THE NEW DEAL AND ECONOMIC GROWTH

By Spencer,

Our conservative/libertarian friends keep saying the FDR made the recovery from the 1929-33 economic downturn weak. I keep asking them weak compared to what, and they never have an answer.

When I look at the data series like this I find it hard to accept that the recovery under FDR was weak. 1940 was the end of FDR’s second term in office and eight years from the bottom of the
1929-33 downturn. It also precedes the impact of WW II military spending that first became
significant in 1941. Moreover, it is long enough that the normal end of a recession snap-back should has a negligible impact. So this eight year period should be a good measure of the impact of the New Deal on economic growth.

Source:

http://www.measuringworth.org/datasets/usgdp/result.php

The eight year growth to 1940 of real per capita GDP was some 50%, the strongest eight years in US economic history except for the few years of WW II. The 1930s growth rate was more than 25% stronger than the next largest boom that ended in 1883. Now I will accept that growth was stronger in WW II than under the New Deal in the 1933-1940 era. But we all know WW II was an exceptional period when from one-third to one-half of the economy was doing the equivalent of digging holes and filling them in.

I for one propose a new rule for the debate over the impact of the New Deal. No one should be allowed to make any claims about growth in that era without showing what growth was in other eras so every one can make their own comparisons.

One other things that comes out of this data is the long term growth rates of US per capital real GDP.

1800-1850 ….0.7%
1850-1925, 1850-1930, 1850-1950 =…1.4%
1930-2008…2.5%
1950-2008…2.1%.

It is interesting how the modern mixed economy does such a superior job of providing for the economic well being of the US population than the old small government model of 1850-1930
despite what many claim. If you look at the chart the major difference between the modern mixed economy and the old small government model is that since 1950 the system seems to have eliminated the repeated growth collapses of the old era.