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It lasted less than 6 months before they created the Federal Surplus Relief Corporation, which instead of creating artificial scarcity bought the stocks and distributed it (some 600 Million pounds of grain, cotton, and meat) to impoverished sectors across the US.



Doesn't giving something for free totally counters the effects of buying it at higher price to begin with?

sounds more like "helping my friend producer with tax money" than "keeping market stable"

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sounds to me like they were trying to feed the hungry. i suppose it all comes down to your perspective.

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They could also have fed the hungry merely by allowing prices to fall. But doing that makes it harder to get the farming vote (a big deal in that era).

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> They could also have fed the hungry merely by allowing prices to fall.

And giving money to the needy, if necessary.

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Which is the very same as lowering real prices (value) in the long run while raising monetary value. Pretty much more inflation

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To the extent that there's a lot of slack in the economy, factories laying idle and so forth, more money will tend to result in more production rather than more inflation. Now there are always some sectors of the economy that aren't idle so more money will always result in at least a little inflation, but in the case of the Great Depression this was very little. And they were experiencing deflation at the time anyways, so more inflation would have gotten them closer to price stability.

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Giving money to the needy has different effects than that.

For one thing, if you finance the handouts with taxes rather than printing money, they will have no effect on inflation.

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Prices had been pegged very high due to the Ukraine famine in the 1920s, and global trade further collapsed due to Smoot Hawley ( which was immediately countered worldwide ). Redistributing excess produce for free can work well in the face of collapsing prices. It doesn't signal increased production and buffers people getting out of producing without completely destroying prices. Direct food subsidies continued well into the 1960 ( we called them "commodities", and if you were poor, you could get them from ... USDA offices? something like that). This was the predecessor to food stamps ( although it may have run in parallel ).

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FDR did not pay the farmers as a way to get their vote. He already had their vote. Furthermore, allowing prices to fall would have done nothing for many of the victims of the Great Recession, as many of them did not have jobs and thus could not afford to pay for food no matter what it cost.

The Federal Surplus Relief Corporation was created for the sole purpose of maintaining America's agricultural output, which then and now, was the primary source of America's economic strength. Maintaining food production also meant that many of the associated farming jobs would remain intact, preventing the crisis for worsening.

The farming jobs supported many skilled industrial production jobs, especially for heavy equipment such as tractors. This would prove invaluable a decade later when the U.S. entered WWII and the factories began producing weapons and tanks. The factories already had plenty of trained workers ready to work the lines.

All of this is covered in most high school U.S. history courses.

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That's partially correct. FDR wasn't just trying to buy farmers votes, he really did believe that high prices were good for the economy. He correctly realized that the deflation being experienced in the US was bad, but he thought that artificially increasing prices would fix things, but in reality people didn't have the money to pay the new, higher, prices and all of FDR's efforts to raise the prices of things (the NRA especially) just ended up making the depression worse.

Now, FDR did a lot of things and some of them worked pretty well. He'd touched off the fastest industrial expansion in US history a few months before he killed it with the NRA, for example. I'm not aware of any current economic school of thought that would endorse the idea that price supports actually helped with the depression. A Keynesian would say that you have to run a deficit to increase the aggregate demand, a Monetarist would say you need more money to increase aggregate demand, a Supply-Sider would say you can't help, a Socialist would say the state needs to take over the means of production, etc.

Now, I do have friends from states that rely on agricultural subsidies, and their high school history textbooks evidently did wax poetic about how awesome agricultural subsidies were, but that isn't in most American's high school educations.

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"America's agricultural output, which then and now, was the primary source of America's economic strength"

I think that's not correct.

Sectors by percentage of the US GDP: agriculture: 1.2%, industry: 22.1%, services: 76.7%

http://en.wikipedia.org/wiki/Economy_of_the_United_States

Arms and weapons alone (one of the main perceived sources of "America's economic strength" abroad, along with intellectual property and others) make more than that (sources estimate between 1% and 4% of the US GDP).

http://www.stanford.edu/class/e297a/U.S.%20Defense%20Industr...

http://en.wikipedia.org/wiki/Arms_industry

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Standing in line to receive 'free' food is not without opportunity cost, so it's not hard to keep the marginal cost of getting that food more expensive than the market price for anyone with the ability to actually pay for food.

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It depends whether or not the people you give it to would otherwise buy it.

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Only if it is a permanent solution. I thought the main issue was that the (US) gov't was supposed to stabilize rapid price fluctuations, not exist as a constant state of subsidy.

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