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Aug 27, 2007

The attack on FDR and the New Deal



I have not read Amity Shlaes's book deriding the accomplishments of the New Deal (The Forgotten Man: A New History of the Great Depression.). But I have read enough about the book and similar indictments to have identified what I believe is a chief weakness in books of this sort.

All argue that it was WW II which brought us out of the Depression. This leads them to draw two conclusions: A. the New Deal was a failure and B. the free market should have been left alone to fix itself.

I have never understood how B follows A.

What evidence is there that the economy could have fixed itself? There is none. What evidence we have is that more government intervention was needed not less. WW II after all marked the high point of government intervention in the free enterprise system. The defense budget in 1940 was four times what the whole budget had been two years earlier. And in subsequent years the defense budget grew even more.

Hoover's intervention in the economy undoubtedly was negative. His embrace of Smoot-Hawley was a disaster. But since when was a high tariff evidence of radicalism? In the context of American politics from the 1830s on it was always business interests which lobbied for high tariffs. William McKinley, no radical he (ask Karl Rove) campaigned on the resoration of a high tariff.

Lumping in Hoover with FDR, as Shlaes and other New Deal critics do, underestimates Hoover's essential conservatism. Was he not a major proponent of the unfettered free enterprise system? Did he not blast the New Deal as socialism?

To cast both Hoover and FDR in the same boat is illogical. Worse, it does grave disservice to history. The waters in which they sailed clearly led one to lean right and the other left. There never was a danger of their ships running into one another in the middle of the night. They were in different oceans.


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Ed Schmitt - 8/29/2007

I also have not read Shlaes's book so I'm hesitant to comment (though I did see her interviewed on C-SPAN), but I think you have a very salient point regarding the absence of evidence that the road not taken (the hands off free market approach proposed by Shlaes and Jim Powell) would have been better. I think these authors with an economic focus also neglect the social and political value that an activist federal government provided those of a conservative bent - providing the unemployed some hope that may have headed off significant social upheaval or real revolution. Of course those with more New Left or radical perspectives would contend that FDR should have chosen another road not taken, calling for more significant economic restructuring and income redistribution.

On another note, there are a range of important interpretations of Hoover, of which I'm sure you're aware, and I'm personally convinced by Ellis Hawley, Bruce Lohof, and a bit less so by Joan Hoff that Hoover was trying to chart a middle course with a role for the government to create a more rational economy in the form of an "associative state." Thus I think you could get a good argument that he was not simply "a major proponent of the unfettered free enterprise system," though of course on the critical issue of direct assistance to the unemployed he was immovable, and in his bitterness toward Roosevelt he became an increasingly strident critic. But Hoover was more willing to get the federal government involved than were most congressional Democrats and other national politicians. So I think there is a case to be made that Hoover was at least in the same ocean as Roosevelt, but their ships clearly, as you suggest, leaned in different directions.

Bottom line - Shlaes's argument seems likely too leaky a vessel to carry us to new vistas in understanding the significance of the New Deal. But I plan taking a more extended look at it.