How the USA ‘Finally’ Got Out of the Great Depression

December 30, 2016by Tope Fasua0

So, most of us know about the struggle in the US and other great western countries to get out of the Great Depression which lasted for all of the 1930s, and was prequel to the Second World War. It was an era of madness. I believe the wiser countries have sworn never again to go to war with themselves, but we have seen smaller versions of that war in many smaller, ‘unintelligent’ countries, including our own civil war here. We should swear, Never Again!

Well, some say the Great Depression was triggered by the collapse of the New York Stock Market in 1929, after many middle-class Americans had put all their savings into the ‘pump and dump’ Ponzi scheme that the market had become at that time. Deeper analysis point to more cogent factors – the failure of 9,000 banks pre-1929, imposition of high tariffs on imports from Europe (leading to a lot of suffering, and retaliatory trade policies), drought in the Mississippi Valley and loss of much agricultural production, low per capita productivity, irrational exuberance, decreased purchasing power among American households, refusal to spend on goods (people just hoarded their cash – loss of consumer confidence), high national debt, among others. Hmmm this reminds me of Nigeria today.

Then Frederick Delano Roosevelt became president in 1933. He was wheelchair-ridden, having contracted polio in 1921, but that didn’t stop his stamina to lead. He was known to have tried several things to lift the USA out of the Depression, enacting two or three “New Deals” that sought to focus governance on the truly needy and do economics the way it should be done in times of crisis. Of course, Maynard Keynes convinced him to be active and pro-poor with his policies. Roosevelt caused great construction projects to be done all across the US, especially the building of dams, post-offices, parks, bridges, roads etc. Of course the US would have paid with its own dollar during that time, incurring some level of inflation.

Above all, Roosevelt was a communicator. He was an orator, and used the instrumentality of radio talks which was famously christened ‘Fireside Chats’. He had all of 30 chats with Americans during his long tenure (he is till date the only president ever elected for four consecutive terms of four years). He was always talking, communicating with Americans. His fireside chats did a lot to recover confidence on the part of Americans, and of course saw them through the depression, and the war.

Some of his best quotes were:

“The only thing we have to fear is fear itself.”

“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”

“It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”


“Happiness lies in the joy of achievement and the thrill of creative effort.”

But by the end of the 1930s, the USA was still in a depression. And the WWII had started. The world had gone insane and decided to reduce its population. The US chose not to join early, despite being prodded by its key allies, such as the UK under Winston Churchill. The matter of fact was that the US had several axes to grind with the UK because of the colonial overhang (remember the Tea Party?). Wise Roosevelt chose to sell war stuff to the UK and others instead. Some even allege that Standard Oil (now Mobil) sold aviation fuel to the Germans and kept the Luftwaffe in the air. Others recorded that Coca Cola, not being able to ship goods to Germany during the war, caused its head of German operations to create Fanta, using ingredients that were available in Germany at the time. It was all about the ‘Benjamins’… I mean all about trade. Anyway, Roosevelt didn’t join the war…

Until Pearl Harbor was bombed by the Japs on December 7, 1941.

The US joined the war officially the next day, December 8.

Then Roosevelt took the most important decision. He ordered that as from February 1942, no new civilian car should be produced or delivered to anyone within the US. He ordered that the car manufacturers – Ford, GM, the entire Detroit bunch – recalibrate their plants to be able to assist the aircraft manufacturers like Lockheed and Boeing, to produce as many bombers as possible, for sale all around the world and for use by the US Airforce, etc. Through his speeches, he corralled the support of ordinary Americans for the war effort; he knew that only the people (working together) could achieve such great feats. And the people responded. Mothers took disused mutton fat to designated centres because they were told it was needed to manufacture something or the other. They were proud to so do.

And so it was, that the USA was able to produce over 100,000 warplanes in a year, and another 100,000 for civilian use. The ban on private car purchase ended in December 1944. The war ended on the 2nd of September 1945. It was a period of sacrifice on behalf of everyone. It is not a history that is known to many. But by the end of the war, many nations were owing the US, including the UK – which only managed to pay off the balance of its war debt to the US in 2006 (oh, you think there is ‘brother’ in international politics?). In addition to that, by the end of the war, the US convened some meetings in Bretton Woods, New Hampshire, leading to the formation of the World Bank and IMF. The upshot of the meeting was that the dollar replaced the pounds sterling as the global reserve currency, for the US simply forced the UK to devalue its currency because of what it was owing. The finishing touch was that all major economies in the world were ‘obliged’ to peg their currencies to the US dollar, while the dollar itself was pegged to an ounce of gold at $35 to one ounce. This is known as the Gold Standard Era. However, in 1971, President Nixon decided that the dollar was constrained by the Gold Standard, and besides the production of gold could not keep up with the huge amounts countries had kept in the safe US dollars. He simply abandoned the standard and everybody was on his own. Nixon issued more dollars and paid off some debtors. By then the world was worshipping the dollar.

That is the way political economics is played.

Back to Roosevelt. What can Nigeria learn from him? Look, Nigeria is in a war situation. We’ve always been. Economic war came after the civil war. We hit the limelight with the oil boom. We supported the Arabs and benefited from OPEC, and went slam-bang into the world of petroleum politics. There is always a price to pay. Story for another day.

But I believe that our situation is akin to war. The state of the economy is akin to war. And we will not get out of this state of war except we take the types of steps with which countries get out of wars. Call it an economic emergency. That is not what we have, with the way we spend our commonwealth so lackadaisically. Please, someone should help us collate the amounts we want to spend importing brand new, full options, AMERICAN (capitalised for effect) spec, 2018 edition luxury cars in the 2107 budget, and help us convert to crude oil barrels. I bet we plan to use all the proceeds of crude oil in 2017 to buy cars for those in government. That is not how to win a war, or get out of an economic depression. Mind you, our largest imports – according to some graphics I shared on this page some weeks back – are petroleum products (especially PMS – because here we don’t care about fuel efficiency and such like), rice, sugar, and of course, cars. Not in that order. The purchase of new cars is okay, if one can afford it and for personal use. But for government use at this time… it is a sin. The richest country in the world – US or China, choose one – they don’t luxuriate on government personnel like we do. Never! Why can we not use what we have? Stretch them for at least two more years?

I know why. Minister Lai just released a bombshell that some former Permanent Secretary stole 40 luxury cars and they just recovered them from his house. He protected the man by not mentioning his name. Haba! Why would he want to soil the name of such a great patriot? There is always reward for an official thief in Nigeria. The same people would lynch a child for stealing garri worth N200. In government, those ‘lucky’ enough to be in position just take the commonwealth so liberally. They spend our money freely like confetti. It means nothing to them. Former Inspector General of Police also wrote to his successor that he had signed an Order 295 prohibiting anyone from going after any former IG for any reason, just like Peter Odili obtained a perpetual injunction from the courts. Arase (a very educated man) wondered why his successor in office cannot emulate his good example when he, rather than go after his predecessor who took nine luxury cars purchased with the sweat and blood of Nigerians, with our natural resources and company income taxes, rather chose to turn the other cheek and purchased a brand new bullet proof SUV for the same man. Talk about generosity! He even had to go somewhere to ‘raise’ the money because the man left him a debt of N28billion!

So, there is no way we can take the Roosevelt approach. And no way we can exit this depression in the land any time soon. We just are not wired to solve problems like this. As the problems pile on and get more complicated, other unsolvable issues begin to pile on; tribalism, nepotism, religious wars, terrorism, corruption and so on. And before it, problems overwhelm us and nothing gets done. Everybody who knows how government runs today in Nigeria believes that Nigeria is a joke, no less. But how can we make it less of a tragicomedy?

I’ve been thinking about why we cannot have a MAINTENANCE BUDGET in Nigeria. I have been to a few countries around the world, and the truth is, we have more infrastructure than a handful of them. We say that we don’t have a maintenance culture, and in a way that dismisses the problem, not to find how we can begin to cultivate one. We don’t want to exert ourselves at anything. We love easy problems; even the easy life. We say we are a special people, made by God himself to come and enjoy on this patch of earth called Nigeria. But many Nigerians – like those slaughtered by Boko Haram and other terrorist groups – wouldn’t have felt that way as they stared death in the face and were hacked to pieces. Why can we not have a maintenance budget?

I was reading about the state of the National Theatre in Iganmu today. Tenants moved out of there and relocated to Freedom Park. The edifice sits there, surrounded by miscreants, run down like everything else in Nigeria. Surulere Stadium is now a haven for prostitutes anytime from 630pm (well, so I heard!) Nigeria has infrastructure all over the country. Under the government of Dr. Jonathan, the Coordinating Minister for the Economy once stated that they would prioritise 10,000 abandoned projects. That is 10,000 out of tens of thousands of abandoned projects! We start and throw away… Our psychoanalysis (in government) is like that of spoilt children who destroy their toys so quickly and ask for another. Why can we not try and grow up and really consider what we already have, and see what use we can put them to? Why can we not look for value-for-money in everything we have already? Government is asking the people to manage and tighten belts but they are hardly doing the same themselves. Public funds are never spent the way they do in Nigeria. It is totally unacceptable, reprehensible, irresponsible, unconscionable… I run out of words to describe the act.

Look around you at some wasteful thing that some big man had built in the past on the country’s dime. In this country, as we complain about roads with craters, we have many well-built asphalt roads going to nowhere; products of nepotism – some man was appointed into an office and decided that that was the best thing to do, to impress a girlfriend. We haven’t started governing Nigeria in short. When we are ready, we will know that it is very serious business. Yes, A GOVERNMENT SHOULD BE RUN THE WAY A PERSON WILL RUN A BUSINESS… A BUSINESS CAN ENJOY DIVIDENDS AFTER A GOOD YEAR’S WORK, BUT A BUSINESS ALWAYS LOOKS TO THE FUTURE AND STRIVES TO SURVIVE AGAINST ALL ODDS! A BUSINESS ALSO RECOGNISES EXTERNAL COMPETITION AND STRIVES TO OUTDO THEM BEFORE THEY SEE TO ITS END, AND DEALS SUMMARILY AND RUTHLESSLY WITH THOSE WHO SEEK TO UNDERMINE IT THROUGH SLOPPINESS, FRAUD OR GLUTTONY FROM WITHIN. Like a good business will do, we should by now do a total audit of our resources, and brutally reallocate between surplus and deficit units, and cut almost all nonsense and waste in government, for starters. We just don’t have that luxury of time to faff about in this ultra-crazy world of Repo Men (ask your friend what that is).

So please someone, help us look for this 2017 budget, and help collate how much all the MDAs intend to spend on cars only, which will be comparable to what they spent last year, all for the comfort of the big men and women. Chances are, just as we’ve always done, we will repeat the same budgets next year. All MDAs just throw the figures to the centre, justify all unjustifiables and wait for the money to come raining – in their private accounts.

by Tope Fasua

Tope Kolade Fasua is a Nigerian ex-banker, entrepreneur, economist and writer with 28 years of work, business and policy analysis experience. He is the founder and CEO of Global Analytics Consulting Limited, an international consulting firm with its headquarters in Abuja, Nigeria, and footprints in the United Kingdom, USA and United Arab Emirates. Fasua has authored numerous columns on newspapers and six books. He currently keeps regular columns on policy analysis issues with Premium Times and Daily Trust newspapers.

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