The 1929 stock market crash and the subsequent Great Depression left the American economy in dire straits. About 11,000 banks, half the total number, had failed. Unemployment stood at 25 percent. The ‘dust bowl effect’ had emptied farms.
Parallel 1: The US economy suffered a similar shock in 2008. Unemployment skyrocketed. Venerable financial institutions either collapsed or had to be rescued. The motor trade, America’s pride, went bankrupt.
President Roosevelt instigated the New Deal, increasing state interference in the economy to an unprecedented level. Regulations multiplied, an alphabet soup of new state agencies were created. The printing press began to churn out banknotes, the gold standard was abandoned. Yet after an initial surge the economy began to suffer again.
Parallel 2: Following the 2008 financial crisis, the US administration became an even more active player in the economy. The state stepped in to bail out banks, financial institutions, industrial concerns. The Fed’s printing presses went into high gear.
Henry Morgenthau, Roosevelt’s Treasury Secretary, admitted before Congress that the New Deal had failed (no current politician would make a similar admission): ‘We have tried spending money,’ he commiserated. ‘We are spending more than we have ever spent before and it does not work. I say after eight years of this administration, we have just as much unemployment as when we started… And an enormous debt to boot!’ As a competent economist, Morgenthau knew that the economy was suffering from a chronic disease, not a temporary malady.
Parallel 3: For all its much-touted recovery, the USA is bankrupt: its liabilities exceed its assets. America’s $16.5-trillion debt now stands at 73 percent of annual GDP, not counting internal debts, such as the depleted Social Security trust fund. According to the Congressional Budget Office, the debt is on course to reach 93 percent within 10 years and nearly 200 percent in 25 years. Only Weimar-style hyperinflation would then be able to manage the debt, but the treatment would be even worse than the disease.
Roosevelt, though obviously a more benign politician than Hitler, reached the same conclusion: only a major war could correct the structural defects of the economy. Europe conflagrated in 1939, but there was no domestic consensus for America to join in. Hence Roosevelt hoped that either Germany or Japan, both aggressors of no mean attainment, would launch a pre-emptive strike, the sooner the better. To that end the US government suddenly froze all Japanese assets in American banks, simultaneously imposing an embargo on the export of oil. Japan’s foreign trade instantly shrank by 75 percent and her oil imports by 90 percent.
Parallel 4: Operating either through the UN or unilaterally, the USA imposed crippling sanctions on North Korea, the most aggressive state in the world’s most vibrant region. On 7 March the UN approved fresh sanctions on Pyongyang; North Korea said this gave it the right to a ‘pre-emptive nuclear strike’ on the US and especially its Pacific and Korean bases.
Anticipating a Japanese strike, Roosevelt left Pearl Harbour, the US major naval base in the Pacific, defenceless. Realising that the next naval war would be fought in the air he withdrew the carriers from Pearl Harbour, leaving obsolete battleships as bait. Japan promptly struck, drawing America into a war that went on to solve her economic problems for decades to come.
Parallel 5: Yet to be drawn. However:
Annual military drills and fresh UN sanctions have angered North Korea, while recent US bomber overflights have made it see red.
State news agency KCNA announced that Kim Jong-un ‘judged the time has come to settle accounts with the US imperialists’. US actions, said Kim, represented an ‘ultimatum that they will ignite a nuclear war at any cost on the Korean Peninsula’.
On 12 December, 2012, North Korea launched a three-stage rocket, a UN-banned test of long-range missile technology.
On 12 February, North Korea conducted an underground nuclear test, its third after those in 2006 and 2009.
On 11 March, annual US-South Korea military drills began.
On 19 March, B-2 and B-52 nuclear-capable bombers overflew the peninsula following several North Korean threats to attack US and South Korean targets.
On 20 March, South Korea was hit by a mysterious cyber attack, almost certainly launched by the North.
On 27 March, North Korea cut the military hotline with South Korea – the two countries are no longer on speaking terms.
On 28 March, B-2 stealth bombers overflew the Korean peninsula again, demonstrating, said US officials, an ability to deliver ‘precision strikes at will’. North Korean missile forces were put on stand-by.
According to Euclid, parallel lines can never meet; Lobachevsky showed how they could. In this instance, the clearly discernible parallels can only meet at a crucible of a major war, possibly to be fought with the kind of weapons that were barely tested the first time the USA found a quick way out of its economic difficulties.
Will they or won’t they? Let’s just hope that the time hasn’t come yet for Hilaire Belloc’s macabre forecast of decades ago to be proved right: ‘Like all our modern evils, this evil will not get better. It will get worse. The only remedy for modern evils is catastrophe.’