People want another New Deal?

Thanks to mises.org for posting a nice, short article about how some are now calling for a new New Deal. Why would we want another round of government agencies that interfere in the market with the inevitable result that we will all be less prosperous? The New Deal was a disaster and prolonged the Great Depression. Its long list of new agencies, bureaus, departments, and commissions spent billions while Americans were waiting on bread lines. The AAA, or Agricultural Adjustment Administration, paid farmers to plow under their crops and murder their livestock!

Please, pundits, learn some history and economics. Stop calling for more government interference in the economy and violations of our property rights. Isn't 70 years of Keynesian economics enough?

The Great Depression

With a severe recession looming, there is occasional talk about the Great Depression of the 1930's. Gene Smiley has written a short book, Rethinking the Great Depression, that is a good introduction. It's not as good as Murray Rothbard's America's Great Depression, but it's a good start and is somewhat easier to follow for the neophyte to history and economics.

In the preface, Smiley correctly sums up what every American should be taught but unfortunately are not: "Government efforts to control and direct the gold standard for national purposes brought on the depression. Once it began, government actions, particularly in the United States, caused it to be much longer and much more severe. When the contraction finally ended, government interference in U.S. markets made the recovery unbearably slow and in 1937-1938 brought on a 'depression within a depression.' The 1930's economic crisis is tragic testimony to government interference in market economies."

Dead on point. Unfortunately, an overwhelming majority of history, government, and economics professors, most of whom have always been in academia and have never held a job in the private sector, blame the "free market" and teach students that the government saved the day. They then teach that government is something we need more of and that surrendering your property (hard-earned income) is something to be applauded.

The only thing we learn from history is that we don't learn from history

History can be a fantastic guide for the future, and it seems to work pretty well when it comes to macroeconomic policy. But why doesn't the government, especially the "independent" Federal Reserve, learn from its mistakes? Right now they are continuing to "prime the pump" with liquidity to stave off recession. As you can see by this quote from an article by historian/economist Thomas DiLorenzo, the government tried the same thing during the Great Depression to no avail.

"But as Murray Rothbard showed in America’s Great Depression, it was the easy money policies of the early and mid-1920s that created all the malinvestment that was the trigger for the Great Depression. The only wise thing to have done was to allow the liquidation of hundreds of overcapitalized businesses to occur. Instead, the Fed increased the monetary base by 100 percent in five years, causing more of the same overcapitalization problems that were the source of the problem in the first place."

Isn't it the definition of insanity when you do the same thing over and over again and keep getting the same results, but expecting different results?

The article by DiLorenzo appeared in The Free Market, a publication of The Mises Institute, November, 2004. Full article here.