Friday, August 16, 2013

Depression era solutions

A good summary from David Henderson of the disastrous New Deal policy of forcing farmers to leave ground fallow and destroy crops and livestock.  I will leave the exercise of showing how this could possibly help a nation escape poverty to the reader.  For anyone not familiar with the story, it's worth the read.

Of course, we had our own brilliant ideas, like destroying perfectly good automobiles (does anybody even remember Cash for Clunkers?) and putting a price floor above the market wage of a third of our young people in a deflationary labor market.

An aside:  The Agricultural Adjustment Act led to Wickard v Filburn - the beginning of the end of the commerce clause as a constraint on government interference.  Here is the outline from Wikipedia:

A farmer, Roscoe Filburn, was growing wheat for on-farm consumption in Ohio. The U.S. government had established limits on wheat production based on acreage owned by a farmer, in order to drive up wheat prices during the Great Depression, and Filburn was growing more than the limits permitted. Filburn was ordered to destroy[citation needed] his crops and pay a fine, even though he was producing the excess wheat for his own use and had no intention of selling it......The Court decided that Filburn's wheat growing activities reduced the amount of wheat he would buy for chicken feed on the open market, and because wheat was traded nationally, Filburn's production of more wheat than he was allotted was affecting interstate commerce. Thus, Filburn's production could be regulated by the federal government.

.....soooooo, it is so important to curtail production when people are out of work and to raise the price of wheat while people are starving that even subsistence farmers should have to destroy their wheat so that they have to buy more chicken feed....Yes, we turned the commerce clause on its head for that.  Who could fault the logic, really?

David has a follow up post on the topic, with a famous quote from The Grapes of Wrath.  This passage is apparently usually interpreted as an indictment of capitalism, as if this turn of events was an inevitable, tragic consequence of agri-markets, with FDR the hero for playing tough with the culprits.  This is a very sad story on many levels.


  1. Yeah, cash for clunkers - destroy perfectly functional used automobiles, drive up cost for both used auto parts and used autos. Designed to help big automakers imho.

    Kind of like saying war is good for economies. Instead of buying billion in bombs and blowing them up, why not just take the cash, put it in a big pile and burn it up? Great for the economy. While we're at it, why don't we all burn down our houses so we'll all have to buy another one?