Saturday, June 09, 2007

What Roosevelt Didn't Know What Roosevelt Didn't Know

TCS Daily: What Roosevelt Didn't Know points out that many of the actions that presidents Hoover and then Roosevelt undertook during the Great Depression were counterproductive at a minimu, and in some cases, quite harmful.

Many have argued that the major fault was in following the precepts of John Maynard Keynes. This article suggests that Keynes wasn't really that wrong, but rather, these administrations didn't understand what was going on well enough, and so in many cases, did exactly the wrong thing.

Probably the best example is that of inflation/ deflation. Closing all the banks, and then reopening only some of them, was horribly deflationary. But possibly as destructive, the Roosevelt Administration attempted to fight inflation by reducing supply, by essentially destroying foodstocks, despite people going to bed hungry. It didn't solve the deflationary problem, but did send even more people to bed hungry.

A lot of critics have suggested that much of the New Deal was implemented in order to forstall a communist revolution here. The idea being that if we had some socialism, the more radical communist version would not be as attractive. But this article suggests that most of the negative impact of the New Deal was rather just a result of totally misunderstanding economics.

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