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Go Home Wasting Away in Hooverville

BOOKS MARCH 18, 2009

Wasting Away in Hooverville

BY JONATHAN CHAIT

The Forgotten Man: A New History of the Great Depression
By Amity Shlaes
(HarperCollins, 464 pp., $26.95)

Herbert Hoover
By William E. Leuchtenburg
(Times Books, 208 pp., $22)

Nothing to Fear: FDR's Inner Circle and the Hundred Days that Created Modern America
By Adam Cohen
(Penguin Press, 372 pp., $29.95)

A generation ago, the total dismissal of the New Deal remained a marginal sentiment in American politics. Ronald Reagan boasted of having voted for Franklin Roosevelt. Neoconservatives long maintained that American liberalism had gone wrong only in the 1960s. Now, decades after Democrats grew tired of accusing Republicans of emulating Herbert Hoover, Republicans have begun sounding ... well, exactly like Herbert Hoover. When President Obama recently met with House Republicans, the eighty-two-year-old Roscoe G. Bartlett told him that "I was there" during the New Deal, and, according to one account, "assert[ed] that government intervention did not work then, either." George F. Will, speaking on the Sunday talk show "This Week," declared not long ago, "Before we go into a new New Deal, can we just acknowledge that the first New Deal didn't work?"

When Republicans announce that the New Deal failed--as they now do, over and over again, without any reproach from their own side--they usually say that the case has been proven by the conservative columnist Amity Shlaes in her book The Forgotten Man. Though Shlaes's revisionist history of the New Deal came out a year and a half ago, to wild acclaim on the right, its popularity seems to be peaking now. Fred Barnes of The Weekly Standard recently called Shlaes one of the Republican party's major assets. "Amity Shlaes's book on the failure of the New Deal to revive the economy, The Forgotten Man, was widely read by Republicans in Washington," he reported. "So were her compelling articles on that subject in mainstream newspapers."

This is no exaggeration. The Forgotten Man has been publicly touted by such Republican luminaries as Newt Gingrich, Rudolph Giuliani, Mark Sanford, Jon Kyl, and Mike Pence. Senator John Barrasso was so eager to tout The Forgotten Man that last month he waved around a copy and announced, "in these economic times, a number of members of the Senate are reading a book called The Forgotten Man, about the history of the Great Depression, as we compare and look for solutions, as we look at a stimulus package." Barrasso offered this unsolicited testimonial, apropos of nothing whatsoever, during the confirmation hearing for Energy Secretary Steven Chu. Chu politely ignored the rave, thus giving no sign as to whether he had heard the Good News. Whether or not The Forgotten Man actually persuaded conservatives that the New Deal failed, in the time of their political exile, which is also a time of grave economic crisis, it has become the scripture to which they have flocked.

 

When they say that the New Deal "didn't work," conservatives almost always mean New Deal fiscal stimulus. (Other policies, such as Social Security or clearing the way for unions, clearly succeeded on their own terms, whatever their ideological merits.) And then, in turn, they confuse New Deal fiscal stimulus with Keynesian economics, which is also not exactly the same thing. So let me step back and briefly explain for the uninitiated what Keynesian economics means. We may not all be Keynesians now, but we would all benefit from knowing what a Keynesian actually is.

Prior to Keynes, the economy was held to be self-correcting. The only cure for a recession was to let wages and prices fall to their natural level. The prevailing attitude, as Paul Krugman writes in his recently re-issued book The Return of Depression Economics, was "a sort of moralistic fatalism." Keynes upended the orthodoxy in a way that was every bit as dramatic as Galileo challenging geocentrism. He insisted that recessions are not a natural process, or the invisible hand's righteous judgment against our sins, but a simple failure of consumer demand.

When people worry about losing their jobs, they sensibly cut back on their spending. But that decision, in turn, reduces demand for goods and services, which results in reduced income or lost jobs for other workers. Keynes called this phenomenon "the paradox of thrift": what makes sense for individuals turns into a disaster for society as a whole. The recession was therefore a failure of collective action that required government action. Government needed to encourage spending by reducing interest rates or, failing that, to inject spending into the economy directly by deliberately running temporary budget deficits.

At the time, orthodox economists deemed this diagnosis heretical and dangerous, but, in the decades that followed, it became a consensus view. Today economists disagree sharply about how to apply Keynes's insights, with many conservative economists questioning the practicality of large-scale government spending to combat recessions; but the essential framework constructed by Keynes--that recessions are caused by a failure of demand, and that at the very least government should not respond to an economic slowdown by paring back its largesse--is no longer in dispute. Even a right-wing Republican economist such as Gregory Mankiw, a former Bush advisor, writes that "if you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes."

But everywhere you look, conservative pundits and elected officials have embraced the pre-Keynesian nostrums. Citing The Forgotten Man, they insist that efforts to stimulate the economy are not just insufficient but also counter-productive. Pence has insisted that The Forgotten Man proves "that it was the spending and taxing policies of 1932 and 1936 that exacerbated the situation." Sanford, for his part, offered this fiscal diagnosis: "When times go south you cut spending. That's what families do, that's what businesses do, and I don't think the government should be exempt from that process." That is, of course, a perfect description of the paradox of thrift, only put forward as the solution rather than the problem. Governor Tim Pawlenty of Minnesota insisted that "we can't solve a crisis caused by the reckless issuance of debt by then recklessly issuing even more debt," and called for a balanced-budget amendment to the Constitution, which would of course massively exacerbate the present crisis. It is 1932 again in the Republican Party.

 

Now here is the extremely strange thing about The Forgotten Man: it does not really argue that the New Deal failed. In fact, Shlaes does not make any actual argument at all, though she does venture some bold claims, which she both fails to substantiate and contradicts elsewhere. Reviewing her book in The New York Times, David Leonhardt noted that Shlaes makes her arguments "mostly by implication." This is putting it kindly. Shlaes introduces the book by asserting her thesis, but she barely even tries to demonstrate it. Instead she chooses to fill nearly four hundred pages with stories that mostly go nowhere. The experience of reading The Forgotten Man is more like talking to an old person who lived through the Depression than it is like reading an actual history of the Depression. Major events get cursory treatment while minor characters, such as an idiosyncratic black preacher or the founder of Alcoholics Anonymous, receive lengthy portraits. Having been prepared for a revisionist argument against the New Deal, I kept wondering if I had picked up the wrong book.

Many of Shlaes's stories do have an ideological point, but the point is usually made in a novelistic way rather than a scholarly one. She tends to depict the New Dealers as vain, confused, or otherwise unsympathetic. She depicts business owners as heroic and noble. It is a kind of revival of the old de haut en bas sort of social history, except this time the tycoons from whose perspective the events are narrated appear as the underappreciated victims, the giants at the bottom of the heap.

Mostly Shlaes employs wild anecdotal selectivity. At one point she calls the pro-labor Wagner Act "coercive," and elsewhere she alludes to the subtle anti-Semitism of a newspaper column criticizing opponents of the National Recovery Administration. Shlaes ignores the vastly greater use of violent coercion on behalf of employers, or the immensely more common use of anti-Semitic tropes against the New Deal. Does Shlaes think that workers were more coercive than capitalists, or that liberals were more anti-Semitic than conservatives? The book does not say, but clearly she wants her readers to come away with this impression.

Shlaes begins every chapter with a date (say, December 1936), an unemployment percentage (15.3) and a Dow Jones Industrial Average. The tick-tick-tick of statistics is meant to show that conditions did not improve throughout the course of Roosevelt's presidency. Yet her statistics are highly selective. As those of us who get our economic information from sources other than the CNBC ticker know, the stock market is not a broad representative of living standards. Meanwhile, as the historian Eric Rauchway has pointed out, her unemployment figures exclude those employed by the Works Progress Administration and other workrelief agencies. Shlaes has explained in an op-ed piece that she did this because "to count a short-term, make-work project as a real job was to mask the anxiety of one who really didn't have regular work with long-term prospects." So, if you worked twelve hours per day in a coal mine hoping not to contract black lung or suffer an injury that would render you useless, you were employed. But if you constructed the Lincoln Tunnel, you had an anxiety-inducing make-work job.

In response to this criticism, Shlaes has retreated to the defense that unemployment was still high anyway. "Even if you add in all the work relief jobs, as some economists do," she has contended, "Roosevelt-era unemployment averages well above 10 percent. That's a level Obama has referred to once or twice--as a nightmare." But Roosevelt inherited unemployment that was over 20 percent! Sure, the level to which it fell was high by absolute standards, but it is certainly pertinent that he cut that level by more than half. By Shlaes's method of reckoning, Thomas Jefferson rates poorly on the scale of territorial acquisition, because on his watch the United States had less than half the square mileage it has today.

 

Shlaes's actual critique of the New Deal is not easy to pin down. Defining what she believes depends on whether you are reading the book itself or her incessant stream of spin-off journalism. In one article she adopted the classic right-wing line taken up by Andrew Mellon, Hoover's treasury secretary: "Mellon--unlike the Roosevelt administration--understood that American growth would return if you left the economy alone to right itself." This is the conclusion that most excites Shlaes's conservative admirers. And in keeping with this argument, Shlaes, a committed supply-sider, scolds Roosevelt for raising taxes on the rich, which discouraged them from taking risks. She fails to explain how the economy managed to recover after the outbreak of World War II, which saw even higher taxes on the rich, or in the postwar period, when they remained high.

Moreover, the classic right-wing critique fails to explain how the economy recovered at all. In one of his columns touting Shlaes, George Will observed that "the war, not the New Deal, defeated the Depression." Why, though, did the war defeat the Depression? Because it entailed a massive expansion of government spending. The Republicans who have been endlessly making the anti-stimulus case seem not to realize that, if you believe that the war ended the Depression, then you are a Keynesian.

Shlaes also offers up a more subtle, and slippery, version of this argument. In the second iteration, the problem with the New Deal was not that it involved government but that it involved unpredictable government. Businesses failed to hire workers or open factories not because there was a lack of demand for their products, but because constantly changing government policies made them uncertain. "Uncertainty about what to expect from international events and Washington," Shlaes instructs, "made the Dow Jones Industrial Average gyrate."

I agree that there is something to the notion that unpredictable government policies can spook markets. Shlaes cites an industrialist who urged Roosevelt to "make the program clear and then stick to it." But the answer to this perplexity is not that Roosevelt should have abandoned his public works program, Social Security, and regulatory reforms. It is rather that he should adopted them sooner, and hewed to them more consistently. That would have been perfectly clear.

Yet that is not the conclusion that conservatives wish to draw. Nor is it a useful club to wield against contemporary liberals. So at other times Shlaes suggests--again, her writing is so convoluted that it is hard to discern what she means--that eliminating uncertainty means eliminating government activism. In her recent op-ed pieces, she urges Obama to forego Keynesian stimulus and instead cut taxes for corporations and stockholders. Her real argument, then, is that changing the rules in a liberal direction paralyzes businesses with fear, while changing the rules in a conservative direction promotes growth.

Several of Shlaes's admirers have taken up the line that the current slowdown is caused, or at least worsened, by the "uncertainty" of Obama's fiscal stimulus. "A main reason there's all of this 'money on the sidelines' out there among private investors is that Wall Street doesn't know what the government will do next," Jonah Goldberg wrote in National Review. "In short, don't just do something, President Obama--stand there." If this prescription were true, you would suppose it would show up in the business press. After all, there is a thriving media industry devoted to taking the temperature of the markets and discerning what causes them to rise or fall on any given day. Not all these business reporters are left-wing stooges. And yet almost never do they report that uncertainty about Keynesian politics has caused the market to sink. Instead, you regularly come across coverage like this, from The Wall Street Journal on December 8, 2008:

    The prospect of new government action to create jobs and
    keep auto makers out of the ditch sent stocks higher for a
    second consecutive day, amid hopes that a worst-case
    scenario for the global economy could be avoided. Gains in
    the U.S. were part of a world-wide rally triggered by
    President-elect Obama's plan for a stimulus package.

 

Shlaes's main indictment of the New Deal is contained within the first few pages of her book. It begins with a snapshot of the depressed economy, depicting a desperately poor family, and broadens out to describe a cratering economy, and finally moves on to Washington, where the oblivious Secretary of the Treasury announces his intent to "continue progress toward a balance of the federal budget." The reader is meant to think this is a description of Herbert Hoover's America. But Shlaes concludes the story with an aha! moment: this episode took place in 1937! "The New Deal was almost five years old," Shlaes concludes, after repeating this shocking tale in another op-ed, "but the economy was not back."

If your understanding of the New Deal is limited to the simple notion that Roosevelt spent a lot of money and tamed unemployment, then this story might sound like a persuasive piece of evidence for Shlaes. Yet there is a tip-off within the story that ought to give even the uninformed reader pause: the part where the Treasury Secretary promises to balance the budget. That doesn't sound very New Deal-ish, does it? And indeed it is not. The historical fact is that Roosevelt's administration contained warring factions with often wildly differing ideas. FDR came into office promising to slash the federal budget, but he moved in fits and starts toward a Keynesian policy of fiscal stimulus. After the elections of 1936, though, his more conservative advisors prevailed upon him to roll back the budget. Liberals, including Keynes, protested that this would jeopardize the fragile recovery. And events vindicated them: after impressive growth, the economy plunged back into a recession within a depression.

That Roosevelt see-sawed between Keynesianism and budget-balancing has been conventional wisdom among mainstream historians and economists for decades. The MIT economist E. Carey Brown wrote this in 1956. Keynes made the same point in a pleading letter to Roosevelt in 1937. Economists disagree about the extent to which Roosevelt's fiscal expansion helped. Many give more credit to his abandonment of the gold standard--which Shlaes, naturally, also decries. The fact that he retreated from Keynes in 1937 and that this retarded the recovery, though, bears little dispute.

Adam Cohen's Nothing to Fear, an admiring history of Roosevelt's first hundred days, captures the deep tensions between camps in the Roosevelt administration. Cohen's take is conventional, but it is executed well, tracing the disparate life stories of the main New Dealers in such a way as to make the inevitability of their conflict clear. This was a true team of rivals, some of them winding up as Roosevelt's most unhinged critics. Even before Roosevelt took office, Cohen writes, there was a "fundamental conflict--between spending more to fight the Depression and spending less to balance the budget--that would be a central tension of the Hundred Days." Yet for Shlaes and her admirers, the finding that Roosevelt vacillated between Keynesianism and orthodoxy represents a devastating intellectual blow to the New Deal edifice. And, yes, if you think of the New Deal as a series of unbroken triumphs held together by a clear and consistent ideology, and you have failed to take in any of the scholarship about the period produced over the last half-century, then The Forgotten Man will come as a revelation.

Shlaes writes that her discoveries about the New Deal show that "Roosevelt was unworthy of emulation." But who, exactly, is proposing to emulate everything that Roosevelt did? Much of his program has long been deemed a failure by liberals, including Roosevelt himself. (This includes the National Recovery Administration, which Shlaes dwells on at great length, while breezing past or ignoring altogether vast swaths of the New Deal.) When liberals suggest that Obama follow Roosevelt's model, they do not mean that he should replicate the entire thing. (The way, say, conservatives do when they suggest following Reagan's model.) They mean that he should emulate the Keynesian fiscal policies and other parts of the New Deal that worked. Shlaes has set out to demolish an argument that no serious person has ever made.

At one point in her book, in fact, Shlaes actually concedes that Roosevelt's Keynesian experiment succeeded when he tried it. "The spending was so dramatic that, finally, it functioned as Keynes ... had hoped it would," she writes about 1936, "Within a year unemployment would drop from 22 percent to 14 percent." So Keynesian policy worked, and the main fiscal problem with the New Deal was that Roosevelt made too many concessions to the right. Here we are in agreement. So can conservatives stop carrying around The Forgotten Man like it's Mao's Little Red Book? Can we all go home now?

 

It should be clear that intellectual coherence is not the purpose of Shlaes's project. The real point is to recreate the political mythology of the period. It does not matter that Shlaes heaps scorn on Roosevelt for doing things that liberals also scorn. Anything that tarnishes his legacy, she seems to think, tarnishes liberalism by association.

The conservative movement has invested enormous effort in crafting a political mythology that gratifies its ideological impulses. The lesson they learned from Ronald Reagan is that ideological purity is not only compatible with political success, but is also the best path to political success. They dutifully applied this interpretation to everything that happened since--George H.W. Bush, then Newt Gingrich, and then George W. Bush all failed because they deviated from the true path--and to all that happened before. Nixon failed because he embraced big government. Kennedy succeeded because he was actually a proto-supply-sider.

From such a perspective, Roosevelt casts a long and threatening shadow over the conservative movement. Here was a case of a wildly unpopular conservative Republican, Herbert Hoover, who gave way to an unabashed liberal Democrat who won four presidential elections. Shlaes goes to great pains to explain away this apparent anomaly. In this instance, she does produce an internally coherent argument. It is, alas, wildly ahistorical.

If the New Deal failed so miserably, one might wonder why voters continued to endorse it. In Shlaes's telling, Roosevelt's first challenger, Alf Landon, lost in 1936 because he "failed to distinguish himself" from Roosevelt. It is certainly true that Landon hailed from the party's moderate wing and shied away from the root-and-branch condemnation of the New Deal favored by, say, Hoover. But as the campaign wore on, Landon's rhetoric grew increasingly harsh. If Roosevelt returned to office, he warned, "business as we know it is to disappear." Voters who opposed the New Deal may not have had a perfect choice, but they did have a clear one. It also takes quite a bit of ideological credulity to believe, as Shlaes apparently does, that Roosevelt's twenty-point victory represented anything other than massive support for his program. Landon himself later remarked that "I don't think that it would have made any difference what kind of a campaign I made as far as stopping this avalanche is concerned."

And Shlaes offers an even odder explanation for Roosevelt's triumph in 1940. Wendell Willkie seized the advantage by attacking the New Deal, she writes, but squandered it with his dovish position on the war. The war, she argues, had become "the single best argument to reelect Roosevelt and give him special powers." After the election, she asserts, the Republicans "concluded, accurately enough, that the outcome would sideline not only their party but their record of accuracy when it came to the economy. They had been right so often in the 1930s and they would not get credit for it. The great error of their isolationism was what stood out."

Shlaes, characteristically, bolsters this highly idiosyncratic reading of history with only bare wisps of data. It is true that the outbreak of war in Europe made Roosevelt, the incumbent, appear safer. But this pro-incumbent upsurge merely cancelled out a powerful current of anti-third term sentiment. Moreover, public opinion opposed entry into the war, and Roosevelt had to fight the suspicion that he was nudging the country into the war by explicitly promising to stay out. Shlaes's portrayal of an electorate seeking activist government abroad and laissez-faire at home gets the history almost perfectly backward. (The Forgotten Man ends with the 1940 race, sparing her readers any further contortions of electoral interpretation.)

 

The final unanswered question that must nag at the minds of the true believers is how the Depression managed to develop even before Roosevelt assumed office. After all, his bungling caused the economy to stall for years, yet the Depression was already more than three years old before Roosevelt even took office. Shlaes's answer is to implicate Hoover as a New Deal man himself:

    Hoover had called for a bank holiday to end the
    banking crisis; Roosevelt's first act was to declare a bank
    holiday to sort out the banks and build confidence. ...
    Hoover had spent on public hospitals and bridges;
    Roosevelt created the post of relief administrator for the
    old Republican progressive Harry Hopkins. Hoover had
    loved public works; Roosevelt created a Public Works
    Administration. ... Hoover had known that debt was a
    problem and created the Reconstruction Finance
    Corporation; Roosevelt put Jones at the head of the RFC
    so he might address the debt. ...

    Hoover had deplored the shorting of Wall Street's rogues;
    Roosevelt set his brain trusters to writing a law that
    would create a regulator for Wall Street.

This part of Shlaes's argument has generated enormous enthusiasm on the right. At last the cultural baggage of Roosevelt's predecessor--Hoovervilles, Hoover flags, and the like--has been lifted off the shoulders of conservatism and onto the real culprit, which is liberalism. Senator Kyl proclaimed on the Senate floor last fall that "in the excellent history of the Great Depression by Amity Shlaes, The Forgotten Man, we are reminded that Herbert Hoover was an interventionist, a protectionist, and a strong critic of markets." Recently the House Republican Steve Austria went so far as to declare that Roosevelt actually caused the Depression. "When Roosevelt did this, he put our country into a Great Depression," Austria said. "He tried to borrow and spend, he tried to use the Keynesian approach, and our country ended up in a Great Depression. That's just history."

There is indeed a revisionist scholarship that recasts Hoover as an energetic quasi-progressive rather than a stubborn reactionary. William Leuchtenburg, in his short new biography Herbert Hoover, makes some allowance for the revisionist case, but finally he settles on a more traditional conclusion. Leuchtenburg shows that Hoover's history of activism consistently left him with the belief in the primacy of voluntarism and the private sector, a faith that left him unsuited to handle a catastrophe like the Depression.

Leuchtenburg also provides a handy rebuttal to Shlaes's preposterous conflation of the two presidents. Hoover's National Credit Corporation, he explains, "did next to nothing." Hoover and Roosevelt would be amused to hear that his bank holiday aped Hoover's, given that Hoover denounced the Emergency Banking Act as a "move to gigantic socialism." (Does this ring a bell?) Shlaes's attempt to equate Hoover's disdain for short-sellers and Roosevelt's regulation of the market presumes that there is no important difference between expressing disapproval for something and taking public action against it.

Yes, Hoover created the Reconstruction Finance Corporation. But (I am quoting Leuchtenburg) "at Hoover's behest, RFC officials administered the law so stingily that the tens of thousands of jobs the country had been promised were never created. By mid-October, the RFC had approved only three of the 243 applications it had received for public works projects." Hoover's head of unemployment relief said that "federal aid would be a disservice to the unemployed." Hoover was a staunch ideological conservative who remarked, in 1928, that "even if governmental conduct of business could give us more efficiency instead of less efficiency, the fundamental objection to it would remain unaltered and unabated." This was not, to put it mildly, Roosevelt's philosophy.

Hoover himself would have found the notion that Roosevelt mostly carried on his work offensive. During the campaign of 1932 he warned that, if the New Deal came to fruition, "the grass will grow in the streets of a hundred cities, a thousand towns." This was not mere campaign rhetoric. After Roosevelt won, Hoover desperately sought to persuade him to abandon his platform. He spent the rest of his years denouncing Roosevelt's reforms as dangerous Bolshevism. Leuchtenburg records that Hoover wrote a book about the New Deal so acerbic that his own estate suppressed its publication to avoid further tainting his reputation.

Of course, the transition from one presidency to another always involves some level of continuity. The world never begins completely anew with a presidential inauguration. But the break between Roosevelt and Hoover was certainly sharper than that between any president and his predecessor in American history. After 1932, generations of Democrats continued to paint Republicans as neo-Hooverites. This was mostly a calumny. Though Hoover himself continued to assail the New Deal as calamitous socialism right up to his death in 1964, from 1936 on the party remained in the hands of men who understood that the New Deal had built an enduring base of support and could not be directly assailed.

But now we have come to a time when leading Republicans and conservatives--not just cranks, but the leadership of the party and the movement--once again sound exactly like Herbert Hoover. "Prosperity cannot be restored by raids upon the public Treasury," said President Hoover in 1930. "Our plan is rooted in the philosophy that we cannot borrow and spend our way back to prosperity," said House Minority Leader Boehner in 2009. They have come to this point by preferring theology to history, by wiping Hoover's record from their memories and replacing it with something very close to its opposite. It is Hoover, truly, who is the Forgotten Man.

Jonathan Chait is a senior editor at The New Republic.

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150 comments

That fact that such important people can be so out-of-touch with historical and economic reality is frightening. If we aren't careful as a nation they'll led us right back into the Great Depression.

- Alan

March 4, 2009 at 8:37pm

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Completely off-topic... but you guys need to fire whoever is in charge of the website. The sluggish page loads are one thing, but why am I seeing a link in the sidebar to a section that was discontinued 2 months ago?

- City of Evil

March 9, 2009 at 1:04am

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Leftists like to say that Ms. Shlaes is only a journalist. What they don't tell you is how many Nobel Prize winning economists, including several who are still living, agree with her. The fact is that that the New Deal was an economic failure, a confused, amateurish mess that did a lot more harm than good.

- bulbman1066

March 9, 2009 at 2:12am

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Shlaes builds on the academic research of Cole and Ohanian published in the Journal of Political Economy (Googleable). They argue that Hoover and FDR's pro-cartel, pro-union policies created perhaps a third of the Depression's misery. During World War II, FDR weakened these pro-cartel, pro-union policies. Truman's decision to sign the anti-union Taft-Hartley act was a final act restoring competition to the labor market and helping build the foundation of our post-war growth. This isn't the whole story of the recovery from the Depression: Monetary policy mattered a lot, too. But Shlaes did a great service in bringing Cole and Ohanian's research to a broader public: And their work shows that Hoover and FDR's pro-cartel policies were awful for the U.S. economy.

- Garett Jones

March 9, 2009 at 5:01am

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You are an idiot, lying dirt bag. I imagine you worked as a public school teacher prior to spreading nonsense propaganda online. BELOW IS AN EXACT QUOTE OF FDR'S TREASURY SECRETARY. Control freak ideologues like you should be ashamed of yourselves.Try studying actual facts you moron. “We have tried spending money. We are spending more than we have ever spent before, and it does not work... I say after eight years of this administration, we have just as much unemployment as when we started -- and an enormous debt to boot.” - Henry Morgenthau (FDR's Treasury Secretary)

- Cris

March 9, 2009 at 7:56am

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Why did the Great Depression last as long as it did? Why did the Depression of 1921, though initially more severe, last only about a year? In the case of 1921, the government cut both spending and taxes, and allowed wages to fall as well.

- Neill

March 9, 2009 at 8:21am

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Authour arguments are simplistic. The so called Keynesian, "paradox of thrift' and the authours presentation of such is quite a hoot that sounds off something like this:What is good for the individual(not spending stupidly) is bad for society that needs to have the individual spend like a drunken sailor for society and contiguous economy to function at optimum.In authours economic Weltenschuaang, society must stand in opposition to what is 'good' for the individual because society knows best and certainly better than the dumb saver who refuses to spend. Authour in next paragraph states that recessions are caused by failure of demand. Gooly Gee and i thought that failure of demand was in effect, an effect and certainly not a cause.The rest of the article is an uninterrupted reductio ad absurdum, without direction, point or objective. It is another feeble attempt at the politicization of economics and in our current, 'let us do anything'environment, it holds water.Shales can think. Authour can mock.

- Jack Ajzenberg

March 9, 2009 at 8:28am

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"Why, though, did the war defeat the Depression? Because it entailed a massive expansion of government spending." OK. If so, then let the left stop "lying about Reagan." By your own logic, Reagan rescued us from stagflation by massive military spending. It left us with quite a bit of debt, but so did WW2, so obviously the debt doesn't concern you. In general, if one wishes their sacred cows not to be gored, they ought not to gore the sacred cows of the other.

- Khadjiah

March 9, 2009 at 8:29am

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Many parts of FDR's policies failed. Some worked out well. I would think it is obvious that what the Republicans are talking about is the part that rattled markets and failed to end the economic decline, which are relevant to our current situation. Many of the things that you pointed out as successful, were for a long time, seemingly. We are now dealing with reforming Social Security, which no one seems to really want to do. Unions, which have had a wonderful effect on growing our middle class, also seem to be a problem now. The UAW has had a part in Detroit's many woes.

- Todd Underwood

March 9, 2009 at 8:55am

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Evidence of the negative impact of the New Deal is voluminous. Is Chait honest or dishonest to ignore it & focus on Shlaes? See "A Bibliography on the Great Depression" by David Gordon at lewrockwell.com for Feb 19, 2009.

- jeanag

March 9, 2009 at 9:41am

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Thank you Mr. Chait. I wish congress could have this piece as required reading material. I can't believe that influential members of our government are wielding a poorly researched, contradictory piece that can't follow a simple thesis like they would follow the bible, as pure fact... good work, that's why our tax dollars pay you so much... To not think things through.

- Dan

March 9, 2009 at 9:42am

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Reagan didn't boast about voting for FDR, he was lamenting his shame. As evidenced by this famous quote: "Fascism was really the basis for the New Deal." ~ Ronald Reagan, 1976 His analysis was correct. How else would you explain many of the New Deal Brain Trust keeping pictures of Mussolini on their walls?

- rgosche

March 9, 2009 at 9:59am

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This is the flat-earth crowd. It is indeed frightening that such people can be anywhere near the levers of power and were indeed in power for eight years. With them, it's a case of "faith-based reality." One can only hope that these nuts will end up as marginalized by the Obama administration as their predecessors were by Roosevelt. We are due for another 50 years of Republican impotence.

- roidubouloi

March 9, 2009 at 10:01am

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so the new deal was a total failure huh? So the SEC and the FDIC was a bad idea and a failure, building the Hoover, creating the Tennessee Valley authority (bringing relief and a change in life to the then most impoverished area of our country), the inmummberable WPA infrastructure projects that we still use around the country today, the agricultural reforms, the accomplishments go on and on,.. Was the New Deal perfect, no. Did it accomplish everything intended, no. But to paint this period and the policies and projects that it produced as a total failure is just as ignorant of the historical facts as those who say the new deal ended the great depression. There is no magic bullet with which to interpret all of our history. In reality, it was massive government spending on the war and massive govt spending before the war that lifted us out of the great depression, just as in the 1980's, it was not tax cuts as much as it was a massive infusion of govt. defense spending (wow the govt. spends money and it can stimulate the economy) In the end when the economy and individuals fortunes collapse the govt becomes the true lender and spender of last resort.

- B

March 9, 2009 at 10:04am

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The most damning indictment of the Shlaes's argument about the lack of political popularity of the New Deal is not any of FDR's victories, but Harry Truman's. In '48, Truman seemed too small for such a great job, and the time for a change attitude seeme strong, Republicans had just taken over Congress in '46, presaging taking back the White House, and two Democratic splinter candidates (Wallace & Thurmond) would take votes from Truman's right and left. What did Truman and his advisors do to win? Move left. Truman advocated unions, national health care, and ad subsides. The Fair Deal for the American worker. In essence, Truman's strategy was to divide the country on its core issue at the time, and he would have the (slightly) bigger half. Jon, does Shlaes even both addressing this damning piece of evidence against her argument.

- BK Arbour

March 9, 2009 at 10:11am

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The article seeks to discredit "The Forgotten Man", acknowledges that some parts of the New Deal failed, but does very little to articulate what parts of the New Deal worked. In essence, it does a poor job of defending the New Deal. Does Mr. Chait disagree with the proposition that the Great Depression did not end until WWII (or even after WWII)? That after approximately a decade of "New Dealing", the program had failed to end the depression? What is the argument for the New Deal succeeding even though it did not bring about the end of the Great Depression?

- Patrick - Pittsburgh

March 9, 2009 at 10:26am

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Oh give it up. Keynesism is thoroughly disproven and the New Deal prolonged the Depression. The statement that anybody who believes WWII ended the Depression is a Keynesian is true but that same believer is also an idiot if he thinks that full employment brought about with rationing and an abysmal lack of consumer goods is a good thing(like the old USSR). Such continuing beliefs forbode a gloomy next dozen years as the Obama/Bush era repeats the Hoover/FDR era.

- lesserliz

March 9, 2009 at 10:36am

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If policies of fiscal restraint were the "real" way to end the depression, then why didn't Hoover's winning fiscal policies actually work? I mean, he had 3 years to begin to turn things around.....with zero results. The end of the great depression came by way of government spending.....the spending that finally reached appropriate levels to lift us out of 1929's economic malaise was the war spending of the early 1940's.

- davidwwalters

March 9, 2009 at 10:44am

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Author has some fair criticism of the work, especially the overplayed theme of continuity between Hoover and FDR. But by far the largest theme of "The Forgotten Man," and the real subject the title refers to, is the persecution of wealthy industrialists, small businesses, and government sponsored competition for their enterprises. TVA-Tennessee Valley Authority, WPA-works project admin, NRA-national recovery admin, and AAA-agricultural adjustment act, chiefly but not solely drove out private activity by making it uneconomic, by setting prices and wages, by funding activities such as electricity generation heretofore conducted by private enterprise, that drove out private capital. Also, justice department enforced the policies unpredictably, going after utility magnates such as Sam Insull and Wendell Willkie, and small businesses like the Schechter bros butchers. That, alongside the unpredictability of New Deal policies that the author mentions, are Shlaes' core indictment of the New Deal. And these have direct corollaries to how Obama is proceeding today. Another omission is that Shlaes acknowledges that the Keynesian pump priming, as fiscal stimulus is usually called, succeeded in reducing employment. But it failed to fulfill the metaphor and "prime the pump," since when the deficit stimulus was withdrawn the jobs disappeared, as they did in 1937. The "pump," which is meant to be private employment, never got primed. Why that failed to occur is the subject of Shlaes' book, something that the author barely mentions.

- michael

March 9, 2009 at 10:53am

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Massive government spending due to WWII ended the depression and led to decades of enormous government debt offset by decades of booming economy. The booming economy was the combination of the spending creating a massive manufacturing infrastructure and the fact that our economic competitors were decimated by the war.

- LaughingLou

March 9, 2009 at 10:58am

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Commenter "Neill" has it right. If the New Deal was effective, then why did the depression last so long? It is the quantitative analyses of the New Deal that are damning. Chait attacks random passages but misses the essential point by a mile. But that's OK because clinging to narratives that feel good is the essence of Obamaism.

- George T

March 9, 2009 at 11:12am

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The new argument by liberals when FDR-style deficit spending doesn't work, as it doesn't seem to be now, as it didn't in over a decade of massive deficits in Japan, is that it either isn't enough or, in the case of Japan, wasn't enough quick enough, ie had it been sustained rather than come in spurts it would have done the trick. The argument conservatives make is not that there shouldn't be deficit spending during a significant downturn in the economy, but the type of spending that should be done to get us out of the slump. Tax cuts to individuals and corportations will still create short-term deficits, but they would give an immediate jolt to the economy by putting large sums of money directly in pockets without delay. Today there is an ideological brick wall preventing that from happening because Democrats are in control and have set up a false populist argument that taxes don't matter and deficit spending must be controlled by government. They are aghast at the possibility that a high income individual might get substantially more in tax relief if it was applied to everyone because, duh, the high income individual makes more and as a result any percentage decrease in taxes results in more of a cut in dollar terms. And should that individual then go out and buy an expensive gift for his wife at Tiffany's, the reaction among liberals is absolute horror. What liberals should do is ask the Tiffany's clerk who sells the gift what he or she thinks. People now dismiss "trickle down" economics without really thinking through it's everyday impact. Instead they cling to the notion that an $8 a week cut in taxes for lower wage workers is sufficient to get the economy moving again, or that government will efficiently spend our money to create new opportunities. Let us try the Democrats way, as we must, but let no one say later that they were not warned of it's ability to really stimulate the economy.

- Peter

March 9, 2009 at 11:12am

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Noone would ever argue that it was not a highly successful political strategy. You socialist types just don't get it, and you never will.

-

March 9, 2009 at 11:18am

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The New Deal was a pitiful failure that extended the Depression indefinitely. WWII and the massive buildup ended the Depression. YOU should stop lying about Roosevelt.

- Revolution

March 9, 2009 at 11:18am

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If the New Deal was so effective, then why was it called "The Great Depression?" And why was the Great Depression considered to have lasted into WWII? Because the New Deal did not work. If Keynesian spending is so effective in reducing unemployment, then why was there a recession-within-a-depression in 1937? Because Keynesian spending cannot really reduce unemployment. It can only give the appearance of such, and only in the very short-term, until the consequences of bad government policy become inescapable.

- WM

March 9, 2009 at 11:22am

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In regards to rgosche's comment, you really need to read up on your history of that era. Look at how newspapers and politicians talked about fascism at first and how it was seen as something that might be good for the United States. Mussolini was not seen as a very bad guy until a bit later and nobody even really knew about Hitler in the early 1930's. There were even people pushing Roosevelt to take the reigns of power completely to save the nation. These were not just people on the left, they were from both ends of the political spectrum.

- K - NJ

March 9, 2009 at 11:25am

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The fact that FDR wavered between spending and thrift supports the idea that if the govt had done nothing we may have ended up with the same result, or slightly better or worse. The down side of the New Deal is the legacy of hundreds of govt programs that no longer work (Social Security is a prime example). I'd personally like to see our govt do its job of protecting free trade and prosecuting criminals who abuse the system instead of deciding who wins and loses. Ask yourself why we are rewarding banks with bailouts. Why didn't we bail out World Com and Bernie Ebbers?

- ColoWayno

March 9, 2009 at 11:33am

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A lot of right-wingers here today, and Khadjiah is the only one that makes a coherent argument. Yeah, Reagan's massive government spending did have a role in ending the recession. I just happen to think that there were better things to spend that money on. And that once the recession was over, he should have at least tried to pay back some of the debt.

- City of Evil

March 9, 2009 at 11:44am

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What is most interesting is that the article as well as Shlaes book is war by proxy; just like the US and the USSR had client states in places of no real geo-polical interest like Africa. Liberals/Democrats must prove FDR was a success; Conservatives/Republicans must prove FDR was a failure. As a former Republican and current Demcorat I am something of an agnostic on this historical battlefield. I think it is clear however that some of FDR's policies were failures and others were successes. I do think however the role of Keynesian economics has been abundantly proved and that the only appropriate Federal response to a depression scenario is to act to increase economic activity; the exactly wrong response is to cut spending. Republicans come off as flat-earthers when they advocate spending reductions as the response to a dramatic reduction in consumer and business spending.

- Allan Hughes

March 9, 2009 at 11:50am

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Some of the comments posted here seem to reflect the same sort of ideological purity being used to revise history that the author decries. Some even seem to think that name calling should pass as serious public discourse. Let's take a step back: Did Republican economic and fiscal policies from 1920 to 1932 contribute to the economic collapse which was the Great Depression? Few historians doubt this. Did Roosevelt get it right every step of the way during the depression? Of course not. He was dealing with an unprecedented crisis and trying everything he could to help the situation, and without much precedent to guide him. The underlying question remains: in times of economic crisis what can government do to ameliorate the situation? The response to this question by both Hoover and contemporary Republicans is essentially to stand aside and let the markets work it out. The response by both Roosevelt and Obama is that it is government's responsibility to act, and that by spending money jobs will be created and the impact of the crisis softened. What I find creepy and scary is the intensity of some in defending the same ideology that helped to create the crisis in the first place. That is what happened during the Great Depression, and the public wisely dismissed those politicians as failing to act for the public good. The same thing is apparently happening today, as the Republican party and revisionist historians put ideology over serious attempts to overt further catastrophe. In the long run this might be good news for Democrats, as the GOP becomes more and more a party of crackpots, intellectual and political dishonesty, and proponents of policies that do nothing to address the serious problems that Americans face both individually and collectively. This orientation is likely to guarantee their political marginalization for many election cycles to come.

- zoundsx

March 9, 2009 at 11:51am

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Truman vetoed the Taft-Hartley Act..just a minor correction.

- Jason

March 9, 2009 at 11:52am

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The hard facts are that from 1933-40 the Depression continued, despite all of the social engineering and spending by the federal government. The economy did not come out of the Depression until World War II greatly increased demand in the defense and energy sectors. By 1940 England and France were spending billions buying American-made weapons and munitions and Pres. Roosevelt was trying to build a two-ocean navy to fend off the Germans and Japanese. When the US entered the war 12 million men went into the armed services. This wiped out unemployment. Those who didn't qualify for military service and millions of women went to work in defense-related industries. Although people had money, there were few consumer goods available for purchase, and those that were were rationed. The post-war recession, caused by millions of men returning from war and cancellation of billions of dollars in defense contracts, didn't last long because people had pent-up savings to spend on consumer durables. Automakers, homebuilders and other heavy industries quickly retooled to build consumer goods to supply this demand. The economy is now driven by consumers. If they have money to spend and are not worried about losing their jobs, they will spend it. If they are afraid, they save. Consumer spending these days is greatly dependent on the money supply. If government taxes or borrows, that reduces the money supply available to consumers. Lower interest rates increase the money supply. It is all a very intricate balancing act and it doesn't take too much to get the economy out of kilter. It can take a lot to restore that balance.

- BillofRights

March 9, 2009 at 11:54am

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Chait wants Shlaes to make an argument for how the New Deal failed and really protests people using her book. Since the data show that the Depression did not end until close to WWII, isn't the onus upon Chait's side to show that it did work either by 1) making things not as bad as it could have been (hard to imagine) or 2) it took many years to take effect and Morgenthau spoke too soon, since he was slightly anti-Keynesian anyways. Chait rests his pro-New Deal argument mostly on FDR's electoral victories in 36 and 40. Strange way to determine if policy is effective or not. Good way to evaluate the incumbent's popularity, particulary when that incumbent has been consolidating power for four or eight years. Rather than making an argument for the New Deal, the gentleman doth protest too much, methinks.

- abefroman

March 9, 2009 at 12:01pm

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The New Deal didn't work. The US didn't come out of the slump until WWII. Seems like this guy's trying to have it both ways. Sure govt spending helped get us out by investing for the war, but govt spending on useless projects doesn't do anything. Just because FDR was elected 3 times does not make him a good President. I use to think this way when I was younger and naive. If he was so great, why did it take 9 years and a world war to get us out of the funk we were in?

- GK_1970

March 9, 2009 at 12:09pm

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The notion that the government would pursue fiscal contraction (as Hoover did and FDR did later leading to the second down leg in the GD) and monetary contraction (as sticking to the gold standard effectively did) during a recession is turning the lessons of the Great Depression upside down. It is unfortunate that the people who make these arguments do so out of either obvious ignorance of macroeconomics and history or purely for ideological reasons that have no basis in reality. The fact that many of these people get into power is a shame. While there are many elements of the New Deal that are found wanting, there are many that are still helping Americans this very day which is why there is no political support to get rid of them or even to propose it. This is just a continuation of the alternative reality that many on the right live in. From believing creationism over science to selective revisionist history over basic textbook economics, its no wonder this country is in the mess it is in today after the many years of their governance (or lack of it.)

- Sohojake

March 9, 2009 at 12:16pm

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what is scary and sad is the long term effect of the great depression and FDR's attempts to rectify it. It was war. If FDR had done more to alleviate debt from WWI (from Europe) would we have avoided WWII? I don't think FDR planned or wanted WWII, but like Emanuel, he looked at the stock market crash as an "opportunity" to enact an agenda that he thought was correct to the previous years after Wilson lost. Even though they didn't work, as rising unemployment and overall world economic stagnation showed over the first seven years of his term, he really believed in them. He wanted "social justice", just as our current President does. In the end he wanted internationalism, brought to you by WWII. Governing is a process that over time adapts. WWII saved his legacy. Hence at the end of his life he gave us the UN, which he had been scared to publicly embrace during his time in the Wilson administration.(LON) The UN has very little success. Except blaming Israel and Jews. My fear is that Obama will be viewed as a success by history, because we fought a major war under his watch. Like FDR, he won't be blamed for his hand in creating the conditions for starting it, only that we won it. Why is is that good intentions always lead us to a major war? I hope this is not the case now.

- Todd Underwood

March 9, 2009 at 12:19pm

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Let us look at psychological aspects of this modern revisionism. It is well known that people tend to read/listen to what they already agree with. Conservatives listen to Fox News, etc. Not that liberals are necessarily better--I read this piece because I wanted to bolster my already held beliefs about the New Deal. The conservatives who read Shale already knew that Roosevelt caused or at least extended the Depression. Such critical apparatus as they have in their minds was not engaged. Nor did many have the economic expertise or historical knowledge to see problems with her analysis, had they been inclined to look.

- Chuck Vekert

March 9, 2009 at 12:22pm

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The fact is, no matter how you Obamists want to twist it, Roosevelt's, for then, massive spending did not end the depression. Look at the massive unemployment statisticts in 1937, 1938 and 1939, they were above 20%. It was the impending World War that turned the Roosevelt depression economy around, not his doemstic policies. Another thing to fear, Roosevelt got away with his massive, again for that time, budget deficits because he was coming off of years of balanced budgets and small deficits/surplusses. We are already in trillions of dollars of deficits, passed by 2 successive Democrat controlled Congresses, by the way. If Obama wants to continually say that he inherited this massive deficit, it would be nice if he mentioned that they were approved by him and his Democrat Party members, not Republican controlled Congresses, the last 2 years. This goes equally for the masssive pork barrel appropriations bill he is going to sign this week, a payoff to his party for his nomination and election as President. He is no different than Bush in one aspect, he is a liar.

- Bob G.

March 9, 2009 at 12:28pm

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Get a clue: - Gov spending didn't bring us out of depression -- it was pent-up victory spending by soldiers and investment by businesses after war time rationing, no consumption or production of consumer goods and saving. Nothing to do with Keynes - New Deal did improve the regulatory frameworks -- consistent with allowing the banking markets to function more efficiently - Almost all new deal Gov jobs dissappeared as soon as Gov spending ended --- meaning no improvement to economy - Finally, everyone should be aware of the GDP accounting trick for Gov spending. I could improve GDP and unemployment instantly by just taking the gov unemplyments benefit $$ and hiring/paying the recipients for digging holes and filling them in. Gov expenditures on jobs included in GDP while Gov expenditures on xfer payments like unemployment not. Much of the percieved New Deal benefits due to this trick

- dpf

March 9, 2009 at 12:32pm

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An earlier poster complained about TNR's technical problems.I have a different complaint. Both writers and bloggers on TNR sites have increasingly adopted the snarling tone towards opposing opinion previously limited to outlets like "Human Events". People criticizing Israel are liars, anti-semites and even pigs. Amity Shlaes isn't merely wrong-she is a liar. I suspect I'm not the only one getting sick of it.

- kaboom

March 9, 2009 at 12:42pm

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Who are you Liberals trying to convince? Yourselves? Because you already have the votes. So why the angst over Roosevelt, or what conservatives think. It's starting to sound like you don't really believe it yourselves.

- Daver

March 9, 2009 at 12:44pm

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Obamas own Christina Romer states that "plausible estimates of the effects of fiscal and monetary changes indicate that nearly all of the observed recovery of the U.S. economy prior to 1942 was due to monetary expansion." So enough with the right wing revisionism. The New Deal was a fantastic success as a social welfare program, it put people to work and we all benefited from some things that were built. However, it is very hard to prove that it had any positive stimulative affects. Also, for those relying on WWII as their reasoning, remember we are already at war, and its stimulative affects have not yielded much. The FED is firing on all cylinders and if they dont get it done, if they cant refinance the economy, then it doesnt matter what fiscal policy levers are pulled, we are sunk.

- CCODY

March 9, 2009 at 12:47pm

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i read this up to the point i came across the following statement. "When they say that the New Deal "didn't work," conservatives almost always mean New Deal fiscal stimulus. (Other policies, such as Social Security or clearing the way for unions, clearly succeeded on their own terms, whatever their ideological merits.)" please excuse my apparent ignorance... but... even democrats today tell us that within just a couple of years now social security will be insolvent. and gee... just look at what the unions have done for the auto makers in detroit. absolutely those have been such sweet success's. if you're going to write a 5 page article you should make it a point to at least get your very first fact right. just to entice people to keep reading your bilge.

- bobble

March 9, 2009 at 12:53pm

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Recessions are NOT a natural process but caused by government intervention therefore more government is not the solution. Keynes was incorrect that more government spending stimulates the economy and has been proven wrong many times over (Great depression, Carter, Japan, etc). The fact that Obama claims for every dollar spent by his irresponsible trillion dollar boondoggle the return is 1.5 is absurd. If this were the case the private sector could vanish tomorrow with zero impact. Anything one who thinks that more government is the answer has never read history or learned economics 101. Remember every dollar the government confiscates and gives away is a dollar removed from its most productive use in the private sector, period!!! The aim of Obama's unconscionable and worthless spending is to buy votes, plain and simple. The home mortgage bill that will "save" 9 million people from foreclosure? 9 million votes. Yes it is that simple!!!

- A Conservative Mind

March 9, 2009 at 12:53pm

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Obama could take the highest marginal rate to 50%, but he isn't proposing that. Barack Obama is waging war on the poor!!

- John

March 9, 2009 at 12:57pm

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I took it the debate was not about individuals--do we worship Roosevelt or Reagan?--but whether stimulative spending works. I take it there is substantial evidence that stimulative spending works and spending reduction is a disaster. No one claims Roosevelt was perfect, yet there are responses that argue about the New Deal and Roosevelt rather than the claim about what works. If you want to argue about people, I suppose you could say Hoover did nothing right, and Roosevelt did some things right. As to current people, you could express concern about whether Obama is clear enough, especially as to his plans for banks. Or you could wish Bill Clinton were in charge. (I haven't heard much sighing for the return of George W.Bush.) Or you could note the kind of love you hear from Depression Era people for Roosevelt--not quite like anything you hear about any President since. Folks hero worship Reagan, but what I hear about Roosevelt is the love for someone who practically rates as a family member. It was rather sweet--a sort of plutocrat became a family member of plain folks and retains that status to this day. Maybe that's a little scary for some who don't like government, but I don't think there is anything that compares to it.

- meremortal

March 9, 2009 at 1:01pm

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One comes away from this thread with the distinct impression that the hysterical defenders of Shlaes and detractors of Roosevelt and the New Deal given to vent here haven't read either the book or Chait's nuanced and fair review.

- Django48

March 9, 2009 at 1:08pm

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Thank-you, Mr. Chait, for the excellent critique of Shlaes’ work. New Deal Deniers are willfully ignorant or willfully misleading. The only thing FDR did wrong was err on the side of caution by not spending enough. ...1) Sweden went big with deficit spending and emerged from the depression by 1934, the first nation to do so. Industrial production was 50% higher in 1936 than in 1929. Sweden recovered the deficit in just a few years. ...2) Reagan’s tax cut did nothing to spur the economy. Keynesian like spending of 2 trillion dollars on a 600 ship navy and a further trillion on tanks, planes, and other hardware did. ...3) The massive WW2 spending only shows that if FDR had spent like that sooner the US would have emerged form the depression earlier. If there was no war you could have sunk all the planes, ships, and tanks and still had the same economic impact.

- Rakehell

March 9, 2009 at 1:19pm

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Nice cherry-picking Mr. Chait. It is no surprise that your criticisms fit your one-dimensional, pre-conceived notion rather well. I urge all to read The Forgotten Man and draw their own conclusions.

- Jrod

March 9, 2009 at 1:19pm

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The New Deal certainly succeeded on one level. The useless jobs programs gave people something to do other than join radical political parties and foment revolution. I believe the New Deal actually saved us from communism. Just tell an unemployed guy trying to feed his family that "the market will correct itself eventually, and besides, it's your own damn fault you're unemployed anyway." He'll take to the streets before you can say "bolshevism."

- Jeffro

March 9, 2009 at 1:20pm

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Can any of you that are espousing the conservative line (low taxes and limited government spending) point to an extended period of time in which that policy has led to sustained growth without producing massive bubbles? From 1933-1969, FDR, Truman, Eisenhower, Kennedy and Johnson all kept the top marginal tax rate high and invested billions of federal dollars in infrastructure and social services. Those three-and-a-half decades witnessed America's emergence as the world's unquestioned economic superpower. When has an extended era of low taxes and limited government investment produced anything even remotely comparable?

- 113

March 9, 2009 at 1:21pm

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Is it a full moon tonight? Judas priest the crazies are out today.

- csmiller

March 9, 2009 at 1:34pm

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Very intriguing article, however condescending (to everyone who doesn't agree) it may be. My main complaint about Mr. Chait's article is the assertion that if you believe the war ended the Depression, you are Keynesian. I think the main difference between the New Deal spending of FDR on the WPA and the like and the spending on the war is this: the government has always been in the business of war. The defense of our nation is a top priority and has been since the Revolution. Building dams, clearing forests, etc. were not always government jobs. They were jobs created to alleviate the unemployment rate during a time of economic hardship. They were jobs for the sake of jobs. Created for a single-serving purpose: to put people to work. The war was different, and spending on it was necessary. If we had been involved in the war from the beginning the Depression would have ended much sooner.

- A. Leman Steinberg

March 9, 2009 at 1:46pm

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let me guess, you are not an economist?

- Jeff

March 9, 2009 at 1:48pm

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Keynes ideas were new, almost entirely theoretical and untested when Roosevelt became president -- and, in fact, he had yet to reach many of his most important insights. Distrust of very new ideas, at the time, was natural. But at this date, with a record of success supporting those ideas, it's pretty silly. Consider this; the very first country to emerge from the Great Depression (in only two years) was Sweden -- by following Keynes faithfully and increasing social and infrastructure spending. The second to emerge from the Depression was Germany -- with massively increased spending in munitions and armaments as it geared up for war. England emerged next as it increased defense spending in response to Germany's military build up, etc. The simple fact is the Roosevelt administration wasn't a nest of Keynesians -- it was rather an administration whose members, including the President, for the most part held traditional, commonly accepted views of the economy but, faced with unprecedented circumstances, was willing to "experiment." Some of the "experimental" things they tried were Keynesian. Some were grass roots progressive ideas that had been around for some time -- at least from the first Roosevelt administration. And some were things that had long been part of economic common wisdom -- economic common wisdom that people argued hadn't but had merely been misapplied. Much as conservatives are arguing today.

- esmense

March 9, 2009 at 1:50pm

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Brilliant article and appropriate for the times. I'll be looking forward to reading future articles from the author. Grad-A Fact Checking and Debunking. Well done, sir.

- Jason Ashford

March 9, 2009 at 1:52pm

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Wow, I haven't seen such a foodfight on here in ages. I like this apparent new comments policy, in which TNR hides comments for the first X hours so that comments reflect opinion on the article itself, rather than on other comments. My own comment (not having read The Forgotten Man, but having been a bit exposed to the scintillating topic of Depressionomics): is it really so hard to differentiate between (1) legitimate economists who have legitimate beefs with portions of the New Deal, and (2) dumbass politicians who would use a freakin TV Guide as a prop for whatever claim they were going to make anyway?

- gwolfjr

March 9, 2009 at 1:57pm

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I find the majority of the comments here bizarre and disturbing. What a perfect demonstration of political, economic, and historical ignorance. This is why Shlaes' book is the perfect tome for our times. Its fatuous arguments resonate with that unfortunately large swath of Americans who deign to read broadly, get their "news" from Fox, and believe the 21st century Republican Party brims with ideas. Amazing.

- Bewildered

March 9, 2009 at 2:16pm

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davidwwalters, please retake 10th grade US history... in a private school. Hoover was a staunch interventionist, standing in stark contrast to "Silent Cal" Coolidge and his Treasury Sec. Andrew Mellon. In fact, during the Coolidge Administration, Commerce Sec. Hoover and Treasury Sec. Mellon frequently clashed over spending policy. Hoover heavily advocated government intervention, albeit while strictly adhering to the Constitution in doing so. FDR and his Brain Trust absolutley ignored the Constitution, famously stating in his second inaugural address that, "We are beginning to wipe out the line that divides the practical from the ideal; and in so doing we are fashioning an instrument of unimagined power for the establishment of a morally better world." While they may not have been Communist spies it was no secret that his Brain Trust (many of whom wrote pieces for TNR!) looked to the Soviet Union as a source of inspiration. To their credit, many would later rebuke Stalin once his gulags and purges were discovered and widely reported on. They realized that their ideas were unwelcome during the prospertiy enjoyed during 1927, however once the market crashed in 1929 and its effects were felt in the following years, they used the crisis as an excuse to forward a socialistic ideology on the American people, claiming that only they in their noble goals of equality and income distribution could save us. Sound familiar?

- SC

March 9, 2009 at 2:18pm

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As an independent, a person pretty much in the middle, I am also an agnostic in the ideological argument about the New Deal. However, as one who stands in this position, it is difficult for me to endorse the notion of allowing the "free market" to get our economy out of the mess that we are in, since it was the free market that seems to have gotten us into this disaster. The cause of our current crisis is huge over-leveraging by banks, non-bank banks, corporations and individuals. And yes, the Federal Government as well as state and local governments. Let's be honest. During the Bush years, a huge portion of government spending for the wars in Iraq and Afghanistan were not even included in the Budget. The blame must fall on all of us -- Republicans, Democrats, and yes, Independents. But where do we go from here? We must come together as a nation. We are in desperate danger now, and arguments about whether the New Deal worked or not seem to me to be re-arranging the deck chairs on the Titanic after the ship has sunk. Republicans are currently arguing that the Federal Government simply step aside. The Federal Government did step aside during the Bush administration, and many financial institutions, out of greed and desperate competition with other banks, leveraged themselves at rates of 35 to 1. Can we now let such institutions as Citi and AIG simply fail? Republicans can make that argument because they know very well the current administration and congress will not let that happen. Look what happened when Lehman Brothers was allowed to fail. The failure of even larger, more globally positioned institutions would cause an economic disaster that would make the Great Depression seem like a picnic in the park. Make no mistake. That is where we are right now. And it seems to me that what we must look at is where we are now, not 1937. The task of the Federal Government is to try to keep the economy alive, breathing anyway, while the private sector, the Federal Reserve, and the Treasury Department try to unravel the horrible mess that reckless behavior, greed, and wishful thinking has created in our economy. Many, I might say most, Republicans in Congress and throughout the nation seem to be taking this opportunity to re-define their party as the party of thrift; low government spending and fiscal responsibility after years of profligacy. Now is not the time. This is not the time for ideology. It is a time for all of us to do what we can to save our economy; and the world economy. That means using both Keynsian methods and supply side ideas to stimulate an economy which is sinking into a deflationary spiral. We must stimulate the economy with government spending AND unleash anew the energy of our entrepreneurs and innovators. I do not see these dual goals, both vital, as being mutually exclusive. Ideological rigidity, taking stances and not budging on either side, will not help us. We must assume that the other guy has a point too, and listen to his ideas. And implement the best ones. No matter which side of the political spectrum the ideas seem to come from. If we cannot do this, we may be looking at an outcome even worse than Japan's lost decade.

- JP

March 9, 2009 at 2:23pm

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Wow, the first article in 5 days taking a dig at conservatives. That must be some sort of record these last few years. Even with the Chosen One in office, it seems like Chait, Dionne, Fairbanks, and the usual rabble just can't resist taking digs at Republicans while the DOW has fallen 2000 points + since the inauguration.

- jwl2672

March 9, 2009 at 2:35pm

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The fact that readers of the New Republic know anything about history or economics is amazing in and of itself. The fact that Frank Roosevelt is still revered as a near-god by the Democrats is not. Nor is the fact that Frank Roosevelt couldn't even get nominated for anything remotely associated with the Democrat party today. They just don't make Democrats like Frank Roosevelt anymore; for better or for worse.

- Marko Markovic

March 9, 2009 at 2:45pm

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If I read the article right, I can sum up like this: Amity Shlaes is a poor writer and Republicans are befuddled, at best, or outright hypocrites, at worst. Yet I read no evidence that supported the New Deal as successful. I saw historical context for the problems the nation was facing. And I gleaned no coherent argument for government intervention of any kind. Congratulations on a lengthy op-ed piece... unfortunately, I was hoping for something a little more thoughtful.

-

March 9, 2009 at 2:46pm

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Ahhhh.. so the poor rubes of the era voted for something they simply just didn't understand, but you obviously understand the impossibly complex set of personal circumstances they were living through better than they, themselves, did.... and that history misinterpreted what occurred poorly for 7 decades until a similar crisis presented itself and it became politically expedient.. er.. I mean plain for all to see.. that history needed to be corrected, right? Ahhh, if only.. if ONLY the rubes of that era.. and the rubes of the following 7 decades of political and economic historians.. were as economically & historically astute and absolutely politically impartial as today's elected conservative officials and their narrow band of merry followers. Oh.. IF ONLY!!

- Crafty b

March 9, 2009 at 2:48pm

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"Remember every dollar the government confiscates and gives away is a dollar removed from its most productive use in the private sector, period!!!" Are you sure about this? On what are Wall Street bankers spending their multi-million dollar bonus's?

-

March 9, 2009 at 2:55pm

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excellent article. well reasoned and nicely argued. i have been amused by the modern hooverites, many of whom have responded here.

- mike

March 9, 2009 at 3:04pm

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What a confusing and convoluted piece on the book of Shlaes. Jonathan Chait said the author was off topic and skipped around can be said for what Chait wrote in the long drawn out piece he wrote on Shlaes book, The Forgotten Man. What a waist of time. I wish I had that part of my life back, the time it took me to read the garbage Chait wrote about. What an unintelligible, retarded moron. Chris Cross Atlanta, Georgia

- Chris Cross

March 9, 2009 at 3:11pm

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If Roosevelt was right, why didn't his policies work? The proof is in the pudding. The Harding adminsitration cut taxes and slashed government spending and the economy boomed after WWI. Why didn't Roosevelt follow this lead? Roosevelt's solution was to put a lot of people on the government payroll. The fact that the expanded the money supply and increased liqudity has had little effect on the economy today is proof that the de-leveraging process is not completed and many assets like housing remain to be liquidated and many debts remain to be repaid or charged off.

- jorod

March 9, 2009 at 3:13pm

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Is there usually this much spewing of right-wing vitriol in the comments section? I doubt it. I can only assume the Bush dead-ender/Rush Dittohead crowd followed the link from RealClearPolitics.

- boo

March 9, 2009 at 3:15pm

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Both "The Forgotten Man" and this article are complete messes that don't even begin to understand the Great Depression. Shlaes is correct in asserting that government intervention caused and prolonged the Great Depression, and is also correct in asserting that Herbert Hoover was NOT a laissez-faire libertarian, but that's about where it ends. Murray Rothbard's "America's Great Depression" is the book everyone needs to read to understand what happened in the 30's. The Great Depression was a large-scale market correction to the Federal Reserve's inflation-induced boom in the 1920's. And to those who will counter that the Fed did not inflate in the 1920's, it would behoove you to understand that "money" is not just the physical paper dollars we hold in our wallets. Economists such as Ludwig von Mises, Murray Rothbard, Garet Garrett, Henry Hazlitt, and the Nobel winning F.A. Hayek have offered a much more coherent explanation for how the government started and did not cure the Depression. But for those intent on placing their trust in unprovable causal assertions rather than praxeological fact, why not look at the 1921 Depression, which started off worse than the Great Depression, yet the government did next to NOTHING, and the depression was over in 2 years?

- Josiah Schmidt

March 9, 2009 at 3:36pm

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Bill of Rights in post number 32 got it pretty much correct. Mr. Chait ignores the fact, as Mr. Will did not, that WWII eliminated a good percentage of the male workforce and shipped them overseas. Economist Krugman criticizes the New Deal for not going far enough to be successful. If that is the case, and the spending as well as reduction in available labor caused by WWII were themselves "far enough", what government effort other than war could produce the same effects? Is there a public works project out there, even today, that requires 12 million employees? In today's US economy would 12 million jobs be enough? Mr. Chait's criticisms of Ms Shlaes are over done at the expense of his own economic arguments, which are found wanting.

- Guy

March 9, 2009 at 3:46pm

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Chait debunks, properly, I believe, the conservatives for their misinformation campaign about the Great Depression, FDR and Hoover. What I should have added is that I wish he would do the same for liberal criticism of the George W. Bush era. The Democrats attribute this contemporary crash to Bush, when it owes its source, I believe, in large part to the type of behavior that Democrats had longed wished for -- namely, a generous policy of lending to marginal borrowers so everyone could have a chance to own his or her own home. If Bush had had his way, the government would have washed its hands of FNMA and FreddieMac before those organizations crashed. Now that we have experimented with lending to unworthy borrowers, the Democrats blame the Republicans. Admittedly, it was a bunch of greedy banks that made the bad loans. But would the result have been any better if the bad loans had been made by the government or its agencies?

- Dale Sorenson

March 9, 2009 at 4:11pm

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Why does this article have an alarmist tone to it? There's sort of a "they're looking in the closet where we buried the body" sense I get reading Chait. Chait criticizes Shales' employment #s because they exclude government make work programs. Well, if we're evaluating these programs as reviving the private economy, shouldn't we exclude government employment? Of course. There's really very little debate here. Did the New Deal work? It really depends on what you believe the New Deal was and what its definition of success was. I can make the case that it worked if the New Deal was the CCC and WPA, and that the definition of success was keeping hope alive until the economy finally rebounded. If the New Deal is the NRA and AAA, and its goal was to allow the private economy to function as it had before the crash, of course it was a resounding failure. Both sides are, in fact, talking past each other. What bothers me most about this review, however, is its deseperate, censurious tone. HOW DARE THEY RAISE QUESTIONS ABOUT THE NEW DEAL? HOW DARE ANYONE WRITE A CRITICAL BOOK? No one is supposed to ask questions. No one is supposed to question orthodoxy. That's increasingly the tone we're hearing in Washington, DC these days.

- DCLawyer

March 9, 2009 at 4:22pm

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If the New Deal was so effective, then why was it called "The Great Depression?" And why was the Great Depression considered to have lasted into WWII? Because the New Deal did not work. If Keynesian spending is so effective in reducing unemployment, then why was there a recession-within-a-depression in 1937? Because Keynesian spending cannot really reduce unemployment. It can only give the appearance of such, and only in the very short-term, until the consequences of bad government policy become inescapable. You are exactly right. Keynesian spending take capital out of the market and puts it where some bureaucrat thinks it should go. This is how we end up with bridges to nowhere & funding for condoms in schools that have zero stimulus effect. Then when small businesses need that capital for hiring or expansion, it is nowhere to be found.

- Dave In PA

March 9, 2009 at 4:30pm

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Zoundsx: For a moment, I though I heard a voice of reason coming from behind your pixels. Alas, your closing lines did not issue from sound thinking. We will see Democrats reeling from the voter revolts of 2010 and 2012; Obama's single, schizo-socialist term will be compared to Carter's for its sheer implosive force. And this revolt will be fueled largely by the very idiot-logues who, when they floated into the polls in '08, knew nothing of Obama's real inexperience or the changes he had in mind for this country. These will still be smarting from the collapsed (though improving) economy. We have seen how government throws its collective stupor at economic problems. The winners in '10 and '12 will be the ones who can prove they had little to do with it.

- Satori

March 9, 2009 at 4:33pm

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So what if liberals and conservatives alike subscribe to Keynesian theories? Consensus support for a theory doesn't make it correct. Wasn't there a consensus at one time that the earth was flat?

- lance sjogren

March 9, 2009 at 5:34pm

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JP said: "as one who stands in this position, it is difficult for me to endorse the notion of allowing the "free market" to get our economy out of the mess that we are in, since it was the free market that seems to have gotten us into this disaster" JP, our banking system is a government-sponsored cartel that fixes prices and sponsors the creation of counterfeit "money" by the Federal Reserve and private banks. Exactly how does such a government-created atrocity constitute a "free market" system?

-

March 9, 2009 at 5:39pm

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The idea that the New Deal was a failure is a load of COMPLETE BS conjured up by revisionists. My grandfather was an 18-year-old North Dakota wheat farmer when the Great Depression hit. His father had just died and he was left to support his mother, brothers and sisters all by himself. As the Depression grew worse, he couldn't make enough money faming to support his family or even to keep his farm. But FDR's WPA work projects allowed him to make enough money, using his horse and wagon to haul gravel and build roads where there had been none previously, to feed his family and keep his farm. When prosperity returned, my grandfather, his farm and his family thrived. NONE OF THAT WOULD HAVE BEEN POSSIBLE WITH OUT THE NEW DEAL.

- Bill in OC

March 9, 2009 at 5:39pm

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Why do I get the distinct impression that the conservative/libertarian/Austrian commenters here are conflating Hoover's term as President with Roosevelt's? The Great Depression started in August 1929, five months after Hoover took office. The economy contracted for 43 months after that and only touched bottom the month Roosevelt took office in March 1933. The recovery from the Great Depression practically started the day the New Deal began to be implemented. Shlaes book reads like a historical novel, and to an economist like me, it amounts to pure fiction. There are many better general histories of the Great Depression out there but I recommend "The Great Depression: America 1929-1941" by Robert S. McElvaine. It deals with all of the important events, acts and personalities of the entire Great Depression, and so it is comprehensive, unlike Shales' book. I also recommend McElvaine's "Down and Out in the Great Depression: Letters from the Forgotten Man." It is a collection of letters written by common people during the period (complete with spelling errors), so it serves as a social history, and in that regard, far surpasses Shlaes' book.

- Mark A. Sadowski

March 9, 2009 at 6:03pm

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First of all, Hoover didn't just sit back do nothing. He increased spending by a good amount and paid for it with increased taxes and tariffs. He is part of the left's propaganda game of creating a villain and hammering blame to that person. Hoover's policies were similar to FDR's. Both were abject FAILURES! Enough of the Hoover-free market attachment as nothing could be further from the truth. The left has created this myth and has propagated it. When the current teaching of history is wrong, it needs to be revised. Obama is destined to fail if he continues on this policy path. No amount of delusional advertising or complaining by the left can change that. FDR was an economic failure for nearly a decade and created programs that will one day bankrupt this country, if not addressed. Hopefully the American people will wake up to the fact Obama clearly is unpresidential and unfit to lead this country.

- Malcom Z.

March 9, 2009 at 6:18pm

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Did the New Deal end the Depression? The answer might depend on the source material you use. I use my (dearly departed) Grandpa's memories - he said his Mother had a picture of Roosevelt on the wall next to Jesus. The reason FDR's picture was so honored was the W.P.A. employed his Father, and kept them from going hungry and homeless. This one WPA job ended the Depression for my Grandparents family.

- delano

March 9, 2009 at 6:30pm

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' "Roosevelt-era unemployment averages well above 10 percent. That's a level Obama has referred to once or twice--as a nightmare." But Roosevelt inherited unemployment that was over 20 percent! Sure, the level to which it fell was high by absolute standards, but it is certainly pertinent that he cut that level by more than half. ' A few things the author fails to point out is while unemployment did drop to 13.5-14% (depending on whose numbers you use), it began creeping back up in FDR's second term. It was called the "Depression within a Depression". By 1939 the unemployment rate was HIGHER than the one FDR inherited from Hoover. This prompted FDR's Secretary of Treasury Henry Morgenthau Jr to lament before Congress that the New Deal did not work. The administration had never made good on its promises...only adding to the debt. The author's main point is that Republicans are reverting back to a sacred cow that, when shown to be false, was made into hamburger by the New Dealers. Now that we are heading into a possible depression we need to follow the New Dealer's lead and examine all possible theories on how to rid the country of our economic woes. That includes examining the New Deal and all of its flaws.

- TonyK

March 9, 2009 at 7:18pm

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I wonder what excuse the Con's will have when the Democrats win an even BIGGER share of congress and the senate in 2010, after having talked about how badly the Dem's are going to lose. Reminds me of how they kept claiming back in 2006 that the election cycle then was 'a fluke' or 'rigged' and then 2008 comes along and...viola! Lookie there, THE EXACT SAME THING HAPPENED. They also were claiming, for quite some time, that the economy was 'fine' and that all those lazy liberals without jobs were merely 'victims of a Mental Recession' and anyone who made a peep about the coming debacle that is the current economic crisis were obviously 'Fearmongering SOCIALISTS'. Hint to republicans: If you get things wrong, every single time, people stop listening to what you have to say.

- HJFudge

March 9, 2009 at 7:45pm

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How, exactly, does the government taking money from the productive private sector (you don't tax the unproductive)and paying a few union salaries to move it around and then give to the most politically connected produce wealth? Even a cursory glance would reveal that people who have been successful in business are likely to be more productive than those who work for the Post Office or the DMV. "Keynesian Economics" is a failed premise from the beginning. What is really funny is listening to a Leftist try and explain how the "New Deal worked" when the Great Depression lasted for a decade!

- Marshall Gill

March 9, 2009 at 7:52pm

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' "Roosevelt-era unemployment averages well above 10 percent. That's a level Obama has referred to once or twice--as a nightmare." But Roosevelt inherited unemployment that was over 20 percent! Sure, the level to which it fell was high by absolute standards, but it is certainly pertinent that he cut that level by more than half. ' A few things the author fails to point out is while unemployment did drop to 13.5-14% (depending on whose numbers you use), it began creeping back up in FDR's second term. It was called the "Depression within a Depression". By 1939 the unemployment rate was HIGHER than the one FDR inherited from Hoover. This prompted FDR's Secretary of Treasury Henry Morgenthau Jr to lament before Congress that the New Deal did not work. The administration had never made good on its promises...only adding to the debt. The author's main point is that Republicans are reverting back to a sacred cow that, when shown to be false, was made into hamburger by the New Dealers. Now that we are heading into a possible depression we need to follow the New Dealer's lead and examine all possible theories on how to rid the country of our economic woes. That includes examining the New Deal and all of its flaws.

- TonyK

March 9, 2009 at 8:01pm

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Can any of you read, and not just talk in generalities? Chait makes a key point that no one has pointed to: that there were factions INSIDE Roosevelt's administration, some more liberal, some more conservative. Roosevelt spent a lot at first, and then the conservatives on his own team convinced him to balance the budget. THAT, says Chait caused unemployment to spike again, although previous spending had decreased it. The corollary would be that recessions are not a time to to try to balance budgets. No one cared about spending limits during World War II, because we had a war to win. During what period was the economy more under national control than World War II? None, ever. Price controls. Rationing of everything (tickets to buy a certain amount, as in the former Eastern Block), including oil and gas, a government lock on resources, steel pennies for god sake so we could use the copper for war materiel. THIS period is what really got us out. And we were responsible enough to release that control, once we no longer needed it. Too bad the by-product was the military-industrial complex, which has been buying Republicans and Democrats (but more of the former), ever since Eisenhower (a Republican, in case you forgot, although his granddaughter supported Obama) warned us about it.

- Notaliberal fanatic

March 9, 2009 at 8:20pm

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Chait you are right on this. But you are still a sexist, per your filthy rants about HRC.

- Kabindra

March 9, 2009 at 9:42pm

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Yes, FDR was able to reduce the 25% unemployment number he inherited by one-half in his first term. Unemployement rose again in the late 30's because FDR listened to the conervatives in his administration, including Morgenthau, who advocated a return to a balanced budget. The 30's, like now, were an era of wordwide depression. If you dislike the way FDR handled things, look to the experiences of Germany, Italy or Japan!

- ed connor

March 9, 2009 at 9:45pm

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Garrett- You seem to have your facts wrong. Harry Truman did not sign the Taft Hartley Act, it passed over his veto. In addition, the recovery was doing fine until Roosevelt started listening to his more conservative advisors and cut spending. The economy then went into a tailspin it didn't recover from until federal spending was radically racheted up again when WWII began. The conservative nostrums have all been tried during the last 8 years and it brought us to disaster. Nice try, but no cigar.

- Jim Cook

March 9, 2009 at 9:56pm

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Poster 20 finally gets at what no one ever seems to talk about. Just why did all that WWII spending get us out of the Depression? After all, Bush had a couple of very expensive wars that didn't seem to avoid Recession. The answer is really quite simple and multiple. 1: The great economies of the world were decimated - the US built a huge economic engine and never had to fight the war on our own soil so we came out of it with no competition and more capability than we ever had before. AND we forcefully rebuilt other economies in our image 2: Millions of able bodied but mostly formerly unemployed men joined the military to fight the war - and were PAID - without spending while fighting leaving a huge amount of capital to flood the economy after the war. 3: a stunning and rather unbelievable amount of innovation and technology was created by the war - a small example of which being jets and rockets and radar and interstate highways and tv's and computers and the fledging of electronics. 4: Millions of able bodied potential employees died thus reducing the pool of available labor after the war (sad but true). And Rosie the Riveter went back to the kitchen for a while (I'm NOT arguing against women in the workforce) 5: The GI bill created the first modern educated common man in the workforce and further multiplied innovation. And people underestimate the value of a "military education" (discipline and hard work). The most efficient and effective colleagues I work with came out of the military. None of these items were present in the Bush wars. So the New Deal had no part in relieving the Depression and neither did opposing economic theories. What worked was innovation, remaking a new type of economy, and having the correct number of and properly trained workers to fill it. What CAUSED this current economic distress is a lack of innovation (where is the "new" economy?). Same thing happened in the 70's and then we were bailed out by the computer industry and Moore's Law. I'd argue that the "housing bubble" was a way for the economy to "ankle along" until the "new economy" "kicked in" since the computer industry has failed to drive the economy for several years now. I thought telecommunications might do it but that has failed (thanks Enron and Dynegy). Whoever finds the path to the "new economy" will solve the Recession (new energy technology being my big hope). Spending us into a debt tailspin will NEVER work. Although defense and space technology innovation can help us along the way.

- In the Right

March 9, 2009 at 10:33pm

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Poster 32 has it correct, too. Excellent!

- In the Right

March 9, 2009 at 10:38pm

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If 14% unemployment is a great success, then, yes, the New Deal was also a great success.

- S Smith

March 9, 2009 at 11:20pm

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Tell all the people with their wiped out retirement account that the CNBC ticker is just "numbers".

- anon

March 9, 2009 at 11:30pm

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One more thing, you mention no data regarding the period of moralistic fatalism. How long were recessions back then? What was the effect on employment? These are the questiones you probably never explored in academic economics, because they will lead to you to dangerous heresies...

- anon

March 9, 2009 at 11:32pm

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The author picks apart Amity Schlaes' points in a selective manner. Her central argument was that economic uncertainties, caused by Roosevelt's desire to punish the vulgar rich (the Babbits), frightened those who had capital that could have revived the economy. A good example of such punishment was the undistributed profits tax. Some companies chose to close rather than run a business for nothing. What is amazing is the number of businesses that continued to operate, and employ people, as they lost money every year. Many rich sat on their fortunes awaiting the end of Roosevelt's terms. Understandably they didn't want their wealth confiscated; anyone with any capital can understand why. Those with nothing to lose, naturally would be happy to confiscate everything owned by the rich. That never seems to work as hoped. The most telling fact about the depression is that that Americans had a living standard a third better than Great Britain in 1929. By 1940 the two nations were equal. The UK was an empire in decline. Andrew Mellon was certainly accurate when he said the Great Depression was America's 15 minutes of darkness.

- Renfield

March 10, 2009 at 12:00am

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Roosevelt was a communist sympathizer and a Nazi sycophant with delusions of competence. He put the nation on a path to socialism and destroyed our freedoms forever. May all the Roosevelts burn in hell forever.

- Rick LaBonte

March 10, 2009 at 12:01am

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"By your own logic, Reagan rescued us from stagflation by massive military spending. It left us with quite a bit of debt, but so did WW2, so obviously the debt doesn't concern you." National debt (compared with GDP, which is the only meaningful measure) rose precipitously during WWI, Reagan-Bush41, and Bush43. We paid it back during periods of prosperity prior to Reagan and during the Clinton Administration. Temporary Keynesian borrow-and-spend to rescue the world economy makes sense. Permanent Cheneyian borrow-and-spend to reward the rich does not. That's how we got in this hole, and the Republicans just won't quit digging.

- zenwick

March 10, 2009 at 12:30am

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What the heck is the matter with you leftists? Do you think the 1930's were GOOD TIMES economically? What are you saying? FDR and Democrats had COMPLETE CONTROL of the economy and yet not only did the Depression not end until 1946, but we even had a RECESSION in 1937. We had MUCH LOWER unemployment both BEFORE and AFTER the New Deal. And again, FDR's OWN TREASURY SECRETARY said it didn't work in 1939. Maybe he had a point because unemployment hit 19% in 1939. The New Deal seemed good on paper but in practice FDR's policies made the recession MUCH WORSE than it needed to be. Looks like Obama will continue the same thing, and 12 years later he'll blame Bush too. The New Deal was attempted in the Soviet Union, they just kept it going until it eventually bankrupted them.

- Jojo

March 10, 2009 at 5:10am

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I find this piece very weak. Chait attempts to make his argument by citing virtually no statistical data. It is clear that the depression lasted through FDR's first two terms. Chait never quite gets around to explaining how that equates success. If he is unable to do that, it can mean only one thing. That his polices failed. I also noticed an interesting exclusion. I never heard the word "tax" one time in this piece. Everyone knows that Keynsian spending like the WPA will create jobs in the public sector; but at what cost. At the cost to jobs in the private sector. Someone has to pay these people with tax dollars. There is a reason that the WPA was referred to as "We Piddle Around". The government is not a capable employer. Their jobs will always include major inefficiency, corruption, and politics. There are no less than half a dozen books out that do an adequate job of unraveling New Deal policies. Unfortunately for Chait, they are not kind to his worldview. He is going to have to do better than this to sway an informed public. There is nothing but whining in the piece. Oh yes, and by the way, I would take a closer look at the financial viability of Social Security before you start hailing it as a consensus of liberal success!

- Jeff Pierce

March 10, 2009 at 7:56am

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Well, I'm glad that this thread fleshed out the real passion of GOP stalwarts these days -- that Harding was a great president who rescued the nation's economy from a peril even worse than the Great Depression! Next thing, we will be getting a righteous defense of James Buchanan's wise and conciliatory policies toward the Southern states in the run-up to the Civil War (come to think of it, a lot of these commentators probably do think that Southern secession was perfectly legitimate). Jonathan's article was proof that what most of us know about the New Deal is pretty darn vague -- that Roosevelt fixed unemployment by spending lots of money, and then World War II came along and took care of the rest. With that superficial knowledge of history, it's no wonder that so many people want to buy the lies that Shlaes and her ilk are peddling.

- wildboy

March 10, 2009 at 10:07am

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Ok. I have no idea how Reagan got involved in this article....

- ge205

March 10, 2009 at 12:00pm

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Jeff Pierce -- Your impatience with the length of the Great Depression probably arises from the fact that you, like the rest of modern Americans, have never experienced any economic downturn SINCE the Great Depression and the regulations put in place at that time that has lasted more than 2 years. In fact, most recessions prior to this one have lasted no more than 6 - 12 months. BEFORE the Great Depression and the era of greater regulatory control, economic downturns tended to last, like the Great Depression, much, much longer. Do a little reading on the panics, depressions and recessions of the 19th century and very early 20th century. You'll discover that few lasted less than 3 years, others 7 - 10 years and one as long as 23 years. The Great Depression, in duration, wasn't, in the historical context that proceeded it, unusual. What has been unusual is the brevity of recessions in the more regulated, post-New Deal era that ended in the late 90s. As we tossed regulation and other legacies of the New Deal out the window over the last decade, we tossed out tools that had protected us from deep and persistent economic downturns. Its ironic that the lessons learned in the Great Depression led to such easy, economic complacency that now the very conditions that taught those hard lessons to an elder generation may have to be endured all over again by a new generation.

- esmense

March 10, 2009 at 12:25pm

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Got any relatives or neighbors in their late 80's and older? Ask them how well FDR solved the economic problems during that time. Most of them will tell you that 1937 and 1938 were the most hopeless and desperate years during the GD - well into the president's 2nd term. The TVA, WPA, etc. provided only bandages to the average family, not any real hope and confidence.

- Amiable Chap

March 10, 2009 at 1:40pm

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Unemployment from 1928-1943 according to “Historical Statistics of the United States, Earliest Times to the Present: Millennial Edition,” edited by Susan B. Carter, Scott Sigmund Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gavin Wright. New York: Cambridge University Press, 2006: 1928 ………….. 5.0 1929 ………….. 4.6 1930 ………….. 8.7 1931 ………….. 15.3 1932 ………….. 22.5 1933 ………….. 20.6 1934 ………….. 16.0 1935 ………….. 14.2 1936 ………….. 9.9 1937 ………….. 9.1 1938 ………….. 12.5 1939 ………….. 11.3 1940 ………….. 9.5 1941 ………….. 6.0 1942 ………….. 3.1 1943 ………….. 1.8 These figures were first released in the following two papers: Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941 Author(s): Michael R. Darby Source: The Journal of Political Economy, Vol. 84, No. 1 (Feb., 1976), pp. 1-16 Spurious Volatility in Historical Unemployment Data Author(s): Christina Romer Source: The Journal of Political Economy, Vol. 94, No. 1 (Feb., 1986), pp. 1-37

- Mark A. Sadowski

March 10, 2009 at 2:41pm

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As has been endlessly pointed out over the past 50 plus years (Republicans, not fond of reading things that go against their received wisdom, have largely ignored the best historical scholarship on the New Deal) where Roosevelt went wrong was in not pursing a much more aggressive policy in terms of state intervention. He inherited a weak governmental infrastructure, 25% unemployment, and a vast array of enemies intent on undermining his efforts, even so he performed relative miracles, not the least of which was to restore trust in the government (and bring it to millions of long dispossesed Americans). Roosevelt's failure was a failure of both vision and will; he should have sent millions of Republicans to re-education camps, or simply had them disposed of (we've had to live with these troglodytes for decades - with obvious results).

- Vadim

March 10, 2009 at 2:51pm

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'When people worry about losing their jobs, they sensibly cut back on their spending. But that decision, in turn, reduces demand for goods and services, which results in reduced income or lost jobs for other workers. Keynes called this phenomenon "the paradox of thrift": what makes sense for individuals turns into a disaster for society as a whole. The recession was therefore a failure of collective action that required government action. Government needed to encourage spending by reducing interest rates or, failing that, to inject spending into the economy directly by deliberately running temporary budget deficits.' The central fallacy of the Keynesian argument is that it ignores the role of intermediaries in the economy. When people 'sensibly' cut back on spending, they do not squirrel their money away under their mattresses--rather, they keep it in savings accounts, or in the form of bonds, or they invest in commodities or stocks. Thus, this capital is available for banks and other lending institutions to in turn make available for companies that produce the goods and services we normally demand during boom times. Having this capital--which now comes to them in the form of short-term loans rather than direct purchases--allows these companies to improve their products and find ways to make them more efficiently and cheaply, which eventually results in a return to increased consumer demand. When this natural process is allowed to take its course, consumers find new ways to cut waste and live more frugally in their own lives, and companies find ways to make better and less expensive products. When the government intervenes with artificial spending, there is no incentive for consumers to cut back or companies to improve their efficiency--in fact, there is irrational pressure placed on the public to spend willy-nilly, rather than carefully rationing one's spending on companies that make the best and most inexpensive products. Government intervention further derails the demand cycle down the line when inflation from all this artificial spending distorts price signals. The way to improve the economy is not to spend, but to create wealth.

- Scott from New York

March 10, 2009 at 3:41pm

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Thanks, Jonathan, I've been waiting for an article like this, and you did a great job. Thanks also for being such an effective wingnut attractor -- no doubt the other blogs made more sense while so many fluttered around this one.

- klingb

March 10, 2009 at 5:07pm

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Sheesh! Not even Friedrich Hayek (in the "Road to Serfdom", published in 1944) thought that ALL government action affecting the economy was bad ALL the time. The conversion of Republicans to "free-market" fundamentalism is just as scary as its conversion to religious fundamentalism. If people want their children taught that the world was created in one week in 4004 BC, life will go staggering on. If a major political party believes that an economic collapse will magically halt, then reverse itself if we all just do nothing and wait; then we're talking about grotesque and malevolent fantasy. According to David Frum (interviewed last night by Chris Matthews), Congressional Republican leaders know better. But if so, why are they pandering to the grossest superstitions of cranks at a time like this? I'm an agnostic, but I'm retreating to my upper room to offer up prayers for the country.

- Marvelling at Boneheads

March 10, 2009 at 5:52pm

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Keynes has been so thoroughly debunked, I can't believe anyone still evokes the name. Read 'Essays on the Great Depression' by Ben S. Bernanke if you want the real picture. It was WWII tht ended the depression. The policies put forth by the Liberals today is not to fix the economy -- it's being done to redistribute wealth, pure and simple!

- SGK1212

March 10, 2009 at 9:46pm

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You need to read the book itself. The main thesis is not so much about New Deal government spending as an instrument to recovery. It is that the government went into competition with business (TVA in particular) and the "rules" government imposed on business were so hostile and so constantly in flux that business pulled back. It no longer felt safe to invest in industry. Thus "class war" was the significant factor in the failure of certain New Deal policies. You are right that FDR's relief programs and such innovations as Social Security were long term successes, but the hostile policies aimed at defeating business and destroying wealth prolonged the Depression rather than shortening it. A central question to consider when considering government intervention in the economy is this: is a politician any less likely than a businessman to abuse power and behavior immorally? A healthy skepticism regarding both is a valuable asset when discerning what is the best government policy for a particular situation.

- Carol Frenier

March 11, 2009 at 11:47am

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As someone who has been through a few Economics courses (and actually stayed awake and learned something), I can tell you that there really is not a academic or theory-based justification for Keynesian Economics. It exists simply because it fits well with political imperatives. Granted, the Depression-era remedies were not pure Keynes per se, they still were largely ineffective, and the economic data from the times support that. That is the real point of Shlaes book. Liberals would do well by themselves to stop the Roosevelt and Kennedy worship (Republicans the Reagan worship, too) and get on with the business of financial workouts. That is the best antidote of all.

- JW

March 11, 2009 at 11:59am

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From b (poster 14): "so the new deal was a total failure huh? So the SEC and the FDIC was a bad idea and a failure, building the Hoover, creating the Tennessee Valley authority (bringing relief and a change in life to the then most impoverished area of our country), the inmummberable WPA infrastructure projects that we still use around the country today, the agricultural reforms, the accomplishments go on and on,.." This is exactly the fallacy Henry Hazlitt warned about in his classic "Economics in One Lesson", that of focusing only on what the eye can immediately see (i.e. new dams, roads, etc.) and ignoring what it can't (i.e. the private sector goods that did not get made because of the siphoning off of resources by government spending programs). He warned against thinking about the impact of economic policies only in the short-term and for a certain group of people. Were the WPA projects a 'good' thing for some people and for a certain period of time? Yes...But were they an unqualified good that stimulated the economy as a whole? Absolutely not. And it wasn't WWII that ended the Depression. It was the abandonment of New Deal policies and the return home of soldiers who got to work rebuilding the private sector that ended the Depression. The book to read on all these subjects is Thomas Woods' "Meltdown". The most insightful and plausible account of our current crisis as well as the GD that I have ever read. And I used to be an unreflective liberal Keynesian.

- JD

March 11, 2009 at 12:02pm

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Heehee. My grandma was an Italian communist and anti-fascist through and through. In her youth she was a peasant and treated like dirt by absentee landlords. On top of it all she was a woman in a man's world. In her Brooklyn apartment in her later years she had pictures of Gramsci and Togliatti...along with a statue of the Madonna. She swore that FDR kept the revolution from coming to America. "A few more years of Hoover would have brought down capitalism". She was soooo disappointed I was a liberal! I believe my grandma...not revisionist historians. :-)

- toritto

March 11, 2009 at 12:31pm

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Wow. Are those on the Right in such a panic to be legitimate once again so angry after being out of power for less than two months that they resort to such vitriol and bile? Is this why Rush has been selected as the titular head of the "conservatives" in America - he's so darn good at this language? Or, is it that those on the Right are taking a page from Rush to be heard by co-opting his style? What would William F Buckley say to the tenor of the current "debate" over the political direction of the USA?

- Jake

March 11, 2009 at 1:03pm

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As a doctoral candidate in economics, I can assure you there's not a single Ph.D. in my department who believes in Keynesian economics. Artificial manipulation by the government won't work. You can't legislate the laws of economics any more than you can legislate the laws of physics! Professional politicians will never understand that.

- Ste Kno

March 11, 2009 at 2:42pm

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Rightwingers are trying to change history in broad daylight. I'm 48 and none of this "FDR made the depression worse" BS existed until recently. I assume the right just discovered history. Your entitled to your opinions but not your own facts. No American politician or political party will get far telling the lower and middle class to suck it up when policies that favored the upper class crashed the economy (as it did then and has now)Conservatives must argue that it was simply a coincidence that the two times in the last hundred years that Republicans gained both houses of congress and the executive branch, they created two of the worst economic disasters ever. You can sense the desperation in some of the posts here that attempt to forward this gross revisionism. Even if conservatives were right that you simply let these things play out and the economy will rebound. You can't tell that to an unemployed man who can't find work and has to feed his family. Besides being cruel, it is political suicide. The Republicans did just that and spent close to 50 years in the wilderness. Is that what you want for your party? If so then I suggest you continue with this PR campaign. I doubt those who are taking a haircut now are going to thank you later.

- Tseb

March 11, 2009 at 5:26pm

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#67 is a perfect Republican response: "What a confusing and convoluted piece on the book of Shlaes. Jonathan Chait said the author was off topic and skipped around can be said for what Chait wrote in the long drawn out piece he wrote on Shlaes book, The Forgotten Man. What a waist of time. I wish I had that part of my life back, the time it took me to read the garbage Chait wrote about. What an unintelligible, retarded moron. Chris Cross Atlanta, Georgia " That says it all: Republican brainpower at its best. I wonder if Chris Cross even understands the actual meaning of his statement: "I wish I had that part of my life back, the time it took me to read the garbage Chait wrote about." Chait wrote about Shlaes' book, Chris. So on that point, we agree.

- tvez

March 11, 2009 at 5:50pm

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@Ste Kno As a PhD in economics I took note of your comment. Name one American department of economics (other than George Mason)that teaches macroeconomics without starting with Keynes as the foundation.

- Mark A. Sadowski

March 11, 2009 at 9:28pm

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Dear Tseb #67: Your deep, visceral hatred of all things Republican has blinded you to the realites of the world. Talk about rewriting history! Yours was the classic illustration of doing that.

- Ste Kno

March 12, 2009 at 1:30am

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Here is my rebuttal to the reactionary revisionists about the New Deal. It's an excerpt of my column called "The Crash, The Panic, The Depression" published in a San Francisco Newspaper, on my website allangoldstein.com, on opednews.com and hypocrisy.com (where I blog under the penname Snark Twain.) The column dealt with OUR depression, but included this: " Conservatives have created a particularly malignant piece of revisionist history about the Great Depression. They say that FDR and the New Deal only prolonged it and made it worse. Not only is this pernicious nonsense, it misses the point. The New Deal and FDR allowed capitalism, and, more importantly, the people who lived under it, to survive the depression with democracy intact. Many nations and people weren’t so fortunate. It is important to remember that there are worse methods than Social Security, the WPA and even Supreme Court packing to counter the misery depressions bring. Fascism, Anti-Semitism and militarism, to name three. No set of statistics can convince me that the New Deal was a failure. The number that speaks loudest across the years is four. That’s the number of times the people who were there, and knew best, elected the man who gave them the New Deal." IMHO, that's all the rebuttal those Luddites deserve.

- Allan Goldstein

March 12, 2009 at 8:55am

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Amity Schlaies isn't an economist. She isn't an historian. She is a partisan journalist with a contemporary political point to make who selectively reports some anecdotes on the least attractive trees in the New Deal, like the NRA, and ignores the forest. This is not an historical, or even an economic, argument that she has made. It is grist for today's political mill, no more. Okay, no less, too.

- David

March 12, 2009 at 12:18pm

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@Allan Goldstein: You said it perfectly. FDR was the most popular president ever. If the 22nd Amendment had never been enacted, Bill Clinton would most likely have been elected to at least a 3rd term. During his presidency, America experienced unprecedented economic prosperity. Elect a Democrat, and everyone gets richer. Elect a Republican and only the rich get richer, the rest get poorer and the economy nosedives. I recommend that the United States repeals the 22nd Amendment because there is no good reason to arbitrarily disallow a great president from serving for as long as the people want him in power.

- Richard Catto

March 12, 2009 at 2:10pm

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What has been impressed me is that the GOP policy of no taxes,no government,and no regulation, leads us to anarchy.

- Mike Crowe

March 12, 2009 at 2:58pm

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All the liberals here are too polite to mention that Amity Shlaes was fired from her position with the Financial Times in 2005 for her propaganda piece on the Bush Administration's "superb" handling of the Hurricane Katrina disaster. Thankfully, for her sake, the "wingnut welfare program" kicked in and gave her a position as a Senior Fellow in Economic History at the Council on Foreign Relations despite the fact she has absolutely no formal training in either economics or history.

- Mark A. Sadowski

March 12, 2009 at 8:14pm

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fantastic review, just devastating, wow-Amity Shlaes should be ashamed of herself, Chait need to do more reviews, they are always a great read

-

March 14, 2009 at 12:16am

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The conservatives are arguing that it is a myth that the New Deal solved the Great Depression. True enough - it took additional and massive government spending from WWII to do that. However, except for one year, GDP and employment both improved steadily from 1933 up until the onset of the war. Another myth - an economy can only prosper if taxes are low. From 1943 to 1983, the top marginal tax rate was never lower than 70%. While there were recessions during this period, overall these are considered America's prime economic boom years. There is not necessarily cause and effect here (in fact, I think marginal rates that high are unfair and counter-productive), but it also shows that higher taxes do not = slow growth.

- Wenning

March 17, 2009 at 1:30am

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Hey, Chait, just saw you on Colbert (posting here because I dropped my subscription over the Iraq war). You were great, I was rooting for you and you came off well.

- Dave

March 17, 2009 at 8:06am

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I, far from being a conspiracy junkie, think maybe that the $$ put up to stop Obama's change has hired many a person sitting at home to respond to a liberal magazine with conservative criticism. They are just too numerous to count in these responses. In other words, these conservative responders may have been paid to dispute the work on this article and promote the fiction that FDR made things worse. The fact is, it could not have gotten much worse. The actions or inactions of Hoover and his predisors started a long steep decline. Difficult for anyone to stop in a short period of time, just like now. These posts completely ignore the four main causes of the Depression of the 30's. Excessive debt brought on by a promotion of consumerism, a too large of a gap beteen the rich and everyone else, weakened labor unions, and a lack of regulation of Wall Street. The same conditions that were present for the last eight years. To fix these things IS the answer, period.

- Djones

March 17, 2009 at 9:32am

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It is amazing that an article in TNR is receiving so much attention from the Neo-Cons. The magazine has a very clear political stance. I find it amusing how many Republicans like to get riled up and flood the message-boards to try and discredit the author of this piece. Did you all receive a call to arms from Rush? The arguments are always the same. Look at the Depression of 1921...WWII ended The Great Depression. So according to all of you; Obama is to blame a month into office. And..on whose watch did this financial crisis happen? And what exactly was the tax policy when it happened? And the attitude toward regulation of Wal Street? You right wingers are becoming less and less relevant. Good luck on trying to sell your ideology to the American people after the last 8 years in power. But oh of course, the democrats controlled congress for the last 4 years so it was really their fault. My eyes are rolling as we speak.

- Amused

March 17, 2009 at 9:48am

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Damn right wing mugs... hell are you doing here? -----Anyway, the reasons for decrease in demand and with price inequalities and inequitable tax cuts.. and the irresponsible issuing of credit to people who could not spend.----- The smoot-hawley act introduced massive tariffs on foreign goods. this, in turn resulted in retaliatory tariffs which locked up trade internationally (and before you right wingers start saying that this was exemplary of Hoover being liberal at heart, note that economists across the board opposed these). Indeed, while WWII may have provided a focus to spending (my favorite bot of BS here by a right winger was 'pent up celebritory spending by soldiers') by the state, the war was just as much stimulus as it, in one fell swoop, put an end to such excessive tariffs worldwide. ------ As far as some people noting the high unemployment 27-29, the author addressed this in full as reintroduction of balanced budget and mass decrease in spending. Irrespective of that, unemployment was NOT up to 1931-33 levels. But the underpinning reason for full scale inability for the world to escape the depression in full was not lack of spending, or too much spend, but an utter lock on trade caused by a network of concomitant tariffs.

- Drew

March 17, 2009 at 4:23pm

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All these posts provide conclusive evidence that basic economics and American history are not being taught in our public schools. This is a shame. Our ignorance makes it nearly impossible to resolve our problems today.

- natjanel

March 17, 2009 at 4:47pm

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It's interesting to read the responses of those that want Schae's fictional novel (based on a real event) to be the the Economic 'TEN COMMANDMENTS' of who can and cannot be acclaimed as the deity of prosperity. The real truth is that no one has all the correct answers, just as neither the Democrats nor Republicans knows exactly how to get the USA out of this financial mess. Both parties rather beat their respective chests and point fingers. This is similar to Nero fiddling while Rome burned. ( If you didn't know, that didn't really happen either...). The 'factions' of Washington would rather yell at each other, rather than 'work', ...I mean sweat-breaking work, collectively for the masses that put them there. This mess isn't going to be 'solved' by Washington, and your Government can do nothing to help (except entertain the electorate and fill the 24 hr news cycle by chasing each other around the 'Mall'). Obama (and several other gifted Republicans and Democrats)know that it is the sweat and toil of the greater population of America that will drag your country out of the economic ditch. Time and effort, not left/right wing political views and accusations,...time and effort (struggle, work,)are what will right the Financial boat for you. Neo-cons, Facists, Ultra Liberals, Centrists, and Conservatives need to expend their energy on something that works to help, rather than fill the air and airways with unnecessary CO2 and fowl odor.

- CanuckTruth

March 17, 2009 at 6:30pm

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That's right you moron! I was paid to write this. Your ludicrous statement proves that reading anything on the net should require a minimum IQ.

- SGK

March 17, 2009 at 6:40pm

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Djones: I'm glad you finally found the answer. We need a greater redistribution of wealth so there's no gap between rich and poor; we need powerful labor unions; and we need more rules and regulations for business. Thanx for clearing that up for me. Man I was confused. This free enterprise capitalism and free market trade has got to go! Marxism is the only way!

- SGK

March 17, 2009 at 6:44pm

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Dear Allan Goldstein: So you have your own website. WOW! I guess that means everything you write is gospel.

- SGK

March 17, 2009 at 6:58pm

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To sum up Amity Shae's fail: "The plural of 'anecdote' is not 'data'." Neocons lost the last election, but they are rallying hard. Let's hope the American people can resist the multitude of incessant blowhards on the right, at least for a while longer, while we extricate ourselves from the financial aftermath of the neocon's greed party.

- Adrian

March 18, 2009 at 5:37am

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So if the government should just sit back and let the economy work things out (the conservative line here) why are the republicans trying to ram through huge tax cuts? They specifically see that as a stimulus. The logic is so utterly lacking...and of course we have to leave aside the existing deficit spending of the last 8 years, the timing of which made things much worse (pumping up the bubble). Can't republicans learn the difference between negative feedback (house prices dropping back to sustainable levels, for example) and positive feedback (dropping demand driving further drops in demand due to job losses). Sure, leave negative feedback alone, but you HAVE to break a cycle of positive feedback - unless you just want everyone to suffer from a massive overcorrection.

- xanthoptica

March 19, 2009 at 1:02pm

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@SGK: You seem to critique everyone but you fail to provide any legitimate argument or opinion of your own. Who taught you economic theory and the history of economics in this country? If you think that none of Keynes' theories are being applied in our markets and society today, you are terribly mistaken. Do you know what a real "free market" would look like? Does our government not have macroeconomic policies? Stick to what you know...go put your fox news on and continue to be oblivious to reality.

- disturbed

March 19, 2009 at 3:25pm

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I haven't had the time to read all the posts here but it all reminds me of the story of the blind men who try to identify an elephant by touching one part. The Great Depression was really a series of events, it was two recessions, occurring concurrently with an ecological disaster, at a time of imense civil unrest and social upheavel. The three main problems all fed of each other. The dust storms ruined crops and made mortgage payments impossible, which deepened the recession, which in turn caused foreclosures and the displacement of hundreds of thousands of people which led to further civil unrest. But although the problems were interlocking there was no single solution that would solve all of them. That took time and a massive effort. The New Deal was a comprehensive program aimed at dealing with America's economic, ecological and social woes. To ignore the ecological and social aspects involed, that is to look at what we call the Great Depression only as an economic problem is to touch the tail of an elephant and say it must be a snake. The remarkable thing is not that FDR didn't truly end the Depression, but that he was able to handle all three of these potential disasters even as war began looming in Asia and later Europe. A prior poster noted that some New Dealers had pictures of Mussolini on their walls. Mussolini was quite poular in the 1930s. In fact if you read contemorary sources, you can see that there was a popular idea in those days that democracy was a dying form of government, and that the future belonged to the "new" forms of government, communism and especilly the socialist hybrid, facisim. (John Steinbeck even contributed to this in his novel "In Dubious Battle", a valentine to communism, and the coming of facisim was alluded to in the Leslie Howard/Humphrey Bogart/ Bette Davis play and later film "Pertrified Forest".) FDR stole a march on fascism by changing our politicla system to add aspects of socialism, creating a hybrid of his own and saving America.

- Hawley

March 19, 2009 at 10:37pm

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I find it outright laughable when I hear keynesians try to argue that the sharp downturn of 1937-38, was caused by the federal government's decision to run lower budget deficits in order to balance the budget. See what is conspicuously absent from people like Mr. Chait and Paully "the clown" Krugman's account is the fact that money wages skyrocketed by 13.7 percent in the first three quarters of 1937, thanks to increased labor union activity resulting from the Supreme Court's favorable decision on the National Labor Relations Act of 1935. This spurt in wage rates did not reflect an increase in productivity, and was far out of proportion to any rise in output prices. Naturally, employment declined and economic activity slowed as a result. Increased labor costs associated with various social welfare programs only aggravated the problem. We need not be detained by the claim that insufficient government spending was the culprit behind the economic woes of those years.

- Jekyll

March 22, 2009 at 8:26am

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Some one in an asylum wrote comment 140 as the increased wages and social programs to aid the poor made for more demand , thus for more busniness growth.That comment is thus a red herring and an example of the post hoc fallacy.WE must ever let the insufficient spending inform us to spend what is necesssary. Dr. Paul Krugman knows more than enough to win a Nobel Prize as others have won it but know less about what to do overall. Murray Rothbard , Henry Hazlett, Hayesk, Mises and Friedman were all on the fringe of economics. Paul Samuelson ranks higher than Robert Samuelson. Hazlett makes a logical fallacy in his economics. griggs1947

- Morgan-LynnGriggs Lamberth

March 25, 2009 at 7:01am

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Hard to believe that Republicans, whose economic policies have totally failed three times over - the late 1800s which led to the progressive era, the depression and now. Republicans have nothing to work with so they selectively attack the new deal. Several years ago they attacked the great society. At the end of the day all these people can do is make things up and attack. They have no policies, no schools of thought and the results of their policies and philosophies are what we have now. The real question right now is why haven't things gotten worse? How about food stamps, unemployment insurance, medicaid and medicare, social security. Let's not forget the utlimate socialist program - the G.I. Bill after WWII - which gave GIs education, housing and healthcare. More government spending! And yes Reagan was a Kensyian - unfortunately he tried to pretend he wasn't and everyone moron believed him.

- norman

March 28, 2009 at 11:03pm

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can you give whats this article is all about? i wanna hear just the facts..

- low

March 31, 2009 at 12:46am

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Chait seems to have a bug in his ear about this book. I hope he actually read it. One wonders about the rest of his conclusions when you see something like this in his article "Other policies, such as Social Security or clearing the way for unions, clearly succeeded on their own terms, whatever their ideological merits." Has he not read about the bailout of Social Security in 1983 or the one coming soon? Just what were their "own terms" for social security? Has Chait gone back (as Schlaes did) and looked at what FDR actually said about Social Security? What silliness. Schlaes did a highly readable, well researched history that offered new ideas about how we got into the depression, what happened during the time we were there and how we got out. No more, no less.

- Drtaxsacto

April 18, 2009 at 9:53am

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JP #60. Thanks for your voice of reason! It isn't just financial sector leveraging that contributed to the current enonomic problems. And the fact that a lot of it was based on imaginary accounting. Not to mention attracting the best and brightest college graduates to the financial sector instead of to innovating and creating actual wealth somewhere else, etc. How about consumer debt doubling? Income inequality vastly increasing? Lots of people buying houses they couldn't actually afford? Lots of others borrowing on their existing house to bubble value levels? This all creates instability in the system: a bubble and burst economy. Every sector spends lots of money borrowed from the future (oh right, including the Bush government) and when things collapse everyone has to wait around a few years before spending any more while paying off their debt. Or declaring bankrupcy. It's not that complicated. Individuals and corporations (made up of individuals making the decisions) have a definite capacity for self serving delusion about reality. Apparently some guard rails have to be installed to keep us all on track. You know, like those laws and regulations we used to have and enforce, and also certain economic related social norms (Remember stuffy conservative boring bankers? Remember people proud of paying cash. Not to mention not having a credit card alternative with new ones arriving in their mailbox every day.) It's ALL about "leverage", and not letting us moron humans individually go to far in ways that end up hurting everyone. Just like with pollution or anything else the recent Republican ideology allows, and indeed encourages, individual self serving decisions which hurt us all collectively. Uh-oh, "collectively". Sounds like socialism or something. Which of course was also the big criticism of FDR, and apparently still is.

- emjayay

April 21, 2009 at 12:20pm

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To those who have advocated tax cuts and "trickle down", like post number 22, you ignore basic 101 level economic pitfalls and most of all common sense. First off, allow me to introduce an economic pitfall called "Moral Hazard", and explain how it works with cutting taxes on the wealthy and corporations. Corporations/wealth creators expand and contract due to demand, not reactions to costs. Cutting their taxes will merely increase their profits, not their demand. Incorporate some logical human selfishness and common managerial practice into the equation and those increased profits result in higher bonuses, heavily tilted toward management, rather than actual hires or increased production. This is the same reason i was against a knee-jerk bailout without iron-clad provisions against what inevitably happened. The bail-out was, in effect, an retroactive tax cut, or tax refund.. and tax cuts will have the same effect. There is no "trickle down" because the wealthy don't spend nearly as much of their income as common middle class individuals. They already had enough to get whatever they wanted before.. anything extra is merely horded. If you really want to see a stimulated economy, the government bailout money should have been sent directly to people making less than 45k per capita, heavily tilted toward the unemployed. Their situation COMPELS them to actually spend the money, and on goods which will employ other people. Which finished good employs more workers, one mercedes or 10 fords? Recessions affect society in a binary fashion: you either keep your job or you don't.Cutting taxes on people who keep their job will do nothing for those who lost theirs, especially in today's climate where the people who still have a job have considerable debts due to wages essentially frozen through downward pressure from offshoring for the past decade while inflation continued apace. This ties in with nuber 145's comment about increasing consumer debt and wealth gaps. It's very simple, free trade will only work if labor and targeted living standards are equivalent, otherwise it results in erosion of the middle class of the wealthier nation for short-term profits. The victims of offshoring, seeing slimmer job markets and frozen wages, accrue increasing volumes of debt as they try to maintain their current standard of living against inflation with which their wages are not keeping pace. Eventually, however, their capacity to carry debt gives out. I personally expected this to happen in mid-2010, but the increasing government propensity to let businesses carry on with predatory practices unchecked has hastened it. (note, it's also been a very long time since democrats have actually acted in any meaningful manner to protect workers or consumers as well, this is NOT just a "right wing" issue) "TLDR" version: 1 - trickle-down doesn't work 2 - free-trade with no strings attached to assure labor equality as done by both sides of the aisle the past couple decades erodes the middle class. 3 - After decades of erosion of income and jobs, what did you expect to happen to the mountains of debt? As for the new deal, the infrastructure projects grab me as the most compelling thing we should implement toward today's collapse. This "bails out" our private sector without just handing them money to horde away by hiring people to build needed infrastructure which can then be gifted or sold cheaply to private firms who can use them to service the demand suddenly created by millions of new working middle class people. Finally, i'm not talking out of my derriere, i was educated in one of the higher ranking us institutions in the business and economics sector.

-

April 30, 2009 at 9:10am

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Anyone who can't even spell F.A. Hayak's name right belongs in an asylum. Funny how you try to attack my comment by not arguing any facts. Typical Keynesian! Hell...why then if it was government spending that got us out of the Great Depression, why then when we cut spending in 1946 did we not fall back into a Depression? You people are CLUELESS!!!

- Jekyll

May 1, 2009 at 10:12am

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Chait's critique of Shlaes book is so full of vitriole that it lacks credibility. To attach negative political motives to the author's attempt to re-examine a period in history is nothing more than an ad hominem attack on the author. What evidence does he have that Shlaes is a dishonest right wing hack - which is what he suggests. I guess in his partisan mind anything that Republicans read must be lies and trash. This article was a waste of my time

- paul

May 29, 2009 at 12:53am

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prove to me that Morgenthau said that.

- Barth

June 3, 2009 at 10:39pm

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This debate and the article are a vivid demonstration why government by the people, that is representative democracy, is an ineffective form of government (especially in an age of mass-media when every idiot can have is ideas broadcast if he yells loud enough: Joe the Plumber). The input of more minds does not nec. mean better policies. Simply allowing the unwashed massess to appropriate wealth and economic potential from those who create wealth and harness such potential, that is caving to Obamaesque or Roseveltean populism, is a bad path for a country to take. It is animal farm. Similarly, blindly adhering to libertarian precepts without considering the possibility of market failure, does not lead to a good solution either. The average voter is simply that average. It is not left vs. right politics. It is effecient, proprietary politics vs. rent seeking politics. China is the model for the future. An oligarchy or monarchy owns a nation and thus practices wise stewardship for it. In the US short sighted vote seeking politicians merely tell the people what they want to hear? Why should that lead to a good outcome? Why should politics or nation-management be every man's business? Why not leave it up to economists and technocrats who can analyze policies scientifically rather than pander to shallow, bickering, partisan voters? Those nations that develop or happen upon benevolent oligarchies will prevail. Democracy is a passing fad.

- Greg

June 10, 2009 at 3:23am

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