New Deal Denialism
It's annoying to see libertarians (and right wingers) citing silly Austrian arguments that deny the success of Keynesianism in dealing with the Great Depression. Generally they attempt to focus attention on US history, ignoring all the contemporaneous world history that falsifies their arguments.
But even focusing on US history defeats their arguments. Eric Rauchway, a UC Davis historian who's written The Great Depression And The New Deal, lists 4 revisionist arguments and why they're wrong, especially focusing on Amity Shlaes' arguments.
As an aside, it's kind of sad to see intelligent libertarians such as David Friedman slide into such denialism, both for teh depression and for global warming.
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Mr. Rauchway's book sounds like a good read, thanks for bringing it to our attention.
On this particular topic, I always find it interesting that those who claim that FDR "prolonged" and/or "deepened" the Depression assume that the only factors that are important are its length, depth and/or inconvenience to the wealthy.
Maybe it's just me, but if I were one of the people hit hardest by it I would worry most about how many of us were affected and how miserable our lives would be until the country came out of it. I wouldn't even CARE so much even if FDR did prolong/deepen the recession as long as I was able to come out of it better than I would have if the anti-FDR crowd had their way.
The denialists also don't consider that FDR might have prevented a worse outcome, from their perspective. In the 1930's, it did not escape notice in the U.S. that the Russians, unlike millions of American unemployed, had jobs to go to every day in a centrally planned economy, and that those jobs produced valuable capital goods. The New Deal, which still operated in a capitalist framework, probably alleviated enough economic distress in the U.S. to divert the political trend away from following the Soviet example.
This was also part of idea behind the Marshall Plan in post-WWII Europe, Mark Plus. If the Germans,Italians etc were fed, housed and employed in decent conditions, then Communism would have less appeal. After all, when you are starving in the ruins of other peoples screw-ups, even Stalin starts to look OK...
Wow, government stimulus and destruction of farm production is so great. We should have the New Deal all the time!
(end sarcasm)
The problem is that Austrians actually make their case by looking at historical facts with a supporting theory.
I read Robert Murphy's Politically Incorrect Guide to the Great Depression and found it very accessible and convincing. Check it out.
It addresses the questions of how the economy recovered and the pain suffered by the people during a "laissez faire" recession (for example, the 1920-21 recession) and the interventionist Great Depression.
Btw, when has it become fashionable to label people who don't agree with you "denialists"? Is the next step to call them "unpatriotic"?
Julien:
This Amazon review does a good job of identifying what's wrong with Murphy's denialist propaganda that you recommended.
Rauchway uses the term denialism, and it is an accurate fit.
Anybody who claims something from Regnery Press is believable, objective and without an agenda is stupid.
I would rather you pointed to specific facts in dispute rather than a review, whose author I am not sure read the book.
"[...] Murphy spends a great deal of their time attacking the government economic stimulus, and almost no time criticizing the various protectionist measures included in it [...]"
Actually Murphy is quite clear that the various protectionist measures prevented a lot of advantageous exchange. From border tariffs, to labor protections (fall in wages prevented, vast unionization, work regulated) and famer protections (prices controlled, supplies limited by destruction), they are all clearly attacked in the "PIG to the New Deal"
"In 1928, the US government's share of GDP was about 3%. The idea that such a small player could bring the entire economy to a stop is slightly absurd."
What about the 10 billion dollars injected by the FED (M2) in the 1923-29 period (with no war)? For comparison, the GDP at the time was 110 billion dollars.
Between 1929 and 1949, the FEd had injected another 100 billion, for a total of about 140 billion dollars in M2.
Btw, the author of the review contradicts himself: if this size government cannot have negative significant impact on the economy, then why believe it could have significant positive impact?
I read the book by Rauchway.
He seems genuinely surprised that
govt price supports for farmers
led to high food prices for city dwellers.
Is there any part of the New Deal
you do disapprove of?
What do you call the flipside of denialism? "Memory-holeism"?
For example, how do Austrianists get away with their recurring false predictions of economic collapse? Nobody seems to hold them to account for those, though some Austrianists have apparently made a good living from selling their apocalypse beliefs and stupid financial advice. You can read an example of their doomsday cultism and charlatanry from 1981 here.
Mark Plus, would you care to identify Austrians in the article your cited?
@ Julien:
The two speakers with top billing in the Time article have cited Austrianism as a source of their thinking:
Douglas Casey
Howard Ruff
I also remember that they had best selling books circa 1980, so the Time article accurately portrayed their popularity in that era.
"For example, how do Austrianists get away with their recurring false predictions of economic collapse?"
my theory is - because they're so good looking.
Compare Bernankes predictions back in 2005, 2006. They are on youtube
what a hoot.
Mr. Huben,
Browsing your posts, it was disturbing to note the intellectual irresponsibility you administer in your bashings of libertarianism. None of them merit the title critique: they are logically inconclusive and comparable to juvenile name-calling.
The problem with those who espoue orthodox economists is their reverence for econometrics. You are absolutely ignorant in your preference for viewing economics as a science. Physics, botany, etc. these are, of course, sciences.
Economics is another study of human behavior. Human behavior, opposed to motion and plant growth, does not stand up to empirical causation and lacks a foundation for science.
Another point where you display ignorance is your citation of the Austrian predilection for "arcane philosophy" (loose quote). This is fallacious logic in its appeal to novelty.
Your interest and pursuit of scientific knowledge has probably served you in your lectures in math and science and interests in biology; however, economics, rhetoric, and political philosophy cannot be held to scientific evaluation.
The fact that you have created a blog and addressed these issues is very irresponsible. You have access to people's thoughts and have perhaps succeeded in acting as authority. Yet, you do not have the proper apptitude for such a position.
Eric Brucli
"Human behavior, opposed to motion and plant growth, does not stand up to empirical causation and lacks a foundation for science."
Seldom have I seen such a resounding proclamation of ignorance. Are you seriously suggesting that economics and psychology are invalid because we have souls?
It's hard to take seriously patronizing admonishment from somebody who either is that silly or that bad at explaining his real meaning.
@ mikeyaustudent:
"For example, how do Austrianists get away with their recurring false predictions of economic collapse?"
my theory is - because they're so good looking.
Compare Bernankes predictions back in 2005, 2006. They are on youtube
what a hoot.
You'll have to do better than the tu quoque fallacy. What about the fact that some people have perpetuated Austrian economics for at least a generation to rationalize foolish investment schemes, promoted through falsified doomsday predictions?
Ironically these same Austrianists tend to dismiss global warming as Chicken Little stuff. They want the capital-A Apocalypse to support their beliefs, dammit!, not those other guys' beliefs.
From the article-
" Tu quoque is only a fallacy when one uses it so as to divert attention from the issue at hand, or to avoid or fail to respond to an argument that non-fallaciously gave one the burden of proof.[3]"
If the issue at hand was- making some wrong predictions disproves an entire school of thought- then I was definitely not trying to divert attention from the issue at
hand, but rather focus even more strongly on it.
Some Austrians in the late 70s
like Harry Browne did call for hyper inflation which did not materialize.
But if you read other Austrians on the subject of money and inflation,
(ex Mises Theory of Money and Credit) you see that it is not enough to focus soley on the supply of money but also the demand for money when analysing inflation.
This is what these individuals ignored or underestimated.
As to the New Deal, filling pot holes with gold dust cannot lead to an increase in the standard of living,it only wastes labor and capital.
I believe in global warming but question the sincerity of some statists who look for any reason to impose state control of the economy...ie David Suzuki
Mr Huben, you really do have a lot of courage, or perhaps patience, but most likely both topped with some tolerance.
I grow so tired of even trying to converse with the libertopians. They're just too nutty for me.
I've enjoyed your blog and came across your homepage a few years ago and enjoyed it as well.
Good job, dude!
"I always find it interesting that those who claim that FDR "prolonged" and/or "deepened" the Depression assume that the only factors that are important are its length, depth and/or inconvenience to the wealthy."
Absolutely not. These people tend to say that econometrics is a difficult, if not impossible task, and that hardship is subjective and not measurable or quantifiable. They definitely do not restrict themselves to the three measures you cite.
But with the indicators that we do have, it is clear that the Great Depression was terrible for most if not all groups. In particular, unemployment was terribly high over a long period of time.
It was also very difficult to many people to feed themselves.
Both Hoover and FDR made both of these matters worse, which is a real shame.
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