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NeoNotes — The New Deal and the free market

I've news for you.

There was no need for the New Deal.

All evidence shows that the New Deal prolonged what should have been a short term correction. Not to mention that government actions created the crash to begin with. Things like manipulating the price of gold, restricting the amount of currency, and messing with import/export taxes.

No, it didn't.

The unemployment rate stayed roughly the same for years. Capital dried up. Businesses failed. Farmers came darn close to revolting, the ones who were able to keep their farms anyway.

By most measures, the economy was either worse or the same in 1938 that it was in 1931. Look at the previous depressions and recessions and see how long they lasted.

And don't forget, a major part of this was because government restricted the flow of currency before the bank runs.

The economy can't be controlled and it can't be managed. Each person makes a hundred economic decisions each and every day, most without realizing what they are doing. Do they use a pen or a pencil? Handkerchief or tissue paper? Pack your lunch or grab something downtown? Multiply that by 300 million, that is the self-regulating system that government thinks it can control. There are just too many variables and conditionals, it would take lifetimes to measure.

Fortunately, we don't have to. Humanity is a colony organism. We built these interconnecting, self-repairing, self-regulating systems that require very little from us.

Price when it relies on the free market is the most intricate continually updating feedback mechanism ever created by man. The thing that messes it up is when we change the feedback. Introduce sin taxes, that changes the feedback. Introduce tax abatement, that changes the feedback. Subsidize corn and sugar, it changes the feedback. The price of a thing or service reflects millions of data points that the individual doesn't know about but still provides information about the world.

The unemployment rate stayed in double digits, and in April 1939 one in five still couldn't find work.

And that brings us to the bit that even Keynes could never bring himself to admit: the private sector is the source of wealth and employment. Keynes believed that it was massive government spending that could bring back a depressed economy. He failed to allow that government doesn't create wealth, it can only divert wealth.

Which leads to an inescapable conclusion. Government relief decreases the flow of capital and increases unemployment. It may look good, it may pay for a meal today, but all it really does is shift the costs elsewhere and delay recovery.

There's also the bit that if government takes money to give to others, that's theft. There's a classic essay called “Not Yours to Give” by James J. Bethune that talks about that. It's also about Davy Crockett.

Even WWII after factoring out the costs in human lives didn't end the Depression. It hiked the national debt from $49 billion in 1941 to just under $260 billion in 1945. Real recovery didn't come until after the war. FDR's death prevented his Second Bill of Rights, neither Congress nor the American people were willing to let Truman revive the New Deal after the war.

I was only talking about taxes in terms of how they affect prices. Accurate prices are the main feedback in the free market. Well, that and reputation. Which is a completely new subject, even as it ties into parity.

NeoNotes are the selected comments that I made on other boards, in email, or in response to articles where I could not respond directly.
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