Several weeks ago, I came across a very intriguing issue of Time Magazine. The cover had a picture of Barack Obama that was edited in such a way it was obvious he was intended to represent Franklin D. Roosevelt. It was only once my eyes had drifted from the rather absurd picture to the title that I couldn’t prevent a smile from stretching across my face. For the first time I can remember, I completely agreed with what Time said.
Plastered across the cover was the phrase “A new New Deal,” and it couldn’t have been more correct. The comparison between Obama and Roosevelt is one I made long ago, but to see it on a magazine I rarely read sent a sort of chill down my spine. It was only after further investigation that I came to realize the horrid truth: The comparison was intended to be one of a complimentary nature, a sort of grandiose gesture meant to put Obama in a positive light.
I felt almost foolish for a moment. You see, I had almost forgotten that the general opinion among the populace of Roosevelt and his New Deal is a good one. In the grand scheme of things, this comes as no surprise. After all, he was the master of propaganda. By using an assortment of methods, from his homey fireside chats to the short pro-Roosevelt clips that would play before movies in theaters, he swayed the respect and admiration of the American people during his presidency.
As I mentioned in my previous article, government spending is not the way to help our current economic predicament. A brilliant example of the downside of government intervention is the effect of the New Deal, a radical jumble of government sponsored social programs that were meant to increase employment, fix the country’s infrastructure and primarily get the economy and workforce moving again.
However, this goal fell far short. In fact, there was even less work, on average, during the New Deal than before its implementation. I won’t bore you with statistics, but let’s just say the numbers certainly don’t paint a pretty picture of recovery. If these new policies didn’t end the Great Depression, what did they do? In short, they lengthened and deepened it.
According to The Wall Street Journal editorial by economics professors Harold D. Cole and Lee E. Ohanian, the conditions for strong economic recovery were very favorable during the New Deal: “Productivity grew very rapidly after 1933, the price level was stable, real interest rates were low, and liquidity was plentiful.”
If the foundation for a strong economic turnaround was there, then what stopped (or rather, delayed) it? Three words: The New Deal. It stifled the basic ideas of capitalism, competition and pricing set by the market.
The goal of the government was to provide stability and safety, and to accomplish this, they set prices well above the norm and established codes of so-called fair competition. To the average worker, higher wages and better job security may seem like good ideas, but they actually cripple economic growth because they go against the very laws and nature of capitalism. It is the very nature of capitalism that ensures when the going is good, it’s very good. But the same applies to when things start to go downhill.
When the government intervenes and attempts to smooth these oscillations, it actually hinders the chance of growth. To artificially inflate wages and prices in one industry will have the opposite effect on another. The anti-market policies of the New Deal crushed competition, which is the driving force behind our economy.
When two companies produce the same good, they are constantly in a battle to be more efficient and more effective. To succeed, each must attempt to produce their goods more cheaply and with higher quality than the competition. When this natural ideology is crushed, by policies like the National Industrial Recovery Act, the effect is obvious: little or no growth.
Eventually, the economically deflating policies of the New Deal began to be reversed. This change, coupled with the huge economic boom that accompanied World War II, was enough to lift America out of the Great Depression. Cole and Ohanian estimate the New Deal “prolonged the Depression by seven years.”
I wish the current administration and Congress would learn from the mistakes of our past. Instead, they took our current economic downturn used it to push the largest spending bill in our history. It saddens me to see that such a wasteful and darn-near useless bill has been signed into law, when there are much better things to do with our money. I hope Obama opens his eyes and realizes this mistake. Unfortunately, I fear his partisan blinders will prevent him from seeing clearly.
Ryan Rougeau is a junior majoring in computer engineering. He can be contacted at [email protected].
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New Deal type policies don’t work
Ryan Rougeau
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February 20, 2009
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