Home
/
RELIGION & LIBERTY ONLINE
/
New Deal for April Fools
New Deal for April Fools
Nov 14, 2024 12:54 AM

Last month marked the 75th anniversary of the beginning of FDR’s “New Deal”.

The Great Depression is the most famous event in U.S. macro-economic history. Most or all of my students know that it happened in the first half of the 20th century. They have no sense of what caused it– except perhaps to lay blame on the 1929 stock market crash. And they have a vague sense that the New Deal policies of FDR were helpful in ending it.

Because their impressions of the New Deal are limited, it is relatively easy municate what economists know about the Great Depression and the New Deal.

The Great Depression was noteworthy for its length and depth. A typical recession– probably what we’re dealing with now– is relatively short (e.g., 6-9 months in length) and features a slowdown in economic activity (negative output growth with reduced e and production). The most notable feature, politically, is a modest increase in unemployment. Even unemployment of 6-7% is enough to induce howls of pain from the unemployed and unlikely promises to make things better by a range of politicians (e.g., the recent macro “stimulus package”).

That said, some recessions are (much) more severe than others. For example, in fighting the inflation of the mid-late 1970s, we ended up with double-digit unemployment in the early 1980s. In further contrast, the Great Depression lasted for more than a decade and featured unemployment as high as 25%.

One quick way to note the limits of the New Deal: unemployment was 19% in its 6th year.

Markets may have trouble “adjusting”, but they don’t have that much trouble. So, it is wise to look at government policy during the 1930s to fill out one’s hypothesis of cause/effect about the Great Depression. Economists point to four major policy blunders:

1.) four tax increases, including the initiation of Social Security’s payroll tax on e– a tax on labor, thus making it more painful to hire workers

2.) a shrinking money supply– not from the Fed actively reducing it, but from passively sitting by while confidence decreased, lending activity dropped, and the amount of money in the system fell (in contrast, note the Fed’s activity– or even hyper-activity in recent days)

3.) the Smoot-Hawley Tariff Protection Act of 1930 is generally considered the primary catalyst for the stock market crash of 1929– as investors looked forward to the devastating impact this would have on international trade and the significant impact it would have on our economy

4.) the imposition of laws that would prevent wages and prices from adjusting downward (as they need to do in a recession): most notably, price floors (e.g., in farming), wage floors (the minimum wage), and a spate of pro-union legislation.

Bad policy was responsible for the bulk of the Great Depression– and perhaps is entirely responsible for its length and continued depth.

Finally, the most famous part of the New Deal could not have been all that effective. The government worked hard to create jobs– most famously, through the Works Progress Administration (WPA). And it was successful in part. But in doing so, it must have destroyed at least as many jobs. To note, where did the e from to create the jobs? From the private sector– where economic activity was squashed and jobs were destroyed as a result. Government spending is typically a shell game– moving resources from one area to another, creating some and destroying other. Moreover, government rarely does things in an efficient manner, so one would expect the net effect to be negative. And again, if one looks at the results, it is clear that government policy was not a cure for a struggling economy.

With Amity Shlaes’ recent book, The Forgotten Man: A New History of the Great Depression, I’ve seen two interviews (with her) and an op-ed (by her) on the topic.

As Christians, we believe that history matters. As an economist, I know that economic history matters. May we study both– to learn both the good and the bad from our past.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
Florist Chooses Conscience Over Settlement
Last year Washington State’s Attorney General sued Arlene’s Flowers & Gifts on the basis of consumer protection. Florist Barronelle Stutzman had refused to sell flowers to a long time customer when the arrangements were to be used for a same-sex marriage ceremony. Although Stutzman did not have any qualms about serving serving gay customers, she “didn’t want to be involved in a same-sex marriage.” “I just put my hands on his and told [the customer who made the request] because...
First Comprehensive Health Study Of Trafficking Victims Reveals Complex Needs
The London School of Hygiene and Tropical Medicine and the International Organization for Migration has just published the prehensive study regarding the health of human trafficking victims. The study, which looked at men, women and children, reveals that victims of both labor and sex trafficking have severe plex health concerns. The study was carried out in Cambodia, Thailand and Vietnam, working with people who had been rescued and were entering programs for victims of human trafficking. Researchers asked participants about...
How Anti-Catholic Bias From 140 Years Ago Affects Our Religious Freedom Today
Eleven years ago this week, the Supreme Court handed down a ruling in Locke v. Davey that continues to have a detrimental impact on religious liberty. But the seeds for that ruling were planted 140 years ago, in another attempt to curb religious liberty. When James Blaine introduced his ill-fated constitutional amendment in 1875, he probably never would have imagined the unintended consequences it would have over a hundred years later. Blaine wanted to prohibit the use of state funds...
Religious Activists Push Back Against ‘Blunt Instrument’ of Fossil Fuels Divestment
Your faithful correspondent last week exposed the fossil-fuel divestment endgame of religious shareholder activists. As You Sow President Danielle Fugere sees her group’s activities as awareness-raising exercises for climate change, but AYS’s alignment with environmentalist and divestment firebrand Naomi Klein suggests they’d settle for nothing less than nationalizing panies. This week, I’m happy to report another group frequently called to task in this space, the Interfaith Center on Corporate Responsibility, opposes the AYS divestment onslaught. Reporting in last week’s Wall...
Does Innovation Triumph Over Regulation?
Do government regulations squelch marketplace innovation? A new study from the U.S. Census Bureau’s Nathan Goldschlag and George Mason University’s Alex Tabarrok says, “Not really.” According to Ryan Young at the Competitive Enterprise Institute: …the underlying institutions of social cooperation, market exchange, and dynamism are strong enough that federal regulation has, according to Goldschlag and Tabarrok’s analysis, so far been unable to squelch them. Just as a balloon pressed on one end pushes air to the other end, people will...
Marie Harf May Have Stumbled Into Something
I do not believe Marie Harf is an eloquent speaker, but I did think her “jobs for ISIS” remarks made some sense. We know that in American cities, for instance, if young men do not have education and jobs, they get into mischief. The kind of mischief that includes gangs and drugs and violence. Why would we expect that young men in Libya, Iraq, and elsewhere would be any different? Apparently, I’m not the only one. While others have sneered...
Radically Communitarian Islam
Graeme Wood’s excellent piece in The Atlantic has justly been making the rounds for the past week or so. It is well worth reading with a number of insights and points that strike at the heart of the contemporary conflict between modernity and religious violence. mend “What ISIS Really Wants” to your reading. (Rasha al Aqeedi’s “Caliphatalism,” which looks more closely at the situation in Mosul, makes a panion read.) One of the elements of Wood’s piece that stuck out...
Putting a Leash on the Freedom of Parents and the Imaginations of Children
My parents should have been jailed for child neglect. At least that’s what would be their fate if I were growing up today. Fortunately for them (and for me), I was a child during the 1970s, a time when kids were (mostly) free to explore the world. At age seven I was allowed to wander a mile in each direction from my home. By age nine I was exploring the underground sewers and drainage system of Wichita Falls, Texas. When...
Stopping Human Trafficking Before It Starts
Human trafficking is increasingly gaining public awareness. Law enforcement, social workers, first responders – all are beginning to receive training regarding human trafficking. And that’s all very good. But it’s hardly enough. It is much easier to help a person in a high-risk situation avoid trafficking than to try and put a human being back together after they’ve been brutalized by traffickers. munities, church and charitable organizations must all learn what situations in their own areas put people at risk...
What Patricia Arquette Should Have Said About the Wage Gap and Women’s Rights
During last night’s Oscar ceremony, Best Supporting Actresswinner Patricia Arquette used her acceptance speech to rail against unfair pay for women: To every women who gave birth to every taxpayer and citizen of this nation, we have fought for everybody else’s equal rights. It’s our time … to have wage equality once and for all and equal rights for women in the United States of America. The wage equality that Arquette is referring to is the gender wage gap—the difference...
Related Classification
Copyright 2023-2024 - www.mreligion.com All Rights Reserved