Media Release – America and Canada Don’t Need A “New” New Deal

Frontier Centre, Press Release (historic), Role of Government, Uncategorized

The Frontier Centre for Public Policy today released a study which notes both the correct and incorrect actions taken in the 1930s in the United States under Franklin D. Roosevelt. The study, America (and Canada) Doesn’t Need Another New Deal, notes how government actions in the 1930s both helped some families, but in other cases, also hindered economic recovery and in fact deepened the 1930s depression.

Rohit Gupta, a former policy advisor in the Office of the Prime Minister and research associate with the Bank of Canada, and now the principal of a public policy firm, notes that many politicians today seem too intent on replicating FDRs 1930s approach. If so, he points out they should avoid the worst errors committed by Roosevelt and the American Congress during the Great Depression.

For example, Gupta notes that while unemployment benefits and public pensions were positive policy choices in the 1930s, those positives were overwhelmed by anti-business policies the ultimately exacerbated the economic downturn. For example:

  • The National Recovery Administration (NRA), created in 1933, created cartels in 500 industries to limit competition. It compelled businesses to reduce production and to increase prices and wages during a severe economic downturn when people could not afford to buy the most basic of necessities. “Bizarrely, people who lowered prices were arrested and middlemen were deemed criminals,” writes Gupta.
  • The Agricultural Adjustment Administration (AAA) also implemented a collection of harmful programs. The AAA, in the name of raising prices to battle what Roosevelt perceived to be the country’s biggest economic ill — deflation — forced farmers to cut production by essentially destroying excess crops (mostly cotton) and livestock. It’s estimated that in 1933, 6-million piglets and 220,000 pregnant cows were slaughtered and many cotton farmers plowed under one-quarter of their acreage. “The mandated destruction of food and the increasing of its prices at a time when many Americans were already hungry due to shortages and lack of affordability was curious economic policy, to say the least,” writes Gupta.
  • Many of Roosevelt’s policies worsened the Depression and contributed to a “double-dip depression.” The unemployment rate, which fell gradually from 1934 through 1937 and reached a low of 14.3 per cent, increased again to 19 per cent by 1938. By the end of the decade, even Roosevelt’s own Treasury Secretary Henry Morgenthau Jr. began to have his doubts about FDR’s economic policies. The study quotes Morgenthau Jr. who wrote in his diary:

    “We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot.”

    Gupta points that policy makers should learn the lessons of the 1930s and be careful not to enact anti-competition and anti-business measures: “Stimulus measures must not be used to implement the types of questionable New Deal planned-economy equivalents in today’s world.”

    The Frontier Centre for Public Policy study, America (and Canada) Doesn’t Need Another New Deal, can be found at fcpp.org

    For more information, contact the study author at:

    Rohit Gupta
    613-867-0676
    rgupta@dp3g.ca

    Gary Slywchuk
    403.835.8192
    gary.slywchuk@troymedia.com