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Disabling America

A prosecution brief against the New Deal, a.k.a. FDR's Folly.

By 5.4.04

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In Review: FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression, by Jim Powell (Crown Forum, 352 pages, $27.50)

FDR's Folly is, as the title suggests, a prosecution brief against the New Deal. Don't pick it up expecting author Jim Powell to suspend moral judgment at every possible turn, as an academic historian would: He is out to indict. But it counts for a great deal that he is successful. And it counts for even more that he is pressing a case that has rarely been presented to the general public by hagiographic historians, professional and amateur.

If Mount Rushmore did not exist, and plans were devised to build it today, it can hardly be doubted that the face of Franklin Delano Roosevelt would find its way up there in place of his cousin. Time has not withered the legend of the Greatest Generation's commander-in-chief. Because he led the American people in war, and fell with exquisite theatrical timing as it was reaching its conclusion, he has been perennially deified by politicians of both parties; Ronald Reagan never stopped reminding people that he voted for FDR four times. Most recently Lord Black has produced a doorstop which tries to co-opt Roosevelt posthumously as a conservative hero.

But as Powell's book shows, FDR was a funny sort of conservative. He hired advisors and cabinet secretaries who were convinced that the free market was doomed, that central planning was the wave of the future, and that state monopolies were superior -- economically and morally -- to large private companies. Many were impressed by Italian fascism.

FDR expropriated all the privately held gold in the United States by executive order. He plowed inconceivable sums into Soviet-style public-works megaprojects; tripled federal taxes; gave unionized craft workers new privileges (often simply by looking the other way at their racketeering and violence) at the expense of poorer non-unionized workers and the indigent; supported farmers by paying them to destroy crops amidst unprecedented material want; created the first American payroll taxes amidst unprecedented unemployment; imposed a national code of industrial production and schedule of industrial wages; and stacked the Supreme Court with judges who make contemporary liberals look like Newt Gingrich. If this was a conservative President, the word must have changed meaning since I was a wee lad.

FDR's Folly is a detailed record of all these actions; in a sense, I've just replayed it for you at fast-forward. But it cannot be said that contemporary conservative worshippers of FDR are unaware of the record. They excuse it, in the main, by waving their arms and saying, "Yes -- but there was a Great Depression on, don't you see?" FDR and his cabinet were faced with a profound crisis in capitalism, and they are said sometimes to have "saved" it by turning it into something resembling its exact opposite. Roosevelt's genius is supposed to have been that he did not react to economic conditions ideologically; he tried diverse, novel solutions, rescuing America from Depression by force of charisma.

WHICH IS REALLY WHERE Powell comes in. Unlike your run-of-the-mill historian he is aware of the large literature on the actual economic consequences of the New Deal. FDR's Folly simply puts it between one convenient set of covers, in clear language accessible to the layman. For 30 years at least, professional economists have recognized that the New Deal was harmful medicine for a struggling economy. Faced with a similar crisis, there cannot be more than one in a hundred who would now recommend FDR's specific curatives.

His programs are sometimes praised on vaguely Keynesian grounds by non-economists influenced by that school; they may like to examine Powell's contemporary quotations from Lord Keynes himself. (He criticized the president strongly for pursuing "reform" at the expense of the more urgent "recovery".) The overwhelming consensus of economists is that Roosevelt prolonged the Depression in the United States; and while the minds of Roosevelt's time were equally certain that free markets were dead, other countries still managed to do better at pulling out of the crisis.

There were a few around in the 1930s who had the forensic talents to realize that the New Deal was hokum: one thinks of H.L. Mencken, or the rabid anti-Rooseveltian journalist John T. Flynn. The enduring mystery of the interwar period is there weren't more such critics -- that skepticism of market capitalism should run roughshod over logic to such a great degree.

To take one example, the Social Security Act was passed in 1935, with the idea of creating jobs for young people by moving the elderly out of the workforce, but was not to begin paying benefits to retirees until 1942. Now, one might think that Keynesian practices make a certain sort of basic sense; that it is a good idea for government to borrow against future peaks in the business cycle to rehabilitate the economy during bad periods. But the passage of Social Security introduced a steep new tax on workers during America's time of greatest penury and set the revenue aside while the fund got rolling. This was borrowing against the present -- devised during one of the bleakest years in the annals of the United States -- to pay for the future! Keynesianism through the looking-glass! And yet if anyone bothered to point out the obvious, it certainly had little effect on the American voter -- even the American voter who suddenly found his paycheck smaller.

POWELL'S BOOK IS FULL OF puzzles like this. Did anyone think to speak for the urban hungry when American farmers were plowing food crops under? Did it occur to anyone that price supports for agriculture would help only the fortunate farmers whose crops had survived, and make eating more expensive for the truly imperiled? Did anyone notice that the executive branch's espousal of mandatory collective bargaining was a horrifying blow to American blacks and other minorities, who were excluded by "gentlemen's agreement" from the ranks of the major unions? Had the truths of human nature been forgotten so far that nobody thought raising wages for government contractors would discourage hiring by those companies?

The material in this book even calls into question FDR's basic goodwill toward the American people. Powell documents incontestably that political cronyism was rampant in New Deal relief programs and that the spending of the Civilian Conservation Corps, a New Deal showpiece, went mostly to northern and western states which were the best-immunized from the Depression's effects in the first place -- but which, by pure coincidence, were disproportionately low-hanging fruit for a Democratic ticket trying to win the Electoral College. If one grants that FDR possessed the personal integrity usually attributed to him, it's still hard to see how his worshippers can fail to squirm at bizarre jeremiads against "economic royalists" and "privileged princes" delivered by a wealthy blue-blood who had married his own cousin in the best tradition of the old European houses.

Still, let's not forget -- Powell certainly doesn't -- that the Hoover administration cut a wide path toward American penury with its own lamentable innovations, and that Roosevelt had to outbid more nefarious demagogues like Huey Long, whose assassination was a narrow escape from some nameless, dreadful something-ism for the United States. There may still be room to thank FDR's shade for not having pressed the New Deal further. It wasn't just FDR's folly: in truth, it was America's. And America still hasn't shaken off all of the superstitions that made it possible.

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About the Author

Colby Cosh is a columnist for the National Post of Canada.