Timing

Brad DeLong starts a debate when he argued that the New Deal brought Us out of the Great Depression. HedgeFundGuy provides the best rebuttal to DeLong, while the best link given by him may be Cole and Ohanian which is easily accessible; be sure to read the commentary under the HedgeFundGuy post. Tyler Cowan, from which I initially entered the debate, presents his own estimate. Peter Boettke at the Austrian Economists suggests reading Robert Higgs, which I haven’t because of Price.

My trouble with the whole debate about the recession of 1937 lies in two different factors:

1) it occurs within the range it takes for a macroeconomic policy to take full effect–approximately three years; and

2) my belief that the Production of 1935-6 still lacked an existent Consumption market.

There was much wrong with New Deal economic policy, especially the high rates of Taxation imposed, but not of sufficient magnitude to bring the Production downturn of 40%; something which would have required a lack of a Market.

The recession of 1937 was going to occur, no matter what macroeconomic policy had been adopted. Even the introduction of Easy Credit institutions would have taken at least a decade to alter Consumers’ economic perceptions. The slashing of personal funds with the Stock Market Crash of 1929, plus the consumption of remaining funds in it’s aftermath, barred a Consumption market of sufficient magnitude to incite a rapid return to Production. The real end to the Great Depression came with the buildup for WWII, when a major new market was created for the Product of American and World manufacturing. The blame cannot be laid on New Deal policies, but Supply Side advocacy remains equally as fallacious. lgl