The Forgotten Man: A New History of the Great Depression by Amity Shlaes

Reading between the lines.
July 5 2007 7:18 AM

FDR's Latest Critics

Was the New Deal un-American?

Seventy-five years ago this week, on July 2, 1932, Franklin D. Roosevelt accepted the Democratic nomination for president and pledged "a new deal for the American people." He promised public works, agricultural price supports, new mortgage markets, working-hours legislation, securities regulation, freer world trade, reforestation, and repeal of Prohibition. Congress passed laws for all these goals and added, in his first term alone, watershed management, legalization of labor unions, deposit insurance and a stronger Federal Reserve Board, and Social Security. All these remain: We live in the nation the New Deal made.

As Roosevelt pointed out, the New Deal wasn't so new. He claimed inspiration from the progressivism of Woodrow Wilson, under whose administration Congress created the Federal Reserve System, lowered tariffs, and tried to legalize unions. Republicans supporting him cited Roosevelt's cousin-uncle Theodore, under whose administration Congress began to regulate corporate accounting and passed truth-in-advertising and pure-food laws. Farm supporters of the New Deal drew on the decades-old tradition of populism, which opposed the gold standard and demanded that government assist rural residents as much as it assisted railroad corporations. What was new in 1932 was a basket case economy with 23 percent unemployment, offering the possibility of getting these American traditions together to fuel a national majority coalition—which is what the New Deal did.

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Despite its deep American roots and its popularity across class, regional, religious, racial, ethnic, and to a degree even party lines, the New Deal never lacked critics. They came mainly from the corporate boardrooms and the white-shoe law firms. They could not deny the New Deal's popularity, so they challenged its Americanness. They claimed, as the attorney Frederick Wood did in 1935, that Roosevelt aimed at "some form of national socialism—whether Soviet, Fascist, or Nazi." Some duPont executives, annoyed that the New Deal was raising wage rates for black workers, created the American Liberty League for "encouraging people to get rich" instead of supporting Roosevelt. They made the 1936 election a referendum on the New Deal.

Roosevelt won this referendum by a record majority. He appealed most to the poor—pollsters found Roosevelt garnered 76 percent of the lower-income vote. But he won more than 60 percent of middle-income votes, and even 42 percent of upper-income votes.

If the New Deal survived that test, so did the white-shoe critiques. Today, Grover Norquist complains the New Deal was "un-American." And like-minded Amity Shlaes says in the Wall Street Journal that she wants "[t]o write sympathetically about the Liberty Leaguers." Which she does, in her new book, The Forgotten Man. Despite its subtitle, it's less "a new history of the Great Depression" than what Shlaes says it is: a resurrection of the duPont critique of the New Deal, circa 1935. The New Deal was un-American, she argues, and bad for business.

The New Deal did bear some relation to European welfare states, but it was an uneasy one. Consider Social Security, which would have been simpler had the Democrats written a European-style law, using general funds to support retirees. Instead, out of an American conviction that we "mustn't have a dole," Roosevelt insisted on a contributory scheme which has required repeated tweaks. Shlaes never makes a clear argument about New Dealers' relationship to European politics, center or left. She writes first that "the problem of the New Dealers on the left was not their relationship with Moscow or the Communist Party in the United States, if indeed they had one," but then gives a chapter to discussions of various leftish reformers' interest in the Soviet Union, without showing that this significantly affected New Deal policy.

As for being bad for business: The greatest knock on the New Deal is it did not end the Great Depression. The war did that. Open the authoritative reference work Historical Statistics of the United States and you will find that the unemployment rate did not return to its 1929 level until 1943.

But if the New Deal did not end the Great Depression, was it doing some good? Historical Statistics of the United States says yes: Except in the 1937-38 recession, unemployment fell every year of the New Deal. Also, real GDP grew at an annual rate of around 9 percent during Roosevelt's first term and, after the 1937-38 dip, around 11 percent.

So on the numbers, the U.S. economy improved briskly during the New Deal. Things that are moving quickly and in the right direction, but still haven't reached their destination after a while, are things that have a long way to go—which is true of the U.S. economy recovering from 1932. Historians disagree on which part of the New Deal most encouraged economic growth, but at the least the New Deal did not prevent this recovery.

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