Posted on 08/30/2003 11:59:46 AM PDT by Cathryn Crawford
FDR's Raw Deal Exposed
August 30, 2003
BY THOMAS ROESER
For 70 years there has been a holy creed--spread by academia until accepted by media and most Americans--that Franklin D. Roosevelt cured the Great Depression. That belief spurred the growth of modern liberalism; conservatives are still on the defensive where modern historians are concerned.
Not so anymore when the facts are considered. Now a scholar at the libertarian Cato Institute has demonstrated that (a) not only did Roosevelt not end the Depression, but (b) by incompetent measures, he prolonged it. But FDR's myth has sold. Roosevelt, the master of the fireside chat, was powerful. His style has been equaled but not excelled.
Throughout the New Deal period, median unemployment was 17.2 percent. Joblessness never dipped below 14 percent, writes Jim Powell in a preview of his soon-to-be-published (by Crown Forum) FDR's Folly: How Franklin Roosevelt and His New Deal Prolonged the Great Depression. Powell argues that the major cause of the Depression was not stock market abuses but the Federal Reserve, which contracted the money supply by a third between 1929 and 1933. Then, the New Deal made it more expensive to hire people, adding to unemployment by concocting the National Industrial Recovery Act, which created some 700 cartels with codes mandating above-market wages. It made things worse, ''by doubling taxes, making it more expensive for employers to hire people, making it harder for entrepreneurs to raise capital, demonizing employers, destroying food . . . breaking up the strongest banks, forcing up the cost of living, channeling welfare away from the poorest people and enacting labor laws that hit poor African Americans especially hard,'' Powell writes.
Taxes spiraled (as a percentage of gross national product), jumping from 3.5 percent in 1933 to 6.9 percent in 1940. An undistributed profits tax was introduced. Securities laws made it harder for employers to raise capital. In ''an unprecedented crusade against big employers,'' the Justice Department hired 300 lawyers, who filed 150 antitrust lawsuits. Winning few prosecutions, the antitrust crusade not only flopped, but wracked an already reeling economy. At the same time, a retail price maintenance act allowed manufacturers to jack up retail prices of branded merchandise, which blocked chain stores from discounting prices, hitting consumers.
Roosevelt's central banking ''reform'' broke up the strongest banks, those engaged in commercial investment banking, ''because New Dealers imagined that securities underwriting was a factor in all bank failures,'' but didn't touch the cause of 90 percent of the bank failures: state and federal unit banking laws. Canada, which allowed nationwide branch banking, had not a single bank failure during the Depression. The New Deal Fed hiked banks' reserve requirement by 50 percent in July 1936, then increased it another 33.3 percent. This ''triggered a contraction of the money supply, which was one of the most important factors bringing on the Depression of 1938--the third most severe since World War I. Real GNP declined 18 percent and industrial production was down 32 percent.''
Roosevelt's National Recovery Administration hit the little guy worst of all, Powell writes. In 1934, Jacob Maged, a 49-year-old immigrant, was fined and jailed three months for charging 35 cents to press a suit rather rather than 40 cents mandated by the Fed's dry cleaning code. The NRA was later ruled unconstitutional. To raise farm prices, Roosevelt's farm policy plowed under 10 million acres of cultivated land, preventing wheat, corn and other crops from reaching the hungry. Hog farmers were paid to slaughter about 6 million young hogs, protested by John Steinbeck's The Grapes of Wrath. New Deal relief programs were steered away from the South, the nation's poorest region. ''A reported 15,654 people were forced from their homes to make way for dams,'' Powell writes. ''Farm owners received cash settlements for their condemned property, but the thousands of black tenant farmers got nothing.''
In contrast, the first Depression of the 20th century, in 1920, lasted only a year after Warren Harding cut taxes, slashed spending and returned to the poker table. But with the Great Depression, the myth has grown that unemployment and economic hardship were ended by magical New Deal fiat. The truth: The Depression ended with the buildup to World War II.
Roosevelt is a fresh face
Hitler is a fresh face
Hitler is X, approximately
Therefore Roosevelt is X
What's X?
True. The problem wasn't so much the expedients FDR came up with, but the fact that his people didn't see them as temporary responses to an emergency, but as a plan for the future. The possibility of using the Depression to get more powers for government on a permanent basis was too tempting to resist.
I don't want to argue other peoples' position for them, but IF they are correct that New Deal programs were counterproductive, then all they did was move the misery around. For all the people that got jobs that way, there were others who were poorer longer because of them. That's what I mean by "counterproductive."
Under ordinary circumstances, I'd agree with you. But during the Depression, virtually nobody had any money coming in. If they "had money" they could only sit on it in their mattress -- or worry about whether it would be there in the bank or stock market tomorrow. So the loser wasn't so much the taxpayer, as future borrowers, or the person who might or might not have been able to make money if the economy picked up.
In other words FDR's policies might well have postponed recovery. But as people had already learned, whether recovery would come any time soon was a very big "if." So the situation was rather different from today.
A dogmatist might argue that whenever the government takes a dollar from one person, and gives it to another, it only moves misery around, but when misery seems universal or inescapable, one can understand why governments might resort to such policies. During the Depression the person who was all set to earn money in the free market might have found his chances of doing so were better selling things to those who got government jobs, than to those who have no jobs, and few prospects of getting them.
Not necessarily a bad guy either.
Human psychology is the same the world over. In some situations - for example California governor - a fresh face is what's needed. Doesn't guarantee anything (from the frying pan into the fire) but if the status quo is intolerable trying something new is a plus.
See Risk's comment on his family's personal experience of the Depression. He describes what Roosevelt did and meant as well as anyone could.
Is there any record of anyone actually starving during the depression?
My parents also lived through the depression
there was no Roosevelt or New Deal in Canada
and the depression probably was worse here.
They lived for a while under the barter system
they taught school and the parents brought them food.
Today, the bottom 25% of the population pays 3-4% of the income tax collected by the Federal government which means that most of them have no earned income.
Apparently they're unemployable at all times in all places.
I wouldn't think of it, since I don't know you. But there are people on the Internet and in think tanks who don't realize how dire the situation was in 1933. I'd say they were dogmatists or emotionalists or uninformed.
I don't say everything FDR did was right, just that more was bound to be done by government in the 1930s than today's libertarians would think right, or justified, or permissible.
It looks like we don't disagree that much, if at all. People couldn't be allowed to starve. And creating jobs projects was a way of giving men some dignity and getting them out of the house, rather than just giving them a check or a meal.
But the situation didn't justify the breadth and depth of intervention in the economy the the National Recovery Administration practiced. "Risk" is right: an "expiration date" should have been put on many of the New Deal policies. It is pretty clear that those who wanted a more powerful government exploited the Depression in ways that were regrettable, and FDR himself was too seduced by the prospect of greater power and glory for himself.
But some people in economics departments and think tanks don't always take psychology enough into account. A policy that would be appropriate to bring about recovery from a light recession probably wouldn't have worked in the 1930s. If people aren't convinced that the usual rewards and incentives for effort apply, then policies based on those rewards and incentives won't work. That's not to say that everything FDR did was right or that his policies should become a permanent standard, just that we have to be careful with economic arguments, when the outlook of one age differs so much from another.
Why?
In Canada we got through the depression
with two old worn-out hack faces
R.B. Bennett and W.L. Mackenzie King.
Somehow we survived
and in the end
the economic situation in our two countries was about the same.
That's just wacky. The bottom 25% pay little or no tax because of low marginal rates and (relative to their incomes) high personal and dependent deductions.
But the phrase "relative to GDP" says a lot. Does a massive increase in toxic chemicals or interstate air or highway travel justify a greater role of the federal government in those areas? If it does, that allows for greater growth in government than mere population growth would. If it doesn't, serious troubles might arise or resources may have to come from somewhere else to regulate growing industries.
If we can find a way to make do with less government, fine. If government really is the main problem in some areas, great. Get it out of those areas. But like most people, I'm sceptical of claims that we can have a wholesale rollback of the federal government's powers.
Two "Republican revolutions" didn't bring the long awaited rollback. For that reason, it's doubtful to me that it will ever happen.
That is a "fact" from the Nazi propaganda that current anti-Semites keep alive. The Marx family was Jewish, indeed. Euther Karl's father or grandfather converted out of Judaism. As happens to many converts, Karl Marx became a vicious anti-Semite.
For Nazis, it was not a religion or conduct that mattered: the "Jewish blood" of Marx, no matter how anti-Semitic (he despised Russians, too, incidentially --- how ironic) he was, made him Jewish in the eyes of the Nazis.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.