On The Great Depression’s End: The New Deal or The War?
I keep hearing that FDR’s New Deal didn’t end (or even prolonged) the depression; World War II ended it. Impossible as it is to prove a negative, NPR’s Planet Money looked at the question of if FDR had done nothing with historian Eric Rauchway. His comments are in line with where I come down on the issue:
Between 1933 and 1937 Roosevelt’s first term in office — when you have THE New Deal in full swing — you have the biggest peace-time expansion of the economy in American History… GDP grows something like 39% in those years. It’s growing at a 9% a year rate. When we think about that, for the U.S.economy to be growing that fast, something must be going not too bad.…
So what’s going on is there’s this tremendous rate of economic growth. There’s a recession in ’37 and ’38 but then that rate of growth is resumed. So even if you take the war out of the picture — if you just look at the Roosevelt administration before the war — you are seeing tremendous economic growth.
Emphasis mine. Rauchway on a “better new deal:”
One of the contributing causes of the recession of ’37, ’38 was that Roosevelt pulls back on the economic stimulus that the New Deal was delivering through the WPA in an effort to balance the budget… [we] hadn’t achieved a sufficient recovery to pull out the supports. So a better New Deal [from a Keynesian analysis] would have been one that spent more sooner…
Roosevelt was always fiscally conservative really. He came in as a fiscal conservative wanting a balanced budget and by 1938 he’s still a fiscal conservative wanting a balanced budget and he’s very nervous about what we now call fiscal stimulus. He doesn’t want to do it for any longer than is necessary.
SEE ALSO: Rauchway on Learning From the New Deal’s Mistakes in The American Prospect.