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.
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.
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.
From the lips of Paul Ryan comes this hilarious take on how to ’solve’ the inflation problem in America:
Due to the serious threat that inflation poses to our economy, I have introduced H.R. 6053, the Price Stability Act. Currently, the Federal Reserve Bank has a dual mandate: to promote full employment as well as price stability. Unfortunately, these goals, while laudable, can lend themselves to contradictory policy responses. For example, we are currently seeing both rising unemployment and increasing inflation. Traditionally, the policy response to rising unemployment would be to lower interest rates to stimulate the economy; however, the response to increasing inflation is to raise interest rates. With these competing aims, the Federal Reserve finds itself in a difficult position.
The Price Stability Act would solve this problem by removing the dual mandate. It would instead give the Federal Reserve only one mandate – to maintain price stability. It is important to recognize that, by virtue of its control of monetary policy, the Fed is the only institution that can control inflation over the long-run. By providing stable and foreseeable prices, businesses and individuals are better able to plan for the future and provide continued growth for our economy. Additionally, stable prices would ensure the continued buying power of our wages.
Wow, what a complete waste of time and effort trying to solve the inflation problem, not to mention a very socialist attitude regarding the creation of money. It appears that the only political party left to defend freedom in commerce is the Libertarian Party. The Republican parasite Paul Ryan is holding fast to Keynesian junk science regarding the viability of price stability through government manipulation of interest rates and printing presses. I guess this big government worshiper doesn’t understand that price stability can never happen. Prices always fluctuate to reflect the new information regarding the supply of and demand for the Earth’s natural resources. However, maybe Paul Ryan is more intelligent than I give him credit for. It is possible that in wanting ‘price stability’ he is referring to getting rid of or reducing the continuing rise of prices of most products in the market (which uninformed pseudo-economists incorrectly call inflation). Well, then again we find that Paul Ryan is still misinformed about proper economics. If he is wanting to get rid of the continuous rise in the general price level, than his Price Stability Act surely will be a failure. Paul Ryan wants the Federal reserve to have only one mandate—control inflation. Now this is absolutely hilarious for it is the Federal Reserve itself which inflates the money supply and causes the subsequent rise in the general price level! Mr. Paul Ryan, how in hell is the Federal Reserve going to control price increases when it is the Federal Reserve’s very existence that causes the rise in the general price level!?!?!? Well, politicians aren’t exactly the brightest bulbs in the world. What is so disastrous about this entire comedy is that it is Republican idiots like Paul Ryan who preach about the glories of free markets but have no idea what in the hell that means! What is needed is for more libertarians to run for office to obtain a platform to reach broader audiences to put people like Paul Ryan in his place. Call him out. Tell the public what he really is so that Republican shams like him stop calling socialist policies the ‘free market’. We need true free market libertarians to shout from the rooftop that these big-government-loving Republicans hate the free market for money and love their twisted socialist/fascist monetary schemes.
This great book, What Has Government Done To Our Money?, by Murray Rothbard shows the futility of the Federal Reserve controlling the continuous rise in the general price level. Here and below are some true monetary free market lovers shouting it loud and clear!
Another individual, a man named Mark Gregory Johnson, died after the government-ran 911 emergency center in Madison, Wisconsin mishandled numerous calls for help and allowed this individual to be murdered. This same government-ran 911 center mishandled a call for help from the cell phone of Brittany Zimmermann and allowed her to be murdered in April 2008, a mere seven-months earlier. Why does the Dane County government allow its citizens to be murdered when they pay for emergency dispatch services via taxes? I would like to let Murray Rothbard answer this question. The following excerpt can be found in an excellent book I recommend titled, Anarchy and the Law. This book contains a collection of anarcho-capitalist writings from many authors that talk about a free-market for law and justice. This specific excerpt was taken from a chapter in Murray Rothbard’s book, For a New Liberty.
[…]there is a common fallacy[…]that the government must supply “police protection” as if police protection were a single, absolute entity, a fixed quantity of something which the government supplies to all. But in actual fact there is no absolute commodity called “police protection” any more than there is an absolute single commodity called “food” or “shelter.” It is true that everyone pays taxes for a seemingly fixed quantity of protection, but this is a myth. In actual fact, there are almost infinite degrees of all sorts of protection. For any given person or business, the police can provide everything from a policeman on the beat who patrols once a night, to two policemen patrolling constantly on each block, to cruising patrol cars, to one or even several round-the-clock personal bodyguards. Furthermore, there are many other decisions the police must make, the complexity of which becomes evident as soon as we look beneath the veil of the myth of absolute “protection.” How shall the police allocate their funds which are, of course, always limited as are the funds of all other individuals, organizations, and agencies? How much shall the police invest in electronic equipment? fingerprinting equipment? detectives as against uniformed police? patrol cars as against foot police, etc.?
The point is that the government has no rational way to make these allocations. The government only knows that it has a limited budget. Its allocations of funds are then subject to the full play of politics, boondoggling, and bureaucratic inefficiency, with no indication at all as to whether the police department is serving the consumers in a way responsive to their desires or whether it is doing so efficiently. The situation would be different if police services were supplied on a free, competitive market. In that case, consumers would pay for whatever degree of protection they wish to purchase. The consumers who just want to see a policeman once in a while would pay less than those who want continuous patrolling, and far less than those who demand twenty-four-hour bodyguard service. On the free market, protection would be supplied in proportion and in whatever way that the consumers wish to pay for it. A drive for efficiency would be insured, as it always is on the market, by the compulsion to make profits and avoid losses, and thereby to keep costs low and to serve the highest demands of the consumers. Any police firm that suffers from gross inefficiency would soon go bankrupt and disappear.
I gathered two things from Rothbard’s writing:
1. Government-ran entities are always subjected to bureaucratic bungling because there is no signal from the citizens as to what level of service is needed. Citizens pay taxes to fund the 911 center, but they do not know how many of their individual tax dollars go to the emergency center. Therefore, citizens cannot determine if they personally are paying too much or not enough for the level of service they want. When I go to McDonalds, I know what they offer and at what price. It is transparent and honest. I may not be able to afford every item offered, but at least I know what I could get and at what cost to me. This allows me to accurately calculate the correct level of funds I need to accumulate to acquire the services/goods I want to receive.
2. The services offered by a private 911 emergency center would be optimal in number, efficient, and always accurate. If not, they would be out of business. No free-market 911 center would ever last past the first murder it allowed. The other private 911 centers around the city that were trustworthy and accurate would pick up their customers and life would go on and be better with the faulty emergency center no longer in business. Only in a region such as Dane County where the government-ran 911 center has a monopoly on 911 services do mishandled emergency calls result in more murder. There is no way for this inaccurate and inefficient center to go out of business. This is the hazard of government entities.
If Democrats really believe that monopolies are bad for consumers, why do they allow the government to have a monopoly on emergency dispatch services which continues to allow more brutality and death on its watch? I suspect that Democrat and Republican politicians in Dane County are more interested in holding on to their faulty belief that only government can provide dispatch and protection services. I suspect that Dane County politicians are not as interested in the protection of individuals as they are in maintaining these government institutions despite the fact that free-market dispatch and protection services would never allow such horrendous life-ending results. Politicians here choose to hold on to barbaric myths instead of using reason. Their god is government. They are anti-intellectuals. When will these monopolistic politicians allow personal democracy to take hold in Dane County and allow for the privatization of 911 services? When will individuals have their choice of dispatch and protection services? Apparently, some citizens may never live long enough to find out—due to the inherent failure of government.
Sources of information:
article – “911 center staff still thin”, found in the Wisconsin State Journal print edition of Nov. 7, 2008
– Economist, Robert Higgs
– Historian, Thomas E. Woods (see question #24 – Did Franklin Roosevelt’s New Deal Lift The United States Out Of The Depression?)
– Economic historian, Burton W. Folsom, Jr.
– Historian, Jim Powell
– Economists, Lowell E. Gallaway and Richard K. Vedder
Entries (RSS)