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Comment by rm_-rf_slash | Hacker News Reader

In the course of selling his New Deal to the impoverished American public, president Franklin Delano Roosevelt pitched his reforms by stating: "It is common sense to take a method and try it. If it fails, admit it frankly and try another, but above all try something. The millions who are in want will not stand by silently forever while the things to satisfy their needs are within easy reach."

The most frustrating part of this "longest depression" is that in our hyperconnected age, there more ideas than ever to at least try, from guaranteed income to subsidized apprenticeships, yet our elected representatives spend at least half of their time asking for money to run in their next election, and nothing at all gets done. For at least the United States, any substantial economic reform will require a corresponding reconstruction of how our representatives campaign and are elected and held responsible to the needs of their constituents, lest the economic engine be left to muster no more than a tired sputter.

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FDR tried lots of thing that had the opposite of the intended effect.

Invoking the Trading with the Enemy Act of 1917, Roosevelt declared that "all banking transactions shall be suspended." Banks were permitted to reopen only after case-by-case inspection and approval by the government, a procedure that dragged on for months. This action heightened the public's sense of crisis and allowed him to ignore traditional restraints on the power of the central government.

In their understanding of the Depression, Roosevelt and his economic advisers had cause and effect reversed. They did not recognize that prices had fallen because of the Depression. They believed that the Depression prevailed because prices had fallen. The obvious remedy, then, was to raise prices, which they decided to do by creating artificial shortages. Hence arose a collection of crackpot policies designed to cure the Depression by cutting back on production. The scheme was so patently self-defeating that it's hard to believe anyone seriously believed it would work.

-- snip --

Yet after all this, the grand promise of an end to the suffering was never fulfilled. As the state sector drained the private sector, controlling it in alarming detail, the economy continued to wallow in depression. The combined impact of Herbert Hoover's and Roosevelt's interventions meant that the market was never allowed to correct itself. Far from having gotten us out of the Depression, FDR prolonged and deepened it, and brought unnecessary suffering to millions.

What will be the ultimate result of the interventions you propose? How are we examining the long-term effects of government intervention in the economy and cutting back the government where it is harmful to prosperity?

What about the acute depression of 1920[2]? Are we learning any lessons from that?

[1] https://mises.org/library/how-fdr-made-depression-worse

[2] https://mises.org/library/forgotten-depression-1920

This is the most detailed rebuke I have seen yet. Thank you for adding this to the conversation.

My weasley counterpoint is to say that FDR ultimately made more right moves than wrong, and he did not become, as he feared, "the last president".

Economic manipulation aside, his public works initiatives like the Tennessee valley authority gave people good work when there was none, and strengthened our national infrastructure for the economy to use as it grew. The common conclusion is that the only real cure for the Great Depression was World War II, but from a Mars-eye view, wasn't that essentially an enormous public works program?

> The common conclusion is that the only real cure for the Great Depression was World War II

Probably the common conclusion, but I think 1946-1948 congressional action had quite a bit to do with the the baby boom years. Its an interesting era to read up on.

http://economics-charts.com/gdp/gdp-1929-2004.html#table

The New Deal had already kickstarted the economy by the time WWII rolled around - although obviously WWII served as an even larger public works and employment program. (The government did, however, have wage and price controls for many decades after the Great Depression.)

As you can see in the chart, GDP had already doubled by 1941, returning to pre-Depression levels, with New Deal programs beginning in 1933. You can see that WWII again nearly doubled GDP from 1941 to 1945.

OK, but Europe was at war starting in 1939, and was trying to buy all kinds of stuff from the US. That's still WWII kickstarting the US economy, even though the US wasn't in the war yet.

The very same table I linked showed that story doesn't make sense. Look at the exports column. Nothing to write home about until after 1945. Definitely not an impact remotely comparable to the huge increase in government spending.

Look at an economic chart pre and post New Deal. Not only did FDR's policies help the US recover from the depression, it set the framework for the strongest economic growth of the US' history (pre-1930s growth was much slower than it has been post 1945).

Furthermore, your source is as partisan as they come. 'Austrian' economics exists pretty much only on the internet. Mainstream economics has progressed since 1930.

But post 1945, Europe had been bombed nearly to destruction, as had Japan. Even Russia had been devastated. The US was exporting to the whole world as everybody else tried to rebuild. You can't take 1945-1970 US economic growth as a measure of the quality of FDR's economic policies.

That's a common narrative, but it doesn't make sense when you look at the facts on the ground. And putting some thought into it, bombed-out economies are not good customers.

http://graphics8.nytimes.com/images/2012/11/19/opinion/11191...

As you can see, there was nothing more than a brief spike in the general upward trend in exports. The "Europe bought tons of stuff from us, fueling our economy" story is simply not true. Exports as a share of GDP briefly peaked at 8% and then rapidly returned to prewar levels by the early 1950s.

OK, but what about imports? I'd bet that the US didn't import much until 1970 or so - at least, not in the form of finished goods (and apart from imports from Canada).

The graph shows both. They track pretty closely until the 1980s, with the exception being that brief couple year export spike which was not matched by imports.

This reads like revisionist history. people had called the great depression of 1873 - 1896 the "Great Depression" yet here it was happening again just worse in 30 years. And in those 30 'good' years you had the first world war. Banks where and still are considered a major cause of economic downturns and even today we stress test banks on a regular basis.

Further, environmental devastation played a huge role in the Great Depression. https://en.wikipedia.org/wiki/Dust_Bowl

Why does everyone overlook that Roosevelt invoked the "Trading with the Enemy Act of 1917" in order to declare taxpayers (the people) to be enemies of the state that they must conduct trade with?

Why does everyone overlook the ramifications of this action?

In my opinion, the most frustrating part is that despite our hyperconnectedness, people still believe the propaganda that we're not in a depression or that our leaders got us out of the recession. Future economists will call the decade the "longest depression" not out of 20/20 hindsight, but simply because there will no longer be a need to make things seem rosy.

The terms "depression" and "recession" aren't just catch alls, they have actual definitions. And "we" (depending on the country, i'm assuming USA) are not in either.

depression/recession has now been redefined to mean 'economy is not how we want it to be'

No. They haven't been redefined. They are used that way by people who are ignorant of the definitions, careless, or trying to mislead.

Depends. If you look at the bottom 90% and their economy - we are in depression. Or extremely deep recession. The top 10% are both capturing the lion's share of new growth and siphoning wealth from the rest.

No. It doesn't depend. As he said, those words have actual definitions.

Yeah but USA is having two economies right now that are masked as one in statistics.

Put another way: the proposition is that the current definitions of those words might not be as useful as they once were because assumptions implicit in them have changed.

We already have a "long depression" in the history books:

https://en.wikipedia.org/wiki/Long_Depression

unemployment stayed low, very slight deflation persisted, and over the 30 years GDP per capita and GDP of the US grew considerably.

The propaganda is the statement that we are in a depression. We are NOT in a depression, nor a recession and have not been for several years. So, in fact, historians will not at all call this period a depression.

More likely, they will look back and wonder why so many people thought things were bad when, by all objective measurements, things were actually quite good. Low inflation, low commodities prices, decent wage growth, cheap housing, strong stock growth, a huge surplus of investment capital.

Does no one remember how negative everyone was at the height of the boom in 2007? We look back on that period as a time of incredible prosperity, but I remember it was basically the same as today: everyone complaining about everything.

But still too high unemployment. That's why people feel like it's still a recession.

> decent wage growth, cheap housing

These are not the case in California, where the opposite is unfortunately true.

If anything the story of communication has been one of ever greater methods to spread disinformation. Russians are swarmed on social media with paid shills for the government, and it makes it almost impossible to discern a genuine opinion or paid propaganda. I doubt there is a single person who is truly immune to misinformation, except perhaps the Beatles' "Fool on the Hill."

Fortifying myself against propaganda is one of my perpetual personal development projects... the internet is probably the most difficult information media for this task.

> people still believe the propaganda that we're not in a depression

Is there a source for this? Everyone I know believes that we still are in a depression, so it's probably just my social circles. I'd be interested to see the stats behind that.

The housing costs alone in high growth cities like San Francisco, Portland, Seattle, and so on should be enough to show that for many people, things are just fine. At least, for them. The longer things work out for you financially, the less of a problem you see around you. That's the difference between seeing a homeless person and thinking "how unfortunate that the vulnerable fall through the cracks in such a rich society and have to fend for themselves to survive" and "get a job, you bum!"

That's what is interesting to me: Most of the people I hear complain about it are in those cities, and they are doing just fine. But someone can be doing OK, and still believe the country is not.

What is the basis for everyone you know believing this? "Depression" has an objective definition that objectively doesn't currently hold. Do they not believe the reported numbers of the GDP, or are they using their own incorrect definition of the term?

Disclaimer: I am not an economist. Some of their discussions go well above my head, so it's possible I'm mis-understanding\mis-interpreting what they say. This is also why I'm curious as to a source.

The one thing I hear a lot is: The statistics we are using to measure this are BS. One example: We don't account for people who are under-employed, which is important to note in long-term depressions such as this one. The other things I typically hear are quite anecdotal: "I have family in Rnowheresville, $some_state, and they have no jobs out there!"

There's room for debate in the different numbers that are used to measure employment rates, and you could argue which measure is most important changes over time. But as I understand it, unemployment is a frequent result of an economic depression and not part of its definition, so whether or not there's a depression does not depend on what number is used. Of course, macro measurements don't put bread on the table and obviously jobs matter, and there not being opportunities available in a particular place/time sucks. I'm not denying that. I'm just advocating that people say what they mean and use the correct words to describe their observations.

The standard head-in-the-sand HN response to pointing out the disastrous LPR is "old people are retiring".

They don't bother looking into the reality that retirements are being delayed and most underemployment or nonparticipation is within the prime working age demographic.

Point this out, and the response is downvoting. HN emphatically does not want to accept the possibility that the economy is anything but amazing, for reasons I cannot understand.

I'm very willing to accept the idea that the economy's performance is uneven, with legitimate hardships in some areas/industries/demographics/etc. If what people observe is that there aren't any jobs near them, I wish they would say that, and not describe any economic trouble as a "depression".

Ironically, FDR's economic policy amounted to "we'll try every kind of beating until morale improves". Completely incoherent market interventions aren't good for markets.

https://en.wikipedia.org/wiki/Recession_of_1937–38

People that want to buy and sell will do that, unless someone is interferring with price or threatening profits.

The Federal Reserve expanded credit to give us the Roaring 20s stock market. Eventually, there HAD to be a correction. Instead of letting things correct, government interferred and made it worse. And then kept repeating that.

And we've done the same thing with the housing bubble.

It's not common sense to freely experiment with policy unless you're trying to sell a controversial progressive agenda (like, FDR in 1933). And I say this as a progressive who supports much of what he did. Applying sweeping changes is difficult and costly, and undoing them is even harder. For example, farm subsidies, which are generally unpopular, were put into place by FDR and just can't seem to go away.

Fundamental changes to our economic policy would probably last dozens or 100s of years, and could not easily be rolled back even if they hurt the economy.

FDR was dealing with a far worse situation than we are used to. People where starving and huge tent city's where showing up, that's a recipe for revolution. Don't forget the communist party was gaining significant momentum. So, waiting was no longer a realistic option.

>farm subsidies

The phrase 'Farm subsidies' doesn't quite do justice to what was put into place. The phrase sounds like just giving farmers money to grow stuff, which people might think is inefficient but probably not that big of a deal in the grand scheme of things. After all, these sorts of subsidies should increase supply and lower prices.

The reality is there's a tangled web of price controls, subsidies, import quotas, government purchases, etc. that in many cases have resulted in higher food prices, not lower food prices as simple subsidies might imply.

Take sugar, for instance. We have import quotas and tariffs on sugar resulting in higher sugar prices in the US than in the rest of the world despite having sugar growing regions in Mexico or the Caribbean on our doorstep. This is one of the reasons that we use high fructose corn syrup in everything instead of sugar. If we didn't have these laws, we'd have cheaper, more abundant sugar and probably less HFCS infused food.

Yeah, but we can grow corn and can't grow sugar. It a classic protectionist policy. Since HFCS and sugar are basically perfect substitutes, and the price of HFCS is so low it hardly seems to matter to consumers.

Its also a stupid policy.

> Yeah, but we can grow corn and can't grow sugar.

Both Florida and Hawaii would like a word with you. For that matter, Utah, Idaho, and Colorado (at least) used to grow large amounts of sugar beets. That ended in the 1960s or 1970s (I wasn't old enough to know if government policy changes were responsible).

Sugar is just a single example. Similar policies exist for milk, for instance.

To add insult to injury we also have export subsidies for milk, so not only do we pay the price of higher milk at home we also pay for world prices to be lower.

Ironically, it could be this very abundance of ideas which is so paralyzing. The more choices you have, the harder it is to choose.

That being said, I agree that this problem has its roots in corrupt politics.

I think it's more in the increasing centralization of power. The central power is bigger and thus harder to move by sheer inertia, more risk-averse, and also more able to simply implement whatever it likes regardless of what anybody else thinks because it is isolate from the trenches.

I think one of the top-3 issues facing the US right now is we need a lot more power devolved back to the states... not out of a "state's rights" sense of the argument, but out of a sheer engineering argument that trying to run a large and diverse country from one city is not working in practice, and there's no theoretical reason why it should work. Diversity and central control are, if perhaps not necessarily "incompatible" in the strictest sense of the term, still at great odds with each other; the central authority is forever tempted to homogenize diversity to make central control easier.

I doubt that shifting power to the states will solve many problems; after all it's the states that want to force Christianity on students, ban the teaching of science, deny healthcare to those most in need of it, lower standards for students so many HS grads are still illiterate, defund universities, and hand monopolies to oil, mineral, and telecom companies.

What on Earth do you think the Federal government is, exactly? By what magic is a government over ten million people to be distrusted, but by aggregating 325 million people's government all of which are also ruled over by these presumably nontrustworthy states, are magically transformed into bastions of sense and sensibility? Where's the line, exactly? It's all the same people!

Personally, I think it's just you can sort of imagine a state-sized government, but the Federal government is just inconceivably large so you end up modeling it by what you imagine it could conceivably be, rather than a model that resembles what it is. Other than the fact our Federal government is more interested in fighting Christianity than enforcing it, I could substantiate everything else you said for our Federal government, too. In fact, some of them are clearly more the responsibility of the Federal government right now.

No, some states actually do a good job at some things while other states completely fail at those things. When you mix the good states with the bad states and form a federal government, you reduce the badness in the bad states.

On top of that, the states horrifically manage what should be simple agencies such as the dmv.

As with my other reply... do you somehow imagine that all Federal agencies are wonderfully and wisely managed? By what mental gymnastics are you maintaining that belief? Have you ever been critical of Homeland Security? Ever thought our government was too responsive to concerns about terrorists? Ever thought they were responding to climate change incorrectly? Think Obamacare is not everything it should be?

Nobody really believes in the existence of this Federal government that you and nitrogen are hypothesizing for solely rhetorical reasons. It's just an argument picked up briefly to advocate for more government, then discarded in the next moment, because you're not willing to live by the rest of its implications (namely, that where you and the Federal government disagree, the Federal government must be correct; if you are not willing to say that clearly, this argument falls apart). It is not rational to compare real state governments to hypothetical federal governments.

The things that are broken can't be solved by the states. The patchwork of state laws would become a great hinderance.

The federal government is corrupt and needs to be reformed. We need campaign finance reform, and the ability to recall federally elected officials.

If diversity is real, then the things that are broken can't be solved by the central authority practically.

Is there not real diversity? Are there not legitimately different cultures in different parts of the country? Do these cultures not call for different solutions?

You really can't have both of a political culture of "celebrating diversity" and "one-size-fit-all from Washington DC solutions".

There's needs to be core set of laws which must remain at the federal level. States should be able to pass their own laws to suit diversity to a point. If they go beyond that point then the federal government needs to put things right.

That's why reform has to start at a local level. Solutions that work brilliantly in Massachusetts have no guarantee of succeeding in Mississippi. Whatever ends up working broadly should be adopted by the federal government. Perhaps they could provide a block grant to each of the states to experiment with reforms and study the effects.

Lots of things probably won't work very well at the state level, but might nationally. Consider what could happen if just a single state offered universal basic income, for instance.

That's a good point. I find it hard to imagine the system not straining after a while within a single state. Perhaps as a reach I could offer Massachusetts and its model health care system as an example. It's a high tax state with a great health care system right next to an extremely low tax state (New Hampshire). Many people who live in MA travel to NH to shop without sales tax, but very few who work in MA live in NH. So if MA instituted basic income, it might have the effect of bringing people to the state to live off the dole, but things are expensive there and some might find it easier to either work to have a higher standard of living than one with the basic dignities of food and shelter, or some people will commute from neighboring states.

UBI has been experimented with in many locations, from Canada to Namibia, and they often showed the same effect: some people dropped out of the labor force, others did so but to be homemakers, volunteers, and so on, and for many of the rest, their incomes improved because they had a reliable safety net and worked to increase their earnings so they could live better, as we all do.

We can consider till the cows come home, but people have put up with debate for too long. They need action.

"Consider what could happen if just a single state offered universal basic income, for instance."

Roughly the same thing as one country that offers universal basic income but doesn't control its borders, for the exact same reason?

Also, UBI isn't magic. If it would not work in a state individually, it does not become practical by banding 50 states it doesn't work in together. In fact, with the size of most US states, that's just generally true; it is not possible for something to not work in a state due to resource contraints but suddenly become possible when 50 insufficiently-resourced states band together.

I know I'm contradicting my previous point, but a federal program would inhibit tax-paying citizens and corporations from moving to the most convenient nearby location to do the same business but for cheap.

One example to look at would be the cities of Portland, Oregon, and Vancouver, Washington. A lot of people choose to live in Vancouver because Washington has no income tax and spend their time and money in Portland, which has no sales tax. So one could argue that the insufficient resources of a state are a function of the expected tax base exodus if it is cheaper to move and keep doing business than to stay and pay.

They also spend their time and money in Portland because Vancouver is a hole. And I used to live in St. Johns (AKA Tweakville) so I know whereof I speak.

Single nations and even single cities in the EU are adopting universal income as we speak. I'm sure they found a credible (though perhaps not not guaranteed) way to make it work. In any case, we can learn from their experience.

Entitlement spending is so high that it almost acts like a UBI.

http://thf_media.s3.amazonaws.com/infographics/2014/12/CP-Fe...

The lowest quintile of households have a negative effective tax rate.http://krusekronicle.typepad.com/kruse_kronicle/images/2008/...

A UBI without preconditions would just compound existing spending.

I think it is more that this time round, economics as a "school" is quite a bit more entrenched.

Keep in mind that during the great depression you had fascists in Italy and Germany, and communists in Russia.

Now the fascists have gone underground, and the communists have imploded.

All this gives the current mainstream economic thinking an air of correctness that it didn't have back then, by "virtue" of being the last system standing.

Sadly what is happening now is the rearranging of deckchairs on a sinking ship.

The big names of economics are arguing about where, if at all, the "frictions" are to be found in their models.

This while basically ignoring that the world right now is in the biggest private debt hole since the great depression, because they think that debt and savings are one and the same (and therefore sum to zero).

Maybe the answer is somewhere in between all these failed, xenophobic systems. It always frustrates me when I see good ideas shot down in the public discourse because they sound too much like Communism or Socialism. There is a middle ground that we can't ever get to as long as politics are so polarized.

Nordic social democracy? Sadly its being rapidly dismantled, much like Thatcher did to the UK.

Shouldn't the federal government's legislative reforms move at a snail's pace? I agree that the ideas you've mentioned are worth exploring, but what makes you think that they'll try the good ideas?

Also, why not start at the state or local level?

State and local levels are the only places where there can be any real experimental reform. Just look at Colorado and the other states that have legalized marijuana by referendum. Direct democracy isn't necessarily better than elected representation, but politicians are motivated by the necessity of power, and so whoever controls the politicians controls the political process. People shouldn't be left up to decide everything, but they should have the power to question the decisions of their representatives and put an issue which garners enough support to a popular vote.

And businesses in the now legal marijuana business in Colorado are having problems getting into the federalized banking system because marijuana is illegal federally and banking powers have been centralized.

Growing pains. Problems aside it does show that there is a sizable market and the health effects have not panned out to rot the state from the inside out, as drug scaremongers have sworn would happen for decades and decades.

The problem is that the situation is bad, but not so bad that it can't be made much worse. It's not enough to "try something" - you have to try something that at least will not hurt. If you don't know which way your thing will go, at an absolute minimum be willing and ready to bail on it very quickly if it works out badly.

How many times has the federal government tried something that didn't work and frankly admitted the failure?

Hoover started out doing austerity and raising taxes to balance budgets for the first couple of years, then turned around after that didn't work and started programs very similar to the new deal in his last year in office.

Times when the shame was not due to failure, but success, of their actions. Like the Japanese internment camps in WWII.

the country's been in perpetual bankruptcy since 1787. What did you expect to happen?

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