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 4 of 4)

In the ’30s a right-wing think tank had a look at the NRA, which was a whole bunch of rules in every state, a sort of mixture of government and industry where industry was supposedly self-governing but not really. And this big right-wing think tank concluded after a thousand pages that the NRA was retarding recovery. The name of that think tank was the Brookings Institution. Roosevelt had people from all quarters telling him that this isn’t working, and it was eventually challenged in the Supreme Court, lost, and had to be disbanded. The rules for agriculture, of course, are still with us.

In retrospect it was wonderful that the Supreme Court said no National Recovery Administration for the business sector. Parts of it were reincarnated later. Many of the labor components, for instance, came back as the Wagner Act. But the governing-the-economy-by-rules thing didn’t come back quite the same way.

reason: One of the most important stories you tell is about the family butchers who helped kill the NRA.

Shlaes: The Schechter brothers ran a small chicken slaughter business; they were kosher butchers in Brooklyn. They were prosecuted by the Justice Department under the NRA. They were the case that was picked by the government to go to the Supreme Court to prove the constitutionality of the NRA. I thought that this was a wonderful story, and we never learned it in school because it was against FDR. But it was an important, important story.

The Commerce Clause limits what the federal government can do in the states. The laws have to pertain to interstate commerce. What is interstate commerce, and did the NRA breach that? Everyone knew there needed to be a test. So this chicken business was picked because in another case chickens had been defined as interstate commerce.

The Schechters were prosecuted very nastily, for a lot of sins. Lowering prices, that was illegal. Working too many hours, that was bad, bad. Competing. What I liked about them was that they were furious. They realized that what the government was saying was wrong. To them it seemed probably like the czar’s Russia, where their family had come from.

The government’s lawyers talked down to them. The lawyers kept saying things like, “You’re not an economist; you don’t have any agricultural economics.” And they would say, “No, I don’t have much school; I barely speak English”—their English was mocked. But when they got to the Supreme Court, their argument won because of the logic.

Their lawyer said, “One of the rules of the NRA is that the customer may not pick his chicken. America’s about customer choice.” This was a time when there was still tuberculosis and no antibiotics. Picking your own chicken was important for health reasons. You didn’t want a sick chicken—their case is known as the “Sick Chicken Case”—and the justices sided with the Schechters. They said, “This is delegation run riot, what about the Commerce Clause,” and so on.

There was a lot of discussion around that, and it was an enormous event because if the NRA had stood, we’d have the same kind of intervention in business as we have in agriculture. So it shifted America forever.

reason: What do we gain from a study of the Depression, particularly a revisionist understanding of it?

Shlaes: One lesson is that you do not need to mess with the economy for it to recover. In fact, messing with the economy can retard recovery. You do not need to go into war mode—the NRA was headed by an actual general, Gen. Hugh Johnson—when there is a downturn. The economy has a lot of inherent strength, and there’s plenty of evidence that it would have recovered much sooner—maybe by 1936—had Roosevelt not asked for the mandate of “unimagined power” to change everything in his second inaugural address.

reason: It wouldn’t go over well today to say that as president you want “unimagined power.” At least, not so openly. Isn’t there a strange paradox at work in American politics? We have a much better understanding of economics and of how government interventions often have unintended, and usually negative, consequences. Free market ideas really triumphed in the second half of the 20th century. Yet as a percentage of the economy, government spending is far greater than it was during the Depression.

Shlaes: That challenge of two opposing ideas is one reason I wrote the book. The most important thing for our generation is that the New Deal will come back to bite our children when they pay yet higher payroll taxes because we did not dare to reform Social Security and other entitlements. There are not enough people to pay for Social Security, and Social Security is set up so that you can’t fix it just by growing the economy.

This is a moment of choice for us, our generation and the younger people. We have to look again at Roosevelt. Roosevelt was inspiring. He was right on World War II, but we do not have to have false nostalgia for his wrongheaded policies in the ’30s. We should warn our children and help to change Social Security, but you don’t see that in the presidential candidates. You don’t see daring on Social Security.

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. I’m the sort of liberal who cares a lot about the individual, the forgotten man; I emphasize that rather than the group or the aggregate. My very first job was at The New Republic, where I wrote an article that parents shouldn’t know when girls under 18 had abortions. It was called “The Squeal Squad.” That was the liberal in me. It was, “Leave me alone, even if I’m a child.”

I have great faith in the individual, and I think it’s time for a re-evaluation of the [term] liberal in America. The Republicans were wrong to try to smear Democrats with that word. Ronald Reagan was right when he said it is a good word. Democrats and Republicans should both use it, and we should re-examine traditional liberalism if we can.

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.