A recent online discussion with an energy expert—and this guy really knows his stuff—showed a lot. The fellow understands that America is in an energy revolution where we are leading the world and have become a net exporter of liquefied natural gas (LNG) and are close to being a net exporter of oil Much of this, of course, is due to the shale revolution.
However, to suggest that shale, by itself, has caused this revolution is misguided. For shale and other oil-related sectors, the impact would have been far, far lower had Hillary Clinton won in 2016. One of the first things Donald Trump did was to deregulate as much of the energy sector as possible.
So how does this relate to the Great Depression? An old mentor of mine, Stephen DeCanio of U. C. Santa Barbara, did an excellent (but often ignored) study on why the Great Depression was perpetuated. We can point to any number of terrible FDR policies, but I think DeCanio makes the key point that it was the utter collapse of business expectations due to the imposition of the minimum wage law. In 1934, NOT 1935 with the Wage and Hours Act, the Roosevelt Administration with the 1933 National Industrial Recovery Act included a minimum wage component that caused wages to rise 25% by government mandate.
What would you expect happened? Well, of course, wages rose, by 25%. Did this affect “employment?” Surprisingly, no, because the firms had already shed massive numbers of jobs and there weren’t too many more people to fire. But the companies could, and did, cut hours. The total number of work hours fell.
What else happened? Business expectations, which were already low, fell off the map after the minimum wage law went into effect. It essentially confirmed to business that the FDR policies would never get America out of a Depression.
Business expectations are key in the modern industrial and energy sectors. Under Barack Obama, business expectations were in a nadir. Over-regulation, an anti-business attitude, high taxes and even higher threatened taxes all dampened business expectations. Trump changed all that. His frenzy of deregulation rapidly restored business expectations across the economy. Time to take a lesson from history.