New Deal –Objective Research?

By Spencer

I just read an interesting article on the New Deal by Alan Brinkley in the New Republic titled No Deal, Learning From FDR’s Mistakes”.

The first two paragraphs are quote:

Does the New Deal provide a useful model for fixing our own troubled economy? In many respects, yes. The frenzy of activity and innovation that marked Franklin Roosevelt’s initial months in office–a welcome contrast to the seeming paralysis of the discredited Hoover regime–helped first and foremost to lessen the panic that had gripped the nation. And, during the prewar years of his presidency, Roosevelt’s actions produced an unprecedented array of tangible achievements as well. He moved quickly and effectively to address a wave of bank failures that threatened to shut down the financial system. He created the Securities and Exchange Commission, which helped make the beleaguered stock market more transparent and thus more trustworthy. He responded to out-of-control unemployment by launching the Civil Works Administration, the Public Works Administration, and the Works Progress Administration, which created jobs for millions of the unemployed. He passed the Social Security Act, which over time provided support to the jobless, the indigent, and the elderly–and the Wagner Act, which eventually raised wages by giving unions the right to bargain collectively with employers. He signed the Fair Labor Standards Act, which created the minimum wage and the 40-hour workweek.

Yet, despite these extraordinary achievements, Roosevelt’s initiatives did not, in the end, lift the country out of the Great Depression. At no time in the first eight years of the New Deal did unemployment drop below 15 percent. At no time did economic activity reach levels comparable to those of a decade earlier; and, while there were periods when the economy seemed to be recovering, none of them lasted very long. And so this bold, active, and creative moment in our history proved to be a failure at its central task. Understanding what went wrong could help us avoid making the same mistakes today.

This second paragraph drove me up the wall. Every statement in it is incorrect.
(Explanation below the fold)

STATEMENT 1:At no time in the first eight years of the New Deal did unemployment drop below 15 percent.

UNEMPLOYMENT RATE
…………OFFICIAL………. ADJUSTED

1933……. 25.2……………. 20.9
1934……. 22.0 ………….. 16.2
1935…… 20.3 …………… 14.2
1936…… 17.0 …………… 10.0
1937…… 14.3………………. 9.2
1938…… 19.1……………. 12.5
1939…… 17.2……………. 11.3

Source :BLS

The adjusted rate incorporates Works Programs Employment. If you use this data in every year from 1935 on the unemployment rate was below 15%. But even using the official data it was 14.3% in 1937, directly contradicting Brinkley’s statement.

STATEMENT 2: At no time did economic activity reach levels comparable to those of a decade earlier;

REAL GDP
…………..(BILLION……………..(BILLION
YEAR ……2000 $)….. YEAR…… 2000)……… %
1925…… $748.60……. 1935…… $766.90……. 2.4
1926…… $793.90……. 1936…… $866.60……. 9.2
1927…… $798.40……. 1937……. $911.10…… 14.1
1928…… $812.60……. 1938……. $879.70……. 8.3
1929…… $865.20……. 1939……. $950.70……. 9.9
1930…… $790.70……. 1940…… $1,034……… 30.8

Source: BEA

In 1935 real GDP was 2.4% larger than in 1925. As the table shows in every year after
1935 economic activity exceeded that of a decade earlier. Brinkley is completely wrong.

Note that in 1936 real GDP exceeded the previous peak of 1929. This is the official NBER definition of an economic recovery.

Statement 3: , while there were periods when the economy seemed to be recovering, none of them lasted very long.

According to the National Bureau of Economic Research (NBER)from 1854 to 1929 there were 17 economic cycles. In these 17 cycles the average peace time expansion lasted 24 months and the longest in the early 1880s lasted 36 months. The two longest expansions were of 46 months during the Civil War and 44 Months during WW I. The May 1933 to June 1938 expansion was 50 months and real GDP growth averaged 7.3%–the strongest four year growth since 1881. The 1933-37 expansion is the longest expansion on record until this time. It was more than double the average previous peacetime expansion and even exceeded the two long war time expansions. Again this is the exact opposite of what Brinkley stated.

Source: NBER.org

Alan Brinkley is a world class, respected historian and The New Republic is not some “wingnut” publication. But how are you suppose to react when mainstream historians who are not particularly anti New Deal start off their article and analysis of the New Deal with such incorrect information? As soon as I read the second paragraph I was forced to conclude that Brinkley did not know what he was talking about and his judgment should not be trusted. What else is one to conclude?