Tuesday, February 17, 2009

Myth: The New Deal Didn't End the Great Depression

On this day that our new president signs the biggest ever piece of legislation into law, I am thinking about how many conversations I've been a part of recently that have shown my social circle's ignorance of history. This is a terrible admission to make: that I spend time with a bunch of artists, writers, working blokes, and otherwise respectfully employed individuals who talk a lot about the economy - what else is there to talk about these days without feeling beside-the-point? - but don't know their history from a hole in a 401k.

The major myth bandied about by even my most non-Republican friends is that the New Deal (read: government investment in the creation of jobs, building or improvement of infrastructure, schools and other social programs) did not get the US economy out of the Great Depression of 1929. Call it understandable gloom and doom, call it a generation (we're all 30 to 40 somethings) steeped in ideas of corporate privatization, call it the old American bootstraps ethics that, regardless of political tendencies, has infused society with the "I did it my way" and not the government's, or call it unwitting echo of the great Republican talking points we've been drowned in. I'm guilty too! It's easy to be so pessimistic about the current climate that one could believe the tenet that only a war can stimulate the economy. The myth fit into my anti-capitalism rants on the sins of Western governments. So much pleasurable but poorly informed doom-saying (gay marriage ruins the institution, teaching kids about sex makes them contract STDs and get pregnant) could be corrected with a healthy dose of facts!

Regardless of the source, this myth has no root in economic fact. Roosevelt's New Deal, begun in 1933, nearly four years after the crash and when the US was in trouble deep, brought around the economy almost immediately. By 1936, three years after the start of the New Deal, the US economy was back to pre-crash levels, well before the US began ramping up for WWII. Yup. Government spending worked.

That time. Who's to say that in our present day it can do the same? The stimulus bill will have to not only shore up US institutions and business but also the world's. Will a rising US tide lift the great boat that is the global economy? That's the $787 billion question.

UPDATE: Maybe some of the blame for our lack of information and facts can go to the media?

UPDATEUPDATE: There's a fantastic discussion at TPM about this. Spending, either by citizens or a government, is the way out of a recession/depression. Roosevelt's New Deal policies worked some magic (not all of them did, however) but when he reversed them in 1936, the economy floundered a bit. It took the industrialization of WWII to get things going - which was really just more government spending on infrastructure and manufacturing, spending that had long-term effects. This discussion let me go to sleep more easily last night and, as they say, an undiscernable amount of market performance should be contributed to society's attitude. Obama should definitely stop the gloom and doom talk once he starts to get his "utilities" in place and start giving us some of that good hope.