I’ve already alluded to the right wing’s attempts to spread misinformation about the New Deal and the Great Depression. The mass media echo chamber has been full of them lately, and I’ve linked to a couple of items that have been rowing against the tide. I have perhaps been too casual about assuming that everyone is familiar with the real story, however. A careful look at some empirical truth is called for here, if we are to learn the correct lessons applicable to our current situation.
So let’s revisit those two links in greater detail. A few diligent scholars and journalists have done their homework so you and I don’t have to.
First, from economist Charles McMillion’s essay entitled “The ‘FDR Failed’ Myth” (emph. mine):
[I]t is imperative to expose a dangerous popular myth regarding the efficacy of President Roosevelt’s actions: that it was not the programs of the New Deal, but only the placing of the nation on a wartime footing years later, that restored the health of the nation’s economy.
This belief, though widely held, cannot stand up to even the most basic economic analysis. Yet the mainstream corporate media, which abound with anti-government ideology, seek to reinforce this myth. Just this past Sunday, The Washington Post featured on Page One of its Outlook section an article by Amity Shlaes headlined “FDR Was a Great Leader, But His Economic Plan Isn’t One to Follow.” …
The basic economic facts from the 1930s—according to the Department of Commerce, the Federal Reserve, and other official sources—are fundamentally different from the unsupported claims put forward by Shlaes and prominent in popular myth. The monthly data for industrial production show a near three-year collapse under President Hoover, ending when FDR came to office in March 1933. Production rocketed by 44 percent in the first three months of the New Deal and, by December 1936, had completely recovered to surpass its 1929 peak.
GDP, only available as annual averages, plunged 25.6 percent from 1929-1932, including by 13.0 percent in 1932. It stabilized in 1933, and then soared by 10.8 percent, 8.9 percent and 12.0 percent, respectively, in 1934, 1935 and 1936. Real GDP surpassed its 1929 peak in 1936 and never again fell below it. After-tax personal income, consumer spending, real private investment and jobs all reached or surpassed their 1929 peaks by late 1936.
Second, from The Boston Globe, on “The New Deal and right-wing revisionism”:
One might have thought that voters of that day had pretty much settled the question of whether the New Deal worked by enthusiastically reelecting FDR, and not once but three times. But since right-wing revisionism is really an arrow aimed at the current stimulus plan, the effort to discredit the New Deal is worth examining.
…what do unemployment figures from the era actually show? The best regarded data excluding public-works employees traces a steady decline in joblessness through the first five years of the New Deal, from 25 percent when FDR took office to 14.3 percent in 1937. Then, however, joblessness rose, hitting 19.1 percent in 1938 before dropping back to 14.6 percent in 1940 and 9.9 percent in 1941.
Include work-relief employees, and unemployment declined more steeply, falling to 9.2 percent in 1937. It then rose to 12.5 percent in 1938 before dropping back to 6 percent in 1941. …
Still, the New Deal debate does raise an interesting question: Why did Roosevelt’s recovery falter?
Unfortunately for conservatives, the evidence cuts against their conclusions. The rise in unemployment followed FDR’s cutback in government spending in 1937. The resulting spike in unemployment prompted him to shift courses and expand spending again, whereupon unemployment again fell.
Gross Domestic Product tracks the same way, notes economist Dean Baker, who has matched the increase in federal spending during each Depression year with the following year’s growth in GDP. A 23.7 percent increase in federal spending in 1933 was followed by a 10.8 percent increase in GDP in 1934, for example, while a 34.2 percent increase in 1934 was followed by an 8.9 percent GDP increase in 1935. But when FDR retrenched and spending fell by 10 percent in 1937, the next year’s GDP shrank by 3.4 percent. …
There’s virtually no disagreement that World War II gave the country the strong final tug out of the Depression. Yet that reality also argues for the efficacy of Keynesian remedies; economically, the war constituted a huge government stimulus, financed by massive deficit spending.
Any questions?… 🙄Tags: Depression, economy, FDR, history