The most significant thing about this Daniel Hannan tweet, I think, is not his praise of a Michael Gove speech, but his aside to the effect that FDR “turned a recession into a depression”. This idea is really getting around, and this is a very good thing.
It was the New Deal which put the Great in the Great Depression. (I found myself emitting this sentence at the end of this at my personal blog, which started out being about something else entirely, namely the current Lockdown, rather than about how the world will or will not emerge successfully from it.)
I just googled the above epigram, and the first piece I got to asked: Did New Deal Programs Help End the Great Depression? That item one in such a search casts doubt on (rather than simply endorsing) the claim that The New Deal did end the Great Depression, is a big propaganda step in the right direction.
What people now think is the quickest and best way to end an economic recession matters very much. That surely being why Hannan felt the need to say this about FDR’s disastrous economic policies, even though he was tweeting about something else.
[…] Inspired by this Daniel Hannan tweet, I just did a piece for Samizdata entitled It was the New Deal which put the Great in the Great Depression. […]
I first came across this idea from Milton Friedman. I’d already noticed (unreflectively – I was younger then) that the only points on which standard/left economists and historians of the great depression universally agreed were
a) The policy of the US government made the situation worse (as did the policies of some other governments, e.g the French and, insofar as it mattered to the rest of the world, the Soviet).
b) This sole agreed fact was a minor postscript to be mentioned only in passing while everyone argued over a range of theories about what fundamental defects in the US capitalist economy caused the great depression.
Milton argued that if all anyone could agree on was that the government reacted to the downturn by making things worse, maybe that was why things got worse, instead of its being a normal brief downturn followed by an upturn, as was the well-known short-term experience of the onward advance of any relatively unregulated free enterprise economy.
Milton had his predecessors. The UK approach was on the whole a good deal saner than the US and French and I later came across fairly sensible, long-forgotten remarks in some contemporary UK early-30s coverage. It is only fair to note that the Brits were part-motivated by the (uh, ‘acceptable’ to them) belief that the US, having taken over financial leadership of the world from them as a result of WWI, were making a right cock-up of it, but – though I am a Brit who says it – I think they made a good case. 🙂
Of course, this ‘making things worse’ began before FDR came on the scene. His first contribution as president, agreed with his predecessor, was the huge banking disruption around his inauguration. His new deal ensured that the US climbed out of depression a lot slower than it fell in – and in that sense put the great(ly prolonged) into the great depression.
It is amazing that so many people still don’t understand this after so much time has passed.
There’s a distance between “understand” and “want to accept”, if you’re a progressive New Dealer in America. That’s their model of how things are supposed to work.
Heck, we needed to pass the 22nd Amendment to limit the number of terms a president can serve because he was so god-like here during his four terms.
I remember being shown on Schools TV a number of short films extolling the New Deal, upwards shots of powerful tractors and more powerful new dams. Looking back not much different to the Soviet Tractor Stats and Heroic Worker (I forget his name Stakanov ?) propaganda we were also shown.
As for the UK parts of the country and sectors of the economy might have been in recession but the Southeast was busy building suburban houses and motor vehicles
Don’t be too encouraged as Jellyballs Johnson is talking up state subsidised green jobs bullshit. Worse than the New Deal by a long distance.
And remember Blojob is –like that scum Macron–a greenfreak car grabber–tho more stealthy than the Frog-spawn.
Have a look at how minor MOT matters have now become grounds for fail and more expense.
Central economic planning and control cannot work because as Hayek pointed out, all knowledge is local and the centre cannot have enough knowledge of a complex, changing, interacting system like the economy (or society) to enable it to determine best outcome and then control every aspect to deliver it.
What The Planners & Controllers never factor in, is independent Human agency. People just don’t behave and do what they are supposed to – damnit!
It’s also worth comparing and contrasting the depression of the early 1920s that got nipped before it could become Great:
https://www.cato.org/publications/commentary/notsogreat-depression
I would recommend that anyone interested in that period read “The Forgotten Man; A New History of the Great Depression” by Amity Schlaes. It’s a very interesting and well written accounting of how the New Deal did make things worse than they needed to be.
Part of the problem with the New Deal was the uncertainty. It was restructuring large swathes of the economy with questionable authority. Not only could businesses not be certain what new laws Congress was going to pass in the name of Roosevelt’s New Deal, they couldn’t be certain those laws would withstand the Supreme Court’s scrutiny. Even if those laws were economy maximizers (doubtful at best) the uncertainty could have strangled the economy all on its own.
The New Deal might have been an economic failure, but it was a huge success from the Democrats’ perspective. It gave them more-or-less continuous control of the House of Representatives until the 1980s. It also hugely expanded the size and scope of government, seemingly permanently. Any subsequent attempt to roll back the state, even when lead by people supposedly committed to it, has always ended in ignominious failure.
https://capx.co/the-real-lesson-of-the-great-depression/
Just wrote a long comment – but pressed the wrong key (or something) and all my work is gone.
I will go for a walk, in order to calm down, and then do the work again.
I will start again.
The Credit Money bubble crash of 1929 was caused by the Credit Money expansion of the late 1920s- the phony “boom” causes the bust, this is true of every bust in American history going back to the crash of 1819. Indeed the expansion of bank credit leading to a boom-bust was first explained by Richard Cantillon in the early 1700s.
Did Milton Friedman ever understand this? I doubt that – as his hero Benjamin Strong of the New York Federal Reserve was at the heart of pushing up the Credit Money in the late 1920s. To Mr Strong (as to the economist Irving Fisher – another hero of Milton Friedman) there is no problem if the “Price Level” is stable – he never grasped that the “price level” is just a statistical construct (from some “index” or other) – and what matters is to NOT lend out money that was never really saved.
Contra Keynes – Credit Expansion is NOT saving “as real as any form”, it is not saving at all.
However, a person is unlikely to get a job in a our Credit Bubble banking dominated world by telling the truth.
Still let us turn to the failure of the market to “clear” after 1929. Even as recently as the 1921 Credit Money bust the economy recovered and mass unemployment went – why not after 1929?
Many of the bad things the Hoover Administration did (that led Franklin Roosevelt to denounce Hoover as a “socialist”) were actually the idea of Congress – the higher taxes (especially on the rich) the trade taxes and so on.
But some were Hoover’s own ideas – for example the Public Works and “Price Support” schemes that Franklin Roosevelt inherited, renamed, and took the “credit” for.
The most important bad idea was the “Demand Fallacy” – a fashion that Hoover picked up from many people.
Hoover insisted to businessmen that they NOT cut Real Wage Rates – as employers had done in 1921 and every bust since 1819. Once the labour market has “cleared” once mass unemployment has gone, then wages can work their way back up (and higher) – but after a bust real wage rates must fall, and President Hoover said they must NOT fall.
So did President Franklin Roosevelt – he use laws passed by Congress to use Union Thugs to PREVENT the market clearing, and to keep mass unemployment.
It was only during World War II that Real Wage rates fell – the government hid this by pretending that official prices were real prices (of course “Black Market” prices were the real prices) – so the labour market was finally allowed to clear, and mass unemployment went.
More than ten years of totally unnecessary mass unemployment – due to Herbert “The Forgotten Progressive” Hoover and the utterly pathetic “FDR”.
Did Franklin Roosevelt expand Herbert “The Forgotten Progressive” Hoover’s spending schemes?
Yes he did – which, of course, made them WORSE. Meant they did more damage.
English speaking economists tend to fail to understand the harm government spending (however financed) does. 19th century French Liberal School economists, such as J.B. Say, were better on this.
Ironic – as France now has some of the highest levels of government spending in the world.
[…] who killed bears, Teddy Roosevelt, but not the Roosevelt in the wheelchair who presided over the Great Depression. No wonder the Democrats are all now saying they hate […]