The Great Depression
“Creative destruction” was described in 1890 by David A. Wells and named and popularized in the 1940’s by economist Joseph Schumpeter. The theory is that successful innovation brings temporary market power that erodes the profits and position of old firms then is later eclipsed by new inventions. Capitalism is inherently progressive AND destructive e.g., a new and better way of producing something carries within it the seeds of its own destruction.

The Great Depression

“Creative destruction” was described in 1890 by David A. Wells and named and popularized in the 1940’s by economist Joseph Schumpeter. The theory is that successful innovation brings temporary market power that erodes the profits and position of old firms then is later eclipsed by new inventions. Capitalism is inherently progressive AND destructive e.g., a new and better way of producing something carries within it the seeds of its own destruction.

“Standing still and resting on your laurels can precipitate a swift tumble. Rivals, meanwhile can draw on the available stock of knowledge and technology to catch up with the leaders. To stay ahead, front-runners must keep inventing new things. This means capitalism is inherently unforgiving: today’s leader is tomorrow’s failure, but it is also inherently progressive, since clever ideas are quickly spread through the economy.” [1]

Total Factor Productivity [TFP] is the name for the phenomenon that occurs when new machinery [capital] replaces workers while increasing output as illustrated in the pictures here of the boys picking out slate from coal by hand being put out of jobs by a new machine manned by only one employee. These boy pickers lost their jobs while the owner of the firm increased his profits. Similarly, the couple working with a shovel increases their work output considerably by use of a tractor. Mechanized combines on wheat farms replaced teams of 33 horses.

Output per hour experienced an annualized growth rate as follows: 1870-1920= 1.79%; 1920-1970= 2.82; and 1970=2014=1.62. TFP growth in the 1920-70 interval is almost triple the growth rate registered in the other two periods. It is counterintuitive, but the Great Depression was probably the highest in history because of earlier inventions going through a gestation period before exploding onto the industrial scene in the thirties.

Some of the major contributors to productivity have been: [1] replacing human and animal power with water and wind power, steam, electricity, and internal combustion; [2] infrastructures: canals, railroads, highways, and pipelines; [3] mechanization of agricultural and production machinery; and work practices. The first liberty ship the Kaiser Steel Co. built in 1941, the SS Patrick Henry, required 244 days to build. The average dropped steadily to 44 days, and one, the SS Robert E. Peary, was launched 4 days and 15-1/2 hours after the keel was laid.

CCC

Most readers either experienced some of the Great Depression or are familiar with conditions then. The Civilian Conservation Corps [CCC] was for young, unmarried men 17 to 20. Unemployment nationally peaked at 22.9% in 1932 and was still 12.5% in 1938. Many young persons were underfed and even under clothed. The per cent of malnutrition among that age group was: 1928=27.4%; 1929=30.6%; 1930=46.7%; 1931=27.4%; and 1932=32.0%.

Until the Great Depression, there was no social safety net other than direct relief by voluntary organizations [churches, Salvation Army, et al.], and municipalities. The Great Depression began late in 1929 though by then farmers had been experiencing drought, crop failures, and bumper crops that drove down prices for several years. With millions unemployed, local and state resources were quickly and totally overwhelmed.

President Hoover proposed good programs for relief but Congress balked. Hoover tried. The problem of unemployment and hunger grew to such proportions that by the election of President Roosevelt [FDR] in 1932 it was beyond the means of private philanthropy, cities, and even States. FDR was elected on the promise of bringing a “New Deal” to the country. He was inaugurated in March 1933 and by April had created the Civilian Conservation Corps. [CCC] It was the beginning of federal programs for relief.

Like his cousin Teddy before him, FDR had a sincere interest in conservation. As Governor of New York he had overseen the planting of tens of thousands of trees and put 10,000 unemployed men to work on a reforestation program. President Roosevelt protected more national forest land than all his predecessors combined and greatly expanded the country’s national parks—adding new ones like Shenandoah and Olympic.[4]

Fifty-man units lived in tents and barracks in the woods. Organized Reserve Corps officers were in charge though no military training was given. Twenty-five man work groups performed over 300 types of work.

They received housing, uniforms, food, and medical care and were paid $30 a month with a compulsory allotment of $22-$25 sent to a family dependent. There were 1463 working camps with 250,000 junior enrollees [18-25], 28,000 veterans, 14,000 American Indians, and 25,000 locally enrolled [experienced] men

“The accomplishments of the CCC were vast in protecting and restoring forests, beaches, rivers, and parks, providing flood control and disaster relief; and helping some 2.5 million young men survive the Depression with some degree of self-respect. The CCC was the most widely praised of the New Deal programs.” [4]

Work is useful for the worker and the nation, but there simply is no meaningful work to assign to most children today. Work is usually under the authority of a boss which teaches children discipline that is useful for the common good. President-elect Trump has recommended spending $1 trillion for infrastructure. I hope some of it is for a CCC-type program.

[1] The Economist, Nov. 12, 2016, p62.

[2] Gordon, Robert J., The Rise and Fall of American Growth, Princeton University Press, 2016.

[3] Gerdes , Louise I., The Thirties, Greenhaven Press, 82-3.

[4] McElvaine , Robert S., The Great Depression, NY; Three Rivers Press, 2009, pp154-5.