Location of Repository

"Lessons from the New Deal--Did the New Deal Prolong or Worsen the Great Depression?"

By Greg Hannsgen and Dimitri B. Papadimitriou


Since the current recession began in December 2007, New Deal legislation and its effectiveness have been at the center of a lively debate in Washington. This paper emphasizes some key facts about two kinds of policy that were important during the Great Depression and have since become the focus of criticism by new New Deal critics: (1) regulatory and labor relations legislation, and (2) government spending and taxation. We argue that initiatives in these policy areas probably did not slow economic growth or worsen the unemployment problem from 1933 to 1939, as claimed by a number of economists in academic papers, in the popular press, and elsewhere. To substantiate our case, we cite some important economic benefits of New Deal–era laws in the two controversial policy areas noted above. In fact, we suggest that the New Deal provided effective medicine for the Depression, though fiscal policy was not sufficiently countercyclical to conquer mass unemployment and prevent the recession of 1937–38; 1933's National Industrial Recovery Act was badly flawed and poorly administered, and the help provided by the National Labor Relations Act of 1935 came too late to have a big effect on the recovery.New Deal; Public Works Projects; NIRA; NLRA; Cartelization; Unions; Labor Relations Policy; Fiscal Policy; Fiscal Stimulus; Unemployment; Great Depression

OAI identifier:

Suggested articles



  1. (2002). Accounting for the Great Depression.” American Economic Review Papers and
  2. (2007). FDR and the Depression: The Big Debate.” The New York Review of Books,
  3. (1956). Fiscal Policy in the ‘Thirties:
  4. (2009). Government Spending Is No Free Lunch.” Wall Street Journal,
  5. (2004). New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis.”
  6. (2009). Remarks before the Subcommittee of the Committee on Banking Housing and Urban Affairs, United States Senate on “Lessons from the New
  7. (1990). Statistics (BLS) a. Monthly Household Data. Table A9: Unemployed Persons by Duration of Unemployment. www.bls.gov/cps/tables.htm BLS b. Monthly Household Data. Table A12: Alternative Measures of Labor Underutilization. www.bls.gov/cps/tables.htm
  8. (1975). The Failure of the NRA.
  9. (1999). The Great Depression in the United States from a Neoclassical Perspective.” Federal Reserve of Minneapolis Quarterly Review
  10. (2009). The New Deal: Lessons for Today: Questions and Answers.” Prepared for the Economic Policy Subcommittee of the Senate Committee on Banking, Housing, and Urban Affairs,
  11. (1994). The South and the New
  12. (2009). The Unfortunate Uselessness of Most ‘State of the Art’ Academic Monetary Economics.” VoxEU,
  13. (2009). Warring Economists Are Carried Along by the Crowd.” Financial Times,
  14. (1984). What Do Unions Do?

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.