A Disgraced Theory Best Forgotten

A Review of Amity Shlaes’s The Forgotten Man: A New History of the Great Despression

Amity Shlaes is a senior fellow in economic history at the council on Foreign Relations and a syndicated Columnist at Bloomberg. She has written for The Wall Street Journal, where she was an editorial board member, as well as for the New Yorker, Fortune, National Review, the New Republic, and Foreign Affairs.

BY RONY PALM

The Great Depression produced heroes—or so it seems. Having confronted this crisis, President Franklin Roosevelt emerged an American icon, a savior for the poor and unemployed, a man who “willed us all back into prosperity.”1 This is the story commonly told in American history, but Amity Shlaes does not think it is the truth. She introduces a new explanation of the Great Depression in her revisionist book, The Forgotten Man: A New History of the Great Depression, challenges the dignity of one of America’s greatest presidents, as well as his program—the New Deal.

Life seemed hopeless during the Depression. Shlaes uses a 13-year-old boy who committed suicide, William Troeller, as a representation of the hardships of the 1930s. The economy was tipping even in 1937, and Shlaes asserts that “neither the standard history nor the standard rebuttal entirely captures the realities of the period.”2 She argues that the Great Depression—not inevitable—could have been prevented. Also, contrary to popular belief, “the 1920s was a great decade of economic gains,” and “American capitalism did not break in 1929.”3 In fact, the stock market crash “did not cause the Depression,” but the reaction to it was critical.4 Hoover’s reaction was hampered by the fact that he incompletely understood inflation—a trait he shared with Roosevelt. Then what exactly caused the Depression? Shlaes blames the rough transition from an agricultural society to an industrial one. Furthermore, she claims that programs such as the Civilian Conservation Corps (CCC) were beneficial to the economy, while others such as the National Recovery Administration (NRA) were not. In any case, Shlaes feels such government intervention did harm: it caused the Depression to last from 1929 to 1940. Thus, the forgotten man – the strained taxpayer – was born. Shlaes’ introduction makes her beliefs clear; the subsequent chapters cover the circumstances and the men involved in America’s worst depression. The Flood of 1927 forced President Herbert Hoover, a highly intelligent man with an immaculate engineering background, to “Hooverize,” or ration, food. He was a typical Republican, but not of the same breed as President Calvin Coolidge. Hoover opposed communism, believing its institution to be a “shift from intelligence to ignorance.”5 She compares and contrasts their varying backgrounds, although their differences were initially “nearly indistinguishable to the public eye.”6 Shlaes introduces another key man, Andrew Mellon, who reduced the national debt from $24 billion to $16 billion. While that was a positive outcome, the Sacco-Vanzetti case seemed to confirm American barbarism. Associate Justice of the Supreme Court Felix Frankfurter desired an active American government and disliked businesses—a viewpoint opposed by Coolidge. Shlaes points out that “the bull market of the 1920s was not an empty speculative bubble.”7 There was a realization that this was not just traditional inflation, but a dire situation in which prosperity was at stake. Though many were against it, Hoover voiced the need for protectionist policies and tariffs. At the same time, he distanced himself from the slumping economy.

By the early 1930s, currency had become more valuable as the country suffered from deflation. Compounding these issues were Hoover’s intervention tactics such as the Smoot-Hawley legislation. Two years since its institution, American imports had dropped a whopping 40 percent. Another black mark on the president was the “sprawling [of] Hoovervilles.”8 The Revenue Act of 1932 – a tax increase – was also disagreeable to many. Furthermore, unemployment was high at 16 percent. These factors, as well as Roosevelt’s inspirational fireside chats, were instrumental in Roosevelt’s handily victor over Hoover by seven million votes. Shlaes quickly points out that many of FDR’s projects were extensions of Hoover’s efforts. The first great project in she considers is the National Industrial Recovery Act. Furthermore, the Agricultural Adjustment Administration (AAA) provided government subsidies to farmers to curtail production. The CCC served youths and thus their families. America liked FDR’s attitude, and the “New Deal recovery seemed to have a chance again” under this president’s guidance.9 The program’s “most dramatic project [was] the Tennessee Valley Authority (TVA),” which had hired more than 9,000 by 1934.10

Regardless, books began to attack the president’s New Deal. Eleven million were still unemployed, the NRA having employed a comparatively minute 780,000 workers by 1834: the “Depression was refusing to disappear.”11 Still, although the New Deal was failing, it was advancing politically through the fireside chats. Another act, the Federal Reserve Act, shifted the control of money to the capitol. The Schechter-Poultry Case came to attention at the time and is covered in detail. The NRA felt, citing the Code of Fair Competition, that the Schechters’s company was detrimental to small businesses. The Schechter Poultry case was just one of many ugly cases by the NRA. In the end, the authority of the NRA was rejected, and the program met its death. After six years of depression, responses understandably became tenser. Figures such as Dr. Francis Townsend, Huey Long, and Father Divine gained prominence by exploiting the public mood. FDR did not always have a clear view of where he was taking the country. He became wary of experiments such as the NRA since they had not contributed significantly to the recovery strategy. Roosevelt also “disliked handing money out to the poor.”12 Disappointingly, the Public Works Administration (PWA) and Works Progress Administration (WPA) had generated only 200,000 jobs since 1932. Spending ballooned to double the rates of 1930 at $5.6 billion. 1935 saw tax increases, and unemployment stood at 11.7 million. Details of the Social Security Act also started to emerge before the 1936 election in which FDR easily won. Mellon wanted “to outclass [government].”13 To that end, he began to construct America’s best art gallery, valued at $40 million—a great gift to the nation.

Eight years into the Depression, America had developed a new understanding. On the political side, Roosevelt floated his court-packing plan, which was a failure: “the language of rejection was unforgettable.”14 The economy had improved, but it was not at 1929 levels. Roosevelt needed to balance the budget, so he cut some WPA jobs. This coincided with the beat-up of the union workers at Ford’s River Rouge plant. Helping the workers’ cause was the Wagner Act; United Auto Workers (UAW) membership stood at 350,000. Business was becoming more expensive due to the Wagner Act, and accordingly, wages rose. Clearly, America was no longer what it once was. In light of these events, the author questions what the New Deal had actually achieved. Indeed, Wendell Willkie is brought into the discussion with his observation that “a good catchword can obscure analysis for fifty years.”15 At the same time, Ickes attacked America’s upper class, and New Dealers attacking businesses underestimated the consequences of their actions. There was a “new sense of permanence about the Depression.”16 A third term for Roosevelt seemed improbable, as the Republicans and particularly Willkie appeared strong. The reputation of the New Deal was continuing to nosedive; Willkie’s seemed solid. He argued for a laissez-faire government, contrary to Roosevelt. However, there were inconsistencies in his campaign, and FDR held the advantage on foreign policy. FDR won the 1940 election, but Willkie didn’t go down without a fight: he “had polled 22 million votes, more than any Republican in history.”17 Willkie had reminded America about “the forgotten man.”

Shlaes feels that government intervention was the reason the Great Depression did not end sooner. She comes to this conclusion by juxtaposing the prosperity under conservative President Coolidge with the uneven track record of the New Deal under liberal President Roosevelt. She strengthens her argument with statistics revealing that unemployment had never dropped below 13 percent during the 1930s. Programs such as the NRA and TVA created a level of uncertainty detrimental to the American public, she claims. Confidence, or lack thereof, was a significant psychological aspect of the Depression. Shlaes appears prejudiced by the policies of current times. The book was published in 2007, in the midst of a conservative upswing. She insists that the 1920s was a time of economic prosperity, and that the rise of the stock market was not indicative of the actions of speculators. It was a period best left alone. Instead, the government intervened, prolonging the period following the crash of 1929. Based on this assumption, she notes that during Coolidge’s “hands-off” presidency, unemployment stood below five percent and that there was prosperity in the form of the Roaring Twenties. As a result, Shlaes finds that two men not usually given much credit—Coolidge and 1940 Republican presidential nominee Willkie—are true heroes. On the other hand, Shlaes feels that Hoover was prone to intervening in government affairs. For instance, he sought to cut wages and fire workers as the stock market began to decline. The author points to these “aggressive” steps by Hoover to claim that restraint would have been a better solution. Predictably, Shlaes cuts no slack for the liberal New Dealers and President Roosevelt. Contrary to being given the usual praise, the author depicts them as experimenters, accusing them of being inconsistent and misguided in their actions. Shlaes feels that the free market economy was the best policy for America at the time. History is rewritten constantly, often to fit in with the era in which it was written. This is accepted; indeed, new interpretations are often deemed more appropriate than older ones. However, there is a certain danger that an agenda-driven historian may distort the truth. Shlaes’s book borders on revisionist history, partly due to the fact that some of the ideas presented are significant departures from explanations of the Great Depression deemed logical up to this point. There are a number of plausible explanations to why this may be the case. First, the book was published during a conservative era. With Roosevelt and the New Deal policies being highly liberal for their time period, Shlaes logically attacks the decisions made. Furthermore, if one assumes that Shlaes intends to use the book as a source of income, one would think it possibly easier to raise revenue by providing a controversial, unique interpretation. The author’s warning in the book for current times is targeted at taxation. In fact, the book’s title, The Forgotten Man, refers to the over-burdened taxpayer in the 1930s.

Although excerpts of reviews from highly credible sources indicate critical acclaim for the book, the examination of entire reviews reveals opinion is divided. Both sides agree that there were serious missteps on the part of the Roosevelt administration. However, the lack of precedent makes judging his performance in the handling of the Great Depression inconclusive. Steven F. Hayward of the National Review feels that that Shlaes’ book “deserves to become the preeminent revisionist history for general readers,” which is quite a heady statement that needs ample support to be convincing.18 Sadly, it borders on being more of a summary of the book than an in-depth analysis. The author of the review agrees with most claims made by Shlaes, including the idea that the New Deal was rooted in fascism. Alonzo L. Hamby of the Wall Street Journal, however, is not entirely convinced. Telling is the acknowledgement that Shlaes does not “offer an explicit prescription for how America might better have recovered from [the Great Depression].”19 The review comes off as very neutral and balanced with support for both sides. However, the reviews from The Nation and the Guardian offer more useful, critical feedback. Kim Phillips-Fein of The Nation questions the author’s logic: how could one “believe that the American economy in 1930 was undone by Hoover’s tentative steps towards intervention” when there was “unequal distribution of income, the weak consumer market, the crazy speculative schemes and rampant borrowing that financed the stock market boom, the fragility of the banking system and the agricultural crisis shaking the Midwest?”20 Furthermore, the review criticizes Shlaes for associating the liberal characters with Communists. It is also pointed out that the author’s explanation ignores the fact that Roosevelt won “the loyalty of millions of voters.”21 Viewed on the whole, the book offers “little historical evidence ... that the New Deal made the Depression worse and that without it, the crisis would simply have passed.”22 Guardian’s Anne Perkins echoes these sentiments and feels that The Forgotten Man is an ad hominem attack against Roosevelt. Thus, it is not “a readable analysis of where government works and where it does not.”23

The Forgotten Man is a trampling of the initiatives undertaken by the Roosevelt Administration and its New Deal policies. Shlaes is much too quick in stating her biases, turning a potentially balanced overview of the era into a good vs. bad contest. There is also very little said in what the ideal solution to the Great Depression would have been—other than her praise of hands-off government, which is too general to be considered a solution. And unfortunately, simplifications such as those abound in the book. Her theories rely on the premise that politics is simple and clear-cut – which it definitely is not. Shlaes’s inclusion of viewpoints from ordinary folk of the time fails to strengthen her argument. Furthermore, her assertion that the New Deal worsened and prolonged the Great Depression is misguided at best and outright insulting at worst. To point to statistics that show prosperity during Coolidge’s hands-off presidency and compare it with the high unemployment rates during the Roosevelt presidency is to arrive at the conclusion that the latter president was a failure is unbelievable. One must question Shlaes’s credibility in light of this ignorant thesis. It is unfair to claim that something similar to Coolidge’s policy would have ended the Depression sooner without any precedent or evidence to back it up. Statistics don’t lie, and while the Democrats’ track record was indeed disappointing at times, the Republicans really had nothing to offer, either, a fact the author conveniently omits. One gets the feeling that Shlaes tailors her book to the mid-2000s conservative ideas on government and is closed-minded toward the liberal viewpoint of the 1930s.

Shlaes feels that America could have been much better off in the 1930s if the policies from a decade prior had been continued instead of liberal ideas introduced. She is clear that popular assessment of a highly regarded Roosevelt and the New Deal fails to reflect the state of ruin of the country. Comparing the situation to current times, the author cautions against the heavy taxation that created the “forgotten man.” Like it or not, there is no doubt Roosevelt revolutionized the way government operates. He shaped the modern role of government like no other. Unfortunately, today’s “Great Recession” bears many similarities to the great Depression, but America has a more clear-cut view on how to proceed.

The Great Depression has greatly impacted America today. Even the most critical of the Roosevelt administration cannot deny that a precedent on how to deal with depressions was provided. The 1930s saw the implementation of government programs taken for granted today, but revolutionary then, such as Social Security and welfare, which are crucial to the operation of society. Furthermore, the practice of deficit spending is acknowledged as the ideal method to deal with economic crises, even by Republicans. The 1930s were arduous times, but it allowed the government to advance to where it stands today—presiding over a society “the forgotten man” would envy.

Endnotes

Student Bio

Rony Palm is a junior at Irvine High School. He deeply enjoys the challenge of the AP United States History course and has a keen interest in the Great Depression. Palm has been under the guidance of distinguished teacher and AP test grader Steve Sewell.