Apr 09

Great Debates: Did FDR end the Great Depression?

fdrIf you read your high school text book the answer to whether or not Franklin D. Roosevelt ended the Great Depression isn’t a question, it is stated fact.   But long held beliefs by some Republicans, especially today, say that Roosevelt did not end the Depression.   Who is right?

The Great Depression originated in the United States, and is thought to have started with the fall in stock prices that built up to the stock market crash of October 29, 1929 (Black Tuesday). It soon became a world-wide depression.

There are clearly several other factors that contributed to the Depression including panic, greed, Federal Reserve policies, failure of government regulations, the Dust Bowl and the natural cycles of economics.   But the cause is not the question here, it is how it ended.

Many modern conservatives use the simple statement, “World War II ended the Depression, not government intervention.”   The argument is that unemployment did not get better until the war started and therefore the stimulus of the New Deal did not work and in fact, government stimulus in general does not work.

The fact is unemployment did not go down to an “acceptable rate” until World War II, so is the Right right?

Lets take a look at numbers.

depression-unemployment

The New Deal programs were implemented between 1933 and 1936.   At the time of the New Deal implementation, unemployment was 25.2%.  The first point to be made is that the unemployment rate did not continue to go up and the United States did not collapse.  Many ignore the “it could have been worse” factor.  You can’t argue it too much, because we do not know what would have happened if the government would have taken the Laissez Faire (hands-off) approach.  But it is fact that after the New Deal was implemented, the United States unemployment stopped going up and in fact, went down.  In addition, GDP increased.

During the years from 1933 and the United States entry in World War II in late 1941, unemployment did bounce up and down, but ended up at about 15% at the time of the Japanese attack on Pearl Harbor.  Of course the United States began heading towards a military economy under the leadership of FDR before 1941.  In 1939, before the outbreak of war in Poland, unemployment was at about 17.2%.

Clearly the numbers show that unemployment fell by about 10% under Roosevelt before World War II.  This is undisputed fact.  Government spending, even with deficits, did in fact stop the bleeding and did lift the country out of the worst part of the Depression.

So what brought the Depression to its absolute end?  Clearly World War II.  The United States began emerging from the Depression as it borrowed and spent to build its armed forces from 1939 to 1941 and even more after its eventual entrance into the war.

So is everybody right?  Lets review.  The New Deal clearly helped America during the Depression after the hands-off policies of  Big Business and Herbert Hoover.  The New Deal did create jobs, it did stimulate the economy enough to get it back to a place where it wasn’t going to collapse, and most importantly it gave hope to a hopeless country.  So in many ways Roosevelt did end the worst part of the Depression.  He got the country turned back the right way in spirit and in actual economic numbers.

Not everything in the New Deal worked and the United States and of the world continue to dwell in high unemployment.  It wasn’t until the spending of World War II that the final blow was dealt and the Depression ended.  So, do Conservatives have a point?  Simply put, no.  As has been stated, it was massive GOVERNMENT SPENDING before and during World War II that gave the final blow to the Depression.  Conservatives have simple chosen to ignore the fact that the military build up was government spending.  Did they think it was private business?  Every single Conservative who argues that World War II ended the Depression is arguing that government spending is the way to get out of severe recessions or depressions.

When the people aren’t spending, when business isn’t spending, that leaves only the government to spend.  British economist John Maynard Keynes’ basic idea was simple: to keep people fully employed, governments have to run deficits when the economy is slowing, as the private sector would not invest enough to keep production at the normal level and bring the economy out of recession. Keynesian economists called on governments during times of economic crisis to pick up the slack by increasing government spending and/or cutting taxes.

As the Depression wore on, Franklin D. Roosevelt tried public works, farm subsidies, and other devices to restart the economy, but never completely gave up trying to balance the budget.  According to the Keynesians, this improved the economy, but Roosevelt never spent enough to bring the economy out of recession until the start of World War II.

For all the revisionist historians out there you cannot argue with the simple facts.  Like it or not, FDR did inherit a Depression which started and got worse under a Republican administration. You cannot argue that under Roosevelt’s leadership the United States got out of the Depression without a revolution or collapse, won World War II , and was left with the strongest economy in the history of the world.

1 comment

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