Monday, May 18, 2015

A review of “The Forgotten Man: A New History of the Great Depression”

We've all heard stories about how bad things were during the Great Depression, with extensive poverty and massive unemployment - perhaps the only economic crisis worse than our current one. But the history classes don't often go into the question of why; leaving the complicated subject of causation to economists, rather than the historians of the subject. When history classes do comment on the "why" of the Depression, they often paint a glowing picture of big government, with some economics classes not being much better in this regard.

Poor mother and children - Oklahoma, 1936

The recovery from the Depression is often painted as a triumph of Franklin Roosevelt's New Deal, with the massive spending on poor relief painted as keeping this terrible crisis from getting worse. The real recovery, according to these people, started when there also came to be massive spending on the military as well, with World War II getting us out of the Depression through government's "priming the pump" (or some other such phrase). These arguments are often given faux legitimacy by their having been advocated by John Maynard Keynes - a brilliant economist who really did revolutionize the study of macro-economics, with some important new analytical tools; but whose theories and explanations about the political implications of his work ultimately failed to measure up to these accomplishments. The current theories about this subject are inadequate, and the history is told mostly by people who sympathize with FDR - who judge him by his charisma rather than his results, and whose telling of the Depression is more of a plug for big government than an accurate representation of the history.

John Maynard Keynes

Since my first macro-economics class in early college, I wanted to know more about the causes of the Great Depression; as the subject is of tremendous importance for economics students like me, as well as for history students; and I got the opportunity to study it in more detail in a later economics class. The class was called "money and banking" (also known by its more formal name of "monetary & financial economics"), and it is a subject that is closely related to macro-economics. The period was an important one for money and banking, as well as for the broader economy; and so this class was one which, although otherwise focused on business applications, talked much about the history involved. This was exactly the kind of thing I wanted to study for fun then, and the class was an enlightening one in familiarizing me with the history of this time. I was glad I took this class.

The professor was actually a conservative/libertarian one, and so he assigned us to read a book that helped to correct the record on the "big-government-is-good" version of what happened. The book was called "The Forgotten Man: A New History of the Great Depression," and it was written by an economic historian named Amity Shlaes, who was also a conservative/libertarian scholar of economics. In the words of a review quoted in the first few pages of the book, it was "nothing less than an attempt to reclaim the history of the 1930s for the free market," and I thought it was remarkably successful at doing so; helping to show the folly of Mr. Roosevelt's prewar policies.

Herbert Hoover

To be fair, there is much blame on Herbert Hoover as well, and the book does not spare him in assigning blame for what happened. But the reason the Depression lasted as long as it did was because of Mr. Roosevelt's New Deal, and the government spending was at levels far in excess of what was necessary. It's tempting to conclude that because the Depression ended on FDR's watch, he must have had something to do with it; but there are many other explanations for what happened as well, among them the one that I will offer here: World War II ended the Great Depression, not because it increased government spending through augmented funding for the military, but because it killed the New Deal almost overnight. When the war began, FDR knew that he could not focus on his social policies while still concentrating on the war; and so the New Deal took a back seat to winning the war. FDR really does deserve a lot of credit for his leadership during the war, but his policies during the Great Depression were an unmitigated disaster; and only his charisma has spared him from the well-earned blame for his role in the crisis.

Huey Long

Father Coughlin

FDR's fiscal admirers often point out that he was a better alternative than some other prominent candidates of the time, such as Huey Long and Father Coughlin; but then, getting wounded in battle is better than getting killed in it, and yet I don't see anyone lining up to get wounded by deliberate self-injury. Along with the bad alternatives to FDR, there were also some better ones (including some of his Republican opponents); and the country would have been better off picking one of them. Getting wounded and getting killed were not the only choices, and neither were these men the only alternatives to FDR - there were plenty of other candidates to choose from as well.

Franklin Delano Roosevelt

The stock market crash in 1929 is often cited as the beginning of the Depression, and I suppose that there is some symbolic value in this; but the nation has had other stock market crashes in its long history, and it has recovered from them much faster than it recovered from this one. Recovery was effectively stagnated by Mr. Roosevelt's policies, and the country suffered the effects of choosing charisma and caring over actual real-world results. FDR unquestionably cared, but that didn't stop him from being grossly incompetent on the economy, and so his policies did more harm than good. The expansion of government found in the New Deal was not surpassed until Lyndon Johnson's "War on Poverty" in the 1960's, and the alphabet soup of government agencies that the New Deal created are still there today and still draining money, all these decades later. (A documentary about LBJ called him "the last New-Deal president," or words to that effect; and Lyndon Johnson is a product of this time - expanding the failures of his fellow Democrat FDR to ever larger parts of the American economy.)

FDR meets future president Lyndon B. Johnson (right) in 1937, with Texas Governor James Allred in between

I don't claim to be an expert on this subject, and I don't claim to be presenting any evidence for this point of view here - rather, I am giving the conclusions of the author and myself, and allowing Ms. Shlaes to give the evidence for them in the book itself. If you want the evidence, read Ms. Shales' book; and you'll see the evidence presented by someone who knows far more about economic history than I do. I have a minor in economics (technically a certificate in business economics), but I'm not an expert; while Amity Shlaes is. If you want to get the case for this interpretation, read her book; and you'll have all the evidence you need.

FDR meets with Churchill aboard HMS Prince of Wales - Atlantic Charter, 1941

Having bad-mouthed FDR a lot in this post, I must also add in a kind word for him here: As incompetent as FDR was on domestic policy, that's how good he was on foreign policy issues like World War II - and his great accomplishments in this area are not limited to the post-Pearl-Harbor period - he was also instrumental in getting us prepared for the war, including during the period of the Great Depression that this book covers. The book's focus is necessarily economic, and so it can't spend much time on the buildup to American involvement in the war, but FDR was great at getting us prepared for World War II; and did much before Pearl Harbor to send money and supplies to Great Britain under the Lend-Lease Act, and give them limited military assistance in the Battle of the Atlantic - before America had officially gotten involved. (Pushing the envelope on what Americans would tolerate in this area, in the process.) He does deserve credit for this, and I do not wish to totally dismiss his presidency.

FDR signs Social Security Act, 1935

Nonetheless, he was grossly incompetent on economic policy; and the Great Depression might well have ended sooner if the nation had elected someone else. This man-made crisis was preventable, and yet it stayed unprevented - it was allowed to grow worse, and the cycle of economic suicide is currently repeating itself, as the nation refuses to learn from the lessons of economic history. There is much to learn from economic history, and particularly from the period of the Great Depression; and a knowledge of economics might well help us to better prevent further crises in the future. There will always be problems, but there need not be the man-made kind; and learning from the lessons of the Depression may well help prevent us from having to repeat it.

"The Forgotten Man: A New History of the Great Depression" at Amazon

If you liked this post, you might also like:

Franklin D. Roosevelt movie

Winston Churchill movies

Dwight Eisenhower movies

Harry Truman movie

World War II miniseries

FDR documentary
Available on YouTube

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