“Without Roosevelt’s intervention, the economic recovery that lasted from 1933 to 1937 would have been weaker and shorter—-not unlike our own recovery after the Great Recession.” (David Weiman, “Imagining a World without the New Deal,” The Washington Post, August 12th, 2011.)
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In the previous installment to this series, I showed how the U.S. economy owed most of the recovery it experienced between 1933 and 1937 to an onrush of “hot money” from Europe that revived aggregate spending. I also explained how that hot money owed its warmth, not to any steps FDR took in the U.S., but to the martial maneuverings of Benito Mussolini and Adolph Hitler.
In today’s post I plan to show that the 1933–37 recovery fell far short of reversing the collapse the U.S. economy suffered between 1929 and 1933, and that this disappointing outcome was the result of New Deal policies aimed at boosting wage rates. The resulting higher wage rates prevented the revival of spending from sponsoring a corresponding revival of employment.
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