Why Capitalism Thrives–and how it self-destructs

T.H. Watkins, “The Great Depression”

Legitimate historians like award winning T.H. Watkins clearly described how we got into the depression and how we got out of it.  The following excerpts describe how unions shrank during the decade of the 1920s and corporate profits soared.  Investors and top executives became very rich and they enjoyed a low tax rate.

By the end of 1929, however, most consumers had run out of money and Wall Street woke up to the fact that unsold goods were sitting on the store shelves.  After the stock market crash, President Hoover chose to pursue austerity government solutions, instead of correcting the huge imbalance of wealth between the rich and everyone else.

WWII gave President Roosevelt and a liberal Congress the moral authority to raise taxes on corporations and the wealthy, pay unemployed workers for military service and more millions in the defense industries and their support industries.

This amounted to a massive redistribution of wealth, the creation of a vibrant middle class and four decades of unprecedented economic growth. (More thorough discussions of this issue can be found elsewhere on this website.)

The following brief excerpts are from The Great Depression, by T.H. Watkins. You’ll note amazing parallels between Watkins’ descriptions and what is happening in our economy today.


Membership (of unions plunged from its high of 5.1 million in 1920 to 3.6 million in 1923 and would dribble down to 3.4 million in 1929.
If unionism had shrunk, corporate America had blossomed—at least in the size of individual entities and in the salaries and other benefits of those who sat a t the top of them. In the decade following the war twelve hundred mergers swallowed up more than six thousand previously independent companies, and by 1929 some two hundred corporations controlled almost half of all American industry. The fewer companies, the less competition, the less competition, the less incentive to keep profit margins down—and federal tax policies took very little of that profit. As a result, most of the personal wealth in the country resided in the pockets, bank accounts, and stock portfolios of a tiny percentage of the population.

But goods had been produced for the millions, not for the thousands, and the millions, in the end, simply could not afford them….

In 1928, special emphasis could have been placed on “promotion of speculative enterprises,” as a poor management tool, for the bankers who already had encouraged the southern California and Florida real estate follies of 1924 and 1925—had become willing partners in the stock market extravaganza. The banks, one banker remembered, had “provided everything for their customers but a roulette wheel.”


Like most of his contemporaries—and, indeed, most of the American middle class—if President Hoover believed in anything more profoundly than the virtues of self-reliance and individual initiative, it has not been recorded. This was, after all, the very ethos of a white, Protestant culture, the image that Hoover and his kind held up as the ideal of Americanism. Hard work, honesty, and independence, they believed utterly, had brought this county to the forefront of nations, had built a breed of men (and women, too, some conceded, though not often) who had taken the institutions of the founding fathers and made them the wonder of the world.

Anything that might weaken the strength of that tradition would weaken the very character of America and was, by definition, evil. Government, charity, especially, by robbing people of initiative, would be the very embodiment of error. The national government should stay out of the personal limes of its citizens, even if they were in trouble. For Hoover and for the millions of Americans who shared his convictions, the idea that people would turn to Washington, D.C., to help them out of a bad spot was nearly unthinkable.

p. 68

Stubbornly holding to his principles, Hoover himself continued to insist that the burden of relief should be carried by the Red Cross, not the government, and he did not even support legislation that would have provided $60 million for feed and seed loans from the Department of Agriculture…. It was pinch-penny charity at best and no one will ever know how many suffered how much during all the months in which virtually nothing had been handed out. And since records were as carelessly managed as the relief program itself, no one will know how many died.

Some “relief” efforts did not even pretend to charity. Chief among these was the attempted deportation of Mexican Americans, which managed to combine racism with selfishness and desperation in one of the least edifying episodes in American history.


(At the end of the thirties) In this country, there was less and less discussion in Congress about reform measures, relief appropriations, and public works, and much more consideration of how much to appropriate for the national defense.

Government switched its focus from helping the middle class and poor, and, instead, financed and coordinated the efforts of major corporations like Douglas aircraft, Lockheed, Boeing, Curtis-Wright, Packard, Ford, Pratt & Whitney, Chrysler, General Motors, Savage Arms, Colt, and shipyards on the coasts.  This, in turn, created millions of jobs and got us out of the depression.


At the end of 1940, personal income was $81.1 billion, more than $7 billion higher than any other year in the decade—and by the end of another year income would soar to $104 billion. The Great Depression, as an economic fact, was ended by unprecedented government spending…

Nuff said.

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