Our New Deal:What Obama and Congress can learn from the Depression of the 1930’s

“Those who cannot remember the past are condemned to repeat it” (George Santayana).

“Those who control the past control the future, and those who control the present control the past” (George Orwell).

On Nov. 5, 2008,I decided that our situation was closer to 1933 than 1993, and decided to reinvestigate the New Deal, which was the name Pres. Roosevelt gave to the programs of Relief, Recovery, and Reform that defined his administration.   The changes included relief for the unemployed, recovery of the economy by: Keynesian spending;  agricultural aid; direct help to industry; and reform of business, finance, and housing.  In addition, Social Security – a series of insurance programs to help the elderly, protect the survivors who lose a wage earner, and provide for the disabled – was established, and support for organized labor became law.  Some of the programs were invalidated by the Supreme Court, but many remain to this day.  The effects of the New Deal?

The GDP recovered to exceed the 1929 level by 1936, and then took a dip in 37-38, recovering to climb on war spending.

Social programs, such as Social Security, unemployment insurance, and the FHA are still in place.

Financial reforms, such as the FDIC, SEC, and others are also still in place.

Organized labor, strengthened by the Wagner Act, enabled many blue collar Americans to increase their standard of living in the post war economy,  and consume more of what America produced.

When The Roosevelt administration yielded to conservative pressure, and reduced spending in 1937, the economy took a dip.

The TVA, and other infrastructure programs, were successful in both providing gainful employment, and in providing needed facilities.

What are the lessons?

o Keynesian spending does work, provided it is not too little.

o Relief, in the form of safety nets, does work.

o Don’t listen to conservatives: it was their polices that got us where we are.

o A crisis can provide the moment for major reforms – ignore those who say we should not try to do too much.

o As J.K. Galbraith observed ( in “The Affluent Society”), strong unions negotiate good wages, which enable workers to consume more of what they make.  (It might be noted that the relaxation of regulation and dilution of wages are major contributors to our current economic problems.)

While it could be argued that the US economy did not recover fully until WWII, I offer:

o If we had kept spending in 1937, there would have been no drop.

o The strengthening and expansion of the central government under the New deal provided the precedents, methodologies, and structures that were necessary for the massive efforts required to win the war, which ended with the US as the most powerful country in the world.  (It may be noted that new centralized programs we create under the Obama administration will help us bring our infrastructure, education, economy, energy polices, and health care systems into the 21st century, and then maintain them for generations to come.)

As for those who say the new Deal failed? Perhaps in their short sighted view they oppose relief and strong unions, but they cannot disagree that the US economy, up until we became dependent on Middle Eastern Oil, and paid dividends rather than modernize, was on top of the world.

In closing:

“Those who cannot remember the past are condemned to repeat it” (George Santayana).

“Those who control the past control the future, and those who control the present control the past” (George Orwell).

What do you think?

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