A second recession?
October 28th, 2008 at 7:03 am by David FarrarInfometrics is predicting a second recesson in 2009!
New Zealand has been in recessions since the end of 2007, with negative growth in Q1 and Q2 2008. It is widely expected that Q3 will also be negative.
So Infometrics seem to be saying Q4 might be marginally positive, but then in 2009 Q1 and Q2 will be negative again.
If they are right, the decade of deficits just got worse.
Tags: Economy, Infometrics, recession
October 28th, 2008 at 7:21 am
A second recession wouldn’t surprise me at all. Trouble is a lot on Kiwi’s don’t realize how bad things already are. The PREFU numbers revealed 3 weeks ago will already be way out of date. The crown accounts will be even worse now.
National are going to have right mess to clean up.
Vote:October 28th, 2008 at 7:22 am
I suspect it may be just one recession – lets hope not though.
All that boomer reliance on welfare for their retirement now their spec property invetsments have burnt arent a good sign.
Vote:October 28th, 2008 at 7:31 am
My read is that’s pretty much unavoidable, Labour have so heavily increased the public sector & bogged down the economy that it will take years to fix. I suspect though it’ll be much softer landing under National as private sector investment takes off again.
Vote:October 28th, 2008 at 7:36 am
Nigel,
You’re comment about the increased public sector is correct. It’s Labour’s lack of quality spending over 9 years that has done some real damage.
We are going to be in a difficult period of readjustment whilst the economy is turned around.
Vote:October 28th, 2008 at 7:51 am
A recession is character building stuff.
It’s good to live in interesting times.
Vote:October 28th, 2008 at 7:51 am
We seem to be blissfully unaware of what is happening. Sometimes I feel like the kid on sixth sense when wandering about… I see dead people.
Any country which is 70% dependant on consumer spending is an accident waiting to happen. We are at peek credit. No one can afford to borrow any more money, they are all tapped out.
Recessions are a good thing. They are like a hangover after a drinking binge. They clense the system and disperse any missallocation of capital.
However recessions are the death of any fractional reserve system. Our money has no value, and is “loaned” into existance by the banks. If money is created by loaning into existance, it thus vanishes when the loan is repaid. Any recession where people stop borrowing means that money vanishes as people stop borrowing, and the system implodes.
Vote:October 28th, 2008 at 7:53 am
This from a blog in the states:
[block quote]I’ve been on the road almost all day and have one hour before the next leg of my trip so this will be short. Yesterday I learned that sixty-four countries cannot issue letters of credit necessary for international trade and likewise cannot insure import/export shipments since no one knows if the insurance companies are good for it. It is an understatement to say this makes international trade almost impossible. The reason is the credit crisis and the fact that banks don’t trust each other, or anyone else for that matter. This demonstrates that the US credit crisis has now become a global issue and there are no easy solutions.[/block quote]
When international trade stops, people will starve!
Vote:October 28th, 2008 at 8:53 am
fucking glad I’m living it offshore with housing gains banked in cash. (doh!)
Vote:October 28th, 2008 at 9:31 am
Here’s the message NZers need to get about their declining economic circumstances- The government should stay out of the economy, and government has no business redistributing wealth. Also, the government, National Labour or any damn party, will not “save” them from any impending economic disaster. Its far too late for that. The socialist chickens are coming home to roost, and the only road out is to cut taxes and do away with big ‘fingers in every pie’ government. That road is still to be found by most NZers, weakened intellectually by sucking on the productive sector’s tit for too long. Its going to get a lot worse before it gets better.
Vote:October 28th, 2008 at 9:35 am
Glad I’m making heaps of US$$$’s online with my various membership sites & DVD sales right now!
Not so long a US$1000 per week was worth (NZ $0.70): NZ$1430 but now it’s worth NZ$1850 and hopefully heading towards $2000
Good times ahead for exporters and people taking advantage of the multitude of online opportunities!
Remember, there are always opportunities in good times and bad…
Vote:October 28th, 2008 at 9:40 am
porn peddler…
Vote:October 28th, 2008 at 10:27 am
Beats being a P drug peddler! lol
Just filling a need during tough times when people need some distractions
Vote:October 28th, 2008 at 10:52 am
Damn – Looks like the left’s fourth consecutive term in parliament’s going to be tough times. Beats having the tories in though – last time they found themselves in power during a recession they used the “shock doctrine” to justify union busting (which led to lower wages), and the cutting of social services. As a result, from 1991 to 1996 official measures of child poverty showed a tripling in levels, as did official measures of youth offending (hmmm wonder if they’re related?).
If the Nats got in it would be a disaster for NZ – but fortunately that’s not likely to happen. Yep – the rabid right’s just going to have to suck it up again. Either that or you can follow john lennon’s example (great song) …
Vote:
October 28th, 2008 at 10:54 am
‘member labour, Lange weasel boy LOL!
Vote:October 28th, 2008 at 11:08 am
Yeah Nome, well the last time Labour was in office (1999-2008) official measures had us in our worst recession ever; official measures had us with 10 years of budget deficits going forward; official measures showed a slide of three places down the OECD scale in terms of growth; official measures showed a 88% increase in government spending with no discernible benefit (treasury advice); official measures showed no reduction in hospital waiting lists in 9 years despite 3,000 extra bureaucrats in the health sector; official measures said beneficiaries were no better off now than they were in 1999 (according to the Minister Ruth Dyson); official measures showed a 43% increase in violent crime in 9 years despite 1,000 extra police; official measures said our CO2 emissions increased by 40% since 1999 (rhetoric is amazing, record is appalling); official measures said we were the 3rd most expensive housing market in the world blocking middle and lower income NZ from owning their homes…..shall I go on about these “official measures” Nome?
Vote:October 28th, 2008 at 11:27 am
Gooner – Government spending is the same proportion of the economy as it was in 1999 – and many of the benefits will be difficult to measure and/or long term – i.e. better health standards due to cheaper doctors visits for children and the elderly, plus faster economic growth due to vastly more spending on infrastructure such as roading.
“official measures showed no reduction in hospital waiting lists in 9 years despite 3,000 extra bureaucrats in the health sector;”
reference?
“official measures said beneficiaries were no better off now than they were in 1999″
Yep – but there’s far fewer beneficiaries, and lower income workers are far better off due to working for families, and increases in the minimum wage far higher than they were in the 1990s (National only upped the minimum wage in 1996 because it was part of their agreement with NZ First).
“official measures showed a 43% increase in violent crime in 9 years despite 1,000 extra police”
Official reports state that much of that increase may well be due to changes in policing practices (in particular, more focus on domestic violence).
“official measures said our CO2 emissions increased by 40% since 1999 ”
Yep – and how would have that been different under National?
“official measures said we were the 3rd most expensive housing market in the world blocking middle and lower income NZ from owning their homes”
Again – reference? Our houses became over-priced primarily because our lack of a capital gains tax (which most other OECD countries have) made housing relatively more attractive as an investment option compared to productive capital. As you know, National is against a capital gains tax – so even if you can supply a reference you aren’t scoring any points for the tories i’m afraid.
Vote:October 28th, 2008 at 11:38 am
Gnome, go and do your own homework, you silly google infatuated little boy. BTW, are you today confirming that a capital gains tax is part of Labour’s secret agenda? You know all about the secret agenda don’t you? The one that Shifty and Fiscal Fool won’t tell us about until December?
While you’re there, don’t forget about all the other new taxes they will need. The ‘Kiwi Farewell Fee’; The Text Tax; The Death Duties; The 45 cent marginal rate over $80k; the GST increase to 15%; The V8 tax to name just a few.
Vote:October 28th, 2008 at 11:40 am
guys, this recession is global and its really gonna hurt. We are just now seeing the beginning. People don’t yet know how bad it will get.
Despite the massive bailouts and cash injections into the banking sector, there is 1.3 trillion US dollars worth of bad debt out there, and the banks are still not lending to each other. It’s a 1930′s style depression where it started with the banking sector and spiraled outwards. Alan Greenspan has described it as a Tsunami. Banks are already calling in debt and closing down small businesses in the UK. Unemployment is projected to reach more than 3 million there within two years time.
Don’t think NZ will get away lightly, although I suspect they will do better than the UK, especially if National and Act are in government.
I don’t mean to be alarmist, but this is serious.
Vote:October 28th, 2008 at 11:42 am
I don’t know why infometrics use the term “second recession”.
Vote:They are regular events. The first one I paid any attention to was in 1983-4, as it affected my chances of employment after leaving University. Then there was 1987, one in the early ’90s and the slow down of 2000-2001.
We have been in a recessionary phase since May of this year or ealier and frankly I see it continuing unabated through next year to early 2010.
That comment assumes that the global financial mess we now see gets sorted out or sorts itself out.
October 28th, 2008 at 11:44 am
Roger Nome –
This is a one-eyed hatefest and we’re not interested in debating anything with you. We don’t care how accurate your facts are. Get with the programme!
Vote:October 28th, 2008 at 12:06 pm
The lack of a capital gains tax, which encourages people to try to make a profit on housing rather than on productive investments, is coming back to bite the Kiwis hard. They won’t reduce their deficit voluntarily, so the market will have to do it for them, in a somewhat brutal fashion.
I don’t think the fact that the nz$ has lost something like 40% of it’s value has dawned on most people (well, apart from the exporters). It’s going to mean that a lot of things are going to get a lot more expensive.
I’m so glad that I sell my produce in us$
Vote:October 28th, 2008 at 12:07 pm
That’s the beauty of markets – they go up, they go down again.
When they go up, it’s all due to self-made men and it’s further proof of the triumph of free enterprise.
When they go down, DAMN those socialist bastards that are leading us to ruin, eh?
All Hail The Market.
Vote:October 28th, 2008 at 12:26 pm
“When they go down, DAMN those socialist bastards that are leading us to ruin, eh?”
They and the “socialist bastards” who are simultaneously simpleton morons like you, meaning the large majority of them who by their limp lack of intellect combined with their deep seated ignorance and their ideological prejudices daily spew misinformation and propaganda of the kind that only ensures we fall deeper and deeper into the doom.
Vote:October 28th, 2008 at 12:31 pm
Do you have the 9-10bn a year foreigners aren’t going to lend us anymore Ratbiter? Don’t you think having a Government that has generated the worse CA deficits since the early 80s is praiseworthy? How will your household cope with the NZD on say 30c US?
Governments can’t create wealth. That’s why they tax. If they could create wealth, there wouldn’t be a need for a tax system. They could fund everything out of their wealth creation.
Taxation is a confession Governments can’t create wealth. All they’re good at is finding ways to spend it.
This Government has screwed the private sector into a vast shit-hole of its making and its only plans for the future is to screw it down further.
Vote:October 28th, 2008 at 12:42 pm
Here’s what I said 3 weeks ago:
PhilBest (3288) Vote: Add rating 4 Subtract rating 1 Says:
October 11th, 2008 at 12:08 pm
“bka, you are right, the PREFU analysis was OPTIMISTIC. They showed only a brief recession for the NZ economy, followed by an uptick. Even then we are heading for years of government deficits. I am inclined to think we will have much more than a brief recession. A National Government MAY slow the slide a little, and more of the Heleban would speed it up. But as long as stupid, stupid, stupid Kiwis make it impossible for any political party to win an election without offering new bribes with “churned” taxpayers money, or at least promising not to review any of the other side’s election bribes from times past that have now become entrenched; our economy is STUFFED.”
Vote:October 28th, 2008 at 12:44 pm
STUFF THE NEGATIVE KARMA, Redbaiter is 100% RIGHT:
# Redbaiter (4090) Vote: Add rating2 Subtract rating 4 Says:
October 28th, 2008 at 9:31 am
“Here’s the message NZers need to get about their declining economic circumstances- The government should stay out of the economy, and government has no business redistributing wealth. Also, the government, National Labour or any damn party, will not “save” them from any impending economic disaster. Its far too late for that. The socialist chickens are coming home to roost, and the only road out is to cut taxes and do away with big ‘fingers in every pie’ government. That road is still to be found by most NZers, weakened intellectually by sucking on the productive sector’s tit for too long. Its going to get a lot worse before it gets better.”
Vote:October 28th, 2008 at 1:01 pm
Gooner, Adolf, Chthoniid, Alex Masterley; keep that up, don’t let the Woger Nomer Troll get away with his propaganda. He and other lefty trolls do it to suck in the casual visitor to the site, that is why it is important to jump on it quick and give them a good beating in a fair debate.
“Government spending is the same proportion of the economy as it was in 1999″.
Arguable, but the difference is, Woger, that in 1999 the economy was growing and it is now shrinking and will continue to do so, while promises fro government spending, and rampant lack of constraint right through every level of government, will ensure that no government will be able to balance its books for years to come and may even run right out of available cash to keep paying its wages bill let alone benefits, if sources of loan money are not forthcoming.
Adolf, you have a good point about Roger Nome being privy to Labour secret agenda stuff. He does this over and over again, lets out stuff that show up how close he is to the 9th floor of the beehive. It would be helpful to know what the cost to the taxpayer of Labour Government Internet Trolling is.
The WORST of Woger’s stuff is THIS little gem:
“…..Our houses became over-priced primarily because our lack of a capital gains tax (which most other OECD countries have) made housing relatively more attractive as an investment option compared to productive capital. As you know, National is against a capital gains tax – so even if you can supply a reference you aren’t scoring any points for the tories i’m afraid….”
Woger, does restrictions in supply of land for housing have anything to do with prices inflating? High School Economics? Law Of Supply and Demand? Sorry, I forgot, if you’re a socialist, all that stuff will have gone in one ear and out the other.
Low interest rates played a role too. Who sets those, Woger?
OK, this problem is not restricted to NZ. But we ARE one of the worst in the world, when economists like Gareth Morgan and Bernard Hickey quote findings about NZ’s housing unaffordability being one of the 3 worst in the world, I am inclined to believe them, not socialist government propaganda.
Vote:October 28th, 2008 at 1:09 pm
Liabour’s re-action is to buy a railway at many times its marketable value, buy a High Country Farm and close down it’s production yet allow the owners to stay in the homestead for the rest of their lives for any figure they care to name $50 million, and now to establish a special TV Station for Pacific Islanders.
Vote:October 28th, 2008 at 1:10 pm
Woger, are you familiar with Hugh Pavletich’s work on the housing problem? And Owen McShane’s and Don Brash’s? As I say, this problem is not restricted to NZ although we are one of the world’s worst; but surely we would want to know
1) Did anyone predict this housing bubble crisis?
2) Did any nation or region escape this crisis?
3) Why?
Why would we NOT want to know the reasons why average house prices in Texas and in Germany, Woger Nomer, have never moved outside the range of affordability ratio 2.7 to 3.3 times average income? Don’t kid us it is Capital Gains taxes, when all other nations with capital gains taxes have STILL had a serious housing bubble crisis. When farmland in NZ sells for around one fifteenth of the price per acre that it does if it rezoned for housing, don’t kid me that the obstacles for providing affordable housing are not entirely political ones.
But carry on on your insane course. The next crash will take the whole state down.
Vote:October 28th, 2008 at 1:58 pm
Woger? Real mature philbest. Really makes me want to take you seriously….
Lack of housing supply isn’t the main part of the problem. If that was the case rents would have increased at the same rate as property prices, and they haven’t. In fact property prices have increased nearly twice as fast as rent prices over the last 10 years – this indicates that it’s over-zealous capital investment which is the culprit, not lack of housing availability.
Vote:October 28th, 2008 at 2:07 pm
“Don’t kid us it is Capital Gains taxes, when all other nations with capital gains taxes have STILL had a serious housing bubble crisis.”
Well, with interest rates at 2-4% in the US over the last 5 years, combined with dodgey lending practices, there’s actually been a lot of speculative capital sloshing around the international system, which has also contributed to the problem. However, the fact that our tax system encourages investment in property more than productive capital is no doubt the reason for us having a worse housing bubble than those countries who have a capital gains tax.
Vote:October 28th, 2008 at 2:23 pm
“Adolf, you have a good point about Roger Nome being privy to Labour secret agenda stuff. He does this over and over again, lets out stuff that show up how close he is to the 9th floor of the beehive. It would be helpful to know what the cost to the taxpayer of Labour Government Internet Trolling is.”
Oh no – the tinfoil hat brigade’s on to me! Thanks guys, now you’ve got mike williams on my case about the lack of subtlety in my posting. There goes my bonus – bastards!
Vote:October 28th, 2008 at 2:49 pm
# roger nome (3916) Vote: Add rating 0 Subtract rating 0 Says:
October 28th, 2008 at 1:58 pm
“…….Lack of housing supply isn’t the main part of the problem. If that was the case rents would have increased at the same rate as property prices, and they haven’t. In fact property prices have increased nearly twice as fast as rent prices over the last 10 years – this indicates that it’s over-zealous capital investment which is the culprit, not lack of housing availability.”
Roger, that does not prove what you are trying to make it prove. Firstly, it must take time before higher house orices filter through to higher rentals because of course most rented houses will have been bought by landlords in earlier periods before the house prices rose. Plus, landlords are a class that are vulnerable to political action against them, therefore any rental increases would trail house price increases by a long way; whereas house sellers are unlikely to incur political action against them for attempting to maximise their sale prices, quite the contrary in fact.
Vote:October 28th, 2008 at 3:01 pm
Roger, you can’t explain why Germany and Texas are about the only two places NOT to have a housing bubble and crash OTHER than in terms of their approach to land supply. I agree with the problem of capital sloshing around, and there are certainly reasons why this has fed into a housing market bubble and to a lesser extent, stock market and securities bubbles; while failing to act as a stimulus to real productive activity. The real problem is the taxation disincentives on those real productive activities. Lower corporate tax rates and faster write-offs of capital acquisitions would help.
But the USA is not ONE unified market. It is a fascinating case study to look at the differences in housing markets in the various States. If it wasn’t for California, New York and Florida, there just about wouldn’t BE a crisis in the USA at all. The common factor is the supply of land for housing and the cost differential between farmland and land rezoned for housing. If it wasn’t for restrictions on land supply, the housing market would respond to “capital sloshing around” by building more houses instead of prices going up. Most countries actually have had a housing SHORTAGE all the while that prices were going through the roof, and a whole lot of people who couldn’t afford a house even under the most inventive financing arrangements. We need affordable sections and lower average house prices, not inventive financing arrangements including government provided financing arrangements. If the Government is involved as a subprime creditor, the next bubble and crash will take the government itself down, not the finance sector.
Vote:October 28th, 2008 at 3:06 pm
Do you want links to articles, Roger? Do you know about Hugh Pavletich? He’s been trying to get the attention of our Minister of excuses not to provide Housing, Maryann Street, and her colleagues and predecessors, for years, on this very point.
Meanwhile, Roger, seeing you are so interested in getting informed on economic issues, you will find HOURS of rewarding research HERE:
http://mises.org/story/3128
Vote:October 28th, 2008 at 3:19 pm
This wont be a recession it will be a Global depression for a number of reasons that have already been mentioned, but in my opinion largely due to large scale government intervention world wide.
My advice invest in Cambells soup if Labour get a fourth term, won’t see those stocks dropping in a hurry
As for the Housing market well it’s fuxed not going to go into details but it is part of my job and i am doing an extension to my current residence as well. Seriously if there is any light at the end of the tunnel then i suggest moving aside because it is most likely a train. Keeping the house prices propped up is just going to make things worse and worse and worse but i guess everyone wants a crack at being a Herbert Clark Hoover these days.
Vote:October 28th, 2008 at 3:48 pm
“Firstly, it must take time before higher house orices filter through to higher rentals because of course most rented houses will have been bought by landlords in earlier periods before the house prices rose.”
You’re grasping at straws now Mr Best. If it was a housing supply problem, the prices would flow on down to tenants soon enough. They haven’t. End of debate.
“Roger, you can’t explain why Germany and Texas are about the only two places NOT to have a housing bubble and crash OTHER than in terms of their approach to land supply.”
First you need to prove that Germany and texas are the only two places that haven’t experienced a housing bubble, then you need to prove that it’s their land supply/zoning polices that have caused this. I’ll be waiting …
Vote:October 28th, 2008 at 5:07 pm
Thank you Banana Llama, if enough of us keep saying this it might get through yet. By the way, Franklin D. Roosevelt was not much help either after succeeding Herbert Hoover.
Here is an excerpt from “The Raw Deal” by Jonah Goldberg (It is a review of “The Forgotten Man” by Amity Schlaes)
“…..Wendell Willkie, the utility executive who became FDR’s Republican challenger in 1940. Originally a New Deal sympathizer, Willkie grew disillusioned with its politics. By the presidential race, he called upon Roosevelt to “give up this vested interest that you have in depression” as the rationale for a “philosophy of distributed scarcity.” Willkie was defeated in large part because Roosevelt’s political revolution had succeeded, even if his economic one had failed. But Willkie had it right. FDR’s political interests were deeply tied to continuing economic misery. His class-warfare rhetoric became self-fulfilling. The more the government failed, the more the people resented Big Business, and wanted Roosevelt to punish the “economic royalists.” The longer the economy remained depressed, the more justifiable seemed the New Deal’s permanent welfare state and its abandonment of federalism and other constitutional restraints on the federal establishment.
Although Shlaes notes that some industries cooperated with the New Deal, she dramatically downplays the point. (She de-emphasizes, too, the New Deal’s roots in Woodrow Wilson’s wartime socialism.) By concentrating so much of her fire on the New Deal’s encroachments into utilities regulations (in part to move Willkie’s story along) and banking and trade (in order to explain the real causes of the Depression), she sometimes gives the impression that the 1930s amounted to a war between “business and government,” the “private sector and the public sector.”
The reality was a bit more complicated. Industry leaders were desperate to be inside the tent, carving up the pie, and they were happy to prostitute themselves to the government as the price of admission. These supposed champions of the free market implored FDR to repeal anti-trust rules in the spirit of “cooperation.” Henry I. Harriman, the retiring president of the U.S. Chamber of Commerce, and H.P. Kendall, Chairman of the Business Advisory Council, were New Deal yes-men. “We are here to uphold the president’s hand in the fight against the Depression,” Kendall declared.
Shlaes does not mention Gerald Swope, the General Electric CEO who proposed a sweeping corporatist scheme toward the end of Herbert Hoover’s presidency, whereby, according to Swope, industry would “no longer operate in independent units, but as a whole, according to rules laid out by a trade association of which every unit employing over fifty men is a member—and the whole supervised by some Federal agency.” The “Swope Plan” was in many respects the intellectual foundation for the National Industrial Recovery Act (NIRA).
As Shlaes amply demonstrates, Big Businessmen, including Hoover, were very often progressives, too (Joan Hoff Wilson’s 1975 biography is titled Herbert Hoover: Forgotten Progressive). They had their own cults of efficiency, love of “bigness,” and hostility to the independent entrepreneurs who made their lives difficult. As with the rise of the railroads in the 19th century, businesses often had a vested interest in having the government centralize and streamline the American economy. An aging Clarence Darrow was tasked with investigating the NRA and found that in “industry after industry” big businesses “have for their own advantage written the codes, and then, in effect and for their own advantage, assumed the administration of the code they have framed.” J.T. Flynn’s broadsides against the New Deal often came from this direction as well, believing that the collusion of business and government was a harbinger of fascism.
Which brings us to the question of Roosevelt’s continued sanctity among liberals. In the liberal imagination, but also among Americans generally, there is a pervasive myth that the New Deal “worked.” And most liberals seem content to leave it at that. But if you press them to explain what “worked” means, you will quickly find them shifting ground.
The New Deal didn’t end the Great Depression. It didn’t cure unemployment or get America “back to work.” By 1938, one in six Americans was still without a job, and many more were less than secure in their employment. Presented with these facts, liberals defensively point to Social Security and the expansion of the welfare state. We can debate the merits of those programs another day, but they did not end the Depression, which was the mission FDR accepted when he declared himself the commander-in-chief of all Americans, not just those in uniform.
To admit this is to concede that the intellectual mandate of Roosevelt’s Brains Trust was fraudulent as well. It sought to prove that “planning” was the way of the future and infinitely superior to the chaos of the free market. (And do note the arrogance of the term “Brains Trust.” A trust is a monopoly, after all.) But, again as Shlaes shows, not only did planning not work very well—but there was far less real planning than we were led to believe. On one occasion, she points out, FDR raised the price of gold by 21 cents based upon his careful deduction that 21 is “a lucky number, because it’s three times seven.”
Some contend that these sorts of objections miss the point. Sure, the New Deal made mistakes, they’ll concede, but it made them in the exciting spirit of “experimentation”—FDR’s abracadabra word for “whatever I please.” Left unelaborated is the fact that experimentation and planning are in fact opposites. One doesn’t experiment in building a house; one plans, measuring twice and cutting once. The New Dealers cut first and measured later, if at all. Other liberals, like Jonathan Alter, try to find a safe harbor in poetry. FDR provided “hope.” But for whom? Not for William Troeller, not for the Schechters, nor for Jacob Maged, nor for the countless sharecroppers thrown off their land or the workers left unemployed because their products were barred from export by New Deal trade policies. Another poetic harbor for liberals is the myth that FDR united the country. At least in those days, the sentiment runs, we were all in it together. But we weren’t all in it together, at least not according to Roosevelt. He routinely and blithely made scapegoats of the wealthy (and not so wealthy), blaming the Depression on “the lack of honor of some men in high financial places” and vindictively prosecuting Andrew Mellon for years. Moreover, the 1930s, like the 1960s, were a time of riotous social unrest and profound ideological conflict. If unity itself were the highest virtue, liberals would look at the 1920s and the 1950s with admiration instead of contempt.
Nonetheless, as is often the case, the poetry gets us closer to the truth than the social science does. When liberals speak of unity and hope, what they really mean is success. The 1930s and 1960s, unlike the ’20s and ’50s, were decades when liberals, broadly speaking, were “winning.” When you hear liberals bemoaning divisiveness and insisting that we must “get beyond” “labels” and “ideological” differences, what they are really saying is that their opponents should shut up and get with the program. The New Deal’s appeal lies in the fact that it was the first time when progressive social engineers had real power without the galvanizing dynamic of a war. The Brains Trusters had spent much of the 1920s complaining “we planned in war,” i.e., during World War I; they insisted that they should be allowed to plan in peace as well. The Depression gave them their shot. And that in a nutshell is why supposedly empirically minded and “reality-based” liberals still genuflect to the myth of the New Deal. It is the ne plus ultra of liberal power. Defending the New Deal is the first requirement of liberal power-worship.
Of course, FDR was no cruel dictator. But he saw nothing wrong with using the mechanisms and aesthetics of dictatorship in order to advance the Progressive transformation of the American state. Roosevelt himself privately acknowledged that “what we were doing in this country were some of the things that were being done in Russia and even some of the things that were being done under Hitler in Germany. But we were doing them in an orderly way.” That so many liberals today find that not only forgivable but laudable should tell us something about their ambition. After all, the FDR myth remains liberalism’s most “usable past.”
If there is a major drawback to Shlaes’s brilliantly crafted indictment it is that it takes liberals at their word about what the New Deal was really about. She must do this, of course, if she is going to rebut their arguments. But in truth, the economic policies are merely symptoms of the larger disease. FDR was economically incompetent, as Shlaes demonstrates, but he was politically ingenious. Indeed, as she and others have chronicled, FDR’s economic missteps were part of a larger political ballet. He transformed American politics by creating vast client constituencies who depended on the government—and by extension the Roosevelt Administration—for their livelihood. Such an enterprise stemmed first and foremost from a philosophical vision, not a mere economic one. FDR’s economic policies, like his political maneuvering in general, were means to an end. Recommitting liberalism to the doctrine of a “living constitution” pioneered by Woodrow Wilson, the New Dealers believed that the Constitution could be reinterpreted on the fly, to create a new open-ended constitutionalism that depended not on texts, but on the will of those in charge of interpreting them. “I want to assure you,” FDR’s aide Harry Hopkins told an audience of New Deal activists in New York, “that we are not afraid of exploring anything within the law, and we have a lawyer who will declare anything you want to do legal.” One can only imagine what Jonathan Alter might have said if Karl Rove had been caught saying such a thing.
For nearly three generations, liberal intellectuals have consistently refused to apply the same standards to their own heroes that they relentlessly misapply to their villains……”
Vote:October 28th, 2008 at 9:46 pm
thank you PhilBest , and before that Banana Llama
Vote:I read your commentary carefully,
it is difficult to be happy, I am one of the profligate,
but the truth is the truth,
what is, is
October 29th, 2008 at 9:44 am
The New Zealand economy is going down.
Time to pay the fiddler.
Vote:October 29th, 2008 at 12:33 pm
this is all engineered by the new world order, it is going to get much worse unless people wake up and do some real research into the way the banks have made this happen and are robbing us blind, a good start is to research who owns NZ reserve bank then follow the money trail,then you will get a better understanding about john key also
Vote:October 29th, 2008 at 9:08 pm
Two of my clients have shut up shop in the last 2 weeks, a major player in the tile retailing, and a whiteware outlet. We have provided IT support to these two companies for 10 years plus – do we need anymore evidence? The public are not been told the full story by the RB or any other major financial institutions. A cold southerly breeze is going to sweep down the main street closely followed by the tumbleweed. This country needs competent and decisive leadership, how the f^**&k are we going to get that from a faction fighting bunch of left-wing toss pots? We will become Albania if…….DONT EVEN GO THERE FOLKS, just change the government to avoid the chaos which WILL follow
Vote: