Social Philosophy: Economics: something to think about

Krugman on FDR and the "Clean" New Deal
Posted by Bill Anderson at December 26, 2008 07:26 AM

It's Friday, and Paul Krugman does not disappoint. Today, we read that the New Deal of FDR not only helped revitalize the economy, but also was an exercise in "clean" government. Yes, you cannot make up this stuff:

F.D.R. managed to navigate these treacherous political waters safely, greatly improving government’s reputation even as he vastly expanded it. As a study recently published by the National Bureau of Economic Research puts it, “Before 1932, the administration of public relief was widely regarded as politically corrupt,” and the New Deal’s huge relief programs “offered an opportunity for corruption unique in the nation’s history.” Yet “by 1940, charges of corruption and political manipulation had diminished considerably.”

How did F.D.R. manage to make big government so clean?

A large part of the answer is that oversight was built into New Deal programs from the beginning. The Works Progress Administration, in particular, had a powerful, independent “division of progress investigation” devoted to investigating complaints of fraud. This division was so diligent that in 1940, when a Congressional subcommittee investigated the W.P.A., it couldn’t find a single serious irregularity that the division had missed.

F.D.R. also made sure that Congress didn’t stuff stimulus legislation with pork: there were no earmarks in the legislation that provided funding for the W.P.A. and other emergency measures.

Last but not least, F.D.R. built an emotional bond with working Americans, which helped carry his administration through the inevitable setbacks and failures that beset its attempts to fix the economy.

Unfortunately for Krugman, there is the book by William Shughart and James Couch, The Political Economy of the New Deal. Their research demonstrates strongly that New Deal public works money went to those areas where votes were most needed, contra Krugman.

For example, the "neediest" region was the South (still recovering from Lincoln's war), but that also was known then as the "Solid South," with the Democratic Party being absolutely supreme. Since FDR did not need to bribe southerners to vote for him, the New Deal money went elsewhere.

I reviewed this book in the Quarterly Journal of Austrian Economics several years ago, and found that this book, along with with a paper Bob Tollison and others had in the Journal of Political Economy a while back on the New Deal pretty much established that it was government as we always have known it. So, once again we have a Nobel Prize winning "economist" declaring something that absolutely is not true.

A constant theme of Krugman is that government can work wonders as long as those carrying out the program "believe in government." He has excoriated the Bushies for being ideological free marketeers, which means that even when they employ government programs, they are not run by True Believers, which makes their projects fail.

This is what one might call "Faith-Based Government," in which all it takes is belief. Yes, believe in government and all will be well. Only believe.