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FDR's policies prolonged Depression by 7 years, UCLA economists calculate



January 17, 2009 – Comments (7)


from August '04

By Meg Sullivan


Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.

After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."

In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.

"President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies."

Using data collected in 1929 by the Conference Board and the Bureau of Labor Statistics, Cole and Ohanian were able to establish average wages and prices across a range of industries just prior to the Depression. By adjusting for annual increases in productivity, they were able to use the 1929 benchmark to figure out what prices and wages would have been during every year of the Depression had Roosevelt's policies not gone into effect. They then compared those figures with actual prices and wages as reflected in the Conference Board data.

In the three years following the implementation of Roosevelt's policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.

Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.

"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."

The policies were contained in the National Industrial Recovery Act (NIRA), which exempted industries from antitrust prosecution if they agreed to enter into collective bargaining agreements that significantly raised wages. Because protection from antitrust prosecution all but ensured higher prices for goods and services, a wide range of industries took the bait, Cole and Ohanian found. By 1934 more than 500 industries, which accounted for nearly 80 percent of private, non-agricultural employment, had entered into the collective bargaining agreements called for under NIRA.

Cole and Ohanian calculate that NIRA and its aftermath account for 60 percent of the weak recovery. Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943.

Roosevelt's role in lifting the nation out of the Great Depression has been so revered that Time magazine readers cited it in 1999 when naming him the 20th century's second-most influential figure.

"This is exciting and valuable research," said Robert E. Lucas Jr., the 1995 Nobel Laureate in economics, and the John Dewey Distinguished Service Professor of Economics at the University of Chicago. "The prevention and cure of depressions is a central mission of macroeconomics, and if we can't understand what happened in the 1930s, how can we be sure it won't happen again?"

NIRA's role in prolonging the Depression has not been more closely scrutinized because the Supreme Court declared the act unconstitutional within two years of its passage.

"Historians have assumed that the policies didn't have an impact because they were too short-lived, but the proof is in the pudding," Ohanian said. "We show that they really did artificially inflate wages and prices."

Even after being deemed unconstitutional, Roosevelt's anti-competition policies persisted — albeit under a different guise, the scholars found. Ohanian and Cole painstakingly documented the extent to which the Roosevelt administration looked the other way as industries once protected by NIRA continued to engage in price-fixing practices for four more years.

The number of antitrust cases brought by the Department of Justice fell from an average of 12.5 cases per year during the 1920s to an average of 6.5 cases per year from 1935 to 1938, the scholars found. Collusion had become so widespread that one Department of Interior official complained of receiving identical bids from a protected industry (steel) on 257 different occasions between mid-1935 and mid-1936. The bids were not only identical but also 50 percent higher than foreign steel prices. Without competition, wholesale prices remained inflated, averaging 14 percent higher than they would have been without the troublesome practices, the UCLA economists calculate.

NIRA's labor provisions, meanwhile, were strengthened in the National Relations Act, signed into law in 1935. As union membership doubled, so did labor's bargaining power, rising from 14 million strike days in 1936 to about 28 million in 1937. By 1939 wages in protected industries remained 24 percent to 33 percent above where they should have been, based on 1929 figures, Cole and Ohanian calculate. Unemployment persisted. By 1939 the U.S. unemployment rate was 17.2 percent, down somewhat from its 1933 peak of 24.9 percent but still remarkably high. By comparison, in May 2003, the unemployment rate of 6.1 percent was the highest in nine years.

Recovery came only after the Department of Justice dramatically stepped enforcement of antitrust cases nearly four-fold and organized labor suffered a string of setbacks, the economists found.

"The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes," Cole said. "Ironically, our work shows that the recovery would have been very rapid had the government not intervened."


7 Comments – Post Your Own

#1) On January 17, 2009 at 1:33 AM, JakilaTheHun (99.92) wrote:

This is a joke of an article.  I don't think that FDR made all the right moves, but I question studies like this all the same.  It's almost amusing how economists seem to completely ignore what was going on in the world at the time of the Great Depression:

Japanese invasion of China?  Fascism in Italy, Spain, and Germany?  An extremely aggressive Germany constantly challenging the Western powers?  The German invasion of Poland?  World War II?  A large chunk of the American workforce being shipped overseas to fight the war?  The fact that investors tend to shy away from throwing capital into companies in times of great uncertainty like the period running from 1933 to 1946? 

Somehow all of this never gets mentioned in any of the ideological anti-FDR arguments. 

This is the most amusing and head-in-the-sand part of the article:

"Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943."

Yeah, 1943 was a great year for economic growth around the world!  Hell, the authors seem to ignore the fact that a lot of Roosevelt's efforts gave the nation an infrastructure better suited for fighting for World War II.  I'm not a protectionist, but there is a strong argument as to why having home-grown manufacturing and a strong infrastructure is a huge advantage for any economy.  If not for American industry, the Allies would've lost World War II. 

Actually, the biggest myth propagated by the foaming-from-the-mouth anti-Roosevelt crowd is that World War II got us out the Depression.  In reality, World War II created global uncertainty and destruction on a level never seen before --- thereby, delaying economic recovery for several years.  It's not a coincidence that the market didn't rebound till 1946 and even then, it really took till the '50s for the markets to start growing again.

I'm not going to defend FDR's pricing measures --- in fact, I agree that FDR did make some economic blunders in his time, but to try to blame 13 years worth of economic stagnation on his is completely ludicrous and makes me question the biases and agenda of those conducting this study more than anything.  In fact, I see no real evidence mentioned in this article --- it's just a bunch of opinions masking itself as a scientific survey. 

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#2) On January 17, 2009 at 3:01 AM, DaretothREdux (46.61) wrote:


I am sure if you email UCLA they would be more than happy to share their results with you on a more factual basis.

FDR did prolong the depression, and WWII did not get us out of it either. I agree that teaching children that WWII got us out of the depression is possibly one of the most destructive ideas taught in schools, but it is almost equally destructive to teach that more government spending "helped" when it obviously did not.

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#3) On January 17, 2009 at 3:19 AM, starbucks4ever (77.39) wrote:

Price-fixing is never a good way to stimulate anything.

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#4) On January 17, 2009 at 4:18 AM, JakilaTheHun (99.92) wrote:


I'd disagree that government spending would never stimulate an economy and I find the black-and-white distinctions between the government and the private sector that most people use to be unrealistic.  In reality, a government is not that much different from a company.  Big bulky, sprawling, and convoluted governments like the US, however, can tend to veer on the inefficient side just as big bulky, sprawling, and convoluted businesses can.  However, there are times that centralized government intervention can be more efficient than private sector chaos.

I think a lot of FDR's measures were harmful and any time you try to manipulate prices (whether by direct or indirect means), that can cause a lot of problems, but infrastructure investments like the TVA actually paid off big-time.  The problem is that in times of uncertainty, investors shy away from throwing capital where it needs to go.  The government stepped in and it not only helped eased the Depression a little bit --- it also helped win the war. 

I agree with you on the teaching in schools --- especially at the secondary level.  I hate that they shove propaganda and policy arguments down children's throats.  But I also think that any full historical picture of FDR would also show that he helped revive certain aspects of the American economy and his moves were vital to winning the Second World War.  Sure, he made a lot of mistakes, but he also did a lot that helped.  I suppose it's debatable how much of each he did.

I've never really agreed with the 'market would've corrected itself' argument on this.  The Great Depression was so severe that the market had basically entered a death spiral of sorts.  Who the hell invests when there's 25% unemployment, the entire world is in conflict, and your own country is only a step or two away from massive revolt?  Government had to step in under the circumstances.

That's not to suggest that the same response has been necessary here or that all government intervention is good.  Much to the contrary --- I think most of what we've done to combat the current crisis has helped exacerbate it.  I also think that Hoover's combination of intervention (where he shouldn't have intervened) and non-intervention (where he should have intervened) were big causes in exacerbating things during the Great Depression.

My thoughts for the current economic crisis is that the government should have let the financial pyramid collapse and instead of throwing money into that black hole, should've attacked things on the employment side --- i.e. something like infrastructure spending.  Even that can be fraught with hazards if the government is investing it on crap we don't need (e.g. more Bridges to Nowhere), but so long as a lid can be kept on unemployment, the economy can stay relatively healthy long-term.  Of course, now that we've thrown so much money at Iraq and all these bailouts, I question how much infrastructure spending we can realistically do. 

I expect you to disagree with me, but my main point is that I've never bought into the black-and-white line created between "government" and "the private sector".  Both manage resources and serve similiar functions and while the private sector is, in most cases, better able to serve the population's needs, that's not always the case. 

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#5) On January 17, 2009 at 4:27 AM, saunafool (< 20) wrote:

Here we go again. The blogs and discussion boards keep repeating this "New Deal made the Great Depression worse" theory.

If a recession is defined as 2 quarters of GDP contraction, and a depression is a severe recession, how do you define when the Great Depression ended? When GDP started to grow again?

From 1933 to 1940, GDP growth was the highest in American history, employment was growing, and the nation was recovering. Granted, mistakes were made and the unemployment rate remained quite high, but when FDR was elected, unemployment was 25%, wages had already fallen 40% or so for the people who still had jobs, and the economy appeared to be in free-fall.

My parents, my uncles and aunts, and all of their friends lived through the Depression. They all say that FDR and the New Deal helped them through very difficult times.

I view this study as revisionist history. It might be useful and perhaps even accurate as pure economic theory, but it doesn't acknowledge what was going on at the time. TheHuney points out some of the problems. In 1933, there was a rise of Fascism in Germany, Italy, and Spain. Communism was spreading across Europe and Asia. Extreme ideologies were taking hold around the world.

In the U.S., the market crash and huge economic contraction from 1929 to/ 1932 had destroyed faith in free market principles. The extreme ideologies which were spreading around the world were gaining currency in the U.S. People believed a planned economy could protect them from the viscious down cycles of the free market.

So, economists can sit around now and say that if the New Deal had not been implemented, the lower wages and greater competition would have created massive growth, but they don't know.

An historian, instead of an economist, might equally predict that without FDR and the New Deal, there would have been a loss of hope among the American people, leading to social instability and perhaps communism, fascism, or other extreme measures.

So, we may disagree with FDR's Big Government intervention in the economy during the Depression, but we need to recognize that he was a great leader during a troubled time in American history. He was trusted, beloved by a strong majority of Americans, gave people hope amidst despair, and quite possibly prevented the country from turning to the much more extreme ideologies which were spreading around the world at the time.

Those are things that the economists can't measure.

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#6) On January 17, 2009 at 10:40 PM, rjgarfunkel (< 20) wrote:

FDR, the New Deal and Revisionism of the Right


Richard J. Garfunkel

January 20, 2009

 Host of the Advocates


Most critics of the New Deal and its sea change affects regarding the future of State's Rights, interstate commerce, war powers, civil rights, the "Establishment Clause," collective bargaining, public power (TVA and Niagara Falls), woman's rights, "choice," and a plethora of other important issues, see this as a usurpation of the Founders intent. Truthfully that may be correct, but so what! The Founders never envisioned any of the following that the country and the world has seen. They compromised on "slavery" and look where it got us; strife and disaster for two centuries.


The Founders had wise intent, and were socially progressive compared to their day. Certainly the Declaration of Independence was a radical departure from what had almost always existed, but it was tempered by the US Constitution; a more conservative document. Thankfully the Bill of Rights was added and that changed the Constitution from a framework of government to a unique document truly protecting the individual from the dictates of a potentially malevolent "state."  But as it was said by Harold Ickes, (I believe, and therefore paraphrase) "The Bill of Rights doesn't mean a thing to a hungry man!" And of course Harry Hopkins said, “People need to eat every day, they don’t eat in the long run!” Therefore, if our Constitution doesn’t allow the government to protect people in need, it is a failure. If the federal government ignored the plight of New Orleans, under the aegis of the 1920's courts, would justice or the "general welfare" be served?


Of course millions upon millions of words have been written about these subjects. Therefore the thrust of my thoughts are not on how conservatives feel about the loss of individual rights, but on the necessity of change, and how “critical need” fostered that change. Conservatives bellow about the confiscator nature of the New Deal and how rights have been usurped to the detriment of the Country. In other words owning a machine gun or an AK 47 is a right and if every one had a gun by their side, crime would disappear and the rights to "life and liberty, no less property" would be better protected. As far as I remember, Wyatt Earp, and others like him, limited the carrying of guns in Tombstone, Dodge City and other places and brought civil order and peace. I could just imagine millions of people carrying weapons and every time someone looked cross-eyed at someone else, or they had a tough time at home, or in the office, there would be a shoot-out. Mass murders, as we have evidenced in the past 25 years, do not come with penknives, sticks, bats or etc. Those crimes are actuated by the use of powerful, local weapons of mass destruction, guns!


Of course one doesn’t have to look far or listen very hard to hear the new “revisionist” clamor on the right.

"Obama has drawn the wrong lessons from the New Deal," said Burton Folsom Jr., the author of a new book that has helped reignite the controversy, "New Deal or Raw Deal? How FDR's Economic Legacy Has Damaged America." Folsom argues that Roosevelt's role in creating jobs is vastly overstated; that he increased taxes too much, particularly on wealthier Americans; and that his spending saddled Americans with debt for years.


But Jonathan Alter, who wrote "The Defining Moment," a book on Roosevelt's first 100 days in office - high on Obama's reading list - said "the idea that none of it worked is just right-wing nonsense." One can hear Mr. Alter and his reflections on this subject on the July 26, 2007 edition of The Advocates,

But of course comments on the success or failure of the New Deal don’t only come from some author’s trying to make a “fast buck” by pandering to the right-wing. Rep. Virginia Foxx hopes to persuade her colleagues not to release the second batch of financial industry bailout money and will press her case before the House of Representatives.


Rep. Foxx stated, “I don't think that we should make the same mistakes that were made in the (1930s). We should learn from history," Foxx also said, “The policies of Franklin D. Roosevelt's New Deal were not really effective in turning the economy around, in March of 1940, the unemployment rate was 14 percent."  

A columnist named Ellis Washington, currently a professor of law and political science at Savannah State University, said:

At the ascendancy of our 44th president of the United States and a new administration, I have one simple question to ask: Constitution or corruption? The latter principle of governance has dominated politics beginning with the liberal Theodore Roosevelt (1901-09) and his "Fair Deal." Next came the socialist junta of Woodrow Wilson (1913-21) followed by FDR (1933-45) where the apotheosis of leviathan government over every aspect of our lives was ubiquitously called "The New Deal." Nevertheless, I truly believe that we can reform our decadent ways and return to the original intent of the Constitution's framers. How?

In the early 1930s, FDR used the pretext of the Great Depression to take Theodore Roosevelt's and Wilson's experiments in socialism to a more comprehensive level with his blatantly unconstitutional New Deal programs, including Social Security, Aid to Families with Dependent Children, the Federal Deposit Insurance Corporation, the Federal Housing Administration, the Tennessee Valley Authority, Works Progress Administration, the Securities and Exchange Commission and Fannie Mae, just to name a few leviathan federal programs that have denigrated the liberty and freedom of every American citizen. America is essentially a welfare state where almost daily more of our liberties are confiscated by the government. President-elect Barack Obama has promised to give America "FDR, part II." God help us all.

Mr. Ellis goes on to discuss Rep. John Shadegg, R, Ariz., proposed an "Enumerated Powers Act," or EPA (H.R. 1359 in the 110th Congress).

“If this important bill were passed, it would force all 535 members of Congress to literally cite chapter and verse of how their proposed legislation lines up with the Constitution. The implication being if they could not clearly show the constitutionality of their legislation, ipso facto it would be deemed unconstitutional and summarily rejected from even given the respect of a vote by Congress, because the proposed bill would have to first pass constitutional muster to even be considered.”

Of course, Washington not only denigrates the social advances brought on by reform Presidents like Theodore Roosevelt and Woodrow Wilson, but states the following:

 “Can you imagine how many welfare programs and multi-trillion dollar spending plans America is currently entangled in would be stopped dead in their tracks if Congress simply followed the original intent of the Constitution's framers and enacted Rep. Shadegg's Enumerated Powers Act? Government by definition and necessity would become smaller and decentralized. The people would have more of their own money to do with it what they will, and lazy bums who have lived all their lives off other people's money would be compelled to get off their butts and get a job. It would be tantamount to a third American Revolution.”

These comments are not the ravings of a mad man, but very typical of the right wing revisionists that abound in the land. As FDR characterized, in his famous 1944, “My Little Dog Fala” speech, “the fiction writers, inside and outside of Congress,” is quite apt.

One proto typical internet contribution came from a blog contributor, Mr. Robert French, who stated about the New Deal:

Liberals will tell you that these actions saved the economy then and will do so now. Baloney! What they conveniently ignore is the fact that, after four-plus years of FDR's vaunted programs, the economy was still in a deep hole and in 1937 plunged even deeper. After that, things started uphill very slowly but almost certainly because of the cyclic nature of the economy, not any of the government programs. The economy didn't really recover until World War II descended upon us… If Obama accomplishes anything, it will probably be to make the recession longer and more severe. It will, however, make the government bigger and more able to control our lives, which, one suspects, is probably the real goal.

Note he has already predicted that if President-Elect Obama “accomplishes anything he will make the recession longer.”  In the mind of GOP/right-wing, the Depression was a set-back that would have righted itself eventually. According to these revisionists, if the economy were left alone, recovery would have eventually happened As Herbert Hoover said, “Prosperity is just around the corner.” Not only did recovery not come in the forty months of the Hoover Administration that followed the late October1929, stock market crash, but Hoover, in a campaign speech almost three years later to the day, On October 31, 1932, predicted with a Roosevelt victory, “The grass will grow in the streets of a hundred cities.” Well the grass did not grow in the 100 cities under the New Deal!

As HW Brand has written in his new book on FDR, Traitor to his Class, “Herbert Hoover hated Roosevelt during the campaign, and he hated him even more after the election,” He never really understood what FDR’s landslide victory really meant. He even thought that the slight up-tick in the economy right before the election was a sign that his “patient policies has all but ended the depression, only for the economy to swoon again as a result of Roosevelt’s victory, which frightened investors and made them withdraw from the marketplace.” As Brand, wrote, “Like many other counterfactual claims, Hoover’s couldn’t be disproved.”  Hoover finally came to his senses decades later.  Regarding his limitations on his perspective, Hoover said, “my education was that of an engineer, and I do not know all the nuances of economics.”

Bob Schlesinger, the son of the late FDR biographer, Arthur M. Schlesinger, Jr., wrote, Barack Obama, according to today's Times, has studied FDR's first 100 days, seizing on the idea that Roosevelt had a "conversation with the American public." This is both smart and foreseeable—but he needs to recognize his and the strategy's limitations. To understand why, ask yourself how often FDR gave his famed fireside chats. The answer may surprise you. It's smart because of the obvious historical parallels—a Democratic president taking office at a time of economic crisis and accompanying national psychological distress. It's foreseeable because Obama's speech-giving skill is his greatest asset. Bob Schlesinger, who is an editor and writer with US News and World Report, was also on The Advocates on August 8, 2008.

Right after reading Schlesinger’s remarks on the internet, an unsigned remark chimed in reflecting the revisionist right-wing:

The first thing that FDR did was to move us to a socialistic type of government with the confiscation of gold. Who would of thought that it would be illegal to own your own real money (gold) in the land of the free? I suppose any comment on the turnaround from the depression would have to be that we bombed those Axis industrialized nations into oblivion that would have been our competition in the world in a gigantic war. Having thus done that we proceeded to be most prosperous nation on the face of the earth for around 30 years. After that we decoupled our money from any real standard. If what we have to look forward to is history repeating itself, look out! Here comes WW-III.... Oh let's not forget BHO can communicate real nice. That gives me a warm fuzzy.

On a side note to Mr. Schlesinger, I think it is a shame that you get paid to give your opinion because of your last name and not talent.

Note how it has been ingrained in many people’s minds that without World War II the Depression would have never ended. Does that mean that the $350 billion spending for the war, which was 5.5 times the total spent by the New Deal in 7-8 years, was the amount that should have been allocated by the government for the recovery? Somehow the right-wing wants it both ways. On one hand they decry the spending and the effort of the New Deal, and on the other hand they assuredly feel that we needed greater spending!

From another perspective, Representative Henry Waxman, a Democrat from California seems to believe that the New Deal also didn’t spend enough. When asked how the spending in a stimulus package today would have a different effect than FDR’s spending on federal programs, which did not significantly lower unemployment until the start of World War II, Waxman said Roosevelt did not spend enough.

“Well, a lot of economists tell us that what Roosevelt failed to do was to spend as much money as was needed to get people back to work and get the economy moving again,” he said.

“It wasn’t until World War II when we had major expenditures that the Depression was finally resolved,” said Waxman. “We’re going to be looking at that experience. But I think what we are facing now is unique. But we’ve got to approach it with what we’ve learned from the past but think through what we need for the future.”

But was it Roosevelt alone, or the southern Dixiecrats of their day, and their conservative GOP allies, who started to demand a cutback in spending? The sharp, but short Recession of September 1937, seems to indicate that any cut back in spending would send the economy back into a quick tailspin and slump. That sharp economic setback, caused by the Fed’s tightening and budgetary threats by the Congress to restrict the New Deal spending, cost the economy 4 million jobs, stultified steel production and reversed many gains of the previous years. Quick intervention by the President and a reversal by the Federal Reserve, ended the recession in the spring of 1938, and the recovery was again on its way.  

For more of the same, Michelle Malkin reminds us of the UCLA study that concluded that FDR's policies not only did not end the Great Depression... but instead actually prolonged it. Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt. After scrutinizing Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.

“Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”

In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.


How this squares with history is a mystery to me and thousands of economists, professors and historians. First of all, the Depression did not last 15 years and the New Deal certainly reversed the free-fall of the economy that the country was experiencing in March of 1933. On one hand they believe that the Depression lasted 15 years (1929 through 1945), and on the other they feel World War II ended it. There was certainly not a Depression from 1942 on when unemployment reached 1.9%,

Of course criticism of the New Deal doesn’t only reside in the hearts of aberrant right-wing nuts, far out Members of Congress, or apostles of the “marketplace” as a partner with G-d, but with establishment figures like Ms. Amity Shlaes.

Shlaes a graduate Yale University magna cum laude with a bachelor’s degree,[ writes a syndicated column for Bloomberg News]. She is a senior fellow in economic history at the Council on Foreign Relations. Her many appearances on television and radio include commentary on public radio for Marketplace.

Her Wall Street Journal piece on New Deal job creation noted that such jobs may not always increase productivity. She wrote a column for the Financial Times for five years, for which she won the International Policy Network's Bastiat Prize for Journalism in 2002. Before that, she worked at the Wall Street Journal, where she was a member of the editorial board. She has also written for The New Yorker, The American Spectator, Commentary Magazine, Foreign Affairs, National Review, and The New Republic, among others. Her obituary of Milton Friedman appeared in The New York Sun.

On 2 September 2005, Shlaes wrote a column for the Financial Times arguing that the George W. Bush administration's response to Hurricane Katrina showed that it had been well prepared for the disaster and that George W. Bush had not been hindered by consideration of federalism in his response. Ten days later, in another Financial Times column, Shlaes noted that there had in fact been delays in responding to Katrina, but argued that the Bush Administration should not be held responsible for them, because they were simply an unfortunate result of federalism

In July 2008, Shlaes wrote a column defending Senator Phil Gramm's comment that Americans were "whiners" with respect to the economy. Shlaes endorsed Gramms's argument that the United States was not in a true recession, saying that at the time, the US GDP had not shrunk during two consecutive quarters

Of course Ms. Shlaes is one of the leading revisionists of the right. She is avid defender of George W. Bush, and held that he should not be responsible for the terrible follow-up regarding hurricane Katrina. She blames that on “federalism.” Also, she seemed to be a recent “recession” denier, as her statements in support of Phil Gramm seem to indicate. But this so-called respected journalist was a member of the Wall Street Journal’s editorial board. In her best-selling book, The Forgotten Man, a New History of the New Deal, she basically states:

That both Presidents Hoover and Roosevelt failed to understand the prosperity of the 1920s and heaped massive burdens on the country that more than offset the benefit of New Deal programs. The real question about the Depression, she argues, is not whether Roosevelt ended it with World War II. It is why the Depression lasted so long. From 1929 to 1940, federal intervention helped to make the Depression great—in part by forgetting the men and women who sought to help one another.

Even though Shlaes talks about Hoover and FDR not understanding the underlining prosperity of the 1920’s, in fact, there are a number of accounts that the Depression had really started long before the 1929 Stock Market crash. Many believe, including the eminent historian, David M. Kennedy, the author of the Pulitzer and Parkman prize-winning book, Freedom From Fear, The American People in the Depression and War, that the Depression started in the early 1920’s and that the economic conditions in that halcyon era were much overstated. He believes that the book, Only Yesterday, published in 1931, by Frederick Lewis Allen, (1890-1954), which many of us read in the 1950’s and 1960’s presented a much rosier picture of the “flapper” era. Kennedy, like others, realized that the 1920’s, as with the war years that preceded that period, had artificially strengthened industries that were endemically flawed and hurting before the Great War. The country’s largest employers in those days were the farms, the railroads, and the coal mining industry. Supplying Europe during the war built American fortunes and turned us from a debtor to a creditor nation.

After the war, while Western Europe was suffering from a lack of food and fuel, American mines, farms, railroads, and shipping created a false economic bubble that started to end when Europe once again became self-sufficient. In that period, farms couldn’t grow enough food for needy Europe mouths, and between coal and grain shipments the railroads were booming. But there were economic rumblings being heard and even though there was a return to the pre-war wealth, there would be great change stirring in the wind. Did President Calvin Coolidge, who seemed to hate government, and sleep away his afternoons at the White House really care? There many warnings, and in the in the words of Alan Greenspan, an atmosphere of “irrational exuberance.” Author Kennedy even believes that the low unemployment figures for that period were way over –stated. The collapse of pre-war Europe and the economic balance of employment and trade sowed the seeds for a future world-wide economic meltdown.

Before the Crash of 1929, more wealth was in the hands of fewer people then any other period in our long history. Unrestricted capitalism led to wild speculation in the market places, an eventual credit crunch, and since we didn't believe in "safety nets" or entitlements, the ensuing collapse devastated our social order. In Arthur M. Schlesinger Junior’s great works, on that period, which include The Crisis of the Old Order, and the Coming of the New Deal much of this history is accurately reported and eloquently described. As in 1929, tax policies from Reagan on, with the exception of the eight prosperous years of the Clinton Administration, favored the rich, have shrunk the middle class, and have concentrated more wealth in fewer hands than at any time since the crash.

This period of “wonderful nothingness, which is what the 1920’s has been variously described, ended with the fall of one of its great characters and swindlers, Richard Whitney and the Bull Market in late October of 1929.

The Dow Jones Average had hit a high of on September 3, 1929, at 381.17. The market had been a bit shaky throughout the fall. Richard Whitney (1888-1974), who had graduated from Groton and Harvard, as did Franklin D. Roosevelt, but was admitted to Pocellian, unlike the late President, was a Wall Street legend. He was a member of the New York Stock Exchange at age twenty-three, was elected to the Board of Governors at thirty-one, and was the head of his own investment company. He was the mirror of the “old guard” of the New York Stock Exchange, which was a loose group of wealthy investors who crafted and guided its direction and destiny. As the leader of this group and at that time in the fall of 1929, he was a Vice-President of the Exchange and its acting President. At the beginning of the Panic on “Black Thursday”, October 24, 1929, he moved on the floor in the midst of the selling frenzy, and placed huge orders in an attempt to bring confidence back to the marketplace and to try to stem the avalanche of selling. He placed an order for 10,000 shares of US Steel at 205, which was 40 points above its current selling price. He also placed other orders for his group in a number of other blue-chip stocks. These orders were estimated to be in the range of $20 million. No one in history had ever spent that type of money in a single afternoon. Of course since he was associated with the House of Morgan, many traders assumed that Morgan was behind such incredible action. This legendary effort seemed to work for a while, and the market, which had dropped precipitously, seemed to take pause. That day over 12.9 million shares had changed hands and the market had lost an incredible amount of its value. Over the weekend investors thought over the situation and decided to sell their holdings and the market absorbed a record 13% loss in value. This set the stage for its ultimate collapse. On “Black Tuesday”, October 29, 1929 the selling reached a historically un-reached crescendo. The losses were incredible and with record 16.4 million shares traded, the market lost another 12%. The market crash had wiped out an incredible amount of wealth. It would eventually bottom out at 41.22 on July 8, 1932 to a level not seen since the 1800’s. By April of 1942 it would have lost 75% of its 1929 value and the Dow Jones Industrial Average would not recover to its 1929 levels until November of 1954. Richard Whitney would still represent the “old guard” as its spokesperson. He served multiple terms as its President from 1930 onward and would be a frequent witness in front of Congressional Hearings until 1935. Because reform elements had indicated he would be opposed fore re-lection in 1935, he chose not to run again. Ironically, he was a terrible manager of his own money. He borrowed from friends and investors by using the name of JP Morgan as his assumed backer. It was estimated that he had borrowed over $30 million and by 1938 he declared bankruptcy and owed over $6 million personally. He was indicted, and pled guilty to misuse of funds and spent three years and four months of his five-to-ten year sentence in the Big House at Sing Sing.


The panic and collapse of the economy, brought on by the crash resulted in a massive deflation that President Herbert Hoover called the “Depression.” The New Deal, authored by Franklin D. Roosevelt, stopped the bleeding, but because of the severity of the collapse it could never resurrect the artificially inflated, halcyon days of the 1920’s. Of course present day business -oriented “talking heads” like to say that the New Deal prolonged the slump. Of course they have conveniently forgotten that the 1920’s made the “Techie Bubble” of 2000 look like a walk in the park.


Many seem to have forgotten or have totally ignored the disaster that we faced in 1933. After three and one-half long years of inaction from the Hoover Administration that left us an enduring and unending legacy of breadlines, shanty towns (Hooverville’s), hobos riding the rails, abandoned farms, beggars, apple selling retailers on the streets, unemployment in the tens of millions, social unrest, starvation, and a net loss of population, as more left America then immigrated, we were mired in an economic situation unlike any in history. What we learned quickly from that era was that state's rights solved few problems, and that the south, which was almost completely in ruins, embraced the New Deal with the most open of arms. State's rights sustained "Jim Crow" laws which kept African-Americans, and white tenant farmers uneducated, impoverished, and certainly regarding Blacks, unable to vote. State's Rights enabled a dictator like Huey Long to run Louisiana like his own private fiefdom. State's right's allowed workers, women and children to be abused by unscrupulous employers as wage slaves. Even with the great centralized power FDR and the New Deal would bring to Washington, it would take legislation like the Wagner Act of 1935, and the rise of unionization, decades to reverse much of the state’s rights abuses of both its minority citizens and its workers. Therefore without the enhanced federalism of the New Deal, the country may have faced a greater threat to its unity than even the Civil War posed.


FDR understood the problem of regionalism, the power and the abuse of the “solid south,” and the feelings of conservative wing of the Democratic Party. He had made an effort to bring the southern and northern wings of the Democratic Party together with his efforts to rehabilitate the image of Thomas Jefferson. He had Jefferson placed on the nickel coin replacing the Indian head, had the magnificent Jefferson Memorial built and sought to re-cast him as one of the founding fathers of the Democratic Party with Andrew Jackson. But when it came to his policies, many of these same southern committee chairmen thwarted his efforts in the latter period of the New Deal. Because of their negativity, FDR attempted to purge many of them in the primaries of 1938. This effort failed miserably, and FDR learned his lesson. Later on FDR would need them to support Lend-Lease, and he traded their support for issues he needed against those he could not win, immigration quota reform, and anti-lynching legislation.


The size of the economic cataclysm is almost hard to perceive. Even though the Department of Commerce listed unemployment at 25% many estimates believe it ranged as high as 36% and the most likely number is probably a bit above 30%. The amount of new capital financing had declined 95% since 1929. The amount of new building contracts had declined by at least 75% in those same years. The Dow Jones Average was off 90% since its high in late 1929, and there were 5000 bank closings since the crash, which eliminated nine million, pre FDIC uninsured accounts. US Steel, which had almost a quarter of a million full-time employees in 1929, now employed no one but executives. Schools in major cities and some states virtually shut down for lack of money. In the first half of 1933, 250,000 homes were taken over by the banks, and over 1000 families per day were cast homeless into the streets. This is what Franklin Roosevelt inherited on March 4, 1933.

By 1933, business failures had risen almost 50% from the end of 1928 (109 to 154 per hundred thousand). From 1933 to 1935, only two years they dropped to almost 40% from the 1928 levels (62 to 109 per thousand). Unemployment rose from 3% in 1929 to 25% in 1933. From 1933 through 1937 unemployment dropped 44% to 14%. This figure did not include over 2 million workers employed by the WPA. As to the Gross National Product, by 1933 it had dropped from $103.6 billion in 1929 to $56.4 billion in 1933. This represented a loss of 44% of the total goods and services of the country in 3 years. In FDR’s first administration it rose approximately 64% to $92 billion. By 1940, with defense spending still only 22 % of the federal budget (from 1928 through1932, defense spending represented an average of 38% of the US Budget), and 2% of the GNP, the GNP had risen to $101.4 billion or 4% higher than 1928!  Because of the New Deal, hourly wages which had dropped from 58 cents per hour in 1928 to 49 cents for hour in 1933 (a drop of approximately 25%) rose 74 cents per hour in 1940. This represented a strong recovery of 28% from 1928. These figures are undeniable.

FDR took bold decisive action in the Hundred Days, and fifteen pieces of major legislation passed. The hemorrhaging of the banking crisis ceased, stability was brought back to the market places, and the NRA which came out of the National Recovery Act was the first of many regulatory efforts which would eventually include, the SEC, the AAA, the CCC, the PWA and the WPA.

On May 7, 1933, Roosevelt extolled the CCC in a fireside address on the radio:

"First, we are giving opportunity of employment to one-quarter of a million of the unemployed, especially the young men who have dependents, to go into the forestry and flood prevention work. This is a big task because it means feeding, clothing and caring for nearly twice as many men as we have in the regular army itself. In creating this civilian conservation corps we are killing two birds with one stone. We are clearly enhancing the value of our natural resources and second, we are relieving an appreciable amount of actual distress."

The goal of the WPA was to employ most of the unemployed people on relief until the economy recovered. Its administrator, Harry Hopkins testified to Congress in January 1935 why he set the number at 3.5 million, using FERA data. At $1200 per worker per year he asked for and received $4 billion.

"On January 1 there were 20 million persons on relief in the United States. Of these, 8.3 million were children under sixteen years of age; 3.8 million were persons who, though between the ages of sixteen and sixty-five were not working nor seeking work. These included housewives, students in school, and incapacitated persons. Another 750,000 were persons sixty- five years of age or over. Thus, of the total of 20 million persons then receiving relief, 12.85 million were not considered eligible for employment. This left a total of 7.15 million presumably employable persons between the ages of sixteen and sixty-five inclusive. Of these, however, 1.65 million were said to be farm operators or persons who had some non-relief employment, while another 350,000 were, despite the fact that they were already employed or seeking work, considered incapacitated. Deducting this two million from the total of 7.15 million, there remained 5.15 million persons sixteen to sixty-five years of age, unemployed, looking for work, and able to work. Because of the assumption that only one worker per family would be permitted to work under the proposed program, this total of 5.15 million was further reduced by 1.6 million--the estimated number of workers who were members of families which included two or more employable persons. Thus, there remained a net total of 3.55 million workers in as many households for whom jobs were to be provided."

The WPA employed a maximum of 3.3 million in November 1938. Worker pay was based on three factors: the region of the country, the degree of urbanization and the individual's skill. It varied from $19/month to $94/month. The goal was to pay the local prevailing wage, but to limit a person to 30 hours or less a week of work.

As to the great Harry Hopkins, later in his illustrious career he served as FDR’s special ambassador during World War II. On his initial visit to war-torn Britain in early January of 1941, he met with Prime Minister Winston Churchill to discuss Lend-Lease aid. At the end of Hopkins’ tour of Britain with the Prime Minister they ate dinner at the Station Hotel in Glasgow, Scotland. Churchill drew out Hopkins with praise for Roosevelt and a reference to “the Democracy of the great American Republic.” Hopkins, who was quite ill from the affects of the long-grueling trip and his own weakened constitution sat for a moment after Churchill’s remarks, and the rose to face the Prime Minister.

“I suppose you wish to know what I am going to say to President Roosevelt on my return.” In his soft-measured voice, “Well I ‘m going to quote you one verse from the Book of Books in the truth of which Mr. Johnson  (Tom Johnson, the secretary of state for Scotland and a member of the party) and my own Scottish mother were brought up: ‘Whither thou goest, I will go; and where thou lodgest, I will lodge; thy people shall be my people, the God my God.’” The dropping his voice, he added, “Even to the end.” No one could have said it better. Churchill sat with tears in his eyes.

This vignette reveals just a fragment of what made up the great Harry Hopkins, who was one of FDR’s greatest New Deal lieutenants.

The National Industrial Recovery Act on June 16, 1933, created the Public Works Administration (PWA) and budgeted several billion dollars to be spent on the construction of public works as a means of providing employment, stabilizing purchasing power, improving public welfare, and contributing to a revival of American industry. Simply put, it was designed to spend "big bucks on big projects."

Under the leadership of Harold W. Ickes, the Secretary of the Interior, the PWA epitomized the Rooseveltian notion of "priming the pump" to encourage economic growth. Between July 1933 and March 1939, the PWA funded the construction of more than 34,000 projects, including airports, electricity-generating dams, and aircraft carriers; and seventy percent of the new schools and one third of the hospitals built during that time. It also electrified the Pennsylvania Railroad between New York and Washington, D.C. Its one big failure was in quality, affordable housing, building only 25,000 units in four and a half years. It provided the federal government with its first systematic network for the distribution of funds to localities, ensured that conservation would remain an element in the national discussion, and provided federal administrators with a broad amount of badly needed experience in public policy planning.

When Franklin D. Roosevelt was elected as president, he appointed Henry Wallace as his Secretary of Agriculture. In 1933 Wallace drafted the Agricultural Adjustment Act (AAA).

The AAA paid farmers not to grow crops and not to produce dairy produce such as milk and butter. It also paid them not to raise pigs and lambs. The money to pay the farmers for cutting back production of about 30% was raised by a tax on companies that bought the farm products and processed them into food and clothing. The AAA also became involved in trying to help farmers destroyed by the creation of the dust-bowl in 1934. By the time the Agricultural Adjustment Administration began its operations, the agricultural season for many crops was already under way.

The agency oversaw a large-scale destruction of existing cotton crops and livestock in an attempt to reduce surpluses. No other crops or animals were affected in 1933, but six million piglets and 220,000 pregnant cows were slaughtered in the AAA's effort to raise prices. Many cotton farmers plowed under a quarter of their crop in accordance with the AAA's plans.

Large farms benefited from the AAA policy of reducing surpluses, having "gross farm income increased by 50% during the first three years of the New Deal.”  The increase in gross income for farmers was largely paid for through government subsidies.

These of course are the major programs. FDR would have to fight the Courts over the constitutionality of many of his programs, and a number would be voided. As for example, in 1936 the Supreme Court declared the AAA unconstitutional. The majority of judges (6-3) ruled that it was illegal to levy a tax on one group (the processors) in order to pay it to another (the farmers). In 1938, another AAA was passed without the processing tax. It was financed out of general taxation and was therefore acceptable to the Supreme Court.

This struggle of course opened up the next phase of reform with his Second New Deal. Eventually the Court ruled Social Security to be constitutional, and a number of these very old Justices finally resigned after FDR’s effort to re-organize the Federal court system (The Court Packing!). Eventually, he was able to put his total imprint on the court despite losing his abortive court reform initiative. But with all of his success, new generations of his critics have been spawned in the 60+ years since his untimely death.

As per example, I came across another article decrying the New Deal by William L. Anderson, an assistant professor at Frostburg State, Maryland, MD.

This article has covered only a small portion of the post–New Deal Supreme Court’s crimes against the Constitution. For lack of space, I have not dealt with the Court’s rulings on asset forfeiture, which has accompanied the government’s “war on drugs,” nor have I dealt with the various Court assaults on free speech, religious beliefs, and civil liberties.

To be able to fully gauge the effect that the New Deal has had on our lives today through the Supreme Court, a deforestation of North America would be needed to write a volume large enough. However, there are two consistent themes that have emerged in the past seven decades. The first is that private property is considered to be an anachronism, useful only insofar as it serves as a mechanism to raise tax revenues for government. The second is that the U.S. Supreme Court and all U.S. courts, federal and state, are expected to be movers and arbiters of social change. To put it bluntly, the courts see themselves as having a mission to implement the policies of the Progressive Era. Unfortunately, what the political classes see as being “progressive” actually is little more than a regression into tyranny in which the state has absolute power.

 The "right wing" of this country always seems to trash the rights of the many for the rights of the few, by hiding behind "original intent." Again the Framers had no understanding of the modern world that would come about. As Franklin Roosevelt said, "out of this modern civilization, economic royalists carved new dynasties...The royalists of the economic order have conceded that political freedom was the business of the Government, but they have maintained that economic slavery was nobody's business."  (FDR’s speech accepting re-nomination to the Presidency, June 27, 1936.)


Also in his Second Inaugural, the late President said, "The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little." (Second Inaugural, January 20, 1937)


Little really has changed in the minds of many of the old and new critics of the New Deal. But, did we go back to unrestricted capitalism, and therefore trash the SEC, NASD, and the Securities Laws of 1933, 1934, and 1940, wages and hours, child labor laws and the like? No, thankfully! Should we go back to the great enduring capitalistic legacy of the "Triangle Shirt-Waste Fire?" Or maybe we should trash the reform legacy of Ida Tarbel, Upton Sinclair, Sinclair Lewis, and others who revealed to the public the abuses of private capital and power. Meanwhile how many judges did the "economic royalists" own? How many of them came from the bosom of private capitalism and the world of property? (Thankfully Holmes, Brandeis, and Cardozo didn't!)


The new president has to face another generation of problems that has come out of an era of greed and profit without a concern for economic sustainability and resiliency. In a sense this all goes back to the real legacy of Ronald Reagan. It is hard to believe that Reagan, who voted for FDR all four times he ran for president, would place a picture of Calvin Coolidge in a place of honor in his office. What had Reagan really learned? Interestingly, as much as Reagan seems to replicate Calvin Coolidge more than Herbert Hoover, George W. Bush seems to have done the impossible. He seems to have replicated Harding, Coolidge, and Hoover.


Hopefully when Barack Obama takes the oath on this coming Tuesday, January 20, 2009, he will be able to convey, in his own way and style, the same confidence, vision, thoughtfulness and leadership FDR expressed on March 4, 1933. FDR’s remarks on that famous day conclude my thoughts.



The former Governor of New York rode to the Capitol with President Hoover. Pressures of the economy faced the President-elect as he took his oath of office from Chief Justice Charles Evans Hughes on the East Portico of the Capitol. He addressed the nation by radio and announced his plans for a New Deal. Throughout that day the President met with his Cabinet designees at the White House.

Below is the text of FDR’s First Inaugural!



President Hoover, Mr. Chief Justice, my friends: This is a day of national consecration, and I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our nation impels.

This is pre-eminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great nation will endure as it has endured, will revive and will prosper. So first of all let me assert my firm belief that the only thing we have to fear. . .is fear itself. . . nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.

In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days. In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels: taxes have risen, our ability to pay has fallen, government of all kinds is faced by serious curtailment of income, the means of exchange are frozen in the currents of trade, the withered leaves of industrial enterprise lie on every side, farmers find no markets for their produce, the savings of many years in thousands of families are gone.

More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment. Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply.

Primarily, this is because the rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failures and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True, they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit, they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored conditions. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

Happiness lies not in the mere possession of money, it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow-men.

Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be values only by the standards of pride of place and personal profit, and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance. Without them it cannot live.

Restoration calls, however, not for changes in ethics alone. This nation asks for action, and action now. Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously.

It can be accompanied in part by direct recruiting by the government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our national resources.

Hand in hand with this, we must frankly recognize the over-balance of population in our industrial centers and, by engaging on a national scale in a redistribution, endeavor to provide a better use of the land for those best fitted for the land. The task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities. It can be helped by preventing realistically the tragedy of the growing loss, through foreclosure, of our small homes and our farms. It can be helped by insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced.

It can be helped by the unifying of relief activities which today are often scattered, uneconomical and unequal. It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character.There are many ways in which it can be helped, but it can never be helped merely by talking about it. We must act, and act quickly.

Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order: there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money, and there must be provision for an adequate but sound currency.

These are the lines of attack. I shall presently urge upon a new Congress in special session detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States. Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are, to point in time and necessity, secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.

The basic thought that guides these specific means of national recovery is not narrowly nationalistic. It is the insistence, as a first consideration, upon the interdependence of the various elements in and parts of the United States. . . a recognition of the old and permanently important manifestation of the American spirit of the pioneer.

It is the way to recovery. It is the immediate way. It is the strongest assurance that the recovery will endure.

In the field of world policy I would dedicate this nation to the policy of the good neighbor. . .the neighbor who resolutely respects himself and, because he does so, respects the rights of others. . .the neighbor who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors.

If I read the temper of our people correctly, we now realize, as we have never realized before, our interdependence on each other: that we cannot merely take, but we must give as well, that if we are to go forward we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline, no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline because it makes possibly a leadership which aims at a larger good.

This I propose to offer, pledging that the larger purposes will hind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife. With this pledge taken, I assume unhesitatingly the leadership of this great army of our people, dedicated to a disciplined attack upon our common problems.Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors.

Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations.

It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure. I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require.

But in the event that the Congress shall fail to take one of these courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis. . .broad executive power to wage a war against the emergency as great as the power that would be given to me if we were in fact invaded by a foreign foe.

For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less. We face the arduous days that lie before us in the warm courage of national unity, with the clear consciousness of seeking old and precious moral values, with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.

We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I will take it. In this dedication of a nation we humbly ask the blessing of God. May He protect each and every one of us! May He guide me in the days to come!

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#7) On February 01, 2009 at 4:20 PM, foolsMeThrice (99.08) wrote:

The problem was the inelastic money supply. Money supply contracted which is in stark contrast to what is happening now.  In order to get to a point where he could revalue dollar gold conversion ratio he had to first confiscate gold and enact laws that prevented it from being hoarded.  It's impossible to get away with that now.

From the market perspective, FDR did just wonderful.  From market bottom in 1932 to 1945, the market achieved 14% return annually.

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