AzTeK

According to this chart from Wiki, GDP growth clearly took off from the point the first New Deal was implemented - even with higher growth rates than before the Great Depression. So obviously, the New Deal managed to provide more economic growth than the "free" market before 1929.



Here's a chart of Germany's GDP during WW2. It is per capita, and during wartime it's hard to know what kind of effect that has on the overall GDP but I didn't find anything better atm. Still, after Hitler took power (1933) and placed major governmental restrictions on the markets and forced governmental programs to incresae spending (mostly to prepare for war, of course, but that doesn't matte rin the end), GDP/capita also skyrocketted.



So to say that the government cannot stimulate economy is wrong, which is what Italian Ice already claimed. Since we have no data on a truly free market, we can only speculate if that system could indeed provide for sharper growth, eventhough it's obvious governmental regulations have led to recessions and depressions before.

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Tim

Actually the New Deal economic policies only exacerbated and prolonged the Depession. There is no question that Roosevelt brought hope when so many millions were in despair. That cannot be measured and for that we should be grateful. Also, he is to be thanked for social security which provides a desperately needed safety net.

But his radical left economic policies were a disaster: he strangled the economy with incredibly high rates of taxation that destroyed investment, punished anyone who made a decent salary, and crushed job creation. He was a strongly anti-business politician who surrounded himself with other fercociously anti-business and, indeed, anti-capitalist people of influence.

The most damaging single act came in late 1936, when the economy was finally gathering steam and unemployment had fallen to 15% (comparatively good for the 30s). He slammed the economy with another stunning tax increase - pushing the top tax rate to 79%. It had been 25% in the late 20s.

This added to the other tax increases pushed through by a panicking Hoover.

The result, of course, was to stop the economy in its tracks and start the "second act" of the depression, which saw the economy in free fall.

If any proof is ever needed to show the terrible damage of high taxes, it is the Roosevelt administration.

Tim

Certainly not. The truth is exactly the opposite.

The US economy collapsed during the first part of the Great Deprerssion. Between the start of the Depression in the fourth quarter of 1929 and the bottom of the pit in the second half of 1933, total GDP fell by almost 35%. This was a stunning loss. To put it in perspective - the worst recession since that time was in 1981-82. During that recession, the economy fell by about 2-3%

When growth began again, there were some strong numbers, but they did not make up for what had been lost. Of course some of the growth rates were high - but they were from a very low point. The US economy did not regain what had been lost until the war years. The stock market did not recover all of its losses until 1954. There has never been anything like it in US history.

The 1920s were a period of very high growth, low inflation, low taxes and very low unemployment. At the peak of the 1920s boom in 1925-26, there were severe labor shortages in the US. During the Depression, unemployment soared above 30% and vere fell below 15%. Even as late as 1940, the unemployment rates were in the double digits. During the years you dscribe as "good years", the unemployment rates averaged almost 20% - and that did not include the millions who left the work force.

iTaliAN_ICe

Caltex made the same assertion. Have you examined the data I presented in my posts to him?

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"As the government of the United States is not, in any sense, founded on the Christian religion; as it has in itself no character of enmity against the laws, religion or tranquility of Musselmen… it is declared… The United States is not a Christian nation any more than it is a Jewish or a Mohammedan nation."

-Treaty of Tripoli, 1794.

Truth-Bringer

A lot of people still claim that it was the free market or unregulated capitalism that caused the Great Depression. Nothing could be further from the truth. It was government intervention in the market that set the stage for the Great Depression and made it much worse than it would have been otherwise. Here's a brief list of some of the government intervention and regulation in the economy prior to 1929:

The first labor unions, then called federations were active in 1820. National labor union - 1866. American Federation of Labor - 1886. Dept. of Labor, 1913. Dept. of the Interior 1849. Dept. of Agriculture - 1862. Anti-Trust Acts 1902. Dept. of Commerce 1903. Shift from private to state-funded education began in the 1800's. Interstate Commerce Act of 1887. Federal Highway Act of 1916. Air Commerce Act of 1926. The Income Tax and Federal Reserve Act- 1913 (the graduated income tax and centralized bank are both planks of The Communist Manifesto). Also had the estate tax act in 1916. Corporate Tax Act of 1909. Zoning laws and regulations, which the Supreme Court ruled constitutional in 1921. And we had federal ownership of land throughout the history of our country. Contrary to what some might say, this constitutes a heavily regulated and un-free market. This is anything BUT unregulated capitalism.

The Great Depression was caused by government influence in the economy, not unregulated capitalism. Primarily, the Smoot-Hawley Tariff Act - which even a liberal like Al Gore admits was a major factor, the increase of the income tax (the top rate went from 25% to 63%), and the manipulation of credit, specifically the shrinking of the money supply, through the government central bank, the Federal Reserve:

What Caused the Great Depression of the 1930's


"And, of course, there was the political regime of Franklin D. Roosevelt. To finance government expenditures to pay for his beloved New Deal welfare programs, Roosevelt and his cohorts began printing massive amounts of government notes. To ensure that gold would not expose what they were doing, legal-tender laws were enacted. But that wasn't the worst of it. The Roosevelt people next canceled — nullified — extinguished — every single gold clause in every single contract, public and private.

And even that wasn't the worst of it. Roosevelt and his cronies nationalized — confiscated — the gold coins of the American people and then made it illegal for Americans to own gold. Imagine — after 150 years of the strongest monetary system in history — a system free from government assault — a system that was a bulwark for American liberty — the American people became subject to serving time in a U.S. federal penitentiary for owning a gold coin!

What about the Constitution? What about enumerated powers? Unfortunately, Roosevelt had sufficient cronies on the Court to sustain his policies, especially after his infamous and shameful court-packing scheme."

Link

Truth-Bringer

True. I believe we can lay the blame for the 1929 Stock Market crash (and the Depression it launched) squarely at the feet of the Federal Reserve's inept monetary policy:

"...the Federal Reserve expanded the money supply by more than 60 percent from mid-1921 to mid-1929.[2] The flood of easy money drove interest rates down, pushed the stock market to dizzy heights, and gave birth to the “Roaring Twenties.” By early 1929, the Federal Reserve was taking the punch away from the party. It choked off the money supply, raised interest rates, and for the next three years presided over a money supply that shrank by 30 percent. This deflation following the inflation wrenched the economy from tremendous boom to colossal bust."

Link

Even the current chairman of the Federal Reserve admits that the Fed was the main cause.

Truth-Bringer

True. A growing number of historians are coming to the realization that if FDR had taken no action at all, the economy would have rebounded fairly quickly. Instead, his New Deal programs actually prolonged the Great Depression by several years...

Link 1
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How FDR's New Deal Harmed Millions of Poor People

FDR Policies Prolonged Great Depression For Years

Whether one agrees with this or not, one thing is certain: the Free Market did not cause the Great Depression.

rsather139

I think people are forgetting that the New Deal did many things that the free-market simply wouldn't have. The nation's infrastructure was massively improved, and electricity was now being provided to everywhere in the country. National parks were made, trails, roads, bridges, dams, etc that would not have been made if the New Deal had not come about. Especially the increase in electricity production was a huge factor in out being able to produce the atomic bomb.

Another thing to consider, Canada and Australia both allowed their economies to be free during the start of the great depression, and they didn't pull themselves out.

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"It is dangerous to be right on matters where the established authority is wrong."
-Voltaire

Kazikli Bey

There were many causes of the Great Depression, the most significant of all being Globalisation. The Treaty of Versailles is another as well as the end of the First World War.

Globalisation meant that deflating prices in one country ultimately had a domino effect upon all other countries. Take for example that, before WWI, Britain was a major exporter of coal and, after WWI, with Germany having reparations to pay, it started massive exports of coal at a price far lower then what Britain could compete with (bear in mind, this is off the top of my head). So, as prices for primary products dropped, so too did the prices of the manufactured goods. As the major companies made less and less of a profit, they had to lay off more and more workers.

The end of the First World War put a lot of people out of work, including skilled workers. Whilst during the war, their skills and labour was needed, i.e. to make ammunition, at the end of the war, their services were no longer required. Keep in mind that a lot of soldiers were coming home as well. To top it off, nations no longer were importing vast amounts of primary products, such as iron, coal, etc, for the war effort, forcing their prices down.

There's more, but i'm sick at the moment and confined to my bed but if i get the chance, i'll look for my textbooks where we studied the Great Depression.

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Truth-Bringer

Well that's just pure speculation.

We're not better today because of more socialism/collectivism. Life is perceived as better these days, not because of government involvement, but because of TECHNOLOGY. Take away modern transportation like planes and automobiles, central heat and air conditioning, refrigeration, and, well, anything powered by electricity for that matter, and you'd see how quickly people would perceive things as getting worse all of a sudden.

Your line of argument of course is that government made all of these industries better. Not so. With electricity for example, the electrical industry sold its soul and submitted to government control because profits were slow in coming and investors were difficult to attract in the beginning. Growing pains are growing pains. They should have never made this decision. Public demand would have eventually taken over as more and more people saw the benefit of having electrical power.

The innovations they could have made with the tax money and inflation interest stolen from them in the last 100 years would have probably led to worldwide wireless power by now.

So, government intervention in electricity was unnecessary. And I don't see any evidence for government grants or government involvement being responsible for refrigeration or automobiles or air conditioning.

Without doing any checking, I highly doubt you're describing true "free" economies. As I've already posted, the U.S. economy was in no way "free" prior to the Great Depression, and that was a huge contributing factor to the depression.