Tuesday, November 11, 2008

Theory on the next Great Depression and a "new" New Deal

From LewRockwell.com:
Along with the ascendancy of the Democratic Party to control of the executive and legislative branches of government has come the repetition of the tired, old mantra of an alleged need for a "new New Deal." God help us. The original New Deal unequivocally made the Great Depression much worse, and much longer-lasting, than it would otherwise have been.

One of the most readable expositions of why the New Deal was an economic debacle is Jim Powell’s book, FDR’s Folly. It summarizes more than a half century of economic research on the actual effects of the New Deal and presents the results in a very readable, conversational style that is suitable to a general reading audience. And every bit of it is being studiously ignored by the powers that be in Washington. After his voluminous survey of the ill effects of New Deal interventionism Powell concludes with "lessons for today." Every one of these lessons is not only being ignored by Washington policymakers, but the policy proposals coming out of Washington are ominously structured to do exactly the opposite of what Powell suggests.
Read that whole article for more points, but let's get back to a mainstream article an of arguments against a new New Deal:
There is evidence, however, that FDR's very strength was a negative, because he used it to give himself a license to do true experimenting. In his second inaugural address, FDR said that he sought "an instrument of unimagined power for the establishment of a morally better world."

No one knew what it meant, and markets were terrified. Everyone feared FDR would regulate or prosecute them next. Businesses refused to invest. The 1930s' second half proved frustrating for the country: The economy was always recovering but never quite recovered. The Dow didn't get back to its 1929 level until the mid-'50s.
Of course the New Deal does still have it's fans...
The great genius of the New Deal lay not in ideology but in its pragmatism and practicality. People were out of work so it created jobs. The country’s infrastructure, particularly in the rural areas, was primitive, so it took on the task of modernization.

In some ways, this paralleled what was also being done under the Communists in the Soviet Union as well as under Fascists in Italy and under the National Socialists in Germany. This has led some conservatives, such as “Liberal Fascism” author Jonah Goldberg, to conflate the New Deal legacy with fascism. But this assertion is belied by the fact that we still live under a democratic and liberal political structure, one that by the 1980s had turned to oppose much of that legacy.

Yet I believe that even Ronald Reagan – himself once an avid New Dealer – would admit that the New Deal did much to expand America’s middle class. It did so not by promoting redistribution and welfarism or by moral cajoling – characteristics Mike Lind identifies with the more elite Progressives – but by practical actions that gave people the tools with which to build their own individual prosperity.
Well to close this post out I'm more pro-laissez-faire. Government should provide at the very least minimal activity into the affairs of the economy and therefore should not interject in how private individuals or companies tend to their business affairs. Of course let's not put all of our faith into the business community. I just don't expect government to be the hero when the economy goes into the tank.


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