
FDR's policies prolonged Depression by 7 years, UCLA economists calculate (2004) - mjackson
http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx
======
opam2
This is a revisionist history.

"How can one make this claim? Unemployment reached 25 percent in the Great
Depression, and fell steadily until World War II (although there were some
bumps up along the way). Ah, but the revisionist position is that unemployment
did not fall as much as it should have. And this argument is based on an
interesting interpretation of the available data. As Amity Shlaes, currently
the premier anti-New Deal historical revisionist writing for a popular
audience, explained proudly in her own Wall Street Journal opinion piece in
November, “The Krugman Recipe for Depression,” a necessary step is to not
count as employed those people in “temporary jobs in emergency programs.”

That means, everyone who got a job during the Great Depression via the Works
Progress Administration (WPA) or Civilian Conservation Corps (CCC), or any
other of Roosevelt’s popular New Deal workfare programs, doesn’t get counted
as employed in the statistics used by Cole, Ohanian and Shlaes.

In other words, millions of men and women earned a living wage and self-
respect and contributed mightily to the national infrastructure. But,
according to the statistics as interpreted on the Wall Street Journal
editorial page, they were unemployed."

[http://www.salon.com/2009/02/02/the_new_deal_worked/](http://www.salon.com/2009/02/02/the_new_deal_worked/)

~~~
fleitz
The entire point of history is to revise it as new information and opinions
become available.

History isn't about facts but opinions, a recorded history of every person to
cross the rubicon probably isn't important. How caesar crossing the rubicon
influenced modern times is, and since modern times change history should too.
100 years ago it might have been a really good thing, in 100 years with China
as the dominant player maybe one could say Caesar led to a hubris in the west,
or something like that, etc, etc, etc.

[http://en.wikipedia.org/wiki/Historical_revisionism](http://en.wikipedia.org/wiki/Historical_revisionism)

With out historical revisionism Stalin would be seen as an equal to FDR in
pulling his country out of depression through the grand ideas of collective
farming and 5 year plans, perhaps why CCR remarked '5 year plans and new
deals, wrapped in golden chains'

------
nl
(Perhaps the [2004] date might be appropriate in the title?)

The key problem with this reasoning is they use a fairly unique measure of
unemployment: specifically they don't count those workers who were employed in
"New Deal" programs as employed (!).

Here's a good reponse:
[http://www.salon.com/2009/02/02/the_new_deal_worked/](http://www.salon.com/2009/02/02/the_new_deal_worked/)

At a basic level I think I'd agree the New Deal included some bad ideas. But
overall the general consensus is that it worked reasonably well in migrating
the worst impact of The Depression.

~~~
ekianjo
_> The key problem with this reasoning is they use a fairly unique measure of
unemployment: specifically they don't count those workers who were employed in
"New Deal" programs as employed (!)._

Well if you create artificial jobs, not deemed necessary by market needs, just
for the purpose of stimulating the economy, that assumption can be seen as
correct. It depends on your point of view. You could employ people cutting
tulips around the city hall, and technically they are employed, yes, but do
not produce any value towards economical growth, so it's a net loss compared
to them working in a productive job in the industry.

~~~
nl
_You could employ people cutting tulips around the city hall, and technically
they are employed, yes, but do not produce any value towards economical
growth, so it 's a net loss compared to them working in a productive job in
the industry._

Except it's not a net loss, because those people now have money they can
spend.

------
heydenberk
If ever there were an article worth tagging with its year (2004), this is one.
We've had another economic contraction as a data point since 2004 and it does
not lend support to this kind of claim.

------
chasing
Can someone please explain why an article about FDR written nine years ago is
on the front page?

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mabbo
Well, I guess that settles that debate.

No more liberalism, ever, right everyone?

------
elgabogringo
And Obama will prolong this depression by how many years?

------
EGreg
This kind of paper (from 2004, before the current recession and stimulus by
the Fed) may be well received by those sympathetic to the Austrian economic
school. Milton Friedman, a libertarian of a different kind, argued in his book
that the Fed didn't do enough. However, what's interesting is that this paper
puts the blame on FDR's policies, and not the fed. I haven't read it, so I
can't comment on the validity, but this argument certainly could have some
merit. Note that it's very different from saying the central bank shouldn't
act as a lender of last resort and improve the availability of credit to the
banks.

Personally I am partial to an explanation for the great depression that is
along the lines of Stiglitz, and has a lot to do with technology than these
"Austrian" explanations. Stiglitz noted that, before the great depression, 20%
of American workers were employed in FARM related jobs. After the great
depression it was 2%. I think this is a HUGE smoking gun. Basically, I believe
a lot of the great depression was caused because farm jobs were simply
automated away faster than the economy could absorb the supply shock. In fact,
we can see this as farmers kept overproducing and were paid to stop, even as
their workers left the farms. The dust bowl didn't help, as most of them moved
into the cities (read the Grapes of Wrath for instance).

10 years is what it took for the FUNDAMENTALS of the economy to shift from
disrupting the primary sector to creating factories and jobs in the secondary
sector (manufacturing). [http://en.wikipedia.org/wiki/Three-
sector_hypothesis](http://en.wikipedia.org/wiki/Three-sector_hypothesis) .
People moved to cities. Factories were built. Marketing was done. Demand went
up. People were re-educated and hired. The manufacturing eventually became the
dominant industry in america.

And it also happened that the war effort produced additional demand for
manufacturing. After the war, when Europe and Japan were bombed out, our
automakers were on top of the world (Detroit was booming back then).
Manufacturing was king and unions became powerful, until the 70s.

In the 70s, technology started getting better, and other countries caught up,
to the point where outsourcing became a growing possibility. It's been growing
from the 70s until now. Apple products, once proudly produced in the USA, are
now manufactured all around the world.

But the biggest disruptor of workers' wages isn't even outsourcing. It's
automation. The jobs are returning -- but to robots. Large companies like
Amazon are finally able to pour enough money into R&D to create robots to
replace all those warehouse slaves
([http://www.motherjones.com/politics/2012/02/mac-
mcclelland-f...](http://www.motherjones.com/politics/2012/02/mac-mcclelland-
free-online-shipping-warehouses-labor)) who themselves replaced local
bookstore employees.

Capitalism works well when the employers need enough employees that people can
earn a decent wage. When demand for local human labor drops, so do the average
wages across that industry. These people then cut back on their spending,
which ripples through the economy. Consumer product companies cut back and
even more people lose jobs. Income inequality grows. The money supply shrinks
as banks stop lending and there is a credit crunch. A lot of this can be seen
in the great depression. A third of the banks failed. The fed didn't help with
the credit crunch.

So now that we've had 40 years of growing outsourcing and improving supply
chains, the American worker is in a race to the bottom with the average
workers of the world, who make $70/day. It's a simple trade deficit problem
caused by free trade. The USA is propping up the bubble because of all the
ways we create demand for dollars (including possibly
[http://en.wikipedia.org/wiki/Petrodollar_warfare](http://en.wikipedia.org/wiki/Petrodollar_warfare))
but at the end of the day, there is strong downward pressure on average wages.

Income inequality, therefore, is to be expected. The culprits are outsourcing
and automation. The way to mitigate some of this is to change the progressive
taxation curve to be responsive to income inequality, and LOWER taxes on
people earning less. Republicans have it exactly backwards. Let's assume for a
second that the GOP lawmakers actually want to help the USA. Then they
shouldn't oppose the payroll tax like they did
([http://nymag.com/daily/intelligencer/2011/12/why-
republicans...](http://nymag.com/daily/intelligencer/2011/12/why-republicans-
hate-cutting-the-payroll-tax.html)) They claim they want to cut taxes for "job
creators" only, but the multiplier for regular employees is far greater than
for rich businesspeople.

These employees ARE the people who go out and buy stuff they NEED, sending
price signals to the economy to divert more resources to the companies that
produce stuff people need. Also, it provides much better incentives for
investors and banks to put cash into startups. What pitch works better:

1) "Hey Mr Investor sir, your taxes are lower this year, can you please put
some of your money into my startup since you have more to play with? No one
could afford to buy my product because their taxes were high though."

2) "Hey Mr Investor, I had a few extra bucks to take a risk so I built a
prototype and my customers had a few extra bucks so they are now all using my
product, so I have an actual product and traction?"

Investors want to see DEMAND. The multiplier is bigger for people who earn
less. These are the people whose taxes should be cut. I am in favor of
implementing milton friedman's negative tax, but I doubt that's going to
happen. But if you're going to cut taxes for people, it should be the working
class.

Long term though, I am not sure what to do if there is a growing unemployed
class. We will need a universal basic income either through a negative tax or
some other scheme.

