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Economic Intervention Prolonged the Great Depression

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Started: 6/16/2014 Category: Economics
Updated: 2 years ago Status: Post Voting Period
Viewed: 621 times Debate No: 56690
Debate Rounds (5)
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In this debate, I will argue that economic intervention by the federal government prolonged the Great Depression (1929-1947) and everyone would have been better off with a more free market approach.


Round 1: Acceptance
Round 2: Present arguments
Round 3: Rebuttal of opponent's arguments
Round 4: Defense of case + rebuttals
Round 5: Finishing defenses and rebuttals + conclusion


Round 1 acceptance only.
Forfeit will mean immediate loss for debater who did so (unless something is worked between both debaters in which the debate will stop and there will be a draw).
Failure to follow the structure will result in loss for debater.


I accept your challenge and await your response. I look forward to a wonderful debate.
Debate Round No. 1


Ok then, I hope for a very lively debate. Let's go.

I. Herbert Hoover's New Deal Lite

When the stock market crashed, Hoover should have taken the role his predecessors Warren G. Harding and Calvin Coolidge in lowering taxes and reducing government intervention. The Depression of 1920-21 was quickly resolved within three years. Instead, he decided to hold a series of meetings with business and labor leaders that led to two results:

1. Wages will be preserved in order to make sure workers don't lose their pay
2. No strikes in order to preserve the economic climate

However, the wage preservation did not work. In 1921 and previous recessions, businesses had been able to compensate for their losses by laying of workers. The result was that preserving wages at a certain rate above what was needed caused many businesses to go under and in the end millions of workers went unemployed. The overall unemployment rate according to sources provided by economist Stanley Lebergott, unemployment went from 3% to 24%. The economy was destroyed and the $473 million public works programs didn't help either. [2,6]

In addition, Hoover decided to raise tariffs and taxes to 60% and 63% respectively. The two reasons this was disastrous is obvious. Less capital is taken out of the economy and can no longer be used to invest:

"This was a massive tax to 60 percent on 3,200 imported products. The economy, along with the stock market, started to go into free fall." [1]

II. FDR's Fail Deal

There's a lot to go through. I have decided to put this into parts.

I. Industry

"The centerpiece of the New Deal was the National Industrial Recovery Act of 1933. It created "codes" or cartels in more than 500 industries in order to limit competition. Businesses were told to cut output and maintain high prices and wages. Businessmen who cut prices were cajoled, fined, and sometimes arrested. Fortunately, NIRA was struck down by the Supreme Court in 1935."

While it may have been struck down, that does not mean it still created major problems for the economy. The elimination of business was one problem. Businessmen were very concerned about expanding as Woods explains:

"Businessmen and investors, unsure of what the federal government would do next and what additional punitive members would be imposed on them, simply stopped investing.....long-term investment was particularly hard hit in the 1930s." [3]

On wages, Higgs explains:

"Minimum-wage laws proved a stumbling block to efforts by blacks to secure jobs. These laws prevented employers from undercutting unions by offering lower wages to nonunion members. Since blacks faced exclusion from many of the powerful unions, they were in effect frozen out." [4]

And further from Cole and Ohanian:

"We have calculated that manufacturing wages were as much as 25% above the level that would have prevailed without the New Deal. And while the artificially high wages created by the NIRA benefited the few that were fortunate to have a job in those industries, they significantly depressed production and employment, as the growth in wage costs far exceeded productivity growth." [5]

B. Agriculture

"Besides being theft, gold confiscation didn't work. The price of gold was increased from $20.67 to $35.00 per ounce, a 69% increase, but the domestic price level increased only 7% between 1933 and 1934, and over rest of the decade it hardly increased at all. FDR's devaluation provoked retaliation by other countries, further strangling international trade and throwing the world's economies further into depression." [4]

Cain and Lowrie note that:

"The United States went off the gold in 1933, and that year came in as badly as the Depression's trough year of 1932 in all the major economic categories. In 1934, the United States resumed the gold standard (if at a higher price), and the recovery got going. It was a mediocre recovery, in that going off gold and the dollar devaluation against gold had introduced a lack of clarity in the system." [5]

III. Economic Myths of WW2

"An economy can"t prosper when markets are being overruled by command-and-control rationing. During the war, companies found it easier and more profitable to produce for government than to produce for consumers. Even companies such as Eastman Kodak, the film and camera company, began manufacturing rifle scopes and hand grenades for the military. GM stopped making cars for civilians and made military vehicles instead. Tires, gasoline, shoes, beef, sugar, coffee and much else were rationed. The standard of living in the U.S. during the war collapsed; conditions for consumers were much worse than in the "30s. Remember that the best definition of a depression is: A period of time when most people"s standard of living falls significantly." [7]

In the case of a war economy, we do not look at standard economic terms like unemployment (clearly declining due to the draft) and real GDP (clearly rising due to war production). We look at how well the private economy is doing specifically with investments and expansion. They were further killed with high taxes rates at 79% and higher.


1. Cain, Herman and Rich Lowrie. 9-9-9 An Army of Davids. May 2012.
2. Folsom Jr., Burton. New Deal or Raw Deal?: How FDR's Economic Legacy has Damaged America. November 2009.
3. Woods, Thomas E., Jr. The Politically Incorrect Guide to American History. Washington, D.C.: Regnery Pub., 2004. Print.
4. Higgs, Robert. "How FDR Made the Depression Worse." Ludwig Von Mises Institute, Feb. 1995. Web.
5. Cole, Harold L., and Lee E. Ohanian. "How Government Prolonged the Depression." The Wall Street Journal, 2 Feb. 2009. Web.
6. Shlaes, Amity. The Forgotten Man: A New History of the Great Depression. New York: HarperCollins Publishers, 2007. Print.
7. Casey, Doug. "Escaping the Great Depression - and Extending the Greater Depression." The Casey Report, n.d. Web.


inevitable_winner forfeited this round.
Debate Round No. 2


As we all know, the New Deal prolonged the Great Depression and this person couldn't prove something that isn't true anyway. I win.


inevitable_winner forfeited this round.
Debate Round No. 3


Easy win.


inevitable_winner forfeited this round.
Debate Round No. 4


1Historygenius forfeited this round.


inevitable_winner forfeited this round.
Debate Round No. 5
No comments have been posted on this debate.
1 votes has been placed for this debate.
Vote Placed by jzonda415 2 years ago
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Total points awarded:40 
Reasons for voting decision: Forfeit.