Making Wall Street Unhappy Won’t Reduce Private Investment

Mr. Andrew Ross Sorkin of the New York Times noted Wall Street’s shift of funding to Republicans and told readers that: “Mr. Loeb’s views, irrespective of their validity, point to a bigger problem for the economy: If business leaders have a such a distrust of government, they won’t invest in the country.  And perception is becoming reality.”

Is that so?  Well, business leaders were never more angry at the government than during Franklin Roosevelt’s New Deal.  And, let’s see what they did in those years.  Here are the growth rates for non-residential fixed investment in the first four years of the New Deal.

1934 27.4%
1935 26.7%
1936 35.2%
1937 19.8%

It looks like the business leaders were able to put their anger aside and invest where it was profitable.  Of course business leaders always stand to gain if they convince the public of the argument that Mr. Sorkin is making — if the government doesn’t give them everything they want then they won’t invest.  However, the evidence does not seem to support Mr. Sorkin’s assertion.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR).  He is the author of False Profits: Recovering from the Bubble Economy.  He also has a blog Beat the Press, where he discusses the media’s coverage of economic issues.  This article was first published in CEPR’s “Beat the Press” blog on 31 August 2010 under a Creative Commons license.

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