my response to Glenn on Masson's blog

Glenn wrote:

Eric,

Not being an economist I can’t debate you head-to-head on this in detail, but do you dispute the figures on this website?

http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html

I.e., unemployment dropped from about 24% to 14% from 1933-1937; GDP increased an average of 5.2% annually from 1933 to 1939, better than the Reagan years (although the hole was so deep, this wasn’t enough to end the Great Depression). I imagine you would take issue with this author stating that the reason for the backslide in unemployment in 1937-38 up to 19% was FDR’s backing off of deficit government spending…Bottom line is, not everything FDR tried worked, & he was the first to admit that, but I think a lot of it did. More specifically, massive government intervention in a time of economic crisis can, if nothing else, alleviate human suffering rather than waiting around for a “natural” market correction. And I, personally, have no desire to go back to the “olden days” of no SEC, no NLRB, no FDIC, no SSA…and neither do the vast majority of Americans on the left, right, or in the middle…

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Glenn, the link has some good info but some significant deficiencies as well.

He understates Smoot-Hawley's impact-- as is clear by his later reference to international trade dropping by 2/3rds.

"Even this is compensated for by the fact that American businesses are no longer investing in Europe, but keeping their money stateside." Here, he repeats a common Keynesian flaw about "purchasing power" (see: my reference to the benefit of higher prices). Reducing mutually beneficial trade cannot be good for an economy.

"The consensus of modern economists is that the tariff made only a minor contribution to the Great Depression in the U.S., but a major one in Europe." This assumes that intl trade played a much bigger role there than here. I don't know the numbers on that off-hand, but that seems quite unlikely.

His entry in 1931 implies that Hoover was inactive. While less so than FDR, Hoover was quite the interventionist as well.

The 1934 reference to Sweden is obviously simplistic (what else did they do or not do) and seems to imply a Keynesian bias (deficit spending, by itself, fixed the problem).

How did (or rather, how could) FDR's policies work in terms of economics (not just politics)? Artificially increasing costs and prices? Higher taxes? (Note that a discussion about whether these are desirable today is a different matter than whether they helped or hurt in terms of ending the Depression.) Shuffling money from some to others? How are any of these helpful in promoting productive activity?

Again, you can't reasonably accuse the market *by itself*, because we didn't wait for the market to fix itself. The govt was quite busy intervening from 1929 forward. And why would one expect an unregulated market to only reduce unemployment to 19% after 7 years?

FDR politically, ok...but economically? He's fortunate to have had Keynesianism stay in repute through the 1970s and to have his friends write the bulk of the history.