PragerU: Did FDR End The Great Depression?

Did FDR's New Deal improve an otherwise hopeless economy?

“President Franklin D. Roosevelt ended the Great Depression of the 1930s.” At least, that is what I was told. It is a common trope that the Left loves to tell in order to heap praise on the president who gave us the New Deal.

As Prager University points out, there is just one problem. That story is not a historical fact, but a part of leftist revisionism.

UCLA Economics Professor Lee Ohanian breaks down this myth and explains how Roosevelt’s policies did more to prolong the Great Depression than help it.

“Did President Franklin Roosevelt’s New Deal economic policies pull the country out of the Great Depression,” asks Ohanian. “My research clearly suggests that the answer, contrary to popular belief, is no. In fact, the New Deal made matters worse.”

FDR created the National Industrial Recovery Act, or NIRA, through his New Deal policy. The legislation artificially raised the wages of laborers and the prices of goods and services. At first, it made businesses happy since the government was essentially subsidizing their profits. Unfortunately, the plan backfired.

Ohanian explains, “But here’s what FDR missed: Artificially raising wages also raises labor costs. And when labor costs go up, business hires fewer workers or no workers at all, especially in a difficult economic environment. Meanwhile, artificially raising prices reduces demand for the obvious reason that people buy less of something when its price goes higher.”

He adds, “FDR based his New Deal policy largely on what happened during World War I, which had ended only 15 years earlier, in 1918. During that war, the government established planning boards to set wages and prices, and economic activity increased. If it worked during wartime, FDR reasoned, it should work during peacetime. But Roosevelt confused the economic activity that was actually the result of inflated war demands as being due to government planning.”

Watch the video below:

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