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VIDEO: Why FDR’s New Deal Just Made the Depression Even Worse

The newest must-see course from Prager University makes the case in less than 6 minutes.

by
Lee Ohanian

Bio

April 11, 2013 - 9:00 am

One of the most widely-held views about 20th Century America is that FDR’s policies brought the country out of the Depression. But according to my research, FDR’s industrial and labor policies actually prolonged the Depression for several years by subverting the normal process of competition, supply, and demand, and creating industrial and labor cartels that artificially raised wages and prices and substantially impeded job creation. In fact, the total number of hours worked relative to the working age population recovered only slightly as late as 1939. By the late 1930s, FDR realized that these policies were damaging the economy, and economic policies shifted significantly at this time, which made the economy more competitive and which began to reduce artificially high prices and wages. This policy shift resulted in higher rates of economic growth and job creation and set the stage for the World War II economic boom.

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Lee E. Ohanian is Professor of Economics, and Director of the Ettinger Family Program in Macroeconomic Research at UCLA, where he has taught since 1999. He is an advisor to the Federal Reserve Bank of Minneapolis, and previously has advised other Federal Reserve Banks, Foreign Central Banks, and the National Science Foundation. He has been an economic advisor to state and national political campaigns. His research, which recently has been discussed in the New York Times, Wall Street Journal, Washington Post, and other media sources, focuses on economic crises, and as been published widely in a number of peer-reviewed journals. He is a frequent columnist for the Wall Street Journal, Forbes, Newsweek, and CBS moneyline. He currently serves on the editorial boards of 3 journals. In the past year he has advised the U.S. Senate and the California State Legislature on our current crisis. He previously served on the faculties of the Universities of Minnesota and Pennsylvania, and has been a visiting professor at the Stockholm School of Economics, Arizona State and USC. He is co-director of the research initiative “Macroeconomics across Time and Space” at the National Bureau of Economic Research.

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However, Communism, Socialism and Fascism were waves of the future, or so it seemed at the time. In my opinion, Roosevelt successfully co-opted these movements, and if his measures extended the length of the Depression, well, maybe that was the least best result.
1 year ago
1 year ago Link To Comment
Hmmm, a professor of economics at UCLA. Wonder where he will be teaching now that this video has come out?
1 year ago
1 year ago Link To Comment
Amity Schlaes pointed out in her history of the Depression that Herbert Hoover was also an activist President, and that his activist policies were what kept the economy down in the first place. Hoover is usually characterized as a "do nothing Republican" but that is the reverse of the truth.
1 year ago
1 year ago Link To Comment
Yet another 'god' with feet of clay; Does anyone else see a pattern here ?

It is not just presidents, either; My parents served in the CBI theatre
during the Pacific War, and my father the pilot thought that General
Douglas MacArthur walked on water; My mother the nurse, who
tended those wounded in the General's Island-hopping campaign,
had a different opinion.
1 year ago
1 year ago Link To Comment
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