Unions Contributed to Failure of FDR’s New Deal


By: Warner Todd Huston

A new article on Franklin Roosevelt’s New Deal policies has been published by the Milken Institute Review. The piece reveals how FDR’s strengthening of labor unions contributed to the continued economic downturn experienced during the Great Depression and how the country’s disastrous economic condition was exacerbated by the failure of the New Deal. As time passes more and more honest economists and historians – those not sold out to Roosevelt sycophancy – are coming to terms with the simple fact that FDR was a failure as president with everything except his prosecution of WWII. Here is yet another historical review in that vein. (See .pdf file of article)

The Article, titled “Where the New Deal Went Badly Wrong,” was written by Harold L. Cole and Lee Ohanian. Harold L. Cole, Ph.D. Economics, University of Rochester, 1986, is a professor of economics at the University of Pennsylvania. Lee E. Ohanian, Ph.D. Economics University of Rochester, 1993, is a professor of economics at UCLA.

The pair have noted that the New Deal strengthened unions and gave to them powers for striking that brought industry to its knees just at a time when the country needed as many new jobs as it could get to tug itself out of depression. Unfortunately, the power given unions caused the depression to last far longer than it needed to last.

We have calculated that New Deal labor and industrial policies, which raised wages and prices 20 percent or more in many industrial sectors, were directly responsible for stretching the Depression through the decade of the 1930s. All told, we estimate that these 24 The Milken Institute Review policies kept the economy below the growth rate one would have otherwise expected for an extra seven years.

Additionally:

It’s fair to say, then, that the consequences of New Deal policies are widely misunderstood. Roosevelt’s industrial and labor policies retarded recovery by restricting employment and output in the name of raising profits and wages.

So, the wild demands of unions uncoupled to market forces and with the weight of the government behind them caused untold misery to continue for seven long years, many years longer than it needed to.

Amusingly, the article notes that even Roosevelt came to rue the power he handed the unions and he had to force them to forgo their demands during the war because the war effort was being harmed by union thuggery. He made a monster and it came back to bite him.

Through a discussion of history, the article shows that the mess FDR made is the same one that today’s Employee Free Choice Act will lead us back to. Unions are not interested in what’s right. They are only interested in what they can take regardless of who it hurts or how badly it mars economic recovery. FDR proved that in the 1930s. Barack Obama and the EFCA will prove it today if allowed to become law.

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