Of late national politicians have been invoking Franklin Roosevelt’s policies as a solution to the economic problems we’re facing now. Obama invoked FDR’s housing policies during a debate. The New York Times has praised FDR’s public works projects. Indeed, Obama’s claims that pouring taxpayer money into developing green energy could create jobs and economic growth for the country are reminiscent of FDR’s policies.
Forgetting for a moment that the rocky economic times we’re facing right now aren’t even in the same ballpark, heck not even in the same area code, as the Great Depression, it’s worth noting that FDR’s policies…didn’t really work.
In fact, UCLA economists have calculated that FDR’s policies, far from solving it, actually exacerbated the Great Depression.
Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.
After scrutinizing Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.
“Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”
In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.
“President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services,” said Cole, also a UCLA professor of economics. “So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies.”
It’s worth noting that this country didn’t really pull out of the Great Depression until we mobilized for WWII. If not for our war against fascism the Great Depression might have gone on for decades longer than it did under the liberal, big-government policies of people like FDR.
Roosevelt gets a lot of credit for being a strong war-time leader, and he deserves every bit of that credit, but on domestic policy – and particularly fiscal policy – he didn’t do this country any favors. Just as those who would ape his policies today wouldn’t do anything but make our economic conditions worse.