I recently finished Alan Brinkley’s Voices of Protest, which is a dual biography of Louisana politician Huey Long and radio firebrand Father Coughlin. Father Coughlin is known for being virulently anti-semitic, yet Brinkley takes pains to note that a focus on Jews only occurred towards the end of Coughlin’s career, long after he had ceased to be a major political figure. According to Brinkley, Coughlin is best understood as an heir to the midwestern populist tradition of William Jennings Bryan. And indeed there was quite a bit of overlap between the views advocated by Father Coughlin during the early 1930s and those of Bryan forty years earlier. The Principles of the National Union for Social Justice (Coughlin’s organization) supported the living wage, support for unions, a “conscription of wealth” in the event of war, and the nationalization of “banking, credit and currency, power, light, oil and natural gas and our God-given natural resources,”
Like Bryan, though, Coughlin’s main focus was on monetary policy. To quote Brinkley:
Many factors had conspired to create the Great Depression, Coughlin explained, but one loomed larger than all the others: a “cursed famine of currency money” . . . . Denouncing America’s rigid adherence to the gold standard (“Wedded to the false philosophy that gold is the value and not the measure; that it is the master and not the servant . . . we have been overwhelmed by catastrophe”), he urged immediate revaluation – a doubling of the price of gold per ounce from the present level of $20.67 to $41.34. The government would thus be able to issue twice as much currency on the basis of its existing gold supply. Revaluation would encourage, indeed, almost force the wealthy to put their “hoarded dollars” back into circulation; it would enable debtors to bear mortgages and other loans more easily; it would promote peace by making America’s allies better able to repay their wartime debts; and, most important of all, it would stimulate the economy sufficient to restore jobs and create prosperity for all.
Brinkley is dismissive of Coughlin’s prescriptions, saying that it amounted to little more than “a simplistic promise of quick and easy wealth.” And politicians at the time were equally dismissive (when FDR received a memo urging a large monetary expansion to fight the depression, he reputedly dismissed the idea with the comment “Too easy.”)
The irony, though, is that the standard view among economists today is fairly close to Coughlin’s. In their classic A Monetary History of the United States, Milton Friedman and Anna Schwartz argued that Fed mismanagement late 1920s had led to a contraction of the money supply by nearly a third. With less money circulating, it became impossible for banks and firms to meet contractual obligations or payroll, which led to a major fall in output and an increase in unemployment. So persuasive was Friedman and Schwartz’s argument that Ben Bernanke publicly apologized to Milton Friedman at his 90th birthday party on behalf of the Federal Reserve:
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.
Whether the Fed did, in fact “do it again” during the last recession is a matter of some dispute. While we have not seen anything approaching the problems of the 1930s, recovery has been slow and marginal, and unemployment remains high. More importantly, unlike in the 1890s or 1930s, there has been no major figure able to make a strictly moral case for monetary expansion, as opposed to a strictly technocratic one. Coughlin is an unappealing figure in a lot of ways, and to a lesser extent so was Bryan, but they show that it is possible to speak about monetary policy in a way that is both morally charged and substantively correct.