I generally like the columns of William Rees-Mogg on economics; while he is no hardline free marketeer like the scribes here, he has a sharper nose for the errors of interventionism than many MSM writers. He also has a knack – which comes from a man who is of great age – for putting current events into a proper historical context. But he makes this statement in his generally admiring writeup on Roosevelt that is surely downright wrong. Not just a teeny-weenie bit wrong, but disastrously so for this whole argument:
In March 1933, when Franklin Roosevelt was inaugurated as president, he had to face the Slump. Unemployment was by then running at about 30 per cent. Roosevelt introduced the New Deal, based on an extensive programme of raising employment through public works. Unemployment did actually fall to about 5 per cent by the time of Roosevelt’s second election victory in 1936. There continued to be stumbles along the way, particularly in 1937.
Well according to official US statistics referred to here, unemployment certainly did not fall anything like as low as that during FDR’s 1930s period in the White House, and then only dropped significantly once the Second World War started.
I do not know where Rees-Mogg got his figures from or what sort of statistical resource he is using, but this is not a minor discrepancy. To suggest that unemployment fell as low as 5 per cent in the mid-1930s seems to fly totally in the face of the official data.
My impression is that there are multiple employment data-sets for the 30s, and that Rees-Mogg is probably using one that counts government make-work programs as “employment”.
Most eople don’t know there were 2 depressions instead of one. The last one was in 1937 that shows how good was FDR…
It’s interesting how our thoughts are shaped by language and terminology- as in everyone talking about “employment”. For the past century or so western governments have generally set a target for this “employment” thing, and generally failed to achieve it, but nonetheless the use of the term shapes our thoughts into the idea that the key thing is that everyone should “have a job”. One unfortunate consequence of this is that makework schemes then seem plausible and useful, as does expansion of public sector jobs and so on.
From a libertarian/marketeer perspective, it would be more useful to talk about whether people are productive than whether they are “employed”. Are they doing anything useful? we should ask. Production doesn’t mean just making things of course, it means doing something of utility to other people which can be traded- making widgets or making music or making scientific discoveries or babysitting or being a vicar are all productive uses of time, since these things are all of use to somebody else.
Unemployment figures aren’t much of a good measure of anything. Even if people are employed, if they are consuming more than they produce, as the myriad in the unproductive “parasite economy” are, they are doing more harm than good. It would make more economic sense to pay diversity officers to stay at home and not do anything than to go to work, since their work simply imposes a burden on other productive workers. How do we know if an individual is being productive? Other individuals freely trade with them without state coercion.
Many of the variables we routinely use in economics seem to me to be poor choices of parameters to measure.
Send that man a copy of Amity Shlaes The Forgotten Man, the best re-survey of the Roosevelt era.
There has also been a “scholarly” study that further reinforces her work (which is pretty darn thorough and generally indisputable)
If you want to get the true point of The FDR objectives, get a copy of his first inaugural address and read it carefully (or contact Mona Charen for guidance).
Maybe what he meant was that it fell 5%….to 25%.
The amazing thing about FDR is the difference between his campaign platform and what he actually did. He campaigned on a platform of reducing government (by 25%!) and sound money, then got into power and did the exact opposite. It makes New Labour look positively honest by comparison.
The bad problem with gubbermint make work jobs, they always end in the same place, the unemployment line.
The failures of FDR are about to be realized as the failures of Barry Obama. How does changing light bulbs in federal buildings have anything to do with energy policy. I guess you have to be a warped brain dead liberal to fugure that out.
Fake but true
Yes J.P.
Whatever set of stats one uses – if unemployment was 25% of the workforce in 1933 it did NOT fall to 5% in 1936. Even counting the make work schemes.
W.R.M. is simply wrong.
However, it would not matter if he was right – even if unemployment had gone to 5% (which it did not) this would not prove that “public works” are good idea. Economics is not physics – it is a science (in the old sense) in that it is a body of knowledge, but the “scientific method” (empircism) is not suitable for economics.
Back to Public Works.
In spite of the fact that the old “Chicago School” (that of Knight, Simmons and the others) favoured them and the old Chicago School said a lot of good things (for example in opposing fractional reserve banking) public works schemes do not make sense – as shown by Bastiat (and many others) over the centuries.
Actually they particularly do not make sense now – as Congress and so on would insist that the public works schemes paid union wage rates.
Do people want to reduce unemployment?
The free up the labour market – get rid of pro union laws and other things that make it harder for the market to clear (including welfare schemes and mimum wage regulations).
“But I want full employment and high wages – and good conditions”.
Actually, over time, people can have all these things – if they are prepared to radically roll back the modern state.
Yes J.P.
Whatever set of stats one uses – if unemployment was 25% of the workforce in 1933 it did NOT fall to 5% in 1936. Even counting the make work schemes.
W.R.M. is simply wrong.
However, it would not matter if he was right – even if unemployment had gone to 5% (which it did not) this would not prove that “public works” are good idea. Economics is not physics – it is a science (in the old sense) in that it is a body of knowledge, but the “scientific method” (empircism) is not suitable for economics.
Back to Public Works.
In spite of the fact that the old “Chicago School” (that of Knight, Simmons and the others) favoured them and the old Chicago School said a lot of good things (for example in opposing fractional reserve banking) public works schemes do not make sense – as shown by Bastiat (and many others) over the centuries.
Actually they particularly do not make sense now – as Congress and so on would insist that the public works schemes paid union wage rates.
Do people want to reduce unemployment?
The free up the labour market – get rid of pro union laws and other things that make it harder for the market to clear (including welfare schemes and mimum wage regulations).
“But I want full employment and high wages – and good conditions”.
Actually, over time, people can have all these things – if they are prepared to radically roll back the modern state.
Send the man this.
Extract from p. 13:
“The American economy was soon relieved of the burden of some of the New Deal’s worst excesses
when the Supreme Court outlawed the NRA in 1935 and the AAA in 1936, earning Roosevelt’s eternal
wrath and derision. Recognizing much of what Roosevelt did as unconstitutional, the “nine old men”
of the Court also threw out other, more minor acts and programs which hindered recovery.
Freed from the worst of the New Deal, the economy showed some signs of life. Unemployment
dropped to 18 percent in 1935, 14 percent in 1936, and even lower in 1937. But by 1938, it was back up to
nearly 20 percent as the economy slumped again. The stock market crashed nearly 50 percent between
August 1937 and March 1938. The “economic stimulus” of Franklin Delano Roosevelt’s New Deal had achieved a real “first”: a depression within a depression!”
The whole paper is very enlightening – I particularly like the part about FDR’s proposal for 99.5% marginal tax rate on all income over $100,000.
In his private diary, FDR’s own Treasury Secretary, Henry Morgenthau, wrote: “We have tried spending money. We are spending more than we have ever spent before and it does not work. . . . 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 an enormous debt to boot!”
Being from the other side of the pond, I am a bit ignorant of British writers. Is this the Rees-Moggs who wrote Humbler Heaven: The Beginnings of Hope?
Regards — Cliff
So according to the government’s own stats (the ones that included every make work scheme as a job) unemployment was 14%, not 5%, in 1936.
However, that is still a massive reduction from 25% (and a bigger reduction that I thought had happened).
It goes a long way to explaining the 60% of the vote F.D.R. got in 1936.
In fact only one State voted against him on principle.
Two States voted against F.D.R. in 1936 – but one was Vermont which always voted Republican (it was a very different Vermont). But the other was Maine – most people in Maine had voted FOR Roosevelt in 1932, on the basis of his promises of lower taxes and less government spending, he had done the opposite and they voted against him 1936.
Of course it was a very different Maine in 1936 – although the transformation has been a economic one (Maine was a low tax State in 1936, now it is a high one) not a economic and social one as in Vermont.
I am told the “real” Maine is still there somewhere (it is not just a Stephen King leftism), whereas Vermont is dead.