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duckheads
10-05-2010, 03:14 PM
FDR's policies prolonged Depression by 7 years, UCLA economists calculate





By Meg Sullivan August 10, 2004 Category: Research (http://www.retrievertraining.net/portal/ucla/research.aspx)
Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.
After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.
"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump," said Ohanian, vice chair of UCLA's Department of Economics. "We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."
In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.
"President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies."
Using data collected in 1929 by the Conference Board and the Bureau of Labor Statistics, Cole and Ohanian were able to establish average wages and prices across a range of industries just prior to the Depression. By adjusting for annual increases in productivity, they were able to use the 1929 benchmark to figure out what prices and wages would have been during every year of the Depression had Roosevelt's policies not gone into effect. They then compared those figures with actual prices and wages as reflected in the Conference Board data.
In the three years following the implementation of Roosevelt's policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.
Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.
"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."
The policies were contained in the National Industrial Recovery Act (NIRA), which exempted industries from antitrust prosecution if they agreed to enter into collective bargaining agreements that significantly raised wages. Because protection from antitrust prosecution all but ensured higher prices for goods and services, a wide range of industries took the bait, Cole and Ohanian found. By 1934 more than 500 industries, which accounted for nearly 80 percent of private, non-agricultural employment, had entered into the collective bargaining agreements called for under NIRA.
Cole and Ohanian calculate that NIRA and its aftermath account for 60 percent of the weak recovery. Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943.
Roosevelt's role in lifting the nation out of the Great Depression has been so revered that Time magazine readers cited it in 1999 when naming him the 20th century's second-most influential figure.
"This is exciting and valuable research," said Robert E. Lucas Jr., the 1995 Nobel Laureate in economics, and the John Dewey Distinguished Service Professor of Economics at the University of Chicago. "The prevention and cure of depressions is a central mission of macroeconomics, and if we can't understand what happened in the 1930s, how can we be sure it won't happen again?"
NIRA's role in prolonging the Depression has not been more closely scrutinized because the Supreme Court declared the act unconstitutional within two years of its passage.
"Historians have assumed that the policies didn't have an impact because they were too short-lived, but the proof is in the pudding," Ohanian said. "We show that they really did artificially inflate wages and prices."
Even after being deemed unconstitutional, Roosevelt's anti-competition policies persisted — albeit under a different guise, the scholars found. Ohanian and Cole painstakingly documented the extent to which the Roosevelt administration looked the other way as industries once protected by NIRA continued to engage in price-fixing practices for four more years.
The number of antitrust cases brought by the Department of Justice fell from an average of 12.5 cases per year during the 1920s to an average of 6.5 cases per year from 1935 to 1938, the scholars found. Collusion had become so widespread that one Department of Interior official complained of receiving identical bids from a protected industry (steel) on 257 different occasions between mid-1935 and mid-1936. The bids were not only identical but also 50 percent higher than foreign steel prices. Without competition, wholesale prices remained inflated, averaging 14 percent higher than they would have been without the troublesome practices, the UCLA economists calculate.
NIRA's labor provisions, meanwhile, were strengthened in the National Relations Act, signed into law in 1935. As union membership doubled, so did labor's bargaining power, rising from 14 million strike days in 1936 to about 28 million in 1937. By 1939 wages in protected industries remained 24 percent to 33 percent above where they should have been, based on 1929 figures, Cole and Ohanian calculate. Unemployment persisted. By 1939 the U.S. unemployment rate was 17.2 percent, down somewhat from its 1933 peak of 24.9 percent but still remarkably high. By comparison, in May 2003, the unemployment rate of 6.1 percent was the highest in nine years.
Recovery came only after the Department of Justice dramatically stepped enforcement of antitrust cases nearly four-fold and organized labor suffered a string of setbacks, the economists found.
"The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes," Cole said. "Ironically, our work shows that the recovery would have been very rapid had the government not intervened."
-UCLA-
LSMS368

This was written in 2004 before all of the current stimulus packages, TARPS, and goverment take overs. We are seeing history repeat itself. And just so I clarify myself before Roger and other left wing independants chime in, I DID NOT AGREE WITH GEORGE BUSH WHEN HE STARTED US DOWN THIS SLIPPERY SLOPE.

dnf777
10-05-2010, 03:27 PM
That's funny!
If anyone mentions Bush, it's milliseconds before they come under attack for bringing up the past, yet its ok to bring up FDR?? Although it makes sense, repubicans have loathed him and social security ever since it was created!

ducknwork
10-05-2010, 03:29 PM
It's a history lesson, not a blame game like you and Rog play all the time. Big difference, but not to a pot stirrer!:rolleyes:

dnf777
10-05-2010, 03:32 PM
It's a history lesson, not a blame game like you and Rog play all the time. Big difference, but not to a pot stirrer!:rolleyes:

Talking about the economic disaster known as the "Bush Administration" is also a history lesson, albiet a more recent one, but one that many people are poised to forget and repeat!

So I understand....if democratic follies are discussed, its a history lesson. If republican follies are discussed, its just a blame game. ok.

Buzz
10-05-2010, 03:47 PM
It's a history lesson, not a blame game like you and Rog play all the time. Big difference, but not to a pot stirrer!:rolleyes:

You should read this carefully. What it is saying is that your wages should be cut significantly.

Where have I heard that before?

tom
10-05-2010, 04:20 PM
It's a shame that there is no respect for anything or anyone on this forum

Wouldn't mind it if it was just on this forum.

road kill
10-05-2010, 04:31 PM
That's funny!
If anyone mentions Bush, it's milliseconds before they come under attack for bringing up the past, yet its ok to bring up FDR?? Although it makes sense, repubicans have loathed him and social security ever since it was created!
That's because you guys (middle of the road independents...hahahahaha) give us a constant non-stop slo-drip whine of Bush hate everyday.

First time I recall FDR being mentioned in quite a while.


BTW--the Democrats in command are not concerned about an economic recovery, they know that will happen, they are concerned about slipping in an implementing their ideology as law on an unsuspecting public.



RK

zeus3925
10-05-2010, 05:35 PM
That's because you guys (middle of the road independents...hahahahaha) give us a constant non-stop slo-drip whine of Bush hate everyday.

First time I recall FDR being mentioned in quite a while.


BTW--the Democrats in command are not concerned about an economic recovery, they know that will happen, they are concerned about slipping in an implementing their ideology as law on an unsuspecting public.



RK
Huh! Ya mean Democrats like Limbaugh, Beck, Coulter, Buchanan, Liddy, Boehner, Gingrich, Paul, that nice Mitch McConnell, etc., and ad nauseum. Those are the ones pushing an agenda by bull, beef and belly ache.

YardleyLabs
10-05-2010, 06:02 PM
Writing an article, and having it be true are two very different things. Unfortunately, when studies are conducted to prove pre-existing political beliefs, the results are sadly predictable. The study mentioned is widely quoted. Unfortunately, other then its original publication in a regional Federal Reserve publication, it is seldom cited outside of conservative publications seeking to bolster arguments against any government intervention in dealing with the Great Bush Recession.

However, the article itself is a little loosy goosy. Much of its arguments begin from slower than predicted growth in employment following the beginning of Roosevelt policies. However, in concluding that employment growth was too low, the authors explicitly exclude consideration of public employment in temporary jobs with the WPA and similar programs, even though these employed 60% of those who were otherwise unemployed and produced infrastructure improvements that we continue t benefit from today.

They discard more widely accepted theories for the severity of the Depression based on their belief that these theories do not explain why similar levels of collapse were not experienced in 1920-21 when there was a mini financial crisis involving deflation. This argument is unconvincing since arguing inconsistency with only two data points gives no real basis for evaluating any hypothesis. A better observation might be that all of our economic theories have been "proven" only within very narrow bands of economic performance, and none appears to work well in periods of economic extremes.

Fundamentally, the authors argue that Roosevelt's policies kept wages too high for the armies of the poor living in "Hoover" cities throughout the country. Presumably, had more people been allowed to starve to death, they might have worked for less than the near starvation wages they otherwise received. Given that my father lived during that period in a single parent household earning $8/week to feed my grandmother (working 60 hours/week) and her seven children, I don't think the economic problem was workers who were earning too much.

I do not pretend to any expertise in Depression economics. Such analyses are of primarily historical importance since the fundamental structure of our economy has changed radically. The importance of such revisionist studies does not strike me as an effort at serious economic study. Rather, it seems to be an effort to debunk the perception that government intervention can ever be productive since that undermines one of the most fervent ideological tenets of the neo-con movement. The fact that those living at the time viewed conditions as improving as a direct result of public policy and re-elected Roosevelt to an unprecedented three terms only makes the refutation more important.

Apart from anything else, New Deal policies allowed the US to avoid the move toward fascism that overtook governments in Germany, Spain, and Italy (and would have overtaken France but for WWII). Those policies also allowed us to avoid the Communist takeover experienced in Russia. We were threatened by both and helping people to keep working and eating until the economy recovered was an important reason why.

road kill
10-05-2010, 06:40 PM
Writing an article, and having it be true are two very different things. Unfortunately, when studies are conducted to prove pre-existing political beliefs, the results are sadly predictable. The study mentioned is widely quoted. Unfortunately, other then its original publication in a regional Federal Reserve publication, it is seldom cited outside of conservative publications seeking to bolster arguments against any government intervention in dealing with the Great Bush Recession.

However, the article itself is a little loosy goosy. Much of its arguments begin from slower than predicted growth in employment following the beginning of Roosevelt policies. However, in concluding that employment growth was too low, the authors explicitly exclude consideration of public employment in temporary jobs with the WPA and similar programs, even though these employed 60% of those who were otherwise unemployed and produced infrastructure improvements that we continue t benefit from today.

They discard more widely accepted theories for the severity of the Depression based on their belief that these theories do not explain why similar levels of collapse were not experienced in 1920-21 when there was a mini financial crisis involving deflation. This argument is unconvincing since arguing inconsistency with only two data points gives no real basis for evaluating any hypothesis. A better observation might be that all of our economic theories have been "proven" only within very narrow bands of economic performance, and none appears to work well in periods of economic extremes.

Fundamentally, the authors argue that Roosevelt's policies kept wages too high for the armies of the poor living in "Hoover" cities throughout the country. Presumably, had more people been allowed to starve to death, they might have worked for less than the near starvation wages they otherwise received. Given that my father lived during that period in a single parent household earning $8/week to feed my grandmother (working 60 hours/week) and her seven children, I don't think the economic problem was workers who were earning too much.

I do not pretend to any expertise in Depression economics. Such analyses are of primarily historical importance since the fundamental structure of our economy has changed radically. The importance of such revisionist studies does not strike me as an effort at serious economic study. Rather, it seems to be an effort to debunk the perception that government intervention can ever be productive since that undermines one of the most fervent ideological tenets of the neo-con movement. The fact that those living at the time viewed conditions as improving as a direct result of public policy and re-elected Roosevelt to an unprecedented three terms only makes the refutation more important.

Apart from anything else, New Deal policies allowed the US to avoid the move toward fascism that overtook governments in Germany, Spain, and Italy (and would have overtaken France but for WWII). Those policies also allowed us to avoid the Communist takeover experienced in Russia. We were threatened by both and helping people to keep working and eating until the economy recovered was an important reason why.

Writing a post, and having it be true are two very different things.

This is your opinion, or spin, nothing more.



RK

YardleyLabs
10-05-2010, 06:59 PM
Writing a post, and having it be true are two very different things.

This is your opinion, or spin, nothing more.



RK
You are absolutely right. However, I also read their original article and know, as a consequence, that all of the unemployment numbers they cite as evidence of failure exclude all people employed by the New Deal programs.

FDR ran on a platform of putting people to work, and he did. Those people didn't starve and contributed to the non-government economy as they spent the money they earned. That is not a matter of opinion. Also, at a time when people were working for almost nothing, families were being split up because children couldn't be fed, and people were dying of exposure in tent cities, I find it hard to believe that our world would have been better off had wages fallen an additional 25%. However, that is exactly what the authors are advocating.

depittydawg
10-05-2010, 07:24 PM
FDR's policies prolonged Depression by 7 years, UCLA economists calculate

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I feel blessed that after 80 years someone was finally born in the US that can tell us what really happened back then. Just goes to show how stupid everyone else has been for the last 8 decades.

road kill
10-05-2010, 07:31 PM
You are absolutely right. However, I also read their original article and know, as a consequence, that all of the unemployment numbers they cite as evidence of failure exclude all people employed by the New Deal programs.

FDR ran on a platform of putting people to work, and he did. Those people didn't starve and contributed to the non-government economy as they spent the money they earned. That is not a matter of opinion. Also, at a time when people were working for almost nothing, families were being split up because children couldn't be fed, and people were dying of exposure in tent cities, I find it hard to believe that our world would have been better off had wages fallen an additional 25%. However, that is exactly what the authors are advocating.

My Mom & Dad lived thru that time.

Makes me pretty grateful for all I have.
Yet I long for what they had, for it is GONE.


RK

tom
10-05-2010, 07:37 PM
In 1930 my dad made $17.50/week working 10 hours a day, 7 days a week. And, someone thinks he should have made 25% less?!?!?


Yet I long for what they had, for it is GONE.

Yup,,,, they had a 1 room tarpaper shack with no running water. Life was grand!

road kill
10-05-2010, 08:25 PM
In 1930 my dad made $17.50/week working 10 hours a day, 7 days a week. And, someone thinks he should have made 25% less?!?!?



Yup,,,, they had a 1 room tarpaper shack with no running water. Life was grand!
I guess I have to explain........:rolleyes:

They had values, they had morals, they knew right from wrong, people cared for each other.......very rare in todays world.


RK

dnf777
10-05-2010, 08:43 PM
I guess I have to explain........:rolleyes:

They had values, they had morals, they knew right from wrong, people cared for each other.......very rare in todays world.


RK

My parents have values and morals. My wife, kids any myself have values. My friends have values. Most all of the people I surround myself with have values and morals. Even the people I choose to hire and contract have values.

Where do you live? I choose not to dwell on negativity, and look for the good in people. Its out there, you just have to open your eyes and mind.

YardleyLabs
10-05-2010, 08:54 PM
I also have to say that the people I meet on a day to day basis have strong values, work hard, and give generously. My kids and even my 7 year old granddaughter are the same. My grandson, at age 4, gets a bit of a pass, but is learning quickly. The weak link may be my own generation, the boomers who grew up in the 60's and 70's.

dnf777
10-05-2010, 08:54 PM
Please put me back on ignore.
That post is pathetic, as usual it's always about YOU and some kind of cheap shot.
You totally missed the point, well, actually you didn't but you have to do what you do.
Those people had tremendous character.
Don't even think about comparing yourself to my Dad, where do YOU live?

PLEASE put me back on ignore.........


RK


You need to lighten up.

If you asked your parents or grandparents, or any generation, they would say the world is going to hell in a handbasket, politicians are morally corrupt, and the younger generation is lost!

Get real. Do you think we're the first generation to think things are terrible?

For some people, things are ALWAYS doom and gloom. For others, life is bliss. For most people working and getting by, life has its good days, and its bad days. Its where you choose to dwell that defines your character. I won't make any judgements, but rather let your comments speak for themselves.

Peace--

road kill
10-05-2010, 08:57 PM
I also have to say that the people I meet on a day to day basis have strong values, work hard, and give generously. My kids and even my 7 year old granddaughter are the same. My grandson, at age 4, gets a bit of a pass, but is learning quickly. The weak link may be my own generation, the boomers who grew up in the 60's and 70's.

Here is a surprise, this wasn't about you or little Yardley, it was about those that lived through those times and their character.
One could not possibly have what they had unless they lived thru those things.
I would have to say my Dad had pretty good character, I don't see many today that match him.


As usual, you two must pick and tear at an honest comment that meant no disrespect to anyone and huge respect for those mentioned.



stan b

road kill
10-05-2010, 09:00 PM
You need to lighten up.

If you asked your parents or grandparents, or any generation, they would say the world is going to hell in a handbasket, politicians are morally corrupt, and the younger generation is lost!

Get real. Do you think we're the first generation to think things are terrible?

For some people, things are ALWAYS doom and gloom. For others, life is bliss. For most people working and getting by, life has its good days, and its bad days. Its where you choose to dwell that defines your character. I won't make any judgements, but rather let your comments speak for themselves.
Peace--

I didn't say things were terrible, that is your comment Mr. Positive....I said I admired their chharacter.

Yours speak volumes about you.


RK

depittydawg
10-05-2010, 09:06 PM
I guess I have to explain........:rolleyes:

They had values, they had morals, they knew right from wrong, people cared for each other.......very rare in todays world.


RK

No different than today. Not at all. Values? Some people have them, some don't. My grandparents lived through the Depression. They had values. My wifes grandparents (fathers side) were bankrupted by the depression. They had values and were very decent people. Wife's grandfather mothers side had no values. He was a bigamist, a wife beater, a child beater and a Nazi. Values isn't something that comes from the age we live in. Each person decides what they do, in any age.

dnf777
10-05-2010, 09:08 PM
I didn't say things were terrible, that is your comment Mr. Positive....I said I admired their chharacter.

Yours speak volumes about you.


RK

That wasn't my comment. It was my question.
I've been called much worse than "Mr. Positive", so I'll gladly accept that label.
Look around you, you'll see good people.
There's even a few on this list....;)

ducknwork
10-05-2010, 09:22 PM
You should read this carefully. What it is saying is that your wages should be cut significantly.

Where have I heard that before?

Maybe I did read it wrong...but what I read was that wages were increasing at a time when there was no justification for it, not staying the same as they should have according to the market. If I read it wrong, please point out to me where it says my wages should be cut.

BTW Buzz, did you get my PMs?

ducknwork
10-05-2010, 09:24 PM
Talking about the economic disaster known as the "Bush Administration" is also a history lesson, albiet a more recent one, but one that many people are poised to forget and repeat!

So I understand....if democratic follies are discussed, its a history lesson. If republican follies are discussed, its just a blame game. ok.

Yeah, you and your posse really post things about Bush to help us all learn.:rolleyes:

Yall would make crappy teachers.

YardleyLabs
10-05-2010, 09:25 PM
Here is a surprise, this wasn't about you or little Yardley, it was about those that lived through those times and their character.
One could not possibly have what they had unless they lived thru those things.
I would have to say my Dad had pretty good character, I don't see many today that match him.


As usual, you two must pick and tear at an honest comment that meant no disrespect to anyone and huge respect for those mentioned.



stan b
I know exactly what you are saying about those who grew up in the Depression. Both of my parents did as well. It had a tremendous impact on their characters -- mostly good, but some real issues a well.

My reaction was to your comment that those characteristics were now gone or at least very rare. You defined those characteristics as "They had values, they had morals, they knew right from wrong, people cared for each other.......very rare in todays world." I am continuously impressed by how strong I find those characteristics to be among my children's peers and how strong those characteristics are in the people I meet every day -- people who work full schedules, love and care for their families and still make time every week to work on a volunteer basis with those less fortunate. My father was never too sure about my generation, and I am not either. However, I am very impressed by the 35 and under crowd, and even know some pretty wonderful people who are older. Were he alive today, I suspect that my father would be very happy to see the generation of leaders we are building for the future. I think they may surprise both the liberals and conservatives that dominate politics today.

ducknwork
10-05-2010, 09:28 PM
I know exactly what you are saying about those who grew up in the Depression. Both of my parents did as well. It had a tremendous impact on their characters -- mostly good, but some real issues a well.

My reaction was to your comment that those characteristics were now gone or at least very rare. You defined those characteristics as "They had values, they had morals, they knew right from wrong, people cared for each other.......very rare in todays world." I am continuously impressed by how strong I find those characteristics to be among my children's peers and how strong those characteristics are in the people I meet every day -- people who work full schedules, love and care for their families and still make time every week to work on a volunteer basis with those less fortunate. My father was never too sure about my generation, and I am not either. However, I am very impressed by the 35 and under crowd, and even know some pretty wonderful people who are older. Were he alive today, I suspect that my father would be very happy to see the generation of leaders we are building for the future. I think they may surprise both the liberals and conservatives that dominate politics today.

I'd like to think you are right, Jeff, but I watched the evening news tonight and half of it was people killing people. Sadly, I do not think that there is anywhere near as many good people in the world as there once was and it's only getting worse.

dnf777
10-05-2010, 09:48 PM
I'd like to think you are right, Jeff, but I watched the evening news tonight and half of it was people killing people. Sadly, I do not think that there is anywhere near as many good people in the world as there once was and it's only getting worse.

Come 'on Duck. You know the news media doesn't generate ratings by reporting on boy scouts helping old ladies across the street! They have reporters scouring every inch of this land for the most heinous, vile, crimes to report on.

Case in point is the recent triple murder/rape/arson in CT. Tragic and horrible yes, but news for the rest of us? Not really. But it made Nancy Grace and her ilk get all......well, I don't need to say here.

Don't forget the Elks, Moose, Rotary, Masons, etc....who perform wonderful volunteer community service. Freemasons alone give over $1.5 million PER DAY to charity, much for the Shriner's Childrens Hospitals.

Keep it positive--if you don't....who will?