FDR's policies prolonged Depression by 7 years, UCLA economists calculate

UCLA ^ | 10-28-2008 | UCLA School of Economics

[Chicos_Bail_Bonds]

Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.

After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."

In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.

"President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies."

[Chicos_Bail_Bonds]

This study was released a few years ago, but I thought it was more then appropriate for today as we continue to try and "bail out" our economy. Gov't intervention makes things WORSE!

[GreyFriar]

Ping

[Harry Wurzbach]

Economists dispel the history of left-wing economic policies which, of course, was recorded by left-wing historians.

[BGHater]

History often rhymes.

Hoover to FDR

Bush to Obama

[Plutarch]

I've been reading "The Forgotten Man" about Roosevelt and the Depression.

It starts with Hoover signing Smoot-Hawley Tariff. Everyone agrees this made the Depression worse. Historians, however, think that ill-conceived Government intervention in the economy ended upon the Roosevelt inauguration. All the bone-headed policy after March 1933 was good, and all intervention prior to March 1933 was bad.

[weegee]

They kept him in power until he died and gave the Democrat party something to dangled over their base’s heads for decades afterwards.

[zot]

Thanks for the ping. Another indication that socialism doesn’t work.

[quadrant]

People have known for years that FDR’s policies aggravated the Depression.
Paul Johnson’s book A HISTORY OF THE UNITED STATES details the mistakes that FDR made attempting to restart the US economy.
Trouble is: too many people have too much invested in the cult of FDR and the New Deal to allow this new study to gain much traction.

[Free Vulcan]

I was always under the impression that wages stayed high while prices decreased, squeezing business profits to the point that there was no incentive to manufacture. Glad to be set straight on this.

[Tucson]

This is not new information although it might be to professors at UCLA. True economists have known for years the policies and programs under Roosevelt’s leadership were responsible for the failure to recover from the Depression until World War II dragged us out. Most European nations were recovering after two to three years. Had it not been for WWII we might have remained in a state of economic malaise well into the 1950’s (okay; I’m possibly exaggerating a bit)

[A_perfect_lady]

However, in Los Angeles public schools, all ESL students are required to read extensively on how FDR saved America from the Depression. Then they are required to write a paper on how FDR saved America from the Depression. They are supposed to write this paper in order to exit the ESL program. This is a mandated curriculum.

[massgopguy]

The Depression ended at 8:00 AM Honolulu Time.

[bpjam]

kinda generous by only blaming FDR for 7 of the years....

[Rumplemeyer]

Ping

[quadrant]

As I said, far too many people have too much invested in the cult of FDR for an objective analysis of his presidency to gain much traction.

[count-your-change]

Professors rediscovering the wheel. They could’ve read Von Mises and saved a lot of time. FDR’s policy for raising farm production prices was to destroy huge amounts of produce to create shortages, and this while people were struggling to feed themselves.

[On the Road to Serfdom]

Yea, lets not continue to back up the facts with more research and scholarship published in contemporary mainstream jourals. Lets just let the FDR fans pack journals with their views, well just tell people to read Mises.

[gotribe]

In the three years following the implementation of Roosevelt's policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.

That's a duh. What a dumb Dem he was.

[Moonman62]

I was always under the impression that wages stayed high while prices decreased,

Hoover started the policies of wage support, which led to massive unemployment, and a balanced budget, which led to higher taxes. FDR continued those policies. FDR did some good things, like declaring a bank holiday, insuring deposits and unlinking the dollar and gold. The stock market recovered sharply. One big setback was the recession of 1937 which was caused by a bad decision by the newly created Federal Open Market Committee. The FOMC has been causing economic damage ever since with little acountability.

[DesScorp]

I knew this already, having read an excellent book from a CATO economist, Jim Powell. His book is called FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression.

It's a little over 10 bucks in paperback at Amazon, and I highly recommend it. He lays out many of the same facts the UCLA economists do, and does an even better job of showing just how hostile FDR's advisors were to markets and business. These guys actually believed that markets were "inefficient" without government bureaucracies micromanaging them.

You really need to read this book. I also hear that Amity Shlaes' book The Forgotten Man: A New History of the Great Depression is also very good and lays out many of the same points.