Sunday, March 8, 2009

The Forgotten Man

Back at Valentine's Day, I wanted to buy Ann something romantic. Candy, jewelry, flowers, something like that. She told me she would prefer a George Foreman grill and a day of shopping at thrift stores with no kids. That's what passes for romantic after 23 years. Then she said, "While I'm out, can I get anything for you?" (translation--I haven't gotten you anything.) Not to be outdone in our race to the ultimate levels of boring gifts, I gave her two titles to pick up at Barnes and Noble--both history books. She dropped them back off before the big shopping trip got fully underway, so I was reading within the hour. The two books were Tom Wolfe's The Right Stuff (which is AWESOME), and a new book on the Great Depression called The Forgotten Man, by Amity Shlaes. This week, while on the bus ride to and from Orlando for our class trip, I got a chance to get into The Forgotten Man. (Yes, this is the kind of thing I read for fun.)

The main thesis of the book is that there have been two competing myths about FDR and the Great Depression, each of which is at least partially untrue. The myth of the left is that Herbert Hoover was a laissez-faire, "do-nothing" Republican who sat on his hands from the great crash of 1929 until FDR came along in 1932. Then FDR boldly created the New Deal and saved us from the ravages of the depression, which is why he was so convincingly re-elected in 1936 (and again in 140 and 44). The myth of the right is that FDR didn't really do anything to help with the depression--that his interference actually prolonged it--and that his policies put America on a glide path to a socialistic welfare state. In this view, the real engine that fueled the economic recovery was WWII.

According to this new book, there's plenty of credit and plenty of blame to go around. Hoover was never one to "do nothing." He actually was considered a "progressive" within the Republican party of his time. Sadly, a lot of what he did (like a huge income tax hike and the disastrous Smoot-Hawley Tariff) made things worse. But it is true that countries in Europe that tinkered LESS with their economies emerged from the depression long before we did. That said, FDR did both good and harm. His banking and financial regulations (the FDIC, the SEC, the bank holiday) were extremely helpful in stopping some of the immediate bleeding. And Social Security was a good idea (although the current mathematics of the program need some attention, but that's a post for a different day). However, FDR did not win his landslide victory in 1936 because he had returned prosperity to America (indeed, unemployment remained high throughout his first two terms, and the stock market didn't fully recover until the 1950s). He won because he created modern interest-group politics and gave lots of groups a reason to vote for him--not the least of which was the fact that every American got a letter from the new Social Security administration in the months before the 1936 election telling them of the new benefit which would send them a check for life. Hard to compete with that! Some of the other stuff he did was actually counterproductive--the centerpiece of the New Deal was the NRA for industry and the AAA for agriculture, both of which were eventually ruled unconstitutional. And one can argue that FDR's assault on capitalists was also an attack on capital itself... which therefore stayed on the sidelines rather than re-join the market and fuel a recovery.

Anyway, it's very interesting to watch the current economic news with an eye on the past. FDR's "brain trusters" saw the depression as a great opportunity to put a bold new program in place--reforms they had dreamed about for years. In some cases those reforms had their origins in Stalin's USSR or Mussolini's Italy (and in their defense, they did not yet have the information which later would prove those experiments to be bankrupt). It was striving after all these goals that took the focus off of recovery and quite possibly prolonged the depression. Now I see the Obama administration looking at our current financial crisis and seeing the opportunity to reform health care, education, and energy/enviromental issues. Those might all be nice ideas (I won't bother dealing with those arguments now), but nobody really thinks the reason the stock market is down 50% or unemployment is up right now has anything to do with our lack of a national health care plan. I'd rather see our priorities focus on things like the financial sector and housing. Those grand reforms could wait until the economy is stronger. But it worked for FDR--he managed to win elections long enough to preside over a recovery, and then he got credit not only for shepherding the country through the depression, but also for the bold new plans. Now he is widely seen as the third-best President, after Lincoln and Washington (of course, presiding over voctory in WWII contributes a lot to that ranking, as well). Maybe Obama's gamble will pay off for him in the history books. But that ignores the "Forgotten Man" who bears the brunt of a longer-than-necessary recession.


Anonymous said...

Hello! :)

MichaelPolutta said...

"...but nobody really thinks the reason the stock market is down 50% or unemployment is up right now has anything to do with our lack of a national health care plan."

Except, apparently, our president. He specifically cited this (along with deplorable education and our dependence on foreign oil) as the 3 causal factors for our current malaise, as well as the prescription for getting out of our current malaise being addressing all 3 of those at a federal level.

Good grief.

mbellison said...

I know you hate Chait, but this is interesting.

Greg & Kim said...

I vividly remember learning about this in high school. We watched a video--maybe A&E or the History Channel--all about the Depression and the New Deal. I think I remember it so well b/c the consensus of the historians on the video was shocking to me. They said that it wasn't the New Deal but WWII that got us out of the Great Depression. But the reason wasn't that Republican thing your book talked about. They said it was because FDR grossly underestimated the amount of money that was needed to jumpstart the economy, and it was only the massive spending of WWII that finally brought us out. In other words (and this may have just been my interpretation of their theories), FDR needed to go further in his spending. It seemed like he was spending so much, but it was really just the tip of the iceberg of what was needed.

I'm NOT an economics person (can you tell???), but that theory stuck with me. Unfortunately, it doesn't give me too much comfort with the massive amounts we are spending now. But...spending lots of money is always scary to me. Maybe it's b/c I'm such a frugal person by nature!


C. S. Fox said...

You need to read the 5ooo year leap..
It's on Glen beck's website..


Pete said...

very interesting. After a week without internet, i'm finally back in the loop. I think i've heard of the Forgotten Man book before... it's one i have on my To-Buy list.