U.S. Depressions and War

There are at least two principal views of the economic impact of wars, especially regarding the relationship between war and the Great Depression of the 1930s. Various economists (you know, the guys who know all about money but usually are not wealthy) have asserted what we will term “View One” -- that the federal programs designed to pull the U.S. out of the Great Depression were tremendously helpful and necessary. Another group of economists suggest a “View Two” – that these programs were ineffective bandaids, it actually took a war to get the economy going again, and wars generally stimulate economic growth. The first view is most often defended by those aligned with the Democrat Party (perhaps since FDR was of that party), and, not surprisingly, the second view is most often defended by Republicans (isn't it curious how economic questions become political ones?).

The idea that federal spending drove recovery is appealing as it tends to confirm the idea that purposely action by the government really can stimulate economic recovery. On the other hand (recall Harry Truman's quote about a one-handed economist), the result of massive government spending under the New Deal programs of the 1930s was a GNP in 1939 of just $91 billion, whereas the ensuing years of WWII resulted in a GNP of $212B by 1945. Doubling the GNP is a handful of years is no minor improvement, and these numbers can easily be used to support the argument that war is good for the economy.

That sounds depressing. Can it be that war is a major engine of economic growth, achieved at a horrible human cost? Is the health of the economy, with its resultant affect on hundreds of millions of people, dependent at least to a substantial degree on the machinations of war? Is this normal? Or is this view faulty? Is there usually a direct connection between wars and depressions, or not?

Just for fun (ha! recovering from a minor illness and too lazy to do anything but type on my computer), I researched the relationship between the economy and wars by examining what are known as the "Top 13" depressions in the history of the United States. Here is what I found:

1807-1810 -- Caused primarily by the Embargo Act of 1807, which decimated the shipping business and coastal economy by limiting foreign trade in an attempt to preserve neutrality amidst increasing rivalry between France and England (it didn't work, as the U.S. got drawn into the War of 1812 anyway). Bottom line: the depression was caused by a response to the threat of war, but ended prior to U.S. entry into war; the war cannot be credited with the recovery.

1815-1821 -- Federal spending to support the War of 1812 stimulated the economy, and spurred a period of speculative high prices for land and farm commodities. But heavy U.S. debt incurred to finance the war led to a decrease in available capital, falling land and commodity prices, loan calls, bank failures, and a depression. Bottom line: the war stimulated the economy, but also inflation, speculation, and collapse; the war first helped, then harmed the economy.

1837 Panic -- This will sound similar to very recent history. As the U.S. expanded west, investors saw an opportunity to profit from land development. President Andrew Jackson had obliged them by repealing substantial banking restrictions, and the banks financed a broad array of speculative land deals. Pity Martin Van Buren, who was president when the land boom went bust, and of course was blamed for the Panic of 1837. When the bubble burst, over 40% of banks in the U.S. failed. Bottom line: No direct war connection for this one, but perhaps a cautionary tale about the outcome of making a war hero president.

1857 Panic -- Discovery of gold in California in the late 1840s led to several years of very high consumer optimism, and a period of inflation. The failure of a single company (a branch of the Ohio Life Insurance Co) triggered a panic, resulting in over 5,000 bank failures in a single year. Bottom line: no apparent direct connection to war.

1873 Panic -- This is one of the more interesting depressions in U.S. history. For several years, the economy had been growing, industries churning out goods at full steam, and bank-financed railroads expanding at a frenetic pace. But, beginning in late summer of 1872, an epidemic of Equine flu spread across the U.S. and Canada. Though not generally fatal, in just three months the flu incapacitated virtually the entire North American horse population. Without horses to transport coal or goods, trains and ships stalled, and ports filled with backed up freight. A drop in railroad bond values led to bank failure and the ensuing panic and depression. Bottom line: No direct war connection, though one might postulate that the U.S. and Canada were temporarily immune from attack, as no foreign army would bring its horses to either country until the flu passed.

1893 Panic -- This caused the second worst depression in U.S. history. The cause was overheated railroad expansion at a time when the general economy was slowing. The bankruptcy of a significant railroad (the Philadelphia and Reading ... care for a game of Monopoly?) triggered a run on banks and the failure of over 500 banks and 15,000 other businesses. Bottom line: No war connection for this one.

1907 Panic -- Another sad era reminiscent of recent history. Still operating under the laissez faire policies initiated under President Jackson, railroads, oil, steel, and banking trusts fueled a period of rapid growth. But when copper speculation led to the failure of one of the largest trusts in the country, the stock market crashed, eventually wiping out nearly half of its total value. Bottom line: No war connection; just another reminder of what non-regulated financial institutions can accomplish.

1920-1921 Depression –- This was a very short, very severe depression. As WWI ended, over 1.5 million U.S. troops returned home, swamping the labor market. The results were high unemployment, serious deflation, and an almost instantaneous entry into depression. Bottom line: In a sense, caused by war. Probably better stated as the result of conducting a war without an economic plan for its end.

1930s Depression –- Beginning in October, 1929, with the worst stock market crash in U.S. history, the “Great Depression” lasted nearly twelve years. Banks failed, unemployment was rampant, and the GNP fell by one-half. The cause was unchecked market speculation, largely financed by under-regulated banks. Bottom line: No direct war causation, but (as noted above) arguable war stimulus as key to the eventual recovery.

1973-1975 -– Economists still argue over whether this was a recession or a depression (remember, recession = your neighbor is out of work; depression = you are out of work), and whether it really ended in 1975 , since its effects were felt for many years afterward. Either way, this one is a little complicated. In 1971, the U.S. abandoned the gold standard, which led to an unsettling situation as numerous world currencies moved from fixed to free floating exchange rates (ending an agreement hammered out at the close of WWII). However, the more direct causes of this recession/depression were a “perfect storm” of inflation driven by Vietnam War spending and an OPEC oil embargo, coupled with a stock market crash and resultant unemployment generally attributed to the switch to floating currencies. Bottom line: War spending was at least partly to blame for one of the root causes, and certainly did not aid recovery.

1980s Recession –- Again, arguable in terms of recession/depression, but several years (early 80s) of high unemployment and a stagnant economy. The primary cause was a tightening of the Federal Reserve’s monetary policy, designed to control inflation. The retraction by the Fed eventually caused inflation to subside, but at a cost to GNP and employment. Bottom line: No direct war connection.

2008-2014 –-Another example of what can happen when Washington removes restrictions on banking, this recession/depression was caused by the collapse of an economic segment dependent on loose consumer credit and high risk mortgages. A real estate bubble burst, leading to the failure and/or bailout of banks and insurance companies. Bottom line: No direct war connection, though one could say it’s a bit surprising homeowners didn’t raise an army to attack those responsible for the bubble. Incidentally, Canada, which chooses to more closely regulate its banks, to a large degree escaped the housing meltdown experienced in the U.S.

Summary: A cursory examination of the 13 worst depressions in U.S. history (thus far!) does not actually settle the argument regarding WWII impact on the country’s recovery from the Great Depression of the 1930s. What it does suggest is that when Washington opts to weaken oversight of the banking industry and/or allow speculative lending practices **, economic disaster almost certainly follows.

** With apologies to those opposed to regulation of Wall Street!

Beliefs, Decisions, and Worldviews

 

Beliefs and Their Source

Beliefs originate as ideas. Ideas that align with reality are true. Ideas that do not align with reality are false, even if held by many people for a long period of time. For example, for centuries nearly everyone believed the earth was flat. Near universal acceptance of that idea had no effect on the fact that the idea was not true.

The beliefs we hold are primarily derived from ideas originated by other people. Consider the vast number of things you believe that you learned in school, including math, science, history, and more. Virtually none of these things came from ideas original to you. Rather, you were encouraged to believe them and for the most part, you did. This does not make these beliefs suspect, it merely reminds us that most of our beliefs are built on ideas that existed before we encountered them.

During our lifetimes, we are exposed to a vast array of ideas about all sorts of topics and issues. Some ideas we accept and add to our stock of beliefs. Others we reject, in effect saying to ourselves, “I don’t believe that.” We might occasionally come up with an original idea – one that to our knowledge no one has thought of before – and add it to the things we believe. But that is not where most of the ideas we encounter come from. Our beliefs mainly come from accepting ideas conceived by others, most of whom we do not know. We could say that we outsource most of our beliefs.

Beliefs and Choices

Your beliefs are important. They drive your positions, opinions, choices, and actions. And in doing so they play a huge role in determining the direction of your life. And, once adopted, they are often treated as undeniably correct. As someone once said, “My beliefs are all correct. If they weren’t I would change them.”

Your path in life will generally be determined by choices and actions that align with your beliefs. For example, assume your beliefs include “education is the key to success” and “I should help others in practical ways.” You will most likely choose a path of education and career focused on helping others gain an education. In contrast, if your beliefs include “money is the key to happiness” and “hard work guarantees success” you will choose a different path that prioritizes personal financial gain over the needs of others.

Your daily existence includes myriad choices or decisions with varying degrees of impact. Some are minor (e.g., bran flakes or toast for breakfast), some are more significant (e.g., sign another year’s lease or buy a house), and some are extremely important (e.g., become a parent or not). And, over time, all these choices and their resultant actions play a critical role in determining the course of your life. Obviously, this means it is essential that the process by which you make your choices/decisions is a sound one. Yet, most people are only vaguely aware of their own decision-making process.

The Decision-making Process

If you are like most people, if asked to describe how you make choices/decisions you would probably say something like “I take the facts or information I have, mentally list the options, think it over, and make up my mind.” This sounds reasonable, but there is a uniform process of human decision-making that is somewhat more complex than most people realize.

Here is a simplified illustration of the process by which people make the countless decisions and choices that drive the directions and outcomes of their lives:

Data & Information   à
Ideas & Opinions       à     “Decider”   -->   Choices & Actions
Calls to Action            à                                                 

An example of this process is a seemingly simple situation in which some friends invite you to join them for lunch. Someone might Google nearby eateries and tell the group which are nearby (Data & Information). Someone might suggest a place, followed by another person saying they have eaten there and liked it (Ideas & Opinions). Finally, a member of the group says, “Let’s go there,” then turns to you and asks, “Are you going?” (Call to Action). You must now use the “Decider” function of your brain and choose to join them or not.

But what is your “Decider” and how does it make a decision? Your “Decider” is not a one-step “yes/no” switch, but includes multiple steps and decision filters which can be depicted something like this:

 
  

Data & Info         à  Trusted     Pass                     World
Ideas/Opinions  à  source?     basic     E.O.?     view  --> Choices & Actions

Calls to Action    à                     logic?                  filter

With few exceptions, the innumerable choices and decisions you make result from a process which includes the following steps:

1. “From a trusted source” – this is relatively simple and straightforward. It enables you to quickly filter out ideas, etc., from sources you believe to be untrustworthy. In the “going to lunch” example above, if in your opinion the person who had “eaten there and liked it” had very unusual tastes in food and you had previously taken her advice and regretted doing so, her recommendation would fail the “From a trusted source” test.

2. “Pass basic logic?” – this is another uncomplicated step. It allows us to quickly discard inputs to which our response is “that simply makes no sense” (later, we will consider a potential flaw in this step of the process). In the “going to lunch” illustration, if the available time for lunch was one hour, a suggestion to eat at a restaurant a 20+ minute drive away would quickly fail the “Pass basic logic?” test.

3. “E.O.” stands for Emotional Override” – this applies to instances when you have an emotional reaction of sufficient strength to override our logic and/or the trusted source test, up to and including adrenaline-fueled “flight or fight” reactions. In the “going to lunch” example, this could occur if the suggested restaurant was operated by the parents of your ex-spouse from whom you recently had a bitter divorce.

4. “Worldview filter” – this is the most complex part of the process and plays the largest role in your decision-making. Recognizing the origins and impact of our worldview and how it functions is essential to understanding why you make the choices and take the actions you do. Therefore, we will discuss worldviews in some detail. First, we will describe the predominant view regarding the function and origin of worldviews. Then, we will examine in more detail how worldviews are constructed and the factors which can modify them over time.

Worldview Function (general)

Your worldview is the lens through which you view everything. It is similar to a culture, but on an individual basis. Your worldview is the outlook on life and its issues based on your beliefs about fundamental issues; it reflects your answers to the “big questions” regarding things like human nature, society, human rights, relationships between humans and nature, between humans and governments, and between humans and other humans. It contains your beliefs regarding ethics (how people should conduct themselves), morals (right and wrong), and epistemology (simply put, how we know stuff).

Your worldview colors your positions and opinions about virtually every topic. And if you are like most people, you tend to vigorously defend the beliefs upon which it rests. Disagreements with others about important issues are often due to differences in your respective worldviews. However, if you are like most people, you are likely so intent on stating or defending our own position that this fact is ignored. And, instead of a discussion comparing worldviews as a source of disagreement, the conversation devolves into an argument about whose position is the correct one (or at least more popular, or stronger, or more modern, or …)

Not only do people commonly fail to recognize that differences in opinions and positions may be due to contrasting worldviews, they think little about how a worldview was formed, or whether it might change over time.

Social scientists tell us we begin forming a worldview at about age 2, that our moral compass is well established by about age 9, and that by around age of 13 our worldview is firmly set. Once they reach adulthood, most people do not significantly modify their worldview. There are exceptions, which will be described later.

As one might expect, since development of a worldview occurs at an early age, the factors that determine its formation are primarily those that heavily influence us in childhood. In early childhood, these typically include parents and other close relatives, teachers, and religious leaders. In later childhood, the circle of influencers expands to include peers, close friends, other social groups or organizations, public figures (sports figures, movie stars, other entertainers, political leaders, etc.), entertainment media, news media, etc.

The degree to which each of the categories affects worldview formation varies by individual, and the relative impact of the various categories and individuals within those categories varies over time (e.g., parents’ influence is typically strongest in early childhood and gradually decreases as the child progresses toward adulthood and independence; peer influence grows rapidly during adolescence).

It is important to note that although your worldview has been influenced by a multitude of influencers, you have allowed some to have more impact than others (and rejected some altogether) on the development of your worldview and the basic beliefs that underpin it. If the various influencing elements are viewed as a pyramid (those with little influence on the bottom, those with more influence higher up), your natural position is at the very top.

Worldview Formation & Modification

Major factors in worldview development include at least the following, which will be discussed in sequence:

·        Culture & subcultures

·        Personal influence

·        Institutional influence

·        Education

·        Life experience

·        Religion (last because it is rather unique)

Culture – With the rare exception of a hermit or other nonsocial individual, we are all immersed in multiple layers of culture, each of which imprints its values and norms on its members. At the broadest level, cultures are usually described in terms of large geographic areas. We might live in a Western, Middle Eastern, African, or Asian culture (labels that to varying degrees exist outside the larger area, e.g. Chinatown in a North American city). As with most sociological labels, these designations are useful but imply an exaggerated degree of uniformity.

Each broad cultural category contains multiple layers of subcultures. For example, within Western culture, the British, French, and American cultures differ significantly from each other. Within the American culture, the subculture of New York City is much different from that of Omaha or Los Angeles. Within Los Angeles, Santa Monica is different from Pasadena or Anaheim. Also, within Los Angeles are Asian, Hispanic, and other subcultures.

It is important to note that the many levels and types of subcultures, sub-subcultures, etc., often imprint their values and norms on individuals largely without their awareness (it is a natural thing to adopt the values of the society in which you live without examining or testing them). And these multiple sets of values and norms all play a role in determining your worldview.

Personal influence – Unless you represent the rare exception of a hermit or extremely non-social individual, you live with a complex web of interpersonal relationships. For many and varied reasons, you allow some of the many “others” in your life to have more impact on your choices and decisions than others. Those to whom you allow the most influence on specific choices/decisions have the greatest chance of impacting your beliefs and perhaps changing your worldview. This is due to cognitive dissonance.

Cognitive dissonance is the psychological discomfort you experience when you do something that conflicts with your values or beliefs. Here is an example:

Assume you believe that you should help the poor at every opportunity. At an intersection, you see a disheveled person with a sign asking for money. You avoid eye contact and are relieved when the light turns green. But you feel uncomfortable about not helping the person.

In this example, the discomfort you feel is due to cognitive dissonance – your actions did not align with your belief about helping others. If this dissonance persists and is strong enough, you will do one of two things to resolve it. You will either adjust your actions to align with your belief (i.e., the next time you see someone begging at a corner you will give them money) or you will adjust your belief (i.e., you will conclude the person could get help from government agencies or nonprofits, and therefore begging in public is not justified) to align with your behavior.

One way this comes into play is when you disagree about a significant issue with someone whose relationship is important to you. When you discover you are at odds regarding an issue, your response can take any of several forms, including:

·        Avoid conflict by changing the subject

·        Let the other person state their case, then try to convince them they are wrong

·        State your case, hoping to convince the other person you are right

·        Argue at length about the issue, hoping it does not harm the relationship

·        Because you value the relationship, “forgive” the other person for being wrong

·        Let the other person state their case with the aim of understanding why they hold their belief

·        State your case and explain why you hold your belief

·        Compare the aspects of your respective worldviews that relate to the issue with the aim of understanding the underlying beliefs that led to your differing positions

It will not come as a surprise to learn that the last option above is the least common response on the part of most people, and perhaps on your part as well.

Institutional Influence – For the purposes of this discussion, we will define institutions as an organization that has a specific purpose (e.g, families, schools, churches, companies, lodges and clubs, government bodies, NGOs, etc.). To varying degrees, they all influence your beliefs, including those that support your worldview.

The institutions that influence your beliefs, and thereby your choices/decisions, can be divided into two categories: involuntary and voluntary. In your early years, most of your institutional connections were involuntary (family, school, etc.). As you became more mature and independent, your institutional affiliations changed in two ways. You could choose from a much broader variety of institutions (adults have more options than kids) and some institutional connections that were involuntary (e.g. school, church) became voluntary. This is one reason (of many) some young adults demonstrate their independence by disassociating from schools and/or churches.

Education -- The influence this category has on worldviews is obvious and substantial. Mandatory education laws and the requirements for many occupations mean virtually everyone is exposed to some type of formal education.

Ideally, the educational process equips students with skills in the areas of logic, reason, rational thought, and independent analysis. But it is also true that the values held by educational institutions, and/or those operating them, are inculcated into students as a normal part of the educational process. This is particularly impactful in higher education, as demonstrated by the shift in values that occurs during many students’ university tenure. If you attended college or university, you may have witnessed and/or experienced this.

Life Experience – This is an interesting aspect of worldview formation because it is not a “ground floor” factor, but rather a “second floor” factor. That is, your experience (and everyone else’s) is viewed through the lens of your existing worldview. Therefore, experiences that could impact your belief system and your worldview are interpreted based on the worldview you already hold.

This means that, much as one would like to believe otherwise, you (and everyone else) are unlikely to react to your experiences from a totally objective and purely rational perspective. It also means that to cause a change in your worldview, an experience must be sufficiently impactful (note: repetition enhances impact) to cause you to recognize how the experience connects or conflicts with your worldview and allow you to mentally step outside yourself enough to reevaluate and adjust the beliefs upholding your worldview.

Religion – This category is unique in that its influence on worldview formation should be viewed from two perspectives. First, and most obvious, is the direct influence of religion (if you are religious) on establishing your belief system. Religious tenets address some of the most fundamental issues of life and, therefore, the beliefs that form the foundation of a worldview. Second, religion conflicts with (and when applied to one’s life, ultimately supersedes) the principle of self-reliance.

Your worldview was constructed using a hierarchy of factors which influenced your choice of beliefs and positions. Normally, the factor that occupies the highest position in this hierarchy is not an external one. We might hesitate to say so, but above all else we trust our own reason to select our beliefs, positions, and opinions.

When faced with an issue, we begin by filtering it through our worldview (not necessarily a conscious process) and may consider a variety of external factors or influencers, including any named in the preceding paragraphs. But the ultimate determinant of the beliefs and positions we adopt is our own power of reason.

This faith in our own mental judgment may sound egotistical or arrogant, and perhaps it is. But it is the reality of how we make value judgments and choose sides on controversial issues. This can be illustrated by the fact that we often refute opposing positions by saying “That does not make sense.” The unspoken portion of that sentence is “That does not make sense to me.” The presumption is that my logic/reasoning is flawless, therefore if a position or belief does not make sense to me it does not deserve consideration.

Self-Reliance and Religion

What does self-reliance have to do with religion’s influence on beliefs and worldviews? The answer depends on whether the individual chooses to relinquish their natural dependence on self-reliance in favor of their religious beliefs. That is, whether they elect to replace “my logic/reasoning is flawless” with “I trust the beliefs and principles of my religion to the extent that if my religious beliefs conflict with my limited human reason I will base my decisions and actions on my religious beliefs.” In most religions, this means an intention to follow the teaching of some type of holy scriptures.

Many people claim a religion but remain self-reliant in their worldview. They do so for a variety of reasons, such as the feeling that subjugating self-reliance to religious beliefs means losing control, fear they will be viewed as a religious fanatic, lack of true religious commitment (nominally religious), or following a religion that views human reason as the ultimate authority.

One critical point regarding religion is that it is the source of beliefs most likely to disrupt the usual structure where your power of reason has ultimate authority to determine your beliefs and, consequently, your worldview. This has two important implications:

(1) Religion’s potential to dramatically affect or even determine our worldview is one reason adopting any set of religious beliefs (including atheism, humanism, universalism, agnosticism, deism, etc.) is an extremely weighty decision that warrants rigorous investigation and testing. It is not surprising that many people avoid doing so.

(2) When you disagree about a significant issue with someone whose relationship is important to you, it can be helpful to approach the issue by considering the extent to which the disagreement stems from a difference in worldviews. If so, one very important factor to consider is a possible difference in religious beliefs.

Religion, though the most common, is not the only influence which can be elevated above self-reliance as a determinant of your beliefs and worldview. You may know people whose extreme loyalty to individuals or organizations causes them to accept beliefs, positions, dogmas, etc., without question. In such cases, their “Decider” function relies exclusively on the “Trusted Source” test, bypassing the “Basic Logic” test and slipping past the “Worldview Filter” test (or they have altered their worldview by aligning their beliefs with those of the “Trusted Source”). Examples may include loyalty to cult leaders, religious sects, political parties, heads of government, or extreme nationalism. On a more local scale, examples could include family members, very close friends, or any idolized person.

Summary

What you believe is important because your beliefs determine your choices and actions, which in turn largely determine the direction of your life.

Your worldview is the lens through which you view the world around you and everything that happens to you.

Your core beliefs, and the worldview supported by them, are typically formed as part of childhood development but can be altered and adjusted at any time.

You construct your set of beliefs and modify them over time by accepting some ideas and rejecting other ideas, most of which probably originated from people you don’t know.

Your decision making relies on a multi-step process. Factors include your trust in an idea’s source, a logic test, and your worldview “filter,” all of which may be overridden by strong emotion.

Principal factors in the development of your beliefs and the worldview built on them include cultures and subcultures, personal influence, institutional influence, education, life experience, and religion.

Awareness of worldviews can enhance your insight into the world around you, and especially your interpersonal relationships and interaction. It also has the potential to transform conflicts and arguments about issues important to you into more empathetic discussions characterized by forbearance and understanding.