Bringing on the "Obama Recession" by Forgetting the Lessons of Keynes and FDR

[Karmadillo]

http://www.truth-out.org/bringing-obama-recession-forgetting-lessons-keynes-and-fdr/1312563318

Bringing on the "Obama Recession" by Forgetting the Lessons of Keynes and FDR
Friday 5 August 2011
by: David Woolner, New Deal 2.0 | Op-Ed

“The economic experiments of President Roosevelt may prove, I think, to be of extraordinary importance in economic history, because for the first time — at least I cannot recall a comparable case — theoretical advice is being taken by one of the rulers of the world as the basis of large-scale action. The possibility of such a remarkable event has arisen out of the utter and complete discredit of every variety of orthodox advice. The state of mind in America which lies behind this willingness to try unorthodox experiments arises out of an economic situation desperate beyond precedent.”

~John Maynard Keynes, January 1934

Just under three quarters of a century ago, a group of conservative economic advisers close to Franklin Roosevelt informed the President that they were worried about the rapid rate of growth in the US economy. Since 1933, when FDR took over at the height of the Great Depression, the economy had been expanding steadily, at an average rate of 14 percent per year. Schooled as most of these advisors were in the tenets of economic orthodoxy (which called for cuts in spending during an economic downturn), and unsure of the effects of the Keynesian-style deficit spending that the administration had been engaged in under the terms of the early New Deal, the President was advised to cut the budget, reduce deficit spending and tighten the money supply as a means to stave off inflation. Heeding their word (and no economist himself), FDR did just that.

The results were an unmitigated disaster.

Thanks to the Administration’s decision to move away from the increasingly Keynesian policies it had been following — policies that saw the unemployment rate fall from a high of 25% in 1933 to 14% by 1937 — FDR launched one of the sharpest economic downturns in American history-the so-called “Roosevelt Recession” of 1937-38. In just a few short months, the GDP declined by 13 percent; industrial production by 33 percent; wages by 35 percent and an estimated four million people lost their jobs. No fool, FDR quickly reversed himself and went back to Congress to seek a massive stimulus bill to put people back to work and repair the damage to the Depression-era economy. Within three months growth had returned and the economy was back on track.

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[FiveGoodMen]

1. THIS one is intentional, though

Don't know that FDR was in on the Shock Doctrine.

[Little Star]

2. Lets hope Obama's no fool and quickly reverses himself...

goes to Congress to seek a massive stimulus bill to put people back to work and repair the damage done in this depression-economy!!! He needs to do a FDR real quick!

[Kurmudgeon]

3. That should be Boehner-GOP recession.

[Waiting For Everyman]

4. We know how to solve this, so there's no excuse for not doing so.

The Repubs own this, no matter how many lies they tell. It's them, their thinking, and their followers (including our President when he does it).

When people REALLY want it different, they'll start paying attention to REALITY (what FDR proved beyond any doubt). It'll probably be well into catastrophe by then though.