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FDR’s Policies extended the Depression by 7 years
Posted by: McQ on Thursday, October 23, 2008

And frankly, if WWII hadn't intervened, it could have gone on longer.

Two UCLA economists have done some heavy research into why the Great Depression was A) "Great" and B) lasted so long.

In both cases the culprit was government intervention. In fact, per Harold L. Cole and Lee E. Ohanian, New Deal policies of 71 years ago "thwarted economic recovery for seven long years".

The two major problems had to do with government sponsored industry collusion in return for agreeing to enter into collective bargaining. That drove both prices and wages much higher than they should have been and dramatically slowed the recovery.

Read the excellent summary of their findings, but most importantly, as it appears we're poised to repeat history, heed their conclusion:
"The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes," Cole said. "Ironically, our work shows that the recovery would have been very rapid had the government not intervened."
 
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Previous Comments to this Post 

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you’re obviously not reading enough A Secondhand Conjecture McQ.
 
Written By: ChrisB
URL: http://asecondhandconjecture.com/
I remember in high school an FDR admiring history teacher telling us how FDR’s New Deal ended the depression and to demonstrate, he showed us a graph of what I guess was the GNP from 1928 to 1942, or thereabouts. You could clearly see the dip in 1929, then the sharper dip in 1933, and then it staying pretty low until 1942, when it shot up. We students kept pointing this fact to him—"Look at the chart! These are your figures—see the jump in 1942?" But he just didn’t get it. There are none so blind, etc.

However, to be fair, the graph did show that FDR got us out of the Depression, eventually. With all the talk of a New Deal II, I hope someone puts the fleet on alert this time.
 
Written By: Bilwick
URL: http://
However, to be fair, the graph did show that FDR got us out of the Depression, eventually.
No he didn’t. He made it worse, the market would have ended it much sooner if he kept his mitts off. And he didn’t really end it, it just ended while he was still in office, despite him.
 
Written By: Don
URL: http://
Frankly, we have long since known that FDR was a fraud, that his economic policies were fascist disasters, and that he made the depression worse.

Economists have already pointed this out. What this particular study does is make the case overwhelming.

Yet Democrats will continue the stupid economic tricks, like those that caused the housing bubble and resulting financial meltdown.
 
Written By: Don
URL: http://
Please, someone educate me in the following: Why would (or how did) WWII "end" the Great Depression?
 
Written By: Nuclear
URL: http://
It put 11 million men to work (the military) and backfilled their jobs with what was left of those who weren’t serving in the military as well as many women.

We went from 17% to 24% unemployment to full employment plus.

Idle or under producing industry was geared up for war production and many new business (and jobs) were created to support that.

Those are two of the larger reasons. Without the war, the depression may have dragged on for a few more years.
 
Written By: McQ
URL: http://www.QandO.net
So war is good...at least in this instance. Although I can think of many "jobs" that the government can come up with, none of those jobs create wealth. (And wars are expensive, which requires wealth to sustain them.) So I would think "war jobs", in addition to New Deal jobs, would not create wealth.
 
Written By: Nuclear
URL: http://
Plus, one would think that the economic policies of the 30’s would have had to change in order to truly get out of the Depression, especially after the war. If that is the case, then which Depression-era policies were abandoned or changed?
 
Written By: Nuclear
URL: http://
So war is good...at least in this instance.
In this particular instance, yes.
Although I can think of many "jobs" that the government can come up with, none of those jobs create wealth.
It wasn’t a matter of wealth at that time - it was a matter of employment, three squares and a roof.

From that you can begin to build wealth.
So I would think "war jobs", in addition to New Deal jobs, would not create wealth.
What created wealth occurred after the war when we were just about the only power in the world whose economy hadn’t been destroyed by war.
Plus, one would think that the economic policies If the 30’s would have had to change in order to truly get out of the Depression, especially after the war. If that is the case, then which Depression-era policies were abandoned or changed?
If you read the whole article you’ll note that the NIR which created the two major problems that slowed recovery was declared unconstitutional. And there were other things as well that ended up being abandoned.
 
Written By: McQ
URL: http://www.QandO.net
Seven seems optimistic. It would probably be double that without WW II.
 
Written By: TallDave
URL: http://deanesmay.com
So war is good...at least in this instance.
In this particular instance, yes


Yes and no. It’s good to be the country producing the bombs and guns and tanks if all the fighting is somewhere else.

Overall, of course, WW II devastated the world economy.
 
Written By: TallDave
URL: http://deanesmay.com
More than anything else, I think FDR turned his attention to the war, and consequently was doing less to harm the economy.
 
Written By: Don
URL: http://
" So I would think "war jobs", in addition to New Deal jobs, would not create wealth."

It wasn’t just jobs. There was a huge amount of capital investment and education/training expenditure during the war, as well as beans, bullets, and jobs. Entire industries were created or greatly enlarged from small businesses. The government built factories, research laboratories, etc. which were converted to civilian use after the war. The aluminum industry, for example, was quite small before WWII. Kaiser aluminum was created in 1946 when it acquired three plants built by the government during the war. Airlines and shipping companies were started with surplus equipment. There was actually a shortage of consumer goods after the war until the war industries were converted to civilian production.



"So war is good...at least in this instance."

War is almost always good for someone. The trick is to be that someone. It certainly wasn’t good for 500,000+ Americans or their families. Think of it as similar to a Soviet five year plan; somebody may benefit from the economic growth, but the price is high.
 
Written By: timactual
URL: http://
In fact, I suspect the entire Iraq war also acted as a large fiscal stimulus for the USA. A lot of the money we paid out goes back into the pockets of the troops, contractors, etc., most of whom are American and will eventually spend it back in the States.

Lots of East Asian countries got their economies jump started by the Korean war or the Vietnam war (Japan for Korea and Taiwan/Korea for Vietnam)
 
Written By: Harun
URL: http://
Timactual’s short answer:

"The Fallacy of the Broken Window"

http://en.wikipedia.org/wiki/Parable_of_the_broken_window
 
Written By: Ernest Brown
URL: http://
"Timactual’s short answer:

"The Fallacy of the Broken Window" "

Right on.

"In fact, I suspect the entire Iraq war also acted as a large fiscal stimulus for the USA."

See above. Most government spending, even most defense spending, are mostly transfer payments with no net economic stimulus. Instead of person A spending money, person B spends it. The money will be spent either way. Unless you print new money, which has its own problems.

The economic stimulus given to Japan, etc. by the Korean war was from an external source. American money increased demand and capital investment in those countries, in addition to their own internal demand and investment. In effect, net exports were increased. If the Iraq war was paid for by someone other than the US there would probably be a stimulus.
 
Written By: timactual
URL: http://
Actually, WWII did not create jobs or "end the depression". WWII hurt the American economy from reaching its full potential.

The main reason WWII SEEMED to end the Great Depression was because FDR had to suspend a lot of his New Deal programs/policies to finance the war, including disastrous policies such as price fixing. As these policies came to an end, so did unemployment.

WWII ended the great depression because FDR couldn’t fight a war and manage the economy. Luckily for the USA, FDR died before WWII ended, so no more New Deal programs could be put into effect after WWII; however, this created the illusion that WWII "ended the depression".

http://www.mackinac.org/article.aspx?ID=4013
 
Written By: Samra
URL: http://
FDR did not extend the depression

the GOP blocked actions that would have helped.

Productivity did NOT increase

Spending was limited by accumulation of wealth

Currently the merger of stockbrokers, banks and insurance companies and the Commodity Futures Modernization Act split the originator of the loan from the ultimate collector.

"That ended significant regulation of the financial community.”
 
Written By: nick
URL: http://
Well gee Nick, two economists who researched it and submitted peer reviewed papers seem to disagree.

Wonder who I find more credible. Them or someone blathering on with a collection unrelated sentences?
 
Written By: McQ
URL: http://www.QandO.net

 
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