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  #1  
Old 01-12-2009, 10:52 AM
Paul in Qatar Paul in Qatar is offline
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Did FDR Prolong the Depression?

An honest question for honest debate.

The latest right-wing radio talking point is that FDR prolonged the Depression. Also, I am reading "Traitor to His Class," about FDR and the author points out that about when FDR took over the stock market was making a broad, if modest recovery. Also most panics (as recessions were then known ran for about X months, and the 1929 Depression was at about that natural turning point.

Is there any honest academic opinion that the New Deal kept us in depression longer?

The other thing this book points out for me is that the New Deal was not only about the government controlling Big Business. Just as much it was the introduction of Big Business into the government. ANy truth to this idea you think?
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  #2  
Old 01-12-2009, 11:07 AM
ralph124c ralph124c is offline
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Yes He did!

The hoary myth (that the "new Deal" ended the depression) is a hard one to shake. The fact is, most of the stuff attempted by FDR did not work: take the "national Recovery Act"-it was a useless program, that harked back to state control of industry. It cost a fortune, and eventually was sued, because the NRA gave the Federal Gov. the authority to set prices. Anybody who reads history will realize that price controls usually don't work (since the days of Diocletian).
FDR actually continued a tight money philiosophy, and the economy responded-by slowing down. The recovery (which was well underway by 1933) was plunged into another recession in 1936. The only thing that solved the recession was the demands caused by WWII. By 1941, factories were hiring 9war orders), and the USA had virtually zero unemployment by 1942.
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  #3  
Old 01-12-2009, 11:17 AM
Lantern Lantern is offline
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No, FDR didn't prolong the depression. At worst his fiscal policies weren't sufficiently bold and didn't provide the necessary stimulus. But his other policies like leaving the gold standard helped stimulate the economy and his various relief policies helped reduce the suffering of those worst affected.

This article (pdf file) is a good short summary of the academic consensus on the Great Depression. It's written by Christina Romer who is one of Obama's advisers and a leading researcher on the Depression.
http://elsa.berkeley.edu/~cromer/great_depression.pdf
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  #4  
Old 01-12-2009, 12:17 PM
kunilou kunilou is offline
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I don't buy that the recovery "was well underway by 1933."

Certainly it wasn't in agriculture, where the Dust Bowl conditions were worsening, not improving. Despite the massive crop failures, commodity prices were still at historic lows.

The U.S. Gross Domestic Product continued to decline until 1934.

U.S. Industrial Production continued to decline throughout 1932, and didn't begin to recover until mid-1933.

As for the stock market, it hit its historic low on June 30, 1932. It then rose slightly until early October before falling again. But the second drop began before Roosevelt was even elected. True, the market was rising when he took office, but it continued to rise afterward, so he certainly didn't kill a recovery.

And, of course, any argument that FDR's policies prolonged the Depression ignores the fact that it was a worldwide Depression.

I agree with Lantern that the worst that can be said is that his policies didn't actually end the Depression, but that's not only highly debatable, it's a long way from saying anything he did prolonged it.
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  #5  
Old 01-12-2009, 12:21 PM
BrainGlutton BrainGlutton is offline
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It is a view held by a minority of economists and a smaller minority of historians:

Quote:
"A number of economists" believe the New Deal delayed economic recovery.[51] A 1995 survey of economic historians asked whether "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." Of those in economics departments 27% agreed, 22% agreed 'with provisos' (what provisos the survey does not state) and 51% disagreed. Of those in history departments, only 27% agreed and 73% disagreed.[52]

UCLA economists Harold L. Cole and Lee E. Ohanian are among those who believe the New Deal caused the Depression to persist longer than it would otherwise have, concluding in a study that the "New Deal labor and industrial policies did not lift the economy out of the Depression as President Roosevelt and his economic planners had hoped," but that the "New Deal policies are an important contributing factor to the persistence of the Great Depression." They claim that the New Deal "cartelization policies are a key factor behind the weak recovery." They say that the "abandonment of these policies coincided with the strong economic recovery of the 1940s."[53] Cole and Ohanian claimed that FDR's policies prolonged the Depression by 7 years. [54]

Lowell E. Gallaway and Richard K. Vedder argue that the "Great Depression was very significantly prolonged in both its duration and its magnitude by the impact of New Deal programs." They suggest that without Social Security, work relief, unemployment insurance, mandatory minimum wages, and without special government-granted privileges for labor unions, business would have hired more workers and the unemployment rate during the New Deal years would have been 6.7% instead of 17.2%.[55]

As an example, during the depression there were extreme food shortages and widespread famine. To solve this, the government enacted legislation in the form of the Agricultural Adjustment Act of 1933. This sought to increase the prices of food, to benefit farmers, by reducing supply. It did this by destroying over 10 million acres of crops, slaughtering 6 million pigs, and leaving fruit in the fields to rot. The result was even more widespread famine. But this had little to do with unemployment rate. [56]

Public opinion polls in March and May 1939 asked whether the attitude of the Roosevelt administration toward business was delaying recovery, and 54 and 53 percent, respectively, said yes while 26 and 31 percent said no. Fifty-six percent believed that in ten years there would be more government control of business while only 22 percent thought there would be less. Sixty-five percent of executives surveyed thought that the Roosevelt administration policies had so affected business confidence that the recovery had been seriously held back.[57]
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  #6  
Old 01-12-2009, 12:24 PM
BrainGlutton BrainGlutton is offline
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Originally Posted by kunilou View Post
And, of course, any argument that FDR's policies prolonged the Depression ignores the fact that it was a worldwide Depression.
Well, not exactly. Germany, for instance, had already recovered from its depression before the Great Depression began in the U.S. (and before Hitler attained power).
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  #7  
Old 01-12-2009, 01:15 PM
smiling bandit smiling bandit is offline
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Originally Posted by BrainGlutton View Post
Well, not exactly. Germany, for instance, had already recovered from its depression before the Great Depression began in the U.S. (and before Hitler attained power).
I wouldn't exactly say that. Germany had a recovery of some measure, but so did many countries. That recovery, however, was fragile and not nearly as big as what was required.
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  #8  
Old 01-12-2009, 01:17 PM
Mr. Moto Mr. Moto is offline
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I'm not going to beat Roosevelt up too much here - frankly his opponents didn't know what to do about the Depression either. They were proposing things like the Smoot-Hawley tariff that assuredly did not help matters.

Still, we would not employ most New Deal methods today for these problems - and Roosevelt has to be taken to task too for his hyperkinetic style of trying everything but not going whole hog into it - this uncertainty paralyzed business. They sat on investment until they could figure out what could pay off.

Roosevelt too has to be criticized too for the court-packing scheme and for the blatantly unconstitutional NRA.

In short - the man has to be taken in balance. Fair enough, I think.
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  #9  
Old 01-12-2009, 01:58 PM
haymarketmartyr haymarketmartyr is offline
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Libertarians hate government.
Roosevelt expanded government and put it on the side of the people.
Roosevelt is considered by even libertarian think tanks as one of the three greatest presidents of all time but don't tell that to modern day libertarians.

200 Wall Street Journal poll ranked FDR as 3 best of all time and GREAT. It was sponsored by the Federalist Society.

from their own website



Quote:
The Federalist Society for Law and Public Policy Studies, most frequently called simply the Federalist Society, is an organization of conservatives and libertarians seeking reform of the current American legal system[1] in accordance with an originalist interpretation of the Constitution.
Since we are now in a period of government growth and libertarians hate that, it becomes important to discredit FDR and his programs.

Nothing complicated here.

Last edited by haymarketmartyr; 01-12-2009 at 02:03 PM..
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  #10  
Old 01-12-2009, 02:08 PM
Bridget Burke Bridget Burke is online now
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The folks in this famous cartoon were the ones calling Roosevelt "a traitor to his class." I learned a lot about US history from that New Yorker cartoon book we had when I was a kid--although it took a few years for me to understand some of it. Both political "sides" were satirized, too.

(Pardon the levity. I'll be back when I've read the book mentioned in the OP.)

Last edited by Bridget Burke; 01-12-2009 at 02:09 PM..
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  #11  
Old 01-12-2009, 02:24 PM
Mr. Moto Mr. Moto is offline
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Quote:
Originally Posted by Bridget Burke View Post
(Pardon the levity. I'll be back when I've read the book mentioned in the OP.)
I have not read the book in the OP, and likely won't get around to it soon, but I have recently read The Forgotton Man by Amity Shlaes, which is another interesting look at the Great Depression and some of its personalities.
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  #12  
Old 01-12-2009, 03:05 PM
Captain Amazing Captain Amazing is offline
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Originally Posted by BrainGlutton View Post
Well, not exactly. Germany, for instance, had already recovered from its depression before the Great Depression began in the U.S. (and before Hitler attained power).
That's not what I recall from my reading of the period. Germany had recovered from the hyperinflation that had affected them in the early 20s, but the stock market crash of 1929 hit Germany hard, because Germany was really heavily dependent on American investment, and after the crash, the US pulled its investment and loans from Germany. The German unemployment rate in 1928 was 8.4%, in 1930 was 15.3%, and in 1932, over 30%. Chancellor Bruening of Germany was nicknamed "the Hunger Chancellor" for the depression and his response to it.
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  #13  
Old 01-12-2009, 03:22 PM
puddleglum puddleglum is offline
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FDR's monetary policy was very good, his fiscal and regulatory policies were very bad. The best that can be said about his record economically is that it was not as bad as Hoover.
If you think about the actual policies that were implemented, they seem almost designed to worsen things. In a time where millions of people were undernourished the government payed farmers to destroy food. In a time of record unemployment, the government enacted a new tax on payrolls. In a time where millions struggled to make ends meet, the government threw retailers in prison for offering discounts.
We had depressions before but what made the Great Depression great was Hoover and FDR.
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  #14  
Old 01-12-2009, 03:23 PM
ralph124c ralph124c is offline
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Depression in 1946?

Once WWII was over, the world faced another possible depression-you had governments cancelling war orders, and millions of soldiers/sailors being discharged. So what kept demand up? My thory was that the 10 years of depression (ca. 1929-1940) was a time in which virtually no investments were made-houses were not built, roads fell into disrepair, and there was no highway system. The government started some massive programs after WWII (like the Interstate Highways System), which simulated the demand for cars (new cars hadn't been built (except for government use) since 1941.
So maybe Obama is right-this country needs to go on another 15 year spending binge!
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  #15  
Old 01-12-2009, 03:56 PM
Paul in Qatar Paul in Qatar is offline
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Roosevelt used to tell a joke that went something like this.

Mr. Astor woke up and read the Wall Street Journal and noted the date was Jul 7 (7/7). As his car came to pick him up he saw that the plate said 777. He went to his office on the seventh floor of a building on Seventh Avenue. So he called his bookie and put $700 on number seven at the seventh race at the local track. The horse came in seventh.

"That damn Roosevelt!" he roars.
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  #16  
Old 01-12-2009, 06:31 PM
ultrafilter ultrafilter is offline
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Originally Posted by Lantern View Post
But his other policies like leaving the gold standard helped stimulate the economy....
From the first page of your link:

Quote:
The recovery from the Great Depression was spurred largely by the abandonment of the gold standard....
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  #17  
Old 01-12-2009, 07:22 PM
kunilou kunilou is offline
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Originally Posted by ralph124c View Post
Once WWII was over, the world faced another possible depression-you had governments cancelling war orders, and millions of soldiers/sailors being discharged. So what kept demand up? My thory was that the 10 years of depression (ca. 1929-1940) was a time in which virtually no investments were made-houses were not built, roads fell into disrepair, and there was no highway system. The government started some massive programs after WWII (like the Interstate Highways System), which simulated the demand for cars (new cars hadn't been built (except for government use) since 1941.
So maybe Obama is right-this country needs to go on another 15 year spending binge!
Nitpick. The National Interstate and Defense Highways Act didn't come on the scene until 1956.
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  #18  
Old 01-12-2009, 08:06 PM
The Second Stone The Second Stone is online now
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[Sarcasm]Of course Roosevelt prolonged the depression. There are numerous memos that he wrote to Harry Hopkins explicitly stating that was his goal and he would try one thing after another to continue the depression. It's just that they cannot be found now and nobody ever saw them that talked. He eventually hit upon the idea of plunging the world into the most destructive war it had ever seen as a way of deepening the recession, and did this by pissing off the Japanese and giving them the codes to fly over Pearl Harbor, and then getting Prescott Bush and George Herbert Walker to lend Hitler the money to invade Poland. That it backfired, ended the depression, set the basis for the GI bill under Truman and the new middle class and ended fascism in Europe and Asia only shows how big a failure Roosevelt was. A good thing he didn't overturn the pre-existing Soviet Union, or he that would be screwed up too. [/Sarcasm]

The answer is no, this is a crackpot theory making the rounds because the right-wing noise machine has nothing else to do until Obama is inaugurated. Roosevelt was the best president of the 20th century. He kept the country working and fed while depression swept and impoverished the globe, sweeping autocrats into power all over the place.

Last edited by The Second Stone; 01-12-2009 at 08:07 PM..
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  #19  
Old 01-12-2009, 08:21 PM
History, Mystery and the Wolf History, Mystery and the Wolf is offline
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Originally Posted by The Second Stone View Post
The answer is no, this is a crackpot theory making the rounds because the right-wing noise machine has nothing else to do until Obama is inaugurated. Roosevelt was the best president of the 20th century. He kept the country working and fed while depression swept and impoverished the globe, sweeping autocrats into power all over the place.
Which is why 49% of economists either "agree" or "agree with provisos" with this crackpot theory.

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Old 01-12-2009, 09:00 PM
Mr. Moto Mr. Moto is offline
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Originally Posted by The Second Stone View Post
He kept the country working and fed while depression swept and impoverished the globe, sweeping autocrats into power all over the place.
Autocrats, huh?

You mean like someone who would regulate every single aspect of economic life right down to whether you could choose your own chicken at the market - and who would attempt to jam the Supreme Court with additional sympathetic justices when he kept losing there?

Even Roosevelt's fans have generally come to terms with his autocratic streak - perhaps it's time you did as well.
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  #21  
Old 01-12-2009, 09:14 PM
Paul in Qatar Paul in Qatar is offline
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What has impressed me in this biography I am reading is how FDR didn't have too much of a plan at all. He was willing to try this and then that. Just like Lincoln in that he spread the influence of government but did not want to be a dictator.

Of course government never shrunk back to its old roles, but both men were uncomfortable with the methods they ended up using.
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  #22  
Old 01-12-2009, 09:24 PM
Frostillicus Frostillicus is offline
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David Sirota demolishes this argument much better than I could:

http://open.salon.com/content.php?cid=69309
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  #23  
Old 01-12-2009, 10:49 PM
The Second Stone The Second Stone is online now
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Originally Posted by History, Mystery and the Wolf View Post
Which is why 49% of economists either "agree" or "agree with provisos" with this crackpot theory.

A minority of 27 percent. Yes, I can come up with examples where about 27% of the population that are polled are crackpots. So, yeah, I'd call them crackpots. As to the other 22 percent "agree with provisos" you cannot count them among agreed until you know what the provisos are, which you don't because the survey doesn't say, which makes the data useless to a statistician, all of whom require the context of the question to interpret.

Historians agreed by the same proportion of 27 percent, 73 percent, not being confused at all, disagreeing.

Once again, only 27 percent agreeing in both groups is telling. This is not statistically different than one might expect from just political bias from the point of agreeing. But from the point of disagreeing, it is substantially telling that such large majorities cannot be buffaloed into push poll agreeing with whatever crap questions were asked: tellingly, the non-political aligned middle thinks it is mistaken.

Was sampling of all tenured economic Phds at accredited universities undertaken, or was this a select group? Answer, it was a select group of 90 such economists and 88 historians. That is a statistically invalid survey on its face. 500 is about the minimum you can use to get a valid survey http://www.math.temple.edu/~zachhh/ch6.pdf (see page 14). http://www.sciencebuddies.org/scienc...Soc_p008.shtml lists margins of error for various sample sizes.

Then you combine the 10 percent margin or error with the fact that the "resolved" question in the OP "Did FDR Prolong the Depression?" was not asked at all in the question and the language of the question is of extreme importance in a survey, the survey is more meaningless. When you look at the actual survey questions, you see that they are written by Friedman, Schwartz et al, the usual right wing propaganda hacks and not noted for scholarship on public issue questions. (See Krugman on Friedman http://www.nybooks.com/articles/19857.) While Friedman was capable of scholarship, in his old age, he enjoyed being a propagandist more.

The reliance on polls of economists who have not studied the issue is meaningless. Rigorous economic analysis and published peer reviewed papers are more meaningful. The rigorous economic analysis by Cole and Ohanian that everyone relies on here isn't really that: They assume that during Roosevelt's term constant economic growth at a 1929 level is to be presumed, ignoring the fact that Roosevelt didn't take office until March of 1933. And resuming productivity was not Roosevelt's top priority. Roosevelt stated his goals of the New Deal http://www.nps.gov/fdrm/generation/newdeal.htm and getting people housed, clothed and fed were top. He did that. Millions of Americans would have been much worse off without government jobs to do just that. The problem with Chicago school economics is that it assigns no significant value to those goals when compared to the Chicago school's goals of low inflation and no regulation, as though people had voted for the Chicago school, when they had not, instead of Roosevelt, whom they had voted into office.
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  #24  
Old 01-12-2009, 11:24 PM
Sam Stone Sam Stone is offline
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Originally Posted by The Second Stone View Post
A minority of 27 percent. Yes, I can come up with examples where about 27% of the population that are polled are crackpots. So, yeah, I'd call them crackpots. As to the other 22 percent "agree with provisos" you cannot count them among agreed until you know what the provisos are, which you don't because the survey doesn't say, which makes the data useless to a statistician, all of whom require the context of the question to interpret.
Oh, come on. That's ridiculous spin. The fact is, only 51% of economists disagreed outright with the proposition. The other 49% agreed with it in whole or in part.

The opinion of historians is irrelevant. They have no particular training in economics, so why should I listen to their opinion on economic policy? And I would certainly carefully examine their opinion based on the fact that historians as a profession tend to lean heavily to the left.

Look, there's a lot we know about economics now that we didn't know then - enough to know that some policies, such as the Smoot-Hawley Tariff which predated the New Deal and the various price controls implemented as part of the new deal, were absolutely destructive to the economy. Other policies, such as big spending on 'jobs' programs, probably helped in the short term. Those academics who agree 'with provisos' are probably thinking along these lines - it was a mixed bag, but on balance it certainly didn't help much if at all.

The other half of economists think it helped. Given that this is a politically charged question, and economists can be as partisan as anyone, my guess is that they split down partisan lines.

But to characterize this as a 'crackpot theory' is ridiculous. It's a serious question that has been studied at great length by economists, with no overwhelming consensus being found. That's the complete opposite of a crackpot theory.

Last edited by Sam Stone; 01-12-2009 at 11:26 PM..
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  #25  
Old 01-12-2009, 11:53 PM
Hellestal Hellestal is offline
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Originally Posted by Sam Stone View Post
Oh, come on. That's ridiculous spin. The fact is, only 51% of economists disagreed outright with the proposition. The other 49% agreed with it in whole or in part.
It's not ridiculous at all. We have no idea what the "in part" is counting. Not at all.

Are they including the tax increases from 37 as part of the New Deal? Technically, they weren't, but they're often included anyway because those tax increases did come from FDR, even if they were a reversal of previous policy. And they inarguably lengthened the Great Depression. This is exactly the sort of information we need to verify the trustworthiness of the survey, and yet we can't do it. Put in those qualifiers, and you'd certainly see different results.

As it stands, though, that survey just doesn't prove what you want. Even if you think "crackpot" is too strong, it's still markedly abnormal to claim that the negative effects of the NIRA, which was ruled unconstitutional fairly quickly, outweighed the extensive benefits from monetary expansion and the dropped gold standard, the benefits from the limited fiscal expansion, and the benefits from bank stability in the form of deposit insurance.
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  #26  
Old 01-13-2009, 12:11 AM
The Second Stone The Second Stone is online now
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Oh, come on. That's ridiculous spin. The fact is, only 51% of economists disagreed outright with the proposition. The other 49% agreed with it in whole or in part.

The opinion of historians is irrelevant. They have no particular training in economics, so why should I listen to their opinion on economic policy? And I would certainly carefully examine their opinion based on the fact that historians as a profession tend to lean heavily to the left.

Look, there's a lot we know about economics now that we didn't know then - enough to know that some policies, such as the Smoot-Hawley Tariff which predated the New Deal and the various price controls implemented as part of the new deal, were absolutely destructive to the economy. Other policies, such as big spending on 'jobs' programs, probably helped in the short term. Those academics who agree 'with provisos' are probably thinking along these lines - it was a mixed bag, but on balance it certainly didn't help much if at all.

The other half of economists think it helped. Given that this is a politically charged question, and economists can be as partisan as anyone, my guess is that they split down partisan lines.

But to characterize this as a 'crackpot theory' is ridiculous. It's a serious question that has been studied at great length by economists, with no overwhelming consensus being found. That's the complete opposite of a crackpot theory.
I know that conservatives think that they win when they can lie their way to within 49 percent. But here the 49 percent isn't even asked a question with FDR in the terms of the question. Stop lying about that. The exact question is important. And you cannot accept those provisos, half your votes, if you don't have the ballots to see the question. And you cannot use such a small sample and call it statistically meaningful, particularly in light of the historians tracking the same thing. You reject historians (handpicked and not randomly sampled at that) to economists, again, 90 handpicked economists. You treat this with the same respect that you would a random sample of over 1000 conducted by a peer reviewed science journal. The reason I call it crackpot is because it is utterly fixed for the above reasons, all of which is utterly unanswered in your begging me for mercy and to agree. A poll of 90 people, even if random, is next to worthless. A poll of 90 people hand picked off a list is laughable. Conservatism fails because conservatives like the ones in this thread consider such sloppy statistics to be some kind of science, without even having the ability to recognize these flaws turn the exercise into propaganda. A sophomore at my alma mater would get a C minus for making these kinds of errors. What kind of conservative relies on C minus material to set policy? The ones posting here.

Have all these rich conservatives sent actual questionnaires to a random sample of all economists tenured at accredited universities? No. We are talking about an initial cost of about $2,000 for photocopying and postage. Have we hounded any who haven't sent it back out of this random sample? No, it wasn't a random sample.

The reason that a liberal such as myself (that is a modern liberal) has such contempt for modern conservative thought is that modern conservatives consider C minus to be top notch if it agrees with their preconceived notions.

Are there peer reviewed articles that use computer models to compare other economic program possibilities for the Great Depression to the one actually used? Not cited by the thesis referred to by the OP. Are there rigorous analyses to support that conclusion? No, just an article to alumni about what two profs are doing. That isn't science, that's crap. It's a bunch of Chicago school economists setting up a survey with questions written by the head Chicago school economist and sent to 90 other Chicago school economists (for all we know that is what they did). And even then 73 percent don't agree completely, 23 percent having serious reservations, re-written as provisos. This isn't scholarship, it's propaganda. Only a conservative with the intelligence of Bill O'Reilly and the shame of Nancy Grace would pass this off as economic analysis. Milton Friedman of 1960 would give a rich alum's kid a C minus on the paper. Only Milton Friedman the propagandist of the mid 70s and thereafter would applaud this crap.

As for discounting historians, in favor of a narrow sample of a narrow school of economists, that is just a convenient crackpot argument of the moment. The historians with a 10 percent margin of error, are still well in the majority in rejecting the thesis out of hand in interpreting the proposition. None have provisos. The 27 percent agreeing are well within the margin of error of conservatives in the general population. And even though the conservatives have embraced this study, you suddenly find half of those survey should be discarded entirely for the sole reason that you don't put any credit in the opinion of a historian on a question that involves economics and history because Phd historians are suddenly unqualified to have opinions on historical matters that involve economics when both fields come into play, so you embrace a minority of 27 percent, including those with unspecified reservations to pretend you have 49 percent and call that a consensus. Is it a wonder that I think you've got confirmation bias?

The fact is that the entire world was in a worldwide depression and using the tools available at the time, Roosevelt kept the nation employed, clothed, housed and fed, preserved the US as one of a half dozen real democracies in the world and got the US ready to produce enough to beat Tojo and Hitler at the same time at opposite ends of the earth all from a wheelchair. Roosevelt reveled in the hatred that the crackpots kept coming his way for twelve years. He's no longer around to do that reveling, but I am around to celebrate that Roosevelt is better than any conservative who can be compared to him. By the time I'm ancient at mid-century, the modern consensus that Roosevelt is one of our best three presidents ever (along with Washington and Lincoln) will remain exactly that. The conservatives who make crap up, like in the article referenced in this thread will be forgotten because they contributed what conservatives feel they owe society: nothing.
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  #27  
Old 01-13-2009, 03:55 AM
Alex_Dubinsky Alex_Dubinsky is offline
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The Sacred Stone, you are arguing about something retarded.

How about we actually rehash the policies and see for ourselves? At the least, I'd like to address specifically the claims in post #5 (which makes a great job ignoring monetary policy, which is arguably the biggest factor in the government's affect on macroeconomics)....

What is meant by: "They claim that the New Deal "cartelization policies are a key factor behind the weak recovery"? FDR's policies encouraged cartels?

"They suggest that without Social Security, work relief, unemployment insurance, mandatory minimum wages, and without special government-granted privileges for labor unions, business would have hired more workers and the unemployment rate during the New Deal years would have been 6.7% instead of 17.2%.[55]" -- minimum wages and unions can be very been counterproductive, but it's really a matter of degree. (A $200/hr minimum wage will screw the economy up pretty quick, but $7/hr hardly affects it.) What did FDR actually do? -- However, I don't see how welfare increased unemployment. Unemployment is people who want to find a job, but can't. Welfare makes people not want to find jobs, so it should reduce 'unemployment' (and channel borrowed money into people who'll spend it, which does as much good as public works). This hate for welfare definately sounds like what a partisan conservative might say out of ideology.

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  #28  
Old 01-13-2009, 04:06 AM
Alex_Dubinsky Alex_Dubinsky is offline
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In general, what did FDR do?

I'm trying to look at his monetary policy, which I feel is a huge factor. Supposedly he was great at loosening it. Looking at inflation data, that really doesn't look like the case. There was moderate inflation for some of his years in office, but nothing to compensate for the huge deflation in '31, '32, and '33. Is this what people are referring to when they say "he didn't go far enough?"
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Old 01-13-2009, 01:20 PM
ralph124c ralph124c is offline
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Deflation, Deflation

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Originally Posted by Alex_Dubinsky View Post
In general, what did FDR do?

I'm trying to look at his monetary policy, which I feel is a huge factor. Supposedly he was great at loosening it. Looking at inflation data, that really doesn't look like the case. There was moderate inflation for some of his years in office, but nothing to compensate for the huge deflation in '31, '32, and '33. Is this what people are referring to when they say "he didn't go far enough?"
As was mentioned, despite the "new deal" experimentation, FDR persued a "tight money" policy, just as Hoover had done. The result was deflation-farm prices dropped and commerce ground down. Demand dropped, and industrial production dropped. WWII saved the whole game-all of a suddent the gov placed billions of $ in orders-and the economy responded by hiring and opening plants.
It is a sad fact, but WWII solved the Depression-none of FDR's New Deal gimmicks had any appreciable effect on the depression (except by enshrining myths about how the government is so good at managing the economy).
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Old 01-13-2009, 01:39 PM
suranyi suranyi is offline
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Originally Posted by ralph124c View Post
The hoary myth (that the "new Deal" ended the depression) is a hard one to shake. The fact is, most of the stuff attempted by FDR did not work: take the "national Recovery Act"-it was a useless program, that harked back to state control of industry. It cost a fortune, and eventually was sued, because the NRA gave the Federal Gov. the authority to set prices. Anybody who reads history will realize that price controls usually don't work (since the days of Diocletian).
FDR actually continued a tight money philiosophy, and the economy responded-by slowing down. The recovery (which was well underway by 1933) was plunged into another recession in 1936. The only thing that solved the recession was the demands caused by WWII. By 1941, factories were hiring 9war orders), and the USA had virtually zero unemployment by 1942.
Even if that's true, what caused the WWII boom? Government (that is, military) spending!

Ed
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Old 01-13-2009, 01:42 PM
Lantern Lantern is offline
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You are wrong about FDR pursuing a tight money policy. Monetary policy is conducted by the Fed anyway but by leaving the gold standard in 1933 FDR allowed a looser monetary policy. From the Romer article:

Quote:
The monetary
expansion that began in the United States in early 1933 was particularly dramatic. The American
money supply increased nearly 42 percent between 1933 and 1937.
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Old 01-13-2009, 03:23 PM
Alex_Dubinsky Alex_Dubinsky is offline
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Originally Posted by Lantern View Post
The monetary expansion that began in the United States in early 1933 was particularly dramatic. The American money supply increased nearly 42 percent between 1933 and 1937.
So why was there little inflation? The economy obviously didn't grow 40%. Did it all end up in bank reserves and mattresses, not lent out? In the end, it still looks like it wasn't enough. (Or that his other policies really put a halt on the flow of money.)
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Old 01-13-2009, 03:30 PM
Ocean Annie Ocean Annie is offline
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The right wing needs to discredit the New Deal because it contradicts policy that is driven by free market ideology. The one lingering New Deal policy that has been hard to eliminate is social security, which serves as a reminder of Roosevelt’s impact on American society and the role of government. The only way the hard right can eliminate social security is to bankrupt the program and convince the public that it is part of the welfare state, unsustainable and un-American.

It is easy to make a claim about Roosevelt’s policies based on conjecture. It is more difficult to discredit the rise of a thriving middle class and the economic stability enjoyed by most Americans because of Roosevelt’s policies –-especially fiscal policy--after WWII.

The impact of the New Deal on economic recovery is debatable, but everyone agrees Roosevelt’s response to the war did lead to economic recovery, so either way he deserves credit.
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Old 01-13-2009, 03:50 PM
ralph124c ralph124c is offline
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It Wound up Under matresses

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Originally Posted by Alex_Dubinsky View Post
So why was there little inflation? The economy obviously didn't grow 40%. Did it all end up in bank reserves and mattresses, not lent out? In the end, it still looks like it wasn't enough. (Or that his other policies really put a halt on the flow of money.)
The money was hoarded (by banks fearing "runs"). The real key to what was going on was the drop in real estate prices: prime farm land dropped in value (nobody wanted to produce food that was falling in value).
and homes dropped-my paternal grandfather bought his house in 1933 (for $11,000). It solde (new) in 1924 for over $24,000! That is deflation.
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Old 01-13-2009, 03:54 PM
Mr. Moto Mr. Moto is offline
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The only way the hard right can eliminate social security is to bankrupt the program and convince the public that it is part of the welfare state, unsustainable and un-American.
I will remind you that the Social Security program received decades of additional life because of reforms proposed by the Greenspan Commission - appointed by Ronald Reagan and passed overwhelmingly by Congress with big majorities of both parties. Since Reagan is certainly the most conservative postwar president, your argument starts to break down some.

As for bankruptcy, the biggest problem facing Social Security isn't right wingers but demographics, as I'm sure you will have to admit.

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The impact of the New Deal on economic recovery is debatable, but everyone agrees Roosevelt’s response to the war did lead to economic recovery, so either way he deserves credit.
Look, I haven't made outlandish claims concerning Roosevelt here, so perhaps you ought to refrain from such yourself. I will give Roosevelt credit all day long for wartime leadership - but that doesn't get him off the hook for everything he did in his administration. The man made plenty of mistakes, and both parties have learned from them, I hope.

In any case, if the economy stumbled and bumbled until war production ramped up in 1940, we can credit the emergency for getting people to work. And it would be helpful to look at what happened in the years prior to that - including what went down in the terrible Recession of 1937, where many of the gains of the New Deal were completely wiped out.
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Old 01-13-2009, 04:01 PM
Beware of Doug Beware of Doug is offline
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Originally Posted by Alex_Dubinsky View Post
So why was there little inflation? The economy obviously didn't grow 40%. Did it all end up in bank reserves and mattresses, not lent out? In the end, it still looks like it wasn't enough. (Or that his other policies really put a halt on the flow of money.)
In addition to hoarding, hourly wages remained at or near the 1932 lows, putting an iron-clad ceiling on purchasing power. Indeed, the slow drop in unemployment was probably due in large part to continued low wages.

(Anecdote: It was quite common in the late '30s, especially for young people, to work a full-time job and still be unable to buy lunch.)

The minimum wage did not get put through until 1938, and was all of 35c an hour. Even at that level, there was ferocious opposition to the bill.

Last edited by Beware of Doug; 01-13-2009 at 04:06 PM..
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Old 01-13-2009, 04:05 PM
Mr. Moto Mr. Moto is offline
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Yep - and with food expensive and cigarettes cheap, lots of people were smoking at midday to calm the hunger pangs.
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Old 01-13-2009, 04:12 PM
Beware of Doug Beware of Doug is offline
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[...]it would be helpful to look at what happened in the years prior to that - including what went down in the terrible Recession of 1937, where many of the gains of the New Deal were completely wiped out.
Probably better to look to economists than historians for insight into that period. There was so much going on in Europe at that point that domestic events are pretty much a blank in the national memory.
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Old 01-13-2009, 06:16 PM
Voyager Voyager is offline
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Originally Posted by ralph124c View Post
Once WWII was over, the world faced another possible depression-you had governments cancelling war orders, and millions of soldiers/sailors being discharged. So what kept demand up? My thory was that the 10 years of depression (ca. 1929-1940) was a time in which virtually no investments were made-houses were not built, roads fell into disrepair, and there was no highway system. The government started some massive programs after WWII (like the Interstate Highways System), which simulated the demand for cars (new cars hadn't been built (except for government use) since 1941.
So maybe Obama is right-this country needs to go on another 15 year spending binge!
I think it is more pent up demand from the war, combined with savings. During the war there were massive war bond drives, to help support the needed deficit spending. This was helped by the fact that most of production went into war material. It was difficult or impossible to buy a car or a big appliance. When the war was over, the reunited families had money to buy cars when they became available. Plus, there were veterans benefits which also helped inject money into the economy.
Truman, remembering the recession at the end of WW I from the sudden reduction in federal spending, deliberately stimulated the economy to assist in this, and did a very good job of it. I think economic theory was a bit more sophisticated than it was in 1933.
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Old 01-13-2009, 06:55 PM
Hari Seldon Hari Seldon is offline
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There is no way of giving a definitive answer to the question. The 1932 recovery in the stock market meant little. That is the difference between Wall St. and Main St. There was still 25% unemployment. If you are seriously interested in the question, read "The Defining Moment" by Jonathan Alter. FWIW, he felt that Roosevelt was too concerned with balancing the budget (really) to fully engage the Depression. And when recovery was under way in 1936 he started raising taxes and almost blew it. I was born in 1937 and my father said there was a second depression then and Alter confirms it. He feels that the NRA was an abject failure (soon declared unconstitutional and abandoned anyway), but that the CCC was a brilliant success since it not only put a half million people in the work force (it sounds like a drop in the bucket, but they had a significant multiplier effect) but also produced infrastructure that was valuable for several decades. Of course, the bridges and dams they built then are crumbling and this would be a good excuse to replace them now. Most of what he did was flying blind, but he was already to abandon something that didn't work and try something new.

Many observers at the time believe he averted a revolution. We can never know, but maybe they were right.
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  #41  
Old 01-13-2009, 07:19 PM
Mr. Moto Mr. Moto is offline
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Originally Posted by Voyager View Post
Truman, remembering the recession at the end of WW I from the sudden reduction in federal spending, deliberately stimulated the economy to assist in this, and did a very good job of it. I think economic theory was a bit more sophisticated than it was in 1933.


Frankly, I don't know how you can say that with a straight face.

The postwar economy suffered from shortages of housing and consumer goods, there were massive labor labor problems and high inflation. And while any president would have had to deal with these issues, Truman did so in a way that wasn't what you'd call "sophisticated." In fact it displayed the same autocratic tendencies I alluded to earlier.

When coal miners went on strike Truman threatened to draft them into the army and keep them in the mines. Same with the railroad workers. And the 1952 steel strike led him to seize control of several mills - the Supreme Court overturned this action as it was blatantly unconstitutional.

And of course, when Truman left office the economy wasn't in great shape - it went into recession in early 1953 and remained there for nearly a year.

So given that you ought to support your assertion better or just drop it.
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Old 01-13-2009, 08:20 PM
Voyager Voyager is offline
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Frankly, I don't know how you can say that with a straight face.

The postwar economy suffered from shortages of housing and consumer goods, there were massive labor labor problems and high inflation. And while any president would have had to deal with these issues, Truman did so in a way that wasn't what you'd call "sophisticated." In fact it displayed the same autocratic tendencies I alluded to earlier.

When coal miners went on strike Truman threatened to draft them into the army and keep them in the mines. Same with the railroad workers. And the 1952 steel strike led him to seize control of several mills - the Supreme Court overturned this action as it was blatantly unconstitutional.

And of course, when Truman left office the economy wasn't in great shape - it went into recession in early 1953 and remained there for nearly a year.

So given that you ought to support your assertion better or just drop it.
His action in 1952 was a response to the fact that we were already in another war.

And of course there were shortages of consumer goods in the immediate postwar period. It took time for the factories to retool, and as I mentioned, there was pent up demand. My father got special access to a car in 1946 due to him working in UN security in New York.

Hereis the Wiki article on the post WW I recession. Truman, in the TV interviews that became Speaking Freely, particularly mentioned it. As a returning WW I veteran without a lot of business sense, it no doubt hit him hard, though he did not make it a personal issue.

As for the post WW II era, here is the blurb from a book about it from here
Quote:
After the end of the Second World War businessmen and economists throughout the world feared that the American postwar inflationary boom would end in a serious slump. The slump took a long time to come, and when it did appear in 1949 it was both mild and short lived. In its mildness and brevity it foreshadowed the American business recessions since that time and, indeed, may foreshadow the end of the business cycle as it has been known in the past. This book presents the first full-scale study of the 194849 recession in the United States, making it the focal point of a detailed, analytical account of American business fluctuations from the end of the Second World War until the beginning of the Korean War.
Recessionary periods usually are associated with lower birth rates, certainly not the case there. BTW, you might not have noticed that you contradicted yourself. Recessions don't usually involve shortages of consumer goods, which you can confirm by checking your local mall or car dealer. Calling a 1952 recession a postwar recession is like linking our current recession to 9/11. Try again.
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Old 01-13-2009, 08:21 PM
What Exit? What Exit? is offline
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Roosevelt was the best president of the 20th century.
Yes Roosevelt was the best President of the 20th century. Of course you seem to be confusing Franklin with Theodore.

FDR did not end the depression but he did do a fairly good job keeping the country afloat during it without giving in to the horrors of Fascism and Communism. The economy was mostly recovered before we entered WWII of course but it was WWII that ended the World Wide Depression. Manufacturing was up leading up to Pearl Harbor as we were making and selling goods to countries that were already at war.

I don't think anyone can fairly claim that the New Deal ended the depression.
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Old 01-13-2009, 08:37 PM
MEBuckner MEBuckner is offline
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Stop lying about that.
Moderator's Warning: Accusing another poster of lying is against the rules in Great Debates. Don't do that again (and please tone it down a notch in general).
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  #45  
Old 01-13-2009, 09:07 PM
Mr. Moto Mr. Moto is offline
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Recessionary periods usually are associated with lower birth rates, certainly not the case there. BTW, you might not have noticed that you contradicted yourself. Recessions don't usually involve shortages of consumer goods, which you can confirm by checking your local mall or car dealer. Calling a 1952 recession a postwar recession is like linking our current recession to 9/11. Try again.
So what - your reaction to my post was to attempt to pick nits?

My main point was that Truman attacked economic problems in a heavy handed and unsophisticated fashion - putting the lie to your assertion that he was more sophisticated in this area than Roosevelt.

BTW, I didn't call the recession of 1953 a postwar recession - I simply said the economy at the end of the Truman administration had problems, which is undeniable.
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Old 01-13-2009, 11:33 PM
Lantern Lantern is offline
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Originally Posted by Alex_Dubinsky View Post
So why was there little inflation? The economy obviously didn't grow 40%. Did it all end up in bank reserves and mattresses, not lent out? In the end, it still looks like it wasn't enough. (Or that his other policies really put a halt on the flow of money.)

http://en.wikipedia.org/wiki/Economi..._United_States
The economy actually grew by around 50% between 1933 and 1937. Check out the table in the section on the Depression.
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Old 01-14-2009, 01:21 AM
Voyager Voyager is offline
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Originally Posted by Mr. Moto View Post
So what - your reaction to my post was to attempt to pick nits?

My main point was that Truman attacked economic problems in a heavy handed and unsophisticated fashion - putting the lie to your assertion that he was more sophisticated in this area than Roosevelt.

BTW, I didn't call the recession of 1953 a postwar recession - I simply said the economy at the end of the Truman administration had problems, which is undeniable.
No, I said that economic theory was more sophisticated. If Truman ever studied economics, it escaped me. He sold hats. Badly. I agree that him ending the strike was heavy handed, but that had nothing to do with avoiding a postwar recession.
The facts are that, unlike after WW I, there was no immediate recession and only a mild one a few years later. I have no idea if he was heavy handed or not in preventing one - whatever he did, it worked. I'm sure the country being heavily involved in commerce with a badly damaged Europe helped also.
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Old 01-14-2009, 01:47 AM
The Second Stone The Second Stone is online now
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Moderator's Warning: Accusing another poster of lying is against the rules in Great Debates. Don't do that again (and please tone it down a notch in general).
You are correct, I broke the rule. I am sorry and repentant. I will not do it again. I do not understand the "tone it down a notch in general" however. Truly I don't.

I would also like to see equal application of the rules. Someone in this thread misquoted and thereby mocked my username, and as a result, insulted me by calling me The Sacred Stone.
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Old 01-14-2009, 03:39 AM
Sam Stone Sam Stone is offline
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I'm sure the country being heavily involved in commerce with a badly damaged Europe helped also.
A lot. As did sales of weaponry before and throughout the war to various allied powers. The U.S. came through the war as the arms dealer to the world, and suffered relatively few casualties and almost no infrastructure damage. It emerged from the war as an international titan economically, and that plus the start of major global trade liberalization caused the massive expansion in foreign trade helped recover the economy and pay down the war debt.

Also, WWII turned women into workers, and after the war far more of them entered the work force, which created a boom in labor resources.
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Old 01-14-2009, 11:35 AM
Alex_Dubinsky Alex_Dubinsky is offline
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Originally Posted by Lantern View Post
http://en.wikipedia.org/wiki/Economi..._United_States
The economy actually grew by around 50% between 1933 and 1937. Check out the table in the section on the Depression.
So it did. Hmm. So what was the problem? How did unemplyoment/total payroll fare?
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