SHLAES STRIKES AGAIN…. Over the summer, the Washington Post ran a piece from conservative writer Amity Shlaes, explaining that the national economy was fine, there was no recession, and that Phil Gramm was right to call us a “nation of whiners.”
Undeterred, in early December, the Post ran another piece from Shlaes, which argued that the federal government shouldn’t try to respond to an economic downturn through stimulus investments. In late December, the Post ran yet another piece from Shlaes, repeating the same point, and arguing that FDR’s New Deal did not improve the economy in the 1930s.
It’s been a month, so the Post decided it’s time, once again, to run another piece from Shlaes, this time arguing — you guessed it — that Franklin Roosevelt’s New Deal didn’t work. Indeed, Shlaes insists the Great Depression would have taken care of itself, if only FDR hadn’t tried to rescue the nation from financial ruin.
I’ll just let Dean Baker take it from here.
While the basic argument has the form of a no evidence if counter-factual assertion (e.g. the good fairy of the market would have set things right, if only Roosevelt didn’t get in the way), the discussion is contradicted by the known facts of the era. Roosevelt’s New Deal Agenda lowered the unemployment rate from 25 percent in 1933 to 10 percent in 1937. None of us would be happy with 10 percent unemployment, but it difficult to complain about policies that reduced the unemployment rate by an average of almost 4 percentage points a year. The annual growth rate over these four years averaged 13.0 percent. It is always possible that the magic of the market would have done better, but there is no reason that we should believe so.
Shlaes is correct in pointing out that things turned bad again in 1937. The Blue Dogs of the Roosevelt era won sway and got Roosevelt to cut spending and raise taxes. This threw the economy back into a serious recession, just as any good Keynesian would have predicted.
When it comes to writings on economics, the Post’s Outlook section is probably best viewed as a jobs program rather than a source for serious ideas.
Paul Krugman explained in November that there’s “a whole intellectual industry, mainly operating out of right-wing think tanks, devoted to propagating the idea that F.D.R. actually made the Depression worse.” Shlaes is, alas, at the top of this enterprise.
Now, if only someone would explain to me why the Post‘s op-ed editors feel compelled to publish the same misguided piece from Shlaes, making the same misguided argument every month or so, I’d appreciate it.