Did New Deal or WWII end Depression?

[gitfiddle]

For the last couple of months, I've been seeing a lot of liberal frustration over the repetition of the CW that the boost in industrial production for WWII ended the Great Depression. Their argument (to the best of my memory) is that from the beginning of the New Deal you see a consistent, progressive decrease in unemployment and increase in wealth in the US, except for one period (I believe, 1937) when FDR actually scaled back the New Deal under conservative pressure.

Is this true? Anyone got some hard numbers and graphs? It seems that one of the sticking points, for example, between partisans is who exactly is considered employed. Are people working for the TVA employed since their work is temporary? (one of the sticking points in the current debate, too, right?)

I took a class back in college called history between world wars, and I feel that what I learned was something of a hybrid of these two concepts, i.e. the TVA and other publics works projects jolted the economy, then the production from the war further increased that.

[Hentor the Barbarian]

There's a nice graph in this post at Daily Kos that shows the Us GDP over 1929-1941. It's pretty telling that in 1936, a new record level of GDP was established.

That's the story the numbers tell. The New Deal worked, worked well, and worked quickly. These days, we define recessions as two consecutive quarters of declining gross domestic product. By that measure, when did the Great Depression end? One quarter after Roosevelt took office, that's when. Yes, it took years to repair the damage of the anything goes marketeers, but the recovery started the moment the New Deal started.

That period also shows nicely the negative impact of the conservative effort to scale back deficit spending in 1937.

Paul Krugman's book, "The Conscience of a Liberal" is a good, easy read on this topic, and he does a very nice job of illustrating how the policies of the New Deal laid the foundation for the economic strength and income equality of the US through the 50's until the early 70's.

[furt]

The problem you run into repeatedly in macroeconomics is that we have no control group. That is to say, we don't know what would have happened had FDR's plans not been enacted, or had some other plan been enacted.

Defenders of FDR can point to the fact that the economy did in fact recover. Critics can point to the fact that other countries recovered faster. I don't think anyone would seriously argue that absent the New Deal, unemployment would have stayed at 25%. The question is if doing something else (or doing nothing) would have helped more, and that's likely unknowable.

[tagos]

Originally Posted by furt

The problem you run into repeatedly in macroeconomics is that we have no control group. That is to say, we don't know what would have happened had FDR's plans not been enacted, or had some other plan been enacted.

Defenders of FDR can point to the fact that the economy did in fact recover. Critics can point to the fact that other countries recovered faster.

Really? Cite? Cites that exclude countries with their own version of stimulus.

And as history shows - we do know what would have happened if he did nothing - the mini-slump when he bowed to conservative pressure in 37-38.

[Hentor the Barbarian]

furt, you are correct that there is no control group to compare the US economic recovery to. However, as tagos noted, there is a nice real-workld A-B-A intervention design during 1937 that does give some information.

At least you are starting at the right spot - acknowledging the data, but questioning the implications. Many conservatives now are crazy misinformed about the data. They don't lie - the recovery process started right away and was stable (when the policies were in place consistently - e.g. not 1937) even before the ramp up for WWII.

Other less direct information comes from all the economic data associated with each presidency, which demonstrates that any and all economic indicators that I've seen data on have performed better under Democratic presidents in comparison to Republican presidents. At some point, reality will have to set in.

A subtle point - the ramp up to WWII is nevertheless stimulus by government spending, so it doesn't run contrary to the present intent of the stimulus bill (apart from all of the tax cutting stuff in it).

[tagos]

And there's also the fact that even then it was true that when the USA sneezed everyone else caught a cold. Likewise for any recovery. The bottom line is that the numbers show the New Deal was a positive and no serious economist believes doing nothing was the smart option.

[furt]

Originally Posted by tagos

Really? Cite? Cites that exclude countries with their own version of stimulus.

And see, this is where we go. There is no country that did absolutely nothing, and thus no countries that can serve as control groups. I could point to Australia, which did very little and still recovered, and you can then say that what little they did do was, in fact decisive intervention, or else that the fundamentals of their economy were so different that any comparison is misleading. I could point to Canada, where most New-Deal style programs were shot down in court, but recovery still happened, and you can say that it was because the US and Canadian economies are so intertwined that the recovery of the US pulled Canada through. And of course the fact that most of Europe was back to 1929 GDP levels by the mid-1930s can be attributed to the impending war.

And of course, if I use GDP figures, you can respond that unemployment is what's really important. Or adjusted real wages.

And all of those objections would be valid.

There are smart economists with fact-based arguments who insist that the New Deal was entirely necessary and good. There are smart economists with fact-based arguments who think the opposite.

And they both have good points, and it is in the nature of macroeconomics that, in 2008, we simply do not know enough or have enough data to issue definitive judgements.

[Hentor the Barbarian]

That reminds me of another nice point of Krugman's book - he takes on this "it's impossible to know" mentality pretty nicely. We can know, because we can look at what the outcomes were under different conditions over time.

"We can't know" is simply a conservative myth designed to serve the purpose of continuing to foist failed economic theories on us.

[Lantern]

http://elsa.berkeley.edu/~cromer/great_depression.pdf
Let me again give the Romer article which is probably the best brief piece about the Depression available online.

This quote is directly relevant to the issue of causal link between policy and economic expansion when it comes to one of the most important New Deal policies: the decision to leave the gold standard which allowed for a more expansionary monetary policy.

Given the key roles of monetary contraction and the gold standard in causing the Great
Depression, it is not surprising that currency devaluations and monetary expansion became the
leading sources of recovery throughout the world. There is a notable correlation between the
time countries abandoned the gold standard (or devalued their currencies substantially) and a
renewed growth in their output. For example, Britain, which was forced off the gold standard in
September 1931, recovered relatively early, while the United States, which did not effectively
devalue its currency until 1933, recovered substantially later. Similarly, the Latin American
countries of Argentina and Brazil, which began to devalue in 1929, had relatively mild
downturns and were largely recovered by 1935. In contrast, the “Gold Bloc” countries of
Belgium and France, which were particularly wedded to the gold standard and slow to devalue,
still had industrial production in 1935 well below its 1929 level.

If you look at the US, it left the gold standard in 1933 and that year there was a massive monetary expansion and also the start of a massive recovery in the economy. It's hard to attribute that just to coincidence particularly given the international pattern that Romer notes.

As for Ohanian and Cole, their criticism of NIRA is quite valid but not particularly relevant. No one is proposing NIRA style policies today. The policies that are being carried out are monetary expansion, fiscal stimulus and financial regulation and the history of the Depression offers strong evidence that these policies do work.

[smiling bandit]

Originally Posted by Hentor the Barbarian

There's a nice graph in this post at Daily Kos that shows the Us GDP over 1929-1941. It's pretty telling that in 1936, a new record level of GDP was established.



That period also shows nicely the negative impact of the conservative effort to scale back deficit spending in 1937.

Paul Krugman's book, "The Conscience of a Liberal" is a good, easy read on this topic, and he does a very nice job of illustrating how the policies of the New Deal laid the foundation for the economic strength and income equality of the US through the 50's until the early 70's.

Actually, this makes no sense. Neither Roosevelt nor the New Deal changed the economic situation enarly fast enough. The lag time factor is at least a quarter, and often a year and a half! Their analysis is exceedingly shallow, and pretends there are no other factors than Enlightened, Saintly FDR and Evil, Stupid Republicans.

Secondly, Krugamn, for all his theoretical work, has a serious political chip on his shoulder and has a definite bias. He is well known for disregarding evidence (or even making stuff up) whenever it suits him. He only engages the latter lie in political matters, however.

[furt]

Originally Posted by Hentor the Barbarian

That reminds me of another nice point of Krugman's book - he takes on this "it's impossible to know" mentality pretty nicely. We can know, because we can look at what the outcomes were under different conditions over time.

"We can't know" is simply a conservative myth designed to serve the purpose of continuing to foist failed economic theories on us.

Wow. That's a pretty stunning argument you have there. I'm really impressed by your command of the facts; I especially liked that point-by-point refutation of the actual conservative argument I linked to.

I gotta admit it, that up until now I thought that listening to both sides and being skeptical of both was sort of the way to go. But that was before you told me that you had read a book and that Paul Krugman says that he's right. That makes my life soooo much easier.

I thought about reading something on the issue once, but there were so many different ones, arguing so many different things. I even read that the causes of the Great Depression was still the most-debated issue in economics, spawning dozens of new dissertations every year. I guess all those people never heard of Paul Krugman! They're all wasting their time, those silly people!

Thanks so much for relieving me of the burden of independant thought! Which way to the Soma bar?

[furt]

Originally Posted by Lantern

As for Ohanian and Cole, their criticism of NIRA is quite valid but not particularly relevant. No one is proposing NIRA style policies today. The policies that are being carried out are monetary expansion, fiscal stimulus and financial regulation and the history of the Depression offers strong evidence that these policies do work.

Perhaps true (I'm certainly not knowlegable enough to argue), but I wasn't linking to them as relevant to the current situation; I was linking to them as an example of a credible anti-New deal argument.

[Hentor the Barbarian]

Originally Posted by furt

Wow. That's a pretty stunning argument you have there. I'm really impressed by your command of the facts; I especially liked that point-by-point refutation of the actual conservative argument I linked to.

I gotta admit it, that up until now I thought that listening to both sides and being skeptical of both was sort of the way to go. But that was before you told me that you had read a book and that Paul Krugman says that he's right. That makes my life soooo much easier.

I thought about reading something on the issue once, but there were so many different ones, arguing so many different things. I even read that the causes of the Great Depression was still the most-debated issue in economics, spawning dozens of new dissertations every year. I guess all those people never heard of Paul Krugman! They're all wasting their time, those silly people!

Thanks so much for relieving me of the burden of independant thought! Which way to the Soma bar?

Sheesh. Your point was apparently that some economists say X and some economists say Y, so we can't know. I believe that is false, and is also a dodge. Just because opposing viewpoints are put forward does not mean that we must shrug our shoulders and pretend it's an unresolvable point.

[Algher]

I like Barro's comments about Krugman in the Atlantic (and picked up in today's WSJ):

Atlantic: Do you read Paul Krugman's blog?

Barro: Just when he writes nasty individual comments that people forward.

Atlantic: Oh, well he wrote a series of posts saying he thought the World War II spending evidence was not good, for a variety of reasons, but I guess . . .

Barro: He said elsewhere that it was good and that it was what got us out of the depression. He just says whatever is convenient for his political argument. He doesn't behave like an economist. And the guy has never done any work in Keynesian macroeconomics, which I actually did. He has never even done any work on that. His work is in trade stuff. He did excellent work, but it has nothing to do with what he's writing about.

http://online.wsj.com/article/SB123431574245571025.html

[Hentor the Barbarian]

Originally Posted by Algher

I like Barro's comments about Krugman in the Atlantic (and picked up in today's WSJ):

Seems like Barro made some nasty individual comments that the WSJ forwarded. How ironic.

[Algher]

Originally Posted by Hentor the Barbarian

Seems like Barro made some nasty individual comments that the WSJ forwarded. How ironic.

Those two are certainly not too fond of each other.

Barro is a professor of Economics at Harvard. He is also associated with the Hoover Institution on War, Revolution and Peace at Stanford.

Krugman is a professor at Princeton, and picked up a Nobel for his work on trade.

Both are biased columnists IMHO, but both are damned smart. Barro is doing some interesting research on the multiplier effect of government spending, and has also done research on the effect of tax cuts.

[furt]

Originally Posted by Hentor the Barbarian

Sheesh. Your point was apparently that some economists say X and some economists say Y, so we can't know. I believe that is false, and is also a dodge. Just because opposing viewpoints are put forward does not mean that we must shrug our shoulders and pretend it's an unresolvable point.

Then prove, with scientific certainty, that the Depression would not have ended had the New Deal not happened (or not ended as soon, or as stongly). Be sure to identify the control you are using to prove your case.


It is not a dodge to recognize that some sciences are 1) young and 2) working with drastically limited data sets, and to recognize therefore that most people making definitive statements are doing it on the basis of ideology, not facts.

[Squink]

Originally Posted by furt

Then prove, with scientific certainty, that the Depression would not have ended had the New Deal not happened...

This is an optimization problem, not a science problem. The goal is to achieve the optimal future, not to define our future with absolute certainty.
Past experience suggests that government stimulus does work. To chose not to stimulate the economy, we must have the faith in our methods to step into the total unknown. I find it odd that the so called 'conservatives' are so eager to do that here.

[furt]

Originally Posted by Squink

This is an optimization problem, not a science problem. The goal is to achieve the optimal future, not to define our future with absolute certainty.
Past experience suggests that government stimulus does work.

Except, of course, when it doesn't.

One can describe a stimulus as having "worked," if one cares to, if it creates 100 temporary jobs at the cost of ten trillion dollars. But I think most people would say that's unacceptable.

So far as I know, nobody is advocating "never do anything." The question is what, when, and how much -- even most supporters of government intervention would acknowledge that it isn't always the right step (just as few Friedmanites would say the government should never ever have any role whatsoever), or that it can have unintended consequences, or go too far, etc. Otherwise, they wouldn't be Keynsians, they'd be socialists.

And, to get back to the subject of the OP, I'd love to see a cite from any credible economist that says that all of FDR's interventions were useful. Every one I've ever read, regardless of their overall view of FDR, says that some things were effective, some were ineffective, and some were even counterproductive. So, no, I don't think the record comes close to bearing out a blanket "government stimulus does work"

[Squink]

That's Japan. Our history tells us that when the economy falls off a cliff, and we subsequently spend a lot of government money on job creating programs, the economy comes back.

We have never NOT spent a lot of money on job creating programs after the economy tanks. Without, as you say, absolute scientific proof, that sitting around twiddling our thumbs, and maybe cutting some taxes will work, we are taking a great leap of faith in an untested cure.

[Tom Tildrum]

Originally Posted by Hentor the Barbarian

That reminds me of another nice point of Krugman's book - he takes on this "it's impossible to know" mentality pretty nicely. We can know, because we can look at what the outcomes were under different conditions over time.

So what does it suggest that the Great Depression was the longest economic downturn of the 20th century? Remember, unemployment was still 17% in 1939. Does comparing it to different conditions over time lead to the conclusion that Roosevelt was the worst economic steward of all?

Presumably not. You still have to figure out which similarities and which differences to take into account. And that's why it's so hard to know what might have happened under alternate scenarios.

[furt]

Originally Posted by Squink

That's Japan. Our history tells us that when the economy falls off a cliff, and we subsequently spend a lot of government money on job creating programs, the economy comes back.

Except, as noted, when it doesn't. Such as the late 1970s and the entire 1930s.

Thanks for modeling this principle:

I could point to Australia, which did very little and still recovered, and you can then say that what little they did do was, in fact decisive intervention, or else that the fundamentals of their economy were so different that any comparison is misleading.

[Hentor the Barbarian]

Originally Posted by Tom Tildrum

So what does it suggest that the Great Depression was the longest economic downturn of the 20th century? Remember, unemployment was still 17% in 1939. Does comparing it to different conditions over time lead to the conclusion that Roosevelt was the worst economic steward of all?

Presumably not. You still have to figure out which similarities and which differences to take into account. And that's why it's so hard to know what might have happened under alternate scenarios.

Interesting framing of the matter you've chosen: Cite 1939 unemployment statistics that exclude those on New Deal work relief programs. Where have I heard that before? Oh, yeah: Conservatives cherry-pick 1930s unemployment figures in continued assault on New Deal. For more on the misleading assault on the New Deal by conservatives citing these unemployment stats, see here.

In addition, Scarborough cherry-picked unemployment data to claim that unemployment was at "20 percent" in 1938, a conservative tactic used to ignore the downward trend in unemployment that occurred under the New Deal.

For a more comprehensive discussion, see Talking Points Memo, here.Basically, what you're doing is trying to pretend that the New Deal didn't lead to reductions every year in unemployment, until the 1937 undoing of progress via the attempt at conservative fiscal policy. Furthermore, if you don't exclude those who were actually employed on work relief programs, the New Deal successfully reduced unemployment to 10% before jumping back up after 1937, still following the same sort of course that the GDP graphs show.

[BrainGlutton]

Originally Posted by furt

There are smart economists with fact-based arguments who insist that the New Deal was entirely necessary and good. There are smart economists with fact-based arguments who think the opposite.

True. But the latter is a minority view.

[BrainGlutton]

Originally Posted by Squink

We have never NOT spent a lot of money on job creating programs after the economy tanks.

None of the nine American recessions prior to the Great Depression were followed by government job-creation programs.

[Hellestal]

Originally Posted by furt

There are smart economists with fact-based arguments who insist that the New Deal was entirely necessary and good. There are smart economists with fact-based arguments who think the opposite.

Wow. Yet another deliberately mendacious piece from the sewer that is the WSJ opinion pages.

The 1937 recession happened immediately after FDR reversed his expansionary fiscal policies. He raised taxes and cut spending in an effort to balance the budget, and the economy took a tumble. And the "smart" writers of this "fact-based" argument decide to define the New Deal as 1933-1939, which means they include that huge 180 degree change in policy, and judge FDR accordingly, without spending even a word discussing it. It's the 800 pound gorilla in the room, a chief piece of evidence from the Keynesians, and they act like it doesn't even exist while they simultaneously use that downturn in the numbers to bolster their arguments.

Utter intellectual bankruptcy.

[marshmallow]

As the OP mentions, this entire thing erupts out of the swamp of what passes as modern day political discussion, especially on TV and blogs. After the subjects of Vietnam and the Cold War the liberal and conservative talking heads love to debate and distort the Great Depression more than anything, especially given the current atmosphere.

Of course, many things are left ignored -- like, is there any reason to suspect we should be making one to one comparisons, diagnoses, and cures between 1935 America and 2009 America?

Or suppose the "conservative" talking point is correct, and WWII is what really pulled us out the of the muck and FDR was just getting in the way and more useless than tits on a boar hog. Well, during WWII the United States was the closest it's ever been to a centrally planned economy. I don't think this is the solution they had in mind...you know, if we don't pull the fig leaf off and say that both conservatives and liberals back what may be called State Capital, as long as its massive hose of money goes to their pet causes and friends. I mean, that's pretty much been the point of government for more than a hundred years. The serious money, anyway.

These palatial discussions can get confusing sometimes.

[furt]

Originally Posted by BrainGlutton

True. But the latter is a minority view.

Wow, 49-51 in one survey. My, how definitive.

[furt]

Originally Posted by Hellestal

Wow. Yet another deliberately mendacious piece from the sewer that is the WSJ opinion pages.

Yes, those Ivy-league economists are well-known for their dishonesty.

[DrCube]

I don't know enough about this subject to argue it, but the New Deal wasn't some consolidated, monolithic plan. It was a whole bunch of programs instituted over a long period of time.

So, when you say "the New Deal worked", well, what worked? Surely not everything?

[Hellestal]

Originally Posted by furt

Yes, those Ivy-league economists are well-known for their dishonesty.

Some of them are, yes.

Welcome to the real world, where we point out deliberate misrepresentations and unconscionable ignorance no matter where it comes from. I'm not going to bury my nose in their asses when they demonstrate so perfectly that they're not honest with their arguments. But hey, that's just me.

There are other factual distortions in that piece, even bordering on hypocrisy, but you can plug your ears and scream IVYLEAGUEIVYLEAGUE if you think that's more persuasive.

Originally Posted by DrCube

I don't know enough about this subject to argue it, but the New Deal wasn't some consolidated, monolithic plan. It was a whole bunch of programs instituted over a long period of time.

So, when you say "the New Deal worked", well, what worked? Surely not everything?

No, not everything worked. The market controls from the NIRA and other related programs were in fact actively counter-productive.

But the monetary expansion with the dropped gold standard worked, which Lantern has already cited. Deposit insurance stabilized the financial sector by helping to prevent the bank runs that were so devastating. That helped, too. And the moderate fiscal expansion helped as well, at least until 1937 when that expansion was reversed and the country plunged again into another severe downturn.

If you want to include that complete reversal of policy as part of the New Deal, then you can make a convincing argument that the New Deal lengthened the recession. However, that's including in the "Neal Deal" two diametrically opposite policies: the moderately successful fiscal expansion and the actively harmful fiscal contradiction in 37 that led to another severe downturn. I don't think it's technically accurate to use the longer definition of the New Deal, but it's not a serious issue if they're honest about the changes in policy. The serious problems come up when the partisan hacks always use the extended definition and then deliberately fail to mention this complete reversal in policy. See furt's useless cite above and the toothless appeal to ivy as a follow-up. That kind of nonsense is all they have.

Some of FDR's policies certainly did contribute to lengthening the recession. No doubt about that. But it is absolutely a far-out viewpoint, bordering on wingnuttia, that the policies before 1937 were ultimately harmful on net.

[furt]

Originally Posted by Hellestal

Welcome to the real world, where we point out deliberate misrepresentations and unconscionable ignorance no matter where it comes from.

Welcome the the SDMB, where anonymous posters dismiss 49% of economists (according to BG's cite) as "far-out" and think they're not laughable.

[Hellestal]

Originally Posted by furt

Welcome the the SDMB, where anonymous posters dismiss 49% of economists (according to BG's cite) as "far-out" and think they're not laughable.

It would help if you would actually read what I wrote. Or if you're having trouble with the economics jargon, I will be happy to explain any of it. Here's what I said:

If you want to include that complete reversal of policy as part of the New Deal, then you can make a convincing argument that the New Deal lengthened the recession.

It's fine to include the reversal of fiscal policy in 1937 in the New Deal, as long as you explain that that's what you're doing. That 50% from BG includes those people. In fact, closer to 75% of economists deny that the New Deal lengthened the Depression if you don't allow them qualifiers, and even the 25% that's left has a reasonable case depending on the time period you're talking about. Those details, which you are ignoring, are essential to the discussion. You can't reasonably discuss the New Deal without pointing out that the anti-Keynesian tax increases and cuts in government spending were a reversal of previous policy.

It is not fine to ignore this turn-around from FDR. Quite to the contrary, it is deliberately mendacious or unconscionably sloppy for an expert to ignore this fiscal policy change, since that is the heart of Keynes, which means it is a part of the foundation of modern macroeconomics. The professors you cited know this very well.

They ignored it, which makes their argument shit. That doesn't automatically mean that the conclusions of their arguments are wrong, but it does mean that their reasoning to reach those conclusions is entirely untrustworthy. It's a huge sloppy mistake from the stimulus opponents, one in an ever increasing list. Which is unfortunate, because there are some reasonable arguments to make against this stimulus. But your cite doesn't include any, and in fact quite deliberately ignores the primary issue we're facing today.

[furt]

Originally Posted by Hellestal

It would help if you would actually read what I wrote. Or if you're having trouble with the economics jargon, I will be happy to explain any of it. Here's what I said:It's fine to include the reversal of fiscal policy in 1937 in the New Deal, as long as you explain that that's what you're doing. That 50% from BG includes those people. In fact, closer to 75% of economists deny that the New Deal lengthened the Depression if you don't allow them qualifiers, and even the 25% that's left has a reasonable case depending on the time period you're talking about.

I am ignoring the economics jargon because it has nothing to do with the point which I was making, which can be found in post #3 of this thread and restated several times since: namely that we don't know the answer to the OP's question, and likely will not anytime soon, given that there is much so much disagreement among the experts. Since you yourself concede that those arguing the New Deal was unequivocally bad have "a reasonable case," it would appear we agree.

If you want to debate the stimulus, that's another thread. If you want to argue that those 25% are wrong, go ahead, but I will pass; heavy economics are beyond me. What is not beyond me, however, is recognizing the difference between something that is a matter of settled science and something that is still in significant dispute even among experts. I don't need to know economics to see that the OP's question falls squarely in the latter, any more than I need to know biology to know that the Theory of Evolution is pretty much universally accepted among Biologists.

[Hellestal]

Originally Posted by furt

I am ignoring the economics jargon because it has nothing to do with the point which I was making, which can be found in post #3 of this thread and restated several times since: namely that we don't know the answer to the OP's question, and likely will not anytime soon, given that there is much so much disagreement among the experts.

After which you then cited two people who misrepresent the issue.

There is disagreement, yes. But the clear majority of the experts favor stimulus, and many of the "experts" who are against it are making elementary mistakes. I'm not saying you should automatically bow to the majority, but if you want to rely on arguments against the stimulus, you should look elsewhere instead of coughing up a blind appeal to ivy.

Originally Posted by furt

Since you yourself concede that those arguing the New Deal was unequivocally bad have "a reasonable case," it would appear we agree.

Ah, another blatant misrepresentation. I see the problem wasn't exclusively jargon. But to be clear:

There is no reasonable case to be made that the New Deal was "unequivocally bad". None whatever. That is utter bullshit, and completely contrary to what I said.

There is no reasonable case to be made that FDR's policies from 1933-1936 were "unequivocally bad". None whatever. That is utter bullshit, and completely contrary to what I said.

There is not a reasonable case to be made that FDR's policies from 1933-36 were, on the whole, negative. The monetary expansion from the dropped gold standard, by itself, pretty much outweighs all the other mistakes that were made. Check Lantern's previous cite. In addition to that, there was also deposit insurance, and a moderate fiscal expansion. FDR made some early mistakes, but also did an incredible amount of good.

But yes, it is reasonable to conclude that on net FDR's policies from 1933-39 lengthened the Depression. On net. The policies were not unequivocally bad, not in this universe or any other, but on the whole, he might've lengthened the Depression, in part due to the contractionary fiscal policy that was opposite of his previous plan. I think on net he probably did more good than bad over that entire span of years, but his obvious mistake in 37 does change the equation.

Originally Posted by furt

If you want to debate the stimulus, that's another thread. If you want to argue that those 25% are wrong, go ahead, but I will pass; heavy economics are beyond me. What is not beyond me, however, is recognizing the difference between something that is a matter of settled science and something that is still in significant dispute even among experts. I don't need to know economics to see that the OP's question falls squarely in the latter, any more than I need to know biology to know that the Theory of Evolution is pretty much universally accepted among Biologists.

I don't really disagree with this, but next time, you might consider re-evaluating your cites when they come under fire instead of trying to defend them. You just might be citing a couple partisan hacks.

[furt]

Originally Posted by Hellestal

But yes, it is reasonable to conclude that on net FDR's policies from 1933-39 lengthened the Depression. On net.

Thank you for agreeing with my central point, and addressing the OP.

All else is noise.

[Markxxx]

Well WWII ended the Great Depression. Would the New Deal have done so? No one can be sure.

All Depressions end eventually some with better outcomes than others. New Deal programs clearly ended what before were caused the visible poor. By 1960 we had pretty much ended the idea of visible poor people in American.

What WWII did was bring an equality to people we in America had never known. It became very unpatriotic to be on the black market. So while just five years prior we had an inequity in the populatons of America, that was stabalized.

What WWII did was see rations where suddenly even if you were rich you couldn't get meat or domestic help. Oh sure you could get them but people with many servants were looked down on, as "Surely those servants could be put to better use in War time industries." Plus poor people now could go and get better wages. Sure rich people could get meat at the cost of a black market and the social stigma of being unpatriotic. By in large they had to make do. This brought rich people down a few notches. And despite the Great Depression's enormity there were still many that had money.

In fact due to the New Deals areas such as West Virginia's Appalachia (virtually the whole state), the Tennessee River Valley and Mississippi's "the Delta" actually saw their living standards GO UP, not down, due to the programs.

Read Catherine Reef's "Poverty In America" for a good look on poor people and poverty in the USA from Jamestown through the 80s.

[Aquila Be]

Originally Posted by Hellestal

I don't really disagree with this, but next time, you might consider re-evaluating your cites when they come under fire instead of trying to defend them. You just might be citing a couple partisan hacks.

Unless you’re citing a bunch of classical economists, such as Smith, Say or Bastiat, none of whom were beholden to a political ideology in the modern sense of the word, no matter what pet economic theorist you want to hold up as an authority he (or, less commonly, she) will almost certainly be a partisan hack to a greater or lesser extent.

According to one of Roosevelt’s main economic advisers Henry Morgenthau Secretary to the Treasury from 1934 to 1945: -

Although he was a Roosevelt loyalist and retained his office until 1945, in "New Deal or Raw Deal?" Burton Folsom quotes Morgenthau, testifying before the House Ways and Means Committee in May of 1939, the FDR ally did not sugarcoat it: "We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot."

In the links contained in Hentor the Barbarian’s Post #23 about conservatives cherry picking unemployment figures from the New Deal period, the adjustments made to the figures are mostly fairly minor and transform the figures by only a few percentage points up or down.

Whether you have a 10% or 15 % unemployment rate, this does not change the underlying reality of a severe and apparently intractable economic recession. Nor does it change the reality that until the arrival of WWII no improvements in the unemployment rate during the Roosevelt regime were ever sustained or came close to achieving the employment levels that were the norm in the years before the start of the depression.

[Lantern]

http://www.huppi.com/kangaroo/Timeline.htm

This has a useful timeline of the Depression and a particularly useful table at the bottom. The first thing that's important to understand is how gigantic a hole the economy was in when Roosevelt took office. The unemployment rate was an incredible 25% in 1933. It started improving immediately and was 14% in 1937. 14% sounds terrible in most contexts but if you compare to 1933 that's a 11% decline in just four years which is pretty spectacular. So in its first few years the New Deal was extremely successful by any reasonable measure.

Then you had the 37-38 recession and the unemployment rate climbed to 19% again. However if you look at the budget numbers in that table it's pretty clear what happened. The deficit was more than 5% in 1936. Then Roosevelt was forced to reduce it to 2.5% in 1937 and then just 0.1% in 1938 which lead to a sharp recession. When the deficit climbed to 3.2% in 1939 the economy recovered again with GDP growing by 8% and the unemployment rate falling to 17%. Incidentally I don't know if these unemployment figures were adjusted for government-created jobs in which case the improvement would have been even sharper. Regardless they tell a pretty clear story about the positive impact of deficit spending during the depression.

[Hentor the Barbarian]

Originally Posted by Aquila Be

Whether you have a 10% or 15 % unemployment rate, this does not change the underlying reality of a severe and apparently intractable economic recession. Nor does it change the reality that until the arrival of WWII no improvements in the unemployment rate during the Roosevelt regime were ever sustained or came close to achieving the employment levels that were the norm in the years before the start of the depression.

Intractible? As was written in the first link I presented:

That's the story the numbers tell. The New Deal worked, worked well, and worked quickly. These days, we define recessions as two consecutive quarters of declining gross domestic product. By that measure, when did the Great Depression end? One quarter after Roosevelt took office, that's when. Yes, it took years to repair the damage of the anything goes marketeers, but the recovery started the moment the New Deal started.

It can be only willful ignorance that pretends there was not marked annual improvement subsequent to the onset of the New Deal.

[gonzomax]

WW2 is an example of stimulus spending. It does not matter what the production was used for. What matters is money flew into the economy and the wealth of the citizens increased. Note of course that the wealth of the country is built from the bottom up. When the wealth is centered in the rich, the country suffers.

[ralph124c]

good thread: I am struck by how ell the USA economy absorbed the enormous cost of WWII (which cost about $11 trillion). And most of the war production was for stuff that had NO civilan value! take a Sherman tank -say it cost abot $100,000 (1945 dollars) to build. when hostilities ceased, it was just about worthless.
Somthe USA economy can tolerate a lot of deficit spending-imagine if what was spent on WWII was used to build houses, factories, roads!

[Algher]

Originally Posted by ralph124c

good thread: I am struck by how ell the USA economy absorbed the enormous cost of WWII (which cost about $11 trillion). And most of the war production was for stuff that had NO civilan value! take a Sherman tank -say it cost abot $100,000 (1945 dollars) to build. when hostilities ceased, it was just about worthless.
Somthe USA economy can tolerate a lot of deficit spending-imagine if what was spent on WWII was used to build houses, factories, roads!

Many of those factories were re-tooled for civilian use however. They took a tank factory and made it back into a truck factory. Boeing started making civilian models of military transport planes.

It also helped that Europe was destroyed, so we were able to use all of those nice, shiny factories to sell them stuff that they could not make.

[Squink]

Originally Posted by ralph124c

Somthe USA economy can tolerate a lot of deficit spending-imagine if what was spent on WWII was used to build houses, factories, roads!

Yup, this'd be a good decade to send a man to mars, and return him safely to earth. That'd create a lot of the types of jobs we want if America is to have any hope of retaining its superpower status.