Prediction: Tech Sector Will Recover First
June 30th, 2009
From NPR & KPLU Radio:
On this month’s Future in Review with Mark Anderson [of Strategic News Service], Mark predicts the technology sector will recover before the rest of the economy does. He tells KPLU’s Dave Meyer to keep an eye on computer chip sales.
The Two Issues Behind Steve Jobs’ Health
June 23rd, 2009
I will be covering this in more detail in tomorrow’s issue of the SNS Technology Letter (at www.stratnews.com ) . But I thought there should be more public conversation about these two aspects of this well-covered, but poorly analyzed, issue.
The first, and most important issue is Steve’s actual health condition. What was last described as a “hormonal imbalance” or something like it, now looks a good deal like liver cancer.
If Steve has / had liver cancer, it opens a new vista of medical questions which he should be discussing now, as CEO. So should the media, so, get with it, kids.
Second, on the legal side: I have never heard so much BS in my life, as has been written in the last week about why it was perhaps OK for Apple’s board not to share this information with shareholders and the public.
The test, according to the SEC, is simple: if information would affect an investor’s decision to purchase (or sell) shares, it is material and should be disclosed.
Since anyone who went through the non- Steve Apple years knows that there simply is no Apple without Steve, the fact of his liver transplant, and if so, of his new cancer, are life- and company-threatening. There is no fancy dancing about taking a leave that would remove the obligation to tell investors that the only person who could run the company at length was in jeopardy.
The Apple board has now broken the law, twice: first, over the options deal with Steve; and now, this.
While Steve is great at making products, this board, and this company, suck at obeying the law, and at modern governance. They have put their shareholders at unknown risk, and themselves personally.
The media should stop quoting doctors and lawyers who don’t understand the above, and write one good story about the real risks all have just experienced, and may be continuing to experience, no thanks to Steve or Apple.
I am Very glad Steve is surviving to date, and hope it goes on for a long time; he is the greatest living product genius in technology. But he does not play well with others.
The Most Invisible Ex-President
June 20th, 2009
When I first wrote that George Bush the Younger would be the Worst President in United States history, it was before he had taken office. Too many of our members, perhaps used to the give and take of backroom politics, seemed to think I was using hyperbole, or, more likely, just being mean to the guy heading the other, winning team.
Although most humans are not capable of real mental change, I would like to think that our members are smarter and more open-minded than the average human being, and that, as we have gone through all of the increasingly-crazy and damaging results of Bush’s time in office, they have come to see that I was not being unkind, just predicting something true.
Now we know, as much as one can ever know something: George Bush was indeed the Worst President in the history of the country, by any measure. The list is so long, and so impressive: lying to the people to get them into a war which he had literally mapped out with oil company names almost a year earlier, for example. That has to be a capital offense of the most egregious kind. Killing half a million to a million innocent civilians in the process. Wow. Institutionalizing torture in the U.S.; eavesdropping illegally, domestically; vitiating most of the Bill of Rights; stocking the Justice Department three levels deep with hires (and firings) based solely on political litmus tests; stealing elections with compromised votes on the Supreme Court. And destroying the world economy, or nearly so, with a little prior help from Clinton and the banking lobby.
It’s an amazing list, and much longer.
And now George appears to have earned himself one last Legacy Crown. What else will he be remembered for? With Jimmy Carter perhaps the best act in the role of ex-presidency, we now have a new entry: the Most Invisible Ex-President.
Many presidents honor the unwritten rule of not criticizing their replacements; it is more dignified, better politics, and suits the country’s foreign interests more obviously. But what we see today is not reticence, it’s something altogether different. Hopefully we have some excellent historians in our ranks, and I would like to issue this as an academic challenge: if there has been any ex-president who was less visible, starting the minute of his replacement, please let us know who it was. I am not a historian, but it seems unlikely that it would be humanly impossible to pull off a more effective disappearing act.
What caused Bush to vanish? This is not about him “working on his memoirs.” Immediately after leaving office, he put himself on the speaker’s market. There was, in all of the civilized world, only one city that bit: Calgary, the only major oil city in North America outside of Texas. Compare this to Bill Clinton, with all of his PR problems after leaving office, charging $250k+ per speech, and booking speeches several nights per week around the globe for years after his departure from office – while he wrote his memoirs. It’s how he paid off the $12MM or so in legal cost debt he took from public office.
No, this silence is something else. It could be fear of prosecution, internationally for war crimes, nationally for any of a series of crimes laid out for alternative radio by Al Gore, and in print by others. There are no lack of grounds, or prosecutors. Efforts have already begun outside the U.S. to bring him to international justice.
Or it might be something deeper than fear of retribution. Perhaps he is just starting to catch on to what he did to the country and the world, and as it sinks in, he can think of nothing but hiding in shame from public view.
Nah, no way. He’s just scared. The handlers told him to shut up so Jeb could get to work re-framing the family name, in time for his own run at the big job.
The Good News, and the Bad News
June 16th, 2009
The good news is so obvious that half of the stories in the media are completely missing the point:
We have likely avoided global economic oblivion. The Republicans, who are largely at fault for this horrible experience, have been incessantly whining about spending, self-dealing, and anything else their focus groups can come up with: how truly ignorant, and dangerous to the world.
We, the world, owe a debt of gratitude: first, to Ben Bernanke, who came in modestly, faced a completely frightening task, and did it well, while ignoring the many partisan voices that had no backing in intelligence or data.
Second, to Hank Paulson, who also was and remains a subject of criticism, for many imagined wrongs, while he, at the time, was the only officer awake on deck. Imagine having been Paulson, surrounded by economic idiots like Bush and Cheney, and staring over the edge into what not only seemed like, but really was, the Abyss. Thank you, Hank, for scaring DC just enough to get their jowls out of the troughs and do some meaningful things to avoid disaster, without scaring the world so much that the sky fell in.
Even more to the point, we have Barack Obama, and his hand-picked team of professionals, who since the early days have quietly, every morning, looked into that same Abyss, and reduced its depth by a few miles. No one is getting any thanks for this, so I would like to go on record for appreciating the difficulties, intellectual, emotional and political, that these chosen financial professionals are experiencing dailly, and conquering as they go.
So that is the Good News: by accident, we had an expert in place in a Bush administration riddled with amateurs. And we chose Obama, who did what we hoped, and picked the best people in the country to take the wheel.
The Bad News: it isn’t over. We’re about at the half-way point now. We are not going to repeat the Great Depression, I think, and that is great, but this is the moment of second-greatest danger, as everyone assumes we’re OK, when we are not there yet. What I mean by this: there remain plenty of actors on Wall Street who were doing intellectually dishonest things to “make money” without creating value, and who are ready tonight to go right back at it, hammer and tongs, without a second thought. Wow! Really?
One example of this is in the oil pricing story, where the same schemers are now back again, driving up prices without a thought: why should they care if their personal antics, worth a few bucks in income, put a heavy tax on the global economy? They just don’t get it. Since they don’t, I hope someone in Washington will, and will decide that price manipulation of energy is a federal felony worth prison time. More to the point, that they will seek out such miscreants and put these white collar criminals behind bars for a very, very long time.
Given that the worst is over, but the battle is not, now is a good time for our subscribers, members and blog readers to be vigilant, careful, and not to act as though risks are now history. Plenty of small banks will fail in the next year (watch out, Georgia); California will likely go bankrupt in some form within 90-120 days. More people will lose their jobs, and retail in the U.S., our largest economic input historically, will be in the gutter.
But for those who are careful and paying attention, there are already opportunities, globally and locally, in U.S. real estate, in commodities (copper in China, anyone?), in large scale opportunities in alternative and clean energy. The world is changing in fundamental ways, and that is always the best time to make money.
So, again: Thank you, Hank, Ben, Barack, and Tim. The world owes everything to you, after we twice ran the Monkey in the Cockpit test.
Whatever the angry men on radio and TV are shouting out this week, you saved us from that darkness over the edge that Hank saw the weekend after Lehman failed.
For those who are serious about making money, there are today more ways of doing so than there have been for many years, and these are real, rather than fraudulent. And for those who are serious about world affairs, we are back in adult, professional hands, and none to soon. Now we just have to be very, very careful.
Elon Musk Is First Recipient of “FiRe Entrepreneur of the Year” Award
June 9th, 2009
The Future in Review (FiRe) global technology conference announced this week that Elon Musk, CEO & CTO, SpaceX; CEO & Product Architect, Tesla; and Chairman, SolarCity, has been named “FiRe Entrepreneur of the Year.” The award was presented live at the conference in San Diego, California, on May 21, 2009, by Mark Anderson, Chairman of FiRe and CEO of parent company Strategic News Service. This is the first year this honor has been awarded.
Anderson said of Musk, “He is the most impressive entrepreneur alive today. His ability to see which sectors will matter most, to get there with just the right timing, and to muster all the necessary skills for success in worlds as disparate as rocket design and electric cars is inspiring to all of us, and of benefit to the world. His successes justify our optimism.”
In giving the award, Anderson noted Musk’s early successes with PayPal and Zip2 Corp. prior to helping create the U.S.’ largest solar panel installer, the first viable electric car company in the modern era, and the first company to achieve the launch of a payload into Earth orbit with an entirely privately developed rocket.
On receiving the award, Musk said, “As someone who has attended the FiRe conference for many years and heard some of the most prominent people in the world speak there, I feel honored to receive this award.”
Future in Review, called “the best technology conference in the world” by The Economist, exposes world experts and participants to new ideas, producing an accurate portrait of the future. The conference pioneers in bringing technology solutions to current local and global problems.
World on Fire – Notes and Impressions from FiRe 2009
June 3rd, 2009
Guest blogged by Glen Hiemstra, Founder & Owner, Futurist.com
Last week included four eventful days at the annual Future In Review conference put on by the Strategic News Service. This year, the last at San Diego’s Hotel del Coronado [FiRe 2010 is moving to the Terranea; future FiRe locales aren’t yet scheduled – Ed.], was the best of the five I have attended, of the seven that have been held. (Full disclosure – I am on the planning committee, offering my thoughts as a futurist consultant and speaker.)
What began as a high-level conference about the 5-year future of technology has become over time a 360-degree look at the issues and challenges facing the world, the near-term potentials in technology, and the need for concerted system-wide action to produce a more just and prosperous world. This is quite an evolution and has made the FiRe conference one of the most influential global events each year.
You can read more about FiRe 2009 here, and also learn how to register for FiRe 2010, which will be held in the Los Angeles area (Palos Verdes) next year.
FiRe is the kind of conference that begins early each day and runs more or less non-stop till late evening. Thus this report hits only the highlights, for me.
Two themes dominated the program – “earth in peril” and “technology driving the economic rebound.”
Here are tech innovations discussed in the general program that seemed particularly important…
…The Cloud. This concept is subject to hype and is dismissed by many for that reason. Simply defined it means the ability of servers to hold all personal data and to run applications so that personal computing machines can go back to the future as terminals that access the cloud. In practice it may mean that you could walk up to any terminal, anywhere, and access your own “desktop” that actually resides in a variety of servers. One Cloud expert explained to me that this would enable schools, for example, to resurrect obsolete computers, turn them into terminals, and provide inexpensive high-level computing to everyone. There are many hurdles to jump before this becomes a robust and stable reality, but the cloud is a clear trend in future computing.
…The Gigabit Age. A great story around the world, less so in the U.S., is the continuing installation of much-improved bandwidth via fiber and wireless. We learned about an economic stimulus project in Australia, for example, to replace copper wires with fiber to something like 90% of all buildings and homes, enabling Australia to leap ahead in the information economy by providing net speeds dozens of times faster than available in the U.S. This $43 billion project would cost $350 billion in the U.S., but the U.S. is spending only $7 billion on enhanced bandwidth as part of the stimulus, a missed opportunity. In Australia, a key driver for more bandwidth is the Square Kilometer Array Pathfinder project.
…The Web Becomes the Stream. As we move beyond Web 2.0 into an ever more interactive network, in which users send as much material as they consume, via social nets and video sites, and so on, it becomes obvious that we are progressing from the Internet through the Web to the Stream. It is the constant flow of information that matters. (When Sonia Sotomayor is nominated to the Supreme Court, within about 90 seconds her bio on Wikipedia has been updated.) No static website or traditional media company can keep pace.
…Electric Cars Progressing. Elon Musk brought the Tesla Roadster for more test drives (below is my turn), but more importantly reported a just-completed agreement with Daimler to partner in producing the Tesla Motors sedan set for delivery in 2011, at half the cost of the Tesla sports model, with a 300+ mile range on a single electric charge. (Elon also reported on progress with [his company SpaceX’s] private space launch, including the contract with NASA to be a cargo delivery vehicle for the space station.)
Other Tech Tid-bits – Mark Hurd, CEO of HP, explained why printing will continue to grow when only 20% of current printing is digital. He also noted that they build manufacturing capacity overseas so that they can manufacture close to the buyers; only 8% of their cost is labor, so cheap labor is not the driver; being close to customers is. This was interesting.
Apple is reported to be purchasing 7-inch screens; the question is for what?
Thorium Power may be the nuclear fuel of the future – it is more abundant than uranium, cannot be processed into weapons grade material, decays in about 75 years instead of thousands, and can be used in current reactor designs. Since the energy future may depend on getting energy from many sources, this may keep nuclear in the game.
A smart grid will dramatically reduce energy consumption, especially if humans become part of the “smart.” A recent test in Colorado by Accenture energy showed that installing a small screen on the refrigerator in homes that monitors electricity usage around the house and makes the numbers visible led to a 50% decrease in energy consumption. Knowing what is going on in real time makes a difference.
Calit2 “FiRe Lab” Open House at UCSD: Larry Smarr once again organized an evening at Calit2, the future of computing and telecommunications program at UCSD. I will blog about some specific things there in the future as well – highlights included progress with super-hi definition screens and real-time telepresence, life-like robotics, and the use of wide arrays of sensors to learn about geographic information.
…FiReStarters – the breakthrough companies. Each year at FiRe new companies are nominated to be “FiReStarters,” those early-stage companies with a compelling product or service and a chance to change the world. This year there were 13 companies. One of my tasks was to interview the principals in these companies for short web-video introductions. Those videos will roll out over the next weeks, and I will blog about each company separately, but here are a couple of standouts:
Smaato – bringing order and scale to the world of mobile advertising.
Blue Mars, from Avatar Reality – soon to debut a robust, multi-user, next-generation online virtual world.
SIMtone – bringing cloud computing closer to reality and making it greener.
Vesta Health Systems – developing a technology platform for a simple, strong disinfectant effective against virus and bacteria.
Earth in Peril
The second and dominant theme at FiRe 2009 was “earth in peril.” This was kicked off by the opening dinner keynote from Professor V. “Ram” Ramanathan. Dr. Ramanathan is a distinguished researcher in climate science and global warming. His databased explanation of where global warming is now was sobering to all, even those most knowledgeable on the subject. His program title, “Practical Strategies for Solving the Climate Problem,” was intriguing, and he delivered. It turns out that while CO2 is the biggest long-term problem in that we are producing so much, and it is so long-lasting in the atmosphere, the other greenhouse gases offer some hope of faster success in reducing global warming. Methane, soot, and other greenhouse emissions are easier to reduce, and what is already in the atmosphere dissipates in months or years, not centuries. Thus, if we can eliminate these greenhouse gases soon, the impact will be immediate, and will buy time for the more difficult problem of reducing CO2.
Beyond climate change, there was a major emphasis on the health of the oceans and ocean species. Roger Payne and Lewis Douglas from the Ocean Alliance reported on new research showing chromium to be a problem pollutant in ocean species. Paul Watson of the Sea Shepherd Conservation Society reported on the battle with the Japanese over whaling. And film director Louie Psihoyos presented a premier showing of his documentary The Cove, winner of Sundance and Cannes festival awards. This powerful film highlights the plight of dolphins and the secret industry that kills them. The film opens theatrically in August 2009.
CTO Design Challenge – The Global Water Shortage
A final feature of the FiRe event has become the “CTO Design Challenge.” Chief technology and information officers are given a problem to solve, and a couple of days to solve it. This year the challenge was the looming water shortages in and around San Diego [and the world – Ed.] The team did an outstanding job which we will report more fully as well, but a highlight was the idea of covering canals with anti-evaporation covers, and those with solar cells to collect energy to run the pumps and provide excess energy from an already established right-of-way. Great idea.
Final thought – best FiRe yet. Join the party next year.
NPR: KPLU Radio: Air, Water and FiRe
May 30th, 2009
From NPR and KPLU Radio:
Every spring, KPLU technology commentator Mark Anderson (of Strategic News Service) hosts the Future in Review (FiRe) conference in San Diego. The Economist calls it “the best technology conference in the world,” and it’s attended by executives and scientists from the computing and telecommunications industries. Mark has just returned from San Diego, and spoke with KPLU’s Dave Meyer about air and water quality issues that came up at the conference
Washington’s smug tech industry needs kick in butt
May 14th, 2009
From Techflash:
University of Washington computer science professor Ed Lazowska is known as a straight talking rabble-rouser who doesn’t pull many punches. And he certainly lived up to that reputation today at the OVP Venture Partners Technology Summit, criticizing everything from the state’s inability to adopt a broadband policy to a culture of mediocrity at the UW.
But Lazowska — who appeared on stage with the equally opinionated Mark Anderson of the Strategic News Service – reserved his toughest comments for a Lake Wobegon mentality in the state where everything appears to be above average. …
What Comes After the Great Recession?
May 8th, 2009
Guest blogged by Glen Hiemstra, Founder & Owner, Futurist.com
My year as a consulting futurist and speaker began on January 8, 2009 with a speech on future trends for Cobalt, a company that does websites and other computer services for the auto-dealer community, historically General Motors dealerships. They obviously face some big challenges in 2009.
In that speech I said, for the first time, “This is not your father’s recession, but it could be your children’s renaissance.” Since that time most observers have suggested that when we come out of this recession the world economy, national economies, and our personal economic outlooks, will be different. As one friend, formerly a city manager, now CEO of a municipal development corporation put it, people hoping to get back to normal are going to be surprised the learn that the next normal does not look like the old normal.
So, here is my question. If what emerges on the other side of this economic chasm is something new, what does it look like? I hope SNS blog readers will weigh in on this via comments.
In the video interview below, I suggest some preliminary thoughts. The interview was conducted by Brenda Cooper, futurist, science fiction writer, and technology executive. Brenda happens to be a featured speaker at FiRe 2009 in the program slot on the final day, where we look “further ahead.”
We live in a time where exaggeration of all things is the norm, and thus it is easy to become caught up in the idea that “everything is going to change,” (a familiar phrase, no?) because of the economic meltdown. We need to be cautious with our forecasts. But a few things seem likely – a less debt-driven consumer culture which translates to slower growth in consumer spending, a financial culture focused more, for a while at least, on investing in innovation and productive capacity rather than merely manipulating digitized money in the global casino, a more cautious corporate culture when it comes to debt financing, ditto for the construction industry. Most of all, a shift in societal values toward sustainability and back to thrift as admirable habits. These value shifts may manifest most of all in the newest generation, the Millennials, if we believe what they say they want. Admittedly, we will have to see if these value-shifts hold and become long lasting as the long climb out of the recession continues.
The video interview also explores what keeps me up at night: the chance of a run-away negative feedback loop if Arctic methane melt gets out of control and we get a quick spike in global warming, and also the deep political divides in this nation that lead people to prefer to be right rather than happy. The latter shows up especially when people express a hope that certain economic remedies fail, and fail spectacularly, so that a particular point of view can be proven right, never mind the consequences for communities.
And finally, in the interview with Brenda I discuss the concept of optimism, about which I am asked all the time. To be optimistic is to believe, as I think Mark Anderson once said, that human beings have the capacity, when it matters, to choose the right problems and apply workable solutions to them. This is not guaranteed, but always an option.
Let’s hear from some of you: If the world on the other side of this recession is actually different from what came before, what are a few of its new features?
Here is the video interview of Glen Hiemstra on the future and what comes after this recession.
The New New Deal
May 7th, 2009
Guest-blogged by SNS Member Russ Daggatt
Former New York Senator and UN Ambassador, Daniel Patrick Moynihan famously said, “Everyone is entitled to his own opinion, but not his own facts.”
Increasingly, it seems, Republicans are trying to create not only their own facts but their own reality. This is particularly problematic when the mainstream media treats every issue as some kind of polarized “Crossfire” debate, with “balanced” treatment of “both sides.” Hence, we can end up with mainstream media “debates” over things like evolution, global warming and even torture.
A few years back Paul Krugman commented on the media desire for “balance” over objectivity. As an example he said that if Bush proclaimed the world was flat, the headline in the New York Times the next day would be “Shape of The World, Views Differ.” Indeed, that would be a “balanced” portrayal of the “debate” over the shape of the Earth. But objectively, the world is spherical. Stating that fact is not “bias” (except to the extent reality is a bias). Even if a large group of people – like the entire remaining rump of the Republican Party – disputed that fact, the New York Times would be doing its readers a disservice to give the impression that there was any credible, objective basis for the dissenting view.
At the Future in Review Conference in San Diego last year, Harvard professor James McCarthy, former co-chair of the Intergovernmental Panel on Climate Change, was asked how many of the world’s top 1000 climate experts would disagree with the basic scientific consensus that the increase in greenhouse gas concentrations over the last 50 years to levels not seen in 650,000 years is primarily anthropogenic. He replied, “Five.” (He also told an amusing anecdote about a colleague being asked the same question at a conference and answering, “Ten.” McCarthy went up to him later and asked how he got to ten. The guy replied that he could only think of five – the same five as McCarthy – but doubled the number to provide a margin of error.) That is about as solid a scientific consensus as you are ever likely to get for such a complex set of phenomena. Yet it is almost an article of faith in Republican circles these days that the threat from global warming is at best greatly exaggerated and at worst a “hoax.”
I’m not even going to waste time with evolution. If you think there is a legitimate debate over evolution, don’t even bother to read further.
And I’ve already commented at length on the “torture debate.” (Is it torture to shackle someone naked to the ceiling of a cold cell in an excruciatingly painful position so he can’t sleep for eleven days? “Views differ.”)
Another Republican myth that seems to have become entrenched in their alternative reality in recent months is actually the revival of a classic from … oh, fifty or sixty years ago: The New Deal was a failure. As is typical with these kinds of things, there is the weak form and the strong form. (Like the idea that tax cuts result in gushing tax revenue. The weak form of this Republican myth is that tax cuts merely pay for themselves – or maybe just almost pay for themselves. The strong form is that they will result in a big increase in tax revenue that will actually balance the budget.) The weak form of this one is that the New Deal didn’t do much of anything to help us recover from the Great Depression. The strong form is that the New Deal actually caused the Great Depression.
Then there is the crazy form. For this, I give you Michelle Bachmann (R-MN), the Sarah Palin of Congress. From a speech on the House floor last week (here is the video):
“[T]he recession that FDR had to deal with wasn’t as bad as the recession Coolidge had to deal with in the early ’20s. Yet, the prescription that Coolidge put on that, from history, is lower taxes, lower regulatory burden, and we saw the roaring ’20s where we saw markets and growth in the economy like we never seen before in the history of the country.
“FDR applied just the opposite formula — the Hoot-Smalley Act, which was a tremendous burden on tariff restrictions, and then, of course, trade barriers and the regulatory burden and tax barriers. That’s what we saw happen under FDR. That took a recession and blew it into a full-scale depression. The American people suffered for almost 10 years under that kind of thinking.”
Now there are just a few problems with this narrative. Primarily, there is the notion that FDR “took a recession and blew it into a full-scale depression.” During the Great Depression, unemployment reached its peak of 25% in 1933, the year FDR took office. Similarly, GDP bottomed out in 1933 at almost 33% below its peak in 1929 and began rising thereafter. (More on this below.)
It is probably also worth pointing out that the “Roaring ’20’s” (”where we saw markets and growth in the economy like we never seen before in the history of the country”) were what we call a “bubble,” with wild speculation in the financial markets that resulted in … the CRASH of 1929. Michelle actually stumbles upon a decent point here. The Republican laissez-faire economic policies of the ’20’s, resulting in an unsustainable speculative bubble, can probably be seen as a historical parallel to the de-regulatory policies that reach their peak under George W. Bush.
The crazy humor in this speech, however, is the bit about the “Hoot-Smalley Act” which she attributes to FDR. There is a nice little bit of Palinesque gibberish: “Hoot-Smalley” was a “tremendous burden on tariff restrictions.” Huh? Oh, and the act was actually the “Smoot-Hawley Tariff Act.” Which was named after its two Republican sponsors, Senator Reed Smoot (R-Utah) and Representative Willis C. Hawley (R-Oregon). And then there is the fact that the act was signed into law in 1930 by the Republican president, Herbert Hoover, almost three years before FDR took office.
The Republican rediscovery of the New Deal as an economic boogeyman has certainly been fueled by the constant references in recent months to our current financial crisis being “the worst since the Great Depression” as well as by President Obama’s energetic response, which is similar to the FDR’s economic activism. But the Bible of this revisionism is the book “The Forgotten Man” by Amity Shlaes, which takes the view that the New Deal was counterproductive and prolonged the Great Depression. Shlaes, a former member of the Wall Street Journal editorial board, is not an economist and the book, which is largely anecdotal, has few actual statistics in it. It has drawn fire from economist Paul Krugman, among others. But Republicans can’t get enough of it.
From Politico (”Why GOP is Devouring One Book“):
Shlaes’ 2007 take on the Great Depression questions the success of the New Deal and takes issue with the value of government intervention in a major economic crisis – red meat for a party hungry for empirical evidence that the Democrats’ spending plans won’t end the current recession.
“There aren’t many books that take a negative look at the New Deal,” explained Republican policy aide Mike Ference, whose boss, House Minority Whip Eric Cantor of Virginia, invited Shlaes to join a group of 20 or so other House Republicans for lunch earlier this year in his Capitol suite.
“Republicans are gobbling it up — and so are other lawmakers — because it tells you what they did, what worked and what didn’t.”
“It’s been suggested as required reading for all of us, I think,” said Erica Elliott, press secretary for Rep. Scott Garrett (R-N.J.) – who himself notes that his chief of staff “stole” his hardback copy, so he had to purchase a paperback.
Garrett said the book “is a good read” that details, among other things, “how FDR engaged in vitriolic demonizing of Wall Street and Big Business to advance his agenda.” …
Rep. Steve King (R-Iowa), who invited Shlaes to address the Conservative Opportunity Society earlier this year, uses words like “definitive” when referring to the tome, noting that Shlaes wrote it before the economic meltdown and that he read it “before we saw this even coming.”
“I think it’s conclusive when you read the book, although I don’t believe she said so, that the New Deal was actually a bad deal, and today we have a president who believes that the New Deal was a good deal, and would have been a far better deal if FDR would have spent a lot more money,” he said.
Shlaes builds her case largely around the fact that unemployment remained stubbornly high throughout the Depression, a fact she exaggerates by disregarding official unemployment statistics and coming up with her own that subtract all the government jobs created during the New Deal. Now it is true that unemployment was slow to decline from its peak during the Depression. But Shlaes goes further and argues, in effect, “The New Deal didn’t create many jobs if you don’t count the jobs it actually created.”
Unemployment actually fell pretty impressively during FDR’s first term, from 25% in 1933 to 14.3% in 1937. But in 1937, FDR reacted to concerns about the growing federal budget deficit by cutting spending too much, too soon, which plunged the country back into a “recession within the Depression” in 1937 and 1938, with unemployment rising back up to 19%. Federal spending actually declined by over 26% during those two years. Rather than taking from this experience the lesson that you shouldn’t slam the brakes on prematurely when the economy is still weak, Shlaes cites the state of the economy at the end of 1938 as evidence that the New Deal failed.
Shlaes uses the Dow Jones Industrial Average as her primary metric for gauging the state of the economy at any given time during the Depression – a rather dodgy metric. She pretty much avoids discussion of GDP altogether. And it’s obvious why. Because GDP grew impressively under FDR. Indeed, you can probably refute the New Deal revisionists with just this one graph:
[click to enlarge]
Between August 1929 and March 1933, GDP declined by almost 33%. It hit bottom just after FDR took office and exceeded the previous high three years later in 1936 (growing by over 14% that year).
So, according to this new Republican narrative, what was it that finally brought an end to the Great Depression? Because it did eventually end, right? Here the revisionist narrative merges (sort of) with mainstream economics. Both agree that it was World War II that finally ended the Great Depression once and for all. (Technically, the Depression ended in 1933, we just didn’t return to full employment until WWII.) I received an email a while back from a prominent Seattle investment advisor who slipped this little bit of partisan punditry into his commentary on the Obama stimulus: “[M]any economists are rethinking whether the massive federal spending [during the New Deal] helped bring an end to the depression, or whether WWII was the true catalyst for economic recovery.”
Think about that for a moment. How does World War II ending the Great Depression refute the notion that “massive government spending” doesn’t help stimulate economic recovery?
What happened during WWII? Federal spending and the deficit exploded. Federal spending increased to $97 billion in 1944, up almost fifteen times from $6.5 billion in 1940. But tax receipts only increased about fivefold, leaving a gargantuan deficit. The national debt increased six fold from $43 billion in 1940 to $260 billion at the end of the war. As a percentage of GDP, the national debt increased from 52% in 1940 to 121% in 1946 (see graph below), a level never reached before or since.
[click to enlarge]
Now, I know Republicans think we should always increase military spending, even if we are already spending more on our military than the rest of the world combined. (Just as we should always cut taxes, even if we are fighting two wars and running record budget deficits.) But is there something about spending to fight a war – blowing things up and killing people – that is inherently more stimulative (let alone productive) than, say, developing alternative energy sources, or building a national high-speed rail system, or bringing medical records into the 21st Century? From a spending standpoint, World War II was just the New Deal on steroids and seems to support the view that FDR’s spending programs were too modest during the Great Depression.
The post-War prosperity was built on the foundation of the GI Bill that sent a generation to college and encouraged home ownership. How is that support for neo-Hooverist policies? And why do we need a war to provide the kind of stimulus required to get us back on a path of robust economic growth? (We already have two wars going on, of course, but from a spending standpoint they can’t hold a candle to WWII.) Why not spending on building the national infrastructure required for us to exert global economic leadership well into the 21st Century? Is anything more important than a new energy infrastructure (that frees us from the Saudis, Hugo Chavez, Iran and Dick Cheney, and propels us into the lead in the technologies that are going to drive economic growth for decades), fixing our health care system (which, by almost any metric, costs vastly more and produces woefully worse results, than that of any other major developed country), and bringing our schools (uniformly) back up to global standards. Is military spending somehow a better use of funds? If this crisis – with vast portions of our economy idle or under-employed and the risk of a major global implosion – isn’t enough to prompt a major national effort to re-build, what will it take?
Alas, to have a conversation of this sort assumes everyone shares at least a certain factual baseline – some means of judging the quality of various propositions.
But, then, why unnecessarily constrain ourselves? After all, everyone is entitled to his own facts. Let the “debate” continue.