lackluster recovery from the past recession has been hampered by such things as Obamacare and massive regulation, but the bigger picture is a set of changes connected to globalization (including immigration) and automation. Some guy named Pickety (yes, I’ve misspelled the name) has a book out which claims that the way out is massive wealth taxes, apparently. Other people claim that everything would be just fine if we only raised the minimum wage, or maybe had the government pay everyone’s college tuition bills.

But what I’m thinking about is the fact that this was not the first economic transformation we, as a country, experienced. I’m not talking about the Industrial Revolution broadly speaking. I’m thinking about the fact that, in 1900 or so, we had dirt-caked children living in slums and working in factories. In the 1950s, at least in popular perception, anyone who wished, solely by dint of hard work, could get a job out of high school perfectly suited for supporting a family in reasonable fashion. Yes, there were still sharecroppers in the south, and hardscrabble Appalachian miners (think October Sky), but it was a rather different situation.

What happened?

Well, partly we banned child labor in the early 1900s, and instituted a 40-hour-week (that is, with overtime legislation) and a minimum wage during the Depression. But banning child labor wouldn’t, in itself, improve the economic prospects of families who, after all, sent their children to the sweatshops due to economic necessity.

And, of course, during that 50-year period we experienced an economic depression and two world wars. So I think my first step is to see what the library has to offer in terms of histories of the early part of the century — what was the economy, and the situation of the poor like, on the eve of the Depression?

In any event, in 1924 the country severely curtailed immigration. And in the postwar period, we had a substantial competitive advantage over other countries because they were mostly blown to smithereens. Recall that the Marshall Plan didn’t start until 1948; until then the Germans basically starved. (Besides which, the French, at least, dismantled a fair portion of the remaining portion of their industrial capacity as reparations — which paled in comparison to the scale at which the Soviets dismantled East Germany’s factories, took its coal, etc.) And the Marshall Plan itself consisted of loans, not just cash money — and it seems to me (have to look this up) that the British were repaying loans to the U.S. in the postwar period as well.

Oh, and I’ve been meaning to read more about the Great Depression. Sure, I’ve read in the past about the political and social history aspect, but not the economics of it. Did Roosevelt’s New Deal save the country? If so, why is the conventional wisdom that we didn’t recover from the Depression until the war? As was it really as simple as “the war functioned as a massive stimulus spending” — in the way that Krugman and others on the left now say that the problem with the 2009 stimulus was that it simply wasn’t massive enough? I’m skeptical.

So ultimately this post is about nothing more substantive than “are there lessons from last century’s economic transformation?”

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