The Myth of Public Works as an Economic Stimulus
Words to ponder as the stimulus bill snakes through Congress:
While we have legitimate infrastructure needs, public-works spending historically has been too slow, has delayed private and local government spending, and created few jobs for the unemployed. The programs are not labor-intensive and require skills few unemployed have. Public works did not end the Great Depression. Even FDR’s treasury secretary, Henry Morgenthau, said in 1939, “We have tried spending money . . . and it does not work . . . we have just as much unemployment . . . and an enormous debt to boot.” Nor did a decade of infrastructure spending help the Japanese escape three recessions and a decade of stagnation. It did, however, saddle Japan with a national debt burden four times ours.
Comment by Arnold T on 24 January 2009:
The USA had 25,000 Banks before the crash of 1929.
11,000 of them failed. Depositors lost everything.
Unemployment reach 25% and non-farm(city) unemployment reaching 36%
No one had social security or unemploymentA large segment of the US population had no money and no source of income and no way to survive. This was not some theoretical economic game. It was literally survival for many citizens with families of children. It is the Harsh realities of the collateral damage caused by a financial crisis wrought by the Free Unbridled Market Place of the day. Laissez Faire Capitalism was dead for the generation that lived through and remembered the Great Depression.The damage was done. You could not take it back. The Disaster of the Great Depression unfolded.How can you blame the government (FDR, Democrats) for a disaster that happened before they took office (March 1933)? Sick and dishonest point of view. You either ignore or support the preceding boom and bust laissez faire policies. Then you attack all attempts to alleviate the ensuing suffering. It’s a caustic and cold attitude that does not deserve respectful consideration. You are being purposely deceitful and you know it. Not good. Your credibility is shot.
Comment by Anon on 24 January 2009:
Are you familiar with the saying “the road to hell is paved with good intentions”?The point here is simple, both Hoover and FDR made a bad situation worse. Bush/Obama are repeating their mistakes, i.e they are making a bad situation (recession) worse (deep depression).
Comment by MrC on 24 January 2009:
Arnold T, The free market didn’t crash on its own accord. It was not a free and unbriddled marketplace. High taxation and trade tariffs strangled the market and those rotten government policies made it crash. There has never been a recession or depression that wasn’t caused by government interference. The free market, left to itself, has never failed. Just as we have a separation of church and state, we would be better off with a separation of economy and state. The government has no business interferring with free trade and commerce, or so our founders believed. How could FDRs grossly misguided 90% tax rate have stimulated anything but dispair?
Comment by Arnold T on 25 January 2009:
Utopian Idealists never understand that their theories will never, let me repeat, never exist in real life. The Garden of Economic Eden is a myth. It cannot exist. Repeat….. Free market capitalism cannot exist. The purity test I so often hear is ridiculous. If we had just been more free market it would have worked. As you unbridle or unhinge a market, malfeasant human behavior will always emerge. A market will never make it to the free status before it implodes into either chaos or monopoly of power. You are worshiping a fictional system that will only exist in your mind.Commerce and financing (i.e. capitalism) has always exited and so have governments. Governments have always issued directives, laws and dispersed services and build infrastructures and collected taxes,etc, etc. Each Country evolves it’s own unique system, but always it reflects the influences of it’s culture and history. This is how nature is; messy, imperfect, never satisfying completely and always requiring modifications to control everyones interests. That is the real world. It is not a chalk board list of principles and equations devised in Chicago or Austria. There is not an advanced nation on earth that does not utilize what you call socialism. Mixed economies are the norm historically. Eccentric Radical economies seldom last long.The recent storybook examples of countries that experimented with free market capitalism have imploded recently. Iceland, Latvia and Lithuania ran into the excesses of unbridled capitalism. They are now failed economies.
Comment by Sheldon Richman on 25 January 2009:
Arnold T writes: “The Garden of Economic Eden is a myth. It cannot exist. Repeat….. Free market capitalism cannot exist.”Maybe I was too subtle. I hoped that Arnold T would understand that Peter Lewin’s quote in this post was an answer to his false characterization of free-market advocates as believers in Eden. Before he attacks our position, he should first make sure he understands it. We don’t face a choice among forms of perfection. We face a choice between, on the one hand, dispersed imperfection with usable feedback and flexible entrepreneurial response (freedom and free markets) and, on the other, concentrated imperfection with little or no usable feedback or entrepreneurial response (statism). Oh well. I tried.
Comment by Carl Clegg on 26 January 2009:
There are a lot of Arnolds out there who unfortunately don’t really get it. The only solution they see is for the state to use force to implement Keynsian policies that require heavy borrowing, high tax rates, and big government in an attempt to compensate for the governments own failed policies. The New Deal is such a powerful lesson to learn from and yet there are some who have us think that we’d still be in a great depression had not FDR saved us all.