Last month I discussed the role of the Federal Government, Federal Reserve Bank, and President Hoover in creating America's great depression. This was to explain the false idea that the depression happened as a result of capitalism run amok. Now let's see what happened after Herbert Hoover left office.

In March of 1933 Franklin Roosevelt took office. The Democratic platform of 1932 was a relatively responsible one. In many ways it was more fiscally conservative than the Hoover platform. However, Candidate Roosevelt was much less clear about his ideas than his party. He let anti-Hoover sentiment and a winning smile carry him to the White House.

Once in office President Roosevelt had to deal with the crisis in banking and in the overall depressed economy. The plan for closing and reopening the banks was handled relatively well. In handling economic policy what good sense was to be had in the Democratic platform was soon abandoned. Instead the National Recovery Act (NRA) was passed. This allowed great power to business and labor leaders to restrict competition, create statutorily protected cartels, restrict imports, and generally micro manage the economy. The economy that had shown strong signs of recovery in the first few months after Roosevelt took office promptly collapsed when the NRA took effect in July 1933. By the time the U.S. Supreme Court threw it out in 1935 our country had suffered two more unnecessary years of misery.

After NRA was declared unconstitutional the economy began another tentative recovery. It carried through the 1936 elections insuring Roosevelt's reelection. This was despite the fact he'd had nothing to do with the emerging recovery and clearly didn't understand what was going on. (We saw a similar situation in 1996.) In 1937-38 the economy crashed again. Monetarists blame the Fed for this. The bank reserve requirements were doubled in late 1936. Another causal factor was the high marginal tax rates, (up to 91%) charged to wealthy Americans more as part of a soak the rich mentality then popular than as a rational way of increasing tax revenues.

The final insult came in the 1938 wage and hour act. The labor movement had been pushing for this for years. They couldn't have possibly gotten it at a worse time. As with Hoover's attempts to hold up wages in the face of a declining demand it only exacerbated the unemployment problem. The large pool of unemployed kept wages down.

Only our entry into the Second World War ended the unemployment problem. With millions of Americans in business, labor and government willing to make sacrifices, it was easy to do. However, the Roosevelt administration continued to hurt the economy. They took authority to fix prices on a vast number of commodities. This was in contrast to the cautious and limited use of price controls by the Wilson administration during WWI. The price controls lead, as they always do, to scarcities. The scarcities lead to rationing. The public at home did without many things that would have been readily available, if not for the price fixing.

In short, Mr. Roosevelt's policies ended with similar results to Mr. Hoover's. The NRA, the high marginal tax rates, the price controls, and labor legislation all achieved effects opposite to those intended by their sponsors. Yet governments, such as ours in Hawaii, can never seem to understand the best way to improve an economy is to leave it alone.

PILIKIA WITH THE PUC
John Alford, 'Ohana Adventure Tours Hawaii, Inc.

As a motivated entrepreneur, I seek success with all the ambition I can muster. One thing I find hard to swallow are bureaucratic departments that stomp on small business ideas.

On March 5, 1999 I filed for a PUC license to carry passengers and their gear on our guided adventure tours (hiking, biking, etc.). The PUC department gave me a docket number 99-0054 and said they would publish it in the Midweek to allow for intervention by whom ever feels necessary to block the licensing possibility. Well, the docket hasn't even been published yet and already we have a Motion for Intervention from Temptation Tours of Maui. This company has filed this to stop us from being PUC licensed claiming that they created this niche market and their revenue would suffer from us being issued a PUC license. I phoned this guy, David Campbell, President, Temptation Tours and he was extremely hard to talk to. He doesn't want us to exist. How can anyone be allowed to stop small business growth, especially when he himself had to get a license of the same nature?

Anyhow, he refused to withdraw his Motion for Intervention and said to get an attorney. He also mentioned that it'll be about 18-24 months before a hearing is ever conducted on our case and that he would be happy to discuss it then. So, are we out of business before we even open our doors? Why such a policy? Any ideas?

I am currently enrolled in the Small Business Development Center program and it is awesome! I have been busting my chops creating my business plan, doing market research and performing income projections. They too are shocked by the intervention. However, certain individuals wanted me to forward a petition against the PUC department for allowing this sort of anti-small business activity to exist. I am ready and willing to do what ever it takes to rid Hawaii's government with anti-business tactics.

Dear Lt. Governor Hirono:

I have been attempting to help you in addressing and correcting administrative impediments to business by government agencies and employees. No success. I've got ten specific examples of all kinds but they are not to be shared with you. Why? Because none of the victims want to be identified. Rightly, or wrongly, they fear, yes FEAR, identifying themselves because they, each and every one, believe that if their complaints come to light and they can somehow be identified, they will suffer sever retribution.

When I question them, they tell me horrible stories of sudden first time state or city inspections/audits and the like that always seem to ensue when a business person complains or even seems to complain.

It is possible that this fear is irrational. I am reasonably sure that the actions which have caused the fears are not official sanctions (i.e., you or the Governor or Department Heads do not order such). But I am also convinced that unofficial (apparently random but not random) actions by government employees in retribution do occur all too frequently.

Your efforts to tame the out of control administrative monster are doomed to failure unless you get the facts. And the facts are elusive unless you find a way to alleviate the fear of revealing the details. The problem is the same whether true or untrue. Perception is reality until you and Governor Cayetano find a way to assure and reassure.

The real reason that Linda Lingle almost won the last election was because many voters KNEW that if she won, the retribution system would probably die.

You see, Lt. Governor, a large portion of Hawaii's citizens FEAR their government. Let's be clear here, they don't necessarily fear you, per se, they fear your inability or unconcern to rein in the out of control bureaucracy. In that one way, (abject terror in the presence of the rule) we differ from North Korea, Iraq or Cuba. But we are only a few steps removed and that's a horrible situation.

Bold and decisive action is required if change is to occur. I have some ideas for such action if you are interested. It would be a pleasure to help.

Sincerely,
Richard O. Rowland, CLU, ChFC

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