Really! Watch where I take this post.
In a post titled, “Debasing Lincoln” Krugman writes:
Greg Sargent catches John Boehner invoking none other than Abraham Lincoln to inveigh against the deficit. This is pretty funny — in multiple ways.
One is the whole notion of relying on Lincoln as an authority on economic policy. Why should we believe that a lawyer speaking in 1843…knew what we should be doing about an economic slump…170 years later?
Then there’s Greg’s catch: Boehner truncated the quote, leaving out the part where Lincoln called for balancing the budget by raising taxes. And also the point that Lincoln was actually a big government interventionist for his time, a strong advocate of what we would now call industrial policy.
But wait: there’s more. Lincoln’s most dramatic departure from standard economic policy was … drumroll .. debasing the currency (pdf). Here’s the dollar price of gold:
True, he did it to pay for a war; but do you think a 19th-century version of Paul Ryan would have stroked his immense beard and said “Well, under the circumstances, letting the dollar fall to a third of its gold parity is OK?”
Actually, the greenback experience is interesting, mainly for two reasons: nothing terrible happened despite 15 years off the gold standard, and despite this fact all the Very Serious People continued to believe that going off the gold standard was a terrible, terrible thing. It doesn’t much raise your hopes that they’ll learn from recent failures. [Bold added.]
Wow, where to begin?
First, note the irony here. Krugman is chastising John Boehner for not realizing that Lincoln was a tax-raising, big government advocate of industrial policy, who also debased the currency. And yet, when Tom DiLorenzo was a witness for Ron Paul’s monetary committee, Krugman summarized the episode with a blog post titled “Johnny Reb Economics.” His good buddy Matt Yglesias had an even more inflammatory title, “The Strange Case of Pro-Confederate Monetary Policy.” (In fairness, maybe the editors at ThinkProgress pick their blog post titles.) So it seems if you call Lincoln a big government fascist, you get your head bitten off, and if you cast Lincoln as a small government conservative, you get mocked. Tough crowd, these progressive bloggers.
But that’s just incidental. The real jaw-dropper in Krugman’s post above, is his claim that “nothing terrible happened” from 1862 to 1878, and that therefore the Very Serious People who worried about Lincoln going off gold are proven wrong once again.
Naturally, there was the whole Civil War (aka War Between the States aka War of Northern Aggression), with hundreds of thousands of people dying. So obviously the economy was in awful shape during these years.
NOTE: I am not saying, “Krugman thinks hundreds of thousands of people dying is no big deal!” No, what I’m saying is that he isn’t in any way looking at any kind of metric when he says “nothing terrible happened.” That is a throwaway line, anchored to jack squat. For one simple example, the last time I looked up the stats, I ballparked cumulative price inflation in the North at about 75 percent from 1861 to 1864, for an annualized rate of 20 percent for that three-year stretch. (It was far worse in the Confederacy of course, just proving how ridiculous it is to say Tom DiLorenzo was a fan of Confederate monetary policy.) Isn’t that the most obvious “terrible thing” that a gold bug would bring up? Yet Krugman doesn’t even bother to tell us anything about prices; he just assures us “nothing terrible happened.”
Let’s continue, to prove my point. After the Civil War, but when the U.S. was still not back to dollar parity with gold, did we have any kind of economic problems? After all, Krugman’s chart–and his statement “despite 15 years off the gold standard”–show that we need to consider U.S. economic history from 1866 to 1878, if we want to see what the postwar era was like.
Here’s an interesting idea: Before we look it up, let’s first settle something obvious. If there had been, oh I don’t know, the worst depression in U.S. history to that point, then probably that would count as “something terrible” happening, right? Maybe it wouldn’t be the fault of going off gold, but surely Krugman would be either a liar or ignorant if he said “nothing terrible happened,” right?
The Long Depression was a worldwide economic recession, beginning in 1873 and running through the spring of 1879. It was the most severe in Europe and the United States, which had been experiencing strong economic growth fueled by the Second Industrial Revolution in the decade following the American Civil War. At the time, the episode was labeled the Great Depression and held that designation until the Great Depression of the 1930s. Though a period of general deflation and low growth, it did not have the severe economic retrogression of the Great Depression.
It was most notable in Western Europe and North America, at least in part because reliable data from the period are most readily available in those parts of the world. The United Kingdom is often considered to have been the hardest hit; during this period it lost some of its large industrial lead over the economies of Continental Europe. While it was occurring, the view was prominent that the economy of the United Kingdom had been in continuous depression from 1873 to as late as 1896 and some texts refer to the period as the Great Depression of 1873–96.
In the United States, economists typically refer to the Long Depression as the Depression of 1873–79, kicked off by the Panic of 1873, and followed by the Panic of 1893, book-ending the entire period of the wider Long Depression. The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression’s 43 months of contraction.
In the US, from 1873–1879, 18,000 businesses went bankrupt, including hundreds of banks, and ten states went bankrupt, while unemployment peaked at 14% in 1876, long after the panic ended.
This is simply inexcusable. And as I have taken pains to point out over the years, this is typical Krugman. He simply makes stuff up about the historical “record,” with such carelessness in throwaway lines that when you catch him, his fans won’t even care. To wit: “Oh come on Bob, it’s not like Krugman said, ‘The Long Depression wasn’t terrible.’ All he meant was, Lincoln’s debasement of the currency had no ill effects. The Long Depression wasn’t about gold at all; there was deflation!”
In conclusion, let me make sure my point is clear: Krugman likes to dot his i’s and cross his t’s. Not only does he present what he thinks is an elegant, internally consistent theory, but he prides himself on constantly cross-referencing it objectively with “the data.” But he is so sure that he’s right, and he is often so incredibly sloppy in his work, that he will cite “facts” that, if anything, prove the exact opposite of what he tells his readers.