Below The Beltway

The standard, some might say accepted, history of The Great Depression is one that most of us know pretty well. When Wall Street crashed in October 1929, we’re told, President Hoover, at that point in office for just over nine months, sat back and did nothing as the economy collapsed around. Wedded as he (supposedly) was to the “old” idea of laissez-faire, Hoover was confident that the market, and the economy, would correct itself. It wasn’t until three years later, when Franklin Roosevelt and his wise men arrived on the scene and “saved” the economy while battling reactionary forces in Congress and on the Supreme Court.

As Amity Shlaes demonstrates in her book The Forgotten Man: A New History of the Great Depression, though, there’s a profound difference between the history we were all taught and what actually happened.

Hoover, as Shlaes points out quite clearly, was far from an advocate of free markets and was not at all shy in using the government in an effort to stop the economic decline. The Smoot-Hawley Tariff, after all, was little more than a misguided attempt to protect ailing domestic industries from foreign competition — what it did in reality was contribute to the overall destruction in world trade that made the Great Depression even worse. Hoover also initiated smaller-scare versions of the programs that FDR would later implement himself, and, most disastrously, he raised taxes in 1932; an act which only served to further dampen whatever growth remained in the economy.

Shlaes spends most of her time, though, focusing on the Roosevelt Administration and the intellectuals that formed the core of the “brain trust” that he brought into office with him when he took office in 1933. Contrary to the established history, she shows us that the New Deal did not “save” the country from the Great Depression and in fact there’s abundant evidence that the policies that Roosevelt initiated starting in 1932 and actually worsened the economic conditions and made recovery impossible. It wasn’t until the country started gearing up for World War II, for example, that industrial production returned to anything close to the levels it was at before October 1929, and unemployment remained in double digits for the better part of a decade. The only reason, it seems, that Roosevelt was able to hold onto power during those years was because he turned the Federal Budget into a massive series of transfer payments from one class to another — and, in a democracy, the people receiving the money will always vote to continue receiving it.

The most striking thing about the portrait that Shlaes paints of those years from 1933 through 1940, though, is the picture it paints of Roosevelt himself. He comes across at indecisive, devious, and as someone with no clear understanding of the consequences of what he was doing. Not exactly what we learn in history class, is it folks ?

Shlaes book is a valuable read both as a health revision of the Rooselvelt/Great Depression/New Deal hagiography and as a lesson for us today as we watch yet another President who doesn’t seem to have a clear plan navigate the country out of a crisis.