Great myths about the great depression [Thomas Sowell]

townhall.com ^ | October 9, 2003 | Thomas Sowell

[aculeus]

They say "truth will out" but sometimes it takes a long time. For more than half a century, it has been a "well-known fact" that President Franklin D. Roosevelt got us out of the Great Depression of the 1930s. That view was never pervasive among economists, and even J.M. Keynes -- a liberal icon -- criticized some of FDR's policies as hindering recovery from the depression.

Only now has a book been written in language that non-economists can understand which argues persuasively that the policies of the Roosevelt administration actually prolonged the depression and made it worse. That book is "FDR's Folly" by Jim Powell. It is very readable, factual and insightful -- and is endorsed by two Nobel Prizewinning economists.

If the word "folly" seems a little dismissive, read the book first. Someone described FDR's trust-busting Assistant Attorney General Thurman Arnold as being like one of the Marx brothers who went into government by mistake. That description would apply to many of the others around FDR, including his much-vaunted "brain-trust" of presumptuous and self-righteous people.

It is painfully obvious that President Roosevelt himself had no serious understanding of economics, any more than his Republican predecessor, Herbert Hoover, had. The difference was that Roosevelt had boundless self-confidence and essentially pushed some of the misconceptions of President Hoover to their logical extreme.

The grand myth for decades was that Hoover was unwilling to use the powers of government to come to the aid of the people during the Great Depression but that Roosevelt was more caring and did. In reality, both presidents represented a major break with the past by casting the federal government in the role of rescuer of the economy in its distress.

Scholarly studies of the history of these two administrations have in recent years come to see FDR's New Deal as Herbert Hoover's policies writ large and in bolder strokes.

Those who judge by intentions may say that this was a good thing. But those who judge by results point out that none of the previous depressions -- during which the federal government essentially did nothing -- lasted anywhere near as long as the depression in which the federal government decided that it had to "do something."

In "FDR's Folly," author Jim Powell spells out just what the Roosevelt administration did and what consequences followed. It tried to raise farm prices by destroying vast amounts of produce -- at a time when hunger was a serious problem in the United States. It imposed minimum wage rates that priced unskilled labor out of jobs, at a time of massive unemployment.

Behind both policies was the belief that what was needed was more purchasing power and that this could be achieved by government policies to raise the prices received by farmers and workers. But prices do not automatically translate into greater purchasing power, unless people buy as much at higher prices as they would at lower prices -- which they seldom do.

Then there were the monetary authorities contracting the money supply in the midst of the biggest depression in history -- when the economy was showing some signs of revival, until their monetary contraction touched off another big downturn.

With policy after policy and program after program, "FDR's Folly" traces the high hopes and disastrous consequences. It would be funny, like the Keystone cops running into one another and falling down, except that millions of people were in economic desperation while this farce was being played out in Washington.

Perhaps worse than any specific policy under FDR was the atmosphere of uncertainty generated by incessant new experiments. Billions of dollars of investment were needed to create millions of jobs for the unemployed. But investors were reluctant to risk their money while the rules of the game were constantly being changed in Washington, amid strident anti-business rhetoric.

Some of the people who most admired and almost worshipped FDR -- poor people and blacks, for example -- were hurt the most by amateurish tinkering with the economy by Roosevelt's New Deal administration. This book is an education in itself, both in history and in economics. It is also a warning of what can happen when leaders are chosen for their charm, charisma and rhetoric.

©2003 Creators Syndicate, Inc.

[Savage Beast]

The United States is still suffering from the results of the Franklin Roosevelt administration and the Democrat Party that he designed. My parents, grandparents, and great grandparents were all Democrats. My parents and grandparents were enthusiastic supporters of Franklin Roosevelt. Were they alive today, they would repudiate the Democrat Party and what it stands for absolutely and in no uncertain terms. Had they known where F. Roosevelt and his policies were leading the U.S., they would never have given him their support.

[Sam Cree]

bttt

[CMAC51]

>> To suggest that this is not a priority of the government is either stupidity or a lie. Of course the Federal government should do what it can to help the economy. <<

Of course the Federal government should do what it can to help the economy, it should keep its hands off. The Federal government would be successful if it would follow the first dictate of medicine, "First do no harm".

[ClearCase_guy]

Hoover was in the business of solving problems. He was a mining engineer -- he solved problems constantly. After WWI our government sent him to Europe and asked him to help get food to hungry Europeans. It was a problem to solve, and he did a magnificent job. Largely because of his success in this task, he was elected President. Then our economy got hit hard and people were suffering ... I'm not surprised that he tried to solve that problem too. I just wish he hadn't.

[Tax-chick]

Okay, then how about citations from the Bible, wonk :-).

[CobaltBlue]

Louis T. McFadden was a nut case, and largely responsible for the bank failures that contributed to the Great Depression. He was afraid of "foreign bankers" (by which he meant Jews) taking over America, so sponsored legislation that almost outlawed intrastate branch banking (the 1927 McFadden Act.)

Google Louis McFadden and Jews and see for yourself. He was a loon.

[Redbob]

"And Hoover? Sounds like he might've been history's first recorded RINO!"

I think I'd reserve that award for old "Honest" Abe...

[Orbiting_Rosie's_Head]

The United States is still suffering from the results of the Franklin Roosevelt administration and the Democrat Party that he designed. My parents, grandparents, and great grandparents were all Democrats. My parents and grandparents were enthusiastic supporters of Franklin Roosevelt. Were they alive today, they would repudiate the Democrat Party and what it stands for absolutely and in no uncertain terms. Had they known where F. Roosevelt and his policies were leading the U.S., they would never have given him their support.

My maternal grandparents were hard-core Republicans who new exactly where the "New Deal" would lead. My grandfather would expound for hours in the early 70's about how the "stagflation" economy was a direct consequence of the new deal and great society. They hated FDR so much that my mother relates a story that on the day he died, my grandmother danced down the street of her mostly-DemocRAT neighborhood, swigging a bottle of wine and shouting "hooray! That son of a bitch is dead!"

[Savage Beast]

"Democracy is a form of religion; it is the worship of jackals by jackasses. -- H.L. Mencken"

It can be difficult to tell the benevolent but stupid "Liberals"/Democrats from the malevolent but smart ones.

The jackasses "judge by intentions.". The jackels admonish to "judge by intentions" as a means of misleading.

Millions of people across the globe--notably in North America and Europe--are communicants of this religion of "Liberalism" (The Left).

In the final analysis, the benevolent but stupid ones probably prove more dangerous, i.e.

A fool is more dangerous than a scoundrel.

[VOA]

This book is an education in itself, both in history and in economics. It is also a warning
of what can happen when leaders are chosen for their charm, charisma and rhetoric.

Question to the forum...has anyone heard the author (Powell) on any
talk radio shows?
I listen to lots of shows (Ingraham, Prager, Medved, Hewitt, etc.) and haven't
heard (or missed) this writer or discussion of this book.

[Sen Jack S. Fogbound]

And don't forget LBJ for continuing and enlarging the "New Deal" into the "Great Society" program.

Both of these programs did great damage to the US economy and it is still doing so today!

[steve50]

Google Louis McFadden and Jews and see for yourself. He was a loon.

Why would I care what his opinion on "Jews" is, the issue is the Federal Reserve and monetary policy. Is it your position that they control the Federal Reserve?

[goodnesswins]

"...danced down the street of her mostly-DemocRAT neighborhood, swigging a bottle of wine and shouting "hooray! That son of a bitch is dead!"

Hey...I have fantasies about doing JUST that when a certain someone meets his maker....

[Cobra Scott]

Probably a good precursor to Coulter's Treason.

[Savage Beast]

My mother lived long enough to repudiate the Democrat Party. She became a passionate Republican, in the final years of her life, and had only scorn for the Democrats and what they stand for.

When I was a child, in the third grade, a school teacher encouraged us children to be Republicans. When I told my mother, she said that I was a Democrat--that we were all Democrats--just as she told me what religion I was, and I accepted this.

As soon as I was old enough to read and understand for myself--and vote!--I became a Republican and later a Libertarian!

Years later, my mother became a Republican. She had only condemnation for the Democrats and the Democrat Party.

Had my father, grandparents, and great grandparents lived long enough, they would also have become Republicans and rejected and condemned the Democrat Party.

All people who are benevolent and wise should reject and repudiate the Democrats and the Democrat Party. The fate of the United States depends upon it.

[LibertyAndJusticeForAll]

You might be interested in this. The book review indicates that tariffs were considered but a rather small part of the problem (and it seems they were misapplied - not for reciprocity or to level the playing field).
FDR tripled taxes and a host of other badly judged government intervention that contributed to and greatly extended this world-wide depression.

[B.Bumbleberry]

Exactly, Tony! Big Bump.

[justshutupandtakeit]

You don't serious believe that there was ever a time when the federal government kept "hands off" the economy do you?

Even if there was such a time would you recommend such a policy if it meant a communist insurrection or takeover as could have easily been the case during the thirties?

In the past there was no study of economics but rather of political economy. That subject indicated an awareness that economics cannot be totally separated from politics and that even the most perfectly operating economy can be brought down by political considerations/actions.

[justshutupandtakeit]

Oh, suuure the man who defined Republican was a "Rino." Amazing.

[Grampa Dave]

The author is Sowell not Powell. I'm sure that you have read his articles and heard about Dr Thomas Sowell.