I concluded with, “they are now even going so far as to rewrite the history of the Roosevelt New Deal. Now we hear that the New Deal was totally ineffective and that it was only World War II that saved the economy.
Thus the Right Wing, Heritage Foundation, published an article on its web-site on January 9, 2009 entitled, “More federal spending: New deal or raw deal?” They then published a graph issued by the Department of Commerce, which I reproduce below: The amazing thing is that anybody who takes the time to actually examine the graph will quickly see that the graph proves the opposite. The graph shows the unemployment rate between the years 1926 to 1947.
In ’26 it was a spectacular 2.5% but then it starts to inch up as the economy slows. By ’28 it is up to over 5%. By the time Roosevelt is inaugurated on March 4, 1933 it has peaked at 35.5%. Roosevelt starts his New Deal and unemployment starts to drop steadily until it gets to just above 20% in 1937, a drop of 15% or a cut in the rate of unemployment of almost 50%. It may not have brought us back to the boom year of ’28 but to minimize this achievement is the height of ignominy.
But despite these successes, Roosevelt was inherently in sympathy with conservative orthodoxy and in the ’37 election ran on a platform of balancing the budget.
Social Security taxes were just beginning to be collected; veterans' bonus payments ended. The Federal Reserve Board raised reserve requirements and supported the Department of the Treasury's advocacy of a cutback in federal expenditures to help achieve a balanced budget for 1938.
These policies choked the frail recovery and by August the economy was showing signs of recession. See here.
In fact this departure by Roosevelt of Keynesian economics caused an exasperated John Maynard Keynes to write the president, urging him to abandon his platform of balancing the budget and raising taxes. See here. In other words to the extent that Roosevelt had a setback in 1937 it was not due to following stimulative policies but rather abandoning them too soon.
All indications are that Obama has learned that lesson and will not make the horrendous mistakes of Hoover, nor the smaller ones of Roosevelt.
But as for Roosevelt having failed, a look at other statistics shows how far Roosevelt had succeed even before the advent of the War. For example let us look at the figures for six major indices.
Table 1: Statistics
1929, 1931, 1933, 1937, 1938, 1940
Real Gross National Product (GNP)
101.4 84.3 68.3 103.9 96.7 113.0
Consumer Price Index
122.5 108.7 92.4 102.7 99.4 100.2
Index of Industrial Production
109 75 69 112 89 126
Money Supply M2 ($ billions)
46.6 42.7 32.2 45.7 49.3 55.2
Exports ($ billions)
5.24 2.42 1.67 3.35 3.18 4.02
Unemployment (% of civilian work force)
3.1 16.1 25.2 13.8 16.5 13.9
For the Gross National Product we see that it was a whopping 101.4 in ’29. By the time Roosevelt came into office it had dropped to 68.3. Stimulative policies brought this above the ’29 rate, to 103.9 in ’37 but because Roosevelt temporarily deviated from sound Keynesian principles and tried prematurely to balance the budget it dropped to 96.7 in ’38, but upon a reversal of those policies reached a new high before the war of 113, higher then the record high of ’29.
We see a similar pattern for the other indices. Enormous improvement, a slight set back in ‘37, and again significant improvement by 1940. See the Right Wing website, Conservapivia.
Or let us look at still another graph showing unemployment and real GDP. The enormous success of Roosevelt’s policies is apparent, with a slight and temporary setback in 1937.
How anyone can claim failure for the New Deal given these incontrovertible statistics has to be a mystery to all who like to draw their conclusions from facts and not from immutable Ideology. If Roosevelt faltered it was not because he did too much too long, but because he didn’t do enough long enough. But the legacy that Roosevelt left us with, includes among others Federal Deposit Insurance Corporation, Unemployment Insurance and the many other programs, which even the denizens of the Right admit are brakes on the collapse of the economy. They are a testament to the success of the New Deal, no matter how convenient it may be for them to try to trash it.
As for World War II finally getting us back to full prosperity, I am waiting to hear from the opponents of stimulative spending as to how they think the war got the economy rolling. It took vast government spending on useless armaments (in the sense of having long range economic benefits-it goes without saying that they were essential to winning the war) that were destroyed on the battlefield, to sufficiently stimulate the economy into the post war booms.
Posts
2 comments:
Without debating the success of the New Deal or its merits, FDR "did something." Inertia is a sure way of failing.....and without FDR's maverick governing, this country could not, would not have been sustained.
Parallel to the past eight years, after a decade of Harding/Coolidge/Hoover and "doing nothing," FDR was the first president that used the government to help the individual. Up until his term(s) in office, Government espoused "hands off." Can you just imagine the chaos caused by creating a Social Security tax for companies and executives and workers!!!!!!!!! He was called every Socialist name in the book. Today we just take for granted (and enjoy) "Social" Security, but in 1935!
Among many other programs, the uproar over the maverick Fair Labor Standards Act! Imagine the government actually dictated the minimum wage that could legally be paid to workers--and, maximum hour levels---and, to boot all: Labor by children under 16 (18 if the occupation was dangerous) was forbidden! Outrageous. Again, he was called every Socialistic slur in the book, from Commie to Marxist to Red, Pinko. In the South, alone, the economy relied on working "children," some 8 years old...many 12 years old!
To some conservatives, the New Deal was a radical attempt to make America over in a Bolshevik-Marxist image. They condemned "Rooseveltski" for bringing to Washington "crackpot" college professors (imagine that)!
"The Red New Deal with a Soviet seal
"Endorsed by a Moscow hand,
"The strange result of an alien cult
"In a liberty-loving land."
Roosevelt was further accused by conservatives of tapping too many bright young leftists for his "Jew Deal," or even of being Jewish himself ("Rosenfeld").
President Roosevelt said, "It is not Capitalism that I am against, it is Capitalists." FDR dealt well with conservatives....it was the radical left that gave him the biggest problems; i.e., Senator Huey Long of Louisiana....King Fish! Is Wall Street still standing? At the end of the day, FDR actually "saved" conservatism and capitalism in this country!
I believe that President Obama's history will be similarly written....
Roosevelt was not only accused of being a Socialist, he was also accused of being a fascist. Former President Herbert Hoover, who developed the fascist theme, said that the NRA was too closely linked to the "fascism" that big business industrialists wanted to impose. Hoover wrote in his memoirs,"Among the early Roosevelt fascist measures was the National Industry Recovery Act (NRA) of June 16, 1933 ...."
Whenever entrenched powers feel threatened, they lash out with name calling, and it doesn't matter what names they use, whether it is Socialist, Communist, Fascist or even Jew lover or worse being Jewish. As Barbara points out, Roosevelt was accused of "being Jewish himself ('Rosenfeld').
On the merits, it is interesting to note that in the three years before Roosevelt was inaugurated the economy was in a free fall, with unemployment rising rapidly, the GNP falling rapidly, but Roosevelt's policies turned these around rather quickly, and things improved constantly during his Administration, with only a slight dip in 1937, after which the economy continued to improve. The statistics I cite and the graphs I reproduce clearly show these indisputable facts.
We are very lucky this time that we changed Administrations and policies relatively early in the downturn, or three years hence we might have had a full fledged depression.
Post a Comment