A New Deal?

By | November 10, 2008

Paul Krugman thinks that Mr Obama has the chance of ushering in a FDR-like New Deal for the United States, but he thinks that Obama should be less cautious about his economic policies. He says that the shortcomings of FDRs New Deal, on the short run, was due to the cautiousness of the economic policies he introduced.

Barack Obama should learn from F.D.R.’s failures as well as from his achievements: the truth is that the New Deal wasn’t as successful in the short run as it was in the long run. And the reason for F.D.R.’s limited short-run success, which almost undid his whole program, was the fact that his economic policies were too cautious.

In another paragraph:

The economic lesson is the importance of doing enough. F.D.R. thought he was being prudent by reining in his spending plans; in reality, he was taking big risks with the economy and with his legacy. My advice to the Obama people is to figure out how much help they think the economy needs, then add 50 percent. It’s much better, in a depressed economy, to err on the side of too much stimulus than on the side of too little.

The whole article, at Paul Krugman’s column, is here.

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  • Arthur James

    In December 1933,the economist John Maynard Keynes wrote an open letter to President Roosevelt, which began:

    “You have made yourself the trustee of those in every country who seek to mend the evils of our condition by reasoned experiment within the framework of the existing social system. If you fail, rational change will be gravely prejudiced throughout the world, leaving orthodoxy and revolution to fight it out.”

    (quoted from Donald Markwell,”John Maynard Keynes and International Relations: Economic Paths to War and Peace”, Oxford University Press, 2006, page 176)

    Although the circumstances are different, exactly 75 years later President-elect Obama is in something like the same position. People around the world see him as the trustee of their hopes, both for better international relations and for revival of the world economy.

    As in FDR’s time, when Depression led remorselessly to war, so today, the two may be more closely connected than we would like to think.

    President Obama must ensure that the US provides leadership in dealing with the global economic crisis of our day. This, too, is one of the lessons – probably not widely enough appreciated – of FDR’s time, and of Keynes’s insights (see Markwell’s book quoted above).

  • Arthur James

    In December 1933,the economist John Maynard Keynes wrote an open letter to President Roosevelt, which began:

    “You have made yourself the trustee of those in every country who seek to mend the evils of our condition by reasoned experiment within the framework of the existing social system. If you fail, rational change will be gravely prejudiced throughout the world, leaving orthodoxy and revolution to fight it out.”

    (quoted from Donald Markwell,”John Maynard Keynes and International Relations: Economic Paths to War and Peace”, Oxford University Press, 2006, page 176)

    Although the circumstances are different, exactly 75 years later President-elect Obama is in something like the same position. People around the world see him as the trustee of their hopes, both for better international relations and for revival of the world economy.

    As in FDR’s time, when Depression led remorselessly to war, so today, the two may be more closely connected than we would like to think.

    President Obama must ensure that the US provides leadership in dealing with the global economic crisis of our day. This, too, is one of the lessons – probably not widely enough appreciated – of FDR’s time, and of Keynes’s insights (see Markwell’s book quoted above).

  • Dear Arthur James,

    You are absolutely right. The connection between global economic crisis and war is not as obvious as it was during FDR’s time, and I hope that we do not ever have to resort to the analogy sometime in the near future. Mr Obama’s presidency presents the opportunity, the chance, of helping make sure that does not happen. Like you said, the world has hope in him – something that has often been described as insane optimism – and we hope that he can provide the leadership that the world needs at this moment. He said, in his acceptance speech, that it would be tough; with a large dose of good sense, openness and constant reminder of how messy the mess is, he might just be able to carry it off.

  • Dear Arthur James,

    You are absolutely right. The connection between global economic crisis and war is not as obvious as it was during FDR’s time, and I hope that we do not ever have to resort to the analogy sometime in the near future. Mr Obama’s presidency presents the opportunity, the chance, of helping make sure that does not happen. Like you said, the world has hope in him – something that has often been described as insane optimism – and we hope that he can provide the leadership that the world needs at this moment. He said, in his acceptance speech, that it would be tough; with a large dose of good sense, openness and constant reminder of how messy the mess is, he might just be able to carry it off.