In assessing the financial background of the causes of
the Great Depression, it is important to understand that underlying political
and social factors were intertwined with the economic factors which produced
this phenomenon. In dealing with this, I
am taking this from the point of two traditionalist Catholic positions,
Integralism and Distributism, and will analyze based on many writers from those
positions what created the Depression, and in many aspects how World War II
aided in recovery. However, some of the writers
referenced were published before the Great Depression, but their insights are
what many later researchers based their conclusions upon.
In reading Ben S. Bernanke’s analysis of this, he
points to two factors which were underlying components in the Great Depression
happening[1]:
1. Failure
of Financial Institutions
2. Widespread
Insolvency of Debtors
By the first, Bernanke is talking about the failure of
small local banks to handle financial complexities of a national economy,
something the position of this article will differ with radically. On the contrary, the tendency of larger banks
to swallow up smaller institutions, as was the case of “crony capitalism,” may
have been more of a contributing factor in this. This causes, as Crean and Fimister note, a
situation where the sale of the use of money (excessive interest) is in essence
a form of legalized fraud in that the use of such money is distinct from its
alienation and thus makes the acquisition of capital more important to
the larger institution rather than its circulation into the economy[2]. As Catholic philosopher/theologian Romano
Guardini notes, the problem here is one fundamentally in the exercise of
power. He writes[3]:
“A more immediate danger threatens when power is at
the disposal of a will that is either morally misguided or morally
uncommitted. Or there may be no
appealable will at all, no person answerable for power, only an anonymous organization,
each department of which transfers its authority to the next, thus leaving each
– seemingly – exempt from responsibility.”
Brazilian Catholic philosopher and economic
commentator Plinio Correa de Oliviera notes something similar when he writes in
his seminal text Revolution and Counter-Revolution the following[4]:
“Private enterprise is more and more limited.
Inheritance taxes are so onerous that in certain cases the federal treasury is
the principal heir. Government
interference in such things as exchange, import, and export makes industry,
commerce, and banking dependent on the state.”
The danger of this type of situation was noticed by
Hilaire Belloc, who wrote in his seminal text The Servile State that
this type of corporate capitalism (he called it “perfect capitalism”) would not
be feasible in that no one outside a cabal of economic elitists the average
person would be deprived of basic essentials such as food, and those who were
among these economic elitists would overproduce, glut the markets, and thus
initiate economic depression[5]. In view of these writers, Bernanke’s thesis
about the cause being the failure of smaller banks is at variance with the views
of these earlier writers, in that the larger institutions tended to grab
resources for themselves, thus altering the markets and causing both consumer
demand and market supply to become unbalanced, and thus causing the
Depression. Many of these same thinkers
would not view in a positive light the idea of “corporate capitalism”
therefore, in favor of the small business instead. The lack of focus on investment in small
businesses, according to these schools of thought (called Integralism and
Distributism) caused many small businesses to falter, and thus adversely
affected the local economy. Bankrupting
the grassroots market, then, would have been the ultimate cause of the 1929
Crash that brought on the Great Depression when seen from this perspective.
Looking at it from that perspective, it could actually
be easily concluded that a fundamental change in the political order also may
have aided in the evolution of factors that led to the Great Depression, as
well as the civil and political unrest seen for many decades of the previous
century. Until 1914, there was a stable
Monarchist political order – Hapsburg Austria, czarist Russia, etc. When war and revolution destabilized many of
those monarchies and caused a shift in the social order, it caused some
upheaval in Europe in particular. So,
what does that have to do with the United States, which was never Monarchist
and also where the 1929 Crash originated?
Although the US is a republican government, in values and civilization
it was still tied to classical Europe, and according to many Catholic thinkers
in particular – Monarchists, Distributists, Integralists, etc. – the collapse
of the “old order” in Europe had a catastrophic domino effect that was felt
worldwide. Many scholars would even argue
actually that World Wars I and II were in reality on 31-year conflict, and the
Depression was located at the central chronological apex of this. If that be the case, it would mean that
socio-political, as well as economic, factors are what made the Great
Depression happen.
As can be seen, there is a variance in theories
between Bernanke and the classic Catholic writers on economics and social
theories, and that variance places the causation of the Depression on two
different things – Bernanke and others like him would say that the small banks
and small business was the cause, while Belloc and others would note that
bigger corporate interests, allowed to grow unchecked in the new “corporatist”
system, were the cause. Personally, the
second view seems to have more credence, as it does appear that larger
interests such as mega-banks and large corporations sought to monopolize
certain sectors and accumulate their fortunes at the expense of the local
businesses that built the individual local economies, that in turn made a
stronger national economic stability possible.
As the bigger corporations made it so they had international reach, they
then could even dictate the economies of nations. It also would impact significantly
local communities (case in point, the city of Gary, Indiana – the major
industries who at one time provided an economic base in Gary eventually abandoned
their endeavors there in order to pursue markets that were more favorable to
them) even beyond the timeframe of the Great Depression. Although it sounds
conspiratory, evidence suggests that a similar role is being played today by
mega-corporations, especially the new “Silicon Valley” group that exercise
almost a monolithic control over cybercommunications. If this is the case, it begs the question as
to whether or not a second Great Depression could happen, and that is something
that surely should be paid closer attention.
[1] Ben S. Bernanke, “Nonmonetary
Effects of the Financial Crisis in the Propagation of the Great Depression,” American
Economic Review 73, no. 3 (1983): 258-261.
[2] Thomas Crean and Alan Fimister, Integralism:
A Manual of Political Philosophy (Havertown, PA: Casemate Publishers,
2020): 191.
[3] Romano Guardini, The End of the
Modern World (Wilmington, DE: Intercollegiate Studies Institute, 1998):
124.
[4] Plinio Correa de Oliviera, Revolution
and Counter-Revolution (Spring Grove, PA: American TFP, 1993): 111-112.
[5] Hilaire Belloc, The Servile
State (London: T.N. Foulis, 1912): 55-56.
