Posted on 12/22/2008 9:07:58 PM PST by jazusamo
With both Barack Obama's supporters and the media looking forward to the new administration's policies being similar to President Franklin D. Roosevelt's policies during the 1930s depression, it may be useful to look at just what those policies were and-- more important-- what their consequences were.
The prevailing view in many quarters is that the stock market crash of 1929 was a failure of the free market that led to massive unemployment in the 1930s-- and that it was intervention of Roosevelt's New Deal policies that rescued the economy.
It is such a good story that it seems a pity to spoil it with facts. Yet there is something to be said for not repeating the catastrophes of the past.
Let's start at square one, with the stock market crash in October 1929. Was this what led to massive unemployment?
Official government statistics suggest otherwise. So do new statistics on unemployment by two current scholars, Richard Vedder and Lowell Gallaway, in their book "Out of Work."
The Vedder and Gallaway statistics allow us to follow unemployment month by month. They put the unemployment rate at 5 percent in November 1929, a month after the stock market crash. It hit 9 percent in December-- but then began a generally downward trend, subsiding to 6.3 percent in June 1930.
That was when the Smoot-Hawley tariffs were passed, against the advice of economists across the country, who warned of dire consequences.
Five months after the Smoot-Hawley tariffs, the unemployment rate hit double digits for the first time in the 1930s.
This was more than a year after the stock market crash. Moreover, the unemployment rate rose to even higher levels under both Presidents Herbert Hoover and Franklin D. Roosevelt, both of whom intervened in the economy on an unprecedented scale.
Before the Great Depression, it was not considered to be the business of the federal government to try to get the economy out of a depression. But the Smoot-Hawley tariff-- designed to save American jobs by restricting imports-- was one of Hoover's interventions, followed by even bigger interventions by FDR.
The rise in unemployment after the stock market crash of 1929 was a blip on the screen compared to the soaring unemployment rates reached later, after a series of government interventions.
For nearly three consecutive years, beginning in February 1932, the unemployment rate never fell below 20 percent for any month before January 1935, when it fell to 19.3 percent, according to the Vedder and Gallaway statistics.
In other words, the evidence suggests that it was not the "problem" of the financial crisis in 1929 that caused massive unemployment but politicians' attempted "solutions." Is that the history that we seem to be ready to repeat?
The stock market crash, which has been blamed for the widespread suffering during the Great Depression of the 1930s, created no unemployment rate that was even half of what was created in the wake of the government interventions of Hoover and FDR.
Politically, however, Franklin D. Roosevelt could not have been more successful. After all, he was the only President of the United States elected four times in a row. He was a master of political rhetoric.
If Barack Obama wants political success, following in the footsteps of FDR looks like the way to go. But people who are concerned about the economy need to take a closer look at history. We deserve something better than repeating the 1930s disasters.
There is yet another factor that provides a parallel to what happened during the Great Depression. No matter how much worse things got after government intervention under Roosevelt's New Deal policies, the party line was that he had to "do something" to get us out of the disaster created by the failure of the unregulated market and Hoover's "do nothing" policies.
Today, increasing numbers of scholars recognize that FDR's own policies were a further extension of interventions begun under Hoover. Moreover, the temporary rise in unemployment after the stock market crash was nowhere near the massive and long-lasting unemployment after government interventions.
Barack Obama already has his Herbert Hoover to blame for any and all disasters that his policies create: George W. Bush.
“i pray the controlling democrats/liberals temper their ambition during these vulnerable and opportunistic times.”
adolescent psychotics dressed in adult clothing do not behave themselves.
IMHO
The problem with “GREAT DEPRESSION II” which is looming in the near future is twofold, one being the huge population increase, the other being the work ethic (or lack thereof) in the current population as compared to the 1930’s.
I first thought it would be “brother can you spare a C-note?” instead of “brother can you spare a dime?”. Now I realize this time its probably gonna be “brother can you spare some ammo?” A well stocked “safe-room” may well be the best investment one could make now.
At this point I suspect that I will “retire” to the nursing home or to the funeral home.
It seems that there have been three American p-residents since the War Between the States who understood Economics- why people interact as they do- and one of them was Coolidge. The others were Cleveland and Reagan. Reagan is the only one who had a degree in Economics. From him is derived the Reagan Boom that is actually only now coming to an end.
That’s what it is! Good metaphor.
... pubic you mean ...
and ignorant. Creating 3 million jobs on the one hand with 1 TR $ destroying 9 million on the other hand. Selective redistribution either in infrastructure, transportation industry, income, labor NEVER works and will hurt us all!!!
War spending did NOT lift us out of the Depression. The Depression did not actually end until Eisenhower reduced regulation and generally got the government out of the way. The difference made by the War is that there was full employment but it just made for a full empployment Depression. Because of strict wage controls, people were not materially better off, they were just as poor, things were just as scarce- but everyone had a job.
Boy ... I’m already greatly depressed ... and it hasn’t even started yet ...
My bet is that the Obamessiah follows their commands to the letter.
Glad you’re not
Actually, it has. Free trade is always beneficial to its practioners. If only one country practices free trade and all others discriminate with tariffs and exclusions, that free trading country will prosper much more than those that restrict trade.
All that government intervention is purely an inefficient use of resources. Those resources that are being diverted from the real, unhampered, economy to the “bailout” and “recovery” are resources being used to force the continuation of inefficient practices i.e. good money being thrown after bad. It is like shovelling the economy’s resources into an expanding black hole. It also necessarily makes for corruption, especially the giving of one man the plenipotentiary power to dispose fo so huge a sum as 700 bil. It is highly likely, even inevitable that a portion of that money, perhaps a large portion, is finding its way offshore in non inflatable forms, like gold.
More than re-arranging the deck chairs, Like FDR did, he means to knock holes in the hull below the waterline in order to let the water out.
So does this mean zerO and his administration of exClinton hacks and Ivy League ideologues may bring us a good depression, but not a great one?
Ahmedjinedad?
Pakistan-India, with a side dish of Afghanistan
I don't know if you meant that as a joke, but it sure made me laugh.
Such persuasion is effectively done with tax policy. Our tax treatment of business is more onerous than many other countries and thus we are losing business and industry to countries that take a smaller bite.
I agree with your observations.
But I will caution you about Thomas Fleming. I read his magazine Chronicles for several years, until I figured out they found Monarchy an acceptable (almost desireable) form of government.
Fleming has a very good grasp of history, but this country fought a bloody revolution to be free of a Monarchy. Totalitarianism is plain evil, in any form.
In my efforts to find the most promising constitutional argument against the "Fairness Doctrine," I have lately been denigrating any appeal to the First Amendment, and instead citing the Article 1 Section 9 stricture,No title of nobility shall be granted by the United Statesbecause IMHO Big Journalism has systematically used "the press" not as a right of the people but in the opposite sense as a title of nobility purporting to grant privileges to the members of the Associated Press not available to the people at large.
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