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We’ve Been Down This Road Before

Here’s a letter to the Wall Street Journal:

Greg Ip is correct that entrepreneurs and investors dislike policy uncertainty, especially the kind now unleashed by the electoral successes of Donald Trump and Bernie Sanders (“How Sanders, Trump Threaten Market Confidence,” Feb. 17).  Industrial and commercial activities are inevitably diminished by threats to radically restrict trade flows, to upend labor markets, to dramatically raise taxes, and, more generally – each candidate in his own way – to weaken the security of property rights.

But Mr. Ip is mistaken to assert that F.D.R. was not guilty of the same sort of reckless meddling and rash restrictions that are now promoted by Trump and Sanders.  Mr. Ip errs in claiming that F.D.R. “got the big questions right.”  Has Mr. Ip forgotten that the Great Depression lasted at least the full length of F.D.R.’s first two terms in office?

Economist Robert Higgs – who calls the problem highlighted by Mr. Ip “regime uncertainty” – explains that the Great Depression was made “Great” largely because of F.D.R.’s unprecedented, unprincipled, and wild intrusions into the economy.  According to Higgs, “the insufficiency of private investment from 1935 through 1940 reflected a pervasive uncertainty among investors about the security of their property rights in their capital and its prospective returns.  This uncertainty arose, especially though not exclusively, from the character of federal government actions and the nature of the Roosevelt administration during the so-called Second New Deal from 1935 to 1940.”*

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

* Robert Higgs, “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed After the War,” Independent Review, Spring 1997, Vol. 1., pp. 561-590. The quotation is from pages 563-564.


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