From: rja@redwood26.cray.com (Russ Anderson)
Subject: Re: What kind of recession we're in
Originator: rja@redwood26
Organization: The 1991 World Champion Minnesota Twins!
Distribution: usa
Date: 22 Jul 92 14:20:12 CDT


In article <1992Jul22.165001.21927@ucsu.Colorado.EDU>, fusco@ucsu.Colorado.EDU (Andrew Fusco) writes:
> mcnally@wsl.dec.com (Mike McNally) writes:
> >fusco@ucsu.Colorado.EDU (Andrew Fusco) writes:
> >>On the other hand, certain policies prolong a recession - or depression.
> >>Roosevelt's policies actually worsened the depression, to the point where
> >>it was so bad that only World War II could get us out of it. With Clinton's
> >>messianic "New Covenant," we may slip into the same sort of depression
> >>that Roosevelt presided over.
> 
> >This sounds a little revisionist to me.  Evverything I've ever seen about
> >the 30's shows that the economy had picked up substantially by the latter
> >half of the decade.  There was even a budget surplus in 1937, and a 
> >small recession following that year.  It's definitely true that the war
> >completely turned things around, though.
> 
> OK, I don't claim to be completely objective, but I'm pretty sure on the
> facts on this one. The economic cycle of the 1930's went pretty much as
> follows: A slow, gradual spiral into depression after the stock market
> crash - people kept expecting recovery to be just around the corner - until
> it bottomed out in 1933-34, with unemployment 30% or more, price deflation,
> etc. Then came Roosevelt's "New Deal" which provided jobs and money to
> help people get by. The economic situation, though, was flat until the
> mid thirties, when a slow economic expansion began - it continued until
> 1937, and people thought we'd weathered the storm. Then there was a complete
> relapse into depression again, not just recession. This lasted until 1939,
> when "lend-lease" began and Roosevelt could get the economy going again by
> fueling England's fight against Germany. At no time during the 1930's, not
> even 1937, were conditions better than the worst of the recession we've
> just experienced. While Roosevelt's policies ameliorated the people's
> problems from day to day, the policies themselves were responsible for
> inhibiting the private sector from rebounding, thus delaying any real
> recovery until the war. 
> 
> As for the budget problems, Roosevelt and the Congress ran up huge deficits
> during the 30's - many years, budget outlays ran 100% more than revenues,
> a far larger deficit, in percent, than any we've experienced. I don't recall
> offhand, but maybe the 1937 budget was balanced. That doesn't indicate a
> healthy economy by itself, however.

A few comments:
1) I think you description is essentially correct.  (The deficits averaged
	~$3,000M in the 1930, 1938 deficit was "only" $89M)
2) The Depression did not end until WWII.

The interesting question is what actions during WWII got the economy going?
Bombing the foreign competion certainly helped the U.S. compete in the 
post-war years, but there was more to the recovery than the lack of
foreign competition (and foreign demand to rebuild).  The U.S. in WWII
was for all practical purposes a command economy with rationing, price 
controls, and a huge increase in goverment spending.  By conventional "free
market" thinking, such governmental interference would make the depression 
*worse*.  The question is: what got the economy going?

-- 
Russ Anderson    |  Disclaimer: Any statements are my own and do not reflect
------------------              upon my employer or anyone else.  (c) 1992
EX-Twins' Jack Morris, 10 innings pitched, 0 runs (World Series MVP!)
Newsgroups: talk.politics.misc