Adventures from reading books captured within short reviews.
This book provides a critical review of actions taken during the Great Depression from 1929 to 1940, and it reflects of whether theses actions helped or hurt the prospects for economic recovery. Viewing that era from today’s perspective can provide plenty of things to criticize. However, we today are the beneficiaries of many of the actions taken then.
Shalaes portrays both Herbert Hoover and Roosevelt (and most other politicians of the time) as not understanding economics and taking actions are resulted in making conditions worse. Hoover signed the disastrous Smoot-Hawley tariff bill and raised taxes to balance the budget. Roosevelt vacillated between public works spending, anti-big-business rhetoric and raising taxes to balance the budget; all the which demonstrated a total “lack of faith in the marketplace.” “From 1929 to 1940, from Hoover to Roosevelt, government intervention helped to make the Depression Great.”
Obviously, the New Deal public works programs provided employment and infused money into a collapsing and deflationary economy. Also, many important foundations of our modern economy began during Roosevelt’s administration: Social Security, the Securities and Exchange Commission, the modern Federal Reserve and more. Roosevelt also pursued a more open trade policy and undid most of the protectionism begun under Hoover.
However, Shlaes indicates that the aggressive expansion of government run enterprises (e.g. T.V.A.) provided uncertainty and fear from government competition in the minds of business investors. This together with monetary policies that limited money supply crippled possible economic growth from the private sector and caused a recession within the depression from 1937 to 1940.
Furthermore, the heavy hand of government bureaucrats began to tarnish the reputation of the New Deal programs. One of the most absurd (from today’s perspective) cases highlighted by this book was the Schechters “sick chicken” case that went all the way to the U.S. Supreme Court. The Schechters were kosher chicken merchants in New York City who had been found guilty of discounting the cost of their chickens which was a violation of federal rules that were intended to prevent deflation. The Supreme Court found for the Schechters and basically determined that the National Recovery Administration was unconstitutional.
Other victims of Roosevelt’s centralization campaign included some wealthy individuals, many of whom were hounded by prosecutors for tax avoidance. Also, privately owned electrical utilities were subjected to alleged unfair competition from subsidized public utilities.
Shalaes provides a sympathetic description of Wendell Willkie who was the 1940 Republican presidential nominee. I got the impression that Shalaes would have voted for him. Willkie promised to scale back the New Deal and allow the free market to fill the void. As it turned out, big government deficit spending for World War II is what ended the Great Depression.
The term “forgotten man” in the book's title is given multiple meanings through the course of this book. Roosevelt referred to “the forgotten man at the bottom of the economic pyramid.” But the phrase had a very different origin. In the late 19th century, the philosopher William Graham Sumner had used it to describe the average citizen “coerced,” as Shlaes writes, “into funding dubious social projects.”
It occurred to me that the term “forgotten man” could also refer the the fact that this book also highlights the work of many different individuals who have been forgotten in people’s memories. One example is Bill Wilson who founded Alcoholics Anonymous and “taught Americans that the solution to their troubles lay not with a federal program but within a new sort of entity — the self-help community,” as Shlaes puts it. The book also features several of the early New Deal leaders who were self styled progressives who had expressed admiration for Communist rhetoric back in the 1920s. Their admiration was toned down by the 1930s when Stalin's ruthless rule became apparent.
I am bothered by the fact that many of today’s political conservatives have claimed that this book supports their opposition to Obama’s policies. I read this book as an illustration of how an overblown emphasis on balancing the budget and limiting money to prevent inflation can cause economic disaster. It appears that lessons of history can support contrary positions.