New Deal stats

On Sunday I addressed the misconception that has taken hold of Herbert Hoover as some market fundamentalist. Now let's take a look at the New Deal itself with a couple of graphs from Megan McArdle:

Unemployment:

GDP:

These tell an interesting tale. In popular mythology FDR's New Deal ended the Great Depression, however we can see that in reality after 7 years of government spending and massive intervention (setting minimum prices on all sorts of things, for example, including the price of apples) that unemployment was around 17% and that GDP was about where it was 9 years prior.

The notion that the New Deal did not end -- and in fact likely prolonged -- the Great Depression has gained increasing currency in recent years, leaving more and more people to argue that it was actually government spending in World War II that lifted us out of the economic doldrums of the 1930s. This is, after all, the only possible example we have in history of us spending ourselves into prosperity.

But let's stop and think about that. During World War II we had just about the closest thing to full employment in the history of the country, that much is true. But remember, having a job is merely a means to an end. We go to work for the paycheck that allows us to buy goods, rarely for the work itself. During World War II there was little that one could spend their paycheck on. Food and consumers goods were strictly rationed. In the guns vs. butter trade-off we were heavy on guns and short on butter. It wasn't much fun. While everyone had a job, it's hard to say that we were very prosperous. Then, after the war, most of the fruit of the country's labor was various instruments of war that no longer served any purpose.

We really need to think twice before deciding whether such a path is the answer to our economic problems.