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The political arguments fly back and forth concerning how to pull out of our economic mess. Some suggest we learn from FDR and how he led the US out of the great depression. Others insist that it was not FDR’s “New Deal” that lifted us from depression, but World War II. Who is right?The best measure of our economy is the gross domestic product (GDP), which measures our national income and output. Another measure is the percent unemployment, which was not considered vital before the depression and so until 1930 was estimated rather than measured. Let us look at the GDP and unemployment data for the years in question. The data is in the table at the bottom of the page.Historical data (arrayed in the table below) indicates that the effects of stock market crash of 1929 were gradually felt by most people. The depression took time and the recovery was slow.As I view the data, it seems clear that FDR’s new deal was leading the US out of the depression. The GDP in 1929 was 103.6 billion dollars. The GDP hit a bottom of 56.4 billion in 1933, but rose to 101.4 billion dollars by 1940. The trend of the GDP is clearly positive before our involvement in WWII. By 1937, well before the war, GDP had increased 61% from its low point, and, of course, by 1940 the GDP had regained most of the loss.

Unemployment, not clearly measured before the depression, was estimated at 3.5 percent in 1929, it was 8.9 percent in 1930 and struck a low point of 24.9 percent in 1933. By 1941, before the war, it had improved to 9.9 percent. The trend of unemployment shows that it had returned to 1930 levels before the war began for the US on December 7, 1941.

Some people note that, before we entered the war, our industry produced the supplies necessary for Britain and the Soviet Union to fight the war. That observation is true, but irrelevant. Technically the war started for Europe in 1939 when Germany invaded Poland. The Lend Lease program that US industry used to manufacture and supply equipment to Europe did not begin until March 1941, so it could not account for the 1940 and early 1941 GDP.

Those who reject FDR’ efforts miss that the US had 17.86 million of our citizens who served in the military during the war. At the end of 1945, 14.32 million were still in uniform. Most service members were released by June 1947, more than 9 million new workers. If our economy was still not recovered, why didn’t unemployment skyrocket after the war? Unemployment in 1946 and 1947 was 3.9 percent, in 1949 5.9 percent, and was mostly in the 5 percent range during the years of the 1950s.

Yes, the GI bill helped our economy after the war by financing higher education and housing for our veterans. Yes, the Marshall Plan, which essentially rebuilt war damaged European countries, stimulated our economy to 300 billion in the 1950s. And yes, the Eisenhower administration sponsored the building of interstate highways which also assisted the economy. But all of those were government sponsored and funded programs, just like the “new deal.”

So, I think the information is clear that the great depression was over for the United States before WWII. If this is true, why don’t we learn from FDR and get ourselves out of this mess?

YEAR GDP* UNEMP*

1929     103.6      3.5

1930      91.2      8.9

1931       76.5    15.9

1932      58.7      23.6

1933      56.4      24.9

1934      66.0      21.7

1935      73.3      20.1

1936      83.8      17.0

1937      91.9      14.3

1938      86.1      19.0

1939      92.2      17.2

1940      101.4      14.6

1941      126.7      9.9

1942      161.9      4.7

*GDP = Gross Domestic Product in Billions

*UNEMP = Unemployment as Percent of Workforce

** US Department of Commerce and US Bureau of Labor Statistics data