UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

February 5, 2009

WHAT REALLY HAPPENED DURING THE NEW DEAL

Campaign for America's Future - The monthly data for industrial production show a near three-year collapse under President Hoover, ending when FDR came to office in March 1933. Production rocketed by 44 percent in the first three months of the New Deal and, by December 1936, had completely recovered to surpass its 1929 peak.

GDP, only available as annual averages, plunged 25.6 percent from 1929-1932, including by 13.0 percent in 1932. It stabilized in 1933, and then soared by 10.8 percent, 8.9 percent and 12.0 percent, respectively, in 1934, 1935 and 1936. Real GDP surpassed its 1929 peak in 1936 and never again fell below it. After-tax personal income, consumer spending, real private investment and jobs all reached or surpassed their 1929 peaks by late 1936.

The official U.S. Business Cycle Dating Committee established that the downturn that began in August 1929 ended in March 1933 with the remarkable economic expansion that started within days of FDR's bold-if trial and error-New Deal programs. By any normal definition, the Great Depression had ended by late 1936, with all major indicators surpassing their previous peaks.

A second cyclical downturn officially began in May 1937 when FDR, always a fiscal conservative, mistakenly thought the economy had become self-sustaining and slashed public spending programs to balance the budget. These harsh and premature spending cuts caused another severe recession that ended after 13 months in June 1938.

Even in this severe downturn, annual GDP did not fall back below its 1929 peak. And although many suffered and most economic measures did fall back below their 1929 levels, not one fell anywhere close to its March 1933 low. For example, although industrial production fell sharply in the 1937-38 recession, at its low point, in April 1938, it remained 49 percent above its level of March 1933.

When the economy again contracted sharply in late 1937 and early 1938, FDR quickly reversed course and rapid growth immediately began again. GDP soared by 10.9 percent in 1939 and industrial production soared by 23 percent.

4 Comments:

Anonymous wellbasically said...

Missing in your history of growth in the 1930s is the fact that FDR devalued the dollar from $25/oz. of gold to $35/oz. The gains you show are illusory, the result of inflation, prices catching up to the new value of the dollar.

This is how the USA could go through the 1970s showing all kinds of gains in growth numbers while real living standards fell. Notice I don't say "real income" because the government statistics were gamed to show less inflation.

Joan Walsh quoted Robert Reich who correctly diagnosed the problem time: the 1970s, although he says real wages fell because of technology or something, which is gibberish. It was taking the dollar off gold and letting inflation run wild.

http://www.salon.com/opinion/feature/2009/02/04/obama/

The problem for you Sam is your liberal monetary plan, which always wanted more Keynesian spending but always was defeated by the gold link to the dollar. Every time the USA ran a big deficit and financed it through inflation, there was a run on the gold reserves. Back then it was the gold investor who was the bad guy. When Milton Friedman got Nixon to delink the dollar, the hedging shifted from the gold people to the derivatives trader.

Production and growth in real wages only comes from making stuff people want or need, not from monkeying with the money. I've been trying to tell you for months.

February 5, 2009 4:58 PM  
Anonymous Anonymous said...

The only thing Roosevelt did that improved the ECONOMY was to end Prohibition. None of the other measures of the New Deal did anything to end the Depression. What those other measures did accomplish was to ameliorate suffering among the poor and unemployed - and they were worthwhile for that reason alone.

And his administration saved the nation, which could have collapsed into anarchy and violent upheaval if he had not acted to offer hope.

February 5, 2009 6:53 PM  
Anonymous Anonymous said...

The thing that really turned things around was WW II. With our economic competitors in rubble, we had the market for manufactured goods to ourselves for about 20 years after the war.
You want to bring back the New Deal? Why stop there? Let's bring back WW II. (Looks like Obama's fixing to do that, starting in Southwest Asia. Credit: Zbigniew Brzezinski.)

February 6, 2009 8:15 AM  
Anonymous Anonymous said...

I agree . . . let's cut to the chase and declare war on Germany and Japan today!

February 6, 2009 4:32 PM  

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