Yeah, I just kind of shake my head whenever I hear it repeated that the New Deal or FDR or what/whomever rescued us from the Great Depression. I suppose in seventy or eighty years public myths will have been similarly contorted and that the response to this crisis will be hailed as some sort of saving grace.

So it goes.

The New Deal didn't solve the problem of the Great Depression, although you can make an argument that the problem was one of scale (that we weren't prepared to commit the resources in peacetime needed to shock the economy back into action). But it did sustain the country through the Depression (and I certainly don't think it slowed down the recovery). But the New Deal most emphatically did preserve American democracy and prevent fascism or communism from establishing a serious foothold within our country. It restored Americans faith in the political process, that they had some control over the world around them, that they could rely on each other in times of adversity, and gave people a stake in their country (it probably preserved capitalism too). In particular it gave young people who came of age during the depression (the people for whom this was all they ever knew) a reason to remain committed to the United States.

Yeah the New Deal is overstated for its economic effect, but not for its effect of preserving democracy, etc, at a time when revolutions were popping up worldwide. Was it socialism-lite? Maybe. But IMO it had the effect of preventing true socialism/communism from taking root in America.

That's akin to me saying the recently-made capo who broke my legs preserved my well-being when he gave me a pair of crutches. If you can't accurately diagnose the causes of the Great Depression, the impotence of the subsequent government interventions, and the geo-political means by which our economy rebounded in the '40s, the argument that said intervention was necessary - and the credit (be it economic, political, or otherwise) then attributed to said intervention - is moot. The New Deal profoundly retarded economic progress and created an environment in which the government capably sold its citizens the notion that it - and it alone - was responsible for all positive things economic.

The failure to understand (appreciate?) some very basic economics, and a fundamental misunderstanding of what capitalism actually is, have for three-quarters of a century obscured the real story of the Great Depression. And it's those very same misunderstandings that today promise to deliver us into another few decades of economic stagnation, or, more likely, far worse.

I want to create a Great Depression thread for this discussion--give me a few minutes.

before I dig into this, briefly what do you think the government should have done (and if not the government than who? I suppose nothing and no one are acceptable answers).


And the New Deal HARDLY established the belief (not even in the 30s and 40s) that the government was responsible for all positive things economic. It saw itself as a steward in the case of market failure (and responsible for preventing failures) but that's not the same thing. There's a reason why WPA jobs paid below market rates

Wait, the New Deal and that government prevented us from falling into fascism? Okay, let's discuss this. Both Mussolini and Hitler admired Woodrow Wilson who was arguably America's first fascist and coined his form of government as "war socialim". Wilson's legacy was thrown into FDR's administration, who proposed a second bill of rights that was very akin to social programs instituted in Italy and Germany. Both Mussolini and Hitler admired the steps that FDR took, and both noted that America could fall into a soft form of fascism without revolution and violence, or a gross police state due the society that existed within the nation. During this period of history economic depression was used to grow the size and scope of government enormously, the judiciary was meddled with and intimidated, and we wound up with a central executive who exhibited gross authoritarian tendencies for 16 years. A man who bucked clear political precedent. We interned tens of thousands of people based on purely racial and ethnic background. Just like the fascists of Europe, Roosevelt also used the New Deal, and his administration, to forward some pretty serious nationalism within our country. FDR also used his pulpit to strong-arm and wrangle the industrial sector of this nation during the Lend Lease Act. Militarism in America , as in Nazi Germany, and Fascist Italy, was a means to an end, not the end itself. And fascist tendencies of FDR's administration go on, and on, and on.

There are some good arguments for explaining why America never fell into a more pure form of fascism versus a benevolent all encompassing state. But the New Deal's existence is not one of them. FDR could hardly be considered one who tempered us away from fascism.

Now, I'm not saying that we were an explicitly fascist nation. We were missing a few key elements, both in our societal and political make-up, that prevented us from reaching that point. But during the Wilson and FDR administrations, we came closer than people are willing to admit. Especially during Wilson. I'm merely saying that the notion that the New Deal drew us away from Fascism is completely false.

I want to assure you that we are not afraid of exploring anything within the law, and we have lawyers who will declare anything you want to do legal." - Harry Hopkinds, FDR aide

Who said it, FDR, Hitler, or Mussolini?

"We have built up instruments of public power. In the hands a people's government this power is wholesome and proper. But in the hands of political puppets of an economic autocracy, such power would provide shackles for the liberties of the people."

A study commissioned in Italy in 1934 titled: Capitalism and Labor Under Fasicm, states: "The fascist principles are very similar to those which have been evolving in America and are of particular interest at this time."

"America itself is abandoning them (immortal principles of Democracy). Roosevelt is moving, acting, giving orders independently of the decisions or wishes of the Senate or Congress. There are no longer intermediaries between him and the nation. There is no longer a parliament but an etat majeur. There are no longer parties, but a single party. A sole will silences dissenting voices. This has nothing to do with any demo-liberal conception of things." - Mussolini

Remember Stip. Fascism was Fascism before the holocaust.

What if we defined the risk of revolution as preventing a fall into totalitarianism? Hitler and Stalin's philosophies differed plenty but both had the lust for power in common.

Yay a Little Wing history lesson.

"We have built up instruments of public power. In the hands a people's government this power is wholesome and proper. But in the hands of political puppets of an economic autocracy, such power would provide shackles for the liberties of the people."

How did they differ plenty? There's really but one major philosophical difference between the two, and that is a matter of fervent nationalism versus the destruction of modern borders and international expansion of socialism.

I probably shouldn't have added that last sentence.

I've always had a soft spot for the notion that the New Deal was more of a political solution than an economic one (despite whatever intentions New Dealers had). Without something to appease the angry Depression masses, there could have been a revolt that could have included the installment of a dictatorship. That's what I was getting at. Your comparison of FDR's policies to fascist ones might be valid, but he never seized near the amount of power that other leaders did during that time period. Remember, the Supreme Court had initially stopped cold much of FDR's agenda.

I think a better question is "What caused the Depression?" Without a decent understanding of money, banking, and capital markets, it's impossible to appreciate the effects of credit expansion and contraction on an economy.

All suggestions to "What should the government have done?" proceed from that understanding.

Yeah, I think I should have phrased that differently.

It's unfortunate that "market failure" seems to now encompass any negative economic metric or phenomenon. Falling wages, bank failures, bankrupt companies, etc are all "market failures." In actuality, each is more likely the market's response to unsustainable conditions, improper business practices, or just flat-out terrible business decisions. That is, it's not the case that "market failures" are altogether bad, or in need of immediate political rectification. Such was the case in 1929, and such is the case today.

The insistence of monetary, fiscal, and political authorities to "manage" the ups-and-downs of a business cycle (ignoring for now that most - though not all - of those ups-and-downs are a consequence of a fiat/fractional-reserve model) inhibit precisely those "market failures" from righting economic wrongs. The political necessity to incessantly jigger regulatory and fiscal programs, and to be seen to be always "doing something," almost universally creates the conditions within which stagnation and ultimate failure is guaranteed.

I will be reading this thread. Please continue.

I know we've had this discussion before.

Re: LW's claim that Hitler and Stalin were basically the same. That was discussed here
My thoughts are largely the same today.

He has a chalkboard and glasses, so I bet he's smart and trustworthy, just like my teachers in the good ol days.

This is a rational position. The dilemma is that there were a whole lot of people thrown into irrational thinking in the world at that time due to desperate circumstances. I realize this is bordering dangerously on an "ends justifies the means" argument, but if there was little patience in the masses to wait out for the "right" solution, the odds of falling to a "larger wrong" scenario may have been more likely than a "smaller wrong" scenario.

Hence my emphasis on understanding what went wrong in the first place. We possess the ability to forestall such circumstances, but the requisite knowledge (to say nothing of the will) has been so obscured as to be nonexistant.

Once in the dregs of the Great Depression, I doubt many people took the time to care (rightly or wrongly) about understanding what went wrong in the first place. They just wanted something done in the present.