Paul Krugman Schools George Will On The Great Depression

On ABC's This Week, conservative pundit George Will took up the case against Franklin Roosevelt's New Deal, arguing that it sent confusing signals to capitalists (who apparently might otherwise have pursued lucrative deals in the 1930s market place) and turned a depression into the Great Depression.

Thankfully, Nobel laureate Paul Krugman was around to remind Will of some history -- that the economy improved after the New Deal, and that it was FDR's attempt to balance the budget in 1937 (a move favored now by many conservatives) that then cut into that progress.

Watch:

Comments

[topgunna]

Krugman is a smart guy, but George Will is right here.

The sum of all investment in the 1930s was negative. That is, the positive years don't make up for the negative years. Gross investment between 1930 and 1939 was positive, but not sufficient to make up for depreciation. It's not even close. Will is right--the investment climate in the 1930s was lousy.

To be honest, I don't think much of Krugman's ideas (the broken window fallacy is a real head-scratcher) but his thoughts on trade theory are pretty sharp. In this instance, however, the data doesn't support his claim.

[research]

It stopped an economic free fall! War or public works, it's government spending that ended the depression.

[legalclubs]

No that's not true. Both Krugman and Will agree that the depression effectively ended when WWII started. So all the programs and government expenditures by the Roosevelt administration during the 1930s didn't work -- we were still in a deep recession (renamed the Depression). It was only when the government buried itself in dept to fight a war and employ 80% of the men in America (into the Armed Services) that the Depression truely ended. In fact, by placing most of the existing work force on the government payroll (again the military) it actually created a worker shortage, which is why so many women started working in factories and other traditionally male professions. Would this work again? Probably not. It worked in our case because we backed it all with debt, debt which happened to be fairly easy to pay back because after WWII the entire world was in complete shambles and we were the only industrial country left with solid infastructure and industry base. For about 15 years we were selling everything to everyone and our economy boomed like crazy letting the government pay back the debt. Now this is not possible, additional debt is not likely to be paid down by some future miracle economy, it will simply crowd out other government spending.

[SeeDaddy]

Was the investment climate in the 30s lousy because consumers didn't have money to buy goods and services? Would a rational business person invest to produce more goods and services when consumers lack money to buy it? Tax cuts are meaningless to those with little or no income. Tax cuts don't cause businesses to invest in producing more when consumers have no money to buy.

To stimulate a crashing/crashed economy, money has to be put into the hands of consumers. When consumers have money, businesses invest. That is the lesson of the Great Depression. That's what Krugman was saying. Supply-side voodoonomics didn't work then, it won't work now.

You can't build a house from the top-down. You start with the foundation (consumers) and build up from there.

[darker]

You don't ever see corrupt guys like G. Will batting down his DESTRUCTIVE republican GREEDY NANNY STATE FOR THE RICH and corporate welfare queens.

Without FDR, America would be a REPUBLICAN SH*T HOLE BANANA REPUBLIC.

Thank God OBAMA WON, so we don't be a banana republic. BUT we must help
reign in the corrupt Congress and lobbyists in order to IMPROVE THINGS FOR working, middle class Americans.

[flossophy]

Thanks for elevating the debate... Typical fare on HuffPuff.

[UberReaganite]

So you say war ended the Great Depression? Wow, you are quite the Economics majors aren't you?
So why then have the Gulf War and the War on Terror done nothing but drive our nation into debt, inflate prices and divert revenue from projects that actually HELP Americans or contribute to America's infrastructure and economy?
Where is the War dividend you geniuses speak of?

WWII was not the cure for the Great Depression. Responsible lending, responsible investment, and government projects that resulted from it all contributed greatly to the end of the Depression but war didn't have a damn thing to do with a 18 year Depression that was already OVER and if it did then WHY pray tell hasn't America seen the economic dividends of Bush's ridculous spending on the war on Terror? Quite the opposite really now isnt it? It wasn't WWII you unimaginative sheep, it was the way the man EXECUTED the war that made the difference.

Mr. we could use a man like Franklin D. Roosevelt again...

[hiraeth3]

Maybe because FDR joined an international coalition and made America "the arsenal of democracy." The factories were running at full tilt after 1940 in large part due to overseas orders from our allies. Bush's wars are running us into the ground financially because he has decided to go it alone and give the finger to the rest of the world. Also--today's wars are far more specialized with low numbers of soldiers, aircraft, transporters, equipment etc. needed. Therefore there will never be the same widespread econmic benefits we saw in WWII when we fed and equipped 16 million of our own soldiers (and much of the rest of the world). Thoughts?

[Hoppy]

I think the republicans have pretty much done away with widespread economic benefits. Wealth has been pooling at the top since the roll out of trickle down. There are a few getting quite rich on weapons trade, but remember that the top 1% of Americans have more wealth than the bottom 95%.

[moveonliberalsorg]

Yes, the collapse of international trade, through tariffs, as Mr. Krugman says, was the aggravating factor that made the Crash a Depression. And it was the international trade from the purchase of weapons in WWII that got America out of the Depression by opening up international trade again.

You cannot say that the WWII did not stop the Great Depression while at the same time crediting Keynesian FDR policy for ending it becaue spending on the war spending is keynesian policy, the same as spending on domestic works projects.

It is time to stop pointing the finger of blame at everyone else because there is plenty of blame to go around. We need people to take responsibility and show leadership by providing solutions, rather that blaming everyone else. The stock market is falling 500 points a day, so the time for talk is over. it is time for action. Someone needs to step up and do something because the stock market has lost over half the value is took over 100 years to develop in the last few months. Looking backwards with hindsight is like driving forward by looking in the rear view mirror and trying to predict the road ahead of you. Foresight; not hindsight.

We need to consult the business people who saw this coming, rather than all the blowhard politicians on both sides who only care about winning the next election rather than doing what is in the best long-term interests of the country.

[legalclubs]

You confused quite a few concepts, however, in a sense you are right that the war didn't end the Depression. What WWII did was end the 25% unemployment rate by taking a huge portion of the workers and turning them into soldiers (i.e. government employees). The entire war was funded through a massive amount of debt (hence the big push for War Bonds) which was otherwise unsustainable outside of the "live or die" situation of WWII. Paying these bonds back would have been impossible, except that after the war the U.S. was the only power standing and we exported are butts off to Europe and Asia, both of which were in shambles.

So to be clear, the unemployment effect of the Great Depression was "solved" by WWII's enormous conversion of average American workers to soldiers, whereas the financial effect of teh Great Depression was solved because we had no world wide competition which allowed our industries to produce items for much of the world. FDR's policies (really a continuation of Hoover's public policies like Hoover Dam) were a mere band aide which obviously didn't work (if it did work the Depression wouldn't of lasted so long).

[UberReaganite]

FDR was not perfect but for a man suffering from POLIO who DIED serving this nation he managed to lead our nation out of the depression, win the war in Europe and most of the Pacific, create scoial services with the intent of HELPING the average american working person in their old age and create American infrastructure improvements that still provide water, power, jobs and facilitate commerce.

Tell me Republicans...WTF Do you have to show for leading America 20 of the past 28 years? HUGE DEBT, RECESSION, AND NOTHING WHATSOEVER in the way of actual accomplishments or projects that contribute anyhing of value to America. Just waste and debt with some of your corporate friends making huge profits at America's expense. That is why your leadership sucks and that is why you are no longer in charge....

Please feel free to post some facts on why Bush and Reagan were BETTER for America than FDR. You people make me laugh. Those idiots aren't worthy of kissing FDR's ass as far as presidential accomplishment in times of war and economic turmoil.

[DontJustFollow]

If you want to go back to the days of Jimmy Carter, you are either and idiot or too young to remember what he did to our country. The stadard of living is double what it was then and the poverty level is holf. More people are educated and the Cold War is over. Plus, a thriving economy allowed Al Gore to invent the internet and grow stinking rich of his global warming, ehr, climate change (global warming II) scam.

[legalclubs]

Ahh....it's not exactly fair to compare modern presidential politics to the greats of the past. The best comparison to FDR for the Republicans is Lincoln. Lincoln was that guy who freed the slaves and saved the union and all. You might of heard of him, if not check out the five dollar bill or penny.

The better comparison to Bush is Carter. When Carter left office unemployment was in the double digits (people couldn't find work), inflation was in the double digits (everything was getting more expensive and those with savings were effectively losing it), and gasoline was being rationed. All in all we are in a much better situation under Bush.

[UberReaganite]

Investment based on debt has a trash foundation and is simply a recession waiting to happen. During the 1920s banks were lending $9 for ever $1 they had in actual assets. When things got ugly they called in this irresponsible debt and created the crash. Today as then we have WAY too much personal debt, corporate debt and deregulation or lack of regulation in the financial arena. The U.S. government is the finest example of fiscal irresponsibility in the world.
In case all of you forgot the time of the most economic prosperity in America in the past 30 years was during the Clinton years when housing costs were low, interest rates were low, prices were low, Republicans in Congress were working to pay down the deficit, and the people invested Profit in the market, not Debt.
WWII started for America in 1941 (1939 behind the scenes) and the Depression in America was over by 1938 so the War did not end the Great Depression, it simply drove a stake through its heart.
Talk all the crap you want about FDR but those public works projects like the Hoover Dam and TVA are STILL contributing jobs and useful infrastructure resources to America TO THIS DAY and have many times over paid for themselves.

[Mannock]

Well THANK YOU! I am fed up with this Republican revisionism stating that America was in the stir up to the Pearl Harbour attack. Essentially, they are saying that the real heroes that ended the Depression were Tojo and Hitler. Effectively, the Depression did end in 1938, and 1937 was a battle year that saw the recovery. At that time the government wasn't jockeying ideas back and forth, they had a true and reliable set of plans. The neo-cons and (god love them) the Rand/Strau­ss-influen­ced libertarians poke at the failure of Keynes in the Depression. His influence was at first marginal to the Roosevelt administration until 1936, when he published The General Theory of Employment, Interest, and Money. Then you see the change. Thank you, Uber! Your words are music to mine ears.

[PAMPAS]

George Will is an effete windbag who lives on the "royalties" derived from his one Pulitzer. He has nothing new to say, but he is a dutiful water boy for the conservative right.

If he can get the word "chimera" into any talking point or written musing, he seems to be so self-satisfied.

I have this advice for George Will -- Tom Friedman. That is a talent who writes lucid, understandable yet intellectual pieces which give welcomed advice and valid insight.

Will needs to take a long sabbatical during which he challenges himself to construct a new philosophy instead of continuing to view politics and life through the broken prism of Buckley conservatism.

[tao53nyc]

Christ. George Will hasn't had an original thought since 1980. But if you want to debate him on BASEBALL, you haven't got a chance.

Krugman is a Keynesian who now has a heightened sense of his own grandeur since one of the world's most socialist countries gave him a Nobel. He certainly would not have "schooled" Ron Paul on this topic. Ron would have mopped the floor with him - like he does Ben Bernanke about once a month.

[truthmachine]

I love it -- denigrate someone based on the economic system of the nation that awards the world's top academic prizes. Can you say "guilt by association" and "fallacy of irrelevance"?

I don't know whether Krugman would have mopped the floor with Ron Paul over the history of the Great Depression, but it's quite irrelevant, as Ron Paul wasn't mentioned in the article you're commenting on.

[scottarino]

No. Ron Paul would have used the government's taxpayer-bought mop, sold it cheap to an investor, then charged the public for the mopping procedure.

[Mannock]

That simplistic dolt Ron Paul? Paul Krugman may lose a debate with Ron Paul simply because it is impossible to successfully argue with an idiot.

[MagicalPossibilities]

Ah sheesh. Need more coffee.... :-O
I meant Krugman for Sec. Treasury!
George Will for dogcatcher...

[GotRights]

Will ought to write a baseball column for Sports Illustrated instead of inflicting his pomposity on the readers of real news.

[MagicalPossibilities]

George Will for Sec. Treasury!!!

[research]

The Great Depression was ended by government spending.

Are you seriously going to argue that War is not just government spending?

So which do you prefer:

Peaceful infrastructure and public works or

war?

[iranter]

the key in this guy argument was that it took 8 years (1929 bust to boom 1937 and then bust again we he tried to balance the budget -then Bush was smart by spending more than he had). And only after entry into the "employment program WW2" did things really get better.

so, getting the economy back on feet takes:

1. spend more money than you have
2. do #1 for many years
3. never balance your budget
4. get into a world war
5. Optional: get elected 4 times.

[rayy]

Actually, this is a ridiculous oversimpli­fication--­the budget only needs to be balance over a period of several years. When the economy is good (as is was from 2003 to 2007), you should be saving money, i.e. running a surplus. Then when the economy goes bad, you can run a deficit, and indeed need to in order to stimulate the economy.

Bush has squandered resources, running deficits by means of his tax cuts, during good times. He is the grasshopper of the fable, and now, unfortunately we are paying for it. He is paying too, in terms of his popularity, but the bulk of the burden falls on the people.

[DuganS1]

There is some truth to what George Will was saying. For example, FDR (after becoming President) went on a big crusade against utility companies. Those companies stopped investing as a result, especially those put into competition by the non-profit TVA. FDR also passed the pro-union Wagner Act, which resulted in a large number of strikes, and companies with striking workers don't invest. FDR also put through the undistributed profits tax which resulted in reduced investment for smaller businesses.

[Mannock]

Yeah, that damned TVA. Caused so much misery. It has NEVER been useful. Yeah, and robots are stealing my luggage.

[ENOS]

If every auto-worker was laid off in America, all the 401k investments would stop, and without the investments the stocks would plumit.

[copestir]

You don't have to be an economic maven to figure out if you are unemployeed or underemployeed you are not going to purchase a car. Secondly, if you can afford to purchase a car ,you can not afford the gas to get to work becuse the only cars available are bloated, oversized SUVs. Bailout? Hum. Let us focus on gettng America working, and making cars we can really use. I find it interesting that no Americian auto maker makes anything close to the Smart car. Come on guys. Auto makers have to understand they blew it. And now we all suffer because of it.

[GenXer]

Not all true and the smart car is really a small niche in the market. GM has the most vehicles that get over 30 MPG of ANY automaker selling in the U.S. The US auto industry got caught in the perfect storm, transitioning from the SUV era, high fuel cost, job losses not seen in 50+ years, and a great reduction in available financing to the people who buy cars. Even if they had smart cars out, the other problems still would have nailed them. There is plenty of blame and problems to go around.
George Will's revised history is hogwash.

[scottarino]

The trouble with all of GM's 30+mpg cars is that none come close to the quality of Japanese designs. Just more typical GM disposables. Oh, but don't forget to blame all their woes all on the UAW.

[DuganS1]

The domestic auto makers manufacturing plenty of fuel efficient vehicles. But that is not the problem. The problem is they make little money selling cars because of high legacy costs.

[iranter]

i guess you never heard of credit?

[truthmachine]

I guess you've been living in a hole and never heard of "credit crunch".

[brandon102]

Why have a Nobel-winning expert on the show and then let an amorphous gassbag like George Will talk over them? George should have said "You know, I was completely wrong but that's because under my tweed jackets I'm actually stoopid and don't have a clue." That would have been nice.

I haven't a clue what anyone sees in George Will, actually; it seems his last opinion was formed somewhere in the 1940's & now he just keeps jamming each decade's developments into his antiquated framework.

He may be an excellent substitute for Andy Rooney, but an attitude of superiority and erudition does not make up for basic intelligence and analytical skills. It's time for George & all the other Reagan-worshipers to see their time has passed, and gracefully exit the stage.

[Torita]

Amen.

[Mariposa27]

I saw that on Sunday, and I was thinking thank heavens someone finally put George in his place. He rambles off like this every week--and no one checks him.

I agree with you Brandon102. My only issue is that George will is not "stoopid"; his problem is what most ideologues suffer from, too much partisanship and prejudice. George Will and most "pundits" on TV reshape history to tell the stories they want to tell, with all the prejudice built in, which is why it's important to have people who are not being paid by a particular party, but are studying various subjects for the sake of the subject not the party.

All we have on the "news" is prejudices passing for information and hosts sit around "debating" as if it were the truth.