The New Deal
"The only thing there is to fear, is fear itself!" So said Franklin D. Roosevelt on his inauguration as president of the United States on March 4, 1933. Roosevelt's charisma, his vigor, the activist policies he pursued—all contributed to a decline in fear and the beginning of an economic recovery. The change in the direction of economic activity had an enormously positive psychological impact that probably contributed to the economic recovery that followed. This was certainly a not inconsiderable achievement.
While Roosevelt may have helped initiate recovery, there is overwhelming evidence that newly instituted policies of his administration served to weaken that recovery and prolong the misery of the Great Depression. In this chapter we will demonstrate how governmental intervention in labor markets contributed in an important way to the continuing double-digit unemployment. Of the ten years of unemployment rates over 10 percent during the Depression, fully eight were during the Roosevelt administration (counting 1933 as a Roosevelt year). Moreover, institutional changes begun during the Roosevelt years had a long-lasting impact on the American economy, and on unemployment in particular. So not only was the record of the New Deal rather poor in terms of achieving economic recovery, the New Deal legacy is with us today in an increased natural rate of unemployment.
Previously, we have emphasized unemployment up to March 1933. While there is some disagreement on the measurement of unemployment, all mea