What we could have learned from the New Deal in dealing with the recent global recession

Modern policy-makers have learned little from the Great Depression and the policy responses of the 1930s. Yet, there is a great deal to learn from the New Deal: quelling the fear and uncertainty of mass unemployment in the pragmatic, experimental process through which the tool for achieving this objective—directed government expenditure—was accepted, even though the New Deal’s public works policies and direct provision of paid employment, rather than being informed by a Keynesian theory of macroeconomic stabilization, were designed to support morale, provide relief from the suffering and uncertainty of unemployment, and serve as a bulwark against more interventionist alternatives. Countering the deep uncertainty in the real sector of the economy thus collided with Roosevelt’s commitment to rein in fiscal deficits, and the resolution of this internal conflict in favor of support for employment and incomes provides the essential, largely ignored lesson of the 1930s.