How We Lost the War on Poverty

Amity Shlaes concludes in her new book that grand governmental schemes to broadly reorder society are doomed to fail.


Great Society: A New History, by Amity Shlaes, HarperCollins, 429 pages, $32.50

With John F. Kennedy's election to the presidency in 1960, Amity Shlaes recounts, Americans developed a growing urge for a "big change that blasted like a space rocket." By 1972, when the smoke from that rocket had somewhat cleared, they had acquainted themselves with the New Frontier, the Vietnam War, the moon landing, two landmark civil rights acts, Medicare, Medicaid, the New Federalism, the "urban disorders" of Watts and Detroit, and the severing of the last feeble tie between the dollar and gold. But it was President Lyndon Johnson's War on Poverty that gave the era the appellation of "the Great Society."

In Great Society: A New History, Shlaes describes the actors, events, and outcomes of those years. The book is a fast-moving and entertaining read, rich in interesting details and extraordinary in the author's marshalling of the history. Shlaes, an experienced journalist, has a gift for leading the reader through subjects that initially seem only marginally related, tying them together in the service of her narrative.

As one who lived through that era, most of it in Washington, I appreciate how Shlaes has shone her reportorial light into many fascinating corners and upon a marvelous and frequently flawed cast of characters. Besides Presidents Kennedy, Johnson, and Nixon, this cast includes poverty czar Sargent Shriver, his brother-in-law Bobby Kennedy, presidential wordsmith Richard Goodwin, United Auto Workers leader Walter Reuther, Fed Chairman Arthur Burns, radical activists Tom Hayden and Michael Harrington, California Gov. Ronald Reagan, Michigan Gov. George Romney, black power leader Nathan Wright Jr., and future senator Daniel Patrick Moynihan. (I had encounters with all of them except Shriver.)

The overarching theme of the Great Society was a massive social project announced by Johnson in a 20-minute address at the University of Michigan on May 22, 1964. He told the graduates that "far from crushing the individual, government at its best liberates him from the enslaving forces of his environment." His administration, Johnson said, had assembled "the best thought and the broadest knowledge to find answers to society's problems." Those answers would be implemented by a "fighting and aggressive" federal government dedicated to winning a war against poverty and against the "loneliness, estrangement, and isolation" that were its consequences.

"The men around Johnson," Shlaes observes, "felt the weight of this faith in them, and strove hard. Viet Nam would be sorted out. There would be a Great Society. Poverty would be cured. Blacks of the South would win full citizenship. The Great Society would succeed." There would be plans! Many plans! Measurements! Results! The federal government, led by a powerful and determined president advised by the best social scientists, would become the driving force for social change, as opposed to merely backfilling the shortcomings of capitalism.

And how did all this work out? Poorly, says Shlaes.

Shlaes' most compelling example contrasts a monumental public housing project in St. Louis called Pruitt-Igoe with an adjacent neighborhood development project called the Bicentennial Civic Improvement Corporation.

Pruitt-Igoe was a stark and stupendous complex of 33 high-rise apartment buildings for the poor, designed by rising architectural star Minoru Yamasaki. Begun in 1955, it was the delight of the urban planners of the '50s. But by the mid-'60s, it had become a decaying, dangerous, increasingly abandoned, and crime-ridden concrete wreck. Interpretations of Pruitt-Igoe's descent vary, but all agree that high-rise rental housing for the poor (or at least the nonelderly poor) turned out to be a very bad idea. Feeble attempts at rehabilitating parts of the project foundered. After resisting the embarrassment for years, the feds threw in the towel in 1972. The demolition was finished in 1976. Half of the site now hosts industrial warehouses; the other half became an unplanned urban forest, later bulldozed for commercial redevelopment.

By contrast, there was the Bicentennial project, literally in the shadow of a Pruitt-Igoe high-rise, inspired by Father Joseph Shocklee of St. Bridget's parish. Working with people of the Jeff-Vander-Lou neighborhood organization, Shocklee put together a team involving the gas company, the Pulaski Savings Bank, a few private donors, and a small-scale minority contractor. Starting in the mid-1960s, Bicentennial bought up vacant brick town houses for $600, found and counseled prospective homeowners, contracted for the rehab, and financed the sale with unsubsidized market-rate mortgages from Pulaski. Existing homeowners cooperated to help the new homeowners improve their education and job skills, find employment, and improve their new properties.

As Bicentennial scored successes with 80 new homeowning families, the appeal of home ownership for the working poor blossomed. Under the Federal Housing Administration (FHA) Section 235 mortgage insurance program, passed in 1968, mortgage brokers rushed to enroll low-income homebuyers. They offered nominal down payments, 40-year terms, and 1 percent financing. But the program relied on new construction, not the more troublesome rehab, and it favored large contractors to achieve the government's grandiose production goals (6 million housing units for low- and moderate-income families over 10 years).

The contractors had to pay FHA-mandated above-market Davis-Bacon wages to their unionized (and largely white) workforces. There was little time or inclination to prepare inexperienced homebuyers for ownership or to bring them into a supportive neighborhood organization. The result: brand new suburban-style split-level houses, purchase price $23,000—unaffordable even with the extreme subsidy terms. When a confused and fitfully employed buyer couldn't pay, the lender foreclosed, the FHA took the hit, and the buyer often departed with all the copper plumbing for resale. (This aftermath is not in the book.)

Shlaes is particularly insightful in describing the tribulations and failures of the Community Action Program (CAP), managed by the free-standing Office of Economic Opportunity (OEO). CAP, a radical departure in the history of federal programs, squeaked through the Democratic Senate on a 46–44 vote. The proposition was this: Uncle Sam would directly fund local organizations in poverty-impacted areas to plan, develop, and coordinate the many facets of Johnson's War on Poverty.

America's mayors did not like this one bit. Accustomed to managing federal funds for urban programs, the mayors regarded the activist groups—composed more often than not of minority citizens resentful of City Hall for its neglect, disrespect, and even oppression—as budding revolutionaries. This, they believed, was not just an affront to the mayors but also a federally funded recipe for revolution.

CAP also required "maximum feasible participation of the residents of the areas and the members of the groups." But participation in what? Making plans? Assenting to the plans of others? Hiring and firing? Dealing with City Hall? Coordinating multifarious other programs and organizations? As Moynihan pithily summarized: "The government did not know what it was doing."

The dream of mass participation wound up dissolving. Fifty years later, it would be a challenging task indeed to find a local CAP agency imbued with anything resembling the revolutionary themes of the 1960s.

Shlaes offers a fascinating, detail-rich re-enactment of President Richard Nixon's Camp David economic summit of August 15, 1971, which she describes as "one of the most impressive [collections of minds] in the history of economic policy." The impetus was a deteriorating international economic situation brought on by the excesses and misfortunes of the Great Society era: the costly and unwinnable Vietnam War, the interminable and conflict-ridden War on Poverty, the unrepaired wreckage from urban riots, a housing finance fiasco that eerily foreshadowed that of 2007, and the forced abandonment of any tangible link of the dollar to gold.

Nixon's Camp David summit produced at least a grudging acceptance of breaking the gold link, imposing wage and price controls, and enacting the first general tariff (10 percent) since Herbert Hoover's day. That all turned out badly. Shlaes, quoting Arnold Weber, notes that "almost everyone associated with the sweeping interventions…has recanted or admitted error."

 And that brings Shlaes to her trenchant conclusion. Quoting the economist Friedrich Hayek, she concludes that grand governmental schemes to broadly reorder society are doomed to fail. Public planners do not have adequate information from the grassroots, and they cannot collect information from a nonexistent price system. The Great Society program deserves to go down in U.S. history as a baneful example of a far-ranging, high-sounding, politically motivated experiment that turned out to be largely futile in achieving its hopes, proposed and carried out by theoreticians and planners who (to borrow from Moynihan) simply did not know what they were doing. With the notable exceptions of the civil rights bills, this was a sorry legislative era that festers in the memory of many people still living.

And what of Bicentennial? The former Pruitt-Igoe tenants had discovered a superior alternative to government housing aid, Shlaes writes. "With his small [private sector] housing program, Father Shocklee had shown that 'the poor' were more like the middle class than people supposed. They gained from something only when they had a chance to own it."