New Deal Revisionism

As George Orwell once explained, whoever controls the past, controls the present. This accounts for a number conservative proclivities, which would appear to be contradictory. On the one hand, conservatives are big defenders of mythological George-Washington-and-the-cherry-tree history. Except of course, for when they aren’t. That would be whenever history — even well accepted, well documented history — conflicts with their ideology.

So it is with the New Deal. Even before it was “history,” while the New Deal was in full swing, cheap labor conservatives had no use for it. They claimed that the depression would cure itself, and anyway, it wasn’t the government’s business to concern itself with millions of unemployed. Just the other day, right on the pages of the Wall Street Journal — where else? — appeared an article entitled How To Think About The 1930′s. Here is the gyst of it.

Ms. Shlaes does not dwell on the causes of the Depression or offer an explicit policy prescription for how America might better have recovered from it. Suffice it to say that her model president is not Herbert Hoover–who made too many activist missteps–but Calvin Coolidge, an exemplar of purposeful passivity. The suggestion is that a policy of benign neglect might have achieved recovery well before World War II. She offers a catalog of activist mistakes–high tariffs (Hoover), clumsy monetary policy (Hoover and Roosevelt), counterproductive tax increases (Hoover and Roosevelt), efforts at government management of the economy (Hoover and Roosevelt) and poisonous attacks on wealth and big business (Roosevelt)–that made things worse rather than better.

One has to wonder what “poisonous attacks” she is talking about. Perhaps the National Labor Relations Act, which created the legal framework for unionization. Or maybe it is that perennial conservative boogieman known as the “minimum wage.” The author explicitly targets the Tennessee Valley Authority.

Ms. Shlaes is especially good at profiling principled conflicts–for instance, between Raymond Moley and Rexford Tugwell over whether state management of the economy should involve consensual public-private relationships or move toward government-managed collectivism. Similarly, David Lilienthal and Arthur Morgan–both administrators of the Tennessee Valley Authority–argued over whether the TVA should concentrate on government-provided electricity or build a cooperative commonwealth. (By and large, Lilienthal prevailed. The TVA became primarily a purveyor of socialized electricity and a threat to private utilities, but not the communal utopia envisioned by Morgan.)

What she doesn’t tell you is why the private utilities were “threatened.” It seems that TVA generated power — which put a lot of to work building those dams — was cheaper than the private utilities could sell it for. While we’re at it, the Federal government also engaged in widespread rural electrification for the simple reason than private utilities refused to run power lines out into the countryside. There wasn’t any profit in it — proving that Ms. Shlaes and her WSJ apologist believe that no one should derive any benefit some capitalist doesn’t profit from providing.

The author of this article also — typical of conservative “scholars” — narrowly focuses on the success of the New Deal during the 1930′s. This is a common attack. The Dow Jones had lost 90% of its value from 1929 to 1933. A quarter of industrial workers were unemployed. But FDR was supposed to restore roaring twenties prosperity by the end of his first term.

Roosevelt’s dismal performance would not prevent him from becoming the most popular sitting president in American history.

Right. That’s why, when he asked voters in 1936 “are you better off than you were four years ago,” they responded by reelecting in the largest landslide up to that time — losing just two states to the hapless Alf Landon. I guess according to Ms. Shlaes, people were just too stupid to know whether things had improved since 1933.

All of which conveniently compartmentalizes Roosevelt’s legacy to his performance in the 1930′s. In fact, his legacy extends well after his death in 1945 — including policies whose benefits are still felt today. Before outlining that legacy it is useful to take note of what happened in World War II. For all of their braying about how Coolidge’s “benign neglect” would have seen an end to the depression. it is generally recognized that World War II is what finally ended it. Interesting, because the “war economy” was almost Soviet in its degree of government control. Not one civilian automobile was produced in Detroit from 1942 to the beginning of 1946. That’s because the government basically commandeered the auto industry. In addition there was widespread rationing, a high marginal tax rate of 94% and a huge deficit to fund the war effort. That doesn’t sound very “laissez-faire” to me — and proves that if the 1930′s were disappointing it is probably because FDR didn’t do enough of the very things they complain about — the way he finally did in the war.

But the real story starts after the war, when American workers started spending the buckets of money they had earned in the union shops during the war, but couldn’t spend what with rationing and all. That’s why the Second World War was the first war in US history that did not end in a major recession. Those union jobs would boost American industrial workers into the middle class, while the GI Bill gave a similar boost to all of those returning GI’s. As for the TVA, it brought American farmers into the twentieth century, creating a market for millions of washing machines, electric ranges, refrigerators, and radios. James Lewis, who’s article I ripped apart yesterday, boasts of America that “[t]his in the wealthiest nation on earth, and the one with the greatest opportunities for people to rise out of poverty.” If that is true, we can all thank FDR. Ms. Shlaes would know that if she could bring herself to stop feeling sorry for poor stepped on Andrew Mellon.

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