Monday, February 2, 2009

Cole & Ohanian on How Government Prolonged the Depression

In this WSJ article Cole & Ohanian dissect the Great Depression and FDR's New Deal, and list painful mistakes that unnecessarily prolonged that crisis -- mistakes that should be avoided at all costs by the new administration (HT Ellery Jr.). Here are some of their conclusions:

The main lesson we have learned from the New Deal is that wholesale government intervention can -- and does -- deliver the most unintended of consequences. This was true in the 1930s, when artificially high wages and prices kept us depressed for more than a decade, it was true in the 1970s when price controls were used to combat inflation but just produced shortages. It is true today, when poorly designed regulation produced a banking system that took on too much risk.

President Barack Obama and Congress have a great opportunity to produce reforms that do return Americans to work, and that provide a foundation for sustained long-run economic growth and the opportunity for all Americans to succeed. ... A large fiscal stimulus plan that doesn't directly address the specific impediments that our economy faces is unlikely to achieve either the country's short-term or long-term goals.

1 comment:

Lulay001 said...

I'm reading a book called "FDR's Folly," and it is all about how FDR and his New Deal policies prolonged and deepened the Great Depression. It truly is fascinating because everyone hails him as a savior, while in actuality he hurt a lot of people in this country. A book that every economics student should read in my opinion.