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

(Page 3 of 4)

Shlaes: Well, the interest group was the farmers. Roosevelt was elected in part by the farm vote. They wanted the kind of high prices they had had before World War I. They had a significant drop in their prices, something on the order of 30 percent to 40 percent. Looking back, we might say that more of America should have moved to the city faster, which is what they did eventually anyhow.

He put Henry Wallace, a figure they knew, in as agriculture secretary. The administration made a bunch of rules. They put in a tax on middlemen, on the theory that that would help the farmers and that middlemen got in the way of efficiency rather than helped efficiency, which is what we think today.

Then there was an analogous beast in the business sphere called the National Industrial Recovery Act, which created the National Recovery Administration and which had a whole bunch of philosophies behind it, copying a little bit from Britain, copying definitely the German cartel system, and copying what Stalin was doing.

Roosevelt’s advisers didn’t know Stalin was a monster, or at least not so much, and very naively they copied him. In the book I trace how some of the characters go to the Soviet Union in 1927 and are bowled over by Stalin. They get six hours with him and they come back and you see them, especially [former Columbia University professor] Rex Tugwell, implementing things they learned from fascist Italy or from the world of Stalin. The influence of these European entities from Russia to Italy was not parenthetical. These people were not working for Moscow, but they were influenced by Moscow.

One of the members of the junket was a very well-known writer named Stuart Chase, an accountant who wrote about economics. He wrote a book called The New Deal, and it appeared in 1932, and that’s where Roosevelt got the phrase. The last sentence of Chase’s book is, “Why should Russians have all the fun remaking a world?” So you see the continuity.

There was a romance with the economy of scale, and not just in America. FDR’s advisers said that having so many different states and so many different ways of doing things was inefficient. If you had 50 flowers blooming, as federalists would have, they bloom differently and it makes for a messy garden. There was this sense that the economy couldn’t grow further unless there was rationalization, standardization. Even now you’ll see businessmen fighting for standardization: “Just make the rule!” they say.

reason: You follow Tugwell, who was born in 1891 and died in 1979, through the book. In many ways, he emerges as the paradigmatic New Dealer. Tell his story.

Shlaes: I liked Tugwell very much because he was honest. He loved Roosevelt and Roosevelt loved him, but The Forgotten Man is also a book about policy agony. It’s about what happens when you go into government and you do your best and you’re not appreciated and the thing that you produced is not what you planned and nobody cares.

Tugwell worked in the Department of Agriculture. He became part of something called the Resettlement Administration, where they moved people around—as described by John Steinbeck in various works. Tugwell saw a lot of poverty, the Dust Bowl, and so on. He saw that a lot of the projects weren’t really working. Some worked: Fertilizer worked, and so did money so farms wouldn’t have to be sold or closed. But a lot of it didn’t work and he had a lot of ambivalence.

He made planned communities, such as Greenbelt, Maryland, and he cozied up to Eleanor Roosevelt. They drank champagne made in New York state, which Roosevelt thought was awful and it probably was.

And then they kind of threw him out. But not before he had laid the plans for his own little Soviet farm, which was in Casa Grande, Arizona. He put settlers in to make a town; he gave them houses. There were people like the migrant workers in the photographs. These were people with nothing. They signed up for the town, and they were supposed to work together and have economies of scale and just one tractor they could share.

What’s wonderful is that Tugwell was honest about it and admitted it wasn’t working. Later, he discovered that the settlers in the little farm hadn’t worked together, that they had fought, that they had trashed the community house. They wanted milking machines, for example, which is a completely rational thing to want since it increases productivity. But the authorities didn’t want them because part of the thesis was that you should be creating jobs, and you take away a job when you have a machine.

All these fallacies were underlying everything, and Tugwell saw that too. He tried to go back to Columbia and they wouldn’t have him, even though he had an apartment on Riverside Drive. So he kind of went around in the private sector and eventually did get his reward: He became governor of Puerto Rico, where he encouraged land reform that had too much of an aspect of appropriation for my taste. And then he spent a lot of years trying to rewrite the Constitution, because he concluded the New Deal had failed because of the Constitution. If only we had a more modern constitution, he thought.

reason: You write that an economist of the time lambasted the NRA as the National Retardation Affair. It was also often derided as Nuts Running America. Effectively, it was an attempt to oversee virtually all aspects of the economy. How did it play out?

Shlaes: With Roosevelt in the White House, America was supposed to be about the little man, the forgotten man. But this was a cartel arrangement, or close to it, where big companies wrote codes that made it hard for little companies to survive.

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.