Have you ever seen George Will do his schtick on some chat show or other and then start wondering if maybe he’s just making stuff up? Wonder no more!
On This Week this past Sunday Will was on with New York Times columnist and Nobel Prize winner Paul Krugman. The following exchange took place:
GEORGE WILL: Sam, one of the ways we turned a depression into the Great Depression that didn’t end until the Japanese fleet appeared off Hawaii was that there were no rules and investors went on strike because the government was completely improvising. Net investment was negative through almost all of the ’30s because, again, people did not know the environment in which they were operating because the government had the fidgets and would not let rules and markets work.
PAUL KRUGMAN: This is not the way – okay. Well, it’s not the way I read the history. It’s not the way – no.
GEORGE WILL: Am I wrong about net investment?
SAM DONALDSON: Yes.
PAUL KRUGMAN: No, the negative net investment was because, you know, when you have 20% unemployment and all the factories are standing idle, who wants to build a new one? You don’t need to invoke the government to explain that. No, what actually happened was, you know, there was a collapse of the financial system, which was not restored for a long time. There was a persistent deep slump in consumer demand and, therefore, no investment demand and so you were stuck in this trap. Roosevelt got the economy moving somewhat. By 1937 things were a lot better than they were in 1933. Then he was persuaded to balance the budget or try to and he raised taxes and cut spending and the economy went back down again and then it took a enormous public works program known as World War II to bring the economy out of the depression.