TheMoneyIllusion
By Scott Sumner
A slightly off-center perspective on monetary problems.
Don't trust historians
Let me say first that I like history. I think historians have a lot of interesting things to say and I don't think historians should be economists. But . . .
I It depends on the definition of "great."
Go to the following link and scroll down to the Ranking of presidents by historians in a 1996 poll. Wilson is ranked 6th whereas his successor Harding is ranked 41st. That's 41st out of 41 presidents when the poll was conducted. Where does one even start?
1. I had known for quite some time that Wilson's economic policies were perhaps the worst in American history. He presided over the creation of the Fed and the income tax, which went from 0% to something like 70% while he was president. In the long run the Fed may have been a good thing, but there can be no doubt that 1913 was premature, we didn't know anywhere near enough about monetary policy to warrant a central bank meddling in the gold standard. He presided over a period of very high inflation after WWI, when we actually needed somewhat lower prices. Then we had a severe depression in his last year of office. Industrial production had fallen by 32.5% by March 1921 when Harding took office (and you think things are bad now!)
But guess what; by November 1922 we had recovered, as industrial production had already passed the previous cyclical peak. (If you factor in a 3% trend rate of growth, a new peak was reached around March 1923.) How did he do it? Recall that Hoover and FDR relied on policies of propping up wages and raising tax rates—that's why FDR's recovery took nearly nine years, and even 8 and 1/2 years from a July 1933 industrial production figure that was roughly as depressed as March 1921.) Instead, Harding let wages fall and cut income tax rates sharply. BTW, do you think industrial production will fully recover by January 2011, after Obama has been in office for 2 years?
2. Wilson had arguably the most destructive foreign policy in American history. When there is a delicate balance of power in Europe you don't want to meddle unless you plan to stay there permanently. Yes, I know Wilson did intend the US to hang around, but he should have known we were an isolationist country before he brought us into WWI. All he did was assure that the strongest country in Europe lost. When we pulled out (as was inevitable), a rematch was almost preordained. WWII was the fruit of Wilson's foreign policy. (As were more than 116,000 dead American soldiers.)
3. Wilson was one of the most repressive presidents in American history, imprisoning thousands of people whose only crime was to disagree with his political views. It was left to Harding to release people like Socialist leader Eugene Debs from prison, as well as many others.
4. And I also recently learned that Wilson was a vicious racist. Yes, I know racism was widespread at the time. But he was much worse than the Republicans who came before and after him. Check out this article from Reason magazine.
So other than being a horrible president in terms of economic policy, foreign policy, civil liberties and civil rights, he was a great president. And Harding was the worst ever. What was Harding's great crime? A few of his aides took bribes. But isn't that common? Didn't Eisenhower and Johnson and Nixon and Carter and Reagan and Bush and Clinton have cabinet secretaries that got involved in scandals? I welcome any historians to write in and tell me exactly why Wilson is a great president and Harding is the worst ever. Is it just a question of Wilson being more active? Are historians using the old fashioned definition of "great," which meant something like "powerful?"
TheMoneyIllusion » Don’t trust historians (26 June 2009)
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