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The Media, the Great Depression, and our future

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Abstract: Did Franklin Roosevelt make the Great Depression worse?

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During the 2008 financial crisis Fox featured interviews with supposed experts, who claimed that the New Deal policies of the Franklin Roosevelt administration made the Great Depression worse, not better. That coverage reportedly played a major role in preventing the Obama administration from bailing out poor and middle-class humans who lost their homes at that time. This article provides context that shows that the Franklin Roosevelt administration dramatically decreased unemployment and produced unprecedented growth in average annual income (GDP per capita adjusted for inflation) with only nominal inflation. Everyone benefitted except the ultra-wealthy. But the ultra-wealthy in recent decades have controlled increasing portions of the money for the media, which may explain why the humans who accepted "liar loans" were demonized while many banks that were too big to fail before the crisis were bigger after, and over five thousand finance industry leaders, many of whom pushed those fraudulent loans, got million dollar bonuses at taxpayer expense.[1] Leading economists in the Modern Monetary Theory school insist that we can repeat the success of the Franklin Roosevelt administration.

Introduction

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Peck (2016)[2] describes how Fox and other conservative media helped shape the debate in the US Congress about the proper response to the 2008 financial crisis. Their coverage included interviews with Amity Shlaes[3] and other conservative authors and politicians pushing two images:

  1. President Franklin Roosevelt's New Deal allegedly prolonged rather than shortened the Great Depression.
  2. The victims of "Liar loans" were portrayed primarily as people of color begging for an unearned handout from government.

Both these claims seem contradicted by evidence summarized in this article. We first plot unemployment, which shows a dramatic increase during the administration of Herbert Hoover (1929-1933) followed by effective correction during the Franklin Roosevelt (FDR) years (1933-1945). We also plot average annual income (GDP per capita adjusted for inflation), which shows an unprecedented fall during the Hoover years followed by even more unprecedented growth during FDR. And we plot the highest marginal tax rate, showing that the ultra-wealthy paid higher taxes under FDR than at any other time in US history with plots showing reductions in inequality that declined from FDR until the inauguration of Ronald Reagan in 1981, when inequality started increasing again. Plots of inflation are noisier and harder to read, so we table growth and inflation comparing especially different wars in US history: This shows that previous wars had high inflation and only nominal growth while WW II had unprecedented growth with only nominal inflation.

Regarding the impact of Fox's claims on the US government's reactions to the 2007-2009 international financial crisis, Acemoglu and Johnson (2023) describe how "The insurance company AIG was saved by a government support of $182 billion in the fall of 2008, yet it was allowed to pay nearly half a billion dollars in bonuses, including to people who had wrecked the company. ,,, [And] nine financial firms that were among the largest recipients of bailout money paid five thousand employee bonuses of more than $1 million per person—supposedly because this was needed to retain 'talent.'" Meanwhile, other options like "firing or prosecuting bankers who had broken the law—for example, by deceiving customers and contributing to the financial meltdown in the first place [and providing] greater assistance to home owners in distress" were not considered.[4]

Unemployment

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Figure 1. US unemployment 1800-2024.[5]

Figure 1 plots US unemployment 1800 to 2024. This shows a dramatic increase during the administration of Herbert Hoover (1929-1933) followed by effective correction during the Franklin Roosevelt (FDR) years (1933-1945).

Schlaes (2007) quotes a few unemployment figures sprinkled throughout her book but does not plot them. Paul Krugman accused Shlaes of disseminating "misleading statistics."[6] Shlaes responded by saying that she used the Lebergott (1964) / Bureau of Labor Statistics (BLS) series.[7] However, her book does not include a table or plot of unemployment, though she does decorate the first page of each of her 15 chapters with a percent of the workforce unemployed on a specific month or day between 1927 and 1940. Her numbers are generally consistent with Figure 1.[8]

Average annual income

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Figure 2. US average annual income (GDP per capita in 2017 K$) 1800-2024. The Herbert Hoover and Franklin Roosevelt (FDR) years present a very different image with GDP per capital falling at 8.1% per year during the Hoover presidency and growing at 8.1% per year during FDR. Between 1800 and 1929, the GDP per capita grew at 1.4% per year. Between 1945 and 2024, GDP per capita grew on average 1.7% per year.[9]

Figure 2 plots average annual income in the US (GDP per capita) 1800 to 2024. This shows an unprecedented fall at 8 percent per year for the 4 years of the Hoover administration followed by an even more unprecedented increase at 8 percent per year for the 12 years of FDR. This raises questions about the claims of Shlaes (2007) and Fox's other guests on this topic.[10]

Highest income tax rate

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Figure 3. Historical US personal income tax rates and brackets as a percent of taxable income (to 2021).[11]

Figure 3 shows the history of personal income taxes in the US. This shows that income was taxed during the Civil War and for a few years after, but the US did not have substantive taxes on income until shortly before World War I. These tax rates were reduced after World War I and increased again during the Great Depression. For 1944 and 1945, late in World War II, the top rate was raised to an all-time high of 94% applied to income above $200,000 (equivalent to $3.57 million in 2024 dollars). It has generally trended down since the end of the war.[12]

But personal income taxes and the top bracket are only part of the story for at least two reasons:

  1. It applies to adjusted gross income, not gross income. This difference has increased dramatically in the 70 years since 1955, when the number of words in US federal tax code and regulations were reported as 1.4 million words. In 2015, there were 10.1 million words in US federal tax code and regulations, according to the Tax Foundation. This suggests a massive increase in tax loopholes.[13]
  2. Taxes on corporations have declined from roughly 30 percent of all federal receipts in the early 1950s to roughly 10 percent in 2012.[14]

What was the impact of the Franklin Roosevelt administration's policies on inequality?

Inequality

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Figure 4. Shares of post-tax US national income for bottom half and top 3 percent, 1913-2023.[15]
Figure 5. Shares of US wealth - bottom 90 and top 1 percent, 1820-2023.[16]

Figures 4 and 5 show inequality of income and wealth in the US. Figure 4 plots the evolution of the shares of the bottom half and top 3 percent of post-tax US national income from 1913 to 2023. Figure 5 shows the evolution of the bottom 90 and top 1 percent of US national wealth from 1820 to 2023. Both show roughly the same image: High inequality dramatically reduced during World War II and continuing after the war with the US on average tending to become slightly more egalitarian until Ronald Reagan became President of the US in 1981. Since then, the mood in Congress has been for politicians to identify and reward people they call "job creators". The evidence should be clear:

When politicians are allowed to reward people they call "job creators", the humans who actually create most of the jobs and the rest of the bottom 99 percent suffer.

Wartime Growth and inflation

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Economists and leading politicians have long understood that inflation was often a problem during wars. During the Napoleonic Wars, the Prime Minister of the UK, William Pitt, reportedly said he was more afraid of high prices than he was of the enemy.[17] This author has so far failed to find a reference discussing productivity growth, like that visible during World War II in Figure 2 above. Rockoff (2015) provides estimates of inflation during the American Revolution, the War of 1812, the American Civil War, and World Wars I and II. The MeasuringWorth data plotted in Figure 2 above starts in 1790, after the end of the American Revolution. Table 1 summarizes economic growth and inflation during the War of 1812, the Civil War and World Wars I and II: The first three of these wars had economic growth comparable to non-war years and exceptionally high inflation. During World War II, the US had the opposite: unprecedented economic growth with only nominal inflation.

In addition to unprecedented income taxes, summarized in Figure 3 above, the Franklin Roosevelt administration also had waged and price controls managed by the Office of Price Administration (OPA) that recruited many volunteers to help manage the program. We will not attempt here to assess the relative contribution of higher taxes and the OPA to controlling inflation during World War II, apart from noting that prices jumped on average 6 percent only a few days after the OPA ceased operations, a monthly increase that would have produced 100 percent inflation if continued for a year. However, less than a month later, the US Congress passed legislation to reopen the OPA, and inflation slowed.[18]

Table 1. Economic growth and inflation in major wars in US history
war start end annual rate of
date year date year growth in real GDP per capita inflation
War of 1812 1812-06-18 1812 1815-02-17 1814 1.8% 10.6%[19]
Civil War 1861-04-12 1861 1865-06-26 1865 4.3% 14.3%
WW I 1917-04-02 1917 1918-11-11 1918 4.2% 13.7%[20]
WW II 1941-12-07 1941 1945-09-02 1945 9.1% 4.5%[21]

Economists in the Modern Monetary Theory (MMT) school support job guarantees like the New Deal programs, while more traditional economists prefer a guaranteed minimum income. When humans are unemployed, their general health and well being tends to decline, they often lose self esteem[22] and good work habits.[23] And employers are less likely to request interviews with applicants who have been unemployed a year or more.[24] These arguments favor a job guarantee over a guaranteed minimum income. But many elites seem to prefer to maintain a large reserve army of unemployed to limit the ability of employees to bargain for better wages and working conditions.[25] European countries led by Denmark are using "flexicurity[26] systems that provide generous unemployment and support for adult education for workers while providing employers greater flexibility in expanding and contracting their workforce in response to changes in demand.

Role of the media

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How did Franklin Roosevelt get the political support needed to tax the ultra-wealthy and create the Office of Price Administration that generated unprecedented economic growth with only nominal inflation, as described above?

One possible answer is given in the research by Acemoglu, Johnson, and Robinson, who shared the 2024 Nobel Memorial Prize in Economics,[27] combined with research on the role of the media in political economy. Acemoglu and Johnson (2023, ch. 4) said that

Acemoglu and Robinson (2012) suggest that the Industrial Revolution began in England, because the English were the first to extend equal protection of the laws to innovative commoners. At other times and places -- including in many countries today -- innovators who threaten powerful individuals and groups can have their innovations blocked,[29] or the fruits of their labors confiscated by members of the first two orders or even imprisoned.[30]

Acemoglu and Johnson (2023) further insist that the inequality is to a large extent a function not of technology but of political power, and we can have a high rate of economic growth with lower inequality, as suggested by Figures 2, 4 and 5 above. They provide a template for doing this based on

  1. altering the narrative,
  2. building countervailing powers [like organized labor], and
  3. developing technical, regulatory, and policy solutions to tackle specific aspects of technology’s social bias.[31]

"Altering the narrative" implies a major role for the media. But media outlets have conflicts of interest in honestly reporting on anything that might offend (a) anyone with substantive control of the money for the media or (b) major news sources like public officials, including law enforcement. Usher and Kim-Leffingwell (2022) found on average 1.4 more federal prosecutions for political corruption in each of the 94 US federal court districts between 2003 and 2019 per member of the Institute for Nonprofit News (INN) in that district the previous year. During that period, the number of journalists in the US fell by roughly a factor of 3 -- between 60 and 70 percent -- with no statistically significant impact on federal prosecutions for political corruption. They did not describe the specific mechanisms connecting INN members to prosecutions for political corruption, but major media outlets often disseminate news produced by members of INN, because they could lose audience if they don't, and their advertising rates are a function of their audience.

More support for local news nonprofits like members of INN may also make it easier to build countervailing powers and disseminate research on policy alternatives that rarely appear in major media outlets. A more diverse media landscape would reduce the impact of decisions like those of YouTube to delete videos posted by Palestinian human rights organizations documenting questionable actions by Israelis.[32] For a summary of research on media reform, see the Wikiversity article on "Media & Democracy lessons for the future".[33]

Appendix. Companion R Markdown vignette

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Statistical details that make the research in this article reproducible are provided in an R Markdown vignette on "The Media, the Great Depression, and our future/Companion R Markdown vignette".

Notes

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  1. ↑ Acemoglu and Johnson (2023, ch. 3).
  2. ↑ See also Peck (2019).
  3. ↑ See esp. Schlaes (2007).
  4. ↑ For more on how the US political economy responds to violations of US law by major corporations, see the discussion of deferred prosecution agreements in Dean Starkman and the watchdog that didn't bark.
  5. ↑ "unemployment" in the USGPDpresidents dataset in Croissant and Graves (2025). Various sources identified in the "help" file for USGPDpresidents including LNS14000000 from the Current Population Survey of the Bureau of Labor Statistics for numbers since 1940.
  6. ↑ Krugman (2008).
  7. ↑ Shlaes (2008).
  8. ↑ Figure 1 follows the Wikipedia article on "Unemployment in the United States", accessed 2025-12-01, in using Lebergott (1964) for 1800 - 1889, Romer (1986) for 1890 - 1929, Coen (1973) for 1930-1939, and the BLS since 1940.
  9. ↑ If we start at 1790 rather than 1800, then Measuring Worth has US GDP per capita growing at 1.5% per year. We could also add a breakpoint in 1947, which would have GDP per capita falling at 7.9% per year for 2 years and growing at 2% per year since. Data from Johnston and Samuel H. Williamson (2025). Available as "realGDPperCapita" in the USGPDpresidents dataset in Croissant and Graves (2025).
  10. ↑ as described by Peck (2016).
  11. ↑ Obtained by adding annotations to File:Historical Income Tax Rates and brackets.png.
  12. ↑ The history of income taxes in the US appears in the section on "History of top rates" in the Wikipedia article on "Income tax in the United States", accessed 2025-12-01.
  13. ↑ "UStaxWords" dataset in Croissant and Graves (2022) from the Tax Foundation, which cite the Tax Foundation (2006) and Greenberg (2015). For alternative perspectives on this issue, see Bishop-Henchman (2014).
  14. ↑ File:Federal Receipts by Source.svg, accessed 2025-12-01.
  15. ↑ Plots of percentile=='p0p50' and 'p97p100' for variable == 'sdiincj999' in the US data in the World Inequality Database (WID) using the WID package for R described by Graves (2025).
  16. ↑ Plots of percentile=='p0p90' and 'p99p100' for variable == 'shwealj999' in the US data in the World Inequality Database (WID) using the WID package for R described by Graves (2025).
  17. ↑ Sabaté and Torregrosa-Hetland (2024).
  18. ↑ Jacobs (1997) and Cohen (2008), cited from the Wikipedia article on "Office of Price Administration".
  19. ↑ The War of 1812 was followed by dramatic deflation and a major recession. Thus, if we change the end year from 2014 to 2015, the economic growth and inflation reported here disappear.
  20. ↑ WW I began in Europe 1914-07-28. Between 1914 and 1917, the US economy averaged 7.8% growth per year in real GDP per capita with 16.5% annual inflation. Different numbers. Same general conclusion.
  21. ↑ WW II began in Europe 1939-09-01. Between 1939 and 1945, the US economy averaged 10.1% growth per year in real GDP per capita with 4.2% inflation. Different numbers. Same general conclusion.
  22. ↑ Green (2010).
  23. ↑ Hult et al. (2018).
  24. ↑ Farber et al. (2018).
  25. ↑ Mitchell et al. (2016, esp. sections 12.3. Unemployment buffer stocks and price stability and 12.4. Employment buffer stocks and price stability, pp. 247-259).
  26. ↑ accessed 2025-12-20.
  27. ↑ Royal Swedish Academy of Sciences (2024).
  28. ↑ Acemoglu and Johnson note that this description applies to many other societies in history and prehistory, e.g., when the pyramids were built in Ancient Egypt but did not apply elsewhere. See also Graeber and David Wengrow (2021).
  29. ↑ In 1707 Denis Papin reportedly built a ship powered by hand-cranked paddles that was destroyed by boatmen of Munden who feared it would threaten their livelihood. He left his family in Germany and went to England, where the Royal Society published several of his papers before he died a pauper and was buried in an unmarked grave.
  30. ↑ Jimmy Lai is Hong Kong businessman and media figure, imprisoned over his criticism of the Chinese Communist Party.
  31. ↑ Acemoglu and Johnson (2023, ch. 11).
  32. ↑ The Cradle (2025).
  33. ↑ accessed 2025-12-20.

Bibliography

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