When Alexandria Ocasio-Cortez and her allies proposed a new stimulus package to take on climate change and income inequality, they called it the Green New Deal. Their reasoning for the economic program’s name is obvious. It pays homage to the New Deal, a bundle of transformative economic reforms captained by President Franklin D. Roosevelt during the Great Depression. Like the original New Deal, the Green New Deal includes massive government intervention in the American economy through more spending, regulation, and taxes.
While many liberals are enthusiastic over the Green New Deal, it’s worth going back to examine the record of the original New Deal and the Great Depression. What many people fail to understand is that Roosevelt won the 1932 presidential election largely because his predecessor’s policies of government intervention made the economy worse. President Herbert Hoover has often been remembered over decades as a failed, do-nothing president who let the economic collapse get worse and worse. But the problem with this view of Hoover is that it only analyzes his presidency from FDR’s perspective.
In recent decades, research has shown that Hoover reacted to the economic downturn with robust government intervention. Lee Ohanian, an economist at the University of California-Los Angeles, published a study in 2009 on why the Great Depression started. Hoover launched a new labor program that made a quick recovery impossible. He met with manufacturing leaders and struck an agreement where they would maintain or raise wages, not slash them. Hoover then met with union leaders and managed to get them to avoid any new demands.
Hoover believed the wage floor would allow workers to keep spending, but the unintended consequence was that businesses could not adjust to a declining economic situation as their profits fell. Employment and work hours both collapsed as wages increased. The unemployment rate rose from 3.2% in 1929 to 23.6% in 1932.
Other factors that contributed to the Great Depression were Hoover’s decision to raise taxes and tariffs. Taking money out of the hands of taxpayers only contributed to the economic crisis. Global trade declined at a rapid pace. High unemployment and high taxes made Hoover extremely unpopular, paving the way for Roosevelt’s landslide victory.
Unfortunately, Roosevelt’s policies were not any better, and in many ways were just an expansion of Hoover’s. Roosevelt decided to continue the policy of raising wages by signing the National Industrial Recovery Act and the Wagner Act. Additionally, he wanted to keep prices high when they should have been slashed. The combination of high unemployment and high prices meant that it was difficult for people to make ends meet. The Great Depression was prolonged and there would be a very slow recovery.
Ohanian and his colleague Harold Cole conducted exhaustive research on the New Deal and the Great Depression in a different study. Businesses refused to hire more workers than they could have because of the raised labor costs. Simultaneously, people are less likely to purchase goods when prices are too high. A strong recovery from the Depression did not occur and the unemployment remained in the double-digits until 1941.
As the debate about the Green New Deal persists, a discussion should take place over the original New Deal and the origins of the Great Depression. Millions of Americans suffered economically during the 1930s. There were real policy consequences from Roosevelt’s policies, which many modern Democrats don’t care to admit. History should never be forgotten and now is a time when it is needed.
John Graber studied history and political science at the University of Wisconsin-Madison.
