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A Mind-Changing Page (Thomas Sowell)
Townhall.com ^ | June 17, 2010 | Thomas Sowell

Posted on 06/17/2010 11:51:12 AM PDT by jazusamo

Sometimes you can read a book that will change your mind on some fundamental issue. Rarely, however, is there just one page that can undermine or destroy a widely-held belief. But there is such a page-- page 77 of the book "Out of Work" by Richard Vedder and Lowell Gallaway.

The widespread belief is that government intervention is the key to getting the country out of a serious economic downturn. The example often cited is President Franklin D. Roosevelt's intervention, after the stock market crash of 1929 was followed by the Great Depression of the 1930s, with its massive and long-lasting unemployment.

This is more than just a question about history. Right here and right now there is a widespread belief that the unregulated market is what got us into our present economic predicament, and that the government must "do something" to get the economy moving again. FDR's intervention in the 1930s has often been cited by those who think this way.

What is on that one page in "Out of Work" that could change people's minds? Just a simple table, giving unemployment rates for every month during the entire decade of the 1930s.

Those who think that the stock market crash in October 1929 is what caused the huge unemployment rates of the 1930s will have a hard time reconciling that belief with the data in that table.

Although the big stock market crash occurred in October 1929, unemployment never reached double digits in any of the next 12 months after that crash. Unemployment peaked at 9 percent, two months after the stock market crashed-- and then began drifting generally downward over the next six months, falling to 6.3 percent by June 1930.

This was what happened in the market, before the federal government decided to "do something."

What the government decided to do in June 1930-- against the advice of literally a thousand economists, who took out newspaper ads warning against it-- was impose higher tariffs, in order to save American jobs by reducing imported goods.

This was the first massive federal intervention to rescue the economy, under President Herbert Hoover, who took pride in being the first President of the United States to intervene to try to get the economy out of an economic downturn.

Within six months after this government intervention, unemployment shot up into double digits-- and stayed in double digits in every month throughout the entire remainder of the decade of the 1930s, as the Roosevelt administration expanded federal intervention far beyond what Hoover had started.

If more government regulation of business is the magic answer that so many seem to think it is, the whole history of the 1930s would have been different. An economic study in 2004 concluded that New Deal policies prolonged the Great Depression. But the same story can be found on one page in "Out of Work."

While the market produced a peak unemployment rate of 9 percent-- briefly-- after the stock market crash of 1929, unemployment shot up after massive federal interventions in the economy. It rose above 20 percent in 1932 and stayed above 20 percent for 23 consecutive months, beginning in the Hoover administration and continuing during the Roosevelt administration.

As Casey Stengel used to say, "You could look it up." It is all there on that one page.

Those who are convinced that the government has to "do something" when the economy has a problem almost never bother to find out what actually happens when the government intervenes.

The very fact that we still remember the stock market crash of 1929 is remarkable, since there was a similar stock market crash in 1987 that most people have long since forgotten.

What was the difference between these two stock market crashes? The 1929 stock market crash was followed by the most catastrophic depression in American history, with as many as one-fourth of all American workers being unemployed. The 1987 stock market crash was followed by two decades of economic growth with low unemployment.

But that was only one difference. The other big difference was that the Reagan administration did not intervene in the economy after the 1987 stock market crash-- despite many outcries in the media that the government should "do something."


TOPICS: Business/Economy; Editorial; Extended News; Government
KEYWORDS: economy; sowell; thomassowell; unemployment
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1 posted on 06/17/2010 11:51:12 AM PDT by jazusamo
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To: abigail2; Amalie; American Quilter; arthurus; awelliott; Bahbah; bamahead; Battle Axe; ...
*PING*
Thomas Sowell

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Please FReepmail me if you would like to be added to or removed from the Thomas Sowell ping list…

2 posted on 06/17/2010 11:53:58 AM PDT by jazusamo (But there really is no free lunch, except in the world of political rhetoric,.: Thomas Sowell)
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To: jazusamo

Is there some way we can do a body snatch? Thomas Sowell into the WH and the kenyan into a mud hut next to his brother where he can’t do any more damage.


3 posted on 06/17/2010 11:57:00 AM PDT by YankeeReb
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To: jazusamo
The very fact that we still remember the stock market crash of 1929 is remarkable, since there was a similar stock market crash in 1987 that most people have long since forgotten.

What was the difference between these two stock market crashes? The 1929 stock market crash was followed by the most catastrophic depression in American history, with as many as one-fourth of all American workers being unemployed. The 1987 stock market crash was followed by two decades of economic growth with low unemployment.

But that was only one difference. The other big difference was that the Reagan administration did not intervene in the economy after the 1987 stock market crash-- despite many outcries in the media that the government should "do something."

As usual, Sowell blows my mind with some insight that he articulates in a powerful way.

This is the type of information we have to teach our children! We are dying as a nation for "lack of knowledge." And, yes, I mean that on several relevant scales.

4 posted on 06/17/2010 11:59:24 AM PDT by fightinJAG (Obama: "I will gladly pay you on Tuesday for a hamburger today.")
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To: jazusamo
Excellent further reading on Depression history, both economic and political:
5 posted on 06/17/2010 11:59:27 AM PDT by T-Bird45 (It feels like the seventies, and it shouldn't.)
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To: jazusamo
I had a discussion with someone who kept saying how awful things were when unemployment was 6.3% during the last months of the Bush administration.

My reply was that number was not that high and 6% had been considered "full employment" at different times in US history.

But she bought the MSM line about how catastrophic that number was. Well, haven't heard anything from her lately about how catastrophic the 50% higher 9.9% unemployment is under Bambi.

6 posted on 06/17/2010 11:59:29 AM PDT by what's up
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To: jazusamo

This article takes too long to state the obvious.
When government ‘does something’ it changes the rules.
It then takes time to re figure out how to play the game.

Running a business is like playing poker. You have to know the odds and all of the players.

When government ‘does something’ they change the odds and change the players. They also change how much the house rakes out of the pot.

All of this takes time and some players simply walk away.


7 posted on 06/17/2010 12:00:02 PM PDT by updatedscreenname
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To: jazusamo

see

http://ingrimayne.com/econ/EconomicCatastrophe/GreatDepression.html

About half way down the page unemployment rate graph


8 posted on 06/17/2010 12:02:17 PM PDT by Ouderkirk (Democrats...the party of Slavery, Segregation, Sodomy, and Sedition)
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To: fightinJAG

Yes, this is a classic Sowell piece and not the first time he’s articulated it. Though he didn’t mention Obama it’s pretty clear his timing for it.


9 posted on 06/17/2010 12:06:45 PM PDT by jazusamo (But there really is no free lunch, except in the world of political rhetoric,.: Thomas Sowell)
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To: jazusamo

Dr. Powell knocks another one out of the park. Truth is the enemy of the left.


10 posted on 06/17/2010 12:08:30 PM PDT by Hoodat (.For the weapons of our warfare are mighty in God for pulling down strongholds.)
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To: jazusamo

Ever tried showing proof to a Liberal? They instantly dismiss it and you. It’s the IDEA, you see, that’s important, not the facts.


11 posted on 06/17/2010 12:08:45 PM PDT by pabianice
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To: Ouderkirk

That graph does not match it’s description in the OP article. It just shows a basically straight line going up in the time period discussed.


12 posted on 06/17/2010 12:09:45 PM PDT by RobRoy (The US Today: Revelation 18:4)
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To: what's up

It’s not unusual that libs believe what they want to believe about an administration they detest and ignore hard reality about one they worship. I doubt you’ll hear a word from her now. :)


13 posted on 06/17/2010 12:10:36 PM PDT by jazusamo (But there really is no free lunch, except in the world of political rhetoric,.: Thomas Sowell)
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To: Running On Empty

Marking


14 posted on 06/17/2010 12:10:46 PM PDT by Running On Empty ((The three sorriest words: "It's too late"))
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To: updatedscreenname

The government doesn’t just change the rake. It reaches into the winners’ chip stacks, keeps a bunch for itself, and tosses the remainder in the air. The short stacks like this game. The competent players leave with the chips they still have.

But it’s really different from poker because the competent players have the ability to create valuable new chips out of talent and hard work. While to competent players are in the game, the number of chips on the table grows. When they leave, the game stagnates.


15 posted on 06/17/2010 12:13:16 PM PDT by Skepolitic
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To: Ouderkirk

Thanks, that sure bears out Dr. Sowell’s piece.


16 posted on 06/17/2010 12:13:37 PM PDT by jazusamo (But there really is no free lunch, except in the world of political rhetoric,.: Thomas Sowell)
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To: jazusamo

New tagline...


17 posted on 06/17/2010 12:17:16 PM PDT by EternalVigilance (Socialism never works. But that never stops socialists from trying.)
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To: jazusamo

bfl


18 posted on 06/17/2010 12:17:16 PM PDT by Reddy (B.O. stinks)
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To: updatedscreenname
Great analogy.

I explained it to a friend that ‘the market’ hates government intervention because it is unpredictable.

It is as if you were going to bet on horse races, and you researched the heck out of what horses were fast, what jockeys were good, etc; and then some official decides that, no matter which horse actually crossed the line first, THEY would decide who the winners and losers were.

Suddenly you wouldn't want to ‘bet’ your money anymore, would you?

19 posted on 06/17/2010 12:18:32 PM PDT by allmendream (Income is EARNED not distributed. So how could it be re-distributed?)
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To: EternalVigilance

Very good and so true.


20 posted on 06/17/2010 12:18:52 PM PDT by jazusamo (But there really is no free lunch, except in the world of political rhetoric,.: Thomas Sowell)
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To: updatedscreenname
This article takes too long to state the obvious.

I'm sure you could teach Dr. Sowell a thing or two about writing clear, concise articles.

21 posted on 06/17/2010 12:19:08 PM PDT by Richard Kimball (We're all criminals. They just haven't figured out what some of us have done yet.)
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To: fightinJAG

It’s worse than a “lack of knowledge”. Rather, it is the false knowledge of things that just are not true.

Like Mark Twain said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

Liberals and progressives are not just ignorant of economics, they are benighted. This is not a mere opinion, it is the conclusion of a scientific survey recently reported in the economics literature.

See http://econjwatch.org/articles/economic-enlightenment-in-relation-to-college-going-ideology-and-other-variables-a-zogby-survey-of-americans.


22 posted on 06/17/2010 12:19:20 PM PDT by Skepolitic
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To: jazusamo

Thanks for the ping jaz. Dr. Sowell pretty much backs up what Reagan said doesn’t he. Those most fearful of words...”Hello, We’re from the government, and we’re here to help”. Something along those lines.

The help we need from the Fed is outlined in the Constitution, and if the Fed were to conduct their business as outlined, then there wouldn’t be much else that would happen that the States would need help with from the Fed.

We have to take it all back, and guide the restoration of the American dream back to what it was designed by the founding fathers.

It’s going to take some honest, hard working patriots, and lots of attention by the American people to get there.


23 posted on 06/17/2010 12:21:58 PM PDT by rockinqsranch (The Left draws criminals as excrement draws flies. The Left IS a criminal organization.)
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To: rockinqsranch

Well said, RQSR.

The very first step is getting the Marxist we now have out of office. 2012 is still a ways away but we can hope for a justified impeachment.


24 posted on 06/17/2010 12:32:12 PM PDT by jazusamo (But there really is no free lunch, except in the world of political rhetoric,.: Thomas Sowell)
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To: RobRoy

THe graph is yearly, but it does confirm Sowell’s point about government interference in the market.

I’m sure that page 77 in the book got the source data from the same place.


25 posted on 06/17/2010 12:51:44 PM PDT by Ouderkirk (Democrats...the party of Slavery, Segregation, Sodomy, and Sedition)
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To: YankeeReb

What a dream!!


26 posted on 06/17/2010 12:52:10 PM PDT by stephenjohnbanker (Support our troops....and vote out the RINOS!)
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To: what's up
It's actually much higher than 9.9% now. The unemployment stats do not include people who have stopped looking for work or stopped receiving unemployment compensation benefits. Nor do they count people who have accepted part-time jobs because they could not find full-time work.

The real current unemployment figure is closer to 18%.

27 posted on 06/17/2010 1:01:44 PM PDT by PackerBoy (Just my opinion ....)
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To: jazusamo
"Out of Work" by Richard Vedder...



"A vee, or an eff, or one dee or two dees -- HIS name is harder to spell than MINE!! You don't know WHAT it is!!"

28 posted on 06/17/2010 1:11:34 PM PDT by 668 - Neighbor of the Beast (STOP the Tyrananny State.)
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To: jazusamo

Here is a Ponder for all FReepers:

Is 2009 a repeat of the 1929 follies?

Is 2010 a repeat of the 1930 follies?

Have we, as a Nation, not learned ANYTHING over the past 80 years?

I.e., massive government intervention in the economy DOES NOT WORK!

My contention is that the same playbook that failed in 1929, and on through the 1930s is being used today, and it WILL NOT WORK!

Is it November, yet?


29 posted on 06/17/2010 1:15:39 PM PDT by Taxman (So that the beautiful pressure does not diminish!)
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To: Taxman
and it WILL NOT WORK!

No doubt you're correct, November can't come soon enough.

30 posted on 06/17/2010 1:23:40 PM PDT by jazusamo (But there really is no free lunch, except in the world of political rhetoric,.: Thomas Sowell)
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To: jazusamo

In the meantime, we must throw every imaginable road block we can muster directly in their path!


31 posted on 06/17/2010 1:29:05 PM PDT by Taxman (So that the beautiful pressure does not diminish!)
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To: updatedscreenname

And the 2008 September “crash” was a government-inspired/demanded crash starting from Pelosi’s AGW-inspired oil price rises of 2007 and early 2008 -which closed markets and lost the transportation, airline, fuel, manufacturing economies and consumer markets

+

the treacherous home mortgage interventions based on a “constantly expanding” housing market and the socialist’s “every should own a home” loan interventions.


32 posted on 06/17/2010 1:37:22 PM PDT by Robert A. Cook, PE (I can only donate monthly, but socialists' ABBCNNBCBS continue to lie every day!)
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To: jazusamo

sfl


33 posted on 06/17/2010 1:39:03 PM PDT by phockthis
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To: YankeeReb

I love Sowell. I’d support him with everything I’ve got if he’d ever run.


34 posted on 06/17/2010 1:41:42 PM PDT by Humble Servant ( See y'all in the gulag.)
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To: jazusamo

I’ve just finished reading “The Politically Incorrect Guide To American History”. The simplest way to get an accurate picture of our history is to take what we’ve been taught and turn it upside down and run it backwards. Ah. That’s better!

From the Revolution to the depression to the two world wars to Jeemee Cawhuduh to Reagan, everything that happened was pretty different from the generally held view. Good book. What Dr. Sowell is saying here fits right in.


35 posted on 06/17/2010 1:42:23 PM PDT by RoadTest (Religion is a substitute for the relationship God wants with you.)
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To: jazusamo

Link problem. It goes to a page that tries to print the article.


36 posted on 06/17/2010 1:44:03 PM PDT by FourPeas (God Save America)
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To: FourPeas; Admin Moderator

Thanks for the heads up, FourPeas.

I linked the printer page and somethings messed up, here’s the article link.

http://townhall.com/columnists/ThomasSowell/2010/06/17/a_mind-changing_page


37 posted on 06/17/2010 1:49:40 PM PDT by jazusamo (But there really is no free lunch, except in the world of political rhetoric,.: Thomas Sowell)
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To: jazusamo

Thanks!


38 posted on 06/17/2010 1:54:59 PM PDT by FourPeas (God Save America)
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To: jazusamo

I love Thomas Sowell!


39 posted on 06/17/2010 2:04:42 PM PDT by purpleporter
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To: Admin Moderator

Thank you, AM, appreciate it.


40 posted on 06/17/2010 2:17:08 PM PDT by jazusamo (But there really is no free lunch, except in the world of political rhetoric,.: Thomas Sowell)
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To: jazusamo
Though he didn’t mention Obama it’s pretty clear his timing for it.

Considering Obama just put 120,000 jobs on the bank in the Gulf and elsewhere with his offshore drilling moratorium, it is a good time to remind people of this.

41 posted on 06/17/2010 2:27:08 PM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing.)
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To: jazusamo; pabianice; what's up

You cannot reason someone out of a position that they did not use reason to get into in the first place. - Alexander Pope


42 posted on 06/17/2010 3:27:37 PM PDT by Sergio (If a tree fell on a mime in the forest, would he make a sound?)
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To: pabianice

“It’s the IDEA, you see, that’s important, not the facts.”
///////////////////////////////////////////////////////////

Absolutely, they have the ability to refute what should be as obviously true as the sunrise while steadfastly maintaining a belief in some childish absurdity.


43 posted on 06/17/2010 4:07:43 PM PDT by RipSawyer (Trying to reason with a leftist is like trying to catch sunshine in a fish net at midnight.)
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To: jazusamo

Most excellent read!

Thanks!


44 posted on 06/17/2010 4:12:30 PM PDT by DCPatriot ("It aint what you don't know that kills you. It's what you know that aint so" Theodore Sturgeon))
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To: jazusamo
Absolutely amazing. Even if one were in a forgiving mood with FDR, on the (dubious) hypothesis that they didn't know any better because no-one had tried it before, that same benefit of the doubt simply cannot be extended to today's democrats/liberals - they cannot be heard to say that they didn't know, or couldn't have known, how catastrophic the effects of their toxic economic policies would be, and therefore must be treated as having intended to do the harm their policies are, in fact, doing. If that isn't treason, it certainly sounds like high crimes and misdemeanors.


45 posted on 06/17/2010 4:14:41 PM PDT by Oceander (The Price of Freedom is Eternal Vigilance -- Thos. Jefferson)
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To: fightinJAG
What the government decided to do in June 1930-- against the advice of literally a thousand economists, who took out newspaper ads warning against it-- was impose higher tariffs, in order to save American jobs by reducing imported goods.

Yet even here on FR, we have people crying for protectionist schemes that they think will magically protect American jobs from more cost-effective competitors. To them, I say: "Sorry, folks, but the union job benefits ain't free and a God-given right."

46 posted on 06/17/2010 5:00:40 PM PDT by Gondring (Paul Revere would have been flamed as a naysayer troll and told to go back to Boston.)
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To: T-Bird45
I second your opinion. Shlaes’ book is terrific.
47 posted on 06/17/2010 5:45:21 PM PDT by Jacquerie (That to secure these rights, Governments are instituted among Men.)
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To: jazusamo
Were it not for government intervention -- by both Hoover and Roosevelt -- the Great Depression would be known today as The Panic of 1929.

And, like the Panics of 1819, 1837, 1857, 1873, 1893 and 1901, over after a few months. And forgotten in a few years.

There's a lesson in there somewhere.

48 posted on 06/17/2010 6:09:48 PM PDT by okie01 (THE MAINSTREAM MEDIA: Ignorance on Parade)
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To: pabianice
Ever tried showing proof to a Liberal? They instantly dismiss it and you.

Ain't it the truth. My sis, the social worker, usually objects to any expression of unwanted fact by saying, "That's just your opinion."

49 posted on 06/17/2010 6:13:55 PM PDT by okie01 (THE MAINSTREAM MEDIA: Ignorance on Parade)
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To: jazusamo

For later reading


50 posted on 06/17/2010 6:16:45 PM PDT by Wyatt's Torch (I can explain it to you. I can't understand it for you.)
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