Amity Shlaes: Why should we celebrate the New Deal?

Roundup: Talking About History

[Miss Shlaes, a Bloomberg columnist and visiting senior fellow at the Council on Foreign Relations, is author of the just-published "The Forgotten Man: A New History of the Great Depression" (HarperCollins), from which this is adapted.]

The late Arthur Schlesinger, Jr. was a true liberal -- a man who welcomed debate. Just before he died this winter, he wrote, quoting someone else, that history is an argument without end. That, Schlesinger added, "is why we love it so."

Yet concerning Schlesinger's own period of study, the 1930s, there has been curiously little argument. The American consensus is Schlesinger's consensus: that FDR saved democracy from fascism by co-opting the left and far right with his alphabet programs. Certainly, an observer might criticize various aspects of the period, but scrutiny of the New Deal edifice in its entirety is something that ought to be postponed for another era -- or so we learned long ago. Indeed, to take a skeptical look at the New Deal as a whole has been considered downright immoral.

The real question about the 1930s is not whether it is wrong to scrutinize the New Deal. Rather, the question is why it has taken us all so long. Roosevelt did famously well by one measure, the political poll. He flunked by two other meters that we today know are critically important: the unemployment rate and the Dow Jones Industrial Average. In his first inaugural address, Roosevelt spoke of a primary goal: "to put people to work." Unemployment stood at 20% in 1937, five years into the New Deal. As for the Dow, it did not come back to its 1929 level until the 1950s. International factors and monetary errors cannot entirely account for these abysmal showings.

When I went back to study those years for a book, I realized two things. The first was that the picture we received growing up was distorted in a number of important regards. The second was that the old argument about the immorality of scrutinizing the New Deal was counterproductive.

The premier line in the standard history is that Herbert Hoover was a right-winger whose laissez-faire politics helped convert the 1929 Crash into the Great Depression. But a review of the new president's actions reveals him to be a control freak, an interventionist in spite of himself. Hoover signed the Smoot-Hawley Tariff Act, which worsened a global downturn, even though he had long lived in London and understood better than almost anyone the interconnectedness of markets. He also bullied companies into maintaining high wages and keeping employees on their payrolls when they could ill afford to do so. Perhaps worst of all, he berated the stock market as a speculative sinner even though he knew better. For example, Hoover opposed shorting as a practice, a policy that frightened markets at an especially vulnerable time.

The second standard understanding is that the Brain Trusters were moderate people who drew from American history when they wrote the New Deal. If their philosophies were left wing, then that aspect ought to be treated parenthetically, the attitude was. But the leftishness of the Brain Trust was not parenthetical. It was central....

So why has it taken so long to revisit this period? The first reason is that the Great Depression was a disaster. From the Crash to the Dust Bowl and the floods, it all felt like a permanent Katrina, and Americans suspended disbelief. But the reality was that the depression did not mean permanent Katrina -- indeed, we see now that that downturn was the exception in the century, not the rule.

The next reason we hesitate is World War II. War always trumps economics. New Deal critics were right on the economy, but they were wrong in their estimations of Hitler. To write sympathetically about the Liberty Leaguers is seen, even today, as siding with the appeasers. The incredible rightness of FDR's war policy obscures the flaws in his prior actions.

The Cold War also played a role in delaying examination of the 1930s. Nearly all writers today -- whether they write policy or history -- make a point to avoid being classed with Sen. Joseph McCarthy and the House Un-American Activities Committee. But that fear of being labeled as a red-baiter prevented the necessary discussion of the counterproductive policy of the 1930s....

Related Links

  • John Updike: Review of Amity Shlaes's book (New Yorker)
  • Read entire article at WSJ

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    More Comments:

    Owen Roberts - 7/1/2007

    Thanks for the reference to DeLong. I'm not so sure I would call his review of Shlaes' book scathing, but he does make good points and he refers to some good material.

    J Pablo Silva - 6/30/2007

    Brad DeLong has a scathing critique of both Shlaes' book and Updike's review. See http://delong.typepad.com/delong_economics_only/2007/06/poor-john-updik.html