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Great myths about the great depression [Thomas Sowell]
townhall.com ^ | October 9, 2003 | Thomas Sowell

Posted on 10/09/2003 6:22:38 AM PDT by 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.


TOPICS: Culture/Society; Editorial; Extended News; Government
KEYWORDS: fdr; greatdepression; history; thomassowell
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To: Yardstick
"Vision of the Annointed" is EXCELLENT. Should be required reading in every college...heck, in every high school.
41 posted on 10/09/2003 8:08:04 AM PDT by Choose Ye This Day (Moving to Turkmenistan, where all the jobs are.)
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To: LibertyAndJusticeForAll
Thank you.
42 posted on 10/09/2003 8:08:20 AM PDT by harpseal (stay well - Stay safe - Stay armed - Yorktown)
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To: VOA
I'm kicking myself because I missed it about three weeks ago, when Walter Williams was subbing for Rush, and he interviewed Sowell.

Sowell doesn't do radio much. I think he prefers to write. I read his columns weekly on Townhall.com.
43 posted on 10/09/2003 8:11:49 AM PDT by Choose Ye This Day (Moving to Turkmenistan, where all the jobs are.)
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To: aculeus
Cyclic massive transfer of wealth. Expansion-contraction is just a continual nibble. Every once in a while, money is short for a long time. Hey, that's what the Fed does. They get the gold, we get the shaft.
44 posted on 10/09/2003 8:12:57 AM PDT by Eastbound
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To: BubbaBasher
I just ordered it. I'll let you know when I've read it.
45 posted on 10/09/2003 8:14:30 AM PDT by aruanan
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Good
46 posted on 10/09/2003 8:15:38 AM PDT by Cyber Ninja (His legacy is a stain on the dress.)
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To: aruanan
bump
47 posted on 10/09/2003 8:16:12 AM PDT by RightWingMama
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To: 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."

Wrong. World War II got us out of the Great Depression!

48 posted on 10/09/2003 8:18:46 AM PDT by Destructor
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To: Bosco
My grandfather, whom I never met, was born around 1870- 1880 and later served in the Secret Service. He was on the White House detail under Teddy Roosevelt, Taft, and Wilson. My mother used to tell me he'd say "This country will curse the day that man (FDR) was elected President". While the media has of course made FDR and icon, and there's no doubt he's admired by most, there were fewer that loved him at the time than it is portrayed today.
49 posted on 10/09/2003 8:27:33 AM PDT by SoCal Pubbie
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To: Grampa Dave
POWELL is the author of the book SOWELL is recommending. Odd coincidence.
50 posted on 10/09/2003 8:27:42 AM PDT by Tax-chick (Too cold to start a fire ... I'm burning diesel, burning dinosaur bones ...)
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To: Destructor
"Wrong. World War II got us out of the Great Depression!"

Read ALL of the article then see what you think of his statement.

51 posted on 10/09/2003 8:28:13 AM PDT by Mad Dawgg (French: old Europe word meaning surrender)
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To: Tax-chick; VOA
Ooops I need more coffee.

Sorry VOA, your are correct. I never heard of Powell.
52 posted on 10/09/2003 8:28:48 AM PDT by Grampa Dave (Fight Liberalism 24/7/365 for only 17 cents / day. Donate $5 monthly to Free Republic.)
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To: All
I recommend the following book: The Roosevelt Myth by John T. Flynn
53 posted on 10/09/2003 8:28:51 AM PDT by dakine
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To: biblewonk
You have to remember the "federal government" is not some monolithic god-like being applying some gestaltic genius to a problem. It is a few corruptable and limited men that consider the problem and makes the ultimate decision, usually one man.

Remember also that an "economy" is a vast, interactive system of vaguely understood cross causes and effects similar to the codependent complexity of Earth's ecosystem.

Anybody that tampers with it by direct action is a spiritual brother to the moron who brought kudsu to the South.

54 posted on 10/09/2003 8:29:52 AM PDT by William Terrell (Individuals can exist without government but government can't exist without individuals.)
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To: Savage Beast
It can be difficult to tell the benevolent but stupid "Liberals"/Democrats from the malevolent but smart ones.

I've noticed the same problem with "conservatives"/Republicans. Seems to be getting worse on both sides of the aisle.

55 posted on 10/09/2003 8:46:12 AM PDT by steve50 ( Democracy is a form of religion; it is the worship of jackals by jackasses. -- H.L. Mencken)
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To: CMAC51
The Federal government would be successful if it would follow the first dictate of medicine, "First do no harm".

Yes, but the economy, like the human body, is a very conplex thing and it's easy to make mistakes.

56 posted on 10/09/2003 8:46:31 AM PDT by biblewonk (Spose to be a Chrisssssssstian)
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To: William Terrell
Anybody that tampers with it by direct action is a spiritual brother to the moron who brought kudsu to the South.

There is a definition problem here since I tamper with the economy everytime I exchange money for anything.

57 posted on 10/09/2003 8:53:00 AM PDT by biblewonk (Spose to be a Chrisssssssstian)
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To: biblewonk
There is a definition problem here since I tamper with the economy everytime I exchange money for anything.

When you exchange money for goods/services you are participating in the economy, not tampering.

58 posted on 10/09/2003 9:18:15 AM PDT by AlBondigas
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To: biblewonk
"Ofcourse the Federal government should do what it can to help the economy."

You're correct to the extent that the government can do nothing to help the economy, and that's exactly what it should do.
59 posted on 10/09/2003 9:27:37 AM PDT by Sofa King (-I am Sofa King- tired of liberal BS! http://www.angelfire.com/art2/sofaking/)
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To: Destructor
World War II got us out of the Great Depression!

Plus the fact that every foreign competitor of ours was destroyed.

60 posted on 10/09/2003 9:36:22 AM PDT by Semper Paratus
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