The new deal

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JohnG Posted: Thu, Dec 25 2008 7:42 PM

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Hi

This may be the wrong forum. Anyway, I found this page: http://desertbeacon.blogspot.com/2008/12/debunking-new-deal-myths.html 

It says that unemployment during the new deal era (1933-1939) fell to 9 %, from 25 %. Any comments to that, or the other arguments on that site?

Of course simply cutting down unemployment isn't much of an accomplishment, unless it's in a way that lasts. I'm not a supporter of FDR or of socialism, I simply think it would be interesting to hear what you think. I'm currently reading Economics in one lesson and will begin with The case again the FED after  I'm finished with it.

/John

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Deist replied on Thu, Dec 25 2008 7:57 PM

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I think the author of the blog spot has the years wrong. It took world war II for unemployment to fall below 10%. Unemployment remained very high until 1942 when every one joined or was drafted into the military. The United States was attacked by Japan in December of 1941.

Unemployment rose under The New Deal programs because it took so much money out of the economy and unions were able to insulate themselves from unemployed workers by raising the price of labor. Also the various New Deal programs created Industry Associations that determined the price of the service or product which only raised prices more.

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JohnG replied on Thu, Dec 25 2008 8:02 PM

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Did it really rise? I thought it went down for a while, like down to 14 %, but then it rose again later, almost back to the levels that they used to be at when FDR took office.

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Deist replied on Thu, Dec 25 2008 8:05 PM

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Also unemplyment was around 14.3% in 1936 and then it jumped to 19% in 1937.

All in all the New Deal policies at best could have created an artificial demand instead of a more solid and healthy economic growth. After all the highly speculative stock market of the twenties that lead to all sorts of malinvestments in the economy which lead to the Great Depression was feuled by the creation of easy credit from below market interest rates from the Federal Reserve Bank.

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JohnG replied on Thu, Dec 25 2008 8:19 PM

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Thank you for the information.

I've made a new thread in the "Economics question"-forum, named "Never trust a keynesian?". You might want to check it out.

/John G