Posted on 08/30/2003 11:59:46 AM PDT by Cathryn Crawford
FDR's Raw Deal Exposed
August 30, 2003
BY THOMAS ROESER
For 70 years there has been a holy creed--spread by academia until accepted by media and most Americans--that Franklin D. Roosevelt cured the Great Depression. That belief spurred the growth of modern liberalism; conservatives are still on the defensive where modern historians are concerned.
Not so anymore when the facts are considered. Now a scholar at the libertarian Cato Institute has demonstrated that (a) not only did Roosevelt not end the Depression, but (b) by incompetent measures, he prolonged it. But FDR's myth has sold. Roosevelt, the master of the fireside chat, was powerful. His style has been equaled but not excelled.
Throughout the New Deal period, median unemployment was 17.2 percent. Joblessness never dipped below 14 percent, writes Jim Powell in a preview of his soon-to-be-published (by Crown Forum) FDR's Folly: How Franklin Roosevelt and His New Deal Prolonged the Great Depression. Powell argues that the major cause of the Depression was not stock market abuses but the Federal Reserve, which contracted the money supply by a third between 1929 and 1933. Then, the New Deal made it more expensive to hire people, adding to unemployment by concocting the National Industrial Recovery Act, which created some 700 cartels with codes mandating above-market wages. It made things worse, ''by doubling taxes, making it more expensive for employers to hire people, making it harder for entrepreneurs to raise capital, demonizing employers, destroying food . . . breaking up the strongest banks, forcing up the cost of living, channeling welfare away from the poorest people and enacting labor laws that hit poor African Americans especially hard,'' Powell writes.
Taxes spiraled (as a percentage of gross national product), jumping from 3.5 percent in 1933 to 6.9 percent in 1940. An undistributed profits tax was introduced. Securities laws made it harder for employers to raise capital. In ''an unprecedented crusade against big employers,'' the Justice Department hired 300 lawyers, who filed 150 antitrust lawsuits. Winning few prosecutions, the antitrust crusade not only flopped, but wracked an already reeling economy. At the same time, a retail price maintenance act allowed manufacturers to jack up retail prices of branded merchandise, which blocked chain stores from discounting prices, hitting consumers.
Roosevelt's central banking ''reform'' broke up the strongest banks, those engaged in commercial investment banking, ''because New Dealers imagined that securities underwriting was a factor in all bank failures,'' but didn't touch the cause of 90 percent of the bank failures: state and federal unit banking laws. Canada, which allowed nationwide branch banking, had not a single bank failure during the Depression. The New Deal Fed hiked banks' reserve requirement by 50 percent in July 1936, then increased it another 33.3 percent. This ''triggered a contraction of the money supply, which was one of the most important factors bringing on the Depression of 1938--the third most severe since World War I. Real GNP declined 18 percent and industrial production was down 32 percent.''
Roosevelt's National Recovery Administration hit the little guy worst of all, Powell writes. In 1934, Jacob Maged, a 49-year-old immigrant, was fined and jailed three months for charging 35 cents to press a suit rather rather than 40 cents mandated by the Fed's dry cleaning code. The NRA was later ruled unconstitutional. To raise farm prices, Roosevelt's farm policy plowed under 10 million acres of cultivated land, preventing wheat, corn and other crops from reaching the hungry. Hog farmers were paid to slaughter about 6 million young hogs, protested by John Steinbeck's The Grapes of Wrath. New Deal relief programs were steered away from the South, the nation's poorest region. ''A reported 15,654 people were forced from their homes to make way for dams,'' Powell writes. ''Farm owners received cash settlements for their condemned property, but the thousands of black tenant farmers got nothing.''
In contrast, the first Depression of the 20th century, in 1920, lasted only a year after Warren Harding cut taxes, slashed spending and returned to the poker table. But with the Great Depression, the myth has grown that unemployment and economic hardship were ended by magical New Deal fiat. The truth: The Depression ended with the buildup to World War II.
It certainly has not achieved the state that we could call science, but this is statement is clearly wrong.
In my college days - the '60s - economists were still teaching that unemployment was an impossibility in a free-market economy. Moreover, you misunderstood what the instructors were telling you. This is much like the "monopoly is bad" lesson of Econ 101 learned today. Which monopoly? With a single good? Static or dynamic? Natural (protected by patents)? The answer depends on the model, and most have seen only the simplest ones. Moreover, as evidenced by your remark, most have misunderstood even those simplest models.
More importantly, and you should not this, in early 1953 freight cars (much like those of the Nazis) were prepared for a deportation of all Jews to Siberia. Stalin's deapth in April of that year prevented the implementation of the plan.
This is a logical necessity. The ethical aspect of religion comes down to axioms about good and evil. However, the latter is defined, to uphold the good one must be intolerant of eveil (at least in certain exreme forms of it).
The only doctrine that does away with this is actually non-ethical: moral relativism of today. It declares that, as you know, that there are no shared forms of good and evil. Hence, its love with "tolerance," "understanding," "love of mandkind." It's going to end soon: this is nothing more that the self-centered creed that robs the children, and the children will eventually figure it out.
This is an excellent point! It is definitely true when it comes to FDR. And we witness many other examples today, where the anti-corporate sentiment leads many --- including those on this supposedly concervative board -- to impute the corporate management with all sorts of malice where those managers are simply doing their best with the objectively limited knowlege at their disposal.
Starvation has been eliminated in this country.
As for unemployment, it is not the duty of society to eliminate it: the job-seeker has a responsibility here. Again, Larry, it is the basic premise of SOCIALISM that one is ENTITLED to a job.
Probably not. Firstly, Hitler ruled for a much shorter period of time, so you should compare the rates of murder and not the totals. Secondy, the military casualties of war -- and that includes 20M Russians --- may be attributed to Hitler to started that war.
Trotsky was not persecuted for his religious beliefs (which he had abandoned) or his Jewish origin. He was persecuted as political rival.
Very true. It wasn't FDR's ideology or economics that carried the day, but his confidence and personal skills. Like Ronald Reagan, Roosevelt convinced people that the future would be better. Hoover was more like Carter or GWB. Reagan's interpretation of FDR was interesting: he rejected many of the claims and goals of the New Deal, but respected and imitated Roosevelt's persona, and aimed his appeal at the groups that FDR had won over, rather than simply to convinced Republicans or Conservatives alone.
FDR did help to bring in "happy face" or "feel good" government which uses all the techniques of advertising, public relations, and management to keep the public contented and obedient. But such a development was implicit in the system long before, as Tocqueville forsaw and Two Adamses and Van Buren learned at their own cost. When people are getting fired and losing their businesses, no politician can afford to look like the guy who gave you your pink slip, called in your loan, or auctioned off your farm.
Context matters a lot, too. Roosevelt wasn't seen in the context of Washington or Reagan, but against the background of Hitler and Stalin, the lackluster, unappealing Hoover and Mellon and the uninspiring leaders of the other interwar democracies. Nobody will ever take FDR for a deep thinker or cultural hero, but in the thirties and forties, he had to be built up into one to serve as an alternative to Hitler and Stalin on the world scene.
I'm curious about Taft and income tax, though. How responsible was he for it?
You have touched on a key truth. The primary prerequisites for general prosperity are: (1) individual liberty, so that a person can act according to his own knowledge and judgement, (2) clear and predictable laws, so that everyone knows in advance what they can and cannot do, and (3) honest courts, so that people are protected from marauders, whether they be poor or rich, well connected or not, violent or not.
The rich can always buy protection from the government, but the poor are at the mercy of the law and the court for their protection from the lawless. Those who are prepared to purchase influence can manage to survive in a lawless country but the poor are stuck on the bottom in the absense of the rule of law.
And, of course, people who cannot govern themselves are doomed to poverty, and their families are saddled with an additional burden. Individual liberty, of course, implies the ability to govern oneself which is a moral quality. You can't separate liberty from morality, and you can't separate general prosperity from it either.
failed to prevent WWII.By this standard, you shouldn't vote next time unless G-d himself is a presidential candidate.
I admit that the people who were willing to face the reality of German rearmament were thin on the ground.But, it has to be said, there were two things which were important for leaders to do in the 1930s--one was to get the economy going again, and the other was to confront Hitler.
It's one thing to say that FDR couldn't do either of them, and another thing to say that they were literally impossible. You can't say that no one knew that Hitler had to be stopped; Churchill was screaming that--from a back bench--for years in Britain.
Maybe the historical necessity was for FDR to do something which would have prevented his reelection in 1936; would it be unjust of me to say it's a shame we didn't have a president then who did that? It seems to me that we have grown up with a circular argument: FDR was a great man, so the fact that he didn't do either of the things that history screams out were needed proves that neither of them could have been done. Whatever FDR did was great--because FDR was a great man. And FDR was a great man because whatever he did was great.
Contrast FDR with Reagan. The people who say that FDR was a great man said that you couldn't cure inflation and unemployment at the same time; Mario Cuomo made his reputation as a speaker at the DNC convention screaming that Reagan's policies would fail. Democrats had no solution but they wouldn't have it that someone who did, should be able to show them up. So according to those who deify FDR, Reagan's domestic success had to be luck.
Again on foreign policy, FDR's adorers didn't know how to end the energy crisis; Reagan got the Saudi's to do it. That helped our (oil importing) economy and whacked the (oil-exporting) Soviet economy. And most signally, neither conservatives nor liberals thought that we would be free of the Soviet Union within a decade of the inauguration of Reagan. Reagan went in determined to "transcend" Communism, and he did it.
So I simply do not accept the conceit that anything which FDR did not do, has been proven to be impossible simply because FDR couldn't do it. Any more than I think that of x42, who I think actually resembles FDR. Don't forget, without the 22nd Amendment we might now be suffering through the 3rd term of that oaf. He has his impeachment, and FDR has his very own Constitutional Amendment to prevent a repitition of his administration.
No, we are going to trash his use of the Army to kill Americans.
Nixon launched the EPA and other big-government programs.
Everyone had their weaknesses. FDR just had them every day of his presidency.
You could very well be correct considering that impetus is a noun which means that which causes a given response.
The Sixteenth Amendment was also ratified while Taft was president. ;-)
All of our past presidents have become part of our American heritage. We must respect them all. ;-)
That simple model had been used repeatedly, by both economists and politicians, to try to blame unions for unemployment. It should never have been so used. It was a model that left out too much and did not explain the real world.
I'll stand by my statement - much of economics is propaganda. The only caveat is that many economists are aware their theories are being misused.
Oh, yes, the head of Lend-Lease at the time, one Harry (the "Hop") Hopkins - FDR's alter ego. The Hop is now known to have been Soviet agent Number 19 from the Venona project's decrypts.
Go it goes ...
Nixon launched the EPA and other big-government programs.
Everyone had their weaknesses. FDR just had them every day of his presidency.
I never dreamed that I would see someone trash Washington, Nixon and FDR, all on the same day! You must have very high standards.
God bless America. ;-)
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