The Ghost of New Deal Pork
Posted January 30th, 2009 at 3.20pm in Ongoing Priorities.
The “cash for clunkers” plan recently proposed in Congress would provide a subsidy for a new car purchase to anyone willing to have their current car destroyed. But the economic rationale is eerily similar to the New Deal program most widely agreed to be a catastrophic failure: FDR’s agriculture plan that slaughtered pigs. The reasoning goes like this:
Crushing the old car has two benefits. First, it ensures that the consumer’s purchase of a more efficient vehicle actually has a net environmental benefit. Second, it prevents a glut of used cars on the market, which would reduce trade-in values for new car buyers, which would cut into the sales incentive effect.
This was the same misguided reasoning that led to the slaughter of six million pigs and plowing under of about half the crop area under cultivation. The head of the Agricultural Adjustment Administration argued that:
People who believe that we ordered the destruction of food are merely the victims of their prejudices and the misinformation that has been fed to them by interested persons. What we actually did was to stop the destruction of foodstuffs by making it worth while for farmers to sell them rather than to destroy them.
In other words, the destruction of crops and livestock would ultimately lead to less waste because prices would be lifted, and so farmers would have more incentive to produce. However, despite vigorous defense by the administration, it is now known that most of the meat went to waste and it was an abysmal failure. Government cannot do a better job than the market in setting prices, and government’s destruction of output will never lead to increased output. It was a failure of economic reasoning – which is now coming back in vogue.
- Author: Guinevere Nell
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January 30, 2009 Kristina, Gloucester VA writes:
We can banter about facts all day about what will get this economy moving - and relate historical evidence to back up what works. The problem we have is that we have factions in government and in society that don’t want the economy to get moving. “That would be unfair.” That would mean that the successful will succeed- ie., earn more money. The successful shouldn’t be allowed to earn more money because they will not spend it wisely on social programs like the benevolent government. They will buy things like corporate jets and fancy spa vacations - which, of course in no way will benefit the “common” man or “working class”. The common man cannot afford such things therefore how dare the rich spend money on such frivolities. The seekers of ultimate benevolence (those of clean hearts who live in shacks and give their hard earned millions to the poor and downtrodded) disdain such frivolous spending, and completely ignore the fact that the “workers” of this country just happen to be the ones who WORK on BUILDING such frivolous things as CORPORATE JETS AND some WORK AT SPA RESORTS. Our economy is faltering, in part, because those with money have been either “shamed” in to not spending it by the captains of moral benevolent care, or are scared to spend (ie. invest) because their previous investments have been destroyed by the same enlightened people.