New Deal Prolonged Depression by Seven Years

UCLA Newsroom ^ | 10/07/2008 | Meg Sullivan

[sono]

wo 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.

"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."

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.

[sono]

Read the whole thing.

[sono]

PING

[ClearCase_guy]

I thought this had become the standard interpretation of the Depression. Amity Shaels (sp?) recently wrote "The Forgotten Man" which advances this sort of view.

Government intervention in the economy makes things worse. If you like Central Planning, go live in the USSR.

[P8riot]

"The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes," Cole said. "Ironically, our work shows that the recovery would have been very rapid had the government not intervened."

No $#!t?

[RayChuang88]

There was one thing that prolonged the Great Depression: raising the maximum federal tax rate on income to 63%. If they did not do that the Great Depression would likely ended at least 3-4 years earlier.

In short, it's time to ditch our current tax system and start over again with a consumption-based tax system such as FairTax. Under FairTax, the USA would suddenly became a huge tax haven by world standards and potentially trillions of dollars and Euros would flow into the USA in almost no time flat!

[ikka]

My 78-year-old mother, very conservative Republican, still says things like “FDR got the country moving again”. The brainwashing pre-Internet must have been pretty intense.

[Ghost of Philip Marlowe]

Yes, the New Deal prolonged the Great Depression.

But the other side of the story that needs to be told is this:

Many claim that it was WWII that got us out of the Depression. This is wrong. The war machine employed many people during WWII, but it hardly ended the Depression.

The Depression continued into the 1950’s BECAUSE Depression- and WWII-era government regulations were still in place. The Great Depression did not end until the 1950’s when the government lifted the regulations on business and business was able to compete and invest and thrive.

That, consequently, is part of the reason why 1960’s radicals attacked the 1950’s were their demonizing of “Ozzie” and “Father Knows Best.” They wanted to destroy not only the economic success of the 1950’s (i.e., the free market) but also of that entire era of prosperity, patriotism, and sense of self-sufficiency.

[decimon]

I thought this had become the standard interpretation of the Depression. Amity Shaels (sp?) recently wrote "The Forgotten Man" which advances this sort of view.

Shlaes is libertarian so it is to be expected. I think that Cole and Ohanian are considered mainstream. Mainstream for UCLA, that is.

[decimon]

Many claim that it was WWII that got us out of the Depression.

Not the war, per se, but the dropping of the New Deal programs during the war.

[downwdims]

The Forgotten Man by Amity Shlaes

[all the best]

Government interference in the free interactions of people(the market) are always an attempt to cheat reality. Insane and childish. It’s a game of let’s pretend. Let’s pretend that everyone has earned and can afford a house. Let’s pretend that everyone is equally credit worhty. Let’s take money from some people and give it to others so we all can pretend that they are prosperous.
You can full reality only for so long. Then it all comes crashing down. The bailout is one more attempt to pretend. CRASH!
Freedom works best. It won’t create a perfect world just the best possible world.

[Ghost of Philip Marlowe]

They were not dropped until after the war. During the war, regulation increased, which helped the economy, minimally, as all wars tend to do, because people are willing to sacrifice more when their nation is at risk. But that is only short-lived.

The most harmful New Deal programs continued through into the 1950’s. When they were dropped then, the economy improved and the dramatic climb out of the Depression began.

[fieldmarshaldj]

"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."

Um, what ? Since when ? I always blamed him for exacerbating the Depression with his big government schemes that we're still paying for today.

[tcostell]

That book was OK (a little tough to read in my view) but this has been the academic consensus for a few years now at least. The only people who haven't bought into it are those noble economists in the various English Literature departments of America's universities.

[Lord Jim]

What the hell is NEW about this? We conservatives have always known. Read “FDR’s Folly” which is one of about 10,000 conservative tomes addressing that gov. sponsored nightmare.

[decimon]

They were not dropped until after the war.

I wish I had a list handy to check. I think programs like CCC were dropped.

The most harmful New Deal programs continued through into the 1950’s.

One reason I think the Eisenhower administration has been underrated is that they skated us through a shaky transitional period without backsliding into New Deal type programs.

[MileHi]

See also The Roosevelt Myth by John T. Flynn

[When do we get liberated?]

I can atest to that. growing up in Mass., I was a strong reader at a young age. Read everything about JFK and FDR. At that age, I really believed they were the greatest presidents ever! Good thing I grew up, huh?

[mmanager]

Bookmark for later

[usshadley]

bttt