Tragically, a common and fatal historical misconception is that FDR's New Deal rescued the United States from the Great Depression. This is often cited as motivation for great government involvement on Wall Street today. Given that this argument is so common and so virulent, it is crucial that Objectivists familiarize themselves with the real history of the Great Depression and the New Deal so that arguments can easily be defeated.
To this end, I highly recommend FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression by Jim Powell. In FDR's Folly, Powell, a CATO Institute historian, examines the long-term results of the New Deal and persuasively argues that they crippled the U.S. economy. Although Powell does not present a compelling moral argument against the New Deal, Powell's attention to detail is impressive and his compilation of facts is extensive. In this respect, his book is of enormous value.
In this detailed book, you will learn about the numerous programs the FDR administration brought about, including the following:
- Programs that inundated private businesses with unprecedented waves of regulations, such as the Agricultural Adjustment Administration, the National Recovery Act and the Securities and Exchange Commission.
- Programs that redistributed wealth from producers to consumers, such as the Federal Emergency Relief Act and the Reconstruction Finance Corporation.
- Programs that nationalized industries, centrally planned infrastructure or created makework projects to increase employment such as the Civilian Conservation Corps, the Public Works Administration and the Tennessee Valley Authority. Powell argues that these programs typically led to poorly planned infrastructure that was more expensive than what could have been acquired in a free market.
This book will also detail the oppressive controls on income and wages under the FDR administration. Under FDR, scores of private sector jobs were eliminated through minimum wage laws, personal income taxes hit 91% for certain brackets and it was a stated part of FDR's platform that nobody should have an annual income in excess of $25,000.
Powell reveals how all of FDR's programs are based upon the fatally flawed premises of Keynesian economics, including the following:
- That government spending is always good for the economy, even if it is engaging in pointless ventures such as building pyramids.
- War is good for the economy.
- Gold (as a standard of currency) is a "barbarous relic" that prevents economic growth.
- A capitalist economy will inevitably slow to a halt without periodic bolsters from centralized planning.
- Consumption (i.e., the destruction of wealth) not production, drives the economy. Thus, government should redistribute wealth from those who would invest it to those who would spend it.
Powell has done a fantastic job with this work. I am not surprised that FDR's Folly has been enthusiastically recommended by famed free market economists such as Milton Friedman and Thomas Sowell. I highly recommend this book for anyone interested in free market capitalism and learning the real history of the Great Depression.
Two other great resources on the history of the Great Depression include Richard Salsman's lecture: The Cause and Consequence of the Great Depression and Burton Folsom's forthcoming book New Deal or Raw Deal?: How FDR's Legacy Has Damaged America, which I am confident will be an amazing read.
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