not because of the New Deal but due to an unremarkable bank reopening plan that Hoover’s outgoing Treasury Department had actually designedand stayed on to implement.By contrast, the real crisis was the de facto shutdown of world trade andthe chaos in the monetary system and foreign exchange markets. The lasthope for reversing this breakdown was the upcoming London EconomicConference in June, which Hoover had organized but for which FDR hadagain resolutely refused to cooperate in the planning and preparatory meetings.
NOT YOUR KRUGMAN’S NEW DEAL
FDR personally torpedoed the London Conference in early July 1933. In sodoing he struck down the international gold standard, left the reparationsissue to fester amid international recriminations, and did not even addressthe need to open the US market to foreign imports in order to revive inter-national trade. In short, Hoover landed a haymaker on the requisites forrecovery of the American export-dependent economy and FDR finishedthe job—no gold, no trade, no capital flows, and no cancellation of the de-structive war debts.There can be little doubt that these crucial matters did not even register with Franklin D. Roosevelt, because on matters of economics he was a re-lentless dilettante with an affinity for quixotic schemes and downrightquackery. This was especially evident when it came to his simplistic belief that the Great Depression was due to low prices, and that the key to restart-ing the nation’s economic engines was a Washington-initiated “reflation”of cotton, wheat, hog, and steel prices. What FDR did not have, however, was an affinity for anything that resem-bled full-strength Keynesian demand stimulus like the $800 billion plan thatLarry Summers, the chief economic advisor in the first years of the Obamaadministration (and secretary of the treasury under Bill Clinton), claimedto have channeled from FDR in February 2009. In fact, Roosevelt met withProfessor Keynes once and found the great economist’s pitch completely unintelligible, and in that reaction he had considerable company. As out-lined below, the only New Deal initiative that even remotely embodied Keynesian demand stimulus was the giant veterans’ bonus payment of 1936, and that was a political accident that FDR actually vetoed.That the New Deal had virtually nothing to do with modern Keynesiantheories of countercyclical demand management is crucial to understand-ing the nation’s present economic deformations. Contrary to the claims of unreconstructed Keynesians like ProfessorKrugman, the giant programsof fiscal stimulus and money printing after the September 2008 crisis had
NEW DEAL MYTHS OF RECOVERY|
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