Remembering 'The Forgotten Man'

Amity Shlaes, author of a new history of the Great Depression, talks about Franklin D. Roosevelt's baleful economic legacy, the growth of government, and the death of classical liberalism.

Nick Gillespie from the January 2008 issue

With the possible exception of the Civil War, no event has transformed American politics more fully than the Great Depression. From the stock market crash of 1929 through U.S. entry into World War II, the country’s economy floundered tragically, with the unemployment rate typically in the high teens. First under the misguided and generally ineffective policies of President Herbert Hoover and later under those of Franklin Delano Roosevelt, the federal government became increasingly interventionist, at times attempting to dictate all aspects of economic production.

When accepting the Democratic Party’s presidential nomination in 1932, Roosevelt proclaimed “a new deal” for the American people. Once in office, he began radically transforming the federal government while seeking to ameliorate the nation’s woes. He pushed subsidies for farmers, changed the banking system, and created the National Recovery Administration, which regulated many aspects of business until it was declared unconstitutional in 1935. Through the creation of the Social Security system and related programs, Roosevelt vastly expanded the scope and size of the federal government and created the political world in which we live. The shift was so complete that even as vocal a foe of big government as Ronald Reagan, who started his political career as a New Deal Democrat, approvingly wrote to Congress in the early 1980s of the “nation’s ironclad commitment to Social Security” and praised FDR’s visionary leadership in creating the program.

In her meticulously researched new history of the Depression, The Forgotten Man (HarperCollins), journalist Amity Shlaes describes the received catechism of the era: “Roosevelt made things better by taking charge. His New Deal inspired and tided the country over. In this way, the country fended off revolution of the sort bringing down Europe. Without the New Deal, we would all have been lost.…The attitude is that the New Deal is the best model we have for what government must do for weak members of society, in both times of crises and times of stability.” But that conventional account, she writes, fails to capture “the realities of the period.” Shlaes shows how both Hoover and Roosevelt “overestimated the value of government planning” and intensified and prolonged the very problems they were seeking to fix.

Told in a rich narrative style, The Forgotten Man follows dozens of historical figures through the Depression, weaving the stories of people as varied as American Civil Liberties Union co-founder Roger Baldwin, Alcoholics Anonymous creator Bill Wilson, power utility magnate (and failed presidential candidate) Wendell Willkie, and African-American evangelist Father Divine into a rich human tapestry. In this, the book calls to mind one of the Depression’s landmark literary texts, John Dos Passos’ U.S.A. trilogy (1930–36).

Shlaes is a columnist for Bloomberg and a senior fellow at the Council on Foreign Relations. A former member of the editorial board at The Wall Street Journal, she is also the author of The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It (2000) and Germany: The Empire Within (1991).

In June she was interviewed on C-SPAN’s After Words program by reason Editor-in-Chief Nick Gillespie. What follows is an edited transcript of that program, which can be viewed online at reason.tv. Comments can be sent to [e-mail].

reason: Your book is subtitled “a new history of the Great Depression.” What’s new about your take?

Amity Shlaes: One of the important things about the existing argument is that it’s all about Keynesianism, about whether government spending can cure the economy when it’s ill. Scholars have overlooked the cost of uncertainty in an economy, what we would now call the “unknown unknowns.” Both the Hoover and Roo­sevelt administrations (but especially the Roosevelt administration) were so unpredictable. That hurt the economy very much, and when I went back and saw the extent I was astounded. Uncertainty is a factor that I thought needed to be explored. There were lots of people who said, “I will not invest ’til I know what’s going to happen.”

During the Depression, you heard the phrase “bold, persistent experimentation” all the time. We’ve been taught that was good. Somebody had to do something, was what we learned. But what I saw was this enormous cost, especially during the second half of the 1930s.

There’s a second thing too. I look at the government’s action using the lens of public choice theory. Very simply, public choice says that government is no better or worse than a business, it’s a competitor. Sometimes I use a crustacean image; The government is like a lobster. It will eat anything, it wants to survive, it will compete with anything, and it can be a cannibal. When you look back at the ’30s using the public choice lens, what you discover is the extent to which the Depression wasn’t about a virtuous government and bad business people. Rather, it was about people in office competing with the private sector for power. Much of the struggle described in the book literally inhered in the power business: utilities. There’s something about power that attracts strong people. And of course the government wins and the private sector loses in the form of the Tennessee Valley Authority, which was created in 1933.

reason: Where does your title, The Forgotten Man, come from?

Shlaes: In 1932, on a radio program called The Lucky Strike Hour, Franklin Roosevelt gave a speech that was written in part by Ray Moley, his adviser. Moley was a man you’d want to have at your dinner table today. He was a wonderful, wonderful man. In that speech Roo­sevelt spoke of the “forgotten man at the bottom of the economic pyramid.” Moley wrote to his sister that he wasn’t quite sure where he had gotten the phrase, but it was in the air.

In the late 19th century, there was a book, a collection of essays, called The Forgotten Man and a famous lecture called “The Forgotten Man.” The author was a Yale professor called William Graham Sumner, who had quite a different forgotten man in mind. He put it algebraically. Sumner said a wants to help x, with x being the man at the bottom. And b wants to help x too. That’s our philanthropic impulse, we want to help. There’s nothing wrong with that. We all have that impulse to provide charity. It becomes a problem when a and b get together and pass a perhaps-dubious law that coerces c into funding their maybe-good project for x. In Sumner’s original version, c is the forgotten man, the man who pays, the man who prays, the man who is not thought of.

That phrase meant a lot to people at the time, and when Roosevelt people debated Hoover people they were all familiar with William Graham Sumner. So [Roosevelt’s supporters] said, “You have the wrong forgotten man! The forgotten man is the man waiting for the recovery that you are not delivering or that you are preventing.”

I think Sumner’s concept of the forgotten man also has to do with today. When you talk about the upcoming presidential election, you see great powerhouses, the Democratic powerhouse (Hillary Clinton) and the Republican powerhouse (maybe McCain, maybe someone else). And the individual voter says, “Where do I fit into this? I feel like the forgotten man.” There’s something very un-fun about this election as it’s beginning to unfold. Given our challenges with the funding of entitlement programs, the forgotten man in the future will be the generation who will pay for what Roosevelt created during the Depression.

Comments

drawnasunder|12.18.07 @ 3:17PM|#

But I thought only a neanderthal would question the wisdom of the New Deal...
http://bloggingheads.tv/diavlogs/7325?in=00:03:11

|12.18.07 @ 3:25PM|#

I saw this one, and many of the other Afterwords. My only beef with AfterWords is that lately it has become a show where you have someone who writes a book and then someone who agrees with the orientation the book takes sitting around and talking. I would much prefer to have Nick interviewing the author of Nickel and Dimed. Or better yet have him interview someone who shares some of his orientation and disagrees on much of it as well. That would produce better debate and discussion imo.

|12.18.07 @ 3:41PM|#

Great book brilliant writer. Schlaes shows how intellectually bankrupt American Universities are. Here she writes a truly incitful and free thinking history of one of the most important events of the 20th Century and Schlaes is a journalist who works for a think tank. What are the chances something like the Forgotten Man would come out of an Ivy League history department? Zero.

|12.18.07 @ 3:51PM|#

Baleful economic legacy? Excuse me, who would want to exchange places with anyone in the good old days of Coolidge prosperity? (Unless you really really miss the 12-hour day.) Read David Kennedy's Freedom From Fear if you want a good picture of the New Deal, with all its faults and failures. As for Amity's selective hatchet job, she finds all of the warts, and none of the triumphs.

|12.18.07 @ 4:07PM|#

John | December 18, 2007, 3:41pm | #
Great book brilliant writer. Schlaes shows how intellectually bankrupt American Universities are. ... What are the chances something like the Forgotten Man would come out of an Ivy League history department? Zero.

You it's a damn good thing that she didn't, you know, graduate from any "ivy legue, intellectively bankrupt university" like Yale.

|12.18.07 @ 4:07PM|#

Triumphs? What triumphs? The fruits of the New Deal produced the seeds that grew to be Johnson's Great Society programs and interventionist foriegn policy. These boondoggles are with us to this day and are bankrupting us.

|12.18.07 @ 4:10PM|#

"You it's a damn good thing that she didn't, you know, graduate from any "ivy legue, intellectively bankrupt university" like Yale."

Your missing the point. She may have gone to school there but she doesn't teach there does she? Universities have become so intellecutally stiffling and leftists, the important thinkers don't work there anymore and have moved to the private sector and think tanks. We live in a world where a classical liberal like Schlaes or main line Democrat like Larry Summners can't work for a top university. That is sad.

|12.18.07 @ 4:12PM|#

As for Amity's selective hatchet job, she finds all of the warts, and none of the triumphs.

Please name the truimphs? The worse years of the depression were in 1937 and 1938. The New Deal turned what should have been a severe two or three year recession into the worst economic catastrophe in US history. There isn't a single economic triumph of the New Deal.

|12.18.07 @ 4:50PM|#

Vanneman,

In the interview, Shlaes did acknowledge the need for and, and longterm success of the SEC and the Federal Reserve.

Shannon Love|12.18.07 @ 5:16PM|#

I have a recurring nightmare in which the National Recover Administration never ended and in which Huey Long beat Roosevelt in 1936. America then slides into a genteel fascism.

I find it ironic that the very success of large corporation in organizing (rationalizing) production on a vast scale seemed to inspire almost all the collectivism of that era. Its like someone today said, "look at Walmart, look at Apple Computer, let's design our society around the same practices!" A lot of really smart people seemed to assume that because certain methods worked on the scale of a large corporation that they would work on the vastly larger scale of entire countries. It's really strange when you look at it from that perspective.

ace|12.18.07 @ 5:19PM|#

"What follows is an edited transcript of that program, which can be viewed online at reason.tv"

aaaaand can't find it. linkage, anyone?

|12.18.07 @ 6:21PM|#

Shannon Love

I always thought that America got a genteel fascism with Roosevelt. Actually I called it a benign fascism and I think it persisted until the 70s.

The movement to freer markets has tended to soften the fascism. On the other hand the rise of the security state and the nanny state have made it a tad harsher.

Huey Long beating Roosevelt in 1936 would have led to full-blown fascism, but probably not the level that Mussolini gave the Italians.

|12.18.07 @ 6:30PM|#

Somehow Hong Kong magically survived the Asian Economic crisis and deflation just fine. In fact, one could call deflation "falling prices", and "things" getting "cheaper".

Clemsonuee|12.18.07 @ 7:14PM|#

I read Kennedy's Freedom From Fear. I didn't find most of his arguments that convincing. And I really don't think that the New Deal is what ended the 12 hour workday. (Of course I say this as we are just hitting the point where my job gets busy and 12 hour days will look pretty nice.)

This reminds me of an argument I had with a friend of mine who claims that the New Deal "created the middle class". When I questioned that thought he told me that it was "accepted historical fact" and that it wasn't even debatable. I should add that he takes most of his historical fact from the above mentioned Freedom From Fear. I told him that one historian making a claim and having his history professor in college agree doesn't mean that everyone agrees with it.

|12.18.07 @ 8:05PM|#

Read the book. Made me hate FDR even more, and I already considered him by far the worst president we've ever had. The best part was the story about the chicken farmers taking down the polished lawyers.

Anyone who reads this book and still reveres FDR and modern liberalism has rocks in their head.

|12.18.07 @ 8:47PM|#

Just think of how much worse and more frequent depressions are now than before the New Deal.

Oh, wait...

|12.18.07 @ 8:56PM|#

The New Deal turned what should have been a severe two or three year recession into the worst economic catastrophe in US history.

The fact that the Depression was just as long and just as deep across the world puts the lie to this claim.

Juan|12.18.07 @ 9:04PM|#

The fact that the Depression was just as long and just as deep across the world puts the lie to this claim.

Wouldn't it do the same to the claim that the ND ended the Depression?

If you ask me, the big difference is a Fed that actually knows what it's doing.

|12.18.07 @ 9:12PM|#

Alan-

Excuse me, who would want to exchange places with anyone in the good old days of Coolidge prosperity? (Unless you really really miss the 12-hour day.)

Coolidge - I can work 12 hrs/day, 5 days/wk for $60/wk (3 oz gold @ $20/oz)- or,

Roosevelt - I can work 8 hrs/day, 5 days/wk for $40/wk (1.14 oz gold @ $35/oz) + 20 Hrs/wk at "time and a half" (.86 oz gold)-- total 2 oz gold! (50% "paycut"! "Man of the People"!)

Please note that I'm still assuming a "$1/hr wage"- though wages might tend to drop during the worst financial crisis in history...)- and that I also added the "overtime-cost" for the extra 20 hrs/wk of "unneeded labor" despite the lack of demand due to the Depression.

|12.18.07 @ 9:18PM|#

The New Deal turned what should have been a severe two or three year recession into the worst economic catastrophe in US history.

The fact that the Depression was just as long and just as deep across the world puts the lie to this claim.

Proves nothing of the sort, joe. The major economies were simultaneously flirting with greater levels of socialism, and engaging in greater trade protectionism, and in general acting like economic idiots, in an intertwined world where the U.S. was a big player that could drag down others. If a bunch of people all get hooked on heroin at the same time, and they all start dying soon afterward, would you then conclude that the heroin you personally took wasn't causing your health to decline because, hey, look at all my friends dying, it must be a group thing dragging us down, not the heroin at all?

|12.18.07 @ 9:24PM|#

Juan,

Anybody who claims that the New Deal ended the Depression is obviously wrong.

FDR's policies were a life preserver during the Depression, and the ones that have survived have allowed the economy to function better and avoid additional depressions, but the Great Depression was ended by a combination of the business cycle and World War Two.

prolefeed,

Once you accept your faith-based premise, your conclusions follow logically from them. I'll grant you that.

|12.18.07 @ 9:40PM|#

Once you accept your faith-based premise, your conclusions follow logically from them. I'll grant you that.

Yes, making an argument based on facts and actually reading and understanding the arguments in the book being discussed can best be described as "faith-based", joe. And dismissing arguments by calling them "faith-based" without actually addressing the points raised is proof that you've "won" an argument, right?

Did you read the book and follow the well-documented trail of destruction FDR's brain-dead policies left in their wake? Or would that interfere with your faith-based premise that Democrats Are Always Good TM?

|12.18.07 @ 9:44PM|#

I wish some of you knew some basic economics. Minimum wage laws and taxes on labor like social security (FDr's policies by the way) made the Depression worse. Raise the price of something and guess what people buy less of it. Der. God Almighty it is so basic. FDR prolonged the Depression to keep the voters dependent on him and the Democratic Party. Oh, he was folksy and could manipulate the masses with his newfound radio broadcasts alright. Read Monetary History of the United States by Friedman and Anna Schwartz folks. The Fed biffed it and FDR's disastrous economics only prolonged the Depression.

|12.18.07 @ 9:48PM|#

FDR's policies were a life preserver during the Depression

Which policies discussed in the book are you claiming were a "life preserver", joe? The arbitrary changes that paralyzed investment? The wage and price controls? Forbidding people from selecting which chickens they wanted to purchase? The raising of taxes? Telling people what crops they could raise? Setting minimum sizes for fruit, and forcing everything else to be dumped in a landfill, at a time when people were starving? etc.

Read the effing book already.

Juan|12.18.07 @ 10:32PM|#

I'll speak good things of one New Deal policy: Ensuring bank deposits.

|12.19.07 @ 9:16AM|#

I have my own problems with FDR, in particular his obstructive attitude towards impeding the Nazi genocide. But what all the FDR-bashers or free market critics miss is this: he transformed the economy of the entire continent. Think of America's south before the TVA: a medieval level existence, impenetrable malaria-ridden swamps, hookworm; who here would like to go back to the US before Coulee Dam, before the St. Lawrence Seaway, before the TVA? I argue that it was precisely these mammoth foundational projects that set the stage for and permitted the productivity explosion by which we overwhelmed both Germany (with Soviet help of course) and Japan. Therefore: some large mistakes may have been made, but let's not throw out the baby with the bathwater. The power companies wouldn't string wire to rural areas as there was no profit in it, as they saw it. At some point government action is necessary, not just to set the rules but to lay the productive foundation level of the national economic system through infrastructure initiatives. . This is the national-system idea, which goes back through our national discussion to Hamilton's bank plan, and further back to Colbert's dirigism.
John Doba
Houston

Russ 2000|12.19.07 @ 1:19PM|#

who here would like to go back to the US before Coulee Dam, before the St. Lawrence Seaway, before the TVA?

My guess is anyone who frets over global warming or lives in upstate New York.

The Toast Will Rise Again|12.19.07 @ 2:15PM|#

Think of America's south before the TVA

Yes, let's congratulate the yankees for rebuilding the backwards south after they destroyed it. What everybody needs after a good boot-crushing is lots of government spending. It worked for Germany!

I have a better idea: go back to antebellum South, get rid of Lincoln, and see how bad it would have been to have more confederation and less union.

fishmonger|12.19.07 @ 2:20PM|#

"I have great faith in the individual, and I think it's time for a re-evaluation of the [term] liberal in America."

Fair enough, I now declare that "liberal" = "classic liberal" and that those who we used to call liberal will now be called SOCIALIST or MARXIST.

"I'm an old-fashioned liberal, and a lot of this book is about the death of that kind of liberalism-liberalism in the European sense."

Before Shlaes gets all wet over European liberals she may want to remember that it was their policies that set the conditions for the economic woes that spread from Europe to the rest of the world thus morphing into the Great Depression.

fishmonger|12.19.07 @ 2:25PM|#

John Doba,

Actually the Soviet Union "overwhelmed" Germany with our help and not the other way 'round.

|12.19.07 @ 2:47PM|#

"he transformed the economy of the entire continent."

I don't consider it much of a transformation when the unemployment rate stayed above 10% until WWII.

|12.19.07 @ 5:47PM|#

Just for the record the St Lawrence Seaway was a creature of the 1950s and the Eisenhower Administration. And grand public works projects were already underway before the Roosevelt Administration.

The is no reason to believe the same kind of projects would not have been undertaken if Hoover had won in '32. After all, they didn't call him the "Great Engineer" for nothing.

Actually, he was called the "Great Engineer" not just because of his boosting of great projects but also because people believed that he could also engineer the creation of a new kind of society. See, the "do-nothing president" was actually a hell of an interventionist.