tag:theconversation.com,2011:/africa/topics/great-depression-2387/articlesGreat Depression – The Conversation2024-03-11T17:18:51Ztag:theconversation.com,2011:article/2254892024-03-11T17:18:51Z2024-03-11T17:18:51ZHayek’s Road to Serfdom at 80: what critics get wrong about the Austrian economist<p>“The most powerful critique of socialist planning and the socialist state”, is how Margaret Thatcher described Friedrich von Hayek’s book, The Road to Serfdom. Published in March 1944 during the Austrian economist’s tenure at the London School of Economics (LSE), the book has been enduringly popular among free-market liberals.</p>
<p>Among its admirers was Winston Churchill, who as prime minister released 1.6 tons of precious war-rationed British government paper to allow additional copies to be printed. More recently <a href="https://x.com/elonmusk/status/1731885154061205750?s=20">Elon Musk tweeted</a> a photo of The Road to Serfdom with the caption “Great Book by Hayek” to his 174 million followers, no doubt bringing Hayek’s work to a new generation. </p>
<p>On the other hand, the Austrian is <a href="https://www.aier.org/article/progressives-blame-f-a-hayek-for-everything-they-dislike/">often seen</a> by the left as an intellectual bogeyman, an enabler of unfettered greed, minimal social responsibility and soaring inequality. </p>
<p>So who was Hayek and why does The Road to Serfdom matter?</p>
<h2>How laissez-faire fell out of favour</h2>
<p>Born into an upper middle-class Vienna family in 1899, Hayek earned doctorates in law (1921) and political science (1923) at the city’s university. He first made a name for himself in economics in 1928, publishing a report for his research institute employer that predicted the Wall Street crash of 1929 (<a href="https://socialdemocracy21stcentury.blogspot.com/2011/12/hayek-and-stock-market-crash-of-1929-so.html">some critics argue</a> that his achievement gets exaggerated). </p>
<p>Hayek spent 18 years at the LSE (1932-1950), before moving to the University of Chicago (1950-1962). There he worked alongside Milton Friedman, another seminal advocate for free-market principles.</p>
<p>These views were profoundly unfashionable at the time. The social democrat consensus had been shaped by the “robber barron” period of the late 19th and early 20th centuries. Key industries such as rail and oil had been dominated by cartels and monopolies, leading to massive wealth inequalities. </p>
<p>Then came the Wall Street crash and great depression, prompting a loss of confidence in economists and economic reasoning. Free-market capitalism took much of the blame. Socialism was offered as a realistic and even desirable alternative.</p>
<p>Prominent colleagues of Hayek’s at the LSE, including political scientist Harold Laski and sociologist Karl Mannheim, believed socialist planning was inevitable in the UK. The Labour party explicitly warned in a <a href="https://search.worldcat.org/title/4719782">1942 pamphlet</a> against a “return to the unplanned competitive world of the inter-war years, in which a privileged few were maintained at the expense of the common good”.</p>
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<a href="https://images.theconversation.com/files/581009/original/file-20240311-24-wfbl99.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Copy of the Road to Serfdom" src="https://images.theconversation.com/files/581009/original/file-20240311-24-wfbl99.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/581009/original/file-20240311-24-wfbl99.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=929&fit=crop&dpr=1 600w, https://images.theconversation.com/files/581009/original/file-20240311-24-wfbl99.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=929&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/581009/original/file-20240311-24-wfbl99.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=929&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/581009/original/file-20240311-24-wfbl99.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1167&fit=crop&dpr=1 754w, https://images.theconversation.com/files/581009/original/file-20240311-24-wfbl99.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1167&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/581009/original/file-20240311-24-wfbl99.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1167&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Hayek disagreed. <a href="https://www.aeaweb.org/articles?id=10.1257/jel.20191542">He thought</a> this wave of popular “collectivism” would lead to a repressive regime akin to Nazi Germany.</p>
<p>In The Road to Serfdom, he accepted the need to move beyond the <em>laissez-faire</em> approach of classical economics. But he argued in favour of “planning for competition” rather than the socialists’ “planning against competition” approach. He opposed the state being the sole provider of goods and services, but did think it had a role in facilitating a competitive environment. </p>
<p>In a central theme of the book, Hayek described the difficulties that democratic decision-making would face under central planning. He believed it would lead to policy gridlock and present opportunities for unscrupulous characters to become the key decision-makers. </p>
<p>Hayek’s goal was to show that the British intelligentsia was getting it wrong. Socialist planning, he believed, would see citizens returned to the types of limited freedoms endured by serfs under feudalism.</p>
<h2>Hayek and conservatism</h2>
<p>The Road was especially popular in the US. This was helped by Reader’s Digest publishing a shortened edition in 1945, introducing Hayek to a non-academic audience of some 9 million households. He was seized upon by conservatives opposing Franklin D Roosevelt’s interventionist <a href="https://en.wikipedia.org/wiki/New_Deal#:%7E:text=The%20programs%20focused%20on%20what,to%20prevent%20a%20repeat%20depression.">New Deal</a>, who feared for the loss of personal freedoms and a drift to totalitarianism. </p>
<p>However, Hayek was concerned his ideas had been oversimplified and misinterpreted. <a href="https://www.aeaweb.org/articles?id=10.1257/jel.20191542">He warned</a> of “the very dangerous tendency of using the term ‘socialism’ for almost any kind of state which you think is silly or you do not like”. By the mid-1950s he had distanced himself from American and European conservatives.</p>
<p>Ultimately, though, after the second world war most western countries adopted a more Keynesian approach. Named after Hayek’s greatest intellectual rival, John Maynard Keynes, this involved using government spending to influence things like employment and economic growth. </p>
<p>Hayek’s work, meanwhile, was mostly ignored until the 1970s, a period during which the UK became mired in stagflation and industrial action. He then <a href="https://www.sothebys.com/en/articles/this-is-what-we-believe-margaret-thatcher-and-f-a-hayek">became the inspiration</a> for Margaret Thatcher’s policy mix of deregulation, privatisation, lower taxes and a bonfire on state controls of the economy. With the US also facing domestic economic challenges, the then US president, Ronald Reagan, followed suit. </p>
<h2>What the critics say</h2>
<p>If that was perhaps peak Hayek, he has been heavily criticised from some quarters in recent years. The American economist John Komlos, in his 2016 paper, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2814469">Another Road to Serfdom</a>, convincingly argues:</p>
<blockquote>
<p>Hayek failed to see that any concentration of power is a threat to freedom. The free market that he advocated enabled the concentration of power in the hands of a powerful elite.</p>
</blockquote>
<p>Such over-concentration had created the “too big to fail” environment in the financial sector in the run-up the global financial crisis of 2008, and many thought Hayekian deregulation was the culprit. </p>
<p>More recently, the tax-cutting economic policies during Liz Truss’s short stint as UK prime minister <a href="https://www.prospectmagazine.co.uk/culture/60233/the-remarkable-influence-of-friedrich-hayek">were incubated by</a> think tanks who <a href="https://oll.libertyfund.org/page/friedrich-hayek-birthday-biography-may-1899">regard themselves</a> as the keepers of the Hayekian flame. Similarly, Argentinian president Javier Milei’s libertarian vision of a minimalist state <a href="https://www.nytimes.com/2023/11/19/world/americas/argentina-election-javier-milei.html">is said</a> to be influenced by Hayek. </p>
<p>Equally, however, it is easy to fall into that trap of oversimplifying Hayek. It is worth noting, for instance, that in the Road, he also envisaged a substantial role for the state. He saw the state providing a basic minimum income for all. He also argued that “an extensive system of social services is fully compatible with the preservation of competition”. </p>
<p>Even Keynes <a href="https://www.cambridge.org/core/books/collected-writings-of-john-maynard-keynes/9793AEBA349007C6A2829CFE044238F5">congratulated him</a> on his publication, saying, “morally and philosophically I find myself in agreement with virtually the whole of it”. </p>
<p>In short, while it’s probably fair to say that the world has had to suffer the flaws in Hayek’s ideas, it is important to separate him from his supporters. He was certainly no statist, but his vision for how best to run an economy was not as uncompromising as many would have us believe.</p><img src="https://counter.theconversation.com/content/225489/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Conor O'Kane does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Championed by Thatcher, Reagan and Elon Musk, there’s a marked tendency to reduce Hayek to less than the sum of his parts.Conor O'Kane, Senior Lecturer in Economics, Bournemouth UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2200192023-12-20T01:28:46Z2023-12-20T01:28:46ZWith ‘White Christmas,’ Irving Berlin and Bing Crosby helped make Christmas a holiday that all Americans could celebrate<figure><img src="https://images.theconversation.com/files/566447/original/file-20231218-29-3t65vi.jpg?ixlib=rb-1.1.0&rect=451%2C37%2C5721%2C3895&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">After Irving Berlin, left, penned 'White Christmas,' he pegged Bing Crosby as the ideal singer for what would become a holiday classic.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/american-composer-lyricist-and-songwriter-irving-berlin-and-news-photo/1296904202?adppopup=true">Irving Haberman/IH Images via Getty Images</a></span></figcaption></figure><p><a href="https://www.nytimes.com/1989/09/23/obituaries/irving-berlin-nation-s-songwriter-dies.html">Irving Berlin</a> was a Jewish immigrant who loved America. As his 1938 song “<a href="https://www.loc.gov/item/ihas.200000007/">God Bless America</a>” suggests, he believed deeply in the nation’s potential for goodness, unity and global leadership. </p>
<p>In 1940, he wrote another quintessential American song, “<a href="https://achristmasclassic.org/">White Christmas</a>,” which the popular entertainer <a href="https://www.nytimes.com/1977/10/15/archives/bing-crosby-73-dies-in-madrid-at-golf-course-bing-crosby-73-dies-at.html">Bing Crosby</a> eventually made famous.</p>
<p>But this was a profoundly sad time for humanity. World War II – what would become <a href="https://www.highpointnc.gov/2111/World-War-II">the deadliest war in human history</a> – had begun in Europe and Asia, just as Americans were starting to pick up the pieces from the Great Depression.</p>
<p>Today, it can seem like humanity is at another tipping point: <a href="https://theconversation.com/how-to-depolarise-deeply-divided-societies-podcast-193427">political polarization</a>, war in <a href="https://theconversation.com/west-banks-settler-violence-problem-is-a-second-sign-that-israels-policy-of-ignoring-palestinians-drive-for-a-homeland-isnt-a-long-term-solution-217177">the Middle East</a> <a href="https://theconversation.com/russian-attempt-to-control-narrative-in-ukraine-employs-age-old-tactic-of-othering-the-enemy-206154">and Europe</a>, <a href="https://theconversation.com/2023s-extreme-storms-heat-and-wildfires-broke-records-a-scientist-explains-how-global-warming-fuels-climate-disasters-217500">a global climate crisis</a>. Yet like other historians, I’ve long thought that <a href="https://scholar.google.com/citations?user=pGEB0QIAAAAJ&hl=en">the study of the past</a> can help point the way forward.</p>
<p>“White Christmas” has resonated for more than 80 years, and I think the reasons why are worth understanding.</p>
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<figcaption><span class="caption">Bing Crosby sings ‘White Christmas’ in the 1942 musical ‘Holiday Inn.’</span></figcaption>
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<h2>Yearning for unity</h2>
<p>Christmas in America had always reflected a mix of influences, from ancient Roman <a href="https://theconversation.com/the-christmas-tree-is-a-tradition-older-than-christmas-195636">celebrations of the winter solstice</a> to the Norse festival <a href="https://theconversation.com/yule-a-celebration-of-the-return-of-light-and-warmth-218779">known as Yule</a>. </p>
<p>Catholics in Europe had celebrated Christmas with public merriment since the Middle Ages, but Protestants often denounced the holiday as a vestige of paganism. These religious tensions <a href="https://theconversation.com/why-the-puritans-cracked-down-on-celebrating-christmas-151359">spilled over to the American colonies</a> and persisted after the Revolutionary War, when slavery divided the nation even further.</p>
<p>After the Civil War, many Americans pined for national traditions that could unify the country. Protestant opposition to Christmas celebrations had relaxed, so Congress finally <a href="https://time.com/4608452/christmas-america-national-holiday/">declared Christmas a federal holiday in 1870</a>. Millions of Americans soon adopted <a href="https://theconversation.com/the-christmas-tree-is-a-tradition-older-than-christmas-195636">the German tradition of decorating trees</a>. They also exchanged presents, sent cards and shared stories of Santa Claus, a figure whose image the cartoonist <a href="https://www.smithsonianmag.com/history/civil-war-cartoonist-created-modern-image-santa-claus-union-propaganda-180971074/">Thomas Nast</a> perfected in the late 19th century.</p>
<p>The Christmases that Berlin and Crosby “used to know” were those of the 1910s and 1920s, when the season expanded to include <a href="https://madisonsquarepark.org/community/news/2021/04/holiday-tree/">the nation’s first public Christmas tree lighting ceremony</a> and <a href="https://www.history.com/news/the-first-macys-thanksgiving-day-parade">the appearance of Santa Claus</a> at the end of Macy’s Thanksgiving Day Parade. </p>
<p>Despite these evolving secular influences, Christmas music and entertainment continued to emphasize Christianity. Churchgoers and carolers often sang “Silent Night” and “Joy to the World.”</p>
<h2>‘The best song anybody ever wrote’</h2>
<p>Berlin’s inspiration for the song came in 1937, <a href="https://www.simonandschuster.com/books/White-Christmas/Jody-Rosen/9780743218764">when he spent Christmas in Beverly Hills</a>. He was near the film studios where he worked but far from his wife, Ellin – a devout Catholic – and the New York City home in Manhattan where they had always celebrated the holiday with their three daughters. </p>
<p>Being apart from Ellin that Christmas was particularly difficult: Their infant son had died on Dec. 26, 1928. Irving knew his wife would have to make the annual visit to their son’s grave by herself.</p>
<p>By 1940, Berlin had come up with his lyrics. In his Manhattan office, he sat at his piano and asked his arranger to take down the notes.</p>
<p>“Not only is it the best song I ever wrote,” <a href="https://www.dacapopress.com/titles/laurence-bergreen/as-thousands-cheer/9780306806759/">he promised</a>, “it’s the best song anybody ever wrote.”</p>
<p>Berlin had connected his lonesome Christmas to the broader turmoil of the time, including the outbreak of World War II and fraught debates about America’s role in the world. </p>
<p>This new song reflected his response: a dream of better times and places. It evoked a small town of yesteryear in which horse-drawn sleighs crossed freshly fallen snow. It also imagined a future in which dark days would be “merry and bright” once again.</p>
<p>This was a new kind of Christmas carol. It did not mention the birth of Jesus, angels or wise men – and it was a song that all Americans, including Jewish immigrants, could embrace.</p>
<p>Berlin soon took “White Christmas” back to Hollywood. He wanted it to appear in his newest musical, one that would tell the story of a retired singer whose hotel offered rooms and entertainment, but only on American holidays. He titled the film “Holiday Inn” and pitched it to Paramount Pictures, with Crosby as the lead.</p>
<h2>Fighting for ‘the right to dream’</h2>
<p>Raised in Spokane, Washington, Crosby had launched his music career in the 1920s. A weekly radio show and a contract with Paramount led to stardom during the 1930s. </p>
<p>With his slim build and protruding ears, Crosby did not look the part of a leading man. But his easygoing demeanor and mellow voice made him immensely popular. </p>
<p>“<a href="https://www.imdb.com/title/tt0034862/">Holiday Inn</a>” premiered in August 1942. Reviewers barely mentioned the song, but ordinary Americans couldn’t get enough of it. By December it was on every radio, in every jukebox and, as the Christian Science Monitor newspaper noted, in nearly “every home and heart” in the country.</p>
<p>The key reason was the nation’s entry into World War II.</p>
<p>“White Christmas” was not overtly patriotic, but it made Americans think about why they fought, sacrificed and endured separation from their loved ones. <a href="https://www.simonandschuster.com/books/White-Christmas/Jody-Rosen/9780743218764">As an editorial</a> in the Buffalo Courier-Express concluded, the song “provided a forcible reminder that we are fighting for the right to dream and for memories to dream about.”</p>
<p>This made it a song all Americans could embrace, including those not always treated like Americans.</p>
<figure class="align-center ">
<img alt="Painting of Santa Clause wearing a stars-and-stripes hat as a young boy and girl sit on his lap." src="https://images.theconversation.com/files/566453/original/file-20231219-15-3zn321.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/566453/original/file-20231219-15-3zn321.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=434&fit=crop&dpr=1 600w, https://images.theconversation.com/files/566453/original/file-20231219-15-3zn321.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=434&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/566453/original/file-20231219-15-3zn321.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=434&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/566453/original/file-20231219-15-3zn321.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=545&fit=crop&dpr=1 754w, https://images.theconversation.com/files/566453/original/file-20231219-15-3zn321.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=545&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/566453/original/file-20231219-15-3zn321.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=545&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">During World War II, aspects of the Christmas holiday – family, home, comfort and safety – took on greater meaning.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/retro-santa-claus-wearing-a-stars-and-stripes-tophat-with-a-news-photo/525363617?adppopup=true">GraphicaArtis/Getty Images</a></span>
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<h2>Affirming faith in humanity</h2>
<p>Berlin and Crosby didn’t set out to change how Americans celebrate Christmas. But that’s what they ended up doing.</p>
<p>Their song’s universal appeal and phenomenal success launched a new era of holiday entertainment – traditions that helped Americanize the Christmas season.</p>
<p>Like “White Christmas,” popular songs such as “Have Yourself a Merry Little Christmas” (1943) tapped into a longing for being with friends and family. “Rudolph the Red-Nosed Reindeer” (1949) and other new songs celebrated snow, sleigh rides and Santa Claus, not the birth of Jesus.</p>
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<a href="https://images.theconversation.com/files/566381/original/file-20231218-25-udqob2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Red and blue cover for sheet music featuring photographs of two smiling young men and two smiling young women." src="https://images.theconversation.com/files/566381/original/file-20231218-25-udqob2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/566381/original/file-20231218-25-udqob2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=799&fit=crop&dpr=1 600w, https://images.theconversation.com/files/566381/original/file-20231218-25-udqob2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=799&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/566381/original/file-20231218-25-udqob2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=799&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/566381/original/file-20231218-25-udqob2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1004&fit=crop&dpr=1 754w, https://images.theconversation.com/files/566381/original/file-20231218-25-udqob2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1004&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/566381/original/file-20231218-25-udqob2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1004&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The sheet music for Irving Berlin’s ‘White Christmas.’</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/sheet-music-for-irving-berlins-white-christmas-new-york-news-photo/455915107?adppopup=true">Robert R. McElroy/Getty Images</a></span>
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<p>“White Christmas” <a href="https://books.google.com/books/about/Bing_Crosby_a_Pocketful_of_Dreams.html?id=2DRE2U_8WJIC">had already sold 5 million copies by 1947</a> when Crosby recorded “Merry Christmas,” the first Christmas album ever produced. On the album, “White Christmas” appeared alongside holiday classics such as “Jingle Bells” and “Santa Claus Is Coming to Town.”</p>
<p>Hollywood followed suit. In the popular 1946 film “<a href="https://www.imdb.com/title/tt0038650/">It’s a Wonderful Life</a>,” for example, bonds of family and friendship proved their value just in time for Christmas. </p>
<p>Faith was affirmed, but it was a faith in humanity. </p>
<p>Over the coming decades, Christmas entertainment continued to reach new audiences.</p>
<p>The upbeat songs of Phil Spector’s 1963 album “A Christmas Gift for You,” for example, appealed to baby boomers. Producers also catered to younger audiences with television specials such as “A Charlie Brown Christmas” and “How the Grinch Stole Christmas.”</p>
<p>Hollywood then rediscovered Christmas during the 1980s, largely because of “<a href="https://www.imdb.com/title/tt0085334/?ref_=nv_sr_srsg_1_tt_7_nm_0_q_christmas%2520story">A Christmas Story</a>,” a film that didn’t exactly view Christmas through rose-colored glasses. While satirizing the chaos and angst of the holiday season, the film nonetheless embraced Christmas, warts and all. A steady stream of Christmas films followed – “<a href="https://www.imdb.com/title/tt0096061/">Scrooged</a>,” “<a href="https://www.imdb.com/title/tt0099785/?ref_=nv_sr_srsg_1_tt_7_nm_0_q_home%2520alone">Home Alone</a>,” “<a href="https://www.imdb.com/title/tt0319343/?ref_=nv_sr_srsg_1_tt_7_nm_0_q_elf">Elf</a>” – where themes of nostalgia, family and togetherness were ever-present.</p>
<p>Since the 1940s, the Christmas season has become even more inclusive. <a href="https://www.pewresearch.org/short-reads/2013/12/23/christmas-also-celebrated-by-many-non-christians/">A 2013 Pew Research survey</a> found that 81% of non-Christians in the U.S. celebrate Christmas. Yes, the holiday has also <a href="https://www.penguinrandomhouse.com/books/122132/the-battle-for-christmas-by-stephen-nissenbaum/">become more commercial</a>. But that, too, has made it all the more American.</p>
<p>Amid these changes, Irving Berlin’s song has been a holiday mainstay, reminding listeners of what makes them not just American, but human: the importance of home, a longing for togetherness and a shared hope for a better future.</p><img src="https://counter.theconversation.com/content/220019/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ray Rast does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The secular carol doesn’t mention Jesus, angels or wise men, while reminding listeners of what makes them not just American, but human.Ray Rast, Associate Professor of History, Gonzaga UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1992092023-08-21T01:34:02Z2023-08-21T01:34:02Z‘An extraordinary dynamo’: Doris Taylor founded Meals on Wheels and helped elect Don Dunstan<figure><img src="https://images.theconversation.com/files/543583/original/file-20230821-246711-6ttzir.png?ixlib=rb-1.1.0&rect=17%2C0%2C3976%2C1994&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">From left: Doris Taylor, and Meals on Wheels volunteers at work.</span> <span class="attribution"><span class="source">National Archives of Australia: A1200 – L22263, L22265, 22266</span></span></figcaption></figure><p>When Doris Taylor took possession of a new motorised wheelchair in 1951, she quipped: “Heaven help any bureaucrat who gets in my way now.”</p>
<p>Few would have dared. For while she may not have been able to walk, Taylor was no walkover. A fearless and passionate advocate for the socially disadvantaged, she refused to sit on the sidelines of society, and had a well-earned reputation for getting things done. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/529063/original/file-20230530-15-ocezkq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/529063/original/file-20230530-15-ocezkq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/529063/original/file-20230530-15-ocezkq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=750&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529063/original/file-20230530-15-ocezkq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=750&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529063/original/file-20230530-15-ocezkq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=750&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529063/original/file-20230530-15-ocezkq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=943&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529063/original/file-20230530-15-ocezkq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=943&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529063/original/file-20230530-15-ocezkq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=943&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Doris Taylor.</span>
<span class="attribution"><span class="source">Meals on Wheels SA</span></span>
</figcaption>
</figure>
<p>After witnessing poor children forced to scrounge for scraps during the <a href="https://theconversation.com/plenty-of-resilience-but-little-resistance-in-a-new-account-of-australias-great-depression-178417">Great Depression</a>, for example, she set up a soup kitchen in the local school. </p>
<p>When she realised elderly people were being institutionalised in psychiatric homes simply because they were undernourished, she founded <a href="https://mealsonwheels.org.au/">Meals on Wheels</a>. </p>
<p>And when she wanted a more radical voice in politics, she convinced a young solicitor, <a href="https://theconversation.com/dunstan-christies-and-me-growing-up-in-the-athens-of-the-south-70266">Don Dunstan</a>, to join the Australian Labor Party and stand for election in the House of Assembly seat of Norwood. She even managed his election campaign, guiding him to victory.</p>
<p>Dunstan, who would go on to become premier of South Australia, later described Taylor as “an extraordinary dynamo” and “the woman who influenced my career more profoundly than any other, except my first wife Gretel”. </p>
<p>“Doris Taylor is one of the great unsung heroines of Australia,” he wrote in his memoir, <a href="https://www.dunstan.org.au/resources/felicia-the-political-memoirs-of-don-dunstan/">Felicia</a>. “I can never record sufficiently the gratitude I owe her, as do thousands of others.”</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/543585/original/file-20230821-239003-etnnyc.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/543585/original/file-20230821-239003-etnnyc.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/543585/original/file-20230821-239003-etnnyc.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=446&fit=crop&dpr=1 600w, https://images.theconversation.com/files/543585/original/file-20230821-239003-etnnyc.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=446&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/543585/original/file-20230821-239003-etnnyc.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=446&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/543585/original/file-20230821-239003-etnnyc.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=561&fit=crop&dpr=1 754w, https://images.theconversation.com/files/543585/original/file-20230821-239003-etnnyc.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=561&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/543585/original/file-20230821-239003-etnnyc.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=561&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Volunteers prepare lunch in a Meals on Wheels kitchen.</span>
<span class="attribution"><span class="source">National Archives of Australia: A1200, L22264</span></span>
</figcaption>
</figure>
<h2>A social conscience wakes</h2>
<p>Born on 25 July 1901 in Norwood, South Australia, Taylor was the eldest of four children of bricklayer Thomas Taylor and his wife Angelina. The family moved to Mt Gambier soon after her birth. There, aged seven, she fell from a ladder, leaving her with a bad limp. </p>
<p>Four years later, after the family had returned to Norwood, Taylor damaged her spine in another fall, leaving her paralysed. She endured several operations, spending years in hospitals encased in plaster, unable to move. But when doctors recommended placing Taylor in the Home for Incurables, her mother refused, insisting on taking her home. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/529057/original/file-20230530-19-bktyo0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/529057/original/file-20230530-19-bktyo0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/529057/original/file-20230530-19-bktyo0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=922&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529057/original/file-20230530-19-bktyo0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=922&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529057/original/file-20230530-19-bktyo0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=922&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529057/original/file-20230530-19-bktyo0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1158&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529057/original/file-20230530-19-bktyo0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1158&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529057/original/file-20230530-19-bktyo0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1158&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Doris Taylor.</span>
<span class="attribution"><span class="source">Meals on Wheels SA</span></span>
</figcaption>
</figure>
<p>In a wheelchair for the rest of her life, Taylor had only limited movement of her head, shoulders, arms and fingers. Her condition was exacerbated by painful rheumatoid arthritis that rendered her fingers stiff and twisted. She could move nothing else, Dunstan wryly noted, “except other people off their behinds”. </p>
<p>Determined to become a useful member of society, she had no time for self-pity, according to Meals on Wheels historian Michael Cudmore. “We are in the world to help each other,” she would say. </p>
<p>It was during the Great Depression that her “social conscience really awoke”. Passing by a local school, she noticed a small boy taking sandwiches from a box in the playground. The box had been placed there by well-meaning teachers so that children with excess lunch could put some aside for those who had little or none. But Taylor witnessed the shame of the child who had to publicly accept the charity of others. </p>
<p>“This child, who could not get enough lunch, was, like so many others, foraging for food,” she recalled. “And there was I gadding about the countryside thinking all was fine in the universe and that sort of tragedy had been going on almost at my front door.”</p>
<p>On Taylor’s initiative, a small soup kitchen was opened at the school, charging a penny a serve. Those who could not afford it did not pay, but every child was issued with a ticket to avoid the humiliation Taylor had observed at the sandwich box. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/hidden-women-of-history-kate-cocks-the-pioneering-policewoman-who-fought-crime-and-ran-a-home-for-babies-but-was-no-saint-191008">Hidden women of history: Kate Cocks, the pioneering policewoman who fought crime and ran a home for babies – but was no saint</a>
</strong>
</em>
</p>
<hr>
<h2>‘Organising genius’</h2>
<p>She also became secretary of the Mothers’ Club at a local kindergarten, a role that always amused her (“fancy me, an old maid running the Mothers’ Club”), organising events to raise money to buy new clothes for the children and food vouchers for their families. </p>
<p>An enthusiastic member of her local branch of the ALP, Taylor served as secretary on various committees and helped to organise a house-to-house survey of local housing conditions. She also worked with trade unions, representing them on the Good Neighbour Council, set up to assist newly arrived European migrants in the post-war years. </p>
<p>An adept one-fingered typist, Taylor spent most of her days writing on a small portable typewriter and answering a telephone mounted on an arm near her bed. She was an “organising genius”, cultivating a long list of contacts in the media and politics, some of whom learnt the hard way never to underestimate her. </p>
<p>Observers marvelled at the long distances she travelled, in all weather, steering her petrol-powered wheelchair with her shoulders. </p>
<p>“Her telephone is one of the busiest in Adelaide,” a News journalist noted in 1958. “She works from 7am to 11pm, guiding and directing by phone, letter and talks at meetings and clubs.” </p>
<p>Widely and “extremely well-read” in politics, philosophy, literature and the arts, Taylor taught herself several languages, including Russian. She also found time to read twice a week to a blind ex-schoolmaster.</p>
<p>In 1952, as secretary of the West Norwood ALP sub-branch, Taylor decided Don Dunstan was the right candidate to win the seat of Norwood and achieve the radical reforms she wanted to see in South Australia. Dunstan recalled how she managed his first election campaign “in her own inimitable way”. The sitting Liberal and Country League member he defeated was Taylor’s cousin.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/529064/original/file-20230530-23-fnmyth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/529064/original/file-20230530-23-fnmyth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/529064/original/file-20230530-23-fnmyth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529064/original/file-20230530-23-fnmyth.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529064/original/file-20230530-23-fnmyth.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529064/original/file-20230530-23-fnmyth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529064/original/file-20230530-23-fnmyth.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529064/original/file-20230530-23-fnmyth.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Doris Taylor managed SA Premier Don Dunstan’s first election campaign. He called her ‘one of the great unsung heroines of Australia’.</span>
</figcaption>
</figure>
<h2>‘A Home for the Aged feels quite wrong’</h2>
<p>But Taylor’s major concerns were always for the aged, the housebound and the disabled. She felt a tremendous empathy for elderly people who were being forced out of their homes and into institutions. After World War II, she joined the South Australian Pensioners’ League, becoming its public relations officer.</p>
<p>“The idea of a Home for the Aged seems quite wrong to me,” she wrote in 1955. </p>
<blockquote>
<p>Any community that segregates any part or group of its people is unhealthy, unbalanced. The community needs its aged people as much as they need and want to remain a part of the community.</p>
</blockquote>
<p>Medical research confirmed Taylor’s suspicions that the elderly deteriorated more rapidly – mentally and physically – when undernourished. And she was “appalled” to discover that hundreds of old people committed to a local psychiatric hospital had been judged to be “quite sane” after just a few weeks of nourishing meals yet were “doomed to end their days in an overcrowded mental hospital” because they had nowhere else to go. </p>
<p>After hearing of home-based meal services operating in England and <a href="https://trove.nla.gov.au/newspaper/article/206443383">South Melbourne</a>, home of <a href="https://www.theage.com.au/national/meals-on-wheels-hit-the-road-20030624-gdvxgg.html">Australia’s first</a> (initially bike-powered) meal delivery service, Taylor struck on the concept for Meals on Wheels. On a wet afternoon in October 1953, she pitched her idea to <a href="https://trove.nla.gov.au/newspaper/article/131244880">a meeting</a> of 96 pensioners, paying the rent for the hall from her own pocket.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/543586/original/file-20230821-233971-6dhqe6.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/543586/original/file-20230821-233971-6dhqe6.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/543586/original/file-20230821-233971-6dhqe6.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=456&fit=crop&dpr=1 600w, https://images.theconversation.com/files/543586/original/file-20230821-233971-6dhqe6.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=456&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/543586/original/file-20230821-233971-6dhqe6.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=456&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/543586/original/file-20230821-233971-6dhqe6.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=572&fit=crop&dpr=1 754w, https://images.theconversation.com/files/543586/original/file-20230821-233971-6dhqe6.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=572&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/543586/original/file-20230821-233971-6dhqe6.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=572&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Meals on Wheels volunteers organising a delivery.</span>
<span class="attribution"><span class="source">National Archives of Australia: A1200, L22266</span></span>
</figcaption>
</figure>
<p>Those attending were enthusiastic, contributing £5 for initial expenses. Taylor also convinced the local paper owned by a <a href="https://theconversation.com/rupert-murdoch-how-a-22-year-old-zealous-laborite-turned-into-a-tabloid-tsar-204914">young Rupert Murdoch</a> to get behind the scheme and run a subscription fund. Dunstan, by that time the newly elected member for Norwood, was enlisted to help draft the organisation’s constitution and became its first chairman.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/friday-essay-love-in-the-time-of-incontinence-why-young-people-dont-have-the-monopoly-on-love-or-even-sex-198416">Friday essay: love in the time of incontinence – why young people don't have the monopoly on love, or even sex</a>
</strong>
</em>
</p>
<hr>
<h2>A bold social experiment</h2>
<p>From the outset, Taylor was adamant that Meals on Wheels would not be a charity “but a social experiment” users would pay for. The <a href="https://trove.nla.gov.au/newspaper/article/132054762">first Meals on Wheels kitchen</a> opened in Port Adelaide on 9 August 1954, operating from a Nissen Hut donated by a local businessman on land provided by the Port Adelaide City Council. Despite the lack of a working sink, 11 “heroic volunteers” prepared and delivered eight meals.</p>
<p>Other kitchens quickly followed at Norwood, Hindmarsh and Woodville. The organisation grew into a statewide body, providing a model for other states and countries to follow. Ten years after it began, Meals on Wheels served its millionth meal.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/530031/original/file-20230605-27-l64npq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/530031/original/file-20230605-27-l64npq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/530031/original/file-20230605-27-l64npq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=492&fit=crop&dpr=1 600w, https://images.theconversation.com/files/530031/original/file-20230605-27-l64npq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=492&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/530031/original/file-20230605-27-l64npq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=492&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/530031/original/file-20230605-27-l64npq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=619&fit=crop&dpr=1 754w, https://images.theconversation.com/files/530031/original/file-20230605-27-l64npq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=619&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/530031/original/file-20230605-27-l64npq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=619&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Meals on Wheels SA</span></span>
</figcaption>
</figure>
<p>Taylor devoted the rest of her life to promoting the organisation, giving regular radio broadcasts and addressing hundreds of meetings across Australia. She accomplished this all in a volunteer capacity until the state body of Meals on Wheels appointed her as a paid organiser in 1958. The following year, she was awarded an MBE. </p>
<p>Paying tribute to Taylor’s efforts on the tenth anniversary of the organisation, Advertiser journalist Stewart Cockburn observed: “She worked, she talked, she argued, she battered with a ferocity of purpose at the doors of half the leaders of the South Australian community.”</p>
<p>Doris Taylor died on 23 May 1968, aged 66 years, but her legacy lives on. Today, Meals on Wheels delivers in excess of ten million meals to more than 120,000 clients Australia-wide each year. The South Australian electorate of Taylor is also named after her. </p>
<hr>
<p><em>The author’s grandmother, Lil Wendt, was a life member of the West Torrens branch of Meals on Wheels, and she has fond memories as a child visiting the kitchen and observing the adults at work.</em></p><img src="https://counter.theconversation.com/content/199209/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carolyn Collins receives funding from the Australian Research Council. </span></em></p>When Doris Taylor became paralysed, her mother was advised to put her in a Home for Incurables. Instead, Doris helped elect a reforming South Australian premier and founded a national institution.Carolyn Collins, ARC Research Fellow, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2023242023-03-29T12:29:05Z2023-03-29T12:29:05ZSVB’s newfangled failure fits a century-old pattern of bank runs, with a social media twist<figure><img src="https://images.theconversation.com/files/517784/original/file-20230327-17-juw7wk.jpg?ixlib=rb-1.1.0&rect=49%2C19%2C3196%2C2318&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Thousands of banks failed in the Great Depression.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/depositors-congregate-outside-the-state-ordered-closed-news-photo/514877484">Bettmann via Getty Images</a></span></figcaption></figure><p>The <a href="https://theconversation.com/silicon-valley-bank-biggest-us-lender-to-fail-since-2008-financial-crisis-a-finance-expert-explains-the-impact-201626">failure of Silicon Valley Bank</a> on March 10, 2023, came as a shock to most Americans. Even people like myself, <a href="https://scholar.google.com/citations?user=RYY7tWEAAAAJ&hl=en&oi=ao">a scholar of the U.S. banking system</a> who has worked at the Federal Reserve, didn’t expect SVB’s collapse.</p>
<p>Usually banks, like all companies, fail after a prolonged period of lackluster performance. But SVB, the nation’s 16th-largest bank, <a href="https://ir.svb.com/financials/annual-reports-and-proxies/default.aspx">had been stable and highly profitable</a> just a few months before, having earned about US$1.5 billion in profits in the last quarter of 2022. </p>
<p>However, <a href="https://americandeposits.com/brief-history-us-bank-failures/">financial history is filled with examples</a> of seemingly stable and profitable banks that unexpectedly failed. </p>
<p>The demise of <a href="https://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp">Lehman Brothers and Bear Stearns</a>, two prominent investment banks, and <a href="https://publicintegrity.org/inequality-poverty-opportunity/no-1-of-the-subprime-25-countrywide-financial-corp/">Countrywide Financial Corp.</a>, a subprime mortgage lender, during the 2008-2009 financial crisis; the <a href="https://www.investopedia.com/terms/s/sl-crisis.asp">Savings and Loan banking crisis</a> in the 1980s; and the complete collapse of the U.S. <a href="https://www.federalreservehistory.org/essays/great-depression">banking system during the Great Depression</a> didn’t unfold in exactly the same way. But they had something in common: An unexpected change in economic conditions created an initial bank failure or two, followed by general panic and then large-scale economic distress.</p>
<p>The main difference this time, in my view, is that modern innovations may have hastened SVB’s demise.</p>
<h2>Great Depression</h2>
<p>The Great Depression, which <a href="https://www.investopedia.com/terms/g/great_depression.asp">lasted from 1929 to 1941</a>, epitomized the public harm that bank runs and financial panic can cause.</p>
<p>Following a rapid expansion of the “<a href="https://www.history.com/topics/roaring-twenties">Roaring Twenties</a>,” the U.S. economy began to slow in early 1929. The <a href="https://www.investopedia.com/terms/g/great_depression.asp">stock market crashed on Oct. 24, 1929</a> – a date known as “Black Tuesday.”</p>
<p>The massive losses investors suffered weakened the economy and led to distress at some banks. Fearing that they would lose all their money, customers began to withdraw their funds from the weaker banks. Those banks, in turn, began to rapidly sell their loans and other assets to pay their depositors. These rapid sales pushed prices down further.</p>
<p>As this financial crisis spread, depositors with accounts at nearby banks also began queuing up to withdraw all their money, <a href="https://doi.org/10.1016/j.jfineco.2015.01.006">in a quintessential bank run</a>, culminating in the failure of thousands of banks by early 1933. Soon after President Franklin D. Roosevelt’s first inauguration, the federal government resorted to <a href="https://www.newyorkfed.org/research/epr/09v15n1/0907silb.html">shutting all banks in the country</a> for a whole week.</p>
<p>These failures meant that banks could no longer lend money, which led to more and more problems. The <a href="https://theconversation.com/how-high-will-unemployment-go-during-the-great-depression-1-in-4-americans-were-out-of-work-135508">unemployment rate spiked to around 25%</a>, and the <a href="https://www.federalreservehistory.org/essays/great-depression">economy shrank until the outbreak of World War II</a>.</p>
<p>Determined to avoid a repeat of this debacle, the government tightened banking regulations with the <a href="https://www.investopedia.com/articles/03/071603.asp">Glass-Steagall Act</a> of 1933. It prohibited commercial banks, which serve consumers and small and medium-size businesses, from engaging in investment banking and <a href="https://www.fdic.gov/about/history">created the Federal Deposit Insurance Corporation</a>, which insured deposits up to a certain threshold. That limit has risen sharply over the past 90 years, from <a href="https://www.bankrate.com/banking/fdic-limits-history/">$2,500 in 1933 to $250,000 in 2010</a> – the same limit in place today.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/517797/original/file-20230327-28-tieoq7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The Federal Deposit Insurance Corporation's round logo on a shiny stone wall" src="https://images.theconversation.com/files/517797/original/file-20230327-28-tieoq7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/517797/original/file-20230327-28-tieoq7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/517797/original/file-20230327-28-tieoq7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/517797/original/file-20230327-28-tieoq7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/517797/original/file-20230327-28-tieoq7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/517797/original/file-20230327-28-tieoq7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/517797/original/file-20230327-28-tieoq7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The government created the FDIC to protect depositors from bank failures.</span>
</figcaption>
</figure>
<h2>S&L crisis</h2>
<p>The nation’s new and improved banking regulations ushered in a period of relative stability in the banking system that lasted about 50 years.</p>
<p>But in the 1980s, <a href="https://www.federalreservehistory.org/essays/savings-and-loan-crisis">hundreds of the small banks known as savings and loan</a> associations failed. Savings and loans, also called “thrifts,” were generally small local banks that mainly made mortgage loans to households and collected deposits from their local communities. </p>
<p>Beginning in 1979, the Federal Reserve began to hike interest rates very aggressively to fight the <a href="https://fred.stlouisfed.org/series/DFF">high inflation rates that had become entrenched</a>.</p>
<p>By the early 1980s, <a href="https://www.presidency.ucsb.edu/documents/remarks-signing-into-law-the-depository-institutions-deregulation-and-monetary-control-act#axzz1mquUfO88">Congress began allowing banks to pay market interest rates</a> on depositers’ accounts. As a result, the interest rate S&Ls had to pay their customers was much higher than the interest income they were earning on the loans they had made in prior years. That imbalance caused many of them to lose money.</p>
<p>Even though about 1 in 3 S&Ls failed from around 1986 through 1992 – somewhere around 750 banks – most depositors at small S&Ls were protected by the <a href="https://americandeposits.com/history-and-timeline-of-changes-to-fdic-coverage-limits/">FDIC’s then-$100,000 insurance limit</a>. Ultimately, resolving that crisis cost taxpayers the equivalent of about <a href="https://www.investopedia.com/terms/s/sl-crisis.asp">$250 billion in today’s dollars</a>.</p>
<p>Because the savings and loans industry was not directly connected to the big banks of that era, their collapse did not cause runs at the bigger institutions. Nevertheless, the S&L collapse and the <a href="https://fraser.stlouisfed.org/title/financial-institutions-reform-recovery-enforcement-act-1989-firrea-1046">government’s regulatory response</a> did reduce the supply of credit to the economy.</p>
<p>As a result, the U.S. economy underwent a mild <a href="https://www.thebalancemoney.com/the-history-of-recessions-in-the-united-states-3306011">recession in the latter half of 1990 and first quarter of 1991</a>. But the banking system escaped further distress for nearly two decades.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/517790/original/file-20230327-14-hky2rp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Black and white photo of people lined up outside a bank." src="https://images.theconversation.com/files/517790/original/file-20230327-14-hky2rp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/517790/original/file-20230327-14-hky2rp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=459&fit=crop&dpr=1 600w, https://images.theconversation.com/files/517790/original/file-20230327-14-hky2rp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=459&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/517790/original/file-20230327-14-hky2rp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=459&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/517790/original/file-20230327-14-hky2rp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=577&fit=crop&dpr=1 754w, https://images.theconversation.com/files/517790/original/file-20230327-14-hky2rp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=577&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/517790/original/file-20230327-14-hky2rp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=577&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">High inflation spurred failures of many small savings-and-loan banks in the 1980s.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/depositors-lined-up-for-the-fourth-day-to-withdraw-money-news-photo/515242014">Bettmann via Getty Images</a></span>
</figcaption>
</figure>
<h2>Great Recession</h2>
<p>Against this backdrop of relative stability, Congress <a href="https://www.investopedia.com/terms/g/glba.asp">repealed most of Glass-Steagall in 1999</a> – eliminating Depression-era regulations that restricted the scope of businesses that banks could engage in.</p>
<p>Those changes contributed to what happened when, at the start of a recession that began in December 2007, the <a href="https://fred.stlouisfed.org/series/USRECD">entire financial sector suffered a panic</a>.</p>
<p>At that time, large banks, freed from the Depression-era restrictions on securities trading, as well as investment banks, hedge funds and other institutions outside the traditional banking system, had <a href="https://www.investopedia.com/terms/m/mbs.asp">heavily invested in mortgage-backed securities</a>, a kind of bond backed by pooled mortgage payments from lots of homeowners. These bonds were highly profitable amid the housing boom of that era, and they helped many <a href="https://fred.stlouisfed.org/series/BOGZ1FA796060035Q">financial institutions reap record profits</a>.</p>
<p>But the Federal Reserve had been <a href="https://fred.stlouisfed.org/series/DFF">increasing interest rates since 2004</a> to slow the economy. By 2007, many households with <a href="https://files.consumerfinance.gov/f/201204_CFPB_ARMs-brochure.pdf">adjustable-rate mortgages</a> could no longer afford to make their larger-than-expected home loan payments. That led investors to fear a rash of mortgage defaults, and the values of securities backed by mortgages plunged.</p>
<p>It wasn’t possible to know which investment banks owned a lot of these vulnerable securities. Rather than wait to find out and risk not getting paid, most of the depositors rushed to get their money out by late 2007. This stampede led to cascading failures in 2008 and 2009, and the federal government <a href="https://www.russellsage.org/publications/rethinking-financial-crisis">responded with a series of big bailouts</a>.</p>
<p>The government even <a href="https://www.politico.com/story/2018/12/19/bush-bails-out-us-automakers-dec-19-2008-1066932">bailed out General Motors and Chrysler</a>, two of the country’s three largest automakers, in December 2008 to <a href="https://doi.org/10.1093/qje/qjw031">keep the industry from going bankrupt</a>. That happened because the major car companies relied on the financial system to provide potential car buyers with credit to purchase or lease new cars. But when the financial system collapsed, buyers could no longer obtain credit to finance or lease new vehicles.</p>
<p>The <a href="https://www.federalreservehistory.org/essays/great-recession-of-200709">Great Recession lasted until June 2009</a>. Stock prices <a href="https://www.thebalancemoney.com/stock-market-crash-of-2008-3305535">plummeted by more than 50%</a>, and <a href="https://www.bls.gov/opub/mlr/2018/article/great-recession-great-recovery.htm">unemployment peaked at around 10%</a> – the highest rate since the early 1980s.</p>
<p>As with the Great Depression, the government responded to this financial crisis with significant new regulations, including a new law known as the <a href="https://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm">Dodd-Frank Act of 2010</a>. It imposed stringent new requirements on banks with assets above $50 billion.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/517792/original/file-20230327-19-xsl2ub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A group of despondent men look aghast." src="https://images.theconversation.com/files/517792/original/file-20230327-19-xsl2ub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/517792/original/file-20230327-19-xsl2ub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/517792/original/file-20230327-19-xsl2ub.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/517792/original/file-20230327-19-xsl2ub.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/517792/original/file-20230327-19-xsl2ub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/517792/original/file-20230327-19-xsl2ub.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/517792/original/file-20230327-19-xsl2ub.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Traders in Chicago watch stock index futures plunge on March 17, 2008.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/traders-watch-prices-in-the-s-p-500-stock-index-futures-pit-news-photo/80276991">Scott Olson/Getty Image</a></span>
</figcaption>
</figure>
<h2>Close-knit customers</h2>
<p>Congress <a href="https://www.cnn.com/2023/03/14/politics/facts-on-trump-2018-banking-deregulation/index.html">rolled back some of Dodd-Frank’s most significant changes</a> only eight years after lawmakers approved the measure. </p>
<p>Notably, the most stringent requirements were now reserved for banks with more than $250 billion in assets, up from $50 billion. That change, which Congress passed in 2018, paved the way for regional banks like SVB to <a href="https://www.govexec.com/oversight/2023/03/regulatory-failure-101-what-collapse-silicon-valley-bank-reveals/384124/">rapidly expand with much less regulatory oversight</a>.</p>
<p>But still, how could SVB collapse so suddenly and without any warning?</p>
<p>Banks take deposits to make loans. But a loan is a long-term contract. Mortgages, for example, can last for 30 years. And deposits can be withdrawn at any time. To reduce their risks, banks can invest in bonds and other securities that they can quickly sell in case they need funds for their customers.</p>
<p>In the case of SVB, the <a href="https://www.reuters.com/business/finance/svb-collapse-unleashes-treasury-volatility-whiplashing-investors-2023-03-14/">bank invested heavily in U.S. Treasury bonds</a>. Those bonds do not have any default risk, as they are debt issued by the federal government. But <a href="https://www.schwab.com/learn/story/what-happens-to-bonds-when-interest-rates-rise">their value declines when interest rates rise</a>, as newer bonds pay higher rates compared with the older bonds.</p>
<p>SVB bought a lot of Treasury bonds it had on hand when interest rates were close to zero, but the <a href="https://fred.stlouisfed.org/series/DFF">Fed has been steadily raising interest rates</a> since March 2022, and the <a href="https://www.cnbc.com/bonds/">yields available for new Treasurys</a> <a href="https://www.usbank.com/investing/financial-perspectives/market-news/interest-rates-affect-bonds.html">sharply increased over the next 12 months</a>. Some depositors became concerned that <a href="https://www.npr.org/2023/03/19/1164531413/bank-fail-how-government-bonds-turned-toxic-for-silicon-valley-bank">SVB might not be able to sell these bonds</a> at a high enough price to repay all its customers.</p>
<p>Unfortunately for SVB, these depositors were very close-knit, with most in the tech sector or startups. They <a href="https://www.washingtonexaminer.com/news/business/svb-collapse-peter-thiel-silicon-valley-">turned to social media</a>, <a href="https://www.marketplace.org/2023/03/17/behind-svbs-collapse-are-a-whole-lot-of-texts-on-messaging-groups/">group text messages</a> and other modern forms of rapid communication to share their fears – which quickly went viral. </p>
<p>Many large depositors all rushed at the same time to get their funds out. Unlike what happened nearly a century earlier during the Great Depression, they generally tried to withdraw their money online – without forming chaotic lines at bank branches.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/517794/original/file-20230327-15-712uah.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="People line up, social distanced, along a wall with the letters s, v and b." src="https://images.theconversation.com/files/517794/original/file-20230327-15-712uah.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/517794/original/file-20230327-15-712uah.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/517794/original/file-20230327-15-712uah.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/517794/original/file-20230327-15-712uah.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/517794/original/file-20230327-15-712uah.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/517794/original/file-20230327-15-712uah.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/517794/original/file-20230327-15-712uah.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Most of the SVB bank failure drama occurred online rather than in person.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/people-wait-for-service-outside-silicon-valley-bank-in-news-photo/1248284116?adppopup=true">John Brecher for The Washington Post via Getty Images</a></span>
</figcaption>
</figure>
<h2>Will more shoes drop?</h2>
<p>The government allowed SVB, which is being <a href="https://www.fdic.gov/news/press-releases/2023/pr23023.html">sold to First Citizens Bank</a>, and <a href="https://www.fdic.gov/bank/historical/bank/bfb2023.html">Signature Bank</a>, a smaller financial institution, to fail. But it agreed to repay all depositors – including those with deposits above the $250,000 limit.</p>
<p>While the authorities have not explicitly guaranteed all deposits in the banking system, I see the bailout of all SVB depositors as a clear signal that the government is prepared to take extraordinary steps to protect deposits in the banking system and prevent an overall panic. </p>
<p>I believe that it is too soon to say whether these measures will work, especially as the Fed is still fighting inflation and raising interest rates. But at this point, major U.S. banks appear safe, though there are growing risks among the smaller regional banks.</p><img src="https://counter.theconversation.com/content/202324/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rodney Ramcharan does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Crises fueled by bank runs, starting with the Great Depression, have had something in common: Unexpected changes spur bank failures, followed by general panic and then large-scale economic distress.Rodney Ramcharan, Professor of Finance and Business Economics, University of Southern CaliforniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1965662022-12-21T15:58:34Z2022-12-21T15:58:34ZBanking reforms could make the UK a sustainable finance hub, but also threaten financial stability<figure><img src="https://images.theconversation.com/files/502380/original/file-20221221-12-6ss9zi.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5470%2C3635&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Relaxing some banking rules could affect the stability of the UK's financial sector, largely based in the City of London.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-nov-1-2012-tower-2162519901">Dmitry Naumov / Shutterstock</a></span></figcaption></figure><p>The UK government wants to rewrite the rules designed to keep the country’s banks and financial institutions stable – again. The so-called <a href="https://www.gov.uk/government/collections/financial-services-the-edinburgh-reforms">Edinburgh reforms</a> announced recently by UK chancellor Jeremy Hunt will “unlock investment and turbocharge growth in towns and cities across the UK”, he says. </p>
<p>The government is certainly heading in the right direction in some areas, including new measures on sustainable finance. Hunt has promised <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1074650/green-finance-strategy-cfe.pdf">a 2023 update</a> to its <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/820284/190716_BEIS_Green_Finance_Strategy_Accessible_Final.pdf">original green finance strategy</a>, published in 2019. This includes regulating the environmental social and governance (ESG) ratings providers from which financial firms get data for green investment and lending decisions.</p>
<p>It will be a challenge to standardise this sector since there were <a href="https://www.sustainability.com/globalassets/sustainability.com/thinking/pdfs/sustainability-ratetheraters2020-report.pdf">more than 600 ESG ratings and rankings in 2018</a> and the industry has only continued to grow since. But government plans to work with regulators to <a href="https://www.fca.org.uk/news/news-stories/code-conduct-esg-data-and-ratings-providers">safeguard transparency and good market conduct</a> in this area could help the City of London to become a global centre for sustainable finance. </p>
<p>On the other hand, some of the regulations that Hunt wants to reverse were only recently introduced in response to the 2008 global financial crisis. Relaxing them could jeopardise the UK’s financial stability. What has changed in less than 15 years to warrant a relaxation of these rules? The short answer is nothing. In fact, history seems to be repeating itself. </p>
<p>The <a href="https://www.britannica.com/event/Great-Depression">Great Depression</a> of the 1930s – the longest and deepest global economic crisis of the 20th century – was triggered by a catastrophic failure of financial markets and banks. <a href="https://www.federalreservehistory.org/essays/glass-steagall-act">Banking legislation</a> introduced afterwards aimed to separate investment banking from commercial banking to protect customer deposits and ensure financial stability. </p>
<p>This was all forgotten during the wave of banking deregulation in the 1980s and 1990s. Reversing these post-depression separation rules basically prepared the ground for the 2008 global financial crisis. After that downturn, <a href="https://www.bankofengland.co.uk/prudential-regulation/key-initiatives/ring-fencing">ring-fencing was reintroduced in both the UK</a> and <a href="https://www.federalreserve.gov/supervisionreg/volcker-rule.htm">the US (via the Volcker rule)</a>.</p>
<figure class="align-center ">
<img alt="Britain's Foreign Secretary Jeremy Hunt attends in an European Union Foreign Affairs Council meeting." src="https://images.theconversation.com/files/502383/original/file-20221221-16-ox2r83.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/502383/original/file-20221221-16-ox2r83.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/502383/original/file-20221221-16-ox2r83.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/502383/original/file-20221221-16-ox2r83.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/502383/original/file-20221221-16-ox2r83.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/502383/original/file-20221221-16-ox2r83.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/502383/original/file-20221221-16-ox2r83.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">UK chancellor, Jeremy Hunt.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/brussels-belgium-15th-july-2019-britains-1451368922">Alexandros Michailidis / Shutterstock</a></span>
</figcaption>
</figure>
<p>This is why it was surprising when UK chancellor, Jeremy Hunt, announced the <a href="https://www.gov.uk/government/collections/financial-services-the-edinburgh-reforms">Edinburgh reforms</a> in December 2022. These changes will relax three important protections that were <a href="https://www.bis.org/publ/arpdf/ar2009e1.pdf">created after the global financial crisis</a> to address some very specific contributing factors to that crash. </p>
<h2>1. The ring-fencing of bank capital</h2>
<p>When retail banks ring-fence a certain amount of capital it protects them from shocks originating elsewhere in their business, such as a risky investment or overseas activities. From a bank’s point of view, it increases the <a href="https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Bankers-Without-Borders-Implications-of-Ring-Fencing-for-European-Cross-Border-Banks-24335">level of shareholder capital it must hold rather than invest</a>, which makes the bank less profitable. A <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1060994/CCS0821108226-006_RFPT_Web_Accessible.pdf">recent independent UK review</a> recommended tweaking ring-fencing regulation slightly to change its scope to focus on large, complex banks. However, it reinforces its fundamental role in protecting the money people deposit with banks in basic savings and current accounts.</p>
<p>Increasing the level of shareholder capital banks must hold was a <a href="https://www.bis.org/bcbs/basel3/b3_bank_sup_reforms.pdf">major post-GFC regulatory change</a> because the levels had not properly cushioned banks’ losses during the crisis. This is partly why billions of pounds of <a href="https://commonslibrary.parliament.uk/research-briefings/sn05748/#:%7E:text=From%20September%202007%20to%20December%202009%2C%20the%20then,of%20which%20has%20been%20recouped%20over%20the%20years.">taxpayers’ money was spent bailing out</a> failed banks in the UK after the 2008 crash.</p>
<h2>2. Senior management accountability</h2>
<p>Excessive risk taking by some bank executives was another factor in the fall of the banking sector in 2008. Flawed compensation schemes that encouraged short-term thinking encouraged many managers to take high stakes bets with no liability. After the crisis <a href="https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/consultation-paper/2014/cp1514">regulators introduced measures</a> to discourage such excessive risk taking. This included bonus caps – <a href="https://theconversation.com/bankers-bonus-cap-why-scrapping-it-could-hurt-the-uk-economy-190811">since removed by the previous chancellor</a> – and clawbacks of previous bonuses for any serious wrongdoing in the run-up to the financial crisis. </p>
<p>The current chancellor is taking this a step further with a review of a key regulation introduced to increase <a href="https://www.fca.org.uk/firms/senior-managers-certification-regime">senior bank managers’ accountability</a>. UK regulators <a href="https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/report/evaluation-of-smcr-2020.pdf?la=en&hash=151E78315E5C50E70A6B8B08AE3D5E93563D0168">recently reported that this rule</a> – the senior managers and certification regime – is curbing risk appetite quite effectively, with 94% of managers seeing a positive impact on behaviour and culture in banks as a result.</p>
<h2>3. Securitisation</h2>
<p>Restrictions on the sale of a group of loans or mortgages as a bundled financial product – or securitisation – will also be reconsidered under Hunt’s plan. A <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1040038/Securitisation_Regulation_Review.pdf">government review</a> last year recommended relaxing such criteria, but there is also <a href="https://www.sciencedirect.com/science/article/abs/pii/S1057521918301339">abundant evidence</a> that securitisation destabilised banks during the 2008 crisis. </p>
<p>The use of these products contributed to deteriorating lending standards at many banks because the bundled nature of these products essentially made them opaque. Once a <a href="https://www.federalreserve.gov/boarddocs/speeches/2005/20050505/">financial innovation that was heavily praised by leading policy makers,</a> securitisation was actually a major cause of the global financial crisis.</p>
<h2>Varying support</h2>
<p>Regulators have <a href="https://www.telegraph.co.uk/business/2022/12/18/bank-england-hits-back-rishi-sunaks-plan-liberate-city-london/">voiced concerns</a> about damage to financial stability due to any relaxation of rules – <a href="https://www.ft.com/content/98882508-7de9-476e-becd-5c9697870770">both current</a> and <a href="https://www.ft.com/content/33f73a5a-9c11-4f59-a7f9-ddd1e56cffbd">former Bank of England staff</a>. Senior European Central Bank figures have also <a href="https://www.ecb.europa.eu/press/blog/date/2022/html/ecb.blog221104%7E34240c3770.en.html">criticised similar efforts</a> to dilute <a href="https://www.ft.com/content/c872d5b9-984e-493c-942d-2dcdc9c8e4b7">EU banking regulations</a>.</p>
<p>Perhaps unsurprisingly, some <a href="https://www.ft.com/content/6cbd63e6-3413-4d4c-9285-6e46dfd7b612">city figures</a> are largely in favour of these changes. City minister Andrew Griffith has said he is <a href="https://www.ft.com/content/7fd1b000-774a-45a2-bf89-611fde48f7ba">“assured” that banks are safe</a>, for example. </p>
<p>But no one predicted the 2008 global financial crisis either. Also, banking sector risk can accumulate over time. Relaxing the rules is unlikely to lead to an immediate crash, but risk could build up in the financial system over the next 5 to 10 years following any changes.</p>
<p>The global financial crisis has cost Britain up to <a href="https://www.economist.com/free-exchange/2010/03/31/big-numbers">£7.4 trillion in lost output</a> alone. It has also had significant negative long-term effects on <a href="https://www.imf.org/en/Publications/WEO/Issues/2018/09/24/world-economic-outlook-october-2018#Chapter%202">global economic growth and income inequality</a>, among many other issues.</p>
<p>Boosting economic growth by making the City internationally competitive may be successful in the short term. But rolling back these key regulatory measures all at once could jeopardise the UK’s long-term financial stability.</p><img src="https://counter.theconversation.com/content/196566/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alper Kara does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>New green finance measures aside, UK chancellor Jeremy Hunt’s Edinburgh reforms look like history repeating itself.Alper Kara, Professor and Head of Department - Accounting, Finance and Economics, University of HuddersfieldLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1879002022-11-10T14:33:27Z2022-11-10T14:33:27ZRemembering the veterans who marched on DC to demand bonuses during the Depression, only to be violently driven out by active-duty soldiers<figure><img src="https://images.theconversation.com/files/494229/original/file-20221108-26-o0msbq.jpg?ixlib=rb-1.1.0&rect=935%2C352%2C4535%2C3453&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Bonus Army protesting on the U.S. Capitol steps on Jan. 2,1932.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/newspaper-report-of-the-bonus-army-made-up-of-unemployed-news-photo/1404441226?phrase=bonus%20army&adppopup=true">Universal History Archive/Universal Images Group via Getty Images</a></span></figcaption></figure><p>The <a href="https://www.pbs.org/wgbh/americanexperience/features/macarthur-bonus-march-may-july-1932/">Bonus Army March</a> is a forgotten footnote of American history.</p>
<p>It involved as many as 30,000 <a href="https://www.nps.gov/articles/bonus-expeditionary-forces-march-on-washington.htm">mostly unemployed veterans</a> who converged on Washington, D.C. in the spring and summer of 1932 to demand an early cash payment of a bonus they were promised for their volunteer service in World War I. </p>
<p>The bonus was due in 1945, but the Great Depression created financial panic across the country, and <a href="https://www.thoughtco.com/bonus-army-march-4147568">the WWI veterans wanted their money</a> sooner rather than later.</p>
<p>When <a href="https://www.britannica.com/event/Bonus-Army">the U.S. Senate refused</a> to pass a bill to make the payments, many of the veterans returned home. But the great majority remained and set up camps and occupied buildings near the Capitol – much to the dismay of local police, who tried to evict the demonstrators from their makeshift campgrounds. </p>
<p>A riot ensued, <a href="https://www.smithsonianmag.com/history/marching-on-history-75797769/">leaving two demonstrators dead</a> and dozens injured. </p>
<p>At that point, on July 28, 1932, the police asked for federal help. In <a href="https://www.presidency.ucsb.edu/documents/statement-about-the-bonus-marchers">a written statement</a>, President Herbert Hoover deployed his Army Chief of Staff, Gen. Douglas MacArthur, to settle the matter.</p>
<p>“In order to put an end to this rioting and defiance of civil authority,” Hoover wrote, “I have asked the Army to assist the District authorities to restore order.”</p>
<p><a href="https://www.washingtonpost.com/news/retropolis/wp/2017/07/28/the-veterans-were-desperate-gen-macarthur-ordered-u-s-troops-to-attack-them/">MacArthur’s orders</a> were to secure the buildings and contain the protesters by surrounding their campsite in Anacostia Flats located near the Capitol.</p>
<p>But as <a href="https://digitalcommons.iwu.edu/cgi/viewcontent.cgi?article=1051&context=history_honproj">MacArthur would do throughout his career</a> – most notably in Korea when his disobedience resulted in his firing – he exceeded his orders. </p>
<p>Late that afternoon, <a href="https://www.zinnedproject.org/news/tdih/bonus-army-attacked/">historians have written</a>, nearly 500 mounted cavalry men and 500 infantry soldiers, with bayonets drawn, were accompanied were accompanied by six tanks and another 800 local police officers to Anacostia Flats. It didn’t take long before the protesters were chased out of the city and their encampments burned to the ground.</p>
<p>Aides to MacArthur would later say he <a href="https://explorethearchive.com/bonus-army">never received the orders</a> to simply contain the Bonus Army. </p>
<figure class="align-center ">
<img alt="Two white men dressed military uniforms are standing next to each other." src="https://images.theconversation.com/files/494208/original/file-20221108-18-ax4heg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494208/original/file-20221108-18-ax4heg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=797&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494208/original/file-20221108-18-ax4heg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=797&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494208/original/file-20221108-18-ax4heg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=797&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494208/original/file-20221108-18-ax4heg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1002&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494208/original/file-20221108-18-ax4heg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1002&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494208/original/file-20221108-18-ax4heg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1002&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">After his troops had ousted the Bonus Army, General Douglas MacArthur, left, stands with his second-in-command, Colonel Dwight D. Eisenhower.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/after-his-troops-had-ousted-the-bonus-army-from-its-news-photo/515553566?phrase=mcarthur%20bonus%20army&adppopup=true">Getty Images</a></span>
</figcaption>
</figure>
<p>The Bonus Army March was one of the few times in American history when the U.S. military was used to shut down a massive demonstration of peaceful protesters. The debacle also came to symbolize Hoover’s <a href="https://www.whitehouse.gov/about-the-white-house/presidents/herbert-hoover/">perceived callousness toward the unemployed</a> during the Great Depression and <a href="https://www.britannica.com/event/United-States-presidential-election-of-1932">led to his defeat</a> by Franklin Roosevelt in the 1932 presidential election. </p>
<p>What the military response did not do was deter the Bonus Army demonstrators for long. </p>
<h2>The fight for bonus checks</h2>
<p>At the <a href="https://library.cqpress.com/cqresearcher/document.php?id=cqresrre1946110600">end of the First World War in 1918</a>, the U.S. government wanted to provide bonus pay to the soldiers who volunteered to fight in the American Expeditionary Force.</p>
<p>The volunteers were given certificates promising a bonus in 1945. <a href="https://www.americanheritage.com/bonus-march">Under the agreement</a>, each veteran would receive US$1 for every day served at home, and $1.25 for every day served overseas. According to the <a href="https://www.u-s-history.com/pages/h1399.html">World War Adjusted Compensation Act</a>, a maximum of $625 plus compound interest per veteran was set.</p>
<figure class="align-center ">
<img alt="Groups of men are eating lunches as they sit and stand near dozens of tents." src="https://images.theconversation.com/files/494214/original/file-20221108-9155-acv2x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494214/original/file-20221108-9155-acv2x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=467&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494214/original/file-20221108-9155-acv2x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=467&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494214/original/file-20221108-9155-acv2x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=467&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494214/original/file-20221108-9155-acv2x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=586&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494214/original/file-20221108-9155-acv2x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=586&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494214/original/file-20221108-9155-acv2x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=586&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Members of the Bonus Army are shown eating their lunches beside their tents in this May 12, 1932, photograph.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/members-of-the-bonus-expeditionary-force-also-called-bonus-news-photo/514685392?phrase=bonus%20army&adppopup=true">Bettmann/GettyImages</a></span>
</figcaption>
</figure>
<p>But by the winter of 1931, many veterans, like most Americans, were desperately in need of cash. </p>
<p><a href="https://www.oregonencyclopedia.org/articles/bonus_army/#.Y2u4JuzMLt0">Starting in Portland, Oregon</a>, about 300 of them <a href="https://www.oregonlive.com/history/2020/08/oregon-wwi-vet-led-20000-strong-bonus-army-in-1932-that-marched-on-nations-capital-met-brutal-resistance.html">decided to travel</a> to Washington to make their case to the government. Their journey gained national attention and prompted other veterans to travel to Washington as well. As time went on, families began to join the men.</p>
<h2>Congressional gridlock</h2>
<p>The Bonus Army became a problem for Hoover and congressional leaders as local authorities grew tired of an estimated 30,000 people camping out in their streets and squatting in city buildings. </p>
<p>But faced with a shrinking federal budget and precarious national economy, neither Hoover nor Congress <a href="https://www.americanheritage.com/bonus-march">wanted to authorize further depletion</a> of the national treasury. Estimates were as high as <a href="https://library.cqpress.com/cqresearcher/document.php?id=cqresrre1932092700">$2.3 billion for the federal government</a> to pay the bonuses. </p>
<figure class="align-center ">
<img alt="Thousands of black and white men are seen cheering with their arms waving in the air." src="https://images.theconversation.com/files/494222/original/file-20221108-4292-r3ej3s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494222/original/file-20221108-4292-r3ej3s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=459&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494222/original/file-20221108-4292-r3ej3s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=459&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494222/original/file-20221108-4292-r3ej3s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=459&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494222/original/file-20221108-4292-r3ej3s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=577&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494222/original/file-20221108-4292-r3ej3s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=577&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494222/original/file-20221108-4292-r3ej3s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=577&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">In this June 16, 1932, photograph, thousands of Bonus Army demonstrators are cheering for U.S. Rep. Wright Patman, who demanded immediate payment of their promised bonuses.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/the-bonus-army-a-demonstration-largely-made-up-of-world-war-news-photo/1243625943?phrase=bonus%20army&adppopup=true">FPG/Archive Photos/Getty Images</a></span>
</figcaption>
</figure>
<p>Bonus marchers tried to pressure congressional leaders by having veterans in the waiting rooms of the offices of each member of the Ways and Means Committee, which oversees the federal budget. But they were losing the public relations war turning against them. </p>
<p>By that time, rumors spread by opponents of the marchers were flying among congressional leaders and military officials about the unsanitary conditions at the camp, as well as possible communist infiltration. </p>
<p>When the bill to pay the bonus was defeated in July 1932, an estimated 8,000 Bonus Army marchers were at the Capitol. With that many angry men surrounding the building, local police feared potential violence. </p>
<p>But instead of launching a violent attack, the marchers began singing “My Country Tis of Thee” and “America the Beautiful” as they walked back to their camp. </p>
<h2>Use of military force</h2>
<p>On July 28, 1932, the local and federal governments decided that time had run out for Bonus Army demonstrators. </p>
<p>Around 11 p.m., MacArthur called a press conference to justify his actions.</p>
<p>“Had the President not acted today, had he permitted this thing to go on for 24 hours more, he would have been faced with a grave situation which would have caused a real battle,” <a href="https://www.smithsonianmag.com/history/marching-on-history-75797769/">MacArthur told reporters</a>. “Had he let it go on another week, I believe the institutions of our government would have been severely threatened.” </p>
<figure class="align-center ">
<img alt="With the dome of the U.S. capitol in the background, a group of men are seated near the ruins of their camps." src="https://images.theconversation.com/files/494218/original/file-20221108-20-fkumk8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494218/original/file-20221108-20-fkumk8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=468&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494218/original/file-20221108-20-fkumk8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=468&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494218/original/file-20221108-20-fkumk8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=468&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494218/original/file-20221108-20-fkumk8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=589&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494218/original/file-20221108-20-fkumk8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=589&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494218/original/file-20221108-20-fkumk8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=589&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">In this 1932 photograph, a group of men huddle near the ruins of their Bonus Army camp.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/bonus-army-in-washington-d-c-united-states-washington-news-photo/535780959?phrase=bonus%20army&adppopup=true">Photo12/Universal Images Group via Getty Images</a></span>
</figcaption>
</figure>
<p>With MacArthur in command, shacks were set on fire, and even the tents loaned by the National Guard were destroyed. Tanks and soldiers blocked several bridges in order to prevent people from re-entering the city.</p>
<p>Images of children and women driven out by tear gas and flames shocked and appalled the American public when they were published by newspapers across the country. </p>
<p>Despite their apparent defeat, Bonus Army veterans continued to push for early payments. </p>
<p>Four years later, in January 1936, <a href="https://www.nps.gov/articles/the-1932-bonus-army.htm">Congress passed the long-stalled Bonus bill</a> that called for payments of nearly $2 billion to the mostly men who volunteered their services during World War I. </p>
<p>Congress overrode Roosevelt’s veto and paid the veterans an average of $580 per man, which was slightly less than the $600 they would have received had they waited until 1945.</p>
<p>Today, the <a href="https://auislandora.wrlc.org/islandora/object/auislandora%3A12752">Anacostia field</a> is a largely overgrown meadowland and only has one very small sign marking that the Bonus Army was ever there.</p><img src="https://counter.theconversation.com/content/187900/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Shannon Bow O'Brien does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Thousands of volunteers joined the military during World War I. But when the war ended and the Great Depression began, the volunteers wanted a bonus to be paid in 1932, not in 1945 as planned.Shannon Bow O'Brien, Associate Professor of Instruction, The University of Texas at Austin College of Liberal ArtsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1922082022-10-10T15:01:56Z2022-10-10T15:01:56ZNobel economics prize: insights into financial contagion changed how central banks react during a crisis<figure><img src="https://images.theconversation.com/files/488978/original/file-20221010-23-ejiz6q.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Left to right: Ben Bernanke, Douglas Diamond and Philip Dybvig. </span> <span class="attribution"><a class="source" href="https://www.nobelprize.org/prizes/economic-sciences/2022/press-release/">The Nobel Foundation</a></span></figcaption></figure><p><em>This year’s <a href="https://www.nobelprize.org/prizes/economic-sciences/2022/prize-announcement/">Nobel prize in economics</a>, known as the Sveriges Riksbank Prize in Economic Sciences, has gone to Douglas Diamond, Philip Dybvig and former Federal Reserve Chair Ben Bernanke for their work on banks and how they relate to financial crises.</em> </p>
<p><em>To explain the work and why it matters, we talked to Elena Carletti, a Professor of Finance at Bocconi University in Milan.</em></p>
<p><strong>Why have Diamond, Bernanke and Dybvig been awarded the prize?</strong></p>
<p>The works by <a href="https://www.nobelprize.org/uploads/2022/10/popular-economicsciencesprize2022.pdf">Diamond and Dybvig</a> essentially explained why banks exist and the role they play in the economy by channelling savings from individuals into productive investments. Essentially, banks play two roles. On the one hand, they monitor borrowers within the economy. On the other, they provide liquidity to individuals, who don’t know what they will need to buy in future, and this can make them averse to depositing money in case it’s not available when they need it. Banks smooth out this aversion by providing us with the assurance that we will be able to take out our money when it’s required.</p>
<p>The problem is that by providing this assurance, banks are also vulnerable to crises even at times when their finances are healthy. This occurs when individual depositors worry that many other depositors are removing their money from the bank. This then gives them an incentive to remove money themselves, which can lead to a panic that causes a bank run. </p>
<p>Ben Bernanke fed into this by looking at bank behaviour during the great depression of the 1930s, and showed that bank runs during the depression was the decisive factor in making the crisis longer and deeper than it otherwise would have been. </p>
<p><strong>The observations behind the Nobel win seem fairly straightforward compared to previous years. Why are they so important?</strong></p>
<p>It’s the idea that banks that are otherwise financially sound can nevertheless be vulnerable because of panicking depositors. Or, in cases such as during the global financial crisis of 2007-09, it can be a combination of the two, where there is a problem with a bank’s fundamentals but it is exacerbated by panic. </p>
<p>Having recognised the intrinsic vulnerability of healthy banks, it was then possible to start thinking about policies to alleviate that risk, such as depositor insurance and reassuring everyone that the central bank will step in as the lender of last resort. </p>
<p>In a bank run caused by liquidity (panic) rather than insolvency, an announcement from the government or central bank is likely to be enough to solve the problem on its own – often without the need for any deposit insurance even being paid out. On the other hand, in a banking crisis caused by insolvency, that’s when you need to pump in money to rescue the institution. </p>
<p><strong>What was the consensus about bank runs before Diamond and Dybvig began publishing their work?</strong></p>
<p>There had been a lot of bank runs in the past and it was understood that financial crises were linked to them – particularly before the US Federal Reserve was founded in 1913. It was understood that bank runs made financial crises longer by exacerbating them. But the mechanism causing the bank runs wasn’t well understood. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/489027/original/file-20221010-11-on0vn4.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Police controlling an angry crowd during a Paris bank in 1904" src="https://images.theconversation.com/files/489027/original/file-20221010-11-on0vn4.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/489027/original/file-20221010-11-on0vn4.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=405&fit=crop&dpr=1 600w, https://images.theconversation.com/files/489027/original/file-20221010-11-on0vn4.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=405&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/489027/original/file-20221010-11-on0vn4.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=405&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/489027/original/file-20221010-11-on0vn4.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=509&fit=crop&dpr=1 754w, https://images.theconversation.com/files/489027/original/file-20221010-11-on0vn4.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=509&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/489027/original/file-20221010-11-on0vn4.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=509&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A bank run in Paris in 1904.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/paris-police-hold-back-crowd-making-242294071">Everett Collection</a></span>
</figcaption>
</figure>
<p><strong>How easy is it to tell what kind of bank run you are dealing with?</strong></p>
<p>It’s not always easy. For example, in 2008 in Ireland it was thought to be a classic example of bank runs caused by liquidity fears. The state stepped up to give a blanket guarantee to creditors, but it then became apparent that the banks were really insolvent and the government had to inject enormous amounts of money into them, which led to a sovereign debt crisis. </p>
<p>Speaking of sovereign debt crises, the work by Diamond and Dybvig also underpins the literature on financial contagion, which is based on a <a href="https://www.jstor.org/stable/10.1086/262109">2000 paper</a> by Franklin Allen and Douglas Gale. I worked with Allen and Gale for many years, and all our papers have been based on the work of Diamond, and Diamond and Dybvig. </p>
<p>In a similar way to how state reassurances can defuse a bank run caused by liquidity problems, we saw how the then European Central Bank President Mario Draghi was able to defuse the run on government bonds in the eurozone crisis in 2011 by saying that the bank would do “<a href="https://qz.com/1038954/whatever-it-takes-five-years-ago-today-mario-draghi-saved-the-euro-with-a-momentous-speech/">whatever it takes</a>” to preserve the euro. </p>
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<p><strong>The prize announcement has attracted plenty of people on social media saying we shouldn’t be celebrating Bernanke when he was so involved in the quantitative easing (QE) that has helped to cause today’s global financial problems – what’s your view?</strong></p>
<p>I would say that without QE our problems would today be much worse, but also that the prize recognises his achievements as an academic and not as chair of the Fed. Also, Bernanke was only one of the numerous central bankers who resorted to QE after 2008. </p>
<p>And it is not only the central bank actions that make banks stable. It’s also worth pointing out that the changes to the rules around the amount of capital that banks have to hold after 2008 have made the financial system much better protected against bank runs than it was beforehand. </p>
<p><strong>Should such rules have been introduced when the academics first explained the risks around bank runs and contagion?</strong></p>
<p>The literature had certainly hinted at these risks, but regulation-wise, we had to wait until after the global financial crisis to see <a href="https://www.ecb.europa.eu/pub/pdf/fsr/art/ecb.fsrart201405_03.en.pdf">reforms such as</a> macro-prudential regulation and more stringent micro-prudential regulation. This shows that regulators were underestimating the risk of financial crises, perhaps also pushed by the banking lobbies that had been traditionally very powerful and managed to convince regulators that risks were well managed. </p>
<p><strong>If retail banks become less important in future because of blockchain technology or central bank digital currencies, do you think the threat of financial panic will reduce?</strong></p>
<p>If we are heading for a situation where depositors put their money into central banks rather than retail banks, that would diminish the role of retail banking, but I think we are far from that. Central bank digital currencies can be designed in such a way that retail banks are still necessary. But either way, the insights from Diamond and Dybvig about liquidity panics are still relevant because they apply to any context where coordination failures among investors are important, such as sovereign debt crises, currency attacks and so on.</p><img src="https://counter.theconversation.com/content/192208/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elena Carletti does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Until Diamond and Dybvig published key papers in the early 1980s, it wasn’t well understood that perfectly healthy banks could be brought down by panicking depositors.Elena Carletti, Professor of Finance, Bocconi UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1904262022-10-09T19:10:24Z2022-10-09T19:10:24ZIn Iris, Fiona Kelly McGregor recreates the criminal underworld of Depression-era Sydney<figure><img src="https://images.theconversation.com/files/487667/original/file-20221003-27633-xq17sl.jpg?ixlib=rb-1.1.0&rect=4%2C4%2C1493%2C1102&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Tilly Devine, State Reformatory, NSW, 1925.</span> <span class="attribution"><span class="source">Public domain/Wikimedia commons</span></span></figcaption></figure><p>It’s spring 1932 and Sydney is in the grip of the Great Depression. In the narrow terrace-lined streets and back lanes of inner Sydney, there are illegal two-up games and off-course betting. Sly grog shops are open after the official pub closing time of 6pm, offering beer, spirits and drugs. Police raids are usually pre-arranged, on these venues and others, such as Black Ada’s Academy School of Dancing, where homosexual men can meet under the guise of taking ballroom dancing lessons with the women who work there. </p>
<p>Most of the prostitutes in the area are “run” by one of the two notorious vice queens of the period, <a href="https://dictionaryofsydney.org/entry/tilly_devine">Tilly Devine</a> in Darlinghurst and <a href="https://dictionaryofsydney.org/entry/kate_leigh">Kate Leigh</a> in Surry Hills. The razor gang wars between the two are finally over and there is a period of relative quiet, punctuated by the odd shooting.</p>
<hr>
<p><em>Review: Iris – Fiona Kelly McGregor (Picador).</em></p>
<hr>
<p>Enter Iris Webber, a country girl from Glen Innes, more recently from Hay Women’s Prison, where she has been incarcerated for wounding her husband with a shotgun as revenge for leaving her and for owing her mother money. Arriving in “the big smoke” at Central Station, which seems to Iris “like a cathedral, light streaming in through its high vaulted roof”, she is intrigued by what she observes: </p>
<blockquote>
<p>a boy selling shoelaces spread out on cardboard, two women in pencil skirts. An old man staggered past with his pants falling down, bronza on full display. Nobody seemed to care in the slightest […] All along the gangplank men held signs asking for work. A woman sat on a butterbox with a bawling baby on her lap and a toddler next to her, muttering Spare change?</p>
</blockquote>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/487663/original/file-20221003-13-3i91nv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/487663/original/file-20221003-13-3i91nv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/487663/original/file-20221003-13-3i91nv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=920&fit=crop&dpr=1 600w, https://images.theconversation.com/files/487663/original/file-20221003-13-3i91nv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=920&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/487663/original/file-20221003-13-3i91nv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=920&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/487663/original/file-20221003-13-3i91nv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1156&fit=crop&dpr=1 754w, https://images.theconversation.com/files/487663/original/file-20221003-13-3i91nv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1156&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/487663/original/file-20221003-13-3i91nv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1156&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption"></span>
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<p>As Iris tries to escape the attentions of a man she has met on the train, a woman intervenes, claiming to be her aunt. After questioning her, she offers Iris a place to stay at her house. </p>
<p>“The penny dropped,” says Iris, when they arrive and she sees women standing around “like they owned the street”: she wants to be like them. </p>
<p>And so begins the saga of her life on the streets, a life of sex work (initially for Tilly Devine), thieving, bar work, and drug running for Kate Leigh. And busking. </p>
<h2>A portrait of an independent woman</h2>
<p>It is evident from the beginning of <a href="https://www.panmacmillan.com.au/9781760787684/">Iris</a> that we are in the hands of a skilled storyteller. Iris is someone who reads a lot, which accounts for her rich use of metaphorical and colloquial language. Behind her is the novelist <a href="http://www.fionamcgregor.com/home">Fiona Kelly McGregor</a>, who has created a suspenseful framework for a richly detailed but inevitably somewhat repetitive account of the criminal underworld of 1930s Sydney over a period of five years. </p>
<p>McGregor punctuates Iris’s narration with scenes describing her being questioned at the police station and the Coroner’s Court about the death of a man. After Iris is charged with his murder, we encounter her at Long Bay State Reformatory for Women (referred to as “the Refty”) while she is awaiting trial. There are also interviews with her defence counsel and with Lillian Armfield, a policewoman with a particular interest in Iris. </p>
<p>It is not until the final chapters of this long novel that we discover what happened at the scene of the crime and learn the trial jury’s decision about Iris’s part in it.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/487666/original/file-20221003-22-z8kkrz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/487666/original/file-20221003-22-z8kkrz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/487666/original/file-20221003-22-z8kkrz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=502&fit=crop&dpr=1 600w, https://images.theconversation.com/files/487666/original/file-20221003-22-z8kkrz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=502&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/487666/original/file-20221003-22-z8kkrz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=502&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/487666/original/file-20221003-22-z8kkrz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=631&fit=crop&dpr=1 754w, https://images.theconversation.com/files/487666/original/file-20221003-22-z8kkrz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=631&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/487666/original/file-20221003-22-z8kkrz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=631&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Kate Leigh, Long Bay Women’s Reformatory, NSW, 1915.</span>
<span class="attribution"><span class="source">Public domain/Wikimedia commons</span></span>
</figcaption>
</figure>
<p>McGregor’s novel is a portrait of a woman who is poor and clever, angry and passionate, courageous and loyal. Above all, Iris is independent, in a milieu where even the rich and powerful women like Kate Leigh had male “protectors”. </p>
<p>After her disastrous marriage and an affair with a violent man when she first comes to Sydney, Iris avoids any such commitment – until her sexual attraction to her young friend Maisie comes to dominate her feelings and threatens her status with the men and women she lives among, not to mention giving the police another reason to abuse her. </p>
<p>Iris has no way to understand her homoerotic feelings except as “perversion”, nor to defend her choice except by reference to the violence and uselessness of men. She meets one or two other queer women, but does not feel a close affinity with them – not like the loyalty she owes her impoverished friends, both male and female. In other classes of Sydney society, or in other places, such as Paris, London or New York in the 1930s, a lesbian might have lived a relatively open life, but denial seems to be the only option for Iris.</p>
<p>All of this is depicted in a way that is entirely credible. The novel captures Iris’s feelings of shame and the intensity of her desire, her moments of blinding rage, and her grounding in the everyday realities of getting a meal, keeping a roof over her head, and looking out for her mates. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/plenty-of-resilience-but-little-resistance-in-a-new-account-of-australias-great-depression-178417">Plenty of resilience, but little resistance in a new account of Australia's Great Depression</a>
</strong>
</em>
</p>
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<h2>A detailed knowledge of time and place</h2>
<p>McGregor’s novel is based on actual people. Some are famous, like Tilly Devine and Kate Leigh, and their gangster mates Guido Caletti, Frank Green, and Phil “the Jew” Jeffs. Others are obscure faces from the police files of the period, like Iris Webber herself. McGregor has created her central character out of scant police records, combined with a detailed knowledge of place and time. </p>
<p>Her immersion in 1930s underworld Sydney is nowhere more evident than in the novel’s language, which is replete with period argot. Some of it was familiar to me: “ridge” (or “ridgy didge”, meaning “truly”), “fenced”, “pinched”, “rozzers”, “swanky”. The meaning of other terms, such as “hoon” and “bludger”, have changed since those times. Examples of rhyming slang, like “tea leafing” for “thiefing”, were fun to figure out. Other words – like “angie” (cocaine) and “royalies” (gay men) – I had to guess from the context, or get help from slang dictionaries: “swy” for two-up, “cockatoo” for keeping a look-out, “bidgee” for a drink based on methylated spirits. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/487664/original/file-20221003-54720-g6jz5o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/487664/original/file-20221003-54720-g6jz5o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/487664/original/file-20221003-54720-g6jz5o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/487664/original/file-20221003-54720-g6jz5o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/487664/original/file-20221003-54720-g6jz5o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/487664/original/file-20221003-54720-g6jz5o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/487664/original/file-20221003-54720-g6jz5o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/487664/original/file-20221003-54720-g6jz5o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Fiona Kelly McGregor.</span>
<span class="attribution"><span class="source">Photo: Jamie James / Picador Publishing</span></span>
</figcaption>
</figure>
<p>The Author’s Note states that “almost all names, dates, places and events in the novel are based on the public record”. Indeed, there are references to contemporaneous political events and figures, such as <a href="https://adb.anu.edu.au/biography/lang-john-thomas-jack-7027">Jack Lang</a>, and to the easing of Depression conditions as the 1930s go on. </p>
<p>The range of crimes and misdemeanours depicted in the novel is also telling. At that time, women could legally operate brothels, but men could not (hence the wealth of Kate and Tilly). A busker could be arrested for “gathering alms”, as Iris is many times for playing her accordion and singing in the street. The consorting law was such that police could arrest just about anyone they pleased on that charge. Lesbianism was not illegal, unlike male homosexual behaviour – nevertheless, it was policed by patriarchal society’s citizens, whether or not they were law abiding in other respects. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/set-in-a-19th-century-australian-leper-colony-eleanor-limprechts-the-coast-depicts-past-cruelties-but-has-powerful-things-to-say-about-the-present-182671">Set in a 19th century Australian leper colony, Eleanor Limprecht's The Coast depicts past cruelties, but has powerful things to say about the present</a>
</strong>
</em>
</p>
<hr>
<h2>Impoverished Sydney</h2>
<p>Iris aligns itself with a strong tradition of novels about impoverished Sydney, one that includes <a href="https://en.wikipedia.org/wiki/Caddie,_A_Sydney_Barmaid">Caddie, A Sydney Barmaid</a> by Catherine Edwards and Dymphna Cusack, Ruth Park’s <a href="https://www.penguin.com.au/books/the-harp-in-the-south-trilogy-pmc-9780143180159">Harp in the South trilogy</a>, Kylie Tennant’s <a href="https://australia-explained.com.au/books/foveaux/">Foveaux</a> and <a href="https://theaustralianlegend.wordpress.com/2021/01/16/tell-morning-this-2/">Tell Morning This</a>, Christina Stead’s <a href="https://en.wikipedia.org/wiki/Seven_Poor_Men_of_Sydney">Seven Poor Men of Sydney</a>, and, even earlier, Louis Stone’s <a href="https://www.textpublishing.com.au/books/jonah">Jonah</a>. The latter provides McGregor with her epigraph: “Yer talk about me bein’ cruel and callous. It’s the game that’s cruel, not me.”</p>
<p>Some of the section titles recall this tradition: The Big Smoke is the title of a novel by <a href="https://adb.anu.edu.au/biography/niland-darcy-francis-11242">D'Arcy Niland</a> and Down in the City alludes to a novel by <a href="https://www.textpublishing.com.au/books/down-in-the-city">Elizabeth Harrower</a>. These are stories of poor people’s Sydney, of underworld Sydney, not the city of the beautiful harbour, Kenneth Slessor’s <a href="https://allpoetry.com/Five-Bells">Five Bells</a>, or Eleanor Dark’s <a href="https://theaustralianlegend.wordpress.com/2019/07/02/waterway/">Waterway</a>. </p>
<p>When Iris appears at the Coroner’s Court at The Rocks, she remarks that this is the first time in her five years in the “big smoke” that she has even seen Circular Quay and the newly-opened Harbour Bridge. Her experience of the city has been confined to the streets around Central Station, Surry Hills and Darlinghurst, and a brief sojourn staying with her aunt in respectable Glebe.</p>
<p>Her life is similarly circumscribed by poverty and struggle. Iris finds herself in a world where petty crime is the only viable mode of survival. Yet she is no victim. She is a woman of verve and spirit, who grasps the pleasures that life offers her, and lashes out when her freedom is threatened. </p>
<p>Iris is an in-depth character study, as well as a vivid and panoramic recreation of a place and time. McGregor has succeeded in fleshing out a full portrait of a woman from some bare bones of fact, and she dedicates the book to her subject: </p>
<blockquote>
<p>In memory of Iris Eileen Mary Webber, nee Shingles (1906-1953).</p>
</blockquote>
<p>McGregor has form as a performance artist as well as the author of other books, including the short story collection <a href="http://www.fionamcgregor.com/words/suck-my-toesdirt">Suck My Toes</a> (1994), the novel <a href="http://www.fionamcgregor.com/words/indelible-ink">Indelible Ink</a> (2010), and most recently the essay collection <a href="http://www.fionamcgregor.com/words/buried-not-dead">Buried Not Dead</a> (2021). This impressive historical novel adds yet another string to her bow. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/488381/original/file-20221005-16-19r1y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/488381/original/file-20221005-16-19r1y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/488381/original/file-20221005-16-19r1y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/488381/original/file-20221005-16-19r1y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/488381/original/file-20221005-16-19r1y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/488381/original/file-20221005-16-19r1y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/488381/original/file-20221005-16-19r1y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/488381/original/file-20221005-16-19r1y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Iris Webber, NSW State Reformatory for Women, Long Bay, 1941.</span>
<span class="attribution"><span class="source">Public domain.</span></span>
</figcaption>
</figure><img src="https://counter.theconversation.com/content/190426/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Susan Sheridan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A panoramic tale and an in-depth character study, Iris immerses its readers in a world of impoverishment and struggle.Susan Sheridan, Emeritus Professor, Flinders UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1851292022-07-08T02:44:57Z2022-07-08T02:44:57ZShanty towns and eviction riots: the radical history of Australia’s property market<figure><img src="https://images.theconversation.com/files/469660/original/file-20220620-13-r5o13d.jpg?ixlib=rb-1.1.0&rect=0%2C5%2C1000%2C761&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A family standing outside a tin shack called Wiloma during the Great Depression, New South Wales, 1932</span> <span class="attribution"><a class="source" href="https://nla.gov.au/nla.obj-160054430/view">NLA/Trove</a></span></figcaption></figure><p>Skyrocketing property prices and an impossible rental market have seen growing numbers of Australians struggling to find a place to live. </p>
<p>Recent images of families pitching tents or living out of cars evoke some of the more enduring scenes from the Great Depression. Australia was among the hardest hit countries when global wool and wheat prices plummeted in 1929.</p>
<p>By 1931, many were feeling the effects of long-term unemployment, including widespread evictions from their homes. The evidence was soon seen and felt as shanty towns – known as dole camps – mushroomed in and around urban centres across the country. </p>
<p>How we responded to that housing crisis, and how we talk about those events today, show how our attitudes about poverty, homelessness and welfare are entwined with questions of national identity.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/i-couldnt-see-a-future-what-ex-automotive-workers-told-us-about-job-loss-shutdowns-and-communities-on-the-edge-180884">'I couldn't see a future': what ex-automotive workers told us about job loss, shutdowns, and communities on the edge</a>
</strong>
</em>
</p>
<hr>
<h2>Shanty towns and eviction riots</h2>
<p>Sydney’s Domain, Melbourne’s Dudley Flats and the banks of the River Torrens in Adelaide were just a few places where communities of people experiencing homelessness <a href="https://catalogue.nla.gov.au/Record/1106767">sprung up</a> in the early 1930s.</p>
<p>Some <a href="https://catalogue.nla.gov.au/Record/1106767">lived in tents</a>, others in makeshift shelters of iron, sacking, wood and other scavenged materials. Wooden crates, newspapers and flour and wheat sacks were put to numerous inventive domestic uses, such as for furniture and blankets. Camps were rife with lice, fevers and dysentery, all treated with home remedies.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/469663/original/file-20220620-23-cm58ov.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/469663/original/file-20220620-23-cm58ov.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469663/original/file-20220620-23-cm58ov.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=837&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469663/original/file-20220620-23-cm58ov.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=837&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469663/original/file-20220620-23-cm58ov.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=837&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469663/original/file-20220620-23-cm58ov.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1052&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469663/original/file-20220620-23-cm58ov.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1052&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469663/original/file-20220620-23-cm58ov.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1052&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Some people lived in tents in the Domain during the Depression of the 1930s.</span>
<span class="attribution"><a class="source" href="http://search.slv.vic.gov.au/primo-explore/fulldisplay?vid=MAIN&search_scope=Everything&tab=default_tab&lang=en_US&context=L&isFrbr=true&docid=SLV_VOYAGER1713846">Knights, Bert/State Library of Victoria</a></span>
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</figure>
<p>But many Australians fought eviction from their homes in a widespread series of protests and interventions known as the <a href="https://commonslibrary.org/lock-out-the-landlords-australian-anti-eviction-resistance/">anti-eviction movement</a>. </p>
<p>As writer Iain McIntyre outlines in his work <a href="https://commonslibrary.org/lock-out-the-landlords-australian-anti-eviction-resistance/">Lock Out The Landlords: Australian Anti-Eviction Resistance 1929-1936</a>, these protests were an initiative of members of the Unemployed Workers Movement – a kind of trade union of the jobless.</p>
<p>As <a href="https://rahu.org.au/wp-content/uploads/2020/08/Sydneys-Anti-Eviction-Movement_-Community-or-Conspiracy_.pdf">explained</a> by writers Nadia Wheatley and Drew Cottle, </p>
<blockquote>
<p>With the dole being given in the form of goods or coupons rather than as cash, it was impossible for many unemployed workers to pay rent. In working class suburbs, it was common to see bailiffs dumping furniture onto the footpath, pushing women and children onto the street. Even more common was the sight of strings of boarded up terrace houses, which nobody could afford to rent. If anything demonstrated the idiocy as well as the injustice of the capitalist system it was the fact that in many situations the landlords did not even gain anything from evicting people. </p>
</blockquote>
<p>The Unemployed Workers Movement <a href="https://rahu.org.au/wp-content/uploads/2020/08/Sydneys-Anti-Eviction-Movement_-Community-or-Conspiracy_.pdf">goal</a> was to</p>
<blockquote>
<p>Organise vigilance committees in neighbourhoods to patrol working class districts and resist by mass action the eviction of unemployed workers from their houses, or attempts on behalf of bailiffs to remove furniture, or gas men to shut off the gas supply. </p>
</blockquote>
<p>Methods of resistance were varied in practice. Often threats were <a href="https://rahu.org.au/wp-content/uploads/2020/08/Sydneys-Anti-Eviction-Movement_-Community-or-Conspiracy_.pdf">sufficient</a> to keep a landlord from evicting a family. </p>
<p>If not, a common <a href="https://rahu.org.au/wp-content/uploads/2020/08/Sydneys-Anti-Eviction-Movement_-Community-or-Conspiracy_.pdf">tactic</a> was for a large group of activists and neighbours to gather outside the house on eviction day and physically prevent the eviction. Sometimes this led to street fights with <a href="https://commonslibrary.org/lock-out-the-landlords-australian-anti-eviction-resistance/">police</a>. Protestors sometimes <a href="https://catalogue.nla.gov.au/Record/1106767">returned</a> in the wake of a successful eviction to raid and vandalise the property.</p>
<p>Protestors went under armed siege in houses barricaded with sandbags and barbed wire. This culminated in a <a href="http://www5.austlii.edu.au/au/journals/ANZLawHisteJl/2007/2.pdf">series</a> of bloody battles with police in Sydney’s suburbs in mid-1931, and numerous arrests.</p>
<h2>It’s not just what happened – it’s how we talk about it</h2>
<p>Narratives both reflect and shape our world. Written history is interesting not just for the things that happened in the past, but for how we tell them.</p>
<p>Just as the catastrophic effects of the 1929 crash were entwined with the escalating struggle between extreme left and right political ideologies, historians and writers have since taken various and even opposing viewpoints when it comes to interpreting the events of Australia’s Depression years and ascribing meaning to them.</p>
<p>Was it a time of quiet stoicism that brought out the best in us as “battlers” and fostered a spirit of mateship that underpins who we are as a nation?</p>
<p>Or did we push our fellow Australians onto the streets and into tin shacks and make people feel ashamed for needing help? As Wendy Lowenstein wrote in her landmark work of Depression oral history, <a href="https://catalogue.nla.gov.au/Record/69032">Weevils in the Flour</a>:</p>
<blockquote>
<p>Common was the conviction that the most important thing was to own your own house, to keep out of debt, to be sober, industrious, and to mind your own business. One woman says, ‘My husband was out of work for five years during the Depression and no one ever knew […] Not even my own parents.’</p>
</blockquote>
<p>This part of our history remains contested and narratives from this period - about “lifters and leaners” or the Australian “dream” of home ownership, for example – persist today.</p>
<p>As Australia’s present housing crisis deepens, it’s worth highlighting we have been through housing crises before. Public discussion about housing and its relationship to poverty remain – as was the case in the Depression era – emotionally and politically charged.</p>
<p>Our Depression-era shanty towns and eviction protests, as well as the way we remember them, are a reminder that what people say and do about the housing crisis today is not just about facts and figures. Above all, it reflects what we value and who we think we are.</p><img src="https://counter.theconversation.com/content/185129/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This research was funded by an Australian Postgraduate Award from the Australian federal government.</span></em></p>Sydney’s Domain, Melbourne’s Dudley Flats and the banks of the River Torrens in Adelaide were just a few places where communities of people experiencing homelessness sprung up in the early 1930s.Helen Dinmore, Research Fellow, University of South AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1856672022-06-29T20:29:14Z2022-06-29T20:29:14ZLet’s spare a few words for ‘Silent Cal’ Coolidge on July 4, his 150th birthday<figure><img src="https://images.theconversation.com/files/471452/original/file-20220628-14646-ondh6m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Calvin Coolidge stands with members of a nonprofit group called the Daughters of 1812.</span> <span class="attribution"><a class="source" href="https://media.gettyimages.com/photos/president-calvin-coolidge-stands-with-members-of-a-group-called-the-picture-id640478979?s=2048x2048"> Library of Congress/Corbis/VCG via Getty Images</a></span></figcaption></figure><p>A woman sitting next to President Calvin Coolidge at a dinner party once told him she had made a bet that she could get him to say more than two words. </p>
<p>“<a href="https://www.whitehouse.gov/about-the-white-house/presidents/calvin-coolidge/">You lose</a>,” replied Coolidge, who served as president from 1923 until 1929.</p>
<p>During a White House recital, a nervous opera singer foundered through a performance before Coolidge. Someone asked him what he thought of the singer’s execution. “<a href="https://whatculture.com/offbeat/12-most-impressive-retorts-in-history?page=3">I’m all for it,” he said</a>. </p>
<p>Coolidge was so taciturn that he was known as “Silent Cal.” </p>
<p>Three U.S. presidents – all of them Founding Fathers, John Adams, Thomas Jefferson and James Monroe – <a href="https://constitutioncenter.org/interactive-constitution/blog/three-presidents-die-on-july-4th-just-a-coincidence">died on July 4.</a></p>
<p>Only one was <a href="https://biography.yourdictionary.com/articles/who-is-the-only-u-s-president-born-on-july-4.html">born on July 4</a>. </p>
<p>Calvin Coolidge <a href="https://www.whitehouse.gov/about-the-white-house/presidents/calvin-coolidge/">was born</a> in Plymouth Notch, Vermont, 150 years ago, on July 4, 1872. He died in January 1933. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/471453/original/file-20220628-14748-ptv14g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A black and white photo depicts a man in a topcoat and hat gazing at a truck bearing images of two men and the words 'Two common sense Americans.'" src="https://images.theconversation.com/files/471453/original/file-20220628-14748-ptv14g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/471453/original/file-20220628-14748-ptv14g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=544&fit=crop&dpr=1 600w, https://images.theconversation.com/files/471453/original/file-20220628-14748-ptv14g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=544&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/471453/original/file-20220628-14748-ptv14g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=544&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/471453/original/file-20220628-14748-ptv14g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=684&fit=crop&dpr=1 754w, https://images.theconversation.com/files/471453/original/file-20220628-14748-ptv14g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=684&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/471453/original/file-20220628-14748-ptv14g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=684&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Calvin Coolidge inspects a campaign truck painted with images of himself and his running mate, Charles G. Dawes.</span>
<span class="attribution"><a class="source" href="https://media.gettyimages.com/photos/calvin-coolidge-inspects-a-campaign-truck-painted-with-images-of-his-picture-id104560171?s=2048x2048">FPG/Getty Images</a></span>
</figcaption>
</figure>
<h2>Getting to know Coolidge</h2>
<p>Fireworks rarely followed Coolidge during his political career. </p>
<p>Coolidge was balding, 5-foot-9 with a slight build, and he could walk into an empty room and blend in. He rarely smiled or changed expression. Alice Roosevelt Longworth, the daughter of President Theodore Roosevelt, described Coolidge’s dour expression by saying <a href="https://libquotes.com/alice-roosevelt-longworth/quote/lbn2b5z">he looked as if</a> “he had been <a href="https://www.urbandictionary.com/define.php?term=weaned%20on%20a%20pickle">weaned on a pickle</a>.”</p>
<p>Such a description would not have offended Coolidge. “I think the American public wants a solemn ass as a president,” <a href="https://www.loc.gov/item/2010643539/">he said</a>, “and I think I’ll go along with them.” </p>
<h2>Best known for a laugh or two</h2>
<p>The 30th president remains a footnote in the history of U.S. presidents. Coolidge was preceded in the White House by Warren Harding, whose administration was one of <a href="https://www.latimes.com/opinion/op-ed/la-oe-schiller-harding-trump-20180802-story.html">the most corrupt in U.S. history</a>. Coolidge was succeeded by Herbert Hoover, who was in office when the country fell into the throes of the <a href="https://www.history.com/topics/great-depression/great-depression-history">Great Depression</a>, which began with the crash of the stock market in October 1929, several months after Hoover took office. </p>
<p>Coolidge is probably best known for his contributions to books of political humor. I included him in a 2020 book I edited, “<a href="https://www.amazon.com/Art-Political-Putdown-Comebacks-Politicians/dp/1452183856">The Art of the Political Putdown: The Greatest Comebacks, Ripostes, and Retorts in History</a>.”</p>
<p>Coolidge, a Republican who believed in <a href="https://coolidgefoundation.org/resources/essays-papers-addresses-17/">small government, low taxes</a>, morality, thrift and tradition, rose quickly – but quietly – in Massachusetts politics, where he became <a href="https://malegislature.gov/VirtualTour/Artifact/90">president of the state Senate in 1914</a>. While serving in this capacity, two senators got into a bitter exchange of words in which one told the other to go to hell. The recipient of the remark demanded that Coolidge take his side. “I’ve looked up the law, Senator,” Coolidge told him, “and <a href="https://coolidgefoundation.org/resources/essays-papers-addresses-17/">you don’t have to go</a>.”</p>
<p>Coolidge was elected <a href="https://malegislature.gov/VirtualTour/Artifact/90">governor of Massachusetts in 1919</a>. He soon earned a national reputation for being decisive by firing striking police officers in Boston and ordering the state militia to bring calm to the city after the strike had left its inhabitants vulnerable to violent mobs in September 1919. </p>
<p>Warren Harding, the Republican presidential nominee in 1920, chose Coolidge as his running mate. Harding and Coolidge won the election. Coolidge then became president when Harding died in 1923. </p>
<p>Early in his term, in December 1923, Coolidge <a href="https://www.whitehouse.gov/about-the-white-house/presidents/calvin-coolidge/">spoke to Congress</a> and pressed for isolation in U.S. foreign policy and tax cuts. He believed <a href="https://slate.com/human-interest/2011/11/calvin-coolidge-why-are-republicans-so-obsessed-with-him.html">in small government</a> and also benefited from the country’s strong economic position in the early 1920s. This helped his popularity rise, and he got more than <a href="https://www.whitehouse.gov/about-the-white-house/presidents/calvin-coolidge/">54% of the popular vote</a> in the 1924 election.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/471459/original/file-20220628-14286-ejcf8t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Calvin Coolidge eats ice cream off a plate next to his wife, in front of a group of men dressed formally in suits and a Navy uniform in this black and white photo" src="https://images.theconversation.com/files/471459/original/file-20220628-14286-ejcf8t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/471459/original/file-20220628-14286-ejcf8t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=444&fit=crop&dpr=1 600w, https://images.theconversation.com/files/471459/original/file-20220628-14286-ejcf8t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=444&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/471459/original/file-20220628-14286-ejcf8t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=444&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/471459/original/file-20220628-14286-ejcf8t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=558&fit=crop&dpr=1 754w, https://images.theconversation.com/files/471459/original/file-20220628-14286-ejcf8t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=558&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/471459/original/file-20220628-14286-ejcf8t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=558&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Calvin Coolidge and his wife, Grace Goodhue Coolidge, eat ice cream at a garden party for veterans at the White House in an undated photo.</span>
<span class="attribution"><a class="source" href="https://media.gettyimages.com/photos/president-and-mrs-coolidge-eat-ice-cream-at-a-garden-party-for-at-picture-id640491357?s=2048x2048">Library of Congress/Corbis/VCG via Getty Images)</a></span>
</figcaption>
</figure>
<h2>A genius for inactivity</h2>
<p>If it was Coolidge’s decisive action that brought him to national attention, it was his inaction as president that defined his presidency and won him the admiration of political conservatives. </p>
<p>Newspaper columnist <a href="https://www.frontporchrepublic.com/2010/06/the-anti-propaganda-of-calvin-coolidge/">Walter Lippmann wrote</a> this about Coolidge in 1926: “Mr. Coolidge’s genius for inactivity is developed to a very high point. It is a grim, determined, alert inactivity, which keeps Mr. Coolidge occupied constantly.”</p>
<p><a href="https://css.cua.edu/wp-content/uploads/2020/02/Arnold-Calvin-Coolidge-Classical-Statesman-1.pdf">Historians, however, praise Coolidge</a> for presiding over low inflation, low unemployment and budget surpluses during every year of his presidency. He kept the country at peace and restored confidence in the government after the <a href="https://www.britannica.com/biography/Warren-G-Harding/Scandals">scandal-plagued Harding years</a>. </p>
<p>But being president and taking daily naps still apparently left Coolidge with a lot of free time. </p>
<p>Coolidge reportedly liked to <a href="https://nebushumor.wordpress.com/2020/03/26/stray-historical-thoughts-calvin-coolidge-edition/">press the alarm buttons</a> in the Oval Office, and when the Secret Service agents ran into the office to see what was wrong, he would be hiding.</p>
<p>Coolidge decided not to run for reelection in 1928. When reporters asked him why, he answered with characteristic succinctness. “<a href="https://www.npr.org/sections/itsallpolitics/2012/05/01/151762298/the-funniest-presidents-in-history">Because there’s no chance for advancement</a>,” he said.</p>
<p>If Coolidge had been reelected, he would have suffered Hoover’s fate of being president during the Depression. His political timing was as good as his comic timing. </p>
<p>Social critic H.L. Mencken once speculated on how Coolidge would have responded to the collapse of the stock market and the collapse of the nation’s economy. </p>
<p>“He would have responded to bad times precisely as he responded to good ones – that is, by pulling down the blinds, stretching his legs upon his desk, and snoozing away the lazy afternoons,” Mencken wrote. And yet the iconoclastic Mencken had this begrudging praise for Coolidge. “There were no thrills while he reigned, but neither were there any headaches. He had no ideas, <a href="http://www.perno.com/amer/docs/H%20L%20Mencken%20on%20Calvin%20Coolidge.htm">and he was not a nuisance</a>.”</p>
<p>When American writer Dorothy Parker, who, like Coolidge, could say much with few words, learned that the former president had died in 1933, she replied, “<a href="https://quoteinvestigator.com/2014/07/04/silent/">How could they tell</a>?”</p><img src="https://counter.theconversation.com/content/185667/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Lamb does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>US President Calvin Coolidge hasn’t gone down in history for his triumphs or failures as president during the 1920s – but his dry sense of humor carries on.Chris Lamb, Professor of Journalism, IUPUILicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1784172022-05-04T02:51:13Z2022-05-04T02:51:13ZPlenty of resilience, but little resistance in a new account of Australia’s Great Depression<figure><img src="https://images.theconversation.com/files/460219/original/file-20220428-26-zbmv26.jpg?ixlib=rb-1.1.0&rect=0%2C2%2C613%2C471&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Schoolchildren queuing for free soup and a slice of bread during the Depression, Belmore North Public School, 2 August 1934.</span> <span class="attribution"><span class="source">State Library of New South Wales</span></span></figcaption></figure><p>In her latest book, <a href="https://www.allenandunwin.com/browse/books/general-books/history/Australias-Great-Depression-Joan-Beaumont-9781760293987">Australia’s Great Depression</a>, Joan Beaumont offers a deeply conservative history animated by the neoliberal spirit of our age. </p>
<p>In many ways a sequel to <a href="https://www.allenandunwin.com/browse/books/general-books/history/Broken-Nation-Joan-Beaumont-9781760111304">Broken Nation: Australians in the Great War</a> (2014), Beaumont’s continuing national saga tells the story of a “resilient nation”, a people whose personal values of “stoicism, independence, self-reliance and personal responsibility” defined their response to the worst economic crisis of the 20th century. </p>
<hr>
<p><em>Review: Australia’s Great Depression – Joan Beaumont (Allen & Unwin).</em></p>
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<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/460202/original/file-20220428-24-5ipwn0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/460202/original/file-20220428-24-5ipwn0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/460202/original/file-20220428-24-5ipwn0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=918&fit=crop&dpr=1 600w, https://images.theconversation.com/files/460202/original/file-20220428-24-5ipwn0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=918&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/460202/original/file-20220428-24-5ipwn0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=918&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/460202/original/file-20220428-24-5ipwn0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1153&fit=crop&dpr=1 754w, https://images.theconversation.com/files/460202/original/file-20220428-24-5ipwn0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1153&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/460202/original/file-20220428-24-5ipwn0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1153&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Although more than a third of workers were unemployed by 1932 and many more were immiserated, although thousands of businesses were bankrupted, homes were lost and families separated, the “narrative of disaster that has dominated popular memory” needs to be “complemented”, in Beaumont’s view, by attention to people’s “capacity for resilience”. </p>
<p>The architects of Jobseeker might find reassurance here. The theory of “resilience” – originally a concept developed in biological sciences, borrowed by psychologists, and since critiqued as “embedded neoliberalism” – provides Beaumont’s book with its conceptual framework and historical narrative. Australia’s Great Depression tells the story of the impact of global economic forces on hapless communities and individuals. “Their endurance and survival,” Beaumont writes, “provide one of the most impressive narratives of resilience in the nation’s history.” </p>
<p>The “agency” displayed by community organisations also characterised the “strategies of self-help” adopted by families – with “the tireless maternal figure at the core”. Noting that “starvation did not stalk the streets of Depression Australia”, Beaumont draws heavily on David Potts’ earlier controversial history <a href="https://www.theage.com.au/entertainment/books/the-myth-of-the-great-depression-20060729-ge2t78.html">The Myth of the Great Depression</a> (2006) concerning the “positive culture of poverty” to conclude that people “knew how to value simpler things”.</p>
<hr>
<p>
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Read more:
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</strong>
</em>
</p>
<hr>
<h2>Political mobilisations</h2>
<p>Beaumont is interested in family and community survival strategies, but not so much in political mobilisations animated by visions of radical change. She provides a detailed account of party politics – the warring of factions and toppling of leaders, from the 1920s into the 1930s, at state and federal levels – but the visions of a different world that sustained Aboriginal, feminist and labour movements and led to real changes in social policy are marginal to this history. </p>
<p>Indeed, “women”, the homeless, men forced “on the track”, Aborigines and migrants are all lumped into one section called “On the Margins” – part eight of a very long ten-part book. But as historians since <a href="https://en.wikipedia.org/wiki/E._H._Carr">E.H. Carr</a>, at least, have pointed out, historical subjects only become “marginal” – or invisible – when historians make them so. </p>
<p>Beaumont’s lack of interest in feminist political mobilisation in response to the experience of the Great Depression is especially puzzling. The 1930s saw an upsurge in women’s political activism and a transformational shift away from earlier forms of maternalist politics towards a demand for equal pay and opportunity. </p>
<p>The oppressive experience of motherhood during the Depression, which led to an increase in abortions and maternal mortality and a decline in the birthrate – together with the relentless attacks on women in paid work – led to new demands for women’s economic equality. </p>
<p>“Women’s right to work,” proclaimed Victoria’s Equal Status Committee in 1935, </p>
<blockquote>
<p>rests not on the number of her dependants, nor on the fact that she does or does not compete with men, but in the absolute right of a free human being, a taxpayer and a voter to economic independence. </p>
</blockquote>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/460222/original/file-20220428-12-u6x1tm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/460222/original/file-20220428-12-u6x1tm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/460222/original/file-20220428-12-u6x1tm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=938&fit=crop&dpr=1 600w, https://images.theconversation.com/files/460222/original/file-20220428-12-u6x1tm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=938&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/460222/original/file-20220428-12-u6x1tm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=938&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/460222/original/file-20220428-12-u6x1tm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1178&fit=crop&dpr=1 754w, https://images.theconversation.com/files/460222/original/file-20220428-12-u6x1tm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1178&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/460222/original/file-20220428-12-u6x1tm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1178&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption"></span>
<span class="attribution"><span class="source">Cover image: Victorian Women's Trust</span></span>
</figcaption>
</figure>
<p>A key figure in this transition was the great labour feminist <a href="https://www.labourhistory.org.au/hummer/vol-3-no-1/muriel-heagney/">Muriel Heagney</a>, whose influential book Are Women Taking Men’s Jobs? (1935) shaped the resurgence of the equal pay campaign in the 1930s and the formation of the Council of Action for Equal Pay in 1937. In the 565 pages of Australia’s Great Depression, Heagney barely rates a mention, and then only in the context of community relief funds.</p>
<p>Other key feminist figures are simply absent. Founder of the leading organisation the United Associations of Women (UA) <a href="https://www.nma.gov.au/explore/features/indigenous-rights/people/jessie-street">Jessie Street</a>, prominent broadcaster <a href="https://adb.anu.edu.au/biography/littlejohn-emma-linda-palmer-7208">Linda Littlejohn</a>, birth-control advocate <a href="https://adb.anu.edu.au/biography/rich-ruby-sophia-14202">Ruby Rich</a>, fierce Aboriginal rights campaigner <a href="https://adb.anu.edu.au/biography/bennett-mary-montgomerie-5212">Mary Bennett</a>, and the five UA candidates who stood in the New South Wales 1932 election are all missing from this history. </p>
<p>Similarly, Aboriginal activists <a href="https://adb.anu.edu.au/biography/gibbs-pearl-mary-gambanyi-12533">Pearl Gibbs</a> and <a href="https://ia.anu.edu.au/biography/tucker-margaret-elizabeth-auntie-marge-1556">Margaret Tucker</a> are nowhere to be found, not even “on the margins” or at the Day of Mourning in Sydney in 1938, which they helped organise alongside the men. </p>
<p>Demands for radical change by angry women don’t fit so easily into narrative frameworks of endurance and stoicism. In Beaumont’s history, the story of resilience trumps the power of resistance.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/460217/original/file-20220428-22-ytmgok.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/460217/original/file-20220428-22-ytmgok.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/460217/original/file-20220428-22-ytmgok.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=581&fit=crop&dpr=1 600w, https://images.theconversation.com/files/460217/original/file-20220428-22-ytmgok.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=581&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/460217/original/file-20220428-22-ytmgok.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=581&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/460217/original/file-20220428-22-ytmgok.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=730&fit=crop&dpr=1 754w, https://images.theconversation.com/files/460217/original/file-20220428-22-ytmgok.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=730&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/460217/original/file-20220428-22-ytmgok.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=730&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Aboriginal activist Pearl Gibbs is a notable omission from Beaumont’s history.</span>
<span class="attribution"><span class="source">Wikimedia commons</span></span>
</figcaption>
</figure>
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<p>
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</p>
<hr>
<h2>A transnational economic history</h2>
<p>Global economic forces and the legacy of World War I shape Australia’s Great Depression. Beaumont’s strength is in economic history. Her account of the causes and duration of the Depression is based on wide reading. It is a marvel of synthesis, rendered more accessible by an extensive “Glossary of Terms” (53 in all, including “Bretton Woods”, “gold standard” and “loan conversion”). </p>
<p>It is something of an irony however that, for all Beaumont’s insistence that hers is a “national history”, its important dynamics are transnational. Indeed, the book might have been subtitled “A Transnational History”.</p>
<p>Part One deals with the effects of the Great War: </p>
<blockquote>
<p>In every sense … the experience of the war framed the way that Australians understood and endured the later economic crisis. </p>
</blockquote>
<p>Generous repatriation benefits – including the vast scheme of soldier settlement – added substantially to Australia’s burden of war debt. The promotion of the Anzac legend </p>
<blockquote>
<p>served the function so critical to societal and personal resilience of investing the huge losses of World War I … with meaning. </p>
</blockquote>
<p>Yet the paean to masculine heroism could also serve to intensify men’s sense of betrayal and humiliation when the promises failed, as the letters of bitter soldier settlers eloquently attested. </p>
<p>Part Two of Australia’s Great Depression covers the 1920s and details the economic and political effects of the dramatic fall in international commodity prices and Australia’s fate as a “voracious borrower” on British and US financial markets. It also introduces the key figure of English banker <a href="https://en.wikipedia.org/wiki/Otto_Niemeyer">Otto Niemeyer</a>, “who had the power to dictate a bitter deflationary medicine”. Beaumont quotes Niemeyer on Australia’s irresponsibility, tellingly casting the nation as female and in need of chastisement: </p>
<blockquote>
<p>As Australia has borrowed abroad something like £200,000,000 since the date of the war loans, and has always represented her prospects and conditions in glowing terms on those occasions, it is quite ridiculous of her to suggest there is any reason why she should not pay a pittance for her prior war debts. This is an odd country full of odd people and even odder theories.</p>
</blockquote>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/460215/original/file-20220428-26-zzgkve.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/460215/original/file-20220428-26-zzgkve.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/460215/original/file-20220428-26-zzgkve.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=858&fit=crop&dpr=1 600w, https://images.theconversation.com/files/460215/original/file-20220428-26-zzgkve.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=858&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/460215/original/file-20220428-26-zzgkve.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=858&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/460215/original/file-20220428-26-zzgkve.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1078&fit=crop&dpr=1 754w, https://images.theconversation.com/files/460215/original/file-20220428-26-zzgkve.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1078&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/460215/original/file-20220428-26-zzgkve.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1078&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Labor Prime Minister James Scullin came to power just as the New York Stock Exchange crashed in 1929.</span>
<span class="attribution"><span class="source">National Library of Australia</span></span>
</figcaption>
</figure>
<p>It was Labor Prime Minister James Scullin’s bad luck to come to office in 1929 as the New York Stock Exchange crashed, presaging “the implosion of the international economic order on which Australian recovery depended”. </p>
<p>Niemeyer arrived in mid-1930 convinced that bitter medicine needed to be administered. He was certain that a profligate country was living beyond its means. He met with Scullin, whom he regarded as “a very decent little man” but out of his depth. He also met with the commonwealth and state treasurers. </p>
<p>The subsequent Melbourne Agreement enshrined his recommendations, but led to immediate political division and bitter acrimony. Labor and non-Labor states differed in their responses. In New South Wales, Labor’s Jack Lang, promised to defend the standard of living, guarantee wheat prices and fund public works. He triumphed in the state election in October 1930, but two years later he was gone, dismissed by Governor Philip Game. </p>
<hr>
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</p>
<hr>
<h2>Humiliation</h2>
<p>The year 1930 saw a peak in male suicides. Unemployment peaked in 1932. Men seemed to suffer more than women: “the men seemed to sag … They looked more beaten than the women”, observed one contemporary. </p>
<p>Though masculine “humiliation” is a constant theme of Beaumont’s story – and her photograph captions – the construct of “masculinity” is notably absent from her analysis and the index. This is in sharp contrast with the histories of the Depression by the late Stuart Macintyre, for example, for whom “gender” and “labour” were key dynamics. </p>
<p>Arguably, masculine humiliation was more likely to lead to demands for political change, rather than reconciliation to the status quo. Indeed “masculinism”, one correspondent argued in the Sydney Morning Herald, would be Australia’s “only salvation”. Under “feminism’s shameless banner”, he proclaimed, women were stealing men’s jobs. </p>
<p>Beaumont attributes some of the “protest and grievance” to what she – ever the academic historian – calls “grant envy”. Complaints also focussed on the filthy camps, the appalling conditions in which men were expected to travel and undertake “relief work”, and the introduction of work for the dole. “Slave Labour for Coolie Wages” was denounced by the Communist-led Unemployed Workers’ Movement, which organised many of the protests, including against evictions. </p>
<p>The main value of the men’s protest was, according to Beaumont, that it gave them a sense of “agency and a voice”. Their resilience meant that they still had the ability to fight and organise. </p>
<p>But insisting on the story of resilience, Beaumont misses the larger significance and consequence of men’s political mobilisations. The degradation of men’s unemployment and casual labour, of “<a href="https://en.wikipedia.org/wiki/The_Susso">susso</a>” and the indignity of charity handouts, fuelled visions of a new kind of welfare state for men, that would enshrine full employment as the number one public policy goal, underpinned by the introduction of a federal unemployment benefit, conceived as a citizen’s right, free of shame or stigma. </p>
<p>As Macintyre noted, post-war reconstruction was in fact “post-Depression reconstruction”. In the words of <a href="https://adb.anu.edu.au/biography/dedman-john-johnstone-303">Minister J.J. Dedman</a>: </p>
<blockquote>
<p>To the worker, it means steady employment, the opportunity to change his employment if he wishes, and a secure prospect unmarred by the fear of idleness and the dole. </p>
</blockquote>
<p>Women imagined a new life freed from the burdens of excessive child bearing and the degradation of dependence. “I populated and I perished,” recalled one survivor of the Depression. Women dreaded the birth of more children. Fear of pregnancy deepened family discord. Children became unhappy witnesses of their parents’ misery. Many daughters determined never to follow in their mothers’ footsteps. Young women sought out birth control. </p>
<p>“I admit to being selfish,” said one, “but there are no medals given out for unselfishness.” </p>
<p>The Council of Action for Equal Pay was formed in 1937. Women would first benefit from equal rates during World War II, when the Women’s Employment Board regulated the pay and conditions of women workers who entered men’s jobs. By the end of that decade, following submissions from women’s organisations, the Arbitration Court lifted the female rate from half the men’s rate – as prescribed by Justice Higgins in the Rural Workers case of 1912 – to 75% of the basic male rate. </p>
<p>In her Epilogue, Beaumont returns to her argument about national resilience. Democracy survived; there was no revolution. People </p>
<blockquote>
<p>accommodated the humiliation of unemployment, the reduction in their standard of living. </p>
</blockquote>
<p>But when we look closely, we can see that new visions of freedom were born in the experience of degradation and the knowledge of fear. In Depression dreaming, there was a new day dawning.</p><img src="https://counter.theconversation.com/content/178417/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marilyn Lake has received funding from the Australian Research Council.</span></em></p>Joan Beaumont’s latest book offers a deeply conservative reading of a pivotal moment in Australian history.Marilyn Lake, Professorial Fellow in History, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1631522021-06-22T12:14:39Z2021-06-22T12:14:39ZThe gas tax’s tortured history shows how hard it is to fund new infrastructure<figure><img src="https://images.theconversation.com/files/407528/original/file-20210621-35169-yfmu75.jpg?ixlib=rb-1.1.0&rect=64%2C55%2C2801%2C1911&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Gas taxes have long been used to pay for roads and bridges.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/GasolinePrices/a6f7aa098ca24f25ad6ec39eddb04c2b/photo?Query=gasoline%20AND%20pumps&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=587&currentItemNo=242">AP Photo/Seth Perlman</a></span></figcaption></figure><p>As the Biden administration and Republicans <a href="https://thehill.com/homenews/sunday-talk-shows/559311-portman-republicans-are-absolutely-committed-to-bipartisan">negotiate a possible infrastructure spending package</a>, how to pay for it has been a key sticking point. </p>
<p>President Joe Biden and Democrats in Congress <a href="https://www.nytimes.com/2021/06/20/us/politics/infrastructure-bill-taxes-rich.html">want to raise taxes on the rich</a>, while some <a href="https://www.businessinsider.com/republicans-infrastructure-cost-companies-average-people-gax-tax-congress-2021-4">Republicans have been pushing for an increase in the gas tax</a> – which would be the first in 28 years. A bipartisan group of senators recently crafted a compromise bill that <a href="https://www.wsj.com/articles/bipartisan-infrastructure-bill-could-lose-gas-tax-rise-senator-says-11624215252">would pay for just under US$1 trillion in spending on rail, roads and bridges</a> over five years in part by indexing the gas tax to inflation. <a href="https://www.businessinsider.com/progressives-oppose-possible-gas-tax-bipartisan-infrastructure-plan-sanders-wyden-2021-6">Democrats call this regressive</a> because it would raise taxes on working Americans.</p>
<p>As the director of energy studies at the University of Florida’s Public Utility Research Center, I’ve studied both <a href="http://warrington.ufl.edu/centers/purc/purcdocs/papers/1312_Kury_ChallengesInQuantifyingOptimalCO2EmissionsPolicy.pdf">taxes on energy</a> and <a href="http://go.pardot.com/l/287662/2018-01-01/b11h9">how the government</a> <a href="http://warrington.ufl.edu/centers/purc/training/p3-certification.asp">spends money on infrastructure</a>. </p>
<p>Throughout the gas tax’s controversial history, leaders have frequently called upon this revenue source when serious infrastructure investment is needed. </p>
<h2>The first 40 years</h2>
<p>This resilient levy is a major source of U.S. funding for roads and transit today. It <a href="https://fraser.stlouisfed.org/files/docs/publications/treasar/pages/59359_1930-1934.pdf">originated during the Great Depression</a> as a “temporary” penny-per-gallon gasoline tax. At the time, a gallon <a href="https://energy.gov/eere/vehicles/fact-915-march-7-2016-average-historical-annual-gasoline-pump-price-1929-2015">cost about 18 cents</a>, or <a href="https://fred.stlouisfed.org/series/GDPDEF">about $2.90 in 2021 dollars</a>. </p>
<p>As he signed the <a href="https://fraser.stlouisfed.org/files/docs/publications/treasar/pages/59359_1930-1934.pdf">Revenue Act of 1932</a> into law, <a href="https://www.fhwa.dot.gov/infrastructure/gastax.cfm">President Herbert Hoover</a> lauded “the willingness of our people to accept this added burden in these times in order impregnably to establish the credit of the federal government.”</p>
<p><iframe id="zJqEz" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/zJqEz/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>The original gas tax, an emergency measure intended to <a href="https://itep.org/wp-content/uploads/pb43fedgastax.pdf">bolster the budget and fund national defense spending</a>, not to meet transportation needs, was slated to expire in 1933. Instead, <a href="https://fas.org/sgp/crs/misc/RL30304.pdf">persistent budget deficits throughout the New Deal and World War II</a> kept it <a href="https://www.fhwa.dot.gov/infrastructure/gastax.cfm">in force throughout Franklin D. Roosevelt’s administration</a> over the objections of the oil, automotive and travel industries. It became a <a href="https://www.thoughtco.com/history-of-the-us-federal-gas-tax-3321598">permanent 1.5-cent levy in 1941</a>.</p>
<p>Multiple efforts to do away with the gas tax ever since have failed.</p>
<p>For example, <a href="https://www.govtrack.us/congress/bills/82/hr4473/text">Congress again scheduled the tax’s repeal in 1951</a> when it increased it to 2 cents as a source of revenue related to the Korean War. Instead, lawmakers agreed to keep the tax on the books to help pay for one of President Dwight D. Eisenhower’s top priorities, the <a href="https://www.fhwa.dot.gov/interstate/history.cfm">national interstate highway system</a>. </p>
<p><a href="http://www.history.com/topics/interstate-highway-system">In 1956</a> the levy rose once more, to 3 cents, when Americans were paying about <a href="https://energy.gov/eere/vehicles/fact-915-march-7-2016-average-historical-annual-gasoline-pump-price-1929-2015">30 cents for a gallon of gas</a>. At the same time, the government established the <a href="https://www.fhwa.dot.gov/policy/olsp/fundingfederalaid/07.cfm">Highway Trust Fund</a> to use the gas tax revenue to pay for building and maintaining the new interstates.</p>
<p>The tax rose to <a href="https://www.finance.senate.gov/imo/media/doc/Rpt87-367.pdf">4 cents per gallon in 1959</a> and froze at that level for more than two decades.</p>
<h2>Running on empty</h2>
<p>Gas tax revenue stopped keeping up with the expenses it was supposed to cover in the early 1970s following a severe <a href="https://www.investopedia.com/articles/economics/09/1970s-great-inflation.asp">bout of inflation</a> and OPEC’s <a href="https://www.thebalance.com/opec-oil-embargo-causes-and-effects-of-the-crisis-3305806">oil embargo</a>. U.S. gas prices soared from about 36 cents per gallon in 1972 to $1.31 in 1981.</p>
<p>Responding to what members of both major political parties saw as a <a href="https://www.fhwa.dot.gov/infrastructure/reagan.cfm">transportation infrastructure crisis</a>, Congress more than doubled the tax to 9 cents per gallon as part of the <a href="https://www.govtrack.us/congress/bills/97/hr6211">Surface Transportation Assistance Act of 1982</a>. The same law split the Highway Trust Fund and its revenue stream into two parts: The first 8 cents would finance roadwork while the other penny would finance mass transit projects.</p>
<p>This hike may have struck drivers as a sharp increase, but public spending on transportation infrastructure would continue to <a href="https://www.cbo.gov/publication/49910">fall as a percentage of all outlays</a>. </p>
<p>In 1984, Congress increased spending on highways by funneling proceeds from fines and other penalties that <a href="https://www.ccjdigital.com/fmcsa-expands-out-of-service-order-ability-increases-fines-for-violations/">businesses pay for safety violations</a>, such as failing to label hazardous materials or forcing drivers to work too many hours in a row. </p>
<p>Congress boosted the tax twice more in the 1990s but primarily to <a href="https://www.congress.gov/bill/101st-congress/house-bill/5835">reduce the then-ballooning federal deficit</a>. Only half of a 5-cent increase in 1990 went to highways and transit, while a 4.3-cent lift three years later went entirely to lowering the deficit. </p>
<p>By 1997, the government had <a href="https://fas.org/sgp/crs/misc/RL30304.pdf">redirected all gas tax revenue reserved for deficit reduction</a> to the <a href="https://www.fhwa.dot.gov/infrastructure/gastax.cfm">Highway Trust Fund</a>, where it still flows today.</p>
<p>Along the way, <a href="https://www.fhwa.dot.gov/infrastructure/gastax.cfm">other federal fuel taxes</a> arose, including a 24.4-cent-per-gallon diesel tax and taxes on methanol and compressed natural gas. And <a href="https://www.taxadmin.org/assets/docs/Research/Rates/mf.pdf">state fuel taxes</a>, which in most cases <a href="https://fas.org/sgp/crs/misc/RL30304.pdf">began before the federal gas tax</a>, range from as low as 8.95 cents per gallon in Alaska to as high as 57.6 cents per gallon in Pennsylvania. </p>
<p>[<em>Understand key political developments, each week.</em> <a href="https://theconversation.com/us/newsletters/politics-weekly-74/?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=politics-understand">Subscribe to The Conversation’s politics newsletter</a>.]</p>
<h2>Making do</h2>
<p>Since 1993, when the federal gas tax was first parked at 18.4 cents, inflation and <a href="https://edzarenski.com/2016/01/31/construction-inflation-cost-index/">rising construction costs</a> have eroded its effectiveness as a transportation-related revenue source. In addition, U.S. <a href="https://www.wired.com/2015/04/electric-cars-intensifying-highway-funding-fiasco/">vehicles have grown more fuel-efficient</a> overall – which means Americans <a href="https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103600001&f=A">use less fuel</a> for every mile they drive.</p>
<p>As a result, highway and transit spending has significantly outpaced the revenue collected from the gas tax and other sources. Since 2008, the government has transferred over <a href="https://www.fhwa.dot.gov/highwaytrustfund/docs/fe-1_may2021.pdf">$80 billion</a> to the fund that it had to take from other sources. </p>
<p>But it’s still not enough. The <a href="https://www.asce.org/infrastructure/">American Society of Civil Engineers</a>, which gives U.S. infrastructure a C-minus, is calling on the government and private sector to increase spending on roads and bridges by at least $2.5 trillion within a decade. </p>
<p>While it’s true the gas tax <a href="https://www.thebalance.com/regressive-tax-definition-history-effective-rate-4155620">may be regressive</a> because lower-income people pay the same rate as those who earn higher incomes, there are still advantages to this tax. </p>
<p>For one thing, it follows the <a href="https://ppiaf.org/sites/ppiaf.org/files/documents/toolkits/highwaystoolkit/6/pdf-version/1-12.pdf">“user pays” principle</a> of providing government services. Under this principle, the people using the roads are held responsible for paying for their upkeep. As the number of motorists using electric vehicles increases, however, this may become less true over time.</p>
<p>Further, it would also create an incentive to <a href="https://www.nber.org/digest/may09/effect-gasoline-tax-carbon-emissions">at least marginally decrease the use of fossil fuels</a>, accomplishing another goal of the administration. </p>
<p>Finally, the government could always subsidize the tax for the poor, perhaps through annual lump-sum payments, making it less regressive.</p>
<p>Clearly, U.S. infrastructure is in dire need of upgrading and investment. At the end of the day, Americans will pay for it one way or another – whether in taxes or through costs of unsafe and inadequate infrastructure, including in <a href="https://www.nytimes.com/2018/08/14/world/bridge-collapses-history.html">lost lives</a>. How the government pays for investment may matter less than that it finally does it.</p>
<p><em>This is an updated version of an article first published on <a href="https://theconversation.com/why-trump-may-usher-in-the-biggest-gas-tax-hike-ever-92007">Feb. 27, 2018</a>.</em></p><img src="https://counter.theconversation.com/content/163152/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Theodore J. Kury is the Director of Energy Studies at the University of Florida’s Public Utility Research Center, which is sponsored in part by the Florida electric and gas utilities and the Florida Public Service Commission, none of which has editorial control of any of the content the Center produces.</span></em></p>A bipartisan group of senators proposed the gas tax should be indexed to inflation to help pay for new infrastructure spending, an approach Biden calls ‘regressive.’Theodore J. Kury, Director of Energy Studies, University of FloridaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1585842021-04-13T14:07:18Z2021-04-13T14:07:18ZHow a radical interpretation of the Great Depression became the orthodoxy behind solving the COVID economic crisis<figure><img src="https://images.theconversation.com/files/394087/original/file-20210408-21-1kv13eg.png?ixlib=rb-1.1.0&rect=4%2C0%2C1417%2C794&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It even inspired the global TV hit, La Casa de Papel </span> <span class="attribution"><span class="source">Netflix</span></span></figcaption></figure><p>At the start of the COVID-19 pandemic in March 2020, US Federal Reserve System governor Jerome Powell made an extraordinary declaration: “We’re not going to run out of ammunition.” The central bank stood ready to take any action necessary to stem the mounting economic crisis. Three months later, the Fed injected nearly US$3 trillion dollars of liquidity into the US economy. </p>
<p>Such radical action by central banks – quantitative easing (QE) – has its critics on the right and left. Just as striking is that many prominent economists and economic historians have rallied <a href="https://www.theguardian.com/business/2019/jun/11/quantitative-easing-qe-recession">in support of QE</a> in responding to the threat of economic crisis. Their remarkable certainty reveals a story about how our understanding of present crises came to be dominated by lessons drawn from past crises, and in particular the Great Depression in the 1930s and its interpretation by economists, Milton Friedman and Anna Schwartz, in their 1963 book, <a href="https://www.jstor.org/stable/j.ctt7s1vp">A Monetary History of the United States</a>. </p>
<p>Friedman and Schwartz claimed that the Federal Reserve System was responsible for turning an ordinary economic downturn into the Great Depression. When a massive financial crisis led to a sharp decline in the stock of money in the US economy, the Fed failed to take action to mitigate the problem. </p>
<p>By the end of the 20th century, their interpretation of the Great Depression had become sufficiently dominant in economics and economic history to qualify as the orthodoxy. When the global financial crisis struck in 2008, the Federal Reserve System proposed aggressive policies of monetary expansion to avoid its supposed mistakes during the Great Depression. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/394088/original/file-20210408-17-1cfk3u7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/394088/original/file-20210408-17-1cfk3u7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394088/original/file-20210408-17-1cfk3u7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394088/original/file-20210408-17-1cfk3u7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394088/original/file-20210408-17-1cfk3u7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394088/original/file-20210408-17-1cfk3u7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394088/original/file-20210408-17-1cfk3u7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The US Federal Reserve Board Building.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/marriner-s-eccles-federal-reserve-board-676743697">Steve Heap/Shutterstock</a></span>
</figcaption>
</figure>
<p>That flood of liquidity into capitalism’s financial system is remarkable in historical perspective, <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674980822">surpassing all previous records</a> for monetary interventions, outside of wartime, since the beginning of the 20th century. It defines our economic reality to such an extent that the fictional story of a mysterious “Professor”, who meticulously plans a raid on the Royal Mint of Spain to print billions of euros, became the basis for the wildly popular television series, <a href="https://www.netflix.com/gb/title/80192098">La Casa de Papel</a>. As the Professor explained:</p>
<blockquote>
<p>In 2011, the European Central Bank made €171 billion out of nowhere. Just like we’re doing. Only bigger … ‘Liquidity injections,’ they called it. I’m making a liquidity injection, but not for the banks. I’m making it here, in the real economy. </p>
</blockquote>
<p>The Professor made these remarks long before central banks responded to the coronavirus crisis with an even greater flood of liquidity. </p>
<h2>Historical analysis as economic heresy</h2>
<p>The onset of the Great Depression coincided with “a golden age” of theoretical and empirical research on business cycles and crises. Although they did not agree on the causes of cycles, economists tended to look for explanations of the recurrent fluctuations in economic activity in the internal dynamics of the economic system. This emphasis is <a href="https://fraser.stlouisfed.org/files/docs/publications/books/mitch_buscyc/mitchell_buscyc.pdf">readily apparent in the work</a> of <a href="https://en.wikipedia.org/wiki/Wesley_Clair_Mitchell">Wesley Clair Mitchell</a>, an American economist in the early 20th century who was the foremost global authority on business cycles.</p>
<p>Mitchell began his career as a monetary economist at the University of Chicago where he met Thorstein Veblen <a href="https://www.routledge.com/The-Evolution-of-Institutional-Economics/Hodgson/p/book/9780415322539">and was inspired</a> by the unconventional economist’s criticisms of orthodox economic theory and, in particular, <a href="https://www.journals.uchicago.edu/doi/10.1086/257011">its neglect</a> of the process of “evolutionary” economic change. </p>
<p>To Mitchell, it was the “precarious dependence” of material wellbeing on an economy organised for profit-seeking <a href="https://fraser.stlouisfed.org/files/docs/publications/books/mitch_buscyc/mitchell_buscyc.pdf">that generated business cycles</a>: “Where money economy dominates, natural resources are not developed, mechanical equipment is not provided, industrial skill is not exercised, unless conditions are such as to promise a money profit to those who direct production.” He looked to the dynamics of enterprises’ profit-making to explain the recurrent phases of business activity and how they “grow out of and grow into each other” in a process of cumulative change.</p>
<p>The depth and persistence of the Depression, especially in the country that seemed to embody capitalism in its most sophisticated form, reinforced the importance of understanding fluctuations in economic activity. A novel perspective proposed by <a href="http://www.bbc.co.uk/history/historic_figures/keynes_john_maynard.shtml">John Maynard Keynes</a> attracted particular attention: Keynes looked to the internal dynamics of the economic system for the roots of cycles, echoing other economists’ scepticism about its capacity for self-adjustment, but identified a significant new role for government in ensuring economic stability.</p>
<p>The significance of the interpretation of the Great Depression that Friedman and Schwartz laid out can be appreciated only by understanding the continuity and rupture it marked in economists’ analyses of business cycles. Their book was based on a combination of theory and history <a href="https://www.cambridge.org/gb/academic/subjects/economics/history-economic-thought-and-methodology/theory-and-measurement-causality-issues-milton-friedmans-monetary-economics?format=PB">that bears an uncanny resemblance</a> to Mitchell’s distinctive methodological approach to the study of cumulative change. But just as Mitchell had used historical annals and statistics to challenge the economic orthodoxy of his day, Friedman and Schwartz employed their historical research to confront not only what Mitchell and Keynes believed but what many economists believed about the inherent instability of a capitalist economic system.</p>
<p>In a Monetary History, Friedman and Schwartz conceived of the norm in capitalism as stability, as characterised by a harmonious covariance of money and income, interrupted only by aberrant cycles. It was during these unusual historical moments, they claimed, that money mattered a great deal. Insofar as the Great Depression was concerned, they posited that it was the drop in money that caused income to fall. While they acknowledged the monetary collapse originated in the waves of banking crises that ravaged the US financial system in the early 1930s, they blamed the US monetary authority for failing to inject enough liquidity into the system to counter the collapse. In doing so, they held government responsible for what seemed to most people to be a crisis of capitalism.</p>
<p>To defend their bold claims, Friedman and Schwartz embraced a methodological approach inspired by Mitchell but increasingly castigated as old-fashioned against the growing influence of <a href="https://www.imf.org/external/pubs/ft/fandd/2011/12/basics.htm">econometric analysis</a> in economics. Econometricians agreed with Mitchell on the importance of integrating economic theory and evidence but they cast economic activity in terms of stable mathematical relationships that belied the importance of cumulative change that Mitchell emphasised. </p>
<p>Friedman and Schwartz refused to be swayed by methodological fashion, opting instead for history to discriminate among different explanations of “statistical covariation” by going “beyond the numbers alone” to “discern the antecedent circumstances whence arose the particular movements that become so anonymous when we feed the statistics into the computer”. </p>
<p>Based on historical research, they purported to reconstruct the temporal sequence of events that they claimed led to a “catastrophic contraction” during the Great Depression. They also used historical reasoning to go further, to transcend a story that would otherwise locate the collapse of the US economy in the failures of its private financial system. The Federal Reserve System had “ample powers”, they suggested, “to cut short the tragic process of monetary deflation and banking collapse” but did not use these powers “effectively”. Through the use of counterfactual history, therefore, they created the impression of a crisis that did not have to occur.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/394091/original/file-20210408-15-19ydepe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Black and white photo of men in coats and hats queing outside building with sign reading 'Free soup coffee and doughnuts for the unemployed'." src="https://images.theconversation.com/files/394091/original/file-20210408-15-19ydepe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/394091/original/file-20210408-15-19ydepe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=486&fit=crop&dpr=1 600w, https://images.theconversation.com/files/394091/original/file-20210408-15-19ydepe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=486&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/394091/original/file-20210408-15-19ydepe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=486&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/394091/original/file-20210408-15-19ydepe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=611&fit=crop&dpr=1 754w, https://images.theconversation.com/files/394091/original/file-20210408-15-19ydepe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=611&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/394091/original/file-20210408-15-19ydepe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=611&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Unemployed men queued outside a soup kitchen opened in Chicago by Al Capone.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/great-depression-unemployed-men-queued-outside-238058275">Everett Collection/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Money, money, money</h2>
<p>Asking why the Great Depression occurred in the US was a difficult question. Friedman and Schwartz’s answer was provocative and plausible, but much was left out and a great deal added in. We would expect criticism of their claims, and a plethora of alternatives. Yet, despite criticism over the years, many historians have extended the money hypothesis or qualified specific elements of it, rather than confront or evaluate the core claims on which it was constructed.</p>
<p>By the end of the 20th century, the radical interpretation of the Great Depression that Friedman and Schwartz proposed had become historical orthodoxy. The few scholars who were impertinent enough to directly confront it were subject to an onslaught of criticism. And for those unwilling to buy into the claim of capitalism’s inherent stability, neglect proved to be a powerful weapon. That such neglect was by design as much as ignorance can be seen in the writing of an academic economist, Ben Bernanke, who was to build an even more dazzling career as a central banker. </p>
<p>Bernanke acknowledged an important gap in the money story and proposed to fill it. Friedman and Schwartz’s interpretation of the Great Depression relied heavily on a banking panic, in which depositors pulled their money out of healthy and unhealthy banks, but without offering any serious explanation of the disruption of the US financial system. Bernanke came to the rescue but only by ruling out the few contemporaries like <a href="https://www.levyinstitute.org/about/minsky/">Hyman Minsky</a> to whom he might have turned for insights on the instability of the US financial system, since their work departed “from the assumption of rational economic behaviour”.</p>
<p>That Bernanke’s paper garnered so much academic attention suggests the crushing effect of academic orthodoxies on purportedly scientific inquiry. But the stakes suddenly became a great deal more important, and the action more dramatic, when the historical orthodoxy of the Great Depression passed from academic minds into the policy sphere in the early 21st century.</p>
<p>Some sense of what was to come was in evidence at a celebration of Friedman’s 90th birthday in 2002. By then, Bernanke was a member of the Board of Governors of the Federal Reserve System and in <a href="https://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/">an oft-cited tribute</a>, he said: “I would like to say to Milton and Anna: regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.” </p>
<p>Bernanke’s words surely gave the nonagenerian as much pause as pleasure. In Friedman’s presidential address to the American Economic Association, a few years after A Monetary History’s publication, <a href="https://www.jstor.org/stable/1831652?refreqid=excelsior%3Afbcc95a5a7653457cf9f69e7cf27f2c2&seq=1#metadata_info_tab_contents">he worried that</a> “we are in danger of assigning to monetary policy a larger role than it can perform”. Still, he could hardly have imagined what Bernanke would dare when the opportunity presented itself.</p>
<p>Friedman may not have been around to witness the aggressive policies of monetary expansion that Bernanke implemented in his determination not to “do it again”. However, <a href="https://www.city-journal.org/html/monetarism-defiant-13165.html">Schwartz suggested</a> he was fighting the wrong war since the 2008-2009 crisis had nothing to do with liquidity. Ironically, many economists once believed much the same thing about the Great Depression of the 1930s. Just imagine what it would imply about our understanding of that crisis, not to mention the current fashion for quantitative easing, if they were right. </p>
<p><em>This article is adapted from the <a href="https://archive-ouverte.unige.ch/unige:150852">Economic History Society’s annual Tawney Lecture</a></em></p><img src="https://counter.theconversation.com/content/158584/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mary O'Sullivan received some research funding as part of the “Uses of the Past in International Economic Relations” (UPIER) project, financially supported by the HERA Joint Research Programme 3 Uses of the Past which is co-funded by AHRC, AKA, BMBF via DLR-PT, CAS, CNR, DASTI, ETAg, FWF, F.R.S. - FNRS, FWO, FCT, FNR, HAZU, IRC, LMT, MIZS, MINECO, NWO, NCN, RANNÍS, RCN, SNF, VIAA and The European Commission through Horizon 2020.
</span></em></p>The story of how money injections became the go-to policy for tackling economic crises.Mary O'Sullivan, Professor of Economic History, Université de GenèveLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1562962021-03-07T19:07:49Z2021-03-07T19:07:49ZAustralia has a long history of coercing people into work. There are better options than ‘dobbing in’<p>After heated criticism from several quarters, the federal government last month announced a meagre rise in the JobSeeker payment for people looking for work. But at just $25 more a week, the subsidy remains the <a href="https://theconversation.com/the-50-boost-to-jobseeker-will-take-australias-payment-from-the-lowest-in-the-oecd-to-the-second-lowest-after-greece-155739">second-lowest in the OECD</a>.</p>
<p>The government also <a href="https://www.smh.com.au/politics/federal/it-breaks-my-heart-jobseekers-hit-back-at-25-a-week-dole-increase-20210225-p575p9.html">announced a hotline</a> for employers to “dob in” unemployed people who reject “suitable work”. These reports will contribute evidence that may be used to reduce or stop payments to JobSeeker recipients.</p>
<p>As many have observed, it is a policy with all-too-familiar resonances. A pallet of punitive and stigmatising measures have been rolled out in liberal economies <a href="https://www.upress.umn.edu/book-division/books/fast-policy">worldwide</a> over the past 40 years. These include drug testing, cashless welfare cards, mandatory job training and a variety of “mutual obligation” requirements.</p>
<p>As many <a href="https://onlinelibrary-wiley-com.ezproxy.library.sydney.edu.au/doi/epdf/10.1002/ajs4.101">academics</a> have argued, these measures have done much to inflict misery, and little to create jobs or foster a genuine sense of mutuality. They have also propped up the myth that individuals are overwhelmingly responsible for their own wagelessness, regardless of wider labour market conditions.</p>
<p>Has it always been this way?</p>
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Read more:
<a href="https://theconversation.com/first-lift-jobseeker-then-add-on-fully-funded-unemployment-insurance-155383">First lift JobSeeker, then add on fully funded unemployment insurance</a>
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<h2>A long history of coercing people into work</h2>
<p>The idea that it is desirable to use the law to coerce people into employment relationships they do not wish to be in has a long history around the world. </p>
<p>To understand it, we need to look to the origins of both labour law and welfare law. The English parliament passed the <a href="https://www.oxfordreference.com/view/10.1093/oi/authority.20110803100046308">1351 Statute of Labourers</a> in the wake of another plague – the Black Death. It required any able-bodied person below the age of 60 to accept any offer of work. </p>
<p>The <a href="https://www.familysearch.org/wiki/en/England_Old_Poor_Law,_1601_through_1833_(National_Institute)">Old Poor Laws</a>, introduced some 250 years later, were a landmark in the early history of welfare provision. They granted parishes the power to offer support to able-bodied people on the condition they could demonstrate they were “deserving”: that is, neither idle, dissolute, lazy, of poor character nor prone to vice. Together, these feudal and early modern laws reflected and encoded the practice of scrutinising the “unwillingness” of the wageless to work. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/387919/original/file-20210305-19-b5axoz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/387919/original/file-20210305-19-b5axoz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=361&fit=crop&dpr=1 600w, https://images.theconversation.com/files/387919/original/file-20210305-19-b5axoz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=361&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/387919/original/file-20210305-19-b5axoz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=361&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/387919/original/file-20210305-19-b5axoz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=454&fit=crop&dpr=1 754w, https://images.theconversation.com/files/387919/original/file-20210305-19-b5axoz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=454&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/387919/original/file-20210305-19-b5axoz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=454&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">After the Black Death, the Statute of Labourers was used to coerce people into work.</span>
<span class="attribution"><span class="source">Pierart dou Tielt/Wikicommons</span></span>
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<p>As the historian John Murphy <a href="https://www.routledge.com/A-Decent-Provision-Australian-Welfare-Policy-1870-to-1949/Murphy/p/book/9781138268296">has argued</a>, lawmakers in the Australian colonies were adamant the Australian “new world” would not reproduce the injustices of the old. The colonies vigorously rejected enacting any equivalent of the Poor Law. However, in the context of a sparsely inhabited continent afflicted by labour shortages, colonial laws concerning work were nevertheless highly coercive.</p>
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Read more:
<a href="https://theconversation.com/new-finding-boosting-jobseeker-wouldnt-keep-australians-away-from-paid-work-150454">New finding: boosting JobSeeker wouldn't keep Australians away from paid work</a>
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<p>British <a href="https://reviews.history.ac.uk/review/1085">master and servant legislation</a>, which granted employers sweeping powers over employees for absconding, disloyalty and desertion, backed by criminal sanctions, were adopted with even harsher penalties in Australia than in the UK. </p>
<p>The NSW <a href="https://jade.io/j/?a=outline&id=444024">1828 Servants and Laborers Act</a> provided for up to six months’ imprisonment for absenteeism or desertion: double the penalty of the equivalent UK legislation. In the 19th century, employers didn’t “dob” on workers who declined a job. Rather, they dobbed on workers who left without permission. </p>
<p>In the early 20th century the state intervened in labour markets with a very different objective: to enshrine the pre-conditions of “civilisation”. Justice Higgins’ <a href="https://www.nma.gov.au/defining-moments/resources/harvester-judgement">famous Harvester Judgment</a> required minimum wages calculated on the basis of “the needs of the average employee, regarded as a human being living in a civilised community”, rather than the “higgling of the market”.</p>
<p>In addition to establishing the legal and economic institutions for a “wage earners’ welfare state”, the imperative to break with stigmatising traditions was expressed through campaigns to entrench welfare systems in Australia that did not depend on people proving their poverty and good character as a precondition to accessing collective funds.</p>
<p>Instead, reformers argued welfare should be organised around the principle of contributory insurance. This involved workers, employers and the state compulsorily saving for future needs. Under such a model (which Australia later embraced on a national scale for superannuation) funds could be accessed in times of need without the taint of “charity”. </p>
<h2>Enter the Great Depression</h2>
<p>These interwar campaigns failed on the whole, with Queensland the only state to pass an <a href="https://catalogue.nla.gov.au/Record/887668">Unemployed Workers Insurance Act in 1922</a> under the leadership of “Red Ted” Theodore. As unemployment rates soared over 30%, the plausibility of insurance models as solution to large-scale social need, or a panacea for welfare stigma, faded and the spectre of “deservedness” in welfare provision returned.</p>
<p>Depression-era systems enabled Unemployment Relief Councils to offer “sustenance work” to men below the basic wage. They also offered forms of “relief” that hinged on proof they had not only applied for work but had moved across the district in pursuit of it. Where the master and servant laws had once functioned to keep workers in place, in the 1930s “<a href="https://www.routledge.com/A-Decent-Provision-Australian-Welfare-Policy-1870-to-1949/Murphy/p/book/9781138268296">track rations</a>” policies kept workers on the move.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/387918/original/file-20210305-22-127riym.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/387918/original/file-20210305-22-127riym.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=396&fit=crop&dpr=1 600w, https://images.theconversation.com/files/387918/original/file-20210305-22-127riym.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=396&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/387918/original/file-20210305-22-127riym.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=396&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/387918/original/file-20210305-22-127riym.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=498&fit=crop&dpr=1 754w, https://images.theconversation.com/files/387918/original/file-20210305-22-127riym.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=498&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/387918/original/file-20210305-22-127riym.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=498&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">During the Great Depression, ‘sustenance work’ was offered to men below the basic wage.</span>
<span class="attribution"><span class="source">National Museum of Australia</span></span>
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</figure>
<p>The passage of wartime emergency laws added a new dimension to the state’s willingness and powers to intervene in individual employment relationships. These laws were aimed at securing the production of munitions and essential supplies and services. </p>
<p>The <a href="https://www.naa.gov.au/learn/learning-resources/learning-resource-themes/war/world-war-ii/requirement-teenage-identification-cards-amended-national-security-manpower-regulations">Manpower Directorate</a>, <a href="http://workers.labor.net.au/14/c_historicalfeature_bev.html#:%7E:text=Rather%2C%20the%20Government%20chose%20a,workers'%20relative%20efficiency%20and%20productivity."> Women’s Employment Board</a> and <a href="https://www.legislation.gov.au/Details/C1942L00034/Download">National Security (Employment) regulations</a> were used to scrutinise and curtail the movement of skilled workers between jobs. They were also used to keep “desirable” employees with particular employers and in jobs deemed essential.</p>
<p>These initiatives were introduced against a backdrop of <a href="https://www.imf.org/external/pubs/ft/fandd/2014/09/basics.htm">Keynesian economics</a>, which would expand after the war and drive a commitment to full employment as an economic objective. They would also engender more generous welfare systems, funded from general revenue, which required the needy to show they were “capable and willing to undertake suitable work” with no time limit on benefits or property means test.</p>
<h2>‘Dobbing in’ may not have the desired effect</h2>
<p>The notion of enlisting employers to “dob in” people unwilling to enter an employment relationship is likely to be ineffective, given the levels of <a href="https://www.theguardian.com/business/grogonomics/2020/may/19/the-unemployment-rate-gets-the-headlines-but-its-underemployment-we-should-look-out-for">under-employment</a> in the labour market and the <a href="https://www.theguardian.com/australia-news/2021/feb/25/jobdobber-hotline-may-lead-to-bogus-claims-and-undermine-work-prospects-retail-body-says">negative</a> response the measure received from some employer groups.</p>
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<strong>
Read more:
<a href="https://theconversation.com/no-people-arent-unemployed-because-theyre-lazy-we-should-stop-teaching-children-myths-about-work-153643">No, people aren’t unemployed because they’re lazy. We should stop teaching children myths about work</a>
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<p>It is likely, too, to deepen social division and increase the potential for exploitation of already vulnerable people. It is an illiberal policy, philosophically at odds with the notion that the parties in labour markets should be free to enter and withdraw from contracts as they see fit. </p>
<p>By placing the policy within the longer context of Australia’s 20th-century history of flawed “bold experiments” in regulating work and welfare, though, we can also see there are alternatives to coercing people into employment relationships. </p>
<p>States can actively intervene in labour markets on a principled basis to promote secure work that meets human need. They can pass policies that are designed to ameliorate, rather than inflame, ideas of “deservedness”. They can actively intervene in labour markets on the basis of the pursuit of a wider social “<a href="https://www.penguin.com.au/books/mission-economy-9780241435311">mission</a>”.</p>
<p>It is important not to romanticise these policy initiatives in Australian history. Each one of them simultaneously deepened processes of exclusion for some, while reconfiguring new possibilities of fair treatment for others. Nevertheless, in an age of rising inequality, social fragmentation and climate change, it is worth remembering these experiments, if only as a stimulus to boldly proposing new ones for our times.</p><img src="https://counter.theconversation.com/content/156296/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Frances Flanagan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia has a long history of making unemployment support contingent on the idea of “deservedness”. JobSeeker rules are an extension of that.Frances Flanagan, Sydney Fellow, Discipline of Work and Organisational Studies, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1541542021-02-04T13:13:38Z2021-02-04T13:13:38ZWall Street isn’t just a casino where traders can bet on GameStop and other stocks – it’s essential to keeping capitalism from crashing<figure><img src="https://images.theconversation.com/files/382356/original/file-20210203-17-l8h3t9.jpg?ixlib=rb-1.1.0&rect=56%2C156%2C2831%2C2271&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Traders on the floor of the New York Stock Exchange in 1955.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/NewYorkStockExchange1955/10406bc6b6a94ba681a2fa65c883fbf8/photo?Query=trading%20AND%20floor&mediaType=photo&sortBy=arrivaldatetime:asc&dateRange=Anytime&totalCount=5287&currentItemNo=31">AP Photo</a></span></figcaption></figure><p><a href="https://theconversation.com/why-gamestop-shares-stopped-trading-5-questions-answered-154255">Shares of GameStop</a> and other companies or <a href="https://www.kitco.com/charts/livesilver.html">assets that shot up</a> in value in recent weeks are now <a href="https://finance.yahoo.com/quote/GME/">dropping</a> <a href="https://www.washingtonpost.com/technology/2021/02/02/gamestop-stock-plunge-losers/">like stones</a>. While I feel sorry for the many investors who will likely lose a lot of money, the stocks’ return to Earth is actually a good thing – if you want to avoid financial meltdown to the long list of crises the U.S. is facing. </p>
<p>The reason has to do with what financial markets are – and what they are not – as well as what happens when prices of stocks and other securities become untethered from the fundamental value of the assets they’re meant to represent. </p>
<p>As a finance professor who does <a href="https://scholar.google.com/citations?user=JfUEmSUAAAAJ&hl=en">research on how markets respond to new information</a>, I believe it is important to maintain a close link between security prices and fundamentals. When that stops happening, a market collapse may be not far behind. </p>
<figure class="align-center ">
<img alt="Sillouettes of faces can be seen against slot machines and other gambling devices" src="https://images.theconversation.com/files/382359/original/file-20210203-23-127o48d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/382359/original/file-20210203-23-127o48d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=370&fit=crop&dpr=1 600w, https://images.theconversation.com/files/382359/original/file-20210203-23-127o48d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=370&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/382359/original/file-20210203-23-127o48d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=370&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/382359/original/file-20210203-23-127o48d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=465&fit=crop&dpr=1 754w, https://images.theconversation.com/files/382359/original/file-20210203-23-127o48d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=465&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/382359/original/file-20210203-23-127o48d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=465&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Although investors such as hedge funds engage in speculation, Wall Street isn’t meant to be like a casino.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/MassachusettsGamblingWynn/0e0c68a0a3d64eac81bcaedc155c64b2/photo?Query=casino%20AND%20floor&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=387&currentItemNo=45">AP Photo/Charles Krupa</a></span>
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<h2>Capital markets aren’t casinos</h2>
<p><a href="https://www.nbcchicago.com/lx/gamestop-short-squeeze-wall-streets-david-and-goliath-story-explained-by-an-expert/2423671/">Some have portrayed</a> GameStop as a David vs. Goliath story. According to that narrative, the big guys on Wall Street have been getting rich gambling on the stock market for years. What’s the problem when the little guy gets a chance? </p>
<p>The first thing to keep in mind is that markets aren’t a big casino, <a href="https://www.tradersmagazine.com/departments/equities/the-stock-market-is-now-a-casino/">as some seem to believe</a>. Their core purpose is to efficiently connect investors with companies and other organizations that will make the most productive use of their cash. </p>
<p>Accurate market prices, meant to reflect a company’s expected profits and overall risk level, provide an important signal to investors whether they should hand over their money and what they should get in return. Companies like Apple and Amazon simply would not exist as we know them today without <a href="https://www.stlouisfed.org/education/tools-for-enhancing-the-stock-market-game-invest-it-forward/episode-1-understanding-capital-markets">access to capital markets</a>.</p>
<p>The more jaundiced view of markets focuses on episodes when <a href="https://ssrn.com/abstract=268311">markets seemingly go crazy</a> and on the <a href="https://ssrn.com/abstract=1622184">speculative gambling behavior of some traders</a>, such as <a href="https://hbswk.hbs.edu/item/the-problem-with-hedge-funds">hedge funds</a>. The GameStop saga feeds into this storyline.</p>
<p>But GameStop also illustrates what happens when stock prices don’t reflect reality.</p>
<h2>The GameStop bubble</h2>
<p>GameStop fundamentals <a href="https://news.gamestop.com/static-files/9d2139e1-31c7-498f-ad95-63db1e6d085a">are, to put it mildly, lackluster</a>.</p>
<p>The company is a brick-and-mortar chain of video game stores. Most video game sales now <a href="https://screenrant.com/digital-game-sales-consoles-outnumber-physical-first-time/">take place as digital downloads</a>. GameStop <a href="https://www.washingtonpost.com/business/2021/02/01/gamestop-retail-stores/">has been slow</a> to adapt to this new reality. Its revenue peaked in <a href="https://news.gamestop.com/static-files/8ddaae13-8fcc-4ea1-9ac6-0ea74d0d9d7c">2012 at US$9.55 billion</a> and had dropped by a third <a href="https://news.gamestop.com/static-files/9d2139e1-31c7-498f-ad95-63db1e6d085a">as of 2019</a>. It hasn’t earned a profit since 2017. Put simply, it is a money-losing company in a competitive and quickly changing industry. </p>
<p>The recent speculative frenzy, however, increased the GameStop stock price <a href="https://finance.yahoo.com/quote/GME/">from under $20 in early January to as high as $483</a> in a little over two weeks, <a href="https://www.wsj.com/articles/gamestop-stock-short-squeeze-ugly-side-11611750250">driven by retail investors on Reddit</a> who coordinated their buying to harm hedge funds – <a href="https://www.wsj.com/articles/gamestop-mania-reveals-power-shift-on-wall-streetand-the-pros-are-reeling-11611774663?mod=livecoverage_web">costing the professionals billions of dollars</a>. </p>
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<p>It is <a href="https://marker.medium.com/gamestop-proves-were-in-a-meme-stock-bubble-b3f39163a77f">clearly a speculative price bubble</a> and has some characteristics of a Ponzi scheme. Many small investors who “get on the train” late and buy at the inflated prices – especially <a href="https://ssrn.com/abstract=1151595">those attracted by the extreme price moves</a> and media coverage – will be left holding the bag.</p>
<p>And sooner or later, the stock price will likely come back to Earth to a level that can be supported by the fundamentals of the company. Shares <a href="https://www.marketwatch.com/investing/stock/gme">closed on Feb. 4 at $53.50</a>, the lowest since Jan. 21. </p>
<p>The problems begin when that doesn’t happen until too late.</p>
<h2>Bubbles are made to pop</h2>
<p>Financial markets are made up of people. People are imperfect, and so are markets. This means market prices are not always “right” – and it’s often hard to know what the “right” price is. </p>
<p>That is true when it comes to the price bubbles in individual stocks like GameStop. But it’s also true on a much bigger scale, when it comes to a market as a whole. </p>
<p>Price bubbles and crashes are good for neither Wall Street nor Main Street. When the dot-com bubble popped in 2000 – <a href="https://www.investopedia.com/terms/d/dotcom-bubble.asp">after prices of dozens of tech stocks soared exponentially in the late 1990s</a> – an <a href="https://time.com/3741681/2000-dotcom-stock-bust">economic recession</a> followed soon after. The bursting of a <a href="https://www.investopedia.com/terms/h/housing_bubble.asp">housing bubble in 2008</a> <a href="https://www.history.com/topics/21st-century/recession">triggered a global financial crisis and the Great Recession</a>.</p>
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<img alt="A boys makes a large soap bubble." src="https://images.theconversation.com/files/382360/original/file-20210203-21-1tp1sm0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/382360/original/file-20210203-21-1tp1sm0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=480&fit=crop&dpr=1 600w, https://images.theconversation.com/files/382360/original/file-20210203-21-1tp1sm0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=480&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/382360/original/file-20210203-21-1tp1sm0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=480&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/382360/original/file-20210203-21-1tp1sm0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=603&fit=crop&dpr=1 754w, https://images.theconversation.com/files/382360/original/file-20210203-21-1tp1sm0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=603&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/382360/original/file-20210203-21-1tp1sm0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=603&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The bigger the bubble, the bigger the ‘pop.’</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/young-boy-blows-large-soap-bubble-royalty-free-image/114931642">Robin Knight/Moment via Getty Images</a></span>
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<h2>Too much momentum</h2>
<p>So markets fail sometimes, and we need sensible regulation and enforcement to make such failures less likely. </p>
<p>Taken in isolation, the GameStop craze is unlikely to trigger a disruption to the overall stock market, especially if its price continues to fall more in line with the company’s fundamental value. Unfortunately, this was not an isolated case. Nor was GameStop the first sign of problems. </p>
<p>In recent days, Reddit users have also driven up the <a href="https://www.cnbc.com/2021/02/02/is-silver-the-next-gamestop.html">prices of silver</a> and <a href="https://www.washingtonpost.com/business/2021/01/28/gamestop-stocks-reddit/">companies</a> such as BlackBerry and movie theater giant AMC Entertainment. Popular trading apps like Robinhood <a href="https://www.wsj.com/articles/when-the-stock-market-is-too-much-fun-11607705516">have made trading easy, fun</a> and basically free.</p>
<p>[<em>Deep knowledge, daily.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=deepknowledge">Sign up for The Conversation’s newsletter</a>.]</p>
<p>The share price of Tesla, for example, <a href="https://finance.yahoo.com/quote/TSLA/">skyrocketed 720% last year</a>, in large part when investors bought the stock because it was already rising. This is called <a href="https://www.wsj.com/articles/day-trader-mania-will-challenge-sec-under-gensler-bidens-choice-for-chairman-11611961219/">momentum investing</a>, a trading strategy in which investors buy securities because they are going up – selling them only when they think the price has peaked. </p>
<p>If this continues, it will likely lead to more financial bubbles and crashes that could make it harder for companies to raise capital, posing a threat to the <a href="https://www.politico.com/news/2021/01/27/fed-us-economic-recovery-weakening-463190">already limping U.S. economic recovery</a>. Even if the worst doesn’t happen, large price movements and allegations of price manipulation <a href="https://www.politico.com/news/2021/01/29/wall-street-washington-crackdown-gamestop-463935">could hurt public confidence</a> in financial markets, which would make people more reluctant to invest in retirement and other programs.</p>
<p>Warren Buffett <a href="https://markets.businessinsider.com/news/stocks/warren-buffett-21-best-quotes-2019-2-1027944381">once said</a> about stock market behavior: “The light can at any time go from green to red without pausing at yellow.” </p>
<p>What he meant was that markets can turn on a dime and plunge. He saw these moments as opportunities to find deals in the market, but for most people they result in panic, heavy losses and economic consequences like mass unemployment – as we saw in 1929, 2000 and 2008. </p>
<p>There’s no particular reason it won’t happen again.</p><img src="https://counter.theconversation.com/content/154154/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexander Kurov does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Market prices are supposed to reflect a company’s fundamental value. When they no longer do, bad things can happen.Alexander Kurov, Professor of Finance and Fred T. Tattersall Research Chair in Finance, West Virginia UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1543672021-02-01T18:58:53Z2021-02-01T18:58:53Z‘The stories a nation tells itself matter’: how will the COVID generation remember 2020?<p><em>This is a longer read. Enjoy</em></p>
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<p>The speed with which the COVID-19 virus infected the world and the dramatic nature of its fallout is without parallel. Individually and collectively we have struggled to understand and process it. Early on in the pandemic, journalists looked to historians to help make sense of what was happening and to read from the past the possible impacts of this moment on the future. Experts on past pandemics tried to shed light on how we might recover, and on the prospective local and global consequences of this COVID-19 catastrophe. </p>
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<a href="https://images.theconversation.com/files/381623/original/file-20210201-23-z719mw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/381623/original/file-20210201-23-z719mw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/381623/original/file-20210201-23-z719mw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=915&fit=crop&dpr=1 600w, https://images.theconversation.com/files/381623/original/file-20210201-23-z719mw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=915&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/381623/original/file-20210201-23-z719mw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=915&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/381623/original/file-20210201-23-z719mw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1150&fit=crop&dpr=1 754w, https://images.theconversation.com/files/381623/original/file-20210201-23-z719mw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1150&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/381623/original/file-20210201-23-z719mw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1150&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.griffithreview.com/articles/generation-covid/">Griffith Review</a></span>
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<p>Historians find remnants of the past in libraries and archives, in objects, monuments and buildings, in fields and forests, in music and art and images, in memories and stories. This is where we find the <a href="https://www.paulkrameronline.com/history-in-a-time-of-crisis/">roads not taken</a>, the possibilities foreclosed, the thinking that shapes a culture, the choices made that, sometimes through the slow accretion of time and action and sometimes suddenly and dramatically, change outcomes and “make history”. </p>
<p>The sense that a generation carries a distinct identity is <a href="https://www.tandfonline.com/doi/full/10.1080/1031461X.2015.1120335">forged by sharing</a> the “experience of profound and destabilising events”. Those events have their greatest impact if people experience them young, typically in their late teens and early 20s.</p>
<p>Generational consciousness is shaped by the sharing of those dramatic events, their subsequent remembering and the recognition, often by older generations, of the distinctiveness of a generational experience or mode of self-representation.</p>
<p>What might the past offer us at this moment, and how will future generations reflect on this year? How will this present become the future’s past?</p>
<h2>The COVID generation</h2>
<p>The generation currently in their late teens and early 20s — the COVID generation — already had cause to be worried about their future. </p>
<p>In 2018 and 2019, hundreds of thousands of them had filled city streets to call for action on climate change and for an end to our dependence on fossil fuels. </p>
<p>In 2020, those young people found themselves stuck at home with remote learning, their rites of passage cancelled, their plans upended, their casual labour no longer required, their collective protests in city streets ruled illegal, their sense of agency curtailed by a microscopic virus with its origins in the ecological breakdown they fear. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/no-festivals-no-schoolies-young-people-are-missing-out-on-vital-rites-of-passage-during-covid-145097">No festivals, no schoolies: young people are missing out on vital rites of passage during COVID</a>
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<p>Many joined the long unemployment queues snaking outside Centrelink offices. </p>
<p>While they are in the age bracket least likely to suffer serious health effects from the coronavirus, they are the generation most likely to struggle to find employment in the post-pandemic world, and the ones who, along with their younger siblings, will be carrying the debt burden of the government’s relief measures for the longest.</p>
<p>The fragility of their future is suddenly even more immediately apparent. Not since their great-grandparents were young has an Australian generation lived with such uncertainty, such a profound sense that the future is out of its control.</p>
<h2>Collective memory</h2>
<p>“Collective memory” is a term historians use to refer to the ways the public “remembers” an event or a period of time. It is the version that gets publicly told, endorsed and reworked through films and history books, commemorative activities, monuments and school curricula. </p>
<p>The further back in time an event occurred, the more abstracted the collective memory of it becomes.</p>
<p>Think Anzac, now one of our most carefully curated memories. In the immediate post-World War I period, understandings of what the war had meant for the nation were <a href="https://publishing.monash.edu/product/anzac-memories/">highly contested</a>. Defeat at Gallipoli, 60,000 lives lost (the highest death rate among the Allied forces), a divided and grieving home-front community and an economy in shreds were not obvious raw materials from which to build a narrative about heroic manhood and the founding of the nation. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/how-anzac-day-came-to-occupy-a-sacred-place-in-australians-hearts-76323">How Anzac Day came to occupy a sacred place in Australians' hearts</a>
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<p>Historians played a key role in creating that narrative. C.E.W. Bean <a href="https://www.tandfonline.com/doi/abs/10.1080/10314618908595824">crafted it carefully</a>, selecting the stories that would best illustrate the history he wanted to tell, and then campaigning for a monument and museum that would house and celebrate that story — the Australian War Memorial. </p>
<p>Anzac provided a healing narrative that gave solace to grieving families and the nation alike. It helped make sense of unimaginable loss. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/381564/original/file-20210201-21-16h1mif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The Australian War Memorial." src="https://images.theconversation.com/files/381564/original/file-20210201-21-16h1mif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/381564/original/file-20210201-21-16h1mif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/381564/original/file-20210201-21-16h1mif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/381564/original/file-20210201-21-16h1mif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/381564/original/file-20210201-21-16h1mif.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/381564/original/file-20210201-21-16h1mif.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/381564/original/file-20210201-21-16h1mif.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Australian War Memorial housed the collective ANZAC narrative. It helped make sense of unimaginable loss.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/canberra-australia-december-12-2014-australian-239719210">Shutterstock</a></span>
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<p>For the COVID generation, the return of overwhelming uncertainty cuts deeply in a cohort for whom anxiety and depression were already being described as a pandemic and in a context where mental health was a growing source of national disquiet. They might remember that feeling in their future — or it might not be mere memory. </p>
<p>In 50 years’ time, living with anxiety and uncertainty may be a normal part of the human experience, a consequence of the disruption and havoc of environmental degradation.</p>
<p>Which stories will the COVID generation remember from 2020 — 20, 30, 50 years from now? </p>
<h2>An X-ray of inequality</h2>
<p>They might remember their mothers. One of the fault lines of the pandemic has been gender. More jobs have been lost in <a href="https://www.smh.com.au/business/workplace/pandemic-has-impacted-women-most-significantly-20200604-p54ziu.html">female-dominated sectors</a> than in male-dominated ones. Gender inequality is being further entrentched. While men’s participation in childcare has increased slightly with working-from-home arrangements, women have continued to carry the major load, as well as the <a href="https://www.abc.net.au/news/2020-06-20/coronavirus-covid19-domestic-work-housework-gender-gap-women-men/12369708">bulk of the housework</a>. The juggle of working while home-schooling their children has taken its toll on women. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/low-paid-young-women-the-grim-truth-about-who-this-recession-is-hitting-hardest-141892">Low-paid, young women: the grim truth about who this recession is hitting hardest</a>
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<p>The COVID generation might also remember living in families where precarity and uncertainty were daily realities. The pandemic has functioned as an X-ray of inequality, revealing the cracks in our social fabric. </p>
<p>Will the image of Melbourne’s public housing towers — in which, as the Victorian premier admitted, some of the state’s most vulnerable communities lived — locked down and encircled by police, or the anxious face of a young child gazing from an upper-floor window, become part of the city’s collective memory? </p>
<p>Let them remember, too, alongside all the failures of our systems that have been exposed by the pandemic, the many examples of community strength and collective endeavour. For more than eight months, five million Victorians sacrificed personal freedoms to protect those most vulnerable to the virus. </p>
<p>Many thousands also acted with generosity and selflessness to support and care for those in need. Australians around the country made similar sacrifices. </p>
<h2>The stories we tell ourselves matter</h2>
<p>Historians know the stories a nation tells itself matter; collective memory can suppress competing versions of the past, while individual and family stories might hold conflicting memories. Our work has been crucial in shaping and dismantling, telling and retelling the narratives through which we have come to think of ourselves as a nation. </p>
<p>We have colluded in the silences of colonial dispossession, the erasure of women’s voices and the celebration of environmental-wreckage-as-progress, as much as we have, “in alliances with communities of action”, found voices that have challenged the racist and sexist hierarchies on which such histories were founded. </p>
<p>It’s important to note, however, that many of those stories have not been framed as “national”, but rather as histories of specific groups of people. Their essence has not been abstracted to a national stage and inflected with the power to carry us forward as Australians in periods of existential crisis. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/white-male-and-straight-how-30-years-of-australia-day-speeches-leave-most-australians-out-130279">White, male and straight – how 30 years of Australia Day speeches leave most Australians out</a>
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<p>It is time to bring these marginalised group stories into the national story so we all learn from them as a nation: understand their morals and enact their lessons. </p>
<p>Such an embrace would provide the opportunity for a more honest reckoning with our past — including Indigenous histories — a more authentic reflection of our collective present and richer traditions from which to draw as we face an uncertain future.</p>
<p>The survivors from generations who lived through the Great Depression or World War II, many of them subsequently Australia’s postwar migrants, are among the COVID casualties from our aged-care facilities. They are the generation that helped create our contemporary world. </p>
<p>Daily obituaries in The Age told their stories, their experiences of mass unemployment, war, widespread rationing, poverty and few social services, and presented illuminating stories of hardship, endurance and the importance of community.</p>
<p>But beyond the COVID-19 case count, the exposure of an economic system contingent on precarity and inequality, and the incriminating tally of aged-care deaths, what memories might linger and take shape in the generations who live to look back on this watershed year?</p>
<h2>An obituary to neoliberalism</h2>
<p>It is far too early to predict where this particular historical tide will settle and how this moment of crisis will be recalled. We are still living this story, still captured by the drama of its unfolding, navigating our way along a shoreline none of us has walked before.</p>
<p>If 2020 does prove to be a rupture in our previous trajectory, that contingency will entirely depend on what happens next, be that further pandemics and climate catastrophes or a radical rewind of our carbon emissions and a restructuring of our economy. </p>
<p>Either way, the memories we take forward from this time will be a mix of stories. They will be drawn from individuals and families and gradually coalesce into a broader cultural narrative, one in turn shaped by more powerful forces seeking to draw national significance and meaning from the disaster. </p>
<p>The COVID generation will bring their own distinct memories to shape the national story.</p>
<p>The national stories we tell at this time are crucial. We need stories of adaptation and survival, of resilience and sacrifice, of rebuilding lives shattered by world events, of campaigning for justice, of hope and possibilities.</p>
<p>Too many obituaries have already been written as a result of this pandemic. But I hope for one more. I hope for an obituary to neoliberalism. When the COVID generation remember 2020 and the time that came just after, may they remember the power of community action, collective responsibility and the strength of our diverse body politic. </p>
<p>May they remember the way the passion for change that they carried onto the streets in 2018 and 2019 gradually infected us all, countering the poison of complacency and the power of the fossil-fuel industry alike. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/friday-essay-covid-in-ten-photos-145318">Friday essay: COVID in ten photos</a>
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<p>May they recall a government that, as in the postwar period, invested heavily in employment schemes, in the welfare state, in social housing and higher education; a government willing to make the connections between the droughts, fires and floods that have ravaged our land in the past three years and the pandemic that has ruptured our world, and to act in response — belatedly but definitively — to protect the future. </p>
<p>And may they celebrate and commemorate a community whose vision, sharpened by these unprecedented times, determined that the history they made and bequeathed would be infused with the values of care, stewardship and justice.</p>
<p><em>This is an edited version of an essay published in <a href="https://www.griffithreview.com/articles/generation-covid/">Griffith Review 71: Remaking the Balance</a></em></p><img src="https://counter.theconversation.com/content/154367/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Katie Holmes receives funding from the Australian Research Council. </span></em></p>What might the past offer us at this moment, and how will future generations reflect on this year? How will this present become the future’s past?Katie Holmes, Professor of History, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1538132021-01-29T17:15:43Z2021-01-29T17:15:43ZWhat those mourning the fragility of American democracy get wrong<figure><img src="https://images.theconversation.com/files/380558/original/file-20210125-13-c01ock.jpg?ixlib=rb-1.1.0&rect=26%2C26%2C2901%2C1967&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Armed demonstrators attend a rally in front of the Michigan Capitol in Lansing to protest the governor's stay-at-home order on May 14, 2020. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/armed-demonstrators-attend-a-rally-in-front-of-the-michigan-news-photo/1224848091">Scott Olson/Getty Images</a></span></figcaption></figure><p>For many people, the lesson from the assault on the U.S. Capitol on Jan. 6, 2021 – and more broadly from the experience of the last four years – is that American democracy has become newly and dangerously fragile. </p>
<p>That conclusion is overstated. In fact, American democracy has always been fragile. And it might be more precise to diagnose the United States as a fragile union rather than a fragile democracy. As President Joe Biden said in his <a href="https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/01/20/inaugural-address-by-president-joseph-r-biden-jr/">inaugural address</a>, national unity is “that most elusive of things.”</p>
<p>Certainly, faith in American democracy has been battered over the last year. <a href="https://drive.google.com/file/d/1H3uFRD7X0QttkZ26bccmlQVkbS-63uGj/view">Polls show that 1 in 4 Americans do not recognize Joe Biden as the legitimate winner of the 2020 election</a>. The turn to violence on Capitol Hill was a disturbing attack on an important symbol of U.S. democracy. </p>
<p>But there are four other factors that should be considered to evaluate the true state of the nation. Taking these into account, what emerges is a picture of a country that, despite its long tradition of presenting itself as exceptional, looks a lot like the other struggling democracies of the world.</p>
<h2>Democratic fragility is not new</h2>
<p>First, fragility is not really new. It’s misleading to describe the United States as “<a href="https://www.politico.com/news/magazine/2021/01/06/donald-trumps-america-shithole-countries-455692">the world’s oldest democracy</a>,” as many observers have recently done. By modern definitions of the concept, the United States has only been a democracy for about 60 years. Despite constitutional guarantees, most <a href="https://www.loc.gov/classroom-materials/elections/right-to-vote/voting-rights-for-african-americans/">Black Americans could not vote in important elections before the 1960s</a>, nor did they have basic civil rights. Like many other countries, the United States is still working to consolidate democratic ideals.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/380564/original/file-20210125-19-at2h5x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A group of voters lining up outside a polling station, a Sugar Shack small store, in Peachtree, Alabama in 1966." src="https://images.theconversation.com/files/380564/original/file-20210125-19-at2h5x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380564/original/file-20210125-19-at2h5x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=403&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380564/original/file-20210125-19-at2h5x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=403&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380564/original/file-20210125-19-at2h5x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=403&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380564/original/file-20210125-19-at2h5x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=507&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380564/original/file-20210125-19-at2h5x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=507&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380564/original/file-20210125-19-at2h5x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=507&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Voting Rights Act was passed in 1965, ensuring Blacks the right to vote, as people in Peachtree, Alabama, did at this polling place in May 1966.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/group-of-voters-lining-up-outside-the-polling-station-a-news-photo/3088626?adppopup=true">MPI/Getty images</a></span>
</figcaption>
</figure>
<p>Similarly, the struggle to contain political violence is not new. Washington has certainly seen its share of such violence. Since 1950, there have been <a href="https://www.washingtonpost.com/history/2021/01/07/us-capitol-violent-political-attacks/">multiple bombings and shootings at the U.S. Capitol</a> <a href="https://www.history.com/news/a-history-of-white-house-attacks">and the White House</a>. Troops have been deployed to keep order in Washington four times since World War I – <a href="https://www.washingtonpost.com/history/2019/07/15/deadly-race-riot-aided-abetted-by-washington-post-century-ago/">during riots and unrest in 1919</a> <a href="https://www.washingtonpost.com/graphics/2018/local/dc-riots-1968/#:%7E:text=On%20April%204%2C%201968%2C%20the,before%20in%20Detroit%20and%20Newark.&text=His%20assassination%20ignited%20an%20explosion,in%20ruins%20for%2030%20years.">and 1968</a>, <a href="https://www.politico.com/news/magazine/2020/06/07/us-army-demonstrations-washington-305913">economic protests in 1932</a>, and again in 2021. The route from the Capitol to the White House passes near the spots where <a href="https://www.loc.gov/collections/abraham-lincoln-papers/articles-and-essays/assassination-of-president-abraham-lincoln/">Abraham Lincoln was assassinated in 1865</a>, <a href="https://www.pbs.org/newshour/health/dirty-painful-death-president-james-garfield">James Garfield was fatally shot in 1881</a>, and <a href="https://prologue.blogs.archives.gov/2015/11/01/the-plot-to-kill-president-truman/">Harry Truman was attacked in 1950</a>.</p>
<p>Political instability is also a familiar feature of economic downturns. There were <a href="https://www.nytimes.com/1975/06/29/archives/the-crisis-of-democracy.html">similar fears about the end of democracy during the 1970s</a>, when the United States wrestled with inflation and unemployment, <a href="https://www.cambridge.org/core/journals/american-political-science-review/article/abs/democracy-in-crisis-by-harold-j-laski-chapel-hill-the-university-of-north-carolina-press-1933-pp-267-the-state-in-theory-and-practice-by-harold-j-laski-new-york-the-viking-press-1935-pp-299/C295FBBABD2BB43006CF56336642202B">and during the Great Depression of the 1930s</a>. Of course, those fears had some justification. Many people wondered whether democratic governments could rise to new challenges. But there is evidence from historical episodes like this that democracies do eventually adapt – indeed, that they are better at adapting than non-democratic systems like the <a href="https://history.state.gov/milestones/1989-1992/collapse-soviet-union">Soviet Union, which collapsed in 1991</a>.</p>
<p>Finally, the debate about American democracy is <a href="https://penntoday.upenn.edu/news/researcher-penn-explores-why-voters-ignore-local-politics">fixated excessively on politics at the national level</a>. This fixation has been aggravated by the way that <a href="https://theconversation.com/when-newspapers-close-voters-become-more-partisan-108416">the media and internet have developed over the last 30 years</a>. Political debate focuses more and more heavily on Washington. But the American political system also includes 50 state governments and <a href="https://www.census.gov/content/dam/Census/library/publications/2013/econ/g12-cg-org.pdf">90,000 local governments</a>. More than <a href="https://www2.census.gov/programs-surveys/gus/tables/1995/gc92-1-2.pdf">half a million people</a> in the United States occupy a popularly elected office. Democratic practices may be imperfect, but they are extensive and not easily undone.</p>
<p>On balance, claims about the fragility of American democracy should be taken seriously, but with a sense of proportion. Events since the November 2020 election have been troubling, but they do not signal an impending collapse of America’s democratic experiment.</p>
<h2>A crisis of unity</h2>
<p>It might be more useful to think of the present crisis in other terms. The real difficulty confronting the country might be a fragile national union, rather than a fragile democracy. </p>
<p>Since the 1990s, the country has seen the emergence of <a href="https://theconversation.com/think-the-us-is-more-polarized-than-ever-you-dont-know-history-131600">deep fissures between what came to be called “red” and “blue” America</a> – two camps with very different views about national priorities and the role of federal government in particular. The result has been increasing <a href="https://theconversation.com/search/result?sg=231cca2a-cb7e-49a2-b6c6-0796ad9aba0f&sp=1&sr=1&url=%2Fcongress-used-to-pass-bipartisan-legislation-will-it-ever-again-107134">rancor and gridlock in Washington</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/380561/original/file-20210125-19-pcati6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A supporter of President Donald Trump holds a Confederate battle flag outside the Senate chamber." src="https://images.theconversation.com/files/380561/original/file-20210125-19-pcati6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/380561/original/file-20210125-19-pcati6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=389&fit=crop&dpr=1 600w, https://images.theconversation.com/files/380561/original/file-20210125-19-pcati6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=389&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/380561/original/file-20210125-19-pcati6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=389&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/380561/original/file-20210125-19-pcati6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=489&fit=crop&dpr=1 754w, https://images.theconversation.com/files/380561/original/file-20210125-19-pcati6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=489&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/380561/original/file-20210125-19-pcati6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=489&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Old political divisions – exemplified by this Confederate battle flag held by a supporter of President Trump during the breach of the Capitol – are still at play in the U.S.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/supporter-of-us-president-donald-trump-holds-a-confederate-news-photo/1230505469?adppopup=true">Saul Loeb/AFP via Getty Images</a></span>
</figcaption>
</figure>
<p>Again, this sort of division is not new to American politics. “The United States” did not become established in American speech as a <a href="https://www.theatlantic.com/magazine/archive/2012/02/the-words-that-remade-america/308801/">singular rather than a plural noun</a> until after the Civil War. Until the 1950s, it was commonplace to describe the United States as a composite of sections – North, South and West – with distinctive interests and cultures. </p>
<p>[<em>Get the best of The Conversation, every weekend.</em> <a href="https://theconversation.com/us/newsletters/weekly-highlights-61?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=weeklybest">Sign up for our weekly newsletter</a>.]</p>
<p>In 1932, Pulitzer Prize-winning historian <a href="https://www.britannica.com/biography/Frederick-Jackson-Turner">Frederick Jackson Turner compared the United States to Europe</a>, describing it as a “federation of nations” held together through careful diplomacy.</p>
<p>It was only in the 1960s that this view of the United States faded away. Advances in transportation and communications seemed to forge the country into a single economic and cultural unit. </p>
<p>But politicians overestimated this transformation. </p>
<h2>Return of old divisions</h2>
<p>Since the 1990s, old divisions have re-emerged.</p>
<p>America’s current political class has not fully absorbed this reality. Too often, it has taken unity for granted, forgetting the country’s long history of sectional conflict. Because they took unity for granted, many new presidents in the modern era were tempted to launch their administrations with <a href="https://www.wilsonquarterly.com/quarterly/back-to-the-future/the-hundred-day-mistake/">ambitious programs that galvanized followers while antagonizing opponents</a>. However, this winner-take-all style may not be well suited to the needs of the present moment. It may aggravate divisions rather than rebuilding unity.</p>
<p>Only 20 years ago, many Americans – buoyed by an economic boom and the collapse of the Soviet Union – were convinced that their model of governance was on the brink of conquering the world. President George W. Bush declared American-style democracy to be the “<a href="https://georgewbush-whitehouse.archives.gov/nsc/nssall.html">single sustainable model for national success</a>.” By contrast, many people today worry that this model is on the brink of collapse. </p>
<p>The hubris of the early 2000s was misguided, and so is the despair of 2021. Like many other countries, the United States is engaged in a never-ending effort to maintain unity, contain political violence and live up to democratic principles.</p><img src="https://counter.theconversation.com/content/153813/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alasdair S. Roberts does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Everyone’s saying it: ‘Democracy is fragile’ in the United States. But a political science scholar says that has always been the case.Alasdair S. Roberts, Director, School of Public Policy, UMass AmherstLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1529512021-01-12T19:09:22Z2021-01-12T19:09:22ZHow can America heal from the Trump era? Lessons from Germany’s transformation into a prosperous democracy after Nazi rule<figure><img src="https://images.theconversation.com/files/378297/original/file-20210112-21-1m1nob1.jpg?ixlib=rb-1.1.0&rect=14%2C7%2C4868%2C3216&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trump supporters clash with police and security forces as people try to storm the U.S. Capitol Building in Washington, D.C., on Jan. 61. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/trump-supporters-clash-with-police-and-security-forces-as-news-photo/1230454153?adppopup=true">Joseph Prezioso/AFP via Getty Images</a></span></figcaption></figure><p>Comparisons between the <a href="https://www.nytimes.com/2021/01/10/us/politics/arnold-schwarzenegger-video.html">United States under Trump and Germany during the Hitler era </a> are once again being made following the <a href="https://www.washingtonpost.com/dc-md-va/2021/01/06/dc-protests-trump-rally-live-updates/">storming of the U.S. Capitol on Jan. 6</a>.</p>
<p>Even in the eyes of German history scholars like myself, <a href="https://theconversation.com/trump-hitler-comparisons-too-easy-and-ignore-the-murderous-history-92394">who had earlier warned of the troubling nature of such analogies</a>, Trump’s strategy to remain in power has undeniably proved that he has fascist traits. <a href="https://www.npr.org/2020/09/06/910320018/fascism-scholar-says-u-s-is-losing-its-democratic-status">True to the fascist playbook</a>, which includes hypernationalism, the glorification of violence and a fealty to anti-democratic leaders that is cultlike, Trump launched a conspiracy theory that the recent election was rigged and incited violence against democratically elected representatives of the American people. </p>
<p>This is not to say that Trump has suddenly emerged as a new Hitler. The German dictator’s lust for power was inextricably linked to his <a href="https://encyclopedia.ushmm.org/content/en/article/victims-of-the-nazi-era-nazi-racial-ideology">racist ideology</a>, which unleashed a global, genocidal war. For Trump, the need to <a href="https://www.theatlantic.com/magazine/archive/2016/06/the-mind-of-donald-trump/480771/">satisfy his own ego</a> seems to be the major motivation of his politics. </p>
<p>But that doesn’t change the fact that Trump is just as much of a mortal danger to American democracy as Hitler was to the Weimar Republic. The first democracy on German soil <a href="https://www.theatlantic.com/magazine/archive/2016/06/the-mind-of-donald-trump/480771/">did not survive the onslaught of the Nazis</a>. </p>
<p>If America is to survive the attacks of Trump and his supporters, its citizens would do well to look to the fate of Germany and the lessons it offers Americans looking to save, heal and unite their republic.</p>
<h2>From Nazi ideology to democracy</h2>
<p>The <a href="https://www.britannica.com/place/Weimar-Republic">Weimar Republic, the first democracy on German soil</a>, was a short-lived one. Founded in 1918, it managed to survive the political turmoil of the early 1920s, but succumbed to the crisis brought about by the Great Depression. It is therefore not the history of the failed Weimar Republic but rather that of the <a href="https://www.britannica.com/place/Germany/Formation-of-the-Federal-Republic-of-Germany">Federal Republic, founded in 1949</a>, that provides important clues. </p>
<p>Just like Weimar, the West German Federal Republic was founded in the aftermath of a devastating war, World War II. And, just like Weimar, the new German state found itself confronted with large numbers of citizens who were deeply anti-democratic. Even worse, many of them had been involved in the Holocaust and other heinous crimes against humanity. </p>
<p>During the first postwar decade, a majority of Germans still believed that Nazism <a href="https://www.google.com/books/edition/Postwar/10oPnprPjcgC?hl=en&gbpv=1&dq=%22Nazism+was+a+good+idea,+badly+applied%22&pg=PA58&printsec=frontcover">had been a good idea, only badly put into practice</a>. This was a sobering starting point, but Germany’s second democracy managed not just to survive but even to flourish, and it ultimately developed into one of the most stable democracies worldwide. </p>
<p>How?</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/378311/original/file-20210112-15-w95x5j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="German war crimes defendants sitting in a courtroom at the Nuremberg trials." src="https://images.theconversation.com/files/378311/original/file-20210112-15-w95x5j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/378311/original/file-20210112-15-w95x5j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=468&fit=crop&dpr=1 600w, https://images.theconversation.com/files/378311/original/file-20210112-15-w95x5j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=468&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/378311/original/file-20210112-15-w95x5j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=468&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/378311/original/file-20210112-15-w95x5j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=589&fit=crop&dpr=1 754w, https://images.theconversation.com/files/378311/original/file-20210112-15-w95x5j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=589&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/378311/original/file-20210112-15-w95x5j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=589&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">German war crimes defendants sitting in a courtroom at the Nuremberg trials in November 1945. Among them are Hermann Goering, Rudolf Hess and Joachim Von Ribbentrop.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/german-war-crimes-defendants-sitting-in-a-courtroom-of-the-news-photo/158743770?adppopup=true">Mondadori Portfolio by Getty Images)</a></span>
</figcaption>
</figure>
<h2>Denazification: ‘Painful and amoral process’</h2>
<p>For one, there was a legal reckoning with the past, beginning with the trial and prosecution of some Nazi elites and war criminals. That happened first at <a href="https://www.theguardian.com/law/2020/dec/18/landmarks-in-law-the-first-trial-where-the-word-genocide-was-spoken">the Nuremberg Trials</a>, organized by the Allies in 1945 and 1946, in which leading Nazis were tried for genocide and crimes against humanity. A further significant reckoning happened during the <a href="https://www.ushmm.org/collections/the-museums-collections/collections-highlights/auschwitz-ssalbum/frankfurt-trial">Frankfurt Auschwitz trials</a> of the mid-1960s, in which 22 officials of the SS, the elite paramilitary organization of the Nazi Party, were tried for the roles they played at the Auschwitz-Birkenau death camp. </p>
<p>To protect the new German democracy from the political divisions that had plagued parliamentary government during the Weimar period, an electoral law was introduced that aimed to prevent the proliferation of small extremist parties. This was <a href="https://www.dw.com/en/how-does-the-german-general-election-work/a-37805756">the “5 percent” clause</a>, which stipulated that a party must win a minimum of 5% of the national vote to receive any representation in parliament.</p>
<p>In a similar vein, <a href="https://www.gesetze-im-internet.de/englisch_stgb/englisch_stgb.html">Article 130 of the German Criminal Code</a> made “incitement of the masses” a criminal offense to stop the spread of extremist thought, hate speech and calls for political violence.</p>
<p>Yet as important and admirable as these efforts were in exorcising Germany’s Nazi demons, they alone are not what kept Germans on a democratic footing after 1945. So, too, did the successful integration of anti-democratic forces into the new state.</p>
<p>This was a painful and amoral process. In January 1945, the Nazi Party had <a href="https://www.crl.edu/collections/topics/germany">some 8.5 million members</a> – that is, significantly more than 10% of the entire population. After the unconditional surrender of Nazi Germany, many of them claimed that they <a href="http://www.alliiertenmuseum.de/en/topics/denazification.html">had been only nominal members</a>.</p>
<p>Such attempts to get off scot-free did not work for the Nazi luminaries tried at Nuremberg, but it certainly did work for many lower-level Nazis involved in countless crimes. And with the advent of the Cold War, <a href="https://ips-dc.org/the_cias_worst-kept_secret_newly_declassified_files_confirm_united_states_collaboration_with_nazis/">even people outside of Germany were willing to look past these offenses</a>. </p>
<p><a href="https://digicoll.library.wisc.edu/cgi-bin/History/History-idx?type=article&did=History.Denazi.i0003&id=History.Denazi&isize=M">Denazification, the Allies’ attempt to purge German society, culture and politics</a>, as well as the press, economy and judiciary, of Nazism, petered out quickly and was officially abandoned in 1951. As a result, many Nazis were absorbed into an emerging new society that officially committed itself to democracy and human rights.</p>
<p>Konrad Adenauer, the first West German chancellor, said in 1952 that it was time <a href="https://www.spiegel.de/international/germany/from-dictatorship-to-democracy-the-role-ex-nazis-played-in-early-west-germany-a-810207.html">“to finish with this sniffing out of Nazis.”</a> He did not say this lightheartedly; after all, he had been an opponent of the Nazis. To him, this <a href="https://books.google.com/books?id=wNd9Zp1A1a4C&pg=PA240&lpg=PA240&dq=hermann+l%C3%BCbbe+communicative+silencing&source=bl&ots=g5dLTJ6zYy&sig=ACfU3U0aXiIxejpQVKvX4vVsiImuFRi9sQ&hl=en&sa=X&ved=2ahUKEwjxxfzg_JTuAhUFYawKHdmiCM0Q6AEwB3oECAgQAg#v=onepage&q=hermann%20l%C3%BCbbe%20communicative%20silencing&f=false">“communicative silencing”</a> of the Nazi past – a term coined by the German philosopher Hermann Lübbe – was necessary during these early years to integrate former Nazis into the democratic state. </p>
<p>Where one was going, advocates of this approach argued, was more important than where one had been.</p>
<h2>A dignified life</h2>
<p>For many, this failure to achieve justice was too heavy of a price to pay for democratic stability. But the strategy ultimately bore fruit. Despite the recent <a href="https://www.cnbc.com/2020/02/06/shockwaves-in-berlin-as-far-right-afd-lends-support-to-mainstream.html">growth of the far right and nationalist “Alternative for Germany” party</a>, Germany has remained democratic and has not yet become a threat to world peace. </p>
<p>At the same time, there were increasing efforts to confront the Nazi past, especially after the upheaval of 1968, when a new generation of young Germans challenged the older generation <a href="https://www.dw.com/en/68-movement-brought-lasting-changes-to-german-society/a-3257581">about their behavior during the Third Reich</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/378314/original/file-20210112-19-mz23ap.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Young people at a demonstration in Nuremberg, Germany, in 1968." src="https://images.theconversation.com/files/378314/original/file-20210112-19-mz23ap.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/378314/original/file-20210112-19-mz23ap.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=441&fit=crop&dpr=1 600w, https://images.theconversation.com/files/378314/original/file-20210112-19-mz23ap.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=441&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/378314/original/file-20210112-19-mz23ap.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=441&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/378314/original/file-20210112-19-mz23ap.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=554&fit=crop&dpr=1 754w, https://images.theconversation.com/files/378314/original/file-20210112-19-mz23ap.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=554&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/378314/original/file-20210112-19-mz23ap.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=554&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In 1968, young Germans demonstrated against the older generation about many concerns, including their behavior during the Third Reich.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/demonstrators-with-banners-on-sunday-in-front-of-the-news-photo/1074504810?adppopup=true">Karl Schnörrer/picture alliance via Getty Images</a></span>
</figcaption>
</figure>
<p>Another crucial factor helped make Germany’s democratic transition a success: <a href="https://www.britannica.com/place/Germany/Political-consolidation-and-economic-growth-1949-69#ref297761">an extraordinary period of economic growth in the postwar period</a>. Most ordinary Germans benefited from this prosperity, and the new state even created <a href="https://files.stlouisfed.org/files/htdocs/publications/review/75/10/Postwar_Oct1975.pdf">a generous welfare system</a> to cushion them against the harsh forces of the free market. </p>
<p>In short, more and more Germans embraced democracy because it offered them a dignified life. As a result, philosopher <a href="https://www.foreignaffairs.com/reviews/capsule-review/2008-05-03/constitutional-patriotism">Jürgen Habermas’ concept of “constitutional patriotism” – as one interpreter put it</a>, that citizens’ political attachment to their country “ought to center on the norms, the values and, more indirectly, the procedures of a liberal democratic constitution” – eventually came to replace older, more rabid forms of nationalism.</p>
<p>[<em>Get our most insightful politics stories.</em> <a href="https://theconversation.com/us/newsletters/politics-weekly-74/?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=politics-most">Sign up for The Conversation’s Politics Weekly</a>.]</p>
<p>In the coming weeks and months, Americans will debate the most effective ways to punish those who instigated the recent political violence. They will also consider how to restore the trust in democracy of the many millions who have given their support to <a href="https://theconversation.com/a-field-guide-to-trumps-dangerous-rhetoric-139531">Donald Trump and still believe the lies of this demagogue</a>.</p>
<p>Defenders of American democracy would do well to study carefully the painful but ultimately successful approach of the Federal Republic of Germany to move beyond fascism. </p>
<p>The United States finds itself in a different place and time than postwar Germany, but the challenge is similar: how to reject, punish and delegitimize the powerful enemies of democracy, pursue an honest reckoning with the violent racism of the past, and enact political and socioeconomic policies that will allow all to lead a dignified life.</p><img src="https://counter.theconversation.com/content/152951/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sylvia Taschka is not a member of the Democratic party, but has volunteered for them during election periods.</span></em></p>The US faces many of the same problems Germans faced after World War II: how to reject, punish and delegitimize the enemies of democracy. There are lessons in how Germany handled that challenge.Sylvia Taschka, Senior Lecturer of History, Wayne State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1523822020-12-22T21:08:32Z2020-12-22T21:08:32ZHow holiday cards help us cope with a not-so-merry year, according to a professor of comedy<figure><img src="https://images.theconversation.com/files/376136/original/file-20201221-13-1jromdx.jpg?ixlib=rb-1.1.0&rect=0%2C78%2C6863%2C4080&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A colorful vintage cartoon greeting card depicts a caricature of a soldier receiving a message from the ‘Pigeon Express'.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/colorful-vintage-cartoon-greeting-card-depicts-a-caricature-news-photo/140324993">Donaldson Collection/Michael Ochs Archives/Getty Images</a></span></figcaption></figure><p>The first Christmas card was, perhaps predictably, one of good cheer. The concept is commonly credited to <a href="https://www.smithsonianmag.com/history/history-christmas-card-180957487/">Sir Henry Cole,</a> the founder of the Victoria and Albert Museum in London. </p>
<p>To spare himself the stress of responding to the all-too-many Christmas letters he received from friends, Cole commissioned an artist to create 1,000 engraved holiday cards in 1843. Featuring a prosperous family toasting the holidays, the image was flanked on both sides by images of kindly souls engaging in acts of charity. A caption along the bottom read, “A Merry Christmas and a Happy New Year to You.”</p>
<figure class="align-center ">
<img alt="first Christmas card of family in a bountiful feast flanked by people doing acts of charity" src="https://images.theconversation.com/files/376130/original/file-20201221-17-6vera.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/376130/original/file-20201221-17-6vera.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=384&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376130/original/file-20201221-17-6vera.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=384&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376130/original/file-20201221-17-6vera.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=384&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376130/original/file-20201221-17-6vera.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=483&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376130/original/file-20201221-17-6vera.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=483&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376130/original/file-20201221-17-6vera.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=483&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sir Henry Cole’s Christmas card.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Firstchristmascard.jpg">commons.wikimedia.org</a></span>
</figcaption>
</figure>
<p>But given the end to a bruising year of a worldwide pandemic, enormous economic suffering and a venomous election season, a classic and macabre Charles Addams cartoon might feel more appropriate in 2020. The Addams family gazes outside a bay window to see snow falling while their neighbors decorate, deliver gifts, and build snowmen. <a href="https://www.google.com/search?q=suddenly+i+have+a+dreadful+urge+to+be+merry&sa=N&rlz=1C5CHFA_enUS853US853&biw=1481&bih=744&tbm=isch&source=iu&ictx=1&fir=2S-vGXrqjuyDMM%252CokrCDwSyUiw32M%252C_&vet=1&usg=AI4_-kS3yKuuYEAb2erWoKbabGq-_6nMSA&ved=2ahUKEwiwiIquzuHtAhVQlVkKHclSBP84ChD1AXoECAoQAQ#imgrc=2S-vGXrqjuyDMM">Gomez Addams lachrymosely sighs</a>, “Suddenly I have a dreadful urge to be merry.” </p>
<p>The comic captures the repressive side of the phrase “Have a Merry Christmas”: the push to be hopeful during the holidays, even when it does not feel right.</p>
<p>I am a <a href="https://www.emerson.edu/faculty-staff-directory/matthew-mcmahan">theater historian who focuses on the history of comedy</a>. Particularly, I’m interested in comedy as a mode of communication and how it uniquely conveys information.</p>
<p>Lately, I’ve been curious to see how recent holiday cards have dealt with the tensions of the year – and how greeting cards during other eras of struggle handled the holidays. From a cursory review, it’s clear other difficult times have revealed a similar instinct to acknowledge the incongruence of strife mixed with the season of joy. </p>
<h2>Macabre with the merry</h2>
<p>In the book “<a href="https://mcfarlandbooks.com/product/american-holiday-postcards-1905-1915/">American Holiday Postcards, 1905-1915: Imagery and Context</a>,” author Daniel Gifford writes, “Because holidays are socially constructed, a certain quorum of rituals, meanings, symbols, etc. is shared among the participants in order to give the holiday shape and for participants to understand their significance.” </p>
<p>Over time, these rituals have often taken the form of tokens of merriment such as beatific cherubs or velvet-clad jolly Saint Nicks. They are often ensnared by floral patterns, holly bushes, firs, pines and wreaths. They evince saccharine families, dressed alike, clinging to each other with an almost enviable, and sometimes believable, warmth. </p>
<figure class="align-center ">
<img alt="People pulling up Santa on a stock market dip during the Great Depression" src="https://images.theconversation.com/files/376054/original/file-20201220-23-1jg3d77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/376054/original/file-20201220-23-1jg3d77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=498&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376054/original/file-20201220-23-1jg3d77.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=498&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376054/original/file-20201220-23-1jg3d77.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=498&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376054/original/file-20201220-23-1jg3d77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=626&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376054/original/file-20201220-23-1jg3d77.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=626&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376054/original/file-20201220-23-1jg3d77.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=626&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Pulling Santa out of the Great Depression.</span>
<span class="attribution"><a class="source" href="https://www.collectorsweekly.com/articles/dreaming-of-a-posh-christmas-in-postcards/">courtesy of Lizzie Bramlet</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>The cards are usually rife with sentimentality, and the imagery tends toward the cliché. The combination of these two – the sentimental and the cliché – offers up the perfect opportunity to make jokes. A tendency in many comic holiday cards is to bring up the circumstances of the day and how the state of affairs disrupt the usual joviality of the season. </p>
<p>The side effect is that these joke cards preserve history in a playful way. <a href="https://howlround.com/laughing-matters-0">Although the chief objective</a> of any joke or gag is to entertain, because they are meant to evoke an emotional response – a laugh, a smile or even a groan – they also capture what the joke teller and his or her audience may feel about the holidays. </p>
<p>The timely Christmas card, then, infuses the typical – holiday imagery – with the topical – what’s going on at that specific moment in time. The Great Depression is a prime example.</p>
<figure class="align-center ">
<img alt="A card of four stick figures poring over bills that say merry xmas." src="https://images.theconversation.com/files/376252/original/file-20201221-15-7iwhdg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/376252/original/file-20201221-15-7iwhdg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=446&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376252/original/file-20201221-15-7iwhdg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=446&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376252/original/file-20201221-15-7iwhdg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=446&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376252/original/file-20201221-15-7iwhdg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=561&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376252/original/file-20201221-15-7iwhdg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=561&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376252/original/file-20201221-15-7iwhdg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=561&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A 1933 holiday card from a family during the Depression.</span>
<span class="attribution"><a class="source" href="https://americanhistory.si.edu/collections/search/object/nmah_1815326">Division of Work and Industry, National Museum of American History, Smithsonian Institution</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<figure class="align-center ">
<img alt="Words written by a family on a holiday card. in 1933" src="https://images.theconversation.com/files/376262/original/file-20201221-21-10hdp0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/376262/original/file-20201221-21-10hdp0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=425&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376262/original/file-20201221-21-10hdp0a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=425&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376262/original/file-20201221-21-10hdp0a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=425&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376262/original/file-20201221-21-10hdp0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=535&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376262/original/file-20201221-21-10hdp0a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=535&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376262/original/file-20201221-21-10hdp0a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=535&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A 1933 holiday card from a family during the Depression.</span>
<span class="attribution"><a class="source" href="https://americanhistory.si.edu/collections/search/object/nmah_1815326">Division of Work and Industry, National Museum of American History, Smithsonian Institution.</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>This homemade card by a financially struggling family tugs on the heartstrings in a different way than holiday cards usually do, but still captures the droll irony of the moment. </p>
<p>The cartoonist Herbert Block was unafraid of addressing political injustice in his yearly holiday drawings. In this 1938 cartoon located in the Library of Congress, he questions whether the Dies Committee – also known as the The House Committee on Un-American Activities – would find Santa Claus to be un-American.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/376266/original/file-20201221-57996-dj09mv.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/376266/original/file-20201221-57996-dj09mv.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=794&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376266/original/file-20201221-57996-dj09mv.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=794&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376266/original/file-20201221-57996-dj09mv.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=794&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376266/original/file-20201221-57996-dj09mv.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=998&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376266/original/file-20201221-57996-dj09mv.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=998&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376266/original/file-20201221-57996-dj09mv.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=998&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">In a political cartoon, Herb Block questions if the Dies Committee would find Santa Claus to be un-American.</span>
<span class="attribution"><a class="source" href="https://www.loc.gov/rr/print//swann/hbgift/images/hbgift04.jpg">A 1938 Herb Block Cartoon, copyright The Herb Block Foundation</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>A funny end to a lousy year</h2>
<p>Today, in the spirit of Jon Stewart, the comedian and political commentator, we’ve all become ironists, wielding a cutting perspective on Twitter, Facebook and Instagram alike. These mediums spur creativity and competition with the elusive promise of making viral – a term we perhaps should reconsider! – the most clever or irreverent gag.</p>
<p>This certainly occurred before the pandemic, but the events of the last year have allowed Americans to mock the usual holiday imagery by acknowledging that this Christmas is not merry, at least not in the usual way. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1336512816786907138"}"></div></p>
<p>One of my favorites is a 2020 card that adds a sardonic twist to the cozy familiarity of Charles Schultz’s Peanuts.</p>
<p>There are other great ones out there where the clever meet the current mood. Take one that addresses the nation’s run on toilet paper from <a href="https://www.etsy.com/listing/862588518/we-rolled-with-it-2020-digital-holiday?variation0=1586974698">Dottie & Caro</a>. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/376173/original/file-20201221-23-wkq7jo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/376173/original/file-20201221-23-wkq7jo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376173/original/file-20201221-23-wkq7jo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376173/original/file-20201221-23-wkq7jo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376173/original/file-20201221-23-wkq7jo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376173/original/file-20201221-23-wkq7jo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376173/original/file-20201221-23-wkq7jo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Making fun of the nation’s run on toilet paper.</span>
<span class="attribution"><span class="source">Card by Dottie & Caro.</span></span>
</figcaption>
</figure>
<p>And see this one from <a href="https://saucyavocado.com/collections/holiday-cards/products/copy-of-deck-the-halls-2020-edition">Saucy Avocado</a> that plays on the night before Christmas magic. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/376169/original/file-20201221-19-1c962s9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/376169/original/file-20201221-19-1c962s9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=582&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376169/original/file-20201221-19-1c962s9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=582&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376169/original/file-20201221-19-1c962s9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=582&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376169/original/file-20201221-19-1c962s9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=731&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376169/original/file-20201221-19-1c962s9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=731&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376169/original/file-20201221-19-1c962s9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=731&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A twist on jolly St. Nick.</span>
<span class="attribution"><span class="source">A Christmas card from Saucy Avacado.</span></span>
</figcaption>
</figure>
<p>So, although many families all over the world are certainly experiencing a period of great strife and loneliness, that doesn’t mean the holiday greetings have to skirt the sad. Rather, a touch of irreverence enables these cards to mark the anxieties and worries of the now with the spirit of a different, and still meaningful, sort of merriment.</p>
<p>[<em>Deep knowledge, daily.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=deepknowledge">Sign up for The Conversation’s newsletter</a>.]</p><img src="https://counter.theconversation.com/content/152382/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew McMahan does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A professor of comedy examines holiday cards in times of struggles. They aren’t all sad.Matthew McMahan, Assistant Director, Comedic Arts, Emerson CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1390882020-08-19T10:02:08Z2020-08-19T10:02:08ZWhat moments of uncertainty mean for war – and peace – between global rivals<p>The coronavirus pandemic has inflamed existing tensions between China and the US. China blamed the US for spreading <a href="https://www.cnn.com/2020/03/24/politics/us-china-coronavirus-disinformation-campaign/index.html">the virus across international borders</a> while the US president, Donald Trump, continues to focus the blame on China by referring to COVID-19 as the “China virus.” Tensions between them have also mounted over the fate of <a href="https://www.bbc.co.uk/news/world-asia-china-53722811">Hong Kong</a> and <a href="https://edition.cnn.com/2020/08/11/asia/china-taiwan-guam-military-exercises-intl-hnk-scli/index.html">the South China Sea</a>. </p>
<p>My <a href="https://academic.oup.com/jogss/advance-article-abstract/doi/10.1093/jogss/ogz079/5735640?redirectedFrom=fulltext">research</a>, done in collaboration with <a href="https://joshualjackson.wordpress.com/">Joshua Jackson</a> and <a href="https://www.georgewilliford.com/">George Williford</a>, suggests that similar, although far less dramatic, moments of uncertainty have led to increased military tensions between rival countries. </p>
<p>A rapid shift in relative military power, a rival state obtaining nuclear weapons, or changes in leadership and economic crises can generate uncertainty between enemies as their resolve to fight is put to the test. In the international system, uncertainty is dangerous and can lead to <a href="https://www.jstor.org/stable/2706903?seq=1">war</a> – but it can also create opportunities for <a href="https://www.jstor.org/stable/2111756?seq=1#metadata_info_tab_contents">peace</a>. </p>
<p>To clear up uncertainty about their rival’s motives, countries often issue threats to send a clear and credible message to their rival that they are committed to continuing a particular dispute. By sending a militarised threat, they also force their opponent to either resist and keep fighting – or to concede. There are numerous examples of this playing out throughout history, which can help us understand what might happen today. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/south-china-sea-after-all-its-posturing-the-us-is-struggling-to-build-a-coalition-against-china-144533">South China Sea: after all its posturing, the US is struggling to build a coalition against China</a>
</strong>
</em>
</p>
<hr>
<h2>China, Japan and the Great Depression</h2>
<p>The uncertainty created by the Great Depression in the 1930s intensified rivalries throughout the world, perhaps none more so than between China and Japan. The two countries were engaged in a longstanding rivalry that stemmed from a dispute over the region of <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674012066">Manchuria</a>. </p>
<p>In 1930 and 1931 Japan experienced one of the largest economic downturns in <a href="https://www.boj.or.jp/en/research/wps_rev/rev_2009/data/rev09e02.pdf">modern history</a>. The Japanese government took decisive steps to prop up its economy and the country’s industrial production grew by 10% in 1932 alone. But China’s economy was devastated by the impact of the Great Depression and experienced a prolonged economic <a href="https://books.google.co.uk/books/about/The_Global_Impact_of_the_Great_Depressio.html?id=oVW0QgAACAAJ&redir_esc=y">downturn</a> which left it politically divided and economically weak.</p>
<p>While Japan and China had tested each other before in the 1920s with few real consequences, after the onset of the depression Japan increasingly sought to signal its resolve and test a weakening China to see if it was willing to continue the military rivalry. It used militarised threats to do this and found China increasingly unwilling to and unable to offer a coherent response. Ultimately, Japan invaded Manchuria in 1931 and China conceded. </p>
<figure class="align-center ">
<img alt="Japanese soldiers standing and lying pointing guns." src="https://images.theconversation.com/files/352313/original/file-20200811-14-1hsyv1d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/352313/original/file-20200811-14-1hsyv1d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=414&fit=crop&dpr=1 600w, https://images.theconversation.com/files/352313/original/file-20200811-14-1hsyv1d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=414&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/352313/original/file-20200811-14-1hsyv1d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=414&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/352313/original/file-20200811-14-1hsyv1d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=520&fit=crop&dpr=1 754w, https://images.theconversation.com/files/352313/original/file-20200811-14-1hsyv1d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=520&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/352313/original/file-20200811-14-1hsyv1d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=520&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Japanese soldiers during the Mukden incident, the precursor to the invasion of Manchuria.</span>
<span class="attribution"><a class="source" href="https://en.wikipedia.org/wiki/Mukden_Incident#/media/File:Japanese_soldiers_taking_an_offensive_posture_on_the_Mukden_Little_West_Gate.jpg">Wikimedia Commons</a></span>
</figcaption>
</figure>
<h2>Brink of war in Cuba</h2>
<p>The Cuban missile crisis – a nuclear standoff between the US and the Soviet Union that took place over 13 days in October 1962 – was also a result of uncertainty. In this case the then US president, John F Kennedy – who had only taken office at the beginning of 1961 – was still an unknown entity. He appeared to be weak – new leaders are often thought to be weak and ripe for “testing” by <a href="https://www.jstor.org/stable/4620099?seq=1#metadata_info_tab_contents">rivals</a>. Kennedy had authorised a failed invasion of Cuba in 1961 and was embarrassed by the Soviet leader <a href="https://www.history.com/news/kennedy-krushchev-vienna-summit-meeting-1961">Nikita Khrushchev</a> at a summit in Vienna in 1962 due to his inexperience and lack of preparation.</p>
<p>The uncertainty surrounding the Americans’ ability and willingness to stand up to Soviet pressure were central to Khrushchev’s decision to install <a href="https://www.penguinrandomhouse.com/books/41412/one-minute-to-midnight-by-michael-dobbs/">nuclear weapons in Cuba.</a> The Soviet Union’s attempts to clear up the uncertainty at the outset of the Kennedy administration led to a period of heightened tensions that came frighteningly close to escalating into a full-scale nuclear war. </p>
<p>The crisis was fortunately de-escalated thanks to <a href="https://www.penguinrandomhouse.com/books/41412/one-minute-to-midnight-by-michael-dobbs/">skilled diplomacy</a>. The Soviet Union found that the US and the Kennedy administration still had the willingness and capability to maintain the rivalry.</p>
<figure class="align-center ">
<img alt="A US aeroplane flying over a Russian boat." src="https://images.theconversation.com/files/352311/original/file-20200811-16-1f5m8zz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/352311/original/file-20200811-16-1f5m8zz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=434&fit=crop&dpr=1 600w, https://images.theconversation.com/files/352311/original/file-20200811-16-1f5m8zz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=434&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/352311/original/file-20200811-16-1f5m8zz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=434&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/352311/original/file-20200811-16-1f5m8zz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=545&fit=crop&dpr=1 754w, https://images.theconversation.com/files/352311/original/file-20200811-16-1f5m8zz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=545&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/352311/original/file-20200811-16-1f5m8zz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=545&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A US Navy patrol flying over a Soviet freighter in 1962.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:P-2H_Neptune_over_Soviet_ship_Oct_1962.jpg">US Navy/Wikimedia Commons</a></span>
</figcaption>
</figure>
<h2>2020: a dangerous moment</h2>
<p>Continued deaths from COVID-19 as well as the political and economic fallout from the pandemic have created a moment of great uncertainty. Our research suggests that what makes this moment especially dangerous is that many of the economic and political costs have not been evenly distributed, and some countries and their leaders have been hit harder by the coronavirus pandemic than others. This is especially true for the rivalry between the US rivalry with China, which is now in a much <a href="https://www.nytimes.com/aponline/2020/08/11/business/bc-global-economy-us-weak-link.html">stronger relative position</a> regarding the number of COVID-19 cases and the state of its economic recovery. </p>
<p>The Trump administration’s response to the crisis has been chaotic and economically catastrophic, and has <a href="https://blogs.lse.ac.uk/eurocrisispress/2020/06/26/polarization-coronavirus/">deepened existing political divisions</a>. This is likely to have raised doubts in Chinese leaders’ minds as to whether or not the US is willing and able to keep disputing the issues – ideological and economic – that are the basis of its rivalries around the world. These doubts have led to an escalation between the two countries.</p>
<p>But research shows that moments of great uncertainty and political shocks make it more likely that global rivalries <a href="https://www.jstor.org/stable/2111756?seq=21#metadata_info_tab_contents">end</a>. For example, the economic and political collapse of the Soviet Union led to the end of the US-Soviet rivalry as well as smaller <a href="https://us.sagepub.com/en-us/nam/handbook-of-international-rivalries/book236978">rivalries</a> around the world. This may yet be a longer-term consequence of the coronavirus pandemic too.</p><img src="https://counter.theconversation.com/content/139088/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Douglas B. Atkinson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>History shows what moments of great political and economic uncertainty mean for tensions between military rivals.Douglas B. Atkinson, Research Fellow, School of Law and Politics, Cardiff UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1409182020-07-01T12:27:17Z2020-07-01T12:27:17ZA summer of protest, unemployment and presidential politics – welcome to 1932<figure><img src="https://images.theconversation.com/files/344628/original/file-20200629-155345-1sy0pr8.jpg?ixlib=rb-1.1.0&rect=8%2C7%2C613%2C474&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Bonus Army stages a demonstration at the empty Capitol on July 2, 1932. </span> <span class="attribution"><a class="source" href="https://www.loc.gov/item/2016649901/">Underwood and Underwood, photographers; Library of Congress</a></span></figcaption></figure><p>An election looms. An unpopular president wrestles with historic unemployment rates. Demonstrations erupt in hundreds of locations. The president deploys Army units to suppress peaceful protests in the nation’s capital. And most of all he worries about an affable Democratic candidate who is running against him without saying much about a platform or plans.</p>
<p>Welcome to 1932. </p>
<p>I am a historian and director of the <a href="https://depts.washington.edu/moves/index.shtml">Mapping American Social Movements Project</a>, which explores the history of social movements and their interaction with American electoral politics.</p>
<p>The parallels between the summer of 1932 and what is happening in the U.S. currently are striking. While the pandemic and much else is different, the political dynamics are similar enough that they are useful for anyone trying to understand where the U.S. is and where it is going. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/344642/original/file-20200629-155303-1n73544.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/344642/original/file-20200629-155303-1n73544.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/344642/original/file-20200629-155303-1n73544.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=438&fit=crop&dpr=1 600w, https://images.theconversation.com/files/344642/original/file-20200629-155303-1n73544.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=438&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/344642/original/file-20200629-155303-1n73544.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=438&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/344642/original/file-20200629-155303-1n73544.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=551&fit=crop&dpr=1 754w, https://images.theconversation.com/files/344642/original/file-20200629-155303-1n73544.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=551&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/344642/original/file-20200629-155303-1n73544.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=551&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Tanks and mounted troops advance to break up a Bonus Marchers’ camp of veterans protesting lost wages, Washington D.C., July 28, 1932.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/tanks-and-mounted-troops-go-to-break-up-bonus-marchers-camp-news-photo/160176122?adppopup=true">PhotoQuest/Getty Images</a></span>
</figcaption>
</figure>
<h2>Multiracial street protest movement</h2>
<p>In 1932, as in 2020, the nation experienced an <a href="http://www.loc.gov/teachers/classroommaterials/presentationsandactivities/presentations/timeline/depwwii/depress/">explosion of civil unrest</a> on the eve of a presidential election.</p>
<p>The Great Depression had deepened through three years by 1932. <a href="https://www.thebalance.com/unemployment-rate-by-year-3305506">With 24% of the work force unemployed</a> and the federal government <a href="https://millercenter.org/president/hoover/domestic-affairs">refusing to provide funds to support the jobless and homeless</a> as <a href="https://depts.washington.edu/depress/economics_poverty.shtml">local governments ran out of money</a>, men and women across the country joined demonstrations demanding relief.</p>
<p>Our mapping project has recorded 389 hunger marches, eviction fights and other protests <a href="https://depts.washington.edu/moves/unemployed_map.shtml">in 138 cities during 1932</a>. </p>
<iframe src="https://public.tableau.com/views/UnemployedProtests1930s/Story1?:embed=y&:embed_code_version=3&:loadOrderID=0&:display_count=y&publish=yes&:origin=viz_share_link" width="100%" height="955"></iframe>
<p>Although less than the thousands of Black Lives Matter protests, there are similarities. </p>
<p>African Americans participated in these movements, and many of the protests attracted police violence. Indeed, the <a href="https://books.google.com/books?id=m1J-Z1GP1kAC&printsec=frontcover&dq=inauthor:%22James+J.+Lorence%22&hl=fr&sa=X&ved=2ahUKEwjqt5WJ353qAhWFtp4KHcICC_AQ6AEwA3oECAUQAg#v=onepage&q&f=false">unemployed people’s movement</a> of the early 1930s was the first important multiracial street protest movement of the 20th century, and police violence was especially vicious against black activists.</p>
<p>Atlanta authorities announced in June 1932 that 23,000 families would be cut from the list of those eligible for the meager county relief payments of 60 cents per week per person allocated to whites (less for Blacks). A mixed crowd of nearly 1,000 gathered in front of the Fulton County Courthouse for <a href="https://www.georgiaencyclopedia.org/articles/history-archaeology/angelo-herndon-case">a peaceful demonstration demanding US$4 per week per family</a> and denouncing racial discrimination. </p>
<p>[<em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>.]</p>
<p>The biracial protest was <a href="https://books.google.com/books?id=m1J-Z1GP1kAC&printsec=frontcover&dq=inauthor:%22James+J.+Lorence%22&hl=fr&sa=X&ved=2ahUKEwjqt5WJ353qAhWFtp4KHcICC_AQ6AEwA3oECAUQAg#v=onepage&q&f=false">unprecedented in Atlanta</a> and yielded two results. The eligibility cuts were canceled, and police promptly hunted down one of the organizers, a 19-year-old Black communist named <a href="https://babel.hathitrust.org/cgi/pt?id=mdp.39015064833224&view=1up&seq=8">Angelo Herndon</a>. He was charged with “inciting to insurrection,” a charge that carried the death penalty. Lawyers spent the next five years winning his freedom.</p>
<h2>Protests over unemployment</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/344647/original/file-20200629-155345-burmon.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/344647/original/file-20200629-155345-burmon.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/344647/original/file-20200629-155345-burmon.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=472&fit=crop&dpr=1 600w, https://images.theconversation.com/files/344647/original/file-20200629-155345-burmon.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=472&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/344647/original/file-20200629-155345-burmon.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=472&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/344647/original/file-20200629-155345-burmon.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=593&fit=crop&dpr=1 754w, https://images.theconversation.com/files/344647/original/file-20200629-155345-burmon.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=593&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/344647/original/file-20200629-155345-burmon.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=593&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Five hundred unemployed ‘Hunger Marchers’ protest on Boston Common on their way to the State House, demanding unemployment insurance and other relief measures, May 2, 1932.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/five-hundred-unemployed-hunger-marchers-protest-on-boston-news-photo/515114596?adppopup=true">Bettman/Getty</a></span>
</figcaption>
</figure>
<p>But race was not the key issue of the 1932 protest wave. It was government’s failure to rescue the millions in economic distress.</p>
<p><a href="https://libcom.org/files/%5BFrances_Fox_Piven,_Richard_Cloward%5D_Poor_People's(Bookos.org)(1).pdf">Organizations representing the unemployed</a> – many led by communists or socialists – had been active since 1930, and now in the summer of 1932 protests surged in every state. <a href="https://depts.washington.edu/moves/unemployed_map.shtml">Here are examples from the Mapping American Social Movement Project timeline from one week in June:</a> </p>
<p>• <strong>June 14</strong></p>
<p>Hundreds of Chicago police mobilize to keep unemployed demonstrators at bay at the start of the Republican Party nominating convention. </p>
<p>• <strong>June 17</strong></p>
<p>A so-called “hunger march” of 3,000 jobless in Minneapolis ends peacefully, but in Bloomington, Indiana, police use tear gas on 1,000 demonstrators demanding relief, while in Pittsburgh unemployed supporters crowd a courthouse to cheer the not-guilty verdict in an “inciting to riot” case.</p>
<p>• <strong>June 20</strong></p>
<p>Police break up a march by 200 unemployed in Argo, Illinois, and a much larger protest by jobless in Rochester, New York. In Lawrence, Massachusetts, 500 protesters successfully demanded an end to evictions of unemployed mill workers; in Pittsburgh, protesters block the eviction of an unemployed widow. The same day in Kansas City, a mostly Black crowd of 2,000 pleads unsuccessfully with the mayor to restore a recently suspended relief program.</p>
<h2>Farmers’ uprising</h2>
<p>The unemployed protests in urban areas of 1932 seem similar to today’s protest culture, but that was not true in the farm belt. </p>
<p>Dealing with collapsing prices and escalating <a href="http://www.iowapbs.org/iowapathways/mypath/great-depression-hits-farms-and-cities-1930s#:%7E:text=Farmers%20Grow%20Angry%20and%20Desperate,bankrupt%20and%20lost%20their%20farms.">farm evictions</a>, farmers in many regions staged near-uprisings. Black farmers in the cotton belt braved vigilante violence when, by the thousands, they joined the <a href="https://libcom.org/files/Hammer%20and%20hoe%20Alabama%20Communists%20during%20the%20Great%20Depression.pdf">Alabama Sharecroppers Union</a>, which advocated debt relief and the right of tenant farmers to market their own crops. </p>
<p>Newspaper headlines focused on the white farmers mobilizing in Iowa, Wisconsin, Nebraska, Minnesota and the Dakotas in the summer of 1932. <a href="http://plainshumanities.unl.edu/encyclopedia/doc/egp.pd.020">The Farmer’s Holiday Association formed that year pledging to strike (“holiday”) to raise farm prices</a>. The strike that began on August 15 involved sometimes heavily armed white farmers blocking roads to stop the shipment of corn, wheat, milk and other products. The strike withered after a few weeks, but farmers had sent a message, and some state legislatures quickly enacted moratoriums on farm foreclosures.</p>
<p>Counties that today are marked as Trump territory distinguished themselves in 1932 as centers of what became known as the “<a href="https://books.google.com/books/about/Cornbelt_rebellion.html?id=En5YAAAAMAAJ">Cornbelt Rebellion</a>.”</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/344630/original/file-20200629-155299-1h4cryd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/344630/original/file-20200629-155299-1h4cryd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/344630/original/file-20200629-155299-1h4cryd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=491&fit=crop&dpr=1 600w, https://images.theconversation.com/files/344630/original/file-20200629-155299-1h4cryd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=491&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/344630/original/file-20200629-155299-1h4cryd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=491&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/344630/original/file-20200629-155299-1h4cryd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=617&fit=crop&dpr=1 754w, https://images.theconversation.com/files/344630/original/file-20200629-155299-1h4cryd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=617&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/344630/original/file-20200629-155299-1h4cryd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=617&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Farmers set up a roadblock near Sioux City, Iowa, during Farmer’s Holiday Strike, August 1932.</span>
<span class="attribution"><a class="source" href="https://iowaculture.gov/history/education/educator-resources/primary-source-sets/protest-america/farmers-strike-sioux-city">State Historical Society of Iowa</a></span>
</figcaption>
</figure>
<h2>Unrest helped FDR defeat Hoover</h2>
<p>Periods of grassroots protest and civil unrest interact in unpredictable ways with presidential elections. In 1932, unrest helped Franklin Roosevelt defeat incumbent Herbert Hoover. Again, there are similarities between that summer and this one. </p>
<p>Democratic presidential candidate Roosevelt, like today’s Democratic candidate, Joe Biden, enjoyed the luxury of <a href="https://www.politico.com/news/2020/06/24/dems-warm-to-bidens-bunker-strategy-338853">running on platitudes instead of programs</a>. <a href="https://teachingamericanhistory.org/library/document/acceptance-speech-at-the-democratic-convention-1932-2/">Roosevelt used the phrase “new deal” in his nomination acceptance speech</a>, but details were few and it was not until he took office that the phrase acquired real meaning.</p>
<p>Roosevelt could avoid commitments because the political dynamics of 1932 forced the incumbent to play defense, <a href="https://www.nbcnews.com/politics/white-house/trump-finds-himself-playing-campaign-defense-core-elements-his-base-n1215576">much like today</a>. </p>
<p>Herbert Hoover was no Trump, almost the opposite. <a href="https://www.upenn.edu/pennpress/book/15433.html">Cautious, principled, quiet, a moderate Republican</a>, he had made major errors in the first years of the Depression, and his reputation never recovered. Democrats accused him of inaction (<a href="https://hoover.archives.gov/exhibits/great-depression">which was not true</a>), while the unemployed movements fixed the label <a href="https://depts.washington.edu/depress/hooverville.shtml">“Hoovervilles”</a> on the homeless encampments and shacktowns that sprang up in cities across the country. </p>
<p>Hoover’s credibility was further damaged in the summer of 1932 when more than 15,000 World War I veterans converged on Washington, D.C. under the banner of the <a href="https://books.google.com/books?id=g5CEg9oOn4MC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false">Bonus Expeditionary Force</a>, commonly called the Bonus Army. They demanded that Congress immediately pay them the bonuses they were due to get in 1945. </p>
<p>When the Senate rejected the proposal, <a href="https://www.smithsonianmag.com/history/marching-on-history-75797769/">the Bonus Army settled into a massive encampment across the Anacostia River from Capitol Hill</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/344643/original/file-20200629-155353-6ptzd7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/344643/original/file-20200629-155353-6ptzd7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/344643/original/file-20200629-155353-6ptzd7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=471&fit=crop&dpr=1 600w, https://images.theconversation.com/files/344643/original/file-20200629-155353-6ptzd7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=471&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/344643/original/file-20200629-155353-6ptzd7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=471&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/344643/original/file-20200629-155353-6ptzd7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=592&fit=crop&dpr=1 754w, https://images.theconversation.com/files/344643/original/file-20200629-155353-6ptzd7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=592&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/344643/original/file-20200629-155353-6ptzd7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=592&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Shacks burned by the U.S. Army in the shantytown constructed by protesters called the ‘Bonus Army’ after they were forced out by the military.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/burning-shacks-in-the-shantytown-constructed-by-the-bonus-news-photo/514907246?adppopup=true">Bettmann/Getty</a></span>
</figcaption>
</figure>
<p>A month later, Hoover called in <a href="https://www.nps.gov/articles/the-1932-bonus-army.htm">U.S. Army troops. During a night of violence</a>, the army burned thousands of tents and shacks and sent the Bonus Army marchers fleeing. </p>
<p>For Hoover, the deployment of U.S. Army units played out much as it did for Trump this May, when he had <a href="https://www.politico.com/news/2020/06/22/watchdog-violent-clearing-of-protesters-white-house-333692">Lafayette Park violently cleared of protesters</a>. Hoover’s action deepened his image problems and strengthened the sense that he lacked compassion for those in need, including those who had fought for their country only 14 years earlier. </p>
<p>Hoover tried to mobilize a backlash against the summer of protests, claiming that Communists were behind all of the unrest, including the Bonus Army, which in fact had banned all Communists. It didn’t work: Roosevelt won in a landslide.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/344648/original/file-20200629-155334-1f7zfhc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/344648/original/file-20200629-155334-1f7zfhc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/344648/original/file-20200629-155334-1f7zfhc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/344648/original/file-20200629-155334-1f7zfhc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/344648/original/file-20200629-155334-1f7zfhc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/344648/original/file-20200629-155334-1f7zfhc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/344648/original/file-20200629-155334-1f7zfhc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/344648/original/file-20200629-155334-1f7zfhc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The poor handling of the unrest and economic crisis by President Hoover, right, led to his election loss to Roosevelt, left.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/in-this-composite-image-a-comparison-has-been-made-between-news-photo/150224243?adppopup=true">Roosevelt: Hulton Archive/Getty Images; Hoover: General Photographic Agency/Getty</a></span>
</figcaption>
</figure>
<p>In the end, the protests helped Democrats in the election of 1932. <a href="https://www.senate.gov/artandhistory/history/minute/Momentous_Political_Realignment.htm">In Congress, Democrats gained 97 House seats and 12 in the Senate, taking control of Congress for the first time since 1918</a>. And equally significant, they helped propel the agenda of the New Dealers, as the new administration prepared to take power and launch the ambitious legislation of the first 100 days. </p>
<p>Three years of grassroots action had forced even reluctant politicians to recognize the urgency of reform. The early New Deal would race to provide debt relief for farmers and homeowners, jobs for the unemployed, and public works projects – part of what demonstrators had been demanding for years.</p><img src="https://counter.theconversation.com/content/140918/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James N. Gregory does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Marches, demonstrations, civic unrest, attacks by law enforcement and the military on protesting civilians: The parallels between the summer of 1932 and what is happening currently are striking.James N. Gregory, Professor of History, University of WashingtonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1415302020-06-29T20:06:26Z2020-06-29T20:06:26ZUnless we improve the law, history shows rushing shovel-ready projects comes with real risk<figure><img src="https://images.theconversation.com/files/344458/original/file-20200629-155322-1v33tho.jpg?ixlib=rb-1.1.0&rect=17%2C0%2C5973%2C3997&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>If the road to hell is paved with good intentions, so too is the road to economic recovery if we don’t get it right.</p>
<p>The <a href="https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_99143/covid-19-recovery-fast-track-consenting-bill">COVID-19 Recovery (Fast Track Consenting) Bill</a>, currently rushing through the parliamentary process, certainly has noble aims. In simple terms, the new law is designed to green light a number of projects that would normally take much longer to be approved under the <a href="http://www.legislation.govt.nz/act/public/1991/0069/latest/DLM230265.html">Resource Management Act</a>. </p>
<p>In the process, its architects argue, it will boost employment and kickstart economic recovery.</p>
<p>The trick will be balancing those aims with the law’s other lofty <a href="http://www.legislation.govt.nz/bill/government/2020/0277/latest/whole.html#LMS345544">ambition</a> “to promote the sustainable management of natural and physical resources”. History shows this is not always the way it goes. </p>
<h2>The past should guide us</h2>
<p>Governments often pass laws with vast powers during emergencies to drive economic recovery. The law of unintended consequences can take a lot longer to repeal.</p>
<p>During the great depression in the 1930s, <a href="http://www.nzlii.org/nz/legis/hist_act/ua193021gv1930n10254/">new laws</a> to deal with mass unemployment were often degrading in practice. Unemployed people were sent far and wide from their homes to perform sometimes useless tasks. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/rich-and-poor-dont-recover-equally-from-epidemics-rebuilding-fairly-will-be-a-global-challenge-138935">Rich and poor don't recover equally from epidemics. Rebuilding fairly will be a global challenge</a>
</strong>
</em>
</p>
<hr>
<p>In the late 1970s, the National government of Robert Muldoon tried to reduce the country’s dependence on imports with so-called “Think Big” projects. <a href="http://www.nzlii.org/nz/legis/hist_act/nda19791979n147246/">Special laws</a> were passed to circumvent normal planning mechanisms and we are still dealing with their economic and environmental consequences.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/344460/original/file-20200629-155330-2ld4qq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/344460/original/file-20200629-155330-2ld4qq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/344460/original/file-20200629-155330-2ld4qq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/344460/original/file-20200629-155330-2ld4qq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/344460/original/file-20200629-155330-2ld4qq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/344460/original/file-20200629-155330-2ld4qq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/344460/original/file-20200629-155330-2ld4qq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Clyde Dam, fast-tracked as part of the Think Big policy in the 1970s but with long-lasting problems.</span>
<span class="attribution"><span class="source">www.shutterstock.com</span></span>
</figcaption>
</figure>
<p>More recently, the <a href="http://legislation.govt.nz/act/public/2011/0012/latest/DLM3653522.html">Christchurch</a> and <a href="http://legislation.govt.nz/act/public/2016/0102/latest/whole.html">Kaikoura</a> earthquakes have pushed dozens of laws to one side. This resulted in citizens and communities struggling to be heard, be treated fairly and have their rights protected under the emergency recovery process.</p>
<p>We are now inviting the same risks with the proposed fast-track consenting law.
It will be the most radical shake-up of environmental regulation in a generation. </p>
<p>Moreover, although the law has a two-year lifespan, there is a risk it could become permanent if a sympathetic government is elected. There is the additional risk it will give the green light to projects that in normal times would never proceed.</p>
<h2>Pace versus public protections</h2>
<p>The core of the proposed legislation is speed. This will be achieved by
by-passing usual consenting process steps, including
public consultation, hearing processes, and appeals to the Environment Court. Judicial review is <a href="http://www.legislation.govt.nz/bill/government/2020/0277/latest/whole.html#LMS354477">still possible</a>, but it’s not clear how far this will go. </p>
<p>Once passed, critical decisions on large-scale projects will be made by “<a href="http://www.legislation.govt.nz/bill/government/2020/0277/latest/whole.html#LMS345651">expert consenting panels</a>”. This is a radical proposition. Public participation sits at the heart of our democracy. To shrink from this rather than strengthen it at this time in our history is very risky. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/past-pandemics-show-how-coronavirus-budgets-can-drive-faster-economic-recovery-137775">Past pandemics show how coronavirus budgets can drive faster economic recovery</a>
</strong>
</em>
</p>
<hr>
<p>If environmentally sustainable development is to have any real meaning, people and participation are key to making better decisions that take into account all relevant community interests. </p>
<p>But for the next two years our biggest environmental decisions will be made by panels consisting of a current or retired Environment Court judge (or person with similar experience), someone from the local authority and one other nominated by the relevant iwi authority in the project area. </p>
<p>Given what is at stake, however, there should also be an independent voice for the environment, separate from the others, the government and its agencies. </p>
<p>The Parliamentary Commissioner for the Environment would be ideal. While this may require some legislative rejigging, without an independent voice tasked only with speaking to environmental protection there is a risk of imbalance in the system.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/344461/original/file-20200629-155349-rnqz82.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/344461/original/file-20200629-155349-rnqz82.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/344461/original/file-20200629-155349-rnqz82.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/344461/original/file-20200629-155349-rnqz82.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/344461/original/file-20200629-155349-rnqz82.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/344461/original/file-20200629-155349-rnqz82.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/344461/original/file-20200629-155349-rnqz82.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Public representation was a victim of emergency rebuild laws after the 2011 Christchurch earthquake.</span>
<span class="attribution"><span class="source">www.shutterstock.com</span></span>
</figcaption>
</figure>
<h2>Five ways to improve the law</h2>
<p>According to the new legislation, these expert panels must “apply” the <a href="http://www.legislation.govt.nz/act/public/1991/0069/latest/DLM231904.html">high level</a> purpose and principles of the Resource Management Act and “act consistently” with the principles of the Treaty of Waitangi (and associated settlements). They must also “have regard” to relevant plans and to regional and <a href="https://www.mfe.govt.nz/rma/rma-legislative-tools/national-policy-statements">national policy statements</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/recession-hits-maori-and-pasifika-harder-they-must-be-part-of-planning-new-zealands-covid-19-recovery-137763">Recession hits Māori and Pasifika harder. They must be part of planning New Zealand's COVID-19 recovery</a>
</strong>
</em>
</p>
<hr>
<p>Cultural impact assessments will be mandatory and the law also <a href="http://www.legislation.govt.nz/bill/government/2020/0277/latest/LMS345668.html">requires</a> the “actual and potential” environmental effects of a project should be assessed. </p>
<p>All of this is good, but it would be improved with five over-riding principles.</p>
<p>First, the decision makers should act in a precautionary manner. If there is significant uncertainty about a project’s environmental impact it should not proceed. </p>
<p>Second, while replacing damaged or destroyed ecosystems is an excellent principle, there should be clear “red lines” around certain irreplaceable places, landscapes, endangered species and ecosystems.</p>
<p>Third, the law should go beyond simply calling for the examination of environmental effects to requiring actual environmental impact assessments. This would mean wider questions – such as whether there are alternatives to a given project – can be addressed. </p>
<p>Fourth, the right to compensation should be entrenched for citizens or communities directly affected by any proposed development.</p>
<p>Finally, if public participation is to be suspended, the ability to witness and have access to all panel deliberations should be underlined. When we are largely excluded from such important decisions, full transparency is the least we should expect in return.</p><img src="https://counter.theconversation.com/content/141530/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alexander Gillespie has received funding from the NZ Law Foundation, but not in relation to the matters discussed in this piece. Also of note, I am concerned with some developments proposed around NZ, but are not a member of any NGO. </span></em></p>A law to fast-track development consents is being fast-tracked itself. Before it’s too late, politicians should insist on greater protection against long-term environmental damage.Alexander Gillespie, Professor of Law, University of WaikatoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1395872020-06-04T19:07:57Z2020-06-04T19:07:57ZThe day is dawning on a four-day work week<figure><img src="https://images.theconversation.com/files/339856/original/file-20200604-31187-zr8x3n.jpg?ixlib=rb-1.1.0&rect=53%2C72%2C4370%2C2301&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">During the COVID-19 pandemic, a window is opening for good ideas to move from the fringes to the mainstream — and that includes a four-day work week. </span> <span class="attribution"><span class="source">(Simon Abrams/Unsplash)</span></span></figcaption></figure><p>Like any crisis, the COVID-19 pandemic is an opportunity to rethink how we do things. </p>
<p>As we near the 100-day mark since the pandemic was declared, one area getting a significant attention is the workplace, where a window is opening for good ideas to move from the fringes to the mainstream. </p>
<p>For example, when <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/200417/dq200417a-eng.htm">millions more Canadians</a> started working from home, many businesses were forced to experiment with telecommuting. Interestingly, <a href="https://www.vox.com/recode/2020/5/21/21234242/coronavirus-covid-19-remote-work-from-home-office-reopening">many now say they’ll continue</a> after the pandemic passes, because it benefits employers and employees alike.</p>
<p>Another idea, less widely tested than telecommuting, is generating buzz: the four-day work week. New Zealand Prime Minister Jacinda Ardern <a href="https://www.theguardian.com/world/2020/may/20/jacinda-ardern-flags-four-day-working-week-as-way-to-rebuild-new-zealand-after-covid-19">raised the possibility of a shortened work week</a> as a way to divvy up jobs, encourage local tourism, help with work-life balance and increase productivity.</p>
<p>As a sociologist who teaches about work and wrote <a href="https://utorontopress.com/ca/productivity-and-prosperity-4">a book about productivity</a>, I believe she’s right.</p>
<h2>Not a compressed schedule</h2>
<p>A four-day work week must not be confused with a compressed schedule that has workers squeeze 37.5 to 40 hours of work into four days instead of five. For reasons that should be clearer below, that won’t help us now.</p>
<p>A true four-day workweek entails full-timers clocking about 30 hours instead of 40. There are many reasons why this is appealing today: families are <a href="https://www.ctvnews.ca/health/coronavirus/women-juggling-caregiving-take-brunt-of-pandemic-labour-impact-1.4921334">struggling to cover child care</a> in the absence of daycares and schools; workplaces are trying to reduce the number of employees congregating in offices each day; and <a href="https://www.cbc.ca/news/business/canada-jobs-april-1.5561001">millions of people have lost their jobs</a>. </p>
<p>A shorter work week could allow parents to cobble together child care, allow workplaces to stagger attendance and, theoretically, allow the available work to be divided among more people who need employment.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-four-day-working-week-could-be-the-shot-in-the-arm-post-coronavirus-tourism-needs-139388">A four-day working week could be the shot in the arm post-coronavirus tourism needs</a>
</strong>
</em>
</p>
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<p>The most progressive shorter work week entails no salary reductions. This sounds crazy, but it rests on peer-reviewed research into shorter work weeks, which finds <a href="https://www.researchgate.net/profile/Ben_Laker/publication/337340662_Will_the_4-Day_Workweek_Take_Hold_in_Europe/links/5dd3dda9299bf1b74b4e69b7/Will-the-4-Day-Workweek-Take-Hold-in-Europe.pdf">workers can be as productive in 30 hours as they are in 40</a>, because they waste less time and are better-rested. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/339869/original/file-20200604-67399-sd9z5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/339869/original/file-20200604-67399-sd9z5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/339869/original/file-20200604-67399-sd9z5m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/339869/original/file-20200604-67399-sd9z5m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/339869/original/file-20200604-67399-sd9z5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/339869/original/file-20200604-67399-sd9z5m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/339869/original/file-20200604-67399-sd9z5m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Most employees probably wouldn’t mind spending their own money on essentials provided at the office in exchange for a four-day work week.</span>
<span class="attribution"><span class="source">(Jasmin Sessler/Unsplash)</span></span>
</figcaption>
</figure>
<p>Shorter work weeks reduce the number of sick days taken, and on their extra day off, employees don’t use the office’s toilet paper or utilities, reducing their employer’s costs. Therefore, while it is counter-intuitive, it’s possible for people to work less at the same salary while <a href="https://blog.abacus.com/heres-how-much-a-4-day-work-week-saves-on-business-expenses/">improving their employer’s bottom line</a>. That people might have to spend more of their own money on toilet paper is a concession most workers would probably accept. </p>
<p>The same body of research also has more predictable findings: <a href="https://doi.org/10.1016/j.labeco.2018.05.010">people like working less</a>.</p>
<h2>Entrenched morality of work</h2>
<p>If it makes this much sense, why don’t we have a four-day week already? It turns out this question is more than 150 years old. </p>
<p>Some of the answer pertains to the logistics involved in transforming our whole system of work, that’s not the entire answer. After all, the work week <a href="https://www.britannica.com/topic/hours-of-labour">has been reduced before</a>, so it can technically be done again. </p>
<p>The rest of the reason is rooted in capitalism and class struggle. </p>
<p>Thinkers from Paul Lafargue (“<a href="https://www.marxists.org/archive/lafargue/1883/lazy/">The Right to Be Lazy</a>,” first published in 1883) to Bertrand Russell (“<a href="https://harpers.org/archive/1932/10/in-praise-of-idleness/">In Praise of Idleness</a>,” from 1932) and Kathi Weeks (“<a href="https://caringlabor.files.wordpress.com/2012/05/the-problem-with-work_-feminism-marxism-kathi-weeks.pdf">The Problem with Work</a>,” from 2012) have concluded we resist worktime reductions in the face of supportive evidence — and our own desires for more leisure — because of the entrenched morality of work and the resistance on the part of “the rich” to “the idea that the poor should have leisure,” in Russell’s words.</p>
<p>We are extremely attached to the idea that hard work is virtuous, idle hands are dangerous and people with more free time can’t be trusted.</p>
<h2>Four-day work weeks floated in the 1930s</h2>
<p>Nobody is suggesting evil governments conspire with evil bosses to keep powerless people busy. As historian <a href="https://davidpakman.com/interviews/benjamin-hunnicutt/">Benjamin Hunnicutt</a> has shown, there was significant interest in shorter work hours in the 1920s and 30s, when the 30-hour week was touted as a way to “share” the work among the Great Depression’s unemployed and underemployed citizens. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/339874/original/file-20200604-67393-1by7rb9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/339874/original/file-20200604-67393-1by7rb9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=749&fit=crop&dpr=1 600w, https://images.theconversation.com/files/339874/original/file-20200604-67393-1by7rb9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=749&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/339874/original/file-20200604-67393-1by7rb9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=749&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/339874/original/file-20200604-67393-1by7rb9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=942&fit=crop&dpr=1 754w, https://images.theconversation.com/files/339874/original/file-20200604-67393-1by7rb9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=942&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/339874/original/file-20200604-67393-1by7rb9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=942&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Henry Ford is seen in this 1919 photo.</span>
<span class="attribution"><span class="source">United States Library of Congress</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Even industrialists W. K. Kellogg and Henry Ford supported a six-hour day because they believed more rest would make for more productive workers. But Hunnicutt’s research in <a href="https://books.google.ca/books/about/Work_Without_End.html?id=lv9cfP1QMAcC&redir_esc=y"><em>Work Without End</em></a> reveals that some employers cut wages when they cut work hours, and when employees fought back, they dropped their demands for shorter work hours and focused instead on wage increases. </p>
<p>In the complex push and pull of capitalism, eventually even the New Deal, <a href="https://www.thecanadianencyclopedia.ca/en/article/bennetts-new-deal">which influenced policy and discourse in Canada</a>, shifted away from its early demands for more leisure toward demands for more work.</p>
<p>It’s quite possible we will do the same in our COVID-19 moment, and <a href="https://thebaffler.com/salvos/why-work-livingston">beg to be put back to work</a> five days a week when this is all over. </p>
<p>But we have new reasons for considering shorter work weeks, and they might be more widely persuasive. It is also possible that we have finally given up on the <a href="http://www.csls.ca/reports/csls2008-8.pdf">false promise</a> that working longer will translate into better lives. The four-day work week could be another wild idea that makes it through the pandemic’s open policy window.</p><img src="https://counter.theconversation.com/content/139587/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Karen Foster receives funding from the Social Sciences and Humanities Research Council (SSHRC) and funding from the Banting Postdoctoral Fellowship program supported some of the research mentioned in this article.</span></em></p>The four-day work week is an idea that should make it through the pandemic’s open policy window.Karen Foster, Associate Professor, Sociology and Social Anthropology and Canada Research Chair in Sustainable Rural Futures for Atlantic Canada, Dalhousie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1384672020-05-21T14:32:31Z2020-05-21T14:32:31ZHow the US government seized all citizens’ gold in 1930s<figure><img src="https://images.theconversation.com/files/336821/original/file-20200521-102637-fu2c9u.png?ixlib=rb-1.1.0&rect=0%2C0%2C1880%2C1334&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Franklin D Roosevelt signs bill that will lead to Gold Reserve Act 1934. </span> <span class="attribution"><a class="source" href="https://en.wikipedia.org/wiki/Gold_Reserve_Act#/media/File:Franklin_Delano_Roosevelt_signs_Gold_Bill_1934.jpg">Wikimedia Commons</a></span></figcaption></figure><p>With global financial markets in disarray, many investors are turning to classic safe havens. Gold <a href="https://www.bbc.co.uk/news/topics/cwjzj55q2p3t/gold">is trading</a> above US$1,750 (£1,429) per troy ounce, which is the standard measure – more than 15% above where it started 2020. Even after a strong rally since March, the S&P 500 stock market index is down nearly 10% over the same period. </p>
<p>Gold confers familiarity during downturns. Its returns are uncorrelated with assets like stocks, so it tends to hold its value when they fall. It is also a good way of avoiding currency devaluation. It therefore features in any well diversified investor’s portfolio, whether via gold-mining shares, <a href="https://www.bullionvault.com/gold-guide/gold-etf">gold funds</a>, bullion or whatever. </p>
<p>Yet there are two slight caveats to viewing gold as a safe haven. Early in an economic downturn, gold prices often plummet with the rest of the market. This is from investors selling gold to <a href="https://www.investopedia.com/terms/m/margincall.asp">offset losses</a> in shares and other assets. We <a href="https://www.bbc.co.uk/news/topics/cwjzj55q2p3t/gold">saw this</a> in March, when gold fell 12% in two weeks, then quickly recovered. If the coronavirus causes more market panic, this could happen again. </p>
<p><strong>Gold return vs S&P 500 (Jan-May 2020)</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/336467/original/file-20200520-152338-alihgf.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/336467/original/file-20200520-152338-alihgf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/336467/original/file-20200520-152338-alihgf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=348&fit=crop&dpr=1 600w, https://images.theconversation.com/files/336467/original/file-20200520-152338-alihgf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=348&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/336467/original/file-20200520-152338-alihgf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=348&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/336467/original/file-20200520-152338-alihgf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=437&fit=crop&dpr=1 754w, https://images.theconversation.com/files/336467/original/file-20200520-152338-alihgf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=437&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/336467/original/file-20200520-152338-alihgf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=437&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
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<span class="attribution"><span class="source">Thomson Reuters/Datastream</span></span>
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<p>During extreme crises, governments can also seize people’s gold. There have been some stunning examples of “gold confiscation” in the past. Most memorably, this occurred in the US in 1933 during the great depression – albeit it’s more accurate to call it a nationalisation than a confiscation, since citizens were compensated. The government of Franklin D Roosevelt seized all gold bullion and coins via <a href="https://mises.org/library/great-gold-robbery-1933">Executive Order 6102</a>, forcing citizens to sell <a href="https://www.exponentialinvestor.com/commodities/if-you-hold-gold-should-you-be-worried-about-executive-order-6102/">at well below</a> market rates. Immediately after the “confiscation”, the government set a new official rate for gold that was much higher as part of the <a href="https://www.investopedia.com/terms/g/gold-reserve-act-1934.asp">Gold Reserve Act 1934</a>. </p>
<hr>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/336004/original/file-20200519-152302-fp0zpu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/336004/original/file-20200519-152302-fp0zpu.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=90&fit=crop&dpr=1 600w, https://images.theconversation.com/files/336004/original/file-20200519-152302-fp0zpu.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=90&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/336004/original/file-20200519-152302-fp0zpu.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=90&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/336004/original/file-20200519-152302-fp0zpu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=113&fit=crop&dpr=1 754w, https://images.theconversation.com/files/336004/original/file-20200519-152302-fp0zpu.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=113&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/336004/original/file-20200519-152302-fp0zpu.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=113&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption"></span>
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<p><em>Gold has enthralled humanity since ancient times. Still it glitters from central bank vaults to jewellery bazaars the world over. The Conversation brings you <a href="https://theconversation.com/uk/topics/gold-series-87168">five essential briefings by academic experts</a> on the world’s favourite precious metal. For more articles written by experts, join the hundreds of thousands who <a href="https://theconversation.com/newsletter">subscribe to our newsletter</a></em></p>
<hr>
<p>This was the era of the gold standard, which meant dollars were tradeable for an exact amount of the precious metal. Seizing the metal enabled the government to print more dollars to try to stimulate the economy, and also to buy more dollars on the international markets to <a href="https://books.google.co.uk/books?id=xLY4DwAAQBAJ&pg=PA354&lpg=PA354&dq=dollar+exchange+rate+1933+too+low&source=bl&ots=FmitRcY5i5&sig=ACfU3U3KKojqXQVbpJoB64fgWQcr8Kc_ug&hl=en&sa=X&ved=2ahUKEwi9rq7flLbpAhV4ShUIHVVFCyUQ6AEwCXoECAsQAQ#v=onepage&q=dollar%20exchange%20rate%201933%20too%20low&f=false">shore up</a> the <a href="https://eh.net/encyclopedia/gold-standard/">exchange rate</a>. </p>
<p>Many gold owners <a href="https://mises.org/library/great-gold-robbery-1933">were understandably unhappy</a> about the gold seizure, and some fought it in the courts. Ultimately, however, the government could not be stopped, and gold ownership remained illegal in the US until the 1970s. </p>
<p>This intervention was not unique, even in contemporary history. In 1959, Australia’s government <a href="https://books.google.co.uk/books?id=nWrXPC33D4oC&pg=PA80&lpg=PA80&dq=Australia+gold+%22expedient+to+do+so,+for+the+protection+of+the+currency+or+of+the+public+credit+of+the+Commonwealth%22&source=bl&ots=nghf22P85K&sig=ACfU3U2hr_DoEdpZKsnvH1xOXLHEKfxaAA&hl=en&sa=X&ved=2ahUKEwj5xZT1ua7pAhXVPsAKHRX9A2IQ6AEwAHoECAgQAQ#v=onepage&q=Australia%20gold%20%22expedient%20to%20do%20so%2C%20for%20the%20protection%20of%20the%20currency%20or%20of%20the%20public%20credit%20of%20the%20Commonwealth%22&f=false">put a law in place</a> that allowed gold seizures from private citizens if “expedient to do so, for the protection of the currency or of the public credit of the Commonwealth [of Australia]”. And in 1966, to stop the decline in the pound, the UK government <a href="https://www.chards.co.uk/blog/uk-gold-bullion-market-since-1964/254">banned citizens</a> from owning more than four gold or silver coins and blocked the private import of gold. This was only lifted in 1979. </p>
<h2>Horns of a trilemma</h2>
<p>Why do governments risk the bad publicity of restricting gold? This is linked to a cornerstone of macroeconomics known as the <a href="https://www.weforum.org/agenda/2015/04/how-to-understand-policy-trilemmas/">monetary policy trilemma</a>. This states that countries must choose between two of the following and can’t generally do all three at the same time: (1) setting fixed exchange rates; (2) allowing capital to move freely over international borders; and (3) being able to independently set interest rates and print money (in other words, control monetary policy). </p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/oLbfAfCVG_4?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
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<p>In the 1930s system, countries generally chose fixed exchange rates linked to gold, plus free capital movement and sacrificed control of monetary policy. The system came under more and more pressure because too many investors were trading in their money for gold. One way for the US to take enough control of monetary policy to print more money was to impose various <a href="https://voxeu.org/article/great-depression-recovery-role-capital-controls">capital controls</a>, including seizing gold. </p>
<p>Today, the situation is different because western economies have free-floating exchange rates so they have control over monetary policy and can allow capital to move freely. This means that during a crisis, they can print money and cut interest rates without having to impose controls on the likes of gold. </p>
<p>In fact, any direct meddling by governments in the gold markets today would likely be counterproductive. It would increase investor anxiety and encourage them to rush to other assets with similar properties such as silver or other precious metals. Those who hold gold are therefore probably safer than they might have been in the past. </p>
<p>There are alternatives open to governments besides outright gold nationalisation. For example, when <a href="https://www.telegraph.co.uk/finance/commodities/11330611/How-the-Bank-of-England-abandoned-the-gold-standard.html">the UK left</a> the international gold standard in 1931, the devaluation of the pound put pressure on other currencies such as the Dutch guilder. In response, the Netherlands <a href="https://ideas.repec.org/p/zbw/qucehw/201903.html">imposed a</a> variety of restrictions on gold that stopped short of confiscation. </p>
<p>Again, this kind of move is unnecessary in today’s era when countries control their own monetary policy. Gold will probably remain a safe haven on the sidelines – unless countries felt they had to sell their reserves aggressively for some reason, say to reduce debts. Even in the current crisis, that’s not on the horizon. But the one lesson from history that all investors need to bear in mind is that in times of crisis, anything goes. </p>
<hr>
<p><strong>If you liked this article, find more expertise in <a href="https://theconversation.com/the-gold-series-five-essential-briefings-on-the-worlds-favourite-precious-metal-139085">our gold series</a>:</strong></p>
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<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>You’ve heard of compulsory purchase orders for houses, but few realise it has sometimes happened with the world’s favourite precious metal.Chris Colvin, Senior Lecturer in Economics, Queen's University BelfastPhilip Fliers, Lecturer in Finance, Queen's University BelfastLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1388022020-05-19T06:32:14Z2020-05-19T06:32:14ZFurther to fall, harder to rise: Australia must outperform to come out even from COVID-19<p>“Pestilence is so common,” writes Albert Camus in The Plague: </p>
<blockquote>
<p>There have been as many plagues in the world as there have been wars, yet plagues and wars always find people equally unprepared. When war breaks out, people say: ‘It won’t last. It’s too stupid.’ And war is certainly too stupid, but that doesn’t prevent it from lasting.</p>
</blockquote>
<p>So, too, with recessions. Too stupid, and so common. Yet they always take people by surprise; and they last.</p>
<p>The damage from the global financial crisis of 2008 <a href="https://www.mup.com.au/books/the-great-crash-of-2008-paperback-softback">lingers</a> in the form of lower economic growth and stagnating wages. </p>
<p>That’s true even in Australia, one of just two developed countries (Korea being the other) that avoided a GFC-driven recession (two successive quarters of declining output).</p>
<p>As I argued in my book title <a href="https://www.blackincbooks.com.au/books/dog-days">Dog Days: Australia after the boom</a>, Australia has long been primed for a recession. Now it is going to get one. Having gained perhaps more than any other developed nation from open borders and trade, it now has more to lose. </p>
<h2>Why recessions happen</h2>
<p>Big recessions happen when a shock reveals a weakness in the structure of the economy. There have been manifold points of weakness in the global economy in recent years:</p>
<ul>
<li><p>in the US, the Trump administration’s <a href="https://cpb-ap-se2.wpmucdn.com/blogs.unimelb.edu.au/dist/a/142/files/2018/01/Corden-and-Garnaut.-EconomicConsequencesofMrTrump-20.-06.18-12d5aia.pdf">expansion of fiscal deficits</a> by cutting taxes at a time of full employment with debt and deficits already at record peacetime highs </p></li>
<li><p>the retreats from China’s new <a href="https://www.researchgate.net/publication/326492510_40_years_of_China's_reform_and_development_How_reform_captured_China's_demographic_dividend">model of economic growth from 2017</a> </p></li>
<li><p>the breakdown in global governance on trade, climate change and security, sharpened by the US-China trade conflict </p></li>
<li><p>the unusually high levels of debt in most economies </p></li>
<li><p>the sustained low investment, productivity and wages growth throughout the developed world. </p></li>
</ul>
<p>Australia has shared many of the developed countries’ points of vulnerability.</p>
<h2>Recession triggers</h2>
<p>The immediate cause of recession can be any of many things. </p>
<p>It could be the piercing of unwarranted confidence in the sustainability of an exchange rate fixed in Thailand. This is what led to the Asian Financial Crisis of 1997. </p>
<p>Or it could be an excess of financial deregulation promoting lending for houses far in excess of their value. This what led to the US subprime loans crisis a decade late, with the Global Financial Crisis the result. </p>
<p>For any single country, the trigger can be other countries’ recession and the associated reduced demand for imports, or the associated financial stress.</p>
<p>This time it’s a new virus, emerging from the Chinese city of Wuhan in December 2019. </p>
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<em>
<strong>
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<p>Had the virus outbreak been contained in China, or its immediate neighbours, the effect would still have been enough impose great damage on the Australian economy. The Australian government was determined to do all it could to avoid a recession. </p>
<p>Avoiding recession is an important objective, because the costs are large and hard to unwind. But developments mean there’s no chance of that now.</p>
<p>We can work, however, to ensure the recession is as shallow and short as possible, and that Australians have confidence there is a path to better days ahead.</p>
<h2>The importance of knowledge</h2>
<p>We don’t know yet how deep the Great Crash of 2020 will dive. That depends a great deal on how governments in many countries respond. Those responses, in turn, depend on the knowledge of leaders, and of citizens, about how the economy works. </p>
<p>Knowledge turns out to be an important part of this story. </p>
<p>First, medical scientific knowledge. </p>
<p>Some governments, including Australia’s, have had access to good medical science and have taken it seriously. This has helped to contain the damage. </p>
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<em>
<strong>
Read more:
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<p>Some governments have paid little and inconsistent attention to scientific knowledge. The people of the Brazil, Britain and the United States endured pain and expense for their government’s ignorance or stupidity. </p>
<p>The virus keeps on doing what a coronavirus does, whatever humans think about it. Just as carbon dioxide keeps on doing what it does, whether or not governments accept scientific knowledge about its effect on climate.</p>
<p>Second, economic policy knowledge. </p>
<p>Since the Great Depression of the 1930s, we’ve learnt a great deal about how to reduce the depth and length of recessions. We’ve also learned much about the sources of broadly based modern economic growth. </p>
<h2>More to gain, more to lose</h2>
<p>Australia will have to perform better than most other countries to avoid economic outcomes being worse. </p>
<p>Our economy’s relatively small size and dependence on exporting primary resources means we have more to gain than most other countries from open borders and international trade. We also have more to lose from disruptions.</p>
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<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/335976/original/file-20200519-83375-1cj243q.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/335976/original/file-20200519-83375-1cj243q.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/335976/original/file-20200519-83375-1cj243q.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/335976/original/file-20200519-83375-1cj243q.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/335976/original/file-20200519-83375-1cj243q.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/335976/original/file-20200519-83375-1cj243q.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/335976/original/file-20200519-83375-1cj243q.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/335976/original/file-20200519-83375-1cj243q.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><span class="source">World Trade Organisation</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>No other developed economy of comparable size has benefited as much as Australia from the easy international movement of people – for business, pleasure, education, and to build new lives as migrants. </p>
<p>Unlike most other developed countries, Australia is also located in a region of developing countries. This means it will be damaged more by the pain the pandemic is likely to disproportionately inflict on the developing world.</p>
<p>The challenge facing Australia is unprecedented. It will require solutions to match.</p>
<hr>
<p><em>Ross Garnaut is presenting a six-part online lecture series about rebuilding Australia’s economy after the pandemic, beginning Wednesday May 20 2020 and continuing for six Wednesdays. For more information <a href="https://fbe.unimelb.edu.au/alumni/events/public-lectures/ross-garnaut-reset-lecture-series">go here</a>.</em></p><img src="https://counter.theconversation.com/content/138802/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ross Garnaut does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia’s economy has prospered due to open borders and international trade. It has much more to lose from disruptions.Ross Garnaut, Professorial Research Fellow in Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.