Read the whole article at UCLA newsroom because, despite being about economics, it is really easy to understand. Here's some key quotes.
Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.Does this remind you of anything, or anyone. Maybe todays financial crisis here in Aus, and Rudd's completely screwing up his "solution" to it? All that has hapenned is we've gone from bad to worse, and we have less chance of getting better soon. Funds are frozen. Go figure.
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"President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies."
...In the three years following the implementation of Roosevelt's policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.
Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled and the gross national product floundered at 27 percent below where it otherwise might have been.
"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."
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"The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes," Cole said. "Ironically, our work shows that the recovery would have been very rapid had the government not intervened."
To boot Rudd has lead the union movement to it's strongest political position ever in Australia. They will push for wage increases at the expense of the unemployed and the same inflated wages, prices and interest rates scenario mentioned above will keep us in a Rudd rut for a decade.
And then there's the ETS. It just keeps getting better, sorry worse. The possibilities for price inflation, failure of key industries and job losses multiplies many times over.
But i'm not alarmist. I'm not undermining trust in our institutions. I'm undermining trust in one man. Kevin Rudd. If he doesn't touch anything we'll be fine.
