New takes on the New Deal

There’s a really interesting Econoblog this week featuring Arnold Kling and Brad DeLong. Unlike the slugfest between
Menzie and
Kash, there are actually some profound disagreements between these two.

Arnold lays down the following challenge for Brad:

[W]hat I think is relevant to ideological debates today is this: Are Social Security, farm price supports, Federal Housing programs, legalization of trade unions, securities market regulation, and other major legacies of the New Deal necessary for macroeconomic stability? What did they contribute to recovery in the 1930s? What do they contribute today? Over to you, Brad.

Brad enumerates many of the things he likes about Roosevelt’s steps and dislikes about Hoover’s, but falls short of addressing this specific list. Brad does offer a defense of the Securities and Exchange Commission and acknowledges the problems with farm price supports, but for the most part ignores the rest of Arnold’s particulars.

I much recommend this exchange by two smart people who try to explain why they see the world differently. But as someone who believed before reading this that Roosevelt made some very good moves and committed some real blunders, I must say that I came away feeling that these two scholars, despite their very different perspectives, are in basic agreement with each other and me on that general characterization.



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11 thoughts on “New takes on the New Deal

  1. DickF

    Brad Delong makes the normal illogical argument for central government control:
    Men are greedy and selfish and cannot be trusted to do what is right; therefore, selected men from among the greedy and selfish should be empowered to use the coercive force of government to take from some to give to others.
    Is it logical to believe that greedy and selfish men will no longer be greedy and selfish simply because they enter government service? Is it logical to believe that the limited power of the entrepreneur is more dangerous than the nearly unlimited power of government? Or is it logical to believe that by shifting power from those who are subject to the laws of the market and society to positions given immunity from oversight and prosecution will change from being greedy and selfish to being more altruistic?
    The entire argument strikes at the very heart of a liberal, constitutional, democratic republic.
    But Arnold Kling does little better surrendering in his opening question and answer. The New Deal did not save us from Fascism; the New Deal was Fascism. The only reason that the US did not succumb to the same tyranny as Germany, Italy, Japan, Spain, Argentina, and others is because of the strengths of the checks and balances designed into our system of government. Kling doesnt understand that saying that the New Deal saved us from Fascism admits to its validity and his debate becomes one of degrees. Similarly Delong doesnt understand that by supporting the New Deal he admits the validity of Fascism and his debate also become one of degrees.
    In other words the debate is whether we gore Delongs ox or Klings ox.
    So what is the proper argument concerning the New Deal? It is the same argument as that of our founding as a nation. What is the proper role of government? Is it to prevent one man or group of men from overpowering others and taking their property, or is it to empower greedy, selfish men to make decisions concerning the distribution of the collective wealth? In other words, should government protect private property or confiscate it?
    Brad Delong wishes to debate altruism and morality. Okay, I will yield to Delong’s wishes for altruism and morality if he will yield to my understanding that empowering greedy and selfish men should not be the role of government.
    In their imaginary worlds would Brad Delong or Arnold Kling give me control over their property? I doubt it seriously. Yet, in their imaginary worlds Delong and Kling see themselves as controlling my property.

  2. Buzzcut

    To say that the New Deal saved us from fascism, or Communism, I think is quite silly.
    On what basis can you make that statement? What data are you using?
    Was the Communist party winning elections? Were they anywhere near the verge of taking over the government through force? Was there a large army of Communists living in, say, Montant, just waiting to march across the country and take over Washington?
    Was there even a Fascist party? Was there an American analogue to Hitler or Mussolini or Peron? You kind of need a dictator if you are going to have a dictatorship!
    But, in fact, Roosevelt was in office for the rest of his life. In that aspect, he was very much like a dictator.
    Claims of the New Deal “saving capitalism” are bogus.

  3. spencer

    There are two debates here.
    One is, did FDR help or hurt the economy in the 1934-40 period. Kling, did not attempt to refute DeLong’s counterfactual that without FDR the economy would not have bottomed in 1934. So on this basis we have to give that part of the debate to Delong — FDR massively helped the economy in the 1930s.
    Second, does the modern mixed economy do a significantly better job or worse job of generating overall economic wellbeing then the old system of small government. In this case neither of the two actually addressed this issue so I would have to say that part of the debate was a draw.

  4. DickF

    spencer,
    Rather than a draw I would say they both lost, or perhaps we lost.
    Just for the record I would have voted for FDR against Hoover because of his promises, but FDR broke his promises of tax cuts and spending restraint. Again and again Hoover’s policies defeated recovery after 1929 and FDR simply continued the same failed Hoover policies. In one sense it was the war, not the New Deal, that brought us out of the depression because the US was the only safe haven for European capital.

  5. 2slugbaits

    I don’t think prevention of “fascism” is quite right. It would be more accurate to say that New Deal things like unions and competing government agencies dampened some of the totalitarian impulses that might have cropped up. The libertarian economic man is basically defenseless against the state. What really protects us isn’t Madison’s erroneous forumulation in Federalist #10, it’s actually the plethora of competing economic power bases that ensure everyone has an ally somewhere. Yes, it creates all kinds of economic drag, but look what happens when you have the profit motive without competing power bases…you get China. And to see what you get when a totalitarian country develops competing power bases, just look at Gdansk, Poland about 25 years ago.

  6. Buce

    “Was the Communist party winning elections? Were they anywhere near the verge of taking over the government through force?”
    Of course not. But reframe. By 1936, Huey Long, Father Coughlin and others of their ilk were running way high in the much-admired sweepstakes.
    Russian-directed communism never had a nickel’s worth of support here beyound a tiny handful of East European immigrants whose minds caught fire from European intellectual debates. But who said that when Communism comes to Britain they will be called “Her Majesty’s Soviets.”

  7. algernon

    Dick F,
    Well said. When has power ever improved anyone’s character? I think social scientist are blind to this because, as you point out, they envision themselves or others of their “disinterested” group as the decision makers.

  8. DickF

    Algernon,
    Thanks.
    I was thinking about this today and I think that Delong’s argument may be easier to see with a little proverb.
    Imagine two men caring for their elderly mothers in nursing homes. Each man is a relatively good businessman and so each has put money aside in investments to use the proceeds to care for his mother. The government arrives at the nursing home and determines that to be humane the mothers need more care, so they mandate that the men take the money out of their investments to pay for improvements.
    The men protests and file petitions to prevent the liquidation. The argument of the government is that the men is hard-hearted businessmen who will not give their mothers more money. The government prevails.
    Now the men have no investments to care for their mothers. The mothers have better furniture and other material things, but now their day-to-day expenses for food and clothing are not being met. The government again steps in and determines that the men are neglecting their mothers and so it hits them with fines.
    To pay for the fine and to give their mothers proper care the men takes on additional jobs working longer hours. One man has a heart attack from the stress and dies. The other because he is working harder and taking all of the overtime he can earns a promotion and his income is sufficient for him to take care of both mothers.
    A government economist analyzes the situation and determines that by forcing the men to liquidate their investments the government actually stimulated the economy and its social programs actually improved economic conditions.
    The moral: The government will take credit for the hard work of the common man.
    What we must realize is that social programs do not create prosperity, prosperity allows social programs. If you eat the seed corn, or kill the worker, the social programs will end.

  9. DickF

    It is also important to note that big government central planners define compassion as how much money the government spends on social programs, but families define compassion as how much time members spend together. In the central planning world family members are required to work longer hours to supply money so that those in government can praise themselves for its distribution, but families find that their level of compassion is reduced because there is less time to be spent with loved ones.
    The distribution of central planners does not require any personal interaction, but when mandated by law it cruelly forces those with the desire for personal interaction to conform to the impersonal benevolence of the state. Is it really compassion to attach a dollar sign to benevolence, as the social planners would have us believe, while hindering the development of a sense of personal community?

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