Before the Great Depression, it was not considered to be the business of the federal government to try to get the economy out of a depression. But the Smoot-Hawley tariff — designed to save American jobs by restricting imports — was one of Hoover’s interventions, followed by even bigger interventions by FDR.Read the rest here.
The rise in unemployment after the stock market crash of 1929 was a blip on the screen compared to the soaring unemployment rates reached later, after a series of government interventions.
For nearly three consecutive years, beginning in February 1932, the unemployment rate never fell below 20 percent for any month before January 1935, when it fell to 19.3 percent, according to the Vedder and Gallaway statistics.
In other words, the evidence suggests that it was not the “problem” of the financial crisis in 1929 that caused massive unemployment but politicians’ attempted “solutions.” Is that the history that we seem to be ready to repeat?
Saturday, December 27, 2008
Are we repeating the errors of the Depression?
Thomas Sowell on misconceptions about the Depression, and how not remembering them could make our own financial crisis worse:
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The basic problem with government intervention is that the government makes economic decisions for political reasons. When a decision works out badly for the economy, it can take years, perhaps decades, of perspective and analysis to figure out what happened and why. But a politician's incentives are in the here and now, and as long as he can talk his way out of the situation, and manage to shift the blame, he is not held accountable.
ReplyDeleteCould a Republican have gotten away with what FDR did? FDR did not cause the Depression, but he certainly did little to end it. Most of his programs were window dressing, or simple continuations of Hoover's disastrous policies. But FDR was a skilled politician and master rhetorician. Even eight years into his presidency, he could find ways to blame the Republicans who had been out of power his entire time in office.
I have no reason to believe Obama is not similarly adept.