Franklin D. Roosevelt Prolonged the Depression
October 10, 2003
They say "truth will come out" but sometimes it takes a long time. For more than half a century, it has been a "well-known fact" that President Franklin D. Roosevelt got us out of the Great Depression of the 1930s. That view was never pervasive among economists, and even J.M. Keynes -- a liberal icon -- criticized some of FDR's policies as hindering recovery from the depression.
In "FDR's Folly," author Jim Powell argues persuasively that the policies of the Roosevelt administration actually prolonged the depression and made things worse:
- It tried to raise farm prices by destroying vast amounts of produce -- at a time when hunger was a serious problem in the United States.
- It imposed minimum wage rates that priced unskilled labor out of jobs, at a time of massive unemployment.
- Then there were the monetary authorities contracting the money supply in the midst of the biggest depression in history -- when the economy was showing some signs of revival, until their monetary contraction touched off another big downturn.
Perhaps worse than any specific policy under FDR was the atmosphere of uncertainty generated by incessant new experiments. Billions of dollars of investment were needed to create millions of jobs for the unemployed. But investors were reluctant to risk their money while the rules of the game were constantly being changed in Washington, amid strident anti-business rhetoric, explains Powell.
Some of the people who most admired and almost worshipped FDR -- poor people and blacks, for example -- were hurt the most by amateurish tinkering with the economy by Roosevelt's New Deal administration. This book is an education in itself, both in history and in economics. It is also a warning of what can happen when leaders are chosen for their charm, charisma and rhetoric.
Source: Thomas Sowell, "Great Myths About the Great Depression," www.townhall.com, October 9, 2003; based upon Jim Powell, "FDR's Folly," Crown Forum, September 23, 2003.
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