Like global warming, the history of the Great Depression and of the Roosevelt administration (at least from 1933 to 1939) seems to already have been decided upon. There seems to be a consensus that Roosevelt’s New Deal generally provided a boon to a failing national economy, and that it was only thanks to his massive spending programs that the United States ever got out of its economic quagmire. Roosevelt is oftentimes hailed as the greatest president (at least during the 20th century), not just for his economic planning but for leading the nation against the heinous Nazi regime and Japanese Empire. There is seemingly no disagreement on his exploits and his great social programs which put hundreds of thousands of Americans to work. Right?
Wrong. There is no consensus on what constitutes to “correct” history of the Great Depression. Authors have criticized the New Deal and Roosevelt’s administration since the fateful year that he was granted supreme power. Even after seventy years the truth still struggles to float through the surface. One historian has helped make a breakthrough. That is none other than Burton Folsom Jr., author of The Myth of the Robber Barons, in his new volume: New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America. In a very rich writing style which unsurprisingly never bores, Burton Folsom managed to provide one of the final nails in Roosevelt’s coffin, helping to provide the reader with a more accurate history of Franklin Roosevelt’s administration during the seven final years of the Great Depression.
He begins his history by covering the president’s early years as governor of the state of New York, his education and his successes (more accurately described as failures) in running his own businesses. He then traces Roosevelt’s campaign trail, which finally leads to the stock market crash of 29 October 1929 and the ensuing recession, which thanks to Hoover’s radical public spending programs spiraled into what became known as the Great Depression. Roosevelt, fortunately for him, took power in 1933, when the American economy had finally bottomed out after four years of a difficult downward spiral. In an effort to “stimulate” the market, Roosevelt would take a page out of Hoover’s book (going against his campaign promise of lowering government expenditure and balancing the budget) and set the pace for even more grandiose government programs. Amongst others, these included the National Industrial Recovery Act (NIRA; later renamed NRA) and the Agricultural Adjustment Act (AAA). Thanks to the former hundreds of small businesses were forced to close, while the larger companies cartelized under the command of the federal government. The AAA only concluded in the destruction of the American agricultural export market, and the continuation of widespread hunger within the United States.
Roosevelt introduced and increased minimum wage during his tenure, spiked taxes and generally did everything possible to produce economic uncertainty amongst the investors. With tax money collected he funneled it into states who’s politicians had promised their support to his 1935 presidential campaign (for the 1936 elections), constructing one of the most corrupt pay-off schemes in the history of the country. For the average American it meant continued poverty. For the U.S. economy it meant a continued struggle to push itself out of recession. Those who disagreed with Roosevelt were purged by what can only be termed Roosevelt’s secret “police”, the IRS. The most unfortunate part of Roosevelt’s administration was his legacy. Since his four-term rule presidents have toiled to mimic his “exploits”.
Even today, Obama threatens to fully implement a “New Deal” of his own (or the “New New Deal”). Public spending is at an all time high (and so is national public debt). An inaccurate history of Roosevelt and the true consequences of his economic policies could be particularly damaging to the United States, and its citizens, over the long-run. The nation is already threatened with bankruptcy, and Roosevelt-esque policies would only serve to hammer the final nail in the proverbial coffin. Fortunately, we have historians such as Burton Folsom to help correct these historical mistakes and paint a far truer picture of what Roosevelt stood for and what Roosevelt’s New Deal actually did to the market.
If there are weaknesses in the book only one will be considered here. The author subscribes to the monetary theory behind the Great Depression. It is not clear what he believes caused the crash of 1929, although Burton Folsom seems to agree with the likes of Milton Friedman and Anna Schwartz (A Monetary History of the United States) that the reasons for the crash and the consequent depression lied within the tariffs which had been erected by the United States and other foreign States. Like Friedman, Folsom believes that an inactive Federal Reserve failed to expand bank reserves in time to stem off the bank runs. It is unfortunate that the author did not couple his accurate opinions on the New Deal with the accurate causes of the Great Depression as described by such authors as Murray Rothbard (America’s Great Depression). As Rothbard shows, the depression was caused by the massive monetary inflation undertaken by the Federal Reserve and the U.S. Treasury during the 1920s (since at least 1924). Rothbard also shows, statistically, that the Federal Reserve did attempt to inflate the money supply severely, but could not inflate beyond the credit contraction caused by failing businesses and the demand for money (termed as uncontrolled reserves in America’s Great Depression). Folsom’s use of Friedman’s theories perhaps weaken the chapter on the beginning of the Great Depression, but the remainder of the book remains completely accurate.
For those interested in a true depiction of the New Deal and its tragic consequences, Burton Folsom Jr.’s New Deal or Raw Deal? provides a perfect account. There are few authors who can provide so much information, especially of this type, without putting his audience to sleep. This author does it while also providing an exhilarating historical textual field trip. All serious scholars should at least consider his thesis, as it holds much merit. It also goes to show that the verdict on Roosevelt is still to be decided. There is far from consensus on this matter. It seems as Roosevelt’s own secretaries disagreed with him:
We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises … I say after eight years of this Administration we have just as much unemployment as we started … And an enormous debt to boot!
These damning words come from Henry Morgenthau, the president’s Secretary of Treasury. If there is a time to take these words into consideration it is now, before our country is pushed into another Great Depression.
