"The general consensus among economists is that the New Deal didn't work."?

That’s the gist of what I heard an economist from U of Missouri (I think) last night on CNN. I was just flipping through the channels, so I didn’t catch the whole comment. He said something along the lines of “The New Deal created jobs, but it didn’t create long-term employment. In that, it was a failure.”

Is there any such consensus among economists that the New Deal failed to accomplish what it set out to do?

Not when I was in college (80s).

Unprecedented prosperity starting in the 40s and leading up to the present day is a failure?

I invite anyone who thinks the New Deal didn’t work to go to a hotel in Nashville Tennessee, flick the lights on and off while pondering the Tennessee Valley Authority until it clicks and the light flicks on as to what connection I might be trying to draw here.

Your examples don’t really prove that the New Deal was successful in pulling the United States out of the Great Depression. Certainly the TVA was pretty cool but did it reverse the depression?

The New Deal was a whole bunch of things. Some of them failed, some worked. On balance there is plenty of evidence that it didn’t do much. Unemployment and economic growth weren’t much better in 1937 than they were in 1931. Some aspects of the New Deal were outright failures - for example, the National Recovery Administration was a big failure, attempting to fix prices and set minimum wages that were unsustainable, and it was eventually declared unconstitutional. On the other hand, going off the gold standard was a good thing.

Two UCLA economists wrote a paper in 2004 in which they claimed the New Deal lengthened the Great Depression by seven years. Here’s an overview: FDR’s policies prolonged Depression by 7 years, UCLA economists calculate

A survey of economists that same year found that about half agreed either strongly or somewhat that the New Deal made the Great Depression worse, and about half disagreed. So anyone claiming categorically that it was either a net positive or a net negative is not speaking for the ‘overwhelming majority’ of economists.

Yeah, this is a statement along the lines of “the consensus among biologists is that evolution doesn’t actually happen” or “the consensus among climatologists is that climate change was created by Al Gore who wanted to show everyone his Powerpoint skills”. You hear it a lot, but only from a small group of idealogical nutjobs and it’s not actually true.

The New Deal in the US created the impetus that kickstarted the US out of the Great Depression by providing a cash injection to reverse a vicious spiral into a virtuous one - the cash input reversed expectations and the multiplier effect built its effects into the economy after the direct effects had passed.

If the question is “will a stimulus in 2009 have the same effect?”, that’s very different - but only fringe economists think that the New Deal didn’t work. Maybe not quite in the way it was intended, but it certainly worked.

The New Deal wasn’t about pulling us out of the depression as I understand it, it was about building an economic foundation so that the depression wouldn’t occur again. The question of whether or not it lead to sustained economic prosperity is as far as I can tell indisputable.

No, the question of whether or not sustained economic prosperity was *subsequent *to the New Deal is indisputable, but those are not at all the same question.

So you think Tennessee’s current prosperity might have happened if they hadn’t laid the electrical grid?

Are you suggesting that if the TVA hadn’t laid the electrical grid, then no one else would have?

I’m not saying it was necessarily a bad idea for them to do so, but just because prosperity followed a specific type and level of government intervention doesn’t mean that said prosperity was *caused *by that specific type and level of intervention.

I don’t really have much to add to this conversation—I’m not a student of macro—but as someone who spends much of his time being taught by economists, I can say that it’s far less controversial among economists to say that the new deal failed than than it would be among biologists that evolution did not occur. (As a thought experiment, I can’t even imagine the most fringe anti-evolution biologist claiming that a majority of his peers agree with him. The disagreement is what allows him to feel martyred.)

I’m saying the TVA DID lay the electrical grid. It probably would have been laid without the New Deal, but when?

Yes, I understand corrolation isn’t causation and all that, but there are concrete examples such as the TVA that can be looked at. What businesses were possible in Tennessee, Alabama et. al. that wouldn’t have been otherwise?

Was the New Deal about restoring America to a previous level of prosperity, or about a more equitable and just sharing of whatever the economy has to offer? There are those who would say that if the economy booms and 90% of the added value goes to the top 1% of the citizenry, that is a booming economy, and an outcome greatly to be admired.

(Excuse, got to put on my Woody Guthrie CD, get in the right mood here…)

In the history books our children are instructed from, they are taught that labor and capital had a long and polite discussion, and in the end capital generously poured the benefits from its outstretched hands. The alternative view is that capital was scared shitless by the radical winds blowing across the nation, and struck the best deal they could…just enough, but not one dime more.

Another view oft repeated is that FDR knew full well that some of his New Deal wouldn’t get to see the light of day, but that was not as important as creating some modus vivendi, that seeing something happening was nearly as important as the actual doing. In economics, this makes a lot of sense, there is a need for optimism to encourage progress, how the people think you are doing is just as important as how you really are doing.

As to whether it had a miraculous economic value, the experiment is shattered by WWII, the war that everybody lost but us. Under such circumstances, even Herbert Hoover would have led the country to economic prosperity, it would have been nearly impossible to fail.

Short answer: No. But it is the view of a minority.

I don’t think those are the appropriate points of comparison if we want to talk about the efficacy of the New Deal. FDR didn’t take office until March of 1933, so of course there was no New Deal to have any effect until then, and GDP didn’t bottom out, nor did unemployment peak, until around then either. By 1937, real GDP had surpassed it’s previous 1929 high, and per-capita income hit a new high as well. Unemployment dropped steadily until 1937 as well, going from about 25% (!) in 1933 to about 15% in 1937. So what changed in 1937? FDR re-discovered fiscal responsibility and slashed the budget, and sent the economy into a minor recession. I don’t dispute that some New Deal programs were better than others, but I would say that, on balance, there is plenty of evidence that the New Deal worked.

Here’s a source for the various economic numbers. The post is definitely biased, but all the statistics are sourced.

Edit: Here are essentially the same stats from Wikipedia

There is no such simple sentence unqualified consensus among economists. And he is a liar for implying that there is such a consensus. As people here have mentioned, it provided a lot of jobs right away, many of those jobs, such as Hoover and Grand Coulee and TVA dams have provided electricity, water and flood control for decades. Those resources, especially electricity are labor multipliers.
The only way this ass-clown is correct is if you limit your definition of success to putting people back to work in same jobs and industries more or less instantly that were destroyed by the crash, credit freeze and deflation, all of which was impossible in 1933 when the New Deal started because the economic destruction had a three year head start to destroy all of that financial and industrial infrastructure. The only way to have avoided the length and depth of the depression would have been to have done within a few months of the 29 crash what Paulson, Bernake and Geithner have done since Bear Sterns and AIG collapsed. It is still entirely possible that if these reckless attempts to prevent another great depression will work, and in fact, they do seem to be working, but it will take at least 2 years to have any confidence in that. I’d still like to see the tasks of risk evaluation of investments and financing of those investments being completely separated, which is not likely to happen in the face of opposition of the big investment houses.

Paul Krugman talked about FDR’s programs in his Rolling Stone article advising Obama about how to handle our latter day Depression. A small part:

Take that as you will.

Your first sentence and second paragraph seem to be setting different standards.

Chronological order does not imply causation but I’m certain a more invested person could put forth considerable evidence that laying the electrical grid was instrumental in future prosperity in Tennessee.

On the other hand in your first sentence it sounds like you’re implying that if the electrical grid could possibly have been laid without the TVA, then the TVA was ineffective. That’s not fair. It was laid thanks to the TVA. If it can be shown to have led to prosperity then it was effective. It might be worthwhile to consider whether it could have happened through other means but it’s not germane to the effectiveness of what did happen.

If A causes B, then A was effective at causing B. In the larger picture it might matter that C could also have caused B, but it wouldn’t change the fact that in reality A did cause B.

I’m currently reading Amity Shlaes’ ‘The Forgotten Man’ and am finding it quite enjoyable. One thing I never fully appreciated was how much of an interventionist Hoover was, prior to FDR’s election. Hoover generally gets a rap as a fiddling-while-Rome-burns President, which I knew was false…what I didn’t know was how much. FDR even railed against some of Hoover’s programs during the election, only to amp them up (or call them something else) after he was elected.

All of the learned economist bickering starts to bore me after a while. I would prefer to stick with some very simple, basic concepts and see if they can-or-can’t paint the big picture. Because that’s what the average, reasonably educated voter needs to deal with. Like me.

  1. The NRA introduced competition codes that not only fixed prices, but destroyed wealth and food (quite literally, as in slaughtering animals) and shut down going-concern businesses when people were starving and unemployed. The theory was that somehow, micro-economic fiddling with price stability and eliminating ‘too much competition’ would spur prosperity.

A child running a lemonade stand might stop and scratch their head and wonder how that was supposed to improve the lot of average Americans. Google ‘Schechter Poultry vs the United States’ or read Shlaes to get a particularly disturbing account of how the government mandarins harassed and hounded hard-working businessmen trying to eke out an honest living during the Great Depression.

There are some eyebrow-raising transcripts and quotes from judges and government lawyers during Schechter’s march through the court system, claiming ‘they know best’ about the economy, and that sound eerily like Rahm Emanuel and Robert Gibbs. I’d throw Obama in there too, but I know that would spark a bajillion reactions that would take us off-topic.

  1. 1933 to 1937 is usually cited as the ‘proving ground’ for the New Deal. I’m no Nobel laureate like Paul Krugman, but I know enough math to realize that is four freaking years. And you can add four more onto the front of it, if you count 1929-1933. And even 3 more onto the back of it, if you want to throw in 1937-1940.

That’s 11 years. The implication is that, if laissez-faire economics were employed rather than New Deal-type interventionism (and to be fair, I’m counting Hoover’s early interventionism here as part of the New Deal), things would have been worse after 11 years. Does that sound plausible to you?

I know some of the horrible things like Smoot-Hawley weren’t Roosevelt’s doing (although he could have un-done them, quicker), and I also know there isn’t a perfect laissez-faire ‘control’ you can compare against.

But 11 years? There was - and is - no comparable period in American history when reasonably laissez-faire economics produced an 11-year period like that. The closest thing was the Long Depression that began with the Panic of 1873 following the bursting of the railroad bubble (which also could be argued was government-induced) but even that didn’t last 11 years.

The painful recessions of the 1970’s (which involved severe external oil shocks) didn’t last nearly as long. Nor that of the 50’s, or the early 80’s.

There are probably lots of pluses and minuses as Sam Stone said. But to state with high confidence that FDR’s New Deal worked and would have been better than the alternative just doesn’t pass any reasonable smell test, even if you aren’t a ‘trained economist’.

You seem to be ignoring the fact that laissez-faire economics was what triggered that 11-year period in the first place.

Yes, it’s reasonable to evaluate ways in which some of the interventionist policies post-1929 didn’t accomplish as much as was hoped, or even in some cases were counterproductive. But let’s not get so obsessed with scrutinizing the flaws in the treatment that we forget what caused the disease.