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.
E.g.: the infamous assasination is not the cause of WWI, for instance.
Next time, check the dictionary:
n. im·pe·tus
I made that remark in response to #37 in which marron states
FDR is the guy that sent refugee Jews back to be slaughtered in Hitler's camps. He's the guy that handed half of Europe over to Stalin, who easily bested Hitler in the butchery department by a factor of at least 3
to try to show him that reality is a lot more complicated than he believes, and that his screed against FDR is completetely distorted by his ignorant prejudices.
It's you who've ignored context and shown your sympathies.
His policies were a continuation of the ideas then in vogue, and still in vogue, that the economy required the direction of good managers in government. This was the idea behind the establishment of the Federal Reserve which placed control of monetary policy in the hands of Fed geniuses, who were the immediate cause of the crash, and it was the idea behind Hoover's incompetent "fixes" after the crash, and Roosevelt's even more aggressively incompetent "fixes" after 1933.Actually, the Fed was created implicitly and specifically to provide liquidity. It had nothing to do with a "guiding hand." Its creation followed the Panic of 1907, a market crash and bank run caused by a stock scandal. J.P. Morgan and the Fed. Gov. pumped money into NY banks, and a disaster was averted. Populists and statists hated the Fed, as it was seen as a big business, big bank conspiracy to rob the common man of liberty and his first born.
In 1908, the staunchest conservative of the day, Sen. Nelson Aldrich, got himself a commission to formulate the Federal Reserve. The project was dangerous and hated, but Aldrich managed to put it together. He held town meetings, traveled the nation, discussed its formulation with newspaper editors the country over, and reported to Congress on his doings. There was nothing secretive about it. President Taft supported it from day one, and he dedicated a large portion of his Dec. 1911 Message to Congress to it. Aldrich presented the Commission's report in late 1911/ early 1912. While Aldrich's model was more independent than that enacted by a Democratic Congress under W. Wilson, it's role, and its function was limited to banking, and not economic policy. It was not, and is not a central bank.
(Btw, Aldrich is the "Nelson" in Rockefeller -- his daughter married J.D.'s son.)
I enjoyed your account of Latin American economies. That's precisely what happens, with Chile the exception. That evil Pinochet, you know. God help us, but maybe Lula will finally pull it off in Brasil?
He could have dressed like a clown and still taken the election.
For safety, I took your 16th amendment question over here
Next time, check the dictionary:
Next time check the thesaurus:
impetus - noun
Something that causes and encourages a given response:
encouragement, fillip, impulse, incentive, inducement, motivation, prod, push, spur, stimulant, stimulation, stimulator, stimulus. See cause/effect.
To clarify: that which immediately precedes the event is not necessarily its cause.
If that which preceded the event is not necessarily its cause then that which preceded the event could possibly have been the cause.
My opinion remains as originally posted...As with most things the cause of the great depression in the United States was a combination of events, all well intended and all wrong. Keep in mind that the world was in depression. The depression in the United States became the great depression with the enactment of the Hawley-Smoot Tariff Act of 1930 while marginal tax rates were increasing.
What is your opinion of the cause of the great depression?
A recent documentary on History channel on the battle of Stalingrad described the penal units.
They were formed from prisoners, in the case of the guy interviewed, he was in jail for protesting the removal of a teacher who criticized stalin. sent to the gulag. then to a 'penal unit'. The Russians used the units a "reconnaissance by attack" - they'd send the unit in, and depending on how and where the unit got shot at, the Russian general knew what they were facing. Literal cannon fodder.
The penal unit 'soldier' interviewed said you were just numb to your destiny, death was inveitable. The death rates were over 90%, this particular man somehow was a survivor.
It is stuff like this that explains how Stalin managed to lose 20 million men fighting a German army a fraction of that size. One can say the deaths are due to Hitler because Hitler attacked Russia, but in reality it was due to Stalin - rather than kill folks in the gulag, he let the German bullets do the dirty work for him.
Just another reason Stalin edges out Hitler as the world's worst Murderous-Evil-Dictator.
FDR was a commie-symp, pure and simple. That comes perfectly clear in the reading of The New Dealers' War (Thomas Flemming). Must reading.
It boggles the mind that such a judgment should/would/could be made.
Not flaming you--but how the hell? Are numbers the only determinant?
GIven enough time, it's entirely possible that Hitler could have "won."
Very true.
This is at the level of "My father can beat up your father."
Grow up.
Next time you analyze a causal relationship take a course in research methods and learn about threats to validity. I've tried to attract your attention to the fact that impetus is NOT necesarily a cause (it is a frequent misunderstanding thereof). All too often this what people do: look for the immediate few minutes before the market crash; immediate few months before a revolution; etc --- as if these would reveal the corresonding cause. More often than not, this is an error. Impetus (something brings the cause out, so to speak, makes it visible by its effects) is not necessarily the cause. Both you and the thesaurus you quote demonstrate that this is a frequent confusion.
As for your second question, to the best of my knowlege, there is no definitively known cause(s) of Depression.
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