Money Matters in the Great Depression

A Review of Elliot A. Rosen’s Roosevelt, the Great Depression, and the Economics of Recovery

Elliot A Rosen is a retired professor of history at Rutger’s University, where he spent his off-time researching the Great Depression and the economics of it. The culmination of his research is Roosevelt, the Great Depression, and the Economics of Recovery.

BY MASON SCHECHTER

Left with the onus of cleaning the country’s economy, President Franklin Delano Roosevelt took the helm in 1933, determined to bail the country out of economic hardship and depression. Elliot A. Rosen’s Roosevelt, the Great Depression, and the Economics of Recovery outlines, in a broad but detailed view, Roosevelt’s deft actions and policies that helped the country get back on its feet after the biggest recession it has ever faced. Throughout the book, Rosen depicts Roosevelt as “stubborn, uncompromising, [and] a superb proselytizer” and describes how these qualities aided Roosevelt in accomplishing all of his feats, even with constant harangue from critics.1 As Rosen walks through the New Deal policies and the steps Roosevelt took to dig the country out of the hole, Rosen shows not only the economic implications, but also the social and political ones as well, leading the reader to believe that the Great Depression had a vast effect on all aspects of American society in the 1930s.

Rosen outlines the conflict faced by Roosevelt in the first part of his book. Hoover’s policies obviously faltered, leaving Roosevelt with the duties of not only recovery, but also reversal of Hoover’s bad policies. Roosevelt’s first challenge was stabilizing the currency and erasing the damage that Hoover had done, without causing instability himself. “Roosevelt refused to assure maintenance of the dollar on the gold standard,” which he thought was the first step in currency stabilization.2 Roosevelt proved to be more open to experimentation, however, and remained inflexible and stubborn throughout the implementation of his ideas. Rosen states that the main characteristic that made Roosevelt successful was his unwillingness to submit to other theories or ideas, while Hoover was spineless and gave into the first idea that sounded good, leading him down the wrong road. Because Roosevelt, unlike Hoover, stood up for his principles, he accomplished enough to singlehandedly—along with the rest his government—bring the economy out of the plummeting downfall that it had been experiencing. Rosen opens his book with the idea that Roosevelt wanted to remove the dollar from the gold standard to chronologically advance through Roosevelt’s plan for economic rehabilitation. Roosevelt believed that the first act of rebuilding the economy was to devalue the American dollar because it would in turn raise prices domestically. With a weaker dollar, Roosevelt believed, prices would naturally have to rise due to inflation-deflation economics. Roosevelt applied certain economic policies and variations that ultimately led to his success in office and in changing the Great Depression. The economy would start to turn, starting from the bottom, which he then believed would encourage an upward trickle of money. His theory proved correct as the devaluation of the currency began the slow and arduous process of recovery from the depression.

Rosen then moves to describe the tricky relationship between England and America and how each of the two economies intertwined with one another, yet operated separately. Roosevelt and Neville Chamberlain, the prime minister of Britain, utilized different economic policies; however, the policies both seemed to be working. Chamberlain focused on the elimination of war debts and domestic debts before paying attention to the value of the dollar or the domestic or international markets. Roosevelt, however, focused more on the value, or rather the “devalue,” of the American currency, as his belief was that it was the root of the economic rebirth. “The Great Depression sundered the special relationship between Great Britain and the United States,” as they both began to look out for their own economic interests, for they could no longer rely on any other country.3 Roosevelt began paving the way for building an internal economy, dependent on appreciated prices for recovery. Chamberlain’s ideas and principles came from careful determination and collaboration with his economic advisers; however, Roosevelt didn’t sway from his principles, nor did he accept an excessive amount of input or feedback from advisers. Rosen comments that many critics looked down upon Roosevelt’s stubbornness and his inability or willingness to compromise, but Rosen points out throughout the book that this was one of Roosevelt’s strengths, because Roosevelt’s principals and purpose were generally favorable, leading to positive outcome in the economy. However, those who did oppose Roosevelt felt that his unyielding nature made him seem dictatorial and less democratic. Roosevelt’s attitude and his strategies, combined with his unwillingness to work together with Great Britain, proved essential in obtaining the goal of stabilizing the economy post-Great Depression.

Rosen continues to move through Roosevelt’s economic system and policies by introducing Roosevelt’s New Deal policies, their effects, and Roosevelt’s goal to balance the budget. During the first 100 days of his term and even continuing on into the mid-1930s, Roosevelt established policies and programs which he hoped would not only stabilize the falling economy, but start the slow climb back up while also possibly balancing the budget. The secondary goal of balancing the budget was a forward thinking venture as Roosevelt realized that after the economy was settled, an unbalanced budget may cause turmoil again. Rosen states that “the New Deal programs for relief, public works, and social insurance had important long-term consequences.”4 New Deal policies, such as the National Industrial Recovery Act (NIRA) and the Tennessee Valley Authority (TVA), were aimed not only to stop the economic freefall, but also, in fact, to help improve the economy. The NIRA was aimed at changing business in the 1930s, hoping to promote stimulus in the economy in 1933. This legislation also contained an aspect of public works, which was one of Roosevelt’s crowning achievements on stimulating the economy. The TVA was aimed at providing jobs in agricultural areas not only to help farmers, but also to give other people jobs that would not normally be available or created. The TVA was involved in areas such as power and water, giving rural areas amenities that were unavailable for so long. The New Deal policies helped create jobs, create infrastructure, and aided many poor or jobless Americans. Rosen suggests that the implementation of all of the New Deal policies, some against recommendations from advisers, was Roosevelt’s greatest accomplishment because of the unseen long-term effects. Certain New Deal institutions, such as social security, are still around today, proving their usefulness and vitality of some of Roosevelt’s ideas. Other New Deal programs were so vital that, if it wasn’t for their institution, the Great Depression might not have been overcome. Rosen points out that although there was a slight recession in the years 1937 and 1938, the effect would have been drastically greater had Roosevelt not enacted the New Deal policies in both the first and second New Deals.

Rosen ends with the overall effect of the New Deal and the reason that it was a highly-analyzed section of history: Roosevelt’s policies, Roosevelt’s accomplishments, and Roosevelt’s success story. Rosen suggests that Roosevelt was set up for success from the beginning as America “depended on primacy in productivity, […] new technologies, […] the building of new institutions, […] and a broad emphasis on public education.”5 Rosen suggests that Roosevelt set himself up for success, and his policies only capitalized on the opportunities presented. Rosen states that the country’s already established principals and ideals, combined with Roosevelt’s resolve and drastic measures, proved to be the correct formula to break the economic hardship that the Great Depression had imprisoned the country with. Roosevelt combined Keynesian economics with his own ideals of the proper economic system to form a cross between a balanced budget and government spending, combined with the New Deal programs that aided in relief and recovery. The division between Keynes and Roosevelt occurred at the time frame of a balanced budget, as Keynes believed in long term deficit spending and budgets, whereas Roosevelt believed the sooner the better. Roosevelt, as Rosen would make it seem, was the main component in getting the United States out of the Great Depression, alongside eventual wartime economic stimulation.

Rosen believes that Roosevelt became the biggest component in turning the economy around during the Great Depression. Without Roosevelt’s cornucopia of reform efforts and economic policies, the Great Depression might have lasted longer than it did. From his point of view, this assumption makes sense, as he is a historian. Not a true economist, Rosen writes from research, rather than knowledge of the field. On the surface, it would seem that Roosevelt is indeed responsible for the positive outcome of the economy in the 1930s; nevertheless, to a true economist, the true recipient of the praise may, in fact, be someone or something different. Rosen sees just the political action taken and its immediate economic influence; however, a true economist would know the true mechanics of the system, and he or she would be able to determine why Roosevelt’s New Deal truly worked, and why Keynesian economics was such a good precedent to follow.

In a review by Jason Scott Smith, Smith praises Rosen for what Rosen does well, and goes through a step by step of Rosen’s book, ending with a overall opinion on how Rosen did as an author. Smith gives Rosen credit for writing out of his field, since Rosen, a historian, undertook the challenge of writing about economics. “This is a book that endeavors to cover a great deal of ground…in such an ambitious project”.6 Rosen studied the Great Depression for years, and proceeded to write about his understanding of Roosevelt’s economic principles and ideals through the eyes of a historian. Smith believes that this perspective gives a different view of the topic, which makes for an interesting read, both for those who are economists and those who are not.

The review by Andrew Kersten is more critical of Rosen. He begins with a summary as well, going through Rosen’s book and describing the organization and the content. However, his tone changes as he becomes caustic toward Rosen for the fact that he is not an economist, although he took on the task of writing an economist book. He is critical of the fact that Rosen is not educated in the field of economics, and therefore, makes uneducated opinions throughout his book about the economic principles and effects of the various New Deal aspects and of Roosevelt’s economic system. He essentially believes that economists and historians should stay in their own fields and not venture into each other’s areas of study, as previous attempts have had little success, due to the intricacies of their respective fields. According to Kersten, “Rosen has done yeoman work, but in the end, that bridge between economists and historians still needs to be a little wider for both camps to engage in a fuller historiographical debate.”7 He considers that there is a long way to go before the two fields can mix successfully, or begin to understand each other, because the link between the two is weak, and doesn’t support the easy transfer from one area to another with success.

Overall, this book was good and had a different, but enjoyable perspective. Rosen was well-versed in anything that surrounded the economics of the Great Depression, and proceeded to walk the reader step-by-step through Roosevelt’s ideals and actions, explaining not only the historical effect but also the economic effect to his knowledge. Rosen’s lack of knowledge of economics was not obvious, as Kersten would lead some to believe, but the point of view that he speaks from is that of a distant observer, rather than from someone who technically knows the true mechanics of economics. Rosen researched the Great Depression economics well, thoroughly, and in enough detail to make him at least seem like an expert on the topic. His book is well-written and organized chronologically, which works superbly well for the topic at hand, as most of the important details happen chronologically.

The Great Depression was the epitome of a watershed in economic and even political history. It was the single worst economic event of the twentieth century, setting precedents for all types of events. Measures were taken to prevent and counter the causes and effects of the Great Depression—measures that, if not established then, would leave the country a weaker one now. Institutions such as Social Security and the Federal Deposit Insurance Corporation (FDIC) are still around today, even though they were not designed or established to carry on till now. However, they keep the economy strong and economic areas maintained. Social Security helps with retirements and pensions, even though it was set up just to aid the older generations through the Great Depression, as they had no source of income. The FDIC regulates the bank to prevent what happened in the Great Depression and a few years ago. Roosevelt’s precedent set in the 1930s is a key part of President Barack Obama’s policies today, and the policies and changes made during the First Hundred Days. He took office during a recession as FDR did, so his duty was to try and help the economy out of the downward spiral, and he has slowly begun to do so. President Obama is taking ideas from Roosevelt, as in the stimulus package and trying to pass an abundance of reforms that may or may not work. The idea about the reforms is that at least a few will be helpful, and the ones that are not helpful will not be harmful, which is something Roosevelt and now Obama know. Obama is essentially picking up where Roosevelt left off, because there were some economic recession trigger factors that were not entirely addressed by Roosevelt, or weren’t problems back then. Roosevelt’s economic braces stabilized the economy enough for the next 75 years, with, along the way, minor recessions that economists would explain are normal, due to the natural cyclical nature of the markets.

In essence, Rosen’s book was informative and interesting, and it provided the reader with a perspective not always found in history. Rosen’s walkthrough of the economic principles and policies of Roosevelt was thorough and educational and left the reader feeling knowledgeable on New Deal reforms and legislation. Rosen not only presents the historians aspect, but he tries also to present the economic standpoint as well to all of his observations and research, which worked to a reader not educated in either field. As Rosen states, “there were two options: substantial federal intervention […] or ascribing the depression to external causes,” and Rosen explains how Roosevelt chose the former.8 Roosevelt’s goals were not only to stop the downfall, but also to balance the budget, raise prices domestically, and remove the dollar from the gold standard. All three tasks were achieved successfully. By removing the dollar from the gold standard, the currency devalued, which raised prices domestically, which caused the budget to start to balance. Rosen goes into detail about how this Roosevelt economic plan worked and tries to explain why. Rosen’s work holds a unique perspective, and information-rich topic, full of anecdotes about political and economic figures that would not normally surface to the normal person.

Endnotes

Student Bio

His name is Mason Schechter and was born and raised in Irvine. He enjoys playing water polo for the high school and swimming on the swim team. He intends to go to a college on the east coast and major in biology/pre-med or study to become a teacher.