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

[AlexP1]

George Will is a make up "lie" and demand it is true republican drone
Paul Krugman is a tell the whole story and ridicule the republican lies...

Another reason why...the old republicans need to fade away.....

[ultimattfrisbee]

So if you want to discuss abstract economic theory and whether the economy was on an upturn in 1940 or not, and whether it had to do with FDR's programs or the war in Europe, feel free, but don't think about those numbers in a vacuum. For people whose luxuries depend on the economy, it's a matter of discussion. For people whose necessities depend on the economy, it's a matter of life and death, and they don't consider themselves statistics or their children necessary sacrifices to the efficiency of the free market system, no matter how much you want them to.

You may dismiss them; presidents and parties do so at their peril.

[ultimattfrisbee]

Which brings up another point conservative critics of FDR rarely mention when they talk in dry economic terms. "Roses" is right in saying that the Great Depression was a human event, and whether or not FDR's New Deal ended the economic slump is only half the point. Many fiscal conservatives, but by no means all, have never known desperation. They assume that hungry, angry, frightened people will just go off and be poor somewhere, maybe starve or at least go stand in a black and white photograph looking forlorn, but that's not what they do. The American Communist Party was increasingly popular in the 1930s, and for understandable reasons (though not reasons HUAC and Joe McCarthy found justifiable in the '50s). The possibility of violence was also quite real. In several automotive worker strikes in Dearborn and Flint, things did get quite violent, and it could have become widespread. When people have children to feed they'll do whatever they need to, and faced with a government they perceived as doing nothing or, worse yet, siding with investors and employers they believed had created their predicament, the fear of violence, radicalism and even revolution was widespread and probably with good reason. (continued below again...)

[ultimattfrisbee]

Wow. Where to start. Haven't read all 19 pages so apolgies to those I repeat.

First, the contention that while the rest of the world had a depression we had a GREAT depression is staggeringly ignorant. Any history student who has never seen or heard of the German wheeling a barrowfull of deutschmarks to buy a loaf of bread doesn't have much company. The depression was awful here; in much of Europe, including Germany, it was devastating, and not helped by the Treaty of Versailles. The German depression helped bring Hitler to power (continued below)...

[zerotimes10]

Yes "ultimattfrisbee", it sowed the seeds of fascism here and abroad. Read "All The Kings Men." The story of Huey "Kingfish" Long who Roosevelt feared because of his charm and demagoguery. Conspiratists even believe that Roosevelt had him killed. I voted for Obama and worked on his campaign for over a year but I realize that he is just one man. A great man, but no man should be King. " ... by and for the people shall not perish."

[ObjectiveRealist]

After the headline video, a menu of 15 related videos becomes available. In the second of those, George Will whines about the $7500 tax incentives to purchasers of the Chevy Volt. Why is "energy independence" only a "national security concern" to this person when he can use it for rhetorical support of petroleum drilling?

http://voxverax.blogspot.com/2008/02/george-will-on-alternative-fuels-right.html

[vedder110]

Although I don't really know George Will's views and probably don't agree with them, the mere mention of the Chevy Volt makes me want to point out that nothing demonstrates the catastrophe of GM better than this car. When demonstrated for Frontline, the car could not make it up a hill and stalled out. Then the GM liaison told PBS that they could speed up the video to make the Volt look like it was a good model.

http://www.youtube.com/watch?v=QPlwxeAGsKM

[truthseeker7]

I also like Paul Krugman and my first comment is this - Even though I don't often agree with him I think George Will is a pretty bright guy. The fact that he is so off-the-mark on the specifics of the Great Depression and the New Deal is really scary and goes to show how misguided people are.

I didn't like the fact that Krugman dropped the W-bomb (WW II) as his final word on what got us out of the doldrums. What if there had not been a WW II and our country used the New Deal cash infusion solely to build infrastructure projects, get people working, making "money" and subsequently spending money. Wouldn't internal (inside the US) demand for goods have prompted investors to react and build factories? And then good old american innovation could have gone to work and created goods and technologies that we could export around the world, further spurring economic growth?

Instead we had a major war, we started our wonderful journey into debt transferring great amounts of wealth from the masses to the international banking community who funded the war - with interest!

Read "Web of Debt" by Ellen Hodgson Brown people and get educated.

[ObjectiveRealist]

Absolutely correct.

[
What if there had not been a WW II and our country used the New Deal cash infusion solely to build infrastructure projects, get people working, making "money" and subsequently spending money. Wouldn't internal (inside the US) demand for goods have prompted investors to react and build factories? And then good old american innovation could have gone to work and created goods and technologies that we could export around the world, further spurring economic growth?
]

The amazing boom in technology, especially auto manufacturing, were concentrated temporally around the end of World War 2 only because that war delayed the births of the Boomers. Had the Second World War not occurred, those births and the consumption boom that necessarily accompanied their upbringing would have been more temporally diffuse. As a result, we would have seen less speculative investment due to narrower marginal profits in every industry. Tighter competition, according to laissez-faire economic theory that George F. Will pretends to espouse, would have given us products with better long-term viability than what Detroit now offers us.

His grade in Free Economics 101: F

Will consistently argues for the military-industrial complex, and growing government partnership with it. Naming his actual political philosophy is left as an exercise for the reader.

[lechnet]

The way I heard it he dropped the PWP (Public Works Project) bomb, suggesting that a public works project of the magnitude of WWII would have done the trick. It would appear that FDR's faith in Keynesian economics was insufficient for the task at hand. If the size of the national debt scared him in 1937, it is unlikely that he would have had the political will to increase it enough to induce economic recovery.

Ironically, it was Reagan who showed us the power of breathtaking deficit spending as economic stimulus. Unfortunately, the nattering nabobs have successfully attributed the beneficial effects to the other side of huge deficits: low taxes.

[politicogal2]

George Will is annoying and smug.

VABOOMER BLOG
Today's post: Consistent Prosperity ~ What NOT to Forget

[LoRiseAntlers]

Just another winger fabricating history.Th­ey do it all the time.It's part and parcel of their existence,which is,apparently,a non-stop litany of lie.

[Flick08]

George Will and Bill Kristol are consistently wrong--I'm amazed that they're still employable. If any of us Average Joes and Janes were wrong as frequently as these two we'd be out on our ear in a NY minute. They're throw backs to an era in which looking and sounding the part was much more important than actually being right because you could always tamp down any dissent by the sheer force of your patrician bearing.

[emcd]

Will was P*SSED! Did you see him tapping ALL his fingers on the table after Krugman contradicted him?

Krugman is the best!

[Sarahmay57]

I LOVE Paul Krugman...­not only is he brilliant, he is very good at explaining things so the layman can understand. Sure hope Obama is talking to him.

[HoraceOvidson]

And I wish Will would stick to writing about the Cubs, and stay away from history.

[jamespatrick101]

Tom Cooley, Dean of the NYC Stern School of Business agreed in an Oct. 13 Newsweek web exclusive. Cooley said, “[M]ost economists and economic historians now realize that FDR’s experimentation and interference with markets probably prolonged the depression considerab­ly.”

Apparently, unlike the rest of his colleagues, Krugman is one of the few failing to look at the evidence.

And, it appears, he's off his rocker. In his article 'When Consumers Capitulate,' he blames you and me for potentially furthering the recession, possibly into a depression. Why? America would be to blame for cutting spending and saving. We need to spend not save, or else it's all our fault? Huh? So Americans, who are already scrimping and trying to get along (let alone, not get laid off) are not supposed to save but instead spend what little money they have. How can we afford to do this? Through Government assistance of course. And where does the government get its money, Krugman? Oh wait, that's right, the taxpayers. So the taxpayers are supposed to support government programs to stimulate the economy with their future earnings so businesses can continue to make profits at our expense.

Krugman, you have no common sense. It takes time for industries to realign to the needs of the consumers. Let it happen.

Given the chance, Krugman would repeat all of the mistakes we made after the crash of 1929.

Get educated Krugman. Start here. http://mises.org/story/3194

[abbiehoff]

So, I guess you have a Nobel prize in economics.
Krugman does (in case you didn't know).

[jamespatrick101]

Is that your, um, argument? BTW, Krugman won his Nobel prize primarily for his work on New Trade Theory from 1979 (in case you didn't know). Yes, that's almost 30 years ago. All of which is besides the point.

I find it odd that you, and everyone that has a problem with alternate ideas, either doesn't know why they do or can't explain why. I'm just sharing an opposing view. I'm ashamed for you, in regards to just how narrow minded you are. In particular, when confronted with what appears to be a very exhaustive study by two very well respected UCLA economists in academia. Guess I expected better.

Why don't you try and argue against the research produced by the two UCLA economists (practising economists by the way) who just finished a 4 year study on the topic, instead of attacking me? Isn't that a Rove tactic - attack the person, not the topic?

Perhaps you should post when you have a real opinion.

[cezar63]

Bitchslap.

[DougNTexas]

Learn a little history first. It was Hoover who did nothing, thats jack nothing for three years while the Country completely tanked. FDR got the Country headed in the right direction and gave it hope again. It took a while to reverse what had been done to the economy. Thank God for FDR. We need another one now. The damn Republicans have always been about greed first.

[vedder110]

I must respectively point out that you are completely wrong. Hoover orchestrated a bailout plan just like our sitting president. You must remember that before the Great Depression the Democrats were the party of "fiscal conservatism" (See this 1936 political cartoon - http://upload.wikimedia.org/wikipedia/en/a/ab/Gop-plank.JPG ). As Regan famously said "I did not leave the Democratic Party, the Democratic Party left me"

The GOP has always been, (except for the small group of anti-New Deal coalition like Robert Taft and Barry Goldwater from the 1930s-1980s), a mercantilist, protectionist party of business favoritism and big government.

----

"We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action...

Nothing has ever been devised in our history which has done more for . . . “the common run of men and women.” Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom. . . . We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destructio­n."

- Herbert Hoover, 1932, Presidential campaign speech

[vedder110]

"Common run of men and women sounds" an awful lot like Main Street vs. Wall Street doesn't it? Also FDR ran on a "New Deal" platform of balanced budgets and reduced spending. He accused Herbert Hoover of "reckless and extravagant spending." He also criticized the Hoover's "two billion dollar fund put at the disposal of the big banks, the railroads and the corporations of the Nation". FDR's innovation was promising assistance to the common man instead of bailing out big corporations.

Hoover did far from nothing. Hoover intervened in the market and made it worse. The only President who has done more damage to the economy is probably President George W. Bush.

[jamespatrick101]

Really, you don't think Hoover did anything? Perhaps YOU might want to open a history text. Hoover started tinkering with the economy. FDR just hit the gas.

Hoover repealed Coolidge's tax cuts, created the RFC and also enacted the Smoot-Hawley Act, which, by almost all accounts, was disastrous. Smoot-Hawley raised protectionist walls just when we needed free trade. It essentially boxed us in, in our own misery, and shut out our European allies when they needed us the most. He also summoned influential business leaders to Washington to persuade them not to lower wages (which would have been a natural next step in a downturn), but instead keep them artificially high. This was done in the hopes that it would encourage spending and confidence. But all it did was make sure businesses couldn't afford the wages of their workers and so they had to lay people off -- leading to massive unemployment. I'm not saying this wasn't going to happen, but the actions of the Hoover was like throwing fuel on a fire. It got out of control.

[bellier20]

>>> Why? America would be to blame for cutting spending and saving. We need to spend not save, or else it's all our fault? Huh?

Krugman's not "blaming," he's making a simple observation of economic fact, ie that "not-spending" is the primary cause of deflation, which if prolonged leads to recession. Why do people "not-spend?" Well, if they're afraid of their personal financial futures they'll hold onto their money; and if they think prices are coming down and will come down even farther, they'll wait it out, another form of "not-spend­ing."

Hell, it was GW Bush right after 9/11 who advised Americans to go out shopping to stave off recession. Not one of our great thinkers, I agree, but the people who told him to say that understood that spending drives the economy, which drives the credit market, which drives payroll which in turn drives more spending.

Get it now?

>>>>
Ha, teh funny. When you get your economics position at Princeton and a Nobel in economics, you let us know, will you?

[jamespatrick101]

Just like everyone else -- attack me, not the information in the study. Guess you're so smart you can simply dismiss a four year study by two well-respected UCLA economists out of hand because it happens to differ from your POV.

Krugman's theory relies on saving in a good economy, in order to keep spending when it's down, thus stimulating the economy. For this to work, you need money in the bank you can spend while the economy dips. Do you? Maybe you do. Maybe I do. If so, great for us. But the average American saves, according to latest figures, less than 5% of earnings annually.

I don't want to support those who have been irresponsible. Nor should I be penalized for being fiscally prudent.

While I don't question it's a workable theory -- I never argued, as a theory, it wasn't. The problem I have with it, is simply that it relies on government and Americans doing something they'd never be willing to accept: Living within their means (i.e. not living on credit and/or with debt) in order to save up to spend when things turn.

So considering that neither the government or American people seem capable of doing that, I question how workable the theory is in practice. I'm not confident. It's not a controlled experiment after all - you can't control all the variables. Consumer behavior being the biggest, most obvious wild card.

[cobobs]

George Will: such an ideologue. I deologues have a hard time creeping out of their crumpled cognitive bunkers.

[Chironomid]

George Will has some very impressive credentials, which some posters have impugned here. I encourage you to Google "George Will bio" just to be educated on who you're criticizing.

That said, there's a world of difference in being a lifelong journalist and a lifelong economist. As someone with advanced credentials in my own field, I can tell you that there's no way in heck you can be a great journalist (which Will is, whether you agree or not) and a great economist at the same time (which Krugman clearly is, agree or not).

Nod has to go to Krugman. If he was debating an equally qualified conservative economist, you would be compelled to look at it in a different light.

[cdj]

no, i wouldn't be compelled to look at it in a different light.

right-wing and libertarian economists such as those that espouse the free-market dogma (and those at the mises institute as suggested) are completely wrong and keep insisting on this wrongheaded approach that is sending much of the world into poverty. consider the the russian and south african debacles in the '90s.

[pjburns11]

Geez, got another one wrong, George. By the way, how is that quick, winnable war in Iraq coming along?

How about some real activist journalism? How about a call for investigations into the Bush Administration?

Here are 35 excellent reasons why:

http://thetruthburns.wordpress.com/2008/11/17/forget-impeachment-its-time-to-probe-investigate-indict-bush/

[hughbetcha]

Oh yes, that's just what the Obama presidency should make its top priority, putting Bush and Co. in the dock. That'll impress the folks who voted for change.