As much of the US population rushes headlong to embrace President Obama’s New Deal, it’s might be prudent to remember that Franklin Roosevelt’s policies not only did little to improve life for the average American during the Great Depression, it actually made things worse for many.
According to economist Thomas J. DiLorenzo, “FDR and his advisors mistakenly believed that the Depression was caused by low prices, therefore, high prices—enforced by threats of violence, coercion and intimidation by the state—would be the “solution.”
In fact, FDR, in the midst of one of the bleakest periods of US economic history, actually signed laws that forced businesses to charge above-market prices for everything.
Jim Powell, a senior fellow at the Cato Institute, details here how Roosevelt, seen by many as the savior of the common man, worsened the lot of the average American by making discounting prices a crime.
Powell identifies some of the vehicles Roosevelt used in his misguided efforts to jump-start the economy through government fiat.
- The National Industrial Recovery Act authorized the president to establish cartels via executive orders. FDR established some 500 cartels, and one of the things they did was fix prices above market levels.
- The Agricultural Adjustment Act aimed to raise prices of agricultural commodities above market levels, in an effort to raise farm incomes.
- The Robinson-Patman Act aimed to protect small grocery stores from price competition offered by A&P and other chain stores.
- The Miller-Tydings Retail Price Maintenance Act was a related effort to protect small businesses from competition with larger, more efficient firms.
- The Civil Aeronautics Act, which established the Civil Aeronautics Authority. It enforced a cartel, protecting existing airlines from new competition.
In addition to outlawing discounting, Powell writes, FDR indirectly forced prices above market levels by signing the National Labor Relations Act. When it was upheld by the Supreme Court in 1937, labor union monopolies developed in mass production industries.
That year, in the midst of the Depression, average labor costs surged 11 percent, Powell says. This put strong upward pressure on the prices of things made with union labor, until the labor cost surge helped trigger a recession that undermined demand. Powell adds that:
“FDR did what private businesses cannot do by themselves, namely use the law to enforce above-market prices. As long as businesses are free to enter any market, somebody who charges above-market prices is likely to attract competitors who will drive prices down. Competitors could be start-up businesses or established businesses entering a new market, and such competitors could come from within the country or overseas. The most famous private ‘monopoly,’ John D. Rockefeller’s Standard Oil, lost market share despite having cut the price of its principal product 90 percent, because it wasn’t backed by the force of government. Perhaps the most intriguing question is why “progressives” continue to view FDR as savior, giving him a free pass as a price-gouger.”
And how did Roosevelt’s policy’s work? Not so well, Powell says. Consider:
- U.S. Census Bureau statistics show that the official unemployment rate was still 17.2 percent in 1939 despite seven years of interference from the Roosevelt administration (the normal, pre-Depression unemployment rate was about 3 percent);
- Per capita GDP was lower in 1939 than in 1929 ($847 vs. $857), as were personal consumption expenditures ($67.6 billion vs. $78.9 billion), according to Census Bureau data;
- Net private investment was minus $3.1 billion from 1930–40.
The wreck of the first American ship sunk during World War II has been located off Australia’s southern coast, Reuters reported.
The freighter MS City of Rayville (shown above), carrying a cargo of lead, wool and copper from South Australia to New York, hit a German mine and sank on Nov. 8, 1940, a year and a month before the US entered the war.
One sailor died in the sinking off Cape Otway in southeast Victoria state while 38 other crew were rescued in lifeboats, Reuters added.
The 6,000-ton Rayville hit a minefield laid by the German commerce raider Passat, formerly a Norwegian tanker captured in the Indian Ocean and converted to an auxiliary minelayer.
The approximate location of the wreck – about 8.5 miles from Cape Otway in the strait that separates mainland Australia from the island state of Tasmania – had been known since 2002 but it was too deep to be precisely located, according to The Associated Press.
Researchers at Deakin University found the vessel 230 feet underwater by using state-of-the-art sonar equipment during a research project to map the seabed off the state of Victoria, The Associated Press reported.
Third Engineer Mac B. Bryan of Randleman, NC, was the only casualty of the sinking. He leapt overboard from the ship without a life belt and was unable to swim, according to a Time magazine report dated Nov. 18, 1940.