It’s all about bigger is better.
Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.
After scrutinizing Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years…
In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.
“President Roosevelt believed that excessive competition was responsible for the Depression…
The number of antitrust cases brought by the Department of Justice fell from an average of 12.5 cases per year during the 1920s to an average of 6.5 cases per year from 1935 to 1938, the scholars found. Collusion had become so widespread that one Department of Interior official complained of receiving identical bids from a protected industry (steel) on 257 different occasions…
Found by Guy Fawkes.
Sometimes the comments on here are very good. Sometimes, however, they’re not.
About what caused the current financial crisis, go here.
Contempt, just in time==appears as if called in from his punchbowl. Amusing if it wasn’t so consistently low brow and off point.
Ok, group: up onto your hind legs==now stay awake, how many here think it was the policies of Roosevelt or Johnson that has brought us todays Market Meltdown? — Mark, theres one. – – – HMyers is that you? Ok, two. – – – Hey, contempt for rational analysis makes it three.
Any other retards in the audience or is Rush on reruns with a 1990 anti-Clinton screed?
Pat on the pointy heads, kind smile. Load the tranquilizer gun.
#35 Little Dog Bobbo
If you want someone to blame for today’s market meltdown then start with Barney Frank and Chris Dodd. That should keep you busy for a while.
#36–contempt for reasonable analysis==I agree those two have a lions share of the responsibility. Now what?
#37 Little Dog Bobbo
Firing squad? OR we could let Mustard or Fusion talk them to death.
Seriously though, both have successfully set themselves up as untouchable so whatever is done it would have to be unconventional.
It just goes to show you can’t be too careful.
Sigh… two economists out of how many thousands write a paper blaming FDR, and the right-wing wackos and dittoheads cling to it like drowning men. Which they are, really… their guy and their policies after eight years have run us into the ground. The truth hurts, doesn’t it boys? Time for a new term: FDRS: FDR Derangement Syndrome. 🙂
#38–contempt==nothing extreme==just what EVERY INCUMBENT needs-to be voted out of office.
Simple, just, effective. Needs to go 3-4 election cycles before the dummies catch on they report to the people and not to money.
#40–Phydeau==don’t we have to be careful about “what the issue is?” Seems to me the general consensus about FDR is: “That he saved the country from the worst of the depression’s effects but that the USA did not recover fully until WW2.”
Now–only if there is agreement that doing less or doing more would have ended the depression sooner than WW2 can FDR be “blamed” for anything and I don’t think there is general consensus on that just as there is not now.
It ain’t the dismal science for nothing.
Not too surprising that looking to fascism for answers will make things worse.
Bobbo,
Please, watching you have a battle of wits with an unarmed opponent is very painful. Can’t you pick on someone more your intellectual equal?
#40, Phydeau,
… two economists out of how many thousands write a paper blaming FDR, and the right-wing wackos and dittoheads cling to it like drowning men. Which they are, really… their guy and their policies after eight years have run us into the ground. The truth hurts, doesn’t it boys?
Very good point. So I’m adding my own two economists.
Two economists, John Maynard Keynes and Paul Klugman. Both have won the Nobel for Economics. (in case anyone is unaware, the Nobel Prise is the most prestigious award today)
Keynes, who was well known before Roosevelt was elected, actually advised Roosevelt to spend more money on public works. His idea was practiced in Sweden where they overcame the depression in less than two years. In contrast, Canada followed lassai faire economic policy right up until 1935 when that government was decidedly voted out of office. They didn’t even start to feel any relief until then.
Many people have suggested that it was WWII that finally pulled America out of the Great Depression. And they are right! Because of the massive government spending by the Federal Government on useless products. (While a bomb might keep the country safe, it doesn’t increase wealth any more than digging a hole)
Seventy-five years later Paul Krugman, also well known and respected, is advising Obama to spend even more on public works. By his analysis, we should quintuple the stimulus.
And yes, I am in favor of higher taxes for the upper income group and high import duties for countries that have unfair labor conditions, pollute, and don’t have free elections.
#31. You nailed it. Excellent observation.
#42, Bobbo,
The problem with credit and blame here is setting up a comparable situation where we can test our hypothesis.
Did Roosevelt help Americans during the Great Depression?
Yes.
Would the economy have improved without his intervention?
Probably.
Would it have improved as quickly?
Who knows?
Comparison to Sweden and Canada during the depression do give some insight, but since their economies were so much smaller and less diverse, are they even good examples? In my opinion, in light of the lack of other examples, they will have to do.
Therefore, any blame accruing to Roosevelt would have to be that he did not do enough.
It tells you a lot about the general usefulness of macroeconomics that 80 years later, there is no consensus on what caused the Great Depression or whether Roosevelt helped or hindered it. It’s mostly a bunch of rewarmed sociology, which has a similar track record.
It should be noted that Roosevelt primarily continued and expanded Hoover’s programs, which history has judged to be abject failure.
IMO, the left has a serious dilemma with Roosevelt. If you think that Roosevelt’s approach (and especially LBJ’s approach) of government spending was right, then you must also consider Clinton’s approach of lower government spending and reduced deficits to be wrong. Which is it? It clearly cannot be both.
#47–fusion==as usual, we agree. But as usual, I will quibble. Although, Tomas would certainly benefit from getting within a cab ride of your central point.
The quibble would be that just because Sweden and Canada are the only two other scenario’s (right now) and they both recovered more quickly===doesn’t mean a thing==AT ALL.
If you don’t control for the other relevant variables, you have NOTHING except the clap trap that contempt, loser, and the political hacks like to regurgitate==but it means nothing.
That even applies to comparing Clinton to earlier Dems. Doesn’t mean shit unless you control the other relevant variables, or you are a dumb shit to begin with.
“Analysis” is like that.
In fact, Thomas, you can.
It’s not so much how much money is spent, but how it is spent.
Hoover spent much of the money on infrastructure such as basic services, dams, power plants, and roads. But he ran into diminishing returns once the absolutely necessary infrastructure was built. How many roads, dams, etc. do you actually need to grow the economy?
Then came WWII, and the spending priorities shifted. We went from making roads to making guns.
Making guns, tanks, boats, etc. shifted the government spending to heavy manufacturing, which increased industrial capacity and efficiency.
Not to mention the Lend-Lease program (and it’s variations) brought money from outside the US to fill our coffers.
Nutshell: Public works programs only work for so long, and the shift in WWII spending brought foreign capital into the US while increasing manufacturing efficiency and capacity.
Hence the post-war boom.
So the question is, does the current stimulus package mimic Hoover, or does it increase Manufacturing and the influx of foreign capital?
#8, The best example of Keynesian economics working was Sweden. They were hurt and back on their feet within a couple of years.
Sweden also cut all corporate taxes to 0%, reduced middle class taxes, and didn’t raise them on the rich.
The money printed by the their government was used to keep the unemployed fed until the corporations started producing again. They’re recovery was based on the fact they were closer to Germany (who recovered second from the GD) as they started producing for a wartime footing.
That is what pulls someone out of a depression — production.
#50, Bobbo,
Quibbling means we aren’t butt buddies like Lyn’ Mike and Cow Patty. 🙂
The quibble would be that just because Sweden and Canada are the only two other scenario’s (right now) and they both recovered more quickly===doesn’t mean a thing==AT ALL.
Let me correct your incorrect impression, and I apologize if I caused it.
Very soon after the Great Depression started, I believe in 1930, Sweden instituted Keynesian Economics. Usng deficit spending, they injected a huge amount of money into the economy. By 1932 the country was in great shape.
On the other hand, Canada did not do anything special other than minimal welfare programs to keep people from starving. When the government changed from Conservative to Liberal in 1935, they started a massive program similar to FDR’s New Deal. Effects were felt quite soon thereafter and continued to improve right up until WWII in 1939.
Deviating slightly here, the thing that really burns my butt is the idea that labor is a commodity. It isn’t. It consists of people. And people are what makes this (or any) country. You can’t put labor in storage while the “movers and shakers” continue to reap the harvest.
#51, Ah Yea,
Hoover spent much of the money on infrastructure such as basic services, dams, power plants, and roads.
Hoover spent $0.00 on infrastructure spending. The best he did was give money from his personal fortune to food banks and charities. It was Roosevelt that spent the money on infrastructure.
Not to mention the Lend-Lease program (and it’s variations) brought money from outside the US to fill our coffers.
Wrong. Lend Lease didn’t bring one penny into American coffers. In exchange for “lending” war materials, the US got to “lease” several bases around the world. Much of the “lend” was lost during the war and that which wasn’t was almost all scrapped at the end.
… WWII spending brought foreign capital into the US while increasing manufacturing efficiency and capacity.
Nope. The European countries that moved their treasuries out of Europe either moved them to England or Canada. No one had any money to spend in the US. Almost all American armaments were given to the Allies. The countries that might have bought armaments were neutral. The armaments were saved not to be sold, but to be used in the fight.
Some armaments were ordered by Britain before America’s entry into the war. Most of those were not delivered before and were assumed by the American Government after it entered the war.
True that much new production capacity was built. It is this capacity that helped build America into the powerhouse it was after the war. The Marshall Plan, after WWII was designed to rebuild Europe, the same as Roosevelt’s New Deal rebuilt America. Thus, there was a huge flow of capital out of the country during and after the war.
But then, the right wing nuts have never been too accurate with their history.
#51
You cannot have it both ways. Is the approach of government deficit spending good for the long term health of the economy or not? I think you are suggesting that it is when there are major infrastructural improvements needed to increase productivity. That leads to a couple of interesting questions. First, when did those infrastructural improvements end during the Roosevelt era or did they not end until after WWII was finished or at all? Second, why would it not be the case that even during times of economic boom that deficit spending is beneficial to the health of the economy? When would it *ever* not be justified or is it the case that Federal government is just a slush fund to help during times of economic problems?
If you really did mean Hoover, that would not explain Roosevelt’s spending and would make his spending approach even more analogous to Obama’s spending than if you really meant Roosevelt’s spending on infrastructure.
Try as you do John, your buddies are the bad guys, facts tell true stories. What caused the current crash. Lets start with repugs making a big deal out of Clinton’s blow job. That got the Gingrich congress elected so they were in control of government from 1998. They had a veto proof majority in 1999 and were able to repeal the Glass-Steagall Act enacted in 1933. With a congressional majority under Gingrich’s chair they were able to override Clinton’s veto and set the stage for the collapse of the economy today.
Why make up shit about 70 years ago when facts from today are slapping you in the puss.
And still everyone is more interested in blame. I haven’t heard one person say how the crisis happened, only what policy is needed to end it. We’re all hung up on Roosevelt being a good or bad actor when we should have grown in our understanding of economics by now, right? Krugman isn’t saying how, only how much. ‘We need to do more.’ Why? How does it work? Because you just know it’ll work? Is anyone aware of someone who predicted the crisis? That’s who I’d want to talk to and see if their theory works. How can we say that the current set of economists are just guessing unless they tell us how it works?
1930 8.7%
1931 15.9%
1932 23.6%
1933 24.9%
1934 21.7%
1935 20.1%
1936 16.9%
1937 14.3%
1938 19.0%
1939 17.2%
Unemployment rates
Hoover spent $0.00 on infrastructure spending.
You apparently have not heard of Hoover Dam or any of the other Hoover infrastructure projects.
MikeN’s post above shows the irony of post-election Roosevelt policy. He repeated this tactic in the 1940 election swearing he would never embroil American in WWII and “keep our boys safe”, then pursued exactly the opposite policy after the election.
#54 Fusion.
Thank you for your excellent comments. It made me think harder, and I very much appreciate the quality of the response.
Now on to some of the questions.
You stated that Hoover spent $0.00 on infrastructure.
Well, no. Hoover spent huge amounts of money on literally thousands of projects such as dams, roads, etc. But here’s the catch. He started these projects and requisitioned much of the money while he was Secretary of Commerce under Coolidge. He maintained and expanded these programs with expanded housing and banking assistance as President ($300 MILLION under the Reconstruction Finance Corporation – That’s 1932 dollars! – and Federal Home Loan Bank Act.
So, Hoover spend huge amounts for infrastructure during the great depression.
Lend Lease. You’re right. Lend Lease didn’t directly flow money into American coffers. It was, though, the big start of American Imperialism which ran it’s course for nearly 50 years. It made America a creditor nation, which we used to our advantage. It made other countries indebted to us on many levels, something like how we have become indebted to China today.
We’re pretty much on the same page as to the rest.
Good comments, Thanks!
#60, Billy Bob,
You apparently have not heard of Hoover Dam or any of the other Hoover infrastructure projects.
And you want to credit Hoover for something that predates him and didn’t really get moving until after he left office. Under Roosevelt’s Administration, the dam was completed more than two years ahead of schedule.
So what were these other infrastructure projects Hoover initiated?
Winston Churchill once declared, “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” With all the talk of our incoming politicians intent on increasing taxes, creating up to an additional trillion dollars worth of stimulus (national debt), and a massive infrastructure building program to “stimulate the economy,” (more national debt) Churchill’s statement seems, well, “Churchillian.”
[…]
Racking up more federal debt will not apply the desired tourniquet to the jobs hemorrhage. Even after the stock market collapse of 1929, and the Depression settling in by 1931, our nation’s biggest industrial collapse actually occurred in 1937, five years into FDR’s New Deal. In 1939, after a full decade of frantic federal spending, unemployment was still over 17 percent. FDR’s Treasury Secretary, Henry Morgenthau, lamented, “I say after eight years of this administration we have just as much unemployment as when we started.”
http://tinyurl.com/c6zv43
Unemployment didn’t really start to decline until we started building things — whether they were used for the war or not.
Make-do government projects and excessive taxation do not bring a country out of depression. You have to produce. This country has forgotten how to do that.
FDR got lucky WWII started while he was in office.
#61, Ah Yea,
Although I appreciate the acknowledgement, the rest of your post concerning Hoover is still off.
So, Hoover spend huge amounts for infrastructure during the great depression.
No. Hoover was a humanitarian. He was not a great social manager though. He firmly believed in allowing private charities do all the work. This was mainly soup kitchens. The best attribute for Hoover is that he never took any pay while in office and did give away a substantial amount of his fortune to help the poor.