‘False Dawn’ Review: The Mirage of Recovery

America’s leaders in the 1930s subjected the country to a series of bizarre economic experiments. Most of them backfired.

By Judge Glock. He reviewed the book False Dawn: The New Deal and the Promise of Recovery, 1933–1947 by George Selgin. Excerpts:

"Franklin Delano Roosevelt . . . and his advisers had no clear explanation for the collapse and his subsequent New Deal would amount to a series of experiments."

"with a few exceptions, FDR’s experiments did not work."

"by 1939 the unemployment rate was still 17%."

"the Roosevelt administration mistakenly worried that there was too much money in the economy."

"In the early part of the New Deal the amount of money the Fed pumped into the economy shrank."

"deficits as a percent of the economy were hardly different during Roosevelt’s time in office than they had been at the end of Herbert Hoover’s. While the New Deal spent more, it also imposed new taxes on food and payrolls. The result was a bigger federal government, but not one that relied on deficits as stimulus."

"The earliest solution they hit on . . . was to restrict production and thus raise prices. The National Industrial Recovery Act that passed in mid-1933 turned much of the American economy over to giant cartels. Industries colluded to raise prices and unions colluded to raise wages. The result was fewer goods on the market and an immediate economic collapse that would still be remembered today if it hadn’t been surrounded by so many others."

"It paid some farmers to plow their cotton back underground and others to kill their breeding sows before they could produce too much pork. Later economic studies confirm what common sense would suggest: Destroying crops and livestock isn’t an ideal route to prosperity."

"he administration’s tight-money preoccupation led the Treasury Department in 1936 to start buying up the incoming gold just to bury in its vaults. That, together with a series of union strikes inspired by New Deal labor policies, produced the “Roosevelt Recession,” which reversed most of the modest gains the nation had made since FDR assumed office."

"John Maynard Keynes noted in 1934 that the administration’s wild swings in policy kept investors on edge. “The important but intangible state of mind, which we call business confidence,” Keynes wrote, “is signally lacking.”"