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Tuesday, February 3, 2009

New Deal Harmed Economy: Two More

Economists Harold Cole and Lee Ohanion unjustifiably praise welfare spending under the New Deal, and they unjustifiably lament the lack of antitrust prosecution. (Government-induced cartels are bad, but successful free-market mergers take advantage of economies of scale and better management.) However, the economists' unemployment figures tell the basic story about the New Deal:

The goal of the New Deal was to get Americans back to work. But the New Deal didn't restore employment. In fact, there was even less work on average during the New Deal than before FDR took office. Total hours worked per adult, including government employees, were 18% below their 1929 level between 1930-32, but were 23% lower on average during the New Deal (1933-39). Private hours worked were even lower after FDR took office, averaging 27% below their 1929 level, compared to 18% lower between in 1930-32.


The economists correctly note that wage and business controls raised unemployment and harmed the economy.

Amity Shlaes also criticizes the New Deal in an article for the Washington Post:

But many of the jobs that the early New Deal produced were not merely temporary but also limited in economic value. It was in these years that the political term "boondoggle," to describe costly make-work, was coined. It came from "boondoggling," the word for leather craft projects subsidized by New Deal work-relief programs. As was the case for the Troeller brothers, work-relief earnings were usually not sufficient to offset other Depression losses.


Shlaes also points out that, as FDR pushed out private utilities with tax-subsidized ones, so Obama is trying to push out private internet with subsidized service.

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