Did New Deal Spending End the Great Depression?: George Selgin’s ‘False Dawn’ empirically demolishes the claim that Franklin Roosevelt pursued a Keynesian recovery strategy. (Marcus M. Witcher, June 11, 2026, Daily Economy)
The Agricultural Adjustment Administration (AAA) and the National Recovery Administration (NRA) were “the twin pillars of Roosevelt’s recovery program” and Selgin finds both wanting. The AAA set out to raise farm commodity prices by incentivizing farmers to restrict supply. The goal was to increase farmers’ purchasing power. Unfortunately, the program had unintended consequences and was especially bad for sharecroppers (who were disproportionately black). The increased spending by farmers “tended to be more than offset by reduced spending by displaced former farm laborers, sharecroppers, and tenants.” One post-New Deal assessment concluded it was “extremely doubtful whether the AAA restriction policy did anything to increase total purchasing power” and another found no evidence that the program was “a stimulus to recovery in the economy as a whole.” After evaluating the latest empirical evidence, Selgin concludes that “it’s hard to imagine a plausible social welfare function that would yield a positive balance, let alone a substantial one” toward encouraging economic recovery.
In Selgin’s account, the NRA performed even worse than the AAA as a vehicle for economic recovery. The goal of the NRA was to lift wages to increase purchasing power across the economy to address underconsumption, which many New Dealers blamed for the Great Depression. To this end, the NRA established “codes of fair competition” that established working conditions, set maximum working hours, and uniform wage rates. The point was to replace competition with cooperation. The result was the cartelization of the American economy.
Selgin gives voice to the NRA’s many critics, among them Keynes, who “was especially critical of the National Recovery Administration…describing it, accurately, as pretending to promote recovery while actually impeding it.” In 1935, the Brookings Institution released a report on the NRA, which condemned the program keeping “business in a churn, preventing re-employment, and consequently retard[ing] American development.” In short, the twin pillars of the First New Deal did not promote economic recovery and likely impeded it.