Building Wealth the New Deal Way

A few weeks ago I took some vacation time to visit family in New York. On the way home we took a side trip to the village of Reynoldsville, PA. Most people have never heard of that little berg. Two reasons it’s special to me: 1) It’s a close neighbor to the weather capital of the world, Punxatawney, PA, and 2) It’s the place my father was born and grew up.

We took a side trip this year to this little town snuggled in the Allegheny Mountains to visit my two aunts who still live there. I mostly listened and sometimes talked to my very sharp 92 year old aunt and to the baby of the family who’s age she doesn’t want anyone to know.. I was reminded once again that the house on Broadway, where they still live, once had a yard that was planted almost property line to property line with vegetables instead of grass. And it had to be that way because a widowed, illiterate father of eight had to try to feed his very hungry family somehow during the Great Depression.

I heard stories of hunger that most Americans these days can’t fathom, real hunger that reached millions of real people.

I had recently finished reading a new book about the Great Depression. Author Amity Schlaes’ recent work The Forgotten Man is a new view of that horrendous period. The Roosevelt Administration had the notion that prices of food weren’t high enough, and that one of the solutions to the Depression would be to raise prices, and to raise prices, farmers were encouraged to reduce food production and even destroy foodstuffs. This at the very time my father and his three brothers and four sisters were scraping the larder for a few calories a day. [See The Forgotten Man, pages 159-160].

The New Deal was evidently based on the obscene idea that the way to increase wealth is to destroy assets, while a family – and many families around the country – clung to survival by a few vegetables from the family garden plot.

Let’s fast forward 75 years to 2009, and we see the same faulty economic theory at work. The Obama “Administration” buys perfectly serviceable cars and, instead of making them available to poor families, they are turned into scrap and sold to the Chinese. This wonderful strategy has the secondary effect of increasing the price of the remaining used cars on the market, thereby making them even less affordable to those with lower incomes.

This has stimulated the assembly lines for new cars, which makes the government-owned auto companies happy, but apparently it’s making Korean and Japanese car makers even happier, if recent sales figures are any indication.

Once again we see in action the insane theory that destroying assets produces wealth. Someone needs to tell those people on the other side of the Potomac that to produce wealth, a nation needs to make stuff, mine stuff, drill for stuff, and grow stuff. Don’t inhibit those activities, but encourage them. Don’t try producing wealth by creating artificial shortages and manufactured demand.

Order Amity Schlaes' book on Amazon.com.