For the editors of the Wall Street Journal, the spectacle of a major government spending program aimed at combating a severe recession is evidently a nightmare beyond belief, complete with a popular interventionist-leaning president, Democratic majorities in both the Senate and the House, and, scariest of all, a legion of zombie back-from-the-dead Keynesian economist holy warriors. How else to explain the paper's increasingly shrill declarations that the New Deal absolutely, positively did not work?
The latest salvo came Monday morning in a piece by two economists, Harold L. Cole and Lee. E. Ohanian: "How Government Prolonged the Depression."
Defenders of the New Deal will find much to argue with in Cole and Ohanion's account, but for simplicity's sake, I am going to zero in on just one point -- the impact of the New Deal on unemployment.
Cole and Ohanian:
The goal of the New Deal was to get Americans back to work. But the New Deal didn't restore employment. In fact, there was even less work on average during the New Deal than before FDR took office.
How can one make this claim? Unemployment reached 25 percent in the Great Depression, and fell steadily until World War II (although there were some bumps up along the way). Ah, but the revisionist position is that unemployment did not fall as much as it should have. And this argument is based on an interesting interpretation of the available data. As Amity Shlaes, currently the premier anti-New Deal historical revisionist writing for a popular audience, explained proudly in her own Wall Street Journal opinion piece in November, "The Krugman Recipe for Depression," a necessary step is to not count as employed those people in "temporary jobs in emergency programs."
That means, everyone who got a job during the Great Depression via the Works Progress Administration (WPA) or Civilian Conservation Corps (CCC), or any other of Roosevelt's popular New Deal workfare programs, doesn't get counted as employed in the statistics used by Cole, Ohanian and Shlaes.
Let us reflect, for a moment, on what the men and women employed by those programs achieved (aside from earning cash to buy food and pay for shelter, of course). In his paper, "Time for a New, New Deal," Marshall Auerback (pointed to by economist James Galbraith) summarizes:
The government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York's Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown.
It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country's entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.
In other words, millions of men and women earned a living wage and self-respect and contributed mightily to the national infrastructure. But, according to the statistics as interpreted on the Wall Street Journal editorial page, they were unemployed.
Way back in 1976, economist Michael Darby exposed the absurdity of not counting WPA workers as "employed" in his paper "Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941." More than 30 years ago, Darby observed that correctly counting those 3 and a half million people as employed workers effectively debunked "the 'un-fact' that recovery was extremely slow from 1934 through 1941. From 1933 to 1936, the corrected unemployment rate fell by nearly 5 percentage points per year..."
Shlaes dismisses Darby's reappraisal of Great Depression unemployment statistics by arguing that "to count a short-term, make-work project as a real job was to mask the anxiety of one who really didn't have regular work with long-term prospects."
Of course, some would argue that "masking the anxiety" of workers who did not know how they were going to feed their children or put a roof over their heads is precisely the job of government in times of great economic turmoil. And that, really, is where the whole project of New Deal revisionism breaks down.
The bottom line conservative position on the New Deal is that, theoretically speaking, the economy would have returned to "normal" more quickly if FDR had refrained from interfering with the workings of the free market through his vast array of interventionist programs. Sadly for them, we never got a chance to find out, because the situation in 1933, when Roosevelt took office, demanded government action. Twenty-five percent of the nation was unemployed. Human suffering was immense. If the market had been left to work its problems out all by itself, further suffering in the near term would have been unimaginable. And not just unimaginable -- but also politically unacceptable.
If the New Deal actually extended the Great Depression, we might wonder, why was Roosevelt reelected three times? One explanation would be that the general public is an idiot, and I must confess, I've leaned toward that point of view myself after viewing the aftermath of Election Day in the U.S. on a number of occasions over the last three decades. But another explanation could be that a majority of voters experienced material improvements in the quality of their lives as a result of New Deal programs. This is a point of enduring frustration to conservatives, and they've expended vast effort over the years in their attempt to rewrite history and convince us that what our grandparents knew was wrong -- to the point that they've even tried to tell us that the people who built the fantastic Art Deco structures at the high school my daughter is currently attending were "unemployed."
I do not think those workers would have agreed.
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