Reassessing Franklin D. Roosevelts reputation

Great Debates
1

Did FDR’s New Deal do more harm than good? I used to think only cranks denigrated the New Deal…until I read these links:

http://www.independent.org/tii/news/950201Higgs.html

http://www.mises.org/freemarket_detail.asp?control=355

http://www.cato.org/pubs/policy_report/v25n4/powell.pdf (Warning: PDF)

From the PDF from the Cato Institute:

From the Link to the Independant Institute report

So, are these attacks on FDR’s policies, especially the New Deal, unwarrented and without merit or are they on point criticisms of a sacred cow?

2

The assumption is that FDR had a definite program in mind which would combat the Depression. History records that the New Deal was not a coherent set of programs that would together achieve a specific result by cause-and-effect, but rather a recognition that Hoover’s policies were not working, and a willingness to experiment and discover what programs would effectively achieve results. For FDR, the motto was, “Try it. If it doesn’t work, we’ll try something else.”

The philosophical differences underlying the NRA, the AAA, the Wagner Act and the NLRB, the CCC, and the WPA and PWA, could scarcely be greater.

And it should not be viewed from a post-Reagan liberal-vs.-conservative perspective either. Many “conservatives” of the time, particularly in the South, supported the New Deal – and many of the other solutions proposed make the New Deal look like nothing more unusual than a proclamation honoring Neil Armstrong or George C. Marshall. Google Upton Sinclair and Huey Long for examples.

3

There’s certainly a considerable amount of merit to these suggestions. The only problem the free marketeers (mises, cato, etc.) face is that a key factor in turning the economy around was wartime Keynesian deficit spending by the government. This sort of “pump priming” economic policy is generally seen as representing excessive government intervention in the economy by many free market advocates.

Note that such free marketeers, or libertarians as some like to be called, are not necessarily the same as Republican conservatives. The former tend to oppose government spending in just about all its guises, they oppose deficits, and have the advantage of at least presenting a consistent position. The latter tend to be strongly opposed to any expenditure on social welfare, and to deficits run up by Democratic presidents, but are often quite happy with corporate welfare and deficits run up by Republican presidents.

4

Well, any reevaluation has to start with the simple fact that Roosevelt took over more than three years after the crash. The Depression was already the Depression when he took over, and it was worldwide.
Personally, I think it all started with the massive dislocations caused by WWI, and that the entire process of working out the horrible mess that stupid war started didn’t finish until the last refugees from WWII were finally repatriated or died. One long continuum, with the Depression as the middle, long slow movement between two fast and thunderous ones.

5

I think much of this is right on the mark.

I just wanted to add a couple of suggestions for further reading.

If you’re interested in the more radical solutions that Polycarp mentions, you should check out Upton Sinclair’s book I, Candidate for Governor, And How I Got Licked, which is a personal account of his 1934 gubernatorial campaign in California.

For a classic examination of New Deal economic policy and the debates among those in the Roosevelt administration, see Ellis Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence, which is much more interesting and easy to read than the title suggests. One thing it shows is the way that big business, despite complaining loudly about New Deal policies, was often a beneficiary of monopolistic and oligopolistic tendencies of the period, and how it was often smaller, independent businesses that got squeezed hardest by New Deal regulation.

Arthur M. Schlesinger, Jr.'s books on FDR and the New Deal are also quite good, if you can get over Schlesinger’s rather-too-obvious love for Roosevelt and his programs.

6

Bank Failures
I believe I’ve read that the crucial issue for the depression in the US was the pervasive failure of banks. The Federal Reserve of the time, in a bid to close the barn door after the horse was gone, decided to “Put the economy on a sound basis” by squeezing out marginal banks and businesses. It was this, more than the Stock Market Crash, that really caused the Depression to be so bad.

That the stock market crash was triggered by margin rates on stock purchase being too liberal (you could buy stock for 10% of the price), is well known. Less well known is that the reserve margin that banks were required to have to support their lending was also seen as too liberal. After the crash, the Federal Reserve tightened up on reserve requirements (triggering bank failures) as the stock exchange tightened up on margin requirements. Modern economists and bankers know that in a depression or deflationary situation, the reserve requirements on the banks should be loosened, not tightened.

I am neither a historian nor an economist. This is what I remember of what I’ve read. We may never know how much worse the Depression might have been had FDR not pushed forward the New Deal.

7

I have a slightly different spin (and I’m not a fan of FDR). We may NOW be able to say his programs were a failure, but 20/20 hindsight is only legitimate if we learn from those mistakes. I think it was successful in that respect. IMO, these programs needed to be tried.

What I liked about the New Deal was the WPA and that has traditionally been lampooned as a failure. I’m still driving over WPA bridges on my way to construction zones for bridges built 30 years ago (damn I’m getting old). If you have to give short term welfare, get something for it in return.

Another thing to consider is the parallel between 9/11 and the great dust bowl. They were both devastating economic catastrophies that could not be planned for in advance.

8

As a libertarian, I’m no fan of Franklin Roosevelt’s policies. The National Industrial Recovery Act represented foolish faith in central planning by elites. The Agricultural Adjustment Act ensured that we would have too many farmers, producing too much food, at too low a price, in return for too many taxpayer subsidies, for decades (centuries?) to come. And Social Security, I will always be convinced, was designed in a fundamentally misguided way and has lowered economic growth and wealth accumulation for all of us in subsequent decades.

But the point cited by Polycarp is Roosevelt’s saving grace. The experiences of other countries during the 1930’s, and the alternatives seriously proposed in this country, make one’s skin crawl. Even if Roosevelt did nothing–even if his policies were objectively harmful–the mere fact that people liked him and believed in him foreclosed worse alternatives, and ensured that capitalism would survive in the world’s largest economy. We can all be grateful, I suppose, for at least that much.

But I do believe we would benefit from a more clear-eyed assessment of his policies, and my assessment would in many cases be negative.

9

Whether or not the New Deal got the US out of the depression or not isn’t important. It probably didn’t. However, what FDR did do was convert what looked more and more like the makings of a rather violent revolution into a non-violent one. And it was a revolution. Unemployment insurance, Social Security, labor unions, crop insurance, farm loans on crops, secured bank deposits and on and on.

Some might think that a “violent revolution” is a little extreme. In my part of the country farmers were out on the roads stopping the trucks of those who were shipping their crops or livestock to market and dumping the produce or releasing the animals. The purpose was to withhold produce to try to get prices up. In some market towns, like Sioux City, IA., the National Gurard had to be used to protect those trying to sell their crops.

Sheriff’s deputies had to protect auctioneers and bidders at forclusure sales. There were groups, including my father’s twin brother, who patrolled roads around my home town to prevent the shipment of commodities.

FDR’s programs might not have worked but they gave people the hope that something was being tried in order to break the cycle of falling prices and rising unemployment. One quarter of all who were employable was unemployed nationwide. In the cities the rate was higher, and there was no such thing as unemployment. The only recourse was to go “on the country” which meant “to the poor farm” in my neck of the woods and the counties had no resources to take care of the numbers who needed help.

To now argue that such programs didn’t work is purely an academic exercise which is valuable in case the situation arises again. But it can’t arise again in that form can it? All the economic parameters have changed since the New Deal so arguing about whether it worked or not is the ultimate in futility. A future Great Depression will result for other factors than the 1930’s and will require different actions because the political and economic environment is not anywhere near the same.

10

Is this not a subject that only a person reasonably qualified in, or at least knowledgeable about, economics can comment on?

Apart from the OP the only authority mentioned in passing is the polemicist Upton Sinclair, of all people. As much an economic illiterate as anyone, even for his time, but hardly a reliable authority on how to run an economy (Not that the President of any country is any better qualified).

11

Firstly, Sinclair was never quoted as an authority, only cited as an example of the more radical politics that Roosevelt eschewed.

Secondly, you may or may not have missed my reference to Ellis Hawley’s book The New Deal and the Problem of Monopoly, which looks in 500-page depth at some of the key economic and policy problems facing the New Deal architects.

Thirdly, my more general points, and i’ll bet some of the points made by others as well, are based on reasonably broad (all though by no means exhaustive) reading on the topic at hand, mostly of works written by economists or economic historians.

If you want a place where only experts with are allowed to comment, may i suggest the annual meeting of the American Economic Association? Although i can’t remember the last time they met in the Sutherland Shire. :slight_smile:

12

FDR’s “New Deal” prolonged and made the depression worse. In addition, the beaurocracies that the New Deal spawned are continuing their evil effects upon us…for example the farm price supports that FDR set up. In 1936, the preponderant farms were family run, and it made sense for the Fedral Government to support them. However, today, the majority of farms are giant corporate-owned affairs…and yet the Fedral Government transfers huge amounts of cash to these enterprises! For example, the King of Belgium is the recipient of tens of millions in subsidies.
The huge increase in the power of the fedral government was also one of FDR’s legacies…you have an army of hacks in Washington, overseeing and interfereing in all aspects of our lives.
In foreign policy, FDR was constantly seeking to inject the United States into world affairs. He was so determined to intervene in WWII, that he sent us Navy ships to assiste the British, without any formal declaration of war!
In the main, FDR was a determined interventionist. He stopped at nothing (and ignored the US congress) in order to enter WWII.

13

Being qualified and reasonably knowledgable in economics, I’ll simply say that the opinions expressed thus far pretty much nail it flat.

The “New Deal” was not a cohesive set of interrelated programs; it was a lot of very different programs that were being tried to fix the economy. Objectively, I cannot honestly say that many of them were terribly successful. Some did have their virtues, like the WPA or the TVA project, and there ARE good things about Social Security. We could spend a 150-post thread talking about any one of the programs and not reach a solid conclusion about its success, but having lookd at the issue, I think I’ll just say that some programs had their successes, some were total failures, and overall the effect was not much, financially speaking.

The truth is that much of it was a case of constructing barn doors after all the horses had gotten out; the reforms that would have worked best were the reforms that would have PREVENTED the Depression, and those had to take place before Roosevelt was President. Actually, even that was too late. The time to stop the Depression was in August 1914; World War I put into motion a series of events that pretty much sank the world economy. World War I was probably the worst thing to ever happen to the human race; I would say, without exaggerration IMHO, that it set our species back 50-100 years, easy.

By the time Roosevelt was elected the U.S. had been effectively hit by a freight train of history that it probably could not have entirely avoided. Financial and economic reforms pre-1929 could have softened the blow to be sure, but bad times were coming no matter what, and by Roosevelt’s presidency all he could do was shuffle the deck chairs.

And to that I must enthusiastically endorse Polycarp and jklann’s point. Roosevelt’s strength wasn’t any particular policy, it was his strategic leadership. It is hard to believe this now, but the Depression could have destroyed the United States of America, just the way it destroyed Germany. The rebellion was simmering. People were desperate and could quite easily have been led astray. Instead, Roosevelt led the USA precisely the way it should have been led; with a reasonable degree of care while saying “We are trying to fix this, we’re doing SOMETHING, please work with us.”

We had an argument about Nelson Mandela a few months ago in which the same case-against was made; the guy’s policies were all bullshit so why do people like him? The counterargument, which I wholly endorse, was… it’s not what he did, it’s what he AVOIDED. Mandela actively prevented South Africa from turning into a horrid bloodbath of vengeance. Roosevelt, IMHO, helped prevent chaos and violence and maybe open rebellion. Granted, it was never AS likely as South Africa going belly up, but it was there. You can make this same point about a lot of leaders - Winston Churchill, for instance. Churchill’s specific strategic military ideas were mostly idiotic; his grace was that his leadership and dedication kept the UK fighting and resisting. That’s Roosevelt; he kept the USA fighting the Depression, rather than devolving into something a lot worse.

14

Ralph, I was under the impression that this thread was largely about whether that opinion was valid or not. It’s nice to have the benefit of your thought, but would you care to defend your perspective, rather than simply pontificating it?

An old saying: “There is nothing more permanent than a ‘temporary governmental expedient.’” You have a valid point here – though the “evil effects” are largely merely in what they cost us, and in their nefarious efforts to prevent the economically powerful from forcing their wishes on the rest of us, a proven result of laissez faire governmental policies.

First half is partially true – bureaucracy has grown immensely since April 12, 1945, but FDR’s agencies were the start of that exponential growth. However, the second half I question. The last occasion I recall the U.S. government having any significant “interference” in my life was when we transported Chris’s mother to her SSI disability appeal hearing, a year and a few months ago.

Grist for a quite separate debate. However, the views of FDR an virtually every historian I’ve ever read suggest that he (and most political leaders, of both parties) were convinced that Hitler posed a major long-range threat to the U.S., if permitted to conquer Europe, North Africa, and the Middle East, and accrue to himself the British and French Empires. (Which would put the Wehrmacht, Luftwaffe, and SS in Labrador, Belize, Trinidad, and the BVI, among other places.) Support for Britain (and France before the Armistice) short of war was a step he felt required to take as Commander-in-Chief. He did make it a point to bring Congress along with him, seeking their approval for things like Lend-Lease (and IIRC ratifying the destroyer deal). And of course it was Congress who declared war on Japan on 12/8/41 – following which Hitler declared war on us.

It’s debatable whether this was the wisest course of action to take, though I’d argue strongly that it indeed was. But again I’d like to see evidence supporting a contrary view, not merely complaints against what was done.

BTW, the parallels and differences between FDR’s stance in 1940-41 and GWB’s interventionist policies today are definitely worth examining in a separate thread, if it’s possible to do so without it degenerating into partisan bickering.

15

The OP links to the Cato Institute and the Independent Institute without noting that they have a specific ideological basis for their existence - minimal government and laissez-faire capitalism. Analyses" that they issue have that as their predetermined conclusion, as shown in this topic.

But the topic is chosen carefully - to discredit the New Deal’s failure to end the Depression, not the Depression’s origins or the efficacy of other approaches. Minimal government and laissez-faire capitalism are, according to conventional wisdom, what caused the Depression and had totally failed even to ameliorate it significantly after three years. New Deal activism may not have been perfect, of course, and certainly had its own aftereffects, but clearly was the best approach.

Conventional wisdom also is that the Depression was ended by World War II. But I don’t think anybody would recommend that as the best course of action in future cases, either.

16

Has anyone raised a counter-argument to this? I ask because it seems like a clear-cut case of extreme government intervention and spending ending economic woes, rather than being the cause of them.

Was it that the war-time economy was a short-term measure that was dissolved before the downsides reared their heads? Was there some other aspect of the war involved? (Dealing with surplus in the labour-market by sending men off to die abroad is not a particularly lovely thought).
Or do supporters of laissez-faire capitalism feel that the Depression wasn’t ended by the war - but rather by the ending of a natural economic cycle, one that would have played out regardless of whether there was a war?

17

You are blaming FDR for corporate farm subsidies that numerous Congresses and Presidents have had ample opportunity to remove?

And as far as I can tell, GW has increased the power of the Federal Government far more than FDR did. Of course a unique national emergency can be claimed as grounds for that. Well, what was the 1930’s depression?

18

I must say that i too find it odd that FDR still gets blamed for making government “big.” Even if he did start some of these trends, there have been plenty of chances to get rid of them and/or roll them back.

Surely, if these farm subsidies were OK when they went primarily to small, family-owned farms (as ralph suggests), then we should blame subsequent presidents and congresses for allowing them to go to huge corporate farms, rather than saying it’s all FDR’s fault.

The problem with federal government power and spending, it seems to me, is most people love it when it benefits them, and bitch about it when it doesn’t. The true libertarians, whether you agree with them or not, are about the only ones that are really consistent on the issue.

19

I think these arguments are of very limited validity. Any time the government introduces a major new program it changes the economic landscape in it’s field. After that it can be very hard to unravel. (As an example, suppose there was no Social Security program, there would be nobody relying on SS, and one might debate whether to introduce such a program or not. Once it has been entrenched, it is impossible to end it and cut off all the old people who rely on it).

Further, the existence of such programs is a primary concern to special interest groups that benefit from them - they will fight a lot harder and more successfully to preserve the status quo than they could to introduce a new program.

(Also, in terms of public support, once a program has been around long enough, it becomes “the Devil you know” while the alternative becomes the Great Unknown - fertile ground for scaremongering).

It is for these reasons that we have seen a steady expansion of government, through Democratic and Republican administrations alike.

20

…that my criticism of the “New Deal” is misunderstood…the main thrust of my arguement is that since 1933 or so, the government has tended to think that all solutions involve Washington. Roosevelt assembled a team of earnest, leftward leaning intellectuals (the so-called “brains trust”). These men earnestly belived that they could put an end to the depression…yet, by sucking so much of the national income away (in taxes), they actually succeeded in delaying the recovery. In fact, there was a second depression, beginning in 1936, which reveresed all of the previous gains. The agricultural subsidies are the most bizarre legacy of the New Deal-now, the subsidies make local milk production (here in NE) so expensive, that it is cheaper to import milk from Wisconsin. The solution? Raise subsidies again-this increases production, and lowers the wholesale (market price of milk). It is this kind of idiotic thinking that has lead to the creation of such monstrosities. It is the kind of idea that a marxist college professor would come up with. Had the US rejected the New Deal. the depression would have lasted 1-2 years, and the recovery would have provided jobs for everybody.
On another point-Ireally liked that cool “NRA” blue eagle logo-when was the NRA declared unconstitutional? Anybodyown the copyright on the blue eagle?