Nov 17th, 2008 at 12:31 pm
Depression Chart
Apropos of Paul Krugman’s demolition of George Will’s argument about the Great Depression, Brad DeLong offers a chart:
There you have it. This is far from saying that every detail of the New Deal regulatory agenda was the right thing to do then or would be the right thing to do now. But the monetary expansion associated with the New Deal helped the economy, and the attempted return to orthodoxy hurt.
32 Responses to “Depression Chart”
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November 17th, 2008 at 12:35 pm
I likey the chart. I agree that the New Deal was good and bad. Price controls bad. Banking reform good. Public works projects good and bad. All this historical argumentation gets a bit taxing though. There are revisionists who still don’t understand Roosevelt’s agricultural policy (Soil Convservation Act anyone?).
November 17th, 2008 at 12:47 pm
My grandfather sharecropped in East Texas and the family’s fortunes were decimated by the Depression. At the very start of the 40s my father graduated from high school and lit out for the territories (escaping the hard farm work his dad would put him to) and signed on with the CCC putting railroad track across New Mexico, Arizona and southern California (he met his first “Chinamen” who were hardworking sons of a guns he tells me). By the time he got to California the war had cranked up and he joined the navy, serving as a sapper following the progress up through the South Pacific, mostly in the Marshall Islands. After a stab at civilian life, he made a career in the military. Whence commeth me, duly overeducated in the post war American way. The New Deal may have been “good and bad,” but it got my dad out of the house and changed his life and life prospects enormously (and thus, changed mine).
November 17th, 2008 at 12:50 pm
Hahahah “there you have it”. Like a topic that has spawned thousands of economics papers was settled by that chart.
Causality is complicated, and you know this–and you know how difficult it is when talking about something as complex as the economy. You owe your readers better than to act as though this debate is settled by sound bytes from George Will and Paul Krugman and a simple chart from Brad DeLong.
You owe your readers at least a cursory look at what the real economics literature on this topic has to say. I know you have an axe to grind here, but people are going to take this knowledge out into the world, and this isn’t exactly an unexplored issue.
November 17th, 2008 at 12:51 pm
George Will is incoherent on economic policy because he doesn’t think Wall Street is part of the economy–he thinks it IS the economy.
All subsequent errors of fact derive from that ideological fallacy.
November 17th, 2008 at 12:54 pm
This is far from saying that every detail of the New Deal regulatory agenda was the right thing to do then or would be the right thing to do now.
Absolutely. You don’t want the NRA back. However, the banking regulations were good stuff.
But the monetary expansion associated with the New Deal helped the economy, and the attempted return to orthodoxy hurt.
Fiscal expansion, Matthew. Fiscal expansion. Congress spent money and lots of it. Even better was when Congress spent more money on building stuff and inventing stuff to build. (If they hadn’t don’t that, you wouldn’t be blogging and I wouldn’t be commenting - no TV’s, no computers.)
Monetary expansion was what Greenspan was doing back in 2001 and that worked well enough to blow a giant financial bubble that has now imploded, leaving us worse off than when we started and a coupla trillion poorer.
max
['Recall who it was who agreed with the Bush administration should cut taxes.']
November 17th, 2008 at 12:58 pm
Delong and Krugman offered some stylized facts as part of a stylized debate on the teevee. WilsonF is surely aware that both these men are professional economists who are aware of the debates and papers he mentions. The context for Krugman’s stylizing and DeLong’s little chart with stylized labels is George Will’s ridiculous and condescending pronouncements on investment behavior during the Depression. If WilsonF were truly concerned with the divergences between teevee narrative, historical fact and academic research, WilsonF would start with Will’s nonsense.
November 17th, 2008 at 1:11 pm
The axe-grinders are the people with the reflexive hatred of Roosevelt.
I’m sure you can find all sorts of scholarly criticism of any good policy that threatens rich people’s wealth. The New Deal was working, and it just bugs the hell out of some people.
November 17th, 2008 at 1:15 pm
In of itself the chart proves nothing as there’s no counterfactual against which to compare the performance from 1933 - 1941 (though no doubt the New Deal reduced the human cost of the Depression). One could just as well point out that the Depression bottomed in June 1932 and improvement began thereafter, 9 months before the advent of the New Deal.
Krugman seems intent of New Deal II but what he’s really pushing for is BushCo II. Recall that in 2001 Bush embarked on a policy of massive deficits which continue to this day, accompanied by (sl)easy money policies which stimulated private spending as well. The result (as even Krugman has pointed out many times) was the weakest recovery ever, with anemic job growth, stagnant incomes, and the start of an even worse recession. This alone should (but doesn’t) give Krugman 2cd thoughts.
Krugman’s an OK economist, but he gets too wound up in partisan advocacy, a mistake that more insightful people like Roubini, Prechter, Fleckenstein, Jantzen, Shedlock, etc. don’t make.
November 17th, 2008 at 1:33 pm
in 2001 Bush embarked on a policy of massive deficits which continue to this day
I’m not sure it’s the deficit itself that’s relevant here—the Bush deficits were, in part, the result of cutting taxes on the rich and waging the Iraq War. Better-directed deficit spending might be beneficial in the long run.
November 17th, 2008 at 1:37 pm
I have a feeling Will’s and other wingers’ arguments about the Depression are coming from a recent book, The Forgotten Man by Amity Shlaes. I was in my local bookstore, saw this book, described as a new history of the great depression. I didn’t look at it very carefully and I bought it. Then as I read the intro it became clear this was a winger’s version of the depression, and then I looked and saw who she was: on editorial board of WSJ, etc etc. I’m reading it anyway because it does have lots of interesting details, but in terms of the analysis it is extremely tendentious and self-contradictory.
November 17th, 2008 at 1:50 pm
UG, I’m pretty positive that Shlaes book is the main or only source for this style of explaining. Folks like Wills and John Updike (who for some strange reason was assigned to review it for the New Yorker) seem to really like it
November 17th, 2008 at 2:02 pm
One interesting thing about that graph has nothing to do with the Depression per se. The popular understanding of business cycles is that consumption goes up and down, but in reality consumption is very stable. It’s investment that suffers badly in a downturn.
November 17th, 2008 at 2:13 pm
My post was overstated, I’m sorry…I think your qualification at the end is sufficient. I just think this is a complicated issue, but this is an interesting chart anyway.
November 17th, 2008 at 2:20 pm
Causality is complicated, and you know this–and you know how difficult it is when talking about something as complex as the economy. You owe your readers better than to act as though this debate is settled by sound bytes from George Will and Paul Krugman and a simple chart from Brad DeLong.
In of itself the chart proves nothing as there’s no counterfactual against which to compare the performance from 1933 - 1941
True. What this chart does is REFUTE an argument - namely, the argument beloved by the right and the libertarians that Roosevelt’s open-purse, regulatory policies caused or lengthened the Depression. It doesn’t prove an argument at all.
But, then, Krugman was refuting Will’s argument.
November 17th, 2008 at 2:34 pm
Worth mentioning that when Social Security checks started to kick in, that had an effect as well.
November 17th, 2008 at 11:20 pm
Vox Day has a different view, and another chart.
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