George Will:
Early in what became the Great Depression, John Maynard Keynes was asked if anything similar had ever happened. "Yes," he replied, "it was called the Dark Ages and it lasted 400 years." It did take 25 years, until November 1954, for the Dow to return to the peak it reached in September 1929. So caution is sensible concerning calls for a new New Deal.
The assumption is that the New Deal vanquished the Depression. Intelligent, informed people differ about why the Depression lasted so long. But people whose recipe for recovery today is another New Deal should remember that America's biggest industrial collapse occurred in 1937, eight years after the 1929 stock market crash and nearly five years into the New Deal. In 1939, after a decade of frantic federal spending -- President Herbert Hoover increased it more than 50 percent between 1929 and the inauguration of Franklin Roosevelt -- unemployment was 17.2 percent.
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1 comment:
Most of the New Deal programs, most notably Social Security, are *still* in place and consume a much larger percentage of GDP compared with the '30s. The question the media should be asking is, will more of the same really solve this problem? If these programs are so great they should be working in place. Why are we in the shape we are in? That is, we've had Keynsean economics for over 70 years. Should we not have reached Utopia by now?
Keynesian economics gained a foothold as a valid approach because it's philosophy was to use government to kick start a stalled economic engine. In effect the New Deal, based on Keynseanism, outlawed economic stagnation. The big problem with forced economy is that requires suppliers to make products regardless of whether the public wishes to buy them. The long term effect is a wasteful economy with high social expense.
Over the last 70 years, and in particular the last 40 years we have chosen to borrow our way out of the inefficiency. The inefficiency continues to increase and the borrowing keeps growing. That is the root of our problem, and the economy is finally paying the price in real terms.
So what is Obama's solution? Ratchet up the Keynsianism, increase the inefficiency and borrow ever more from the Chinese to pay for it. I'd be really pissed at Obama if it weren't for the so-called repoublicans that seem to be complicit with this plan.
I'm afraid that the only solution will be the cratering of the economy and the government that is riding it's back.
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