Why the New Deal Failed

The New Deal was a radical attempt on the part of the Roosevelt Administration to restore full employment and growth to the US economy. It consisted of (i) the National Industrial Recovery Act of 1933 and (ii) the National Labor Relations Act of 1936. These two pieces of legislation have been decried and dismissed by the economics profession with the most vociferous critic being Milton Friedman. This book provides a more accurate account of the causes of its failure, one that, while favorable to the underlying motives, is critical of its actual implementation. In short, while its intentions were laudable, its implementation was doomed from the start.The argument presented differs from the standard, run-of-the-mill critique by revisiting the underlying causes of the Great Depression. It is shown that it was the result of a massive technological shock in the form of electric unit drive which increased productivity by more than it increased income and expenditure. The wage and price policies of the New Deal sought to close this gap. However, the actual measures put in place did more harm than good, owing in large measure to the heterogeneous nature of the technology shock and the dearth of information.