One of the benefits of studying history is that we can see what worked and what didn’t work in the past. That helps us put the present in perspective. My larger point is that many ideas that are fashionable today will be discarded and in the dumpster thirty years from now. In fact, my task as a teacher is often to explain to students how it is possible that so many people in a given generation could have believed something that today is obviously so silly. Let’s look at some examples.
In 1920, most Americans genuinely believed that if we prohibited the manufacture of alcoholic beverages, people would mostly stop drinking and morality would improve. For a while it worked. But a dozen years later the experiment was clearly a flop, and law enforcement agencies around the country were swamped trying to stop bootleggers from selling imported or home-made booze. But that was okay; we put prohibition aside because we had a new fashion–the idea the we could outlaw war. Dozens of nations around the world–the United States leading the way–signed the Kellogg-Briand Pact, which committed nations to outlawing war in international policy. It was all supposed to be that simple. Pass a law, and war will be gone. And then came Mussolini. Then came Hitler. Then came the Japanese. End of Kellogg-Briand Pact. But it was the wisdom of its day.
Finally, in the 1930s came the Keynesian idea that if we had an economic downturn, we should just “stimulate aggregate demand,” that is, spend money we don’t have and that would spark economic growth in the economy. Thus, the U. S. went on a course of massive deficit spending. In Franklin Roosevelt’s first two terms in office, the U. S. amazingly doubled its national debt through a flurry of new programs such as WPA, TVA, AAA, and CCC. What was the result? Toward the end of FDR’s second term, unemployment was 20.7 percent, the top income tax rate was 79 percent, and the Great Depression had become the worst economic catastrophe in U. S. history.
The good news is that we learned some lessons: prohibition didn’t work and unfortunately, we can’t outlaw war. Human nature will not let that happen. But the bad news is that we never got around to discarding the notion that “spending money we don’t have will stimulate economic growth.” For some reason, that fantasy has lingered, and remains in economic fashion in top political circles today. The sooner we can dump that idea in the dustbin, the sooner we can begin again to prosper as a nation.