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The Great Depression: Causes and Consequences

Unread postPosted: Sun Apr 11, 2010 10:40 pm
by Objectivist
WeiWenDi wrote:FDR when first elected was not overly enthusiastic about Keynesian intervention - he largely continued Hoover's incrementalist, apologetic policies


I think I'm just going to start a thread about the Great Depression, because this discussion really deserveds it's own thread. Most people on the left who I've discussed the great depression with suggest that Hoover did not do enough and practiced a laissez faire approach to economics. What is your opinion?

WeiWenDi wrote:It was only after the recession of 1937 that FDR began to get serious about getting the New Deal programmes running with a massive $5 billion campaign, and it was this stimulus along with the war mobilisation that ultimately winched us out of the Depression


Obviously if you draft and send tens of millions of people to war you're going to decrease the unemployment rate. I want to expand on this and talk about the causes of the great depression, and how the policies of Hoover and FDR caused it to last much longer than necessary.

Shikanosuke wrote:I've always understood it to be the general consensus


The general consensus also does not even understand basic economics and there are still tens of millions of people who do not even bother voting. If citing popular opinion as evidence of anything, we'd all have to accept that god exists...after all.

Sun Fin wrote:So except for Objectivist I'm comfortably the most right leaning member of the board. T'is as I expected


As far as I can tell...we're the only right leaning members of this board.

Re: The Great Depression...causes and consequences

Unread postPosted: Sun Apr 11, 2010 11:06 pm
by Shikanosuke
Objectivist wrote:I think I'm just going to start a thread about the Great Depression, because this discussion really deserveds it's own thread.


Might be better suited to the history section.

The general consensus also does not even understand basic economics


I disagree. I'd say economists and historians just didn't get it haphazardly wrong for the past X years.


and there are still tens of millions of people who do not even bother voting.


Which has nothing to do with either my or your assertion. I don't suggest people are ill-informed on <insert subject> based on political apathy.

If citing popular opinion as evidence of anything, we'd all have to accept that god exists...after all.


This is true to a degree. Except religion and economics as distinctly different fields. You seem to be implying that I am citing the general consensus of everyone. I'm not. I'm suggesting it is the general consensus of those versed in the respective fields or history and economics. As such, it does indeed serve as evidence.

Re: The Great Depression...causes and consequences

Unread postPosted: Sun Apr 11, 2010 11:57 pm
by WeiWenDi
Objectivist wrote:Most people on the left who I've discussed the great depression with suggest that Hoover did not do enough and practiced a laissez faire approach to economics. What is your opinion?


Hoover was not strictly laissez-faire; certainly not to the same extent Coolidge or Harding and his Ohio Gang were. His policies were largely protectionist; he shared some similarities with the earlier American School - but he was certainly a 'small-government' type who didn't believe the government should involve itself overly much in combating the Depression, and FDR generally followed in that mould for the first six years of his own presidency, believing in limited, indirect intervention of government in the economy and the encouragement of business through voluntarism. Again, it wasn't until '37-'38 that FDR began the Keynesian experiment in earnest and the New Deal projects started really showing returns... and there is no real historical indication that the Great Depression would have been shorter if government had retreated from the economy altogether.

Objectivist wrote:Obviously if you draft and send tens of millions of people to war you're going to decrease the unemployment rate.


... which is as much as to admit that Baron Keynes' prescriptions worked (though he himself never said that it had to be war which stimulated growth). The shift to a war economy meant that the government was taking on the labour surplus through enlistment, buying up firms' investments in the mobilisation, floating large numbers of securities for public purchase (though that was more monetary policy than fiscal), &c.

Re: The Great Depression...causes and consequences

Unread postPosted: Mon Apr 12, 2010 7:49 am
by Shritzu
Objectivist wrote:Obviously if you draft and send tens of millions of people to war

Objectivist wrote:and there are still tens of millions of people who do not even bother voting

I must ask how you get your statistics if I am to accuratly understand both sides of this debate....(more or less "tens of millions" appears twice in the same post refering to 2 different things...surly these numbers are exagerated)If they are not then references please? :?:

Re: The Great Depression...causes and consequences

Unread postPosted: Mon Apr 12, 2010 9:42 am
by Sun Fin
Objectivist wrote:
Sun Fin wrote:So except for Objectivist I'm comfortably the most right leaning member of the board. T'is as I expected


As far as I can tell...we're the only right leaning members of this board.


Thats to be expecte. Most historian's are left lening like most journalist's are right leanin. In a history forum like this 'd expect the left to dominate discusion.

... which is as much as to admit that Baron Keynes' prescriptions worked (though he himself never said that it had to be war which stimulated growth). The shift to a war economy meant that the government was taking on the labour surplus through enlistment, buying up firms' investments in the mobilisation, floating large numbers of securities for public purchase (though that was more monetary policy than fiscal), &c.


So far as I can tell in my study of British history the wars are the OnLY occasion when Kenesian economic's have truly worked. Moneterism wasn't overly effective either to be fair.

Re: The Great Depression...causes and consequences

Unread postPosted: Mon Apr 12, 2010 3:16 pm
by SunXia
<moved to history section>

Not really current affairs since it happened nearly one hundred years ago!!

Re: The Great Depression...causes and consequences

Unread postPosted: Mon Apr 12, 2010 5:40 pm
by James
WeiWenDi wrote:... and there is no real historical indication that the Great Depression would have been shorter if government had retreated from the economy altogether.

There is a beautiful argument that the the economy would have recovered much quicker if the government had retreated from the spending and programs and focused more on the private sector. Retreating from the economy altogether is one thing—and a pretty extreme statement—but there is much to be said for positions between these extremes (and note that there are also working examples of the opposite extreme, executed properly).

Objectivist wrote:... which is as much as to admit that Baron Keynes' prescriptions worked (though he himself never said that it had to be war which stimulated growth). The shift to a war economy meant that the government was taking on the labour surplus through enlistment, buying up firms' investments in the mobilisation, floating large numbers of securities for public purchase (though that was more monetary policy than fiscal), &c.

I'm not siding with Objectivist here, but this conclusion is heavily flawed. That a war—and it was the war that ended the Great Depression—can cause such an economic shift lends absolutely no support to Keynesian economic theory. None at all. You might as well simplify it to say that employing someone supports Keynesian economics.

The government spending through the Great Depression may have been the single strongest factor that drew the accursed thing out. Almost nothing through that spending (and it wasn't just toward the end that FDR shifted his views—he just became more aggressive) resulted in worthwhile improvements. Unemployment remained horrible right up until the war started. Great misconceptions of what actually happened during the Great Depression have evolved (note that there are are also two political misconceptions held by the right and left, both terribly wrong), and I'm not sure why this has happened when the facts are clear and there are so many great books out there which actually explain things clearly.

Re: The Great Depression...causes and consequences

Unread postPosted: Mon Apr 12, 2010 6:03 pm
by WeiWenDi
James wrote:There is a beautiful argument that the the economy would have recovered much quicker if the government had retreated from the spending and programs and focused more on the private sector.


Then make it. I've shown good faith here by actually outlining the argument, I expect you (or Objectivist) to do the same or concede. The burden of proof is on you to make the case, since a straightforward interpretation of the relevant data between 1933 and 1939 show a marked improvement in output corresponding with the New Deal, accelerated with increased intervention.

James wrote:That a war—and it was the war that ended the Great Depression—can cause such an economic shift lends absolutely no support to Keynesian economic theory. None at all.


I must admit to being disappointed by this response, and a bit insulted by its lack of substantiation.

Baron Keynes' response to recession was that stimulus efforts that would ameliorate its effects. The theory was that government would act as a temporary employer to directly counteract the surplus caused by a decrease in demand in the labour market. And it did exactly what it was designed to do, which was to soak up some of the labour surplus; the problem was that it simply wasn't aggressive enough to counteract the decline in total output - and that is what caused FDR to shift his views on intervention further left after 1937. The $5 billion stimulus package and the subsequent war demanded that the government become more aggressive in its employment policies - though the branches doing the hiring weren't just the WPA, the TVA or any of the other New Deal agencies, but the Army and the Navy.

If you want to argue that the military are not government employees, by all means go right ahead. It should be an interesting argument... if you actually make it rather than the weak 'some people say' that you employed at the end of your last post. (I could likewise claim that 'so many great books out there' will back up the standard interpretation of the efficacy of the New Deal programmes, but generally I have too high a respect for your intelligence to do so.)

Re: The Great Depression...causes and consequences

Unread postPosted: Mon Apr 12, 2010 6:07 pm
by Shikanosuke
James wrote:Almost nothing through that spending (and it wasn't just toward the end that FDR shifted his views—he just became more aggressive) resulted in worthwhile improvements.


Was the TVA a product of the Great Depression?

Re: The Great Depression...causes and consequences

Unread postPosted: Mon Apr 12, 2010 6:20 pm
by WeiWenDi
Yup. So was the WPA. A lot of my hometown - Providence - was rebuilt under the WPA; you can still see the placards everywhere. The Cathedral of Learning at the University of Pittsburgh (where I'll be taking my master's degree in the fall) was completed under funding from the CWA; it's still in use today. I think it's an extreme statement to say that '[a]lmost nothing through that spending ... resulted in worthwhile improvements' came out of the New Deal, and one not borne out by the evidence.