New Deal didn’t spark economy

By Tibor Machan: Freedom New Mexico columnist

If President-elect Barack Obama is serious about admiring President Franklin Delano Roosevelt for how the latter dealt with America’s Great Depression, then America and the world may be in for some very ugly times.

By the most reliable historical accounts, FDR did not overcome the economic crisis of his day by his Keynesian political economic policies — government spending and extensive government-funded public works. Instead, it was World War II that brought the economy back in shape.

In her book, “The Forgotten Man: A New History of the Great Depression,” Amity Shlaes demonstrates it is a widespread myth that FDR led the country to economic recovery by means of his public policies.

Even defenders of it, such as Eric Rauchway writing for Slate, admit The New Deal “did not end the Great Depression. The war did that. Open the authoritative reference work Historical Statistics of the United States and you will find that the unemployment rate did not return to its 1929 level until 1943.” This despite the fact that unemployment, which reached 23 percent at the height of the Great Depression, did begin to subside for most of the years of FDR’s presidency (except 1937-38).

All in all, what brought America out of its economic malaise was not The New Deal but the highly revved-up war economy. At what price? Well, at the price of approximately 300,000 fallen Americans, along with about as many wounded and, of course, the dead and wounded of Germany, Italy and Japan.

Yes, arguably the war was a just one for America, given that Germany declared war on it. But however one assesses the causes of the war, its impact on the American economy does not seem to offset its enormous destructiveness.

Nor, as far as historians can determine, did FDR get America into the war so as to revive the American economy. Nonetheless it is a cautionary fact for us all that war and not the Keynesian economic policies of The New Deal appears to have been the instrument by which the country recovered economically.

By the way, the essence of those policies amounts to using money taken in from and borrowed against future taxes to stimulate the economy, to get people to work, to spend funds on various types of production — precisely what many in Washington insist is needed today.

Such an approach is wholly unproductive because government takes resources from the economy and uses these as politicians judge best, while those who owned the resources are prevented from using them according to theirs.

My worry is that in desperation, after all the government tinkering with the economy will prove to have been ineffective, there may be a strong, even irresistible temptation to get entangled in various military endeavors in part so as to obscure that fact. It would be sheer na