Sunday Book Review: FDR’s Folly

Posted by: Phineas on September 25, 2011 at 7:28 pm

**Posted by Phineas

 

Many years ago, when I was doing my undergraduate degree in History, I read “The Historian’s Craft,” by the great French historian Marc Bloch. One lesson he taught that’s stuck with me all these years is that “objective” history is a myth; the historian, by declaring what is significant through his choice of what facts to include in his work, inevitably suffuse the work with a subjective viewpoint — his opinion.

Careful historians take this inevitable bias into account and look for facts that contradict their thesis, evaluating them against those that support the historian’s point of view and thus reaching a reasoned synthesis. But, again almost inevitably, certain perspectives gain wide enough acceptance that they go from being opinion and argument to unquestioned “received wisdom.”

The history of the New Deal is an example of this. According to the standard telling, the era of vast government intervention in the economy under Democratic President Franklin Delano Roosevelt saved the nation from economic collapse after the reckless laissez-faire economics of the 1920s and a series of “do nothing” Republican presidents. People found jobs, the hungry were fed, and labor gained their just rights. This was the orthodoxy pushed by liberal historians such as Arthur Schlesinger and Frank Friedel, whose works influence the teaching of history in high schools and colleges down to today.

In recent years, however, works by conservative and libertarian authors have challenged this orthodoxy to argue that the New Deal was not nearly as effective as proclaimed, perhaps even a total failure. Actually analyzing the application and results of New Deal policies, rather than just concentrating on the politics, a few years ago two UCLA economists published a study arguing that FDR’s policies lengthened the Depression by seven years. Journalist Amity Shlaes authored “The Forgotten Man,” an important revisionist history of the Great Depression that questions many of the standard assumptions.

Into this latter, revisionist literature in 2003 came Jim Powell’s “FDR’s Folly: how Roosevelt and his New Deal prolonged the Great Depression.” Powell is a scholar with the libertarian Cato Institute, and he approaches the New Deal with a very skeptical eye. His thesis is that the New Deal was a failure because its diagnosis of the problem, that the economic collapse was caused by prices (both of goods and labor) being too low and that the way to fix the problem was to regulate the economy to maintain prices at a higher-than-market value. He shows instead that this contributed to the problem by making labor too expensive, thus pricing less-skilled workers out of the market and thus keeping unemployment high. (By some estimates, unemployment never went below 13-15% during the Depression. If a program is to be judged by its results…)

Powell also criticizes the vast expansion of federal power under FDR, an expansion made necessary because of the administration’s belief that free markets had failed, that unrestrained competition had brought about the crisis, and that the only way out was to highly regulate all aspects of the economy. This had the effect, Powell argues (I think correctly), of severely weakening economic liberty, for example the freedom of two or more parties to agree to a contract, and the rights a property owner, such as  a factory owner, has over his own property. What had previously been the inherent rights of the individual guarded under the Ninth and Fourteenth Amendments were gutted by a succession of Supreme Court rulings, particularly after FDR was able to appoint several sympathetic Justices, who argued that “economic rights” were less important than political rights, such as free speech.

Powell organizes his book in a series of questions, which are then explored to attack one aspect or another of the New Deal orthodoxy. Here are some samples:

  • “What did FDR borrow from Hoover?” (1)
  • “Why did FDR triple taxes during the Great Depression?”
  • “Why did the New Dealers destroy all that food when people were hungry?”
  • “How did New Deal labor laws throw people out of work?”
  • “How did FDR’s Supreme Court subvert individual liberty?”
  • “How did New Deal policies cause the Depression of 1938?”

It’s become a cliché to describe a book as “eye-opening,” but that’s the effect Powell’s book had for me, clearing the scales of liberal orthodoxy away from my eyes by stepping outside the accepted history and daring to ask questions and hold the New Dealers accountable for the results of their policies. And, with the full-throated resurgence of statism under Obama and the progressives, this eight-year old book has a new relevance. Believe me, just change a few of the names and dates, and you’d swear Jim Powell was writing about Barack Obama.

Maybe Time was right to say Obama is the new FDR.

Summary: FDR’s Folly (2003, Three Rivers Press) — recommended.

Footnote:
(1) Yes, the orthodox view of a laissez-faire Hoover is all wrong.

(Crossposted at Public Secrets)

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3 Responses to “Sunday Book Review: FDR’s Folly”

Comments

  1. Carlos says:

    You mention that “If a program is to be judged by its results…”, Phineas. Since when has a statist, ANY statist, been concerned with actual results?

    Rule #1 for would-be “benign autocrats”: it is the intention only that counts. Statistics can be skewed to show good results no matter the actual outcome.

    Hence we have the disaster that is the African-American community now, what with all the “help” they’ve gotten from Uncle Sugar in the last half century. And education. And environmentalism. And on, and on, and…

  2. Aarradin says:

    The ‘conventional wisdom’ on Hoover is wrong too. The whole narrative of his ‘laissez-faire’ policies being a cause of the Depression is simply false. Hoover was an interventionist, just like FDR but without the Totalitarian bent. He was before he became President and remained so in office.

    When the stock market collapsed, he was given sound advice by his Treasury Secretary – advice that he rejected. Instead, he did exactly what FDR did after him. Exactly what Obama is doing now.

    “Hoover’s advisers drew up proposals to stimulate the economy with reductions in taxes, a plan for the Federal Reserve to loosen its credit policies, and more public works spending. Hoover also called openly for local and state governments to expand public works projects.”

    Sound familiar?

    The correct government response to a market correction was demonstrated by Calvin Coolidge (and, later, by Reagan). That’s why we refer to the ‘roaring 20’s’ rather than the Great Depression of the 1920’s. If Coolidge had done what Hoover/FDR did, or GWB/Obama then we would have had a prolonged recession/depression in the early 20’s.

  3. Phineas says:

    Aarradin:

    Exactly. In fact, one of FDR’s key advisers, Rex Tugwell, once said that nearly everything the New Dealers did was either inspired by or a continuation of things begun under Hoover. The conventional history taught regarding our 31st president is an almost total misrepresentation.