CDR: Re: A famine averted...

[James A.. Donald]

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At 12:04 PM 10/14/2000 -0700, Richard Fiero wrote:
 > With respect to equilibria, it's an unwarranted assumption that a
 > market has just one stable point.  Certainly the Great Depression
 > was a stable but undesirable situation.

It was only stable thanks to massive government intervention.

You will notice that the recent Asian crisis started with a market crisis 
of confidence in government financial instruments similar to that which 
occurred just before the beginning of the great depression.

The Asian governments responded to this crisis by looking at what 
governments did back during the great depression, and proceeding to do the 
opposite of whatever governments did back then.

While the crisis of confidence caused some initial hardship, this would 
have swiftly evaporated as it did in the Asian crisis.  What really caused 
the great depression in the United states was Smoot Hawley and government 
intervention to maintain artificially high wages for some groups, and 
artificially high prices to pay those artificially high wages.

Similar wage and price policies in France today are accompanied by 
similarly high permanent unemployment, with totalitarian parties receiving 
a larger vote in France than they ever received in America during the great 
depression.  If those wage and price policies were accompanied by Smoot 
Hawley, we would probably soon enough get a totalitarian regime in France.

In Spain during the great depression, they simultaneously employed 
artificial wage policies, Smoot Hawley like tariff policies, and also 
massive Keynsian stimulation.  This had the interesting result that they 
suffered an inflationary depression, the first major occurrence of the 
infamous stagflation, and did wind up with a totalitarian regime.

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          James A. Donald
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