The New Deal and Recovery, Part 23: The Great Rapprochement

George SelginWhat finally brought the Great Depression to an end? We ' ve seen that, whatever it was, it took place not during the 30s but sometime between then and the end of World War II, when a remarkable postwar revival occurred instead of the renewed depression many feared. We ' ve also seen that, while postwar fiscal and monetary policies weren ' t austere to the point of preventing that revival, they alone can ' t explain it, because they can ' t explain the reawakening of private business investment from its decade-and-a-half-long slumber.Animal SpiritsTo get to the bottom of that reawakening, we must first recall the part businessmen ' s fear of punitive federal government policies played in investment ' s prewar quiescence. As I explained in anearlierseries ofposts, by mid- 1930s, New Deal policies and rhetoric had given businessmen ample reason to be apprehensive about the future. The planners frightened small businesses by treating them as relics of a bygone age, and compelling them to abide by codes mainly set by their larger rivals. The trust-busters scared big businesses by threatening to break them up. Neither group put much stake in either monetary or fiscal policy, let alone in Keynes ' s advice to the effect that a depression was not the right time to be pushing their reforms. In this and other respects, as I explained inanother set of posts, the New Deal, far from having tested Keynesian policies, was at loggerheads with Keynes ' s own advice for achieving...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs