The New Deal Was Not Keynesian

[Agnapostate]

It's grown aggravating to hear the New Deal constantly referenced as "Keynesian" or even more deplorably, as "socialist."

As Renshaw illustrates in Was there a Keynesian Economy in the USA between 1933 and 1945?, the New Deal cannot accurately be described as "Keynesian."

As Eccles pointed out, counter-cyclical spending was really a conservative option which implied 'sustaining government contributions to general purchasing power while the obstacles to private spending are cleared away'. The basic structure and values of capitalism, the ownership and control of the system, would not be disturbed in the long run if such policies were adopted. Yet despite such spending to make good the failure of private investment and so reduce unemployment in 1933-35, and again in 1938-39, almost one in six Americans were still out of work in 1939. In that sense, as Herbert Stein has argued, "It is possible to describe the evolution of fiscal policy in America up to 1940 without reference to Keynes."

Indeed, Stein's summary was remarkably accurate. As he noted, “It is possible to describe the evolution of fiscal policy in America up to 1940 without reference to [Keynes]...y the outbreak of the war a large part of the fiscal revolution had already occurred. It was accepted policy that we would run deficits in depressions, that we would not raise taxes in depressions in an attempt to balance the budget.”

Hence, I would hope that the educated free marketer would re-evaluate that analysis of the New Deal as Keynesian, instead of relying on the Mises Institute to provide economic analysis. The "talking points" free marketer will simply continue to blather on that all government participation in the economy is necessarily Keynesian, or worse, that it is "socialist."