Posted by Ilya Somin:
How the New Deal Prolonged and Deepened the Great Depression:
http://volokh.com/archives/archive_2009_02_01-2009_02_07.shtml#1233562829
Economists Harold Cole and Lee Ohanian have written [1]an interesting
Wall Street Journal p ed summarizing their important research showing
that the New Deal prolonged and deepend the Great Depression of the
1930s:
The New Deal is widely perceived to have ended the Great
Depression, and this has led many to support a "new" New Deal to
address the current crisis. But the facts do not support the
perception that FDR's policies shortened the Depression, or that
similar policies will pull our nation out of its current economic
downturn.
The goal of the New Deal was to get Americans back to work. But the
New Deal didn't restore employment. In fact, there was even less
work on average during the New Deal than before FDR took office....
Why wasn't the Depression followed by a vigorous recovery, like
every other cycle? It should have been. The economic fundamentals
that drive all expansions were very favorable during the New
Deal...
So what stopped a blockbuster recovery from ever starting? The New
Deal. Some New Deal policies certainly benefited the economy by
establishing a basic social safety net through Social Security and
unemployment benefits, and by stabilizing the financial system
through deposit insurance and the Securities Exchange Commission.
But others violated the most basic economic principles by
suppressing competition, and setting prices and wages in many
sectors well above their normal levels. All told, these antimarket
policies choked off powerful recovery forces that would have
plausibly returned the economy back to trend by the mid-1930s.
As they say, read the whole thing.
I previously blogged about the same issues, citing Cole and Ohanian's
research, in [2]this post. Unfortunately, many today are bent on
repeating
References
1. http://online.wsj.com/article/SB123353276749137485.html
2. http://volokh.com/archives/archive_2008_09_21-2008_09_27.shtml#1222450700
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