FDR’s Folly

How Roosevelt and His New Deal Prolonged the Great Depression

By Jim Powell

Crown Forum 2003 Paperback Buy here

Book Review
Reviewed by John Moser

“History is past politics, and politics is present history,” E.A. Freeman famously declared in 1886. There are many who would dispute this sentiment today, but it certainly applies to the way historians have traditionally approached Franklin Roosevelt and the New Deal. For over sixty years, it has been seemingly impossible to deal with the subject in the way that, say, one grapples with the most pressing political issues of the Gilded Age and the Progressive Era. After all, one finds today very few partisans of Free Silver, or of the spoils system, or of the natural right of businessmen to sell tainted meat. But the New Deal is different, since it in large part created the political culture in which we continue to live today. Not only did it dramatically alter the definition of liberalism, associating it with increased government control over the economy and a generous welfare state, but to the extent that Roosevelt’s agenda generated fierce opposition, it can also be said to have created modern conservatism.

All of this creates a difficult situation for historians, as their political biases have an understandable tendency to creep into their work. The result is that traditionally there have been two different types of work on the New Deal—adulatory and condemnatory. And since, in general, most historians come from the liberal end of the political spectrum, the former have long outnumbered the latter, and usually by a huge margin. The 1950s and 1960s—significantly, the high-water mark of American liberalism—saw the publication of a whole series of works on FDR that remain standard works to this day, most notably William E. Leuchtenburg’s Franklin D. Roosevelt and the New Deal, James MacGregor Burns’s Roosevelt: The Lion and the Fox, and Arthur M. Schlesinger, Jr.’s multivolume The Age of Roosevelt. By contrast, most of the works to appear in those years that were critical of the New Deal came from the Marxist left, savaging the thirty-second president for not using the economic crisis of the Great Depression as an opportunity to scrap capitalism altogether. Those few books denouncing Roosevelt for tampering with the free market—John T. Flynn’s The Roosevelt Myth foremost among them—tended to come from small publishing houses with names like Caxton Press and Devin-Adair. While such works were eagerly devoured in conservative and libertarian circles, they were largely ignored by the mainstream press, and made no impact whatsoever in the academy.

In recent years however, there has been a noticeable trend toward works critical of Roosevelt. It began in 1990 with Gary Dean Best’s Pride, Prejudice, and Politics: Roosevelt versus Recovery, 1933-1938, but has really exploded since the 2001 publication of The New Dealers’ War: FDR and the War within World War II. Since then, we have been treated to three more: Rethinking the Great Depression by economic historian Gene Smiley, and the two works considered here, Jim Powell’s FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression and Alonzo L. Hamby’s For the Survival of Democracy: Franklin Roosevelt and the World Crisis of the 1930s. Both works suggest a growing sense that the New Deal has enjoyed altogether too much good press, and that the time has come for a harder look at the policies that have so significantly shaped American politics, culture, and society.

Jim Powell’s title ought to serve as ample warning that Roosevelt fans will not like his book. It is arranged in such a way as to address a series of questions—for example, “Why Did FDR Triple Taxes During the Great Depression?” and “Why Did New Dealers Make Everything Cost More in the Depression?” From beginning to end, he makes it clear the traditional historical accounts of the New Deal have given the thirty-second president far too much credit, and seeks to prove it by drawing on the work of prominent economists, who in the past thirty years or so have been considerably less enthusiastic than historians about the New Deal’s accomplishments. In the end, there is not a single accomplishment by the administration—the Securities and Exchange Acts, the National Recovery Administration, the Agricultural Adjustment Act, Social Security, the Tennesee Valley Authority, etc.—not subjected to a withering assault. Powell’s conclusion is inescapable: had Roosevelt (and Hoover before him) left things alone, the economy would have readjusted itself, and the Depression would have come to an end naturally. However, inspired by the example of Soviet communism, the New Dealers insisted on trying to tinker with the fragile mechanism of the American economy, and the result was a crisis both long and severe.

There is a considerable amount of truth in this analysis. To be sure, the various programs which constituted the New Deal had at least as many disastrous (or at least dangerous) effects as they did salutary ones. Some of these were immediately apparent, such as the trend toward cartelization of the economy which began under the National Recovery Administration, but was mercifully halted when the Supreme Court declared the NRA unconstitutional. Others, however, took years to emerge. For example, Social Security was almost universally hailed in the 1930s and 1940s, when those paying into the system far outnumbered those drawing benefits. Today, however, it threatens the country with what is perhaps the most dangerous fiscal crisis in its history. In this sense, any account seeking to debunk liberal myths surrounding the New Deal ought to be welcomed.

On the other hand, there are a number of points that render FDR’s Folly problematic. For one, it can only really be considered a work of history in the broadest sense; i.e., it deals with past events. Its real purpose is not to give readers a more complete understanding of the past, but rather to encourage them to support a laissez-faire approach to today’s economic problems (this is, indeed, the subject of the book’s final chapter, entitled “What Can We Learn from FDR’s Mistakes?”). While this might be a laudable goal in its own right, it sacrifices to this end any genuine effort to help the reader to understand why Roosevelt and his advisors implemented certain policies. The closest Powell ever comes to doing so is in a few lines suggesting that American progressives, whom he believes to have been the progenitors of the New Deal, were deeply impressed by economic accomplishments of the Soviet Union. Leaving aside the issue of whether the progressives were really the intellectual founders of the New Deal (actually, as Otis Graham demonstrated nearly forty years ago in An Encore for Reform, more of the old progressives opposed Roosevelt’s policies than supported them), this suggestion is amplified into the assertion, which appears on the inside book jacket, that “Communist Russia influenced New Deal programs.” While this was a favorite claim of militant FDR-haters such as William Randolph Hearst (who was, interestingly enough, a progressive), it has no basis in reality. If anything, Mussolini’s brand of corporative fascism was far more influential among Roosevelt’s advisors (as another anti-FDR progressive, John T. Flynn, well understood).

More troubling, is the author’s apparent refusal to include anything that might possibly reflect favorably on the thirty-second president. The reader, whose only knowledge of the New Deal came from FDR’s Folly, would likely emerge from it scratching his head, wondering how in the world this man managed to be elected to four consecutive terms, each time by a convincing margin. In fact, every one of the New Deal’s programs had both positive and negative effects, and in the eyes of most Americans the former generally outweighed the latter. To be sure, the Agricultural Adjustment Act was a disaster for black sharecroppers in the South (and incidentally, Powell is far from the first person to demonstrate this; T.H. Watkins deals with the subject far more eloquently in his generally pro-New Deal The Hungry Years). But is it not worth at least mentioning that it saved hundreds of thousands of family farms from extinction? There is no doubt FDR’s public works projects were often boondoggles, with money funneled to states with more of an eye toward political benefit than actual hardship. But are we to suppose this mattered one bit to the millions of Americans who were able to sustain themselves and their families thanks to these programs? Certainly, unemployment remained high throughout the 1930s, but does not simple fairness dictate the author admit that GDP grew annually at a more than respectable average of eight percent during this same period? An author might include such facts while still reaching negative conclusions about the New Deal, just as pro-Roosevelt historians have not shied away from offering the occasional criticism of the president’s programs. To ignore them altogether suggests the author is selecting only the facts that back up his thesis.

The most important contribution of FDR’s Folly is that it brings the work of modern economics to bear on its subject. Obviously economists have much to offer historians, and it does no credit to the standard literature on the New Deal that their insights have been ignored. However, Powell’s work suggests there is also danger in moving too much in the opposite direction, subjecting Roosevelt’s policies to critical economic analysis without taking seriously the political context in which he and his advisors were acting. The book frequently scores the president for placing partisan politics before the need for recovery, but never pauses to consider Roosevelt, like Hoover before him, found himself in a political environment that, if it did not necessarily dictate the New Deal’s programs, at least closed off some options and opened up others. To expect FDR to act more like Calvin Coolidge in the midst of a depression makes no more sense than it would to ask Abraham Lincoln during the Civil War to behave like James Buchanan (the president, not the economist).

It is precisely in this regard that Alonzo Hamby’s For the Survival of Democracy shows how New Deal revisionism should be written. Hamby begins from a simple premise: the Great Depression was a crisis of international scope, therefore the best way to assess Roosevelt’s policies is in comparison to those of the two other great industrial powers of the day—England and Germany. Each nation reacted to the Depression in its own unique way, and met with different results. In Britain, Stanley Baldwin’s Conservative-dominated National Government kept spending under control and maintained free trade within the so-called “Sterling Bloc” made up of the lands of the British Empire. In Germany, Hitler followed what came closest to a Keynesian policy through massive spending while avoiding many of the negative consequences of this course (inflation, a worsening balance of trade, etc.) through brute force (for instance, sending those who raised prices or demanded higher wages to concentration camps). The New Deal, in contrast to these, was “a humanitarian success, a political triumph, and an economic failure.”

A superficial reading of For the Survival of Democracy would suggest the author is holding up the British example as a universal model for recovery. After all, by the mid-1930s, unemployment in England was considerably lower than in the United States, and living standards there were far higher than in Germany, which only managed to weather the Depression by establishing nearly complete state control over the economy. But Hamby’s point is actually subtler. In short, his argument is that traditions, political culture, and national character matter. What seemed to work fairly well in Great Britain, with an already-established welfare state, an overseas empire, and a tendency toward moderation (which valued solid and serious types like Baldwin and Neville Chamberlain over flashy personalities like Franklin Roosevelt), could not be expected to succeed in Germany, with its tradition of obedience to authority, or the United States, with its rollicking democratic style and its powerful and demanding interest groups.

But while this approach is useful in helping the reader to understand why Roosevelt implemented some of the policies he did, it does not let him and his advisors off the hook. Hamby justly criticizes the president for his efforts to manipulate commodity prices by arbitrarily adjusting the price of gold, for his failure to take meaningful steps toward the restoration of international trade, and for his attempts to use bankers and businessmen as scapegoats for the Depression. Yet because he is always clear as to why Roosevelt did these things, the book never comes across as one-sided or unfair.

For the Survival of Democracy is not without its drawbacks. It should not be taken for a genuine comparative history, as roughly two-thirds of the book deals with the American response to the Depression. There is, therefore, a certain superficiality to the coverage of Great Britain and Germany, one that is heightened by the author’s exclusive use of published sources—and only English-language sources at that. It is also occasionally marred by minor misstatements, such as the assertion Hitler was a “bastard” (true in the figurative sense, of course, but not in the literal—although his father was). Those whose primary interests lie in British or German history in the 1930s would be better advised to look elsewhere, since these subjects are only presented here as points of contrast to the policies of the Roosevelt administration.

Nevertheless, in his treatment of the New Deal the author has provided readers with a scrupulously fair account that is also entertaining to read. By comparison, Jim Powell’s narrative suffers from the use of economic jargon which will strike many readers as tedious, along with excessively long quotations from secondary sources. Moreover, Hamby’s reputation as one of the foremost historians of American liberalism suggests a deeper and more important phenomenon is at work. For the first time, perhaps, it has become possible to examine the New Deal on its own merits (or lack thereof), rather than as a source of ammunition for contemporary political battles. At long last, we may have evolved beyond the portrayal of America in the 1930s as a simple morality play, with FDR cast as Jesus Christ and his conservative critics as Satan. All this is to be welcomed, for while it is true that there is much history can teach us about our own society, it will only yield its secrets to those who are patient enough to consider all sides of the story.