The Great Depression, Comparisons, Parallels and Analogies

By October 30, 2008Economy, Labor Unions

From the D.C. Examiner, “FDR’s New Deal Prolonged the Great Depression“:

A groundbreaking study by UCLA economists Harold Cole and Lee Ohanian demonstrates that President Franklin D. Roosevelt’s excessively pro-labor, anti-competitive New Deal actually prolonged for seven long years the severe economic pain immortalized in John Steinbeck’s “Grapes of Wrath.”

Using 1929 data, the two researchers calculated what wages and prices would have been had without the New Deal, and then compared them to actual wages and prices at the time. Their findings were startling: In 11 key industries, actual wages averaged 25 percent higher than market conditions warranted, but unemployment was also 25 percent higher as well. Meanwhile, the New Deal pushed up prices 23 percent higher than they should have been, so consumers couldn’t afford to buy, leading to even more unemployment.

Higher wages for a few unionized workers, but all the others feel the pain of uncompetitive economic sectors, which in turn limits economic growth in general. So how is it again that the Employee Free Choice Act can be reconciled with the need for an economic stimulus?

At National Review Online’s The Corner, Amity Shlaes, author of “The Forgotten Man,” mentions labor’s role as part of a longer defense of her book’s thesis:

The first critics of the New Deal economics were FDR’s own peers. In the 1930s a respectable think tank produced an enormous tome concluding that Roosevelt’s pride, the National Recovery Administration, was on the whole retarding recovery. (The name of that think tank was the Brookings Institution.) A number of economists and journalists spent the 1930s quantifying the way in which the New Deal was doing damage. One was Benjamin Anderson, the economist for Chase National Bank, who concluded that Roosevelt’s pro-union moves had forced companies to give out too much of their profits in wages and therefore denied them the possibility to invest or hire. This argument has lately been updated by Lee Ohanian of UCLA and Harold Cole of Penn. Other New Deal skeptics are interviewed at length in Randall Parker’s books on economists and the New Deal.

Other history-minded observers of labor now counsel, “Repeal Taft-Hartley.” Revive the Wagner Act!

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