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The school paper had an opinion column in it this week, The Free Market Should Be Free, that so annoyed me with its parroting of Republican talking points that I had to write a letter to the editor. It ended up being longer than the piece itself by about a hundred words. Here it is:
In his recent column in The Metropolitan, the paper's Assistant Sports Editor Robert Dran attacked former president Roosevelt's New Deal policies by concentrating his complaints on a single piece of the multitude of programs enacted, the National Industrial Recovery Act, which, he argued, caused the New Deal to lengthen and deepen the Depression, not shorten it.
It saddens me to see these sorts of unsubstantiated and, frankly, incorrect accusations in print in our school's newspaper, alongside completely unrelated and unsupported comparisons of that failed program with the current stimulus package that the United States Congress just passed and President Obama just signed into law in this very city.
It is true that the National Industrial Recovery Act encouraged monopolistic practices overseen by the federal government, and that these did likely depress workers hours and wages temporarily. But this same act created the Public Works Administration, which would eventually become in 1935 the famous Works Progress Administration, and which was very important in the easing of the crisis that was gripping the country. The entire package was enacted in June of 1933, just a few months into the president's first term. Over a dozen additional pieces of legislation related to what we now call the New Deal would be enacted over the following three years, as part of Roosevelt's spaghetti-against-the-wall model: they tried everything they could, and, if something didn't work, they admitted it and moved on.
The NIRA's oversight boards, in particular, had been abandoned by the time they were struck down as unconstitutional in 1935. Other pieces of the legislation were passed in slightly modified forms in Congress, such as the PWA (renamed the WPA) and many of the protections that worker's unions - which did help stabilize wages and protect worker's hours - now enjoy. The WPA, in particular, was instrumental in the New Deal, as it refused to just send out a paycheck to the unemployed; instead, it put them to work building bridges, roads, tunnels, schools, airports, and dozens of other infrastructure projects, keeping their spirits up and their hands occupied.
It fact, there is even more direct evidence that the New Deal worked to alleviate the pain that the Great Depression caused. In 1937, after Roosevelt was reelected, Congress prevailed upon him to balance the budget. Roosevelt, himself leery of deficits, complied, slashing government spending. At this time, nationwide unemployment was down to around 14 percent off the1933 peak of 23 percent. By the next year, however, the Great Depression had come roaring back, and unemployment spiked back up to the 19 percent that Dran cites in his article. Roosevelt reinstated many of the government spending projects, and unemployment began to decline again, continuing to do so until the United States' entry into World War II.
Dran also cites the affect of World War II in his piece, correctly crediting it with the full recovery of the United States economy. What he neglected to consider was that World War II was, from an economic standpoint, nothing more than an enormous outlay of government spending -- a government stimulus package, if you will. Government money poured into the manufacturing sector, providing millions of Americans with jobs. The war itself was irrelevant to the economic recovery. All those tanks and planes and guns could have been dumped directly into the Atlantic Ocean, and there would have been no different in their stimulative power.
Finally, Dran also appeals that to fix the economy, we need simply let "the free market work." Setting aside that we haven't had a laissez-faire-style economy for generations, that sort of argument is what caused the current crisis in the first place.
Alan Greenspan recently went before Congress and stated that "those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief." This man, who earned his faith in the power of the free-market at Ayn Rand's knee, admitted that free markets were not perfect.
Lax regulation in the banking industry, which Mr. Greenspan fought for his entire term as chairman of the Federal Reserve, combined with an in-built inability to correctly judge the risk in the extremely complex translations that the mortgage-backed security industry, spelled doom for the heady boom days that he reigned over. Short-term profitability was gained at the cost of long term stability and, indeed, without a thought to the consequences to the company after the executives had drifted off, riding golden parachutes.
A "more realistic and pragmatic approach"? I could not agree more. The free market, of course, has its place at the center of our economy and is the most efficient way to generate wealth the world has ever seen. But, as the events of the past year have shown, the unfettered free market can lead to explosive and sudden self-destruction. Proper, sane, and transparent regulation is the correct way forward, as is the kick-start provided by the massive temporary influx of capital that only the government can provide in this time of frozen credit markets and cash-strapped banks.