The New Deal made Things Worse... Much Worse | Politically Incorrect Guide to the Great Depression

Summary

The discussion critiques FDR's New Deal policies, particularly the Agricultural Adjustment Act and the National Industrial Recovery Act. It highlights the paradox of paying farmers to destroy crops to raise prices while neglecting food distribution to the needy. The National Industrial Recovery Act is portrayed as favoring large businesses through price collusion, stifling competition and harming smaller enterprises. Ultimately, the conversation argues that government interventions may have exacerbated economic issues by creating uncertainty and hindering private investment, advocating for a free market approach instead.

Takeaways

• 😀 The Agricultural Adjustment Act (AAA) aimed to stabilize agricultural prices by paying farmers to reduce crop production.
• 📉 FDR's policy of destroying crops, such as slaughtering pigs and eliminating cotton, was intended to raise prices, but raised ethical concerns.
• 🤔 There was a contradiction in FDR's approach: while attempting to assist farmers, the policies also harmed consumers by increasing food prices.
• 🛑 The National Industrial Recovery Act (NIRA) restricted competition by allowing industries to set codes that controlled prices and wages.
• 🏢 Larger businesses benefited from NIRA, as smaller companies struggled to compete without the ability to lower prices.
• 💰 The idea behind FDR's policies was to mitigate the damage of falling prices during the Great Depression, but it may not have been necessary historically.
• 📊 Many economists argue that the New Deal programs displaced private sector jobs instead of creating new employment opportunities.
• 🛠️ The Works Progress Administration (WPA) may have negatively impacted the private sector by drawing resources away from potential investments.
• ⚖️ FDR's New Deal programs reflected a belief that experts could better allocate resources than individuals or the free market could.
• 🚫 The government’s involvement in the economy led to uncertainty, causing businesses to hold back investments and prolonging economic recovery.

Q & A

What was the main issue with food prices during the Great Depression according to FDR's policies?

FDR's policies aimed to raise food prices to help farmers, who suffered when prices fell. This led to the Agricultural Adjustment Act, which paid farmers to reduce production, resulting in the destruction of crops rather than providing food to those in need.

How did the Agricultural Adjustment Act affect food supply and prices?

The Agricultural Adjustment Act reduced the food supply to raise prices, as farmers were paid to destroy crops and livestock. This caused a decrease in available food for consumers, despite the intention to support farmers financially.

What actions did the government take to implement the Agricultural Adjustment Act?

The government paid farmers to cut back on production, including slaughtering six million pigs and destroying ten million acres of cotton to remove these goods from the market and increase prices.

What was the broader implication of the New Deal programs on the economy?

The New Deal programs aimed to stabilize the economy but often harmed various groups, leading to higher prices for consumers and negative effects on the private sector.

How did the National Industrial Recovery Act impact competition among businesses?

The National Industrial Recovery Act allowed industries to establish price and wage codes, which made it difficult for smaller businesses to compete against larger firms, as they could not lower prices to attract customers.

What was the concern regarding big business monopolies during the New Deal era?

There was a fear that big business monopolies could collude to raise prices at the expense of consumers. Ironically, the New Deal laws that aimed to prevent this allowed such collusion to be codified, contradicting the initial concerns.

What did critics argue about the effectiveness of the Works Progress Administration (WPA)?

Critics, including economists John Joseph Wallis and Daniel Benjamin, argued that WPA jobs often displaced existing private sector jobs or dried up capital needed for private investment, ultimately harming the economy.

How did the federal government's actions influence private sector investment during the Great Depression?

The uncertainty surrounding government policies led businesses to hold off on investment, as they were wary of unpredictable federal interventions, resulting in prolonged economic stagnation.

What was a fundamental flaw of the New Deal programs according to the discussion?

A fundamental flaw was the assumption that a group of experts could allocate resources better than individuals and businesses in the market, which often led to inefficient outcomes.

What overarching principle guided the New Deal programs, and how did it affect various groups?

The New Deal programs were guided by the principle of providing support to specific groups, but this often resulted in unintended harm to others, showcasing a conflict in addressing the needs of the entire economy.