April 3, 2009--Hitler's Stimulus Package . . . Yes, His
A few days before the Republican Party offered its own fleshed-out version of a budget, one that includes actual numbers and calls for the repeal of Barack Obama's stimulus package, the New York Times published a column by David Leonhardt that takes an historical look at various national stimulus efforts. (Linked below.)
He looked at the impact of FDR’s during the Great Depression and Japan’s during the 1990s in an attempt to see if they actually were effective. Both have been criticized recently as not having worked to turn either the US or Japanese economies around; and so why, if this is true, should we believe that Obama’s approach will be any different. Skeptics ask, why spend so much money on a failed approach?
Well, according to Leonhardt and many non-ideological economic historians, the New Deal did not fail. True, as has often been asserted, the Depression didn’t fully end until the institution of the massive jobs program that has otherwise been referred to as World War II. But, even before the economic boost that the war provided, as the result of two years of FDR-initiated stimulus activities such as the Works Progress Administration, the Civilian Conservation Corps, and the salvation of the banking system, the unemployment rate that he inherited when he took office was cut in half, down from about 25 to 12 percent.
Just to show how distorted the presentation of history can be, the economist often quoted by Republicans who oppose Obama’s programs—just as their political antecedents resisted FDR’s—Amity Shlaes in her book, The Forgotten Man, fails to include people employed by New Deal programs as employed. She, like many on the extreme right, does not consider public works jobs to be jobs, but rather make-work.
Other critics of the New Deal accurately cite that even if you grant that WPA workers were in fact workers, the unemployment rate began to rise again during the final years of FDR’s first term. This, in the view of most who do not have a political axe to grind, is less the result of the failures of these forms of government intervention than the failure of Roosevelt, under political pressure to reduce the mounting budget deficit, to keep his proverbial foot on the stimulus pedal. It worked when he funded the New Deal; but it didn’t when he backed off.
Japan’s efforts to restore its stalled economy during the 1990s is a more current case and is thus cited widely as evidence of how a government-sponsored economic shot in the arm won’t work. True, in retrospect, this turned out to be Japan’s “lost decade,” but not all parts of the economy failed to respond to government spending. The government made huge investments to rebuild the country’s roads, bridges, and rail system; and this not only brought them to world-class standards, but also put hundreds of thousands to work. What didn’t work were efforts to rescue the banks. In fact, Japanese efforts to deal with the problems of the financial community, compared to FDR’s and Obama’s, were paltry. And as a result the banks’ troubles have still not been remedied. As we have been experiencing, there is reluctance on the part of Japanese bankers to lend; and thus the economy, still the second largest in the world, remains substantially stalled.
So today there are lessons for us to take from both the successes and failures of two of history’s most ambitious stimulus efforts. From the New Deal we should learn the importance of bold, consistent, and long-term action. In other words, keep the pedal to the metal. And from Japan it is obvious that the Obama administration has learned to place equal emphasis on job generation and bank viability.
But, Leonhardt says, if we want to look at the most successful stimulus program of the last hundred years we have to consider Germany in the early 1930s. Yes, when Hitler became Chancellor. Hopefully you will not mishear him or me—this is not a piece of repellant revisionism. Just a glimpse at one ironic historical truth.
Hitler, like his henchman Mussolini, did not just make the trains run on time (Il Duce in fact didn’t), but his programs for massive government spending on military rearmament and infrastructure (building the autobahn, facilities for the 1936 Berlin Olympics, and monuments to glorify himself and the Nazi Party) these programs, plus his interventions in Germany's financial institutions, did reduce the hyper-inflation he inherited and, excluding slave labor, put millions of unemployed German’s to work.
Not that anyone in public office is likely to cite the Nazi experience, but there in fact it is.
He looked at the impact of FDR’s during the Great Depression and Japan’s during the 1990s in an attempt to see if they actually were effective. Both have been criticized recently as not having worked to turn either the US or Japanese economies around; and so why, if this is true, should we believe that Obama’s approach will be any different. Skeptics ask, why spend so much money on a failed approach?
Well, according to Leonhardt and many non-ideological economic historians, the New Deal did not fail. True, as has often been asserted, the Depression didn’t fully end until the institution of the massive jobs program that has otherwise been referred to as World War II. But, even before the economic boost that the war provided, as the result of two years of FDR-initiated stimulus activities such as the Works Progress Administration, the Civilian Conservation Corps, and the salvation of the banking system, the unemployment rate that he inherited when he took office was cut in half, down from about 25 to 12 percent.
Just to show how distorted the presentation of history can be, the economist often quoted by Republicans who oppose Obama’s programs—just as their political antecedents resisted FDR’s—Amity Shlaes in her book, The Forgotten Man, fails to include people employed by New Deal programs as employed. She, like many on the extreme right, does not consider public works jobs to be jobs, but rather make-work.
Other critics of the New Deal accurately cite that even if you grant that WPA workers were in fact workers, the unemployment rate began to rise again during the final years of FDR’s first term. This, in the view of most who do not have a political axe to grind, is less the result of the failures of these forms of government intervention than the failure of Roosevelt, under political pressure to reduce the mounting budget deficit, to keep his proverbial foot on the stimulus pedal. It worked when he funded the New Deal; but it didn’t when he backed off.
Japan’s efforts to restore its stalled economy during the 1990s is a more current case and is thus cited widely as evidence of how a government-sponsored economic shot in the arm won’t work. True, in retrospect, this turned out to be Japan’s “lost decade,” but not all parts of the economy failed to respond to government spending. The government made huge investments to rebuild the country’s roads, bridges, and rail system; and this not only brought them to world-class standards, but also put hundreds of thousands to work. What didn’t work were efforts to rescue the banks. In fact, Japanese efforts to deal with the problems of the financial community, compared to FDR’s and Obama’s, were paltry. And as a result the banks’ troubles have still not been remedied. As we have been experiencing, there is reluctance on the part of Japanese bankers to lend; and thus the economy, still the second largest in the world, remains substantially stalled.
So today there are lessons for us to take from both the successes and failures of two of history’s most ambitious stimulus efforts. From the New Deal we should learn the importance of bold, consistent, and long-term action. In other words, keep the pedal to the metal. And from Japan it is obvious that the Obama administration has learned to place equal emphasis on job generation and bank viability.
But, Leonhardt says, if we want to look at the most successful stimulus program of the last hundred years we have to consider Germany in the early 1930s. Yes, when Hitler became Chancellor. Hopefully you will not mishear him or me—this is not a piece of repellant revisionism. Just a glimpse at one ironic historical truth.
Hitler, like his henchman Mussolini, did not just make the trains run on time (Il Duce in fact didn’t), but his programs for massive government spending on military rearmament and infrastructure (building the autobahn, facilities for the 1936 Berlin Olympics, and monuments to glorify himself and the Nazi Party) these programs, plus his interventions in Germany's financial institutions, did reduce the hyper-inflation he inherited and, excluding slave labor, put millions of unemployed German’s to work.
Not that anyone in public office is likely to cite the Nazi experience, but there in fact it is.
posted by Steven Zwerling at
7:00 AM
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