WaPo Op-Ed Warns Against 'Foolish Five' Economic Policies

Amity Shlaes, a senior fellow at the Council on Foreign Relations, penned an August 18 Washington Post column examining five of the government's Depression-era mistakes that made financial matters worse. Shlaes, author of "The Forgotten Man: A New History of the Great Depression" cautioned today's lawmakers against following in those footsteps.

According to Shlaes, "perverse monetary policy was the greatest cause of the Great Depression." But there were five other mistakes in the 1930s that some politicians today seem ready to repeat. 

  • 1. Giving in to protectionism
  • 2. Blaming the messenger
  • 3. Increasing taxes in a downturn
  • 4. Assuming bigger government will bring back growth
  • 5. Ignoring the cost of inconsistency

"The proximate danger today is a repeat of the 1970s, not the 1930s. But if lawmakers don't remember the old missteps, they might find that their new recovery legislation imperils our recovery," said Shlaes.

Today's network news media have hyped similarities between the Great Depression and our current economy more than 40 times in the first four months of 2008. An analysis of two major weeks in stock market history - the week of the stock market crash in 1929 and the week of the Bear Stearns collapse in 2008 - found a dramatic different between the news coverage.

During the week of the 1929 stock market crash, daily news stories reported positive news more often than negative by a 4-to-1 ratio. The week that the Bear Stearns fall occurred, coverage was the complete opposite. Negative stories on ABC, CBS and NBC outnumbered positive 6-to-1.

Economy Washington Post Amity Shlaes
Julia A. Seymour's picture