Thoughts on Life Before the New Deal

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August 31, 2009 by D Stack

I’ve been reading some commentary lately on how President Franklin Roosevelt’s New Deal was an absolutely awful thing for the United States.  The theory is, as I understand it, government intervention made the Great Depression last longer and put in place an array of anti-business/free market forces.

Over the past few months I’ve been reading up on the history of the western world in general and the United States in particular in the period of the late 19th century through the start of World War II. The picture that emerges is a world where the worker possessed only those rights that his employer chose to give him. I would view it as the ultimate exercise of the free market. And while I reject full government control of production, it is easy to see how socialism and communism found appeal in this period. This is a world of:

  • No unemployment insurance.
  • No definition of a work day.
  • No right to sick time.
  • No compensation for injury on the job.
  • No right to unionize.
  • No right to employment and equal wages independent from race and gender.

I’ve heard the argument that the free market will cure these ills. How? A publicly traded company is accountable to its shareholders for profit. What incentive is there for an employer to offer these benefits? For skilled labor, I can see how competition can assist with this. But for unskilled labor? For easily available labor? A company that offered such benefits would find itself victim of a shareholder revolt.

Over time all these rights have been won. At the time they were viewed as “socialist” by commentators of the day. Some things don’t change very much.

I don’t advocate government control of all industry in the United States. But government regulation is a necessity. History has shown that the free market will not take care of people at the bottom.  Government regulation makes the market less free. But if companies are all playing by the same rules, then competition, with its benefits, is still present.

Does a rising tide lift all boats? Evidence suggests that this is not the case. As I discussed in a previous post, while the GDP of the United States has risen considerable over the past 30 years, an inproportionate portion of it has gone to the wealthiest fraction of the population.

Some interesting books I’ve found over the past few months (with links to entries at Amazon).

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