President Obama’s principal economic advisers – Mr Bernanke, Chairman of the Federal Reserve, and Mrs Romer, the chair of the Council of Economic Advisors – both claim to be devoted students of the Great Depression of the 1930s. As a result of their studies, they believe that the monetary stimulus applied from 1933 on was responsible for strong growth in the U.S. economy. As Mrs Romer says in a paper she wrote:

Plausible estimates of the effects of fiscal and monetary changes indicate that nearly all the observed recovery of the U.S. economy prior to 1942 was due to monetary expansion. A huge gold inflow in the mid- and late 1930s swelled the money stock and stimulated the economy by lowering real interest rates and encouraging investment spending and purchases of durable goods. That monetary developments were crucial to the recovery implies that self-correction played little role in the growth of real output between 1933 and 1942.

This is the worst kind of historicism. Mrs Romer believed that monetary changes would turn out to be important, so she made some estimates, based on that belief, of their potential impact. Guess what? She saw what she expected to see. Her belief was justified. This isn’t even analysis, let alone science. No wonder we’re in trouble. I hope Mr Bernanke’s studies were a little more analytical. But I doubt it.

In any event, it appears that they will be exercising their learning. A thorough comparison of present conditions to the Great Depression by two prominent academic economists shows:

• World industrial production continues to track closely the 1930s fall, with no clear signs of ‘green shoots’.
• World stock markets have rebounded a bit since March, and world trade has stabilised, but these are still following paths far below the ones they followed in the Great Depression.
• The big-4 EU nations divide north-south; today’s German and British industrial output are closely tracking their rate of fall in the 1930s, while Italy and France are doing much worse.
• The North Americans (US & Canada) continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turn around.
• Japan’s industrial output in February was 25 percentage points lower than at the equivalent stage in the Great Depression. There was however a sharp rebound in March.

It is particularly worrying that Mrs Romer authored the Obama administration’s economic recovery plan, and approves of Ms Pelosi’s stimulus package. She appears to have completely ignored the 1930’s recovery plans, in which the government went out and hired large numbers of the unemployed, and put them to work. On projects that were worthwhile investments in many cases – many of the the WPA projects around the country are still in use today and are an amazing legacy of that era. Employing 8.5 million people, the WPA built, inter alia:

• 800 airports, including for example New York’s LaGuardia.
• 78,000 bridges
• 125,000 buildings
• 650,000 miles of roadways
• Countless parks, golf courses and works of art.

Now that was stimulus that even a curmudgeon like me can believe in and get behind. But Mrs Romer apparently believes that this program had little or no economic effect. That is why she approves of Ms Pelosi’s bill, which essentially provides funding for programs already in place, a bailout bill for state bureaucrats for all practical purposes. There is a token amount of money for infrastructure, negligible by comparison with the overall program. Even the Obama administration lamely admits that, instead of adding millions of jobs and making strategic investments, as the Roosevelt administration did, the stimulus package merely preserves some existing jobs.

Most of today’s infrastructure was built in the 1930s through the 1960s. When President Eisenhower left office, 12.5% of the Federal budget was being spent on infrastructure. Today it is less than 2%. As a result, America’s infrastructure is old, worn-out, crumbling and, in many cases, dangerous. As recent bridge collapses have shown. But funding politically favored groups has clearly won out over any notion of the good of the nation.

Green shoots? No. Just a whole lot of fertilizer.