Franklin Roosevelt is still regarded by many as one of our greatest presidents. Yet he presided over the worst depression in our nation’s history.
A Failed Experiment
In dispassionate, careful and finally devastating detail, [George Selgin’s] “False Dawn” shows that, with a few exceptions, FDR’s experiments did not work. And he did not acknowledge it.
By 1939 the unemployment rate was still 17%. After six years of supposed recovery, the economy was in worse shape than in any other recession of that century or the following one.
No Keynesian Economics
[D]eficits as a percent of the economy were hardly different during Roosevelt’s time in office than they had been at the end of Herbert Hoover’s. While the New Deal spent more, it also imposed new taxes on food and payrolls. The result was a bigger federal government, but not one that relied on deficits as stimulus.
Fighting the Depression with Lower Output, Higher Prices
The National Industrial Recovery Act that passed in mid-1933 turned much of the American economy over to giant cartels. Industries colluded to raise prices and unions colluded to raise wages. The result was fewer goods on the market and an immediate economic collapse that would still be remembered today if it hadn’t been surrounded by so many others.
The administration also tried to restrict agricultural output to raise farm prices. It paid some farmers to plow their cotton back underground and others to kill their breeding sows before they could produce too much pork.
Keynes’ view of Roosevelt
That its leaders subjected the country to so many bizarre experiments, and for so many years, still astounds. Even the liberal economist John Maynard Keynes noted in 1934 that the administration’s wild swings in policy kept investors on edge.