@AmaDaden
I’ll reference this a few times, so you may want to give it a quick look-over:
http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_A …
I like a digger who does some research. Oddly enough, at Wake Forest I studied under the professor who ran that survey (Prof. Whaples). I asked him why more economists didn’t support the idea that the government extended the depression (given the rather glaring reduction in Gross Domestic Product (GDP) that was almost a direct consequence of acts such as the Smoot-Hawley Tariff Act), and he suggested that the question might have been too vague and that not all economists believe that the government had much influence, but many do. The by-the-book definition of a recession is multiple successive periods of negative GDP growth, and after Smoot-Hawley was passed, that was almost ensured:
"According to government statistics, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934." -wikipedia on Smoot-Hawley
The basic GDP formula goes thus:
GDP = Consumption + Investment(i.e. private expenditures on new products/markets/etc.) + Goverment spending + (Exports - Imports)
GDP = C + I + G + (X - M)
The New Deal did push GDP to positive growth in the mid-30s, effectively substituting C, I, and (X-M) with a very, very large G. Government projects kept a lot of people employed in the short term in jobs that weren’t exactly extremely nice (it’s also important to consider all the dangerous political consequences of major government control of an economy), and by the time the late 1930s came around, the government’s efforts to stimulate the overall economy had effectively failed (stagnation until G exploded in the 1941), all the while siphoning resources from private enterprises to fund giant public works projects (i.e. sacrificing long-term growth for short-term employment numbers). The dust bowl certainly didn’t help anything, and the growing trend of fascism and socialism (in reality Communism) across the world didn’t do free market economies much good. So "taken as a whole," economists who believe massive fiscal stimulus can boost an economy might take that as..despite Smoot-Hawley and the like, Roosevelt did what he could to boost output.
There are times in a free market economy that are rather turbulent (think of them as extinction events in evolutionary terms…after all an economy can be seen as an evolving creature) but the reactions of free enterprises and free individuals tend to be much more rational, efficient, and expedient than most actions taken by the government. There are things the government can do to help, but most of the time these are lawyers and often relatively uneducated people making rash decisions about extremely complicated matters that 99% of them don’t truly understand (e.g. ask the average congressman how mortgage-backed securities were formed and what function they served, and continue to serve in capital markets).
Also we weren’t in nearly as great a deficit in the 1930s as we are in today. I can guarantee you that by the end of 2009 or the beginning of 2010, there will be nasty inflation in all sectors of the economy (not just food and energy). Any resultant boom (if any) will be very short-lived unless the capital markets return to normalcy (i.e. until the mispricing of asset-backed securities (ABS) is removed and these (actually) valuable securities return to levels that reflect their cash flows).
Please excuse me if I last your interest a long time ago…economics tends to do that at times. If you’re interested in reading about ABS mispricing, the keynote speaker at the October 08 ABS conference gave a speech about an idea for these markets that reflects the innovation in private markets that those economists were talking about:
http://www.tyillc.com/abseast2008
