Jan
07
2009
10 Reasons Why Many Of FDR’s New Deal Programs Prolonged The Great Depression
Posted by: madisonclassicalliberal in Central Planning, Fiscal Policy, Law, Regulation
Did FDR’s New Deal prolong the Great Depression? I think so. If you’ve got a moment, check out these multimedia resources and see if you’ve been fully informed. I placed the 10 reasons why I believe many of FDR’s New Deal programs prolonged the Great Depression near the bottom of the post.
P.S. The video and podcasts/audio are very excellent.
Material that is Readily-Accessible and Free:
Video:
-
FDR’s New Deal: did it work? And will a new “new deal” work today? – A discussion between a handful of historians and economists including GMU’s Russ Roberts
Podcasts/Audio:
- Higgs on the Great Depression – Economist Russ Roberts interviews Economist Robert Higgs
- Burton W. Folsom, Jr. on New Deal or Raw Deal: How FDR’s Economic Legacy Has Damaged America
Articles:
- “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War” – Economist, Robert Higgs
- “The New Deal Debunked” – Economist, Thomas DiLorenzo
- “The New Deal in One Lesson” – Economist, Christopher Westley
- “Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s” – Economist, Robert Higgs
Books:
- Economics In One Lesson (Ch. 6, sec. 3) – New York Times editorialist, Henry Hazlitt explains how the Reconstruction Finance Corporation, the Home Owners Loan Corporation and other government agencies in 1932 and later robbed successful businesses.
- Economics In One Lesson (Ch. 13, sec. 1) – Hazlitt explains how FDR’s insistence on fixing prices lowered the standard of living for those that had to pay the higher prices.
- Economics In One Lesson (Ch. 18) – Hazlitt explains how minimum wage laws (such as created by New Deal) create unemployment.
- America’s Great Depression – Economist, Murray N. Rothbard (thanks to Mises.org)
Material that can be Purchased:
Books:
- Depression, War, and Cold War: Studies in Political Economy
– Economist, Robert Higgs
- Economics In One Lesson – New York Times editorialist, Henry Hazlitt
- 33 Questions About American History You’re Not Supposed to Ask
– Historian, Thomas E. Woods (see question #24 – Did Franklin Roosevelt’s New Deal Lift The United States Out Of The Depression?)
- Roosevelt Myth – Journalist (liberal), John T. Flynn
- New Deal or Raw Deal?: How FDR’s Economic Legacy Has Damaged America
– Economic historian, Burton W. Folsom, Jr.
- FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression
– Historian, Jim Powell
- Out of Work: Unemployment and Government in Twentieth-Century America
– Economists, Lowell E. Gallaway and Richard K. Vedder
My Opinion On Why FDR’s New Deal Prolonged the Great Depression Based On The Material Above:
- FDR’s Agricultural Adjustment Administration (AAA) program had pigs slaughtered and had corn and oat fields burned to keep prices high (to benefit farmers); this was food that could have fed the poor who were starving.
- FDR’s programs fixed prices and wages which lowered the standard of living for those that had to pay the higher prices for food and other goods.
- FDR’s Fair Labor Standards Act created minimum wage laws which created unemployment. See Hazlitt’s book which I linked to above on how minimum wage laws hurt the under-skilled.
- FDR allowed unions and industries to become cartels and push wages and prices higher during a time of mass unemployment.
- FDR’s Reconstruction Finance Corporation, the Home Owners Loan Corporation and other government agencies took money away from successful businesses which could have employed more people if they had been able to keep their earnings to employ.
- FDR’s Banking Act of 1935 gave powers to the Federal Reserve to change reserve requirements for banks. The use of these new powers caused uncertainty in money markets (such as we are experiencing now with the uncertainty government has created during this credit crisis).
- FDR’s hostility to businesspeople through new laws and regulations decreased investment in long-term projects by private investors afraid of the business environment FDR created.
- FDR raised taxes to the top marginal rate in 1935 to 79%. This destroyed the means to create new employment.
- FDR’s make-work programs lowered the standard of living as resources were diverted away from profitable use by companies and were used by government workers in unprofitable, wasteful work that did not raise the standard of living for workers or customers because not all of the services/goods created were actually wanted.
- Even FDR’s World War II did not get us out of the Great Depression either. Higgs’ research suggests it was the buildup of wealth and the transformed expectations of the business environment that paved the way out.
What Are Your Opinions?
Please post a comment with any of your thoughts and resources that you have that are insightful.
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Tags: agricultural adjustment administration, banking act, burton folsom, cartelization, cartels, economist, fdr, great depression, henry hazlitt, historian, home owners loan corporation, jim powell, john t. flynn, make-work programs, mises.org, murray rothbard, new deal, price fixing, prolong, prolonged, reconstruction finance corporation, robert higgs, russell roberts, thomas e. woods, thomas j. dilorenzo, unions, world war ii
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Brian G.’s last blog post..Biden Goes To War
My only question is quite brief. A quality answer is not likely to be so.
What is a classical liberal?
I’ve read the Wikipedia posting on this and believe it sums it up very well:
Classical liberalism
the right bases its New Deal revisionism on the short-lived recession in a year straddling 1937 and 1938. But that was four years into Roosevelt’s term — four years marked by spectacular economic growth. Additionally, the fleeting decline happened not because of the New Deal’s spending programs, but because Roosevelt momentarily listened to conservatives and backed off them. As Nobel-winning economist Paul Krugman notes, in 1937-38, FDR “was persuaded to balance the budget” and “cut spending and the economy went back down again….”
“Excepting 1937-1938, unemployment fell each year of Roosevelt’s first two terms [while] the U.S. economy grew at average annual growth rates of 9 percent to 10 percent,” writes University of California historian Eric Rauchway…
OK — if the verifiable evidence proves the New Deal did not prolong the Depression, what about historians — do they “pretty much agree” on the opposite?
Again, no.
As Newsweek’s Daniel Gross reports, “One would be very hard-pressed to find a serious professional historian who believes that the New Deal prolonged the Depression.”
http://www.salon.com/opinion/feature/2009/01/02/sirota_fdr_depression/
EggZacktly,
Well I guess that would still be Roosevelt’s mistake if he listened to the mistaken conservatives! Incidentally, that’s the biggest problem with the two-party monopoly, they listen to each other! Actually, it is the inherent flaw of centralized government bureaucracies; when the bureaucrat in charge fails, he/she is motivated to fall back on the suggestion of the opponent. If it works, they claim to be great bipartisan bureaucrats. If it fails, they say they it is the opponents fault. It’s a win/win for government bureaucrats. Notice that citizens only win in one of those situations; they lose in the other. You should read “The Scope of Public Choice Theory”. This school of economics classifies a government bureaucracy and its workers as a corporate entity and explains how the incentive structure works. It fully exploits the fallacy that politicians are unselfish servants of the public. Rather, they are self-interested individuals that seek to maximize their profits.
I can’t verify if that is true of conservative writers; however, the works I linked to in my post cover the entire period from the Roaring 20’s through past World War II.
As regards Gross’ statement, I had already shown that to be false. Please see below:
David Sirota—The Armpit Of Great Depression Anti-Intellectualism