Louis Proyect: The Unrepentant Marxist

December 11, 2018

WWII ended the Great Depression, not New Deal economics

Filed under: Counterpunch,financial crisis,WWII — louisproyect @ 2:04 pm

My views on these matters were first put forward in a blog post titled “Did World War Two End the Great Depression”, written in September, 2011. It cited a Paul Krugman Op-Ed piece written in 2008 and titled “Franklin Delano Obama?”. Krugman made the case that “What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.” With respect to the public works projects mentioned by Al Ronzoni, Krugman described them as “largely offset by other factors, notably a large tax increase, enacted by Herbert Hoover, whose full effects weren’t felt until his successor took office.”

In Krugman’s view, FDR was someone who “thought he was being prudent by reining in his spending plans.” Sounds rather like Obama, doesn’t it? In fact, Krugman’s op-ed was a cautionary tale warning Obama, the supposed new FDR, not to be as tightfisted with government-funded recovery programs as occurred during the New Deal unless he wanted to take “big risks with the economy and with his legacy.”

Well, given the high costs of another world war (after all, those H-Bombs can make a real mess of things), Obama didn’t even create a public works program—the only option open to him. In fact, as I have argued, Obama was inspired more by Herbert Hoover than FDR. As someone who relied heavily on U. of Chicago economists, he was not likely to embark on a new New Deal despite all the advice he got from Paul Krugman, The Nation Magazine, Huffington Post, et al.

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7 Comments »

  1. Federal spending on both the New Deal and WWII ended the Great Depression. It’s okay for Marxists to admit that government spending, especially that which is targeted to the working class, causes unemployment to drop.

    Comment by Tyler — December 11, 2018 @ 6:26 pm

  2. Did the dog eat your homework? Or at least the page that had your data on the New Deal?

    Comment by louisproyect — December 11, 2018 @ 7:20 pm

  3. This is basic economic history. FDR got into office, did a lot of New Deal spending, and unemployment dropped significantly. Unsurprisingly, he easily won reelection. Then, he made a big mistake in 1937 by turning to fiscal austerity. This caused the recovery to halt and significantly increased unemployment. Then, Pearl Harbor happened, followed by enormous federal spending on armament and other war operations. This spending ended the Great Depression.

    Marxists should not deny history because they don’t want to admit that government spending causes unemployment to drop even in capitalist nations. Marxists shouldn’t deny history ever, actually.

    Comment by Tyler — December 11, 2018 @ 8:16 pm

  4. “From 1933 to 1937, unemployment had been reduced from 25% to 14% . . .”

    FDR: From Budget Balancer to Keynesian https://fdrlibrary.org/budget

    Comment by Tyler — December 11, 2018 @ 8:20 pm

  5. You don’t seem to grasp my point, Tyler. I am talking about the end of the Great Depression. This is not a function of unemployment alone. It is a function of wages and profits. You need to read some Karl Marx. Most of his writing is online at http://www.marxists.org.

    Comment by louisproyect — December 11, 2018 @ 10:12 pm

  6. It was winning the war that decisively started a new spiral of capitalist accumulation and put the US on the road to world domination. You’re correct as far as you go, Louis, but you must look at it internationally. After all, these were blocs of capital at war, the ultimate competition, not merely democracy vs. fascism.

    Comment by Mike — December 11, 2018 @ 10:52 pm

  7. You wrote in your article, “[T]he real criterion for judging the New Deal was whether such projects made a real dent in unemployment, income and other economic markers that require statistics to judge properly.”

    I provided statistics showing that New Deal spending caused a significant drop in unemployment. I don’t dispute the historical fact that WWII spending was the final government action to end the Great Depression.

    Comment by Tyler — December 12, 2018 @ 12:33 pm


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