This is another response to a Keynesian critic.
My Keynesian critic says I “cannot compare the USA in 1938 and Australia in 1938 apart from both having stimulatory policy”. Well, I can and I did and justifiably so. It’s ludicrous to argue that comparisons are not justified. You also stated that in 1937 America “had the greatest change in fiscal policy under Roosevelt”. Complete baloney – and I have spent considerable time examining the data from official sources. I made my case in my post on the 1937-1938 crash. Prove me wrong and I will cheerfully (well, perhaps not cheerfully) publish it and graciously admit my error.
After that you returned to your GDP mantra even though GDP does not measure growth. In heavens name, how can an economy enjoy economic growth while at the same time consuming its capital? This is akin to a community getting rich by eating its seed corn. I pointed out in my post that it was estimated that net capital consumption dropped by minus 15.2 per cent1. Your response was to completely ignore that fact and keep on stressing Roosevelt’s grossly misleading super-duper GDP record. Continue reading The Great Depression: Australia’s record humiliates Roosevelt and refutes Keynesianism
This post is a response to a Keynesian reader.
If the 1931 spending cuts deepened Australia’s depression, as is alleged, then the rate at which unemployment had been rising would have accelerated. In fact, the reverse happened as shown by the chart below. In the year 1928-29 unemployment leapt by 74 per cent and 42 per cent in the following year. For the year ending 30 June 1931 Commonwealth spending peaked at £68,585,546, after which it fell and the Commonwealth began to accumulate surpluses until war broke out. According to Keynesianism this policy should have been an economic disaster. However, as we can clearly see from the chart, not only did the rate at which unemployment had been increasing slow down significantly, rising by only 5.8 per cent, it then began to quickly drop even though the Commonwealth increased its surplus by 277 per cent and cut spending even further. Continue reading Keynesian fallacies and the Great Depression: or how Australia left Roosevelt eating her dust
The 1937-38 crash was literally a depression within a depression1. The seasonally adjusted production index peaked 118 in May 19372. A year later it stood at 76, a drop of 36 per cent. From April 1937 to May 1938 manufacturing output fell by 38 per cent. The situation for the iron and steel industry was catastrophic with output collapsing by 67 percent. Factory employment dived by 25 per cent, factory payrolls by 36 per cent while aggregate unemployment peaked at 20 per cent. Such a rapid contraction in production was and is unprecedented in US History. The statistics for manufacturing, and the iron and steel industry in particular, are both striking and instructive if the monthly production figures are examined instead of annual aggregates, a fact that will become increasingly clear. Continue reading The Great Depression and the real facts behind Roosevelt’s 1937-38 Depression
I think this article about Australia and the Great Depression might open up another chapter on that economic tragedy. It reveals that contrary to the standard view Australia in fact suffered a near monetary collapse and it was this massive deflation that sent the Australian economy into depression. It is a known fact that manufacturing led the recovery. What is revealed here is that though real wages (nominal wages divided by the price level) remained stable during the depression the real factory wage in terms of output fell by 43 per cent! It comes to the remarkable conclusion that Australia recovered not because of the Premiers’ Plan but because the Plan did so little while allowing prices to do their work.
Continue reading Australia and the Great Depression: What you don’t know but should