NEWSMAX: … The problem then was monetary, some economists now say. Paul Krugman, in his New York Times column on June 2, argued that monetary and fiscal tightening caused the 1937 downturn, and might be squeezing the breath out of the economy now, precluding job creation…. This version of history holds, to some extent…
But two other factors are omitted from this narrative. The first is the price of labor. The Wagner Act, the great modern labor statute, became law in 1935. It made possible the closed shop, under which only unionized workers were allowed into a unit. In 1937, after Roosevelt was safely elected, labor leader John L. Lewis and his Congress of Industrial Organizations began using their new power to its full extent. Labor’s tour de force in this period is memorialized in the photos we still recognize today of sit-down strikes at the General Motors Co. plant in Flint, Michigan. Strike days in 1937 totaled 28 million, up from 14 million during the election year….
The second under-discussed issue is what scholar Robert Higgs has called “regime uncertainty.” Roosevelt’s victory in 1936 had been so convincing that people believed he might do anything. FDR reinforced this suspicion with an inaugural address so aggressive that modern presidential advisers would never allow it on the teleprompter. Roosevelt told the nation he sought in government “an instrument of unimagined power.” That scared markets and small businesses… (more)
