October 9, 2003


Great myths about the great depression (Thomas Sowell, October 9, 2003, Townhall)

It is painfully obvious that President Roosevelt himself had no serious understanding of economics, any more than his Republican predecessor, Herbert Hoover, had. The difference was that Roosevelt had boundless self-confidence and essentially pushed some of the misconceptions of President Hoover to their logical extreme.

The grand myth for decades was that Hoover was unwilling to use the powers of government to come to the aid of the people during the Great Depression but that Roosevelt was more caring and did. In reality, both presidents represented a major break with the past by casting the federal government in the role of rescuer of the economy in its distress.

Scholarly studies of the history of these two administrations have in recent years come to see FDR's New Deal as Herbert Hoover's policies writ large and in bolder strokes.

Those who judge by intentions may say that this was a good thing. But those who judge by results point out that none of the previous depressions -- during which the federal government essentially did nothing -- lasted anywhere near as long as the depression in which the federal government decided that it had to "do something."

In FDR's Folly, author Jim Powell spells out just what the Roosevelt administration did and what consequences followed.

For those of us of a certain age, it's quite heartening to see the degree to which such analyses are becoming rather standard issue, as in David Kennedy's Freedom from Fear : The United States, 1929-1945 from the Oxford History of the United States series. Likewise, in Army at Dawn Rick Atkinson is rightly critical of FDR's demand for Germany's unconditional surrender. When he announced the murderous and war-prolonging policy, FDR compared himself to Ulysses "Unconditional Surrender" Grant, apparently oblivious to the fact that Grant applied those unprecedented conditions only at Fort Donelson and that the Confederate surrender at Appomatox was handled with great generosity. Imagine the reaction if George W. Bush made such a profound mistake concerning the central policy of the war today?

As regards the question of whether voters intentionally choose the less intelligent candidate in American presidential elections, in FDR we got the worst of both worlds: a "second rate intellect" who thought he could use government to perfect the world anyway.

Posted by Orrin Judd at October 9, 2003 9:47 AM

"The laughing boy from Hyde Park" would surely have perfected our system if not for the Republicans? FDR's personality was unique in that he was a bit of a con as well as a mark. The economic statistics of 1931 along side those of 1940 should put to rest the idea that his administration accomplished anything worthwhile, regardles of the feelings of those still attached to his cult of personality. The more I read the modern interepretation of that period the more outlandish and dangerous his presidency looks.

Posted by: Tom C., Stamford,Ct. at October 9, 2003 10:54 AM


Wanna be terrified? Read New Dealers' War, especially when FDR goes to Tehran:


Posted by: oj at October 9, 2003 11:01 AM

I have an autographed first edition. I met Mr. Fleming at a Union League Club book signing. Well worth another read.

Posted by: Tom C., Stamford,Ct. at October 9, 2003 11:17 AM

I've always been wary of the analysis that unconditional surrender was a bad policy. Perhaps this was because whenever it was discussed in a class, it always came a week after people said one reason WWII started was that Hitler used the "stab in the back" legend to convince Germans they hadn't lost WWI. It seemed to me that unconditional surrender would have prevented that from every happening again. No excuses that "our Fuhrer would have won the war with his wonder weapons if that traitor Stauffenberg hadn't murdered him!"

And what if it wasn't the generals who would have gotten rid of Hitler to negotiate a peace. There was a Goebbels-Speer-Goering axis aligned against Himmler and the SS. What if they thought they could deal with the Allies by getting rid of the "extremists." They were, after all, the "moderate Nazis." Would we really have dealt with them? If not, then how is it different from the actual unconditional surrender?

Posted by: Chris Durnell at October 9, 2003 12:00 PM

I think we need to put ourselves in others' shoes, which is an exercise generally used to validate some crime or other.
People were mad in the early Forties. Incandescently angry.
None of the decision-makers at the time had been younger than young adults during WW I. The horrors of WW I were fresh to them.
Just when they were beginning to get over it, here came the same villains doing the same thing, only worse. And the Japanese tried the same on the other side of the world.
It couldn't go on.
The most horrid punishment must be visited on the misreants. So they'll never, ever do it again. The very thought will act like a giant glass of Mexican tapwater, only faster.
It is reported that Ike, that paragon of calm, wanted to round up and execute 50,000 German men and shoot them, on general principles. Just to show the Germans not to EVER think of attacking their neighbors.
Remember the Morgenthau Plan? We didn't do it, but people were so angry that a number of them entertained the thought.
Had it not been for the threat of Russia, I wonder if we'd have actually Morgenthau'd Germany.
Unconditional Surrender was a necessity. History showed the unspeakable price of letting Germany and Japan up easy.

Posted by: Richard Aubrey at October 9, 2003 1:06 PM

It's true that FDR had little understanding of economics. He ran for president on a platform of government economy.

He was not stupid, however, and could recognize a train wreck when he saw one.

And he was smart enough to take advice.

To say that he took an extremer version of Hoover's approach is psychotic. Hoover wanted to react to an economy starving for consumption by increasing production -- pouring water on a drowning man.

FDR accepted the advice of Tugwell -- not new advice, the Columbia economists had been preaching it through the '20s -- that consumption had to be enhanced. This turned out to be exactly right, and when it finally was, in 1946, it set off the greatest boom in history.

However, the method chosen to enhance consumption by improving producer prices and reducing oversupply was strangled by the Supreme Court. To say that the New Deal failed is false.

It was not allowed to be tried.

During the short period it was tried, conditions did improve -- at a greater rate than the econommic statistics Orrin quoted this morning as indicating recovery.

The Great Depression was a caused disaster, nothing that resulted from ineluctable economic structures. Furthermore, even after it was begun, it could have been prevented, had the Republicans and conservative Democrats not been opposed to circuit-breaker safeguards.

Roosevelt and the New Dealers did get those in position, and they have worked well ever since, except for when Reagan fell asleep at the switch.

Posted by: Harry Eagar at October 9, 2003 4:00 PM


Sure, why not? Any group of German poltical leaders/generals that would have deposed Hitler, purged the SS, withdrawn from the West and helped us attack to the East would have been worth cultivating and that would have saved fifty years of Cold War misery.

Posted by: oj at October 9, 2003 4:09 PM

Harry seems to think FDR was like a time-release cold capsule. He can't be blamed for either the state of the economy or the military in 1942, despite having been president with his party in control of Congress for a decade at that point, but then he deserves credit for winning and unlosable war and for the economy finally recovering once we started producing munitions.

Posted by: oj at October 9, 2003 4:15 PM

Even school kids understand the Depression:


Posted by: oj at October 9, 2003 4:53 PM


I thought the pre-war collapse and subsequent revival of international trade after WW2 had a big impact on the Depression?

How important was Smoot-Hawley anyway?

Posted by: M Ali Choudhury at October 9, 2003 6:13 PM

Only a committed statist or a journalist could possibly spin the New Deal like Harry just did. Paul Krugman certainly would agree.

If you were to read Mr. Sowell's take on the policy proscriptions of the New Deal or just compare the downturn with others it should be obvious that FDR and his brain trusts cure was worse than the disease. The intensity of the depression was most certainly caused by bad policy as was it's duration. If underconsumption was the problem why would it make sense to take agricultural resources out of production? Why would it make sense to increase the cost of employment, or to raise taxes? Most Hoover policies were simply expanded by FDR in an almost direct contradiction to his campaign platform.

The worship of FDR by the ill-informed is almost childish but is certainly naive. To put it the context of the vogue for economic planning of the time among the world's intellectual class the hubris and simple stupidity of the New Deal is even more profound.

Posted by: Tom C., Stamford,Ct. at October 9, 2003 7:06 PM

Hoover'e big mistake was the focus on maintaining higher wages in such an economy. If wages had been allowed to reflect the falling prices of the deflationary environment the system would have cleared all of the excesses and probably have recovered normally. The misunderstanding of the basic pricing mechanism is always the problem with politicians and intellectuals. Think of all of the current examples....

Posted by: Tom C., Stamford,Ct. at October 9, 2003 7:19 PM

A few comments on unconditional surrender.

FDR announced the policy without consulting Churchill, and to think Bush is accused of unilateralism!

Probably more German generals would have joined the July 20th plot had there been some possibility of negotiations once Hitler was deposed. The problem, and one of the reasons FDR insisted on unconditional surrender (U\S), was that Hitler's successors only wanted to negotiate with the US and Britain. Most of the generals wanted to continue the war with Russia. Of course Stalin feared this very scenario, but by insisting on U\S, FDR effectively eliminated the possiblity of the Germans embarking on separate negotiations.

Technically, we didn't follow the policy with Japan as we allowed them to keep Hirohito, who some historians now regard as guilty as Tojo. This thesis, advanced by Bergamini over 30 years ago and more recently by Bix, remains a minority view but I tend to concur with it.

Generally I'm not one to defend FDR, but I can understand his reasoning. U\S may have prolonged the war, but that's hindsight. FDR's concern in 1943 was to hold the coalition together and U\S was useful to that end.

Posted by: George at October 9, 2003 10:27 PM

But it wasn't hindsight when he did it and the British, the American military, and the German subversives all opposed it.

Posted by: oj at October 9, 2003 10:30 PM

" it's quite heartening to see the degree to which such analyses are becoming rather standard issue,"

I guess you didn't see Seabiscut

Posted by: Robert Schwartz at October 10, 2003 12:06 AM

The "German subversives" did not exist in 1943, and there were never very many even in 1944.

The Christian generals Orrin admires murdered around 5 million POWs and were indistinguishable from Nazis. They were, for the most part, Nazis, too.

Mr. Choudhury. It is not obvious what should have been done in the aftermath of World War I. Such a situation had never occurred before. But, in the USA, at the very least, the government needed to intervene to bring some order to the farm sector, as it had intervened in the Teens to expand it.

An orderly contraction of agriculture, as opposed to collapse overnight, could not possibly have been worse than the do-nothing no-policy of the doctrinaire Republican (and many Democratic) economists of the '20s.

Tom's notion that manias and crashes are desirable, while popular still, is nuts.

His idea that FDR extended Hoover's policies is too weird to comment on.

It was important that about 40% of the US population in the '20s was farm-bound. It isn't easy to have a consumer economy when 40% of the population has 0 disposable income. As (I believe) a native of Pakistan, you have more direct experience of that than I do.

The market crash of Oct 1929 was not the start of the Great Depression. Market crashes are, often, lagging indicators. The crisis had arrived earlier. Coolidge prosperity was a ghost walking.

Since FDR was not a dictator and was, unlike Reagan, constrained by the judiciary, he was unable to put his economic program into effect, which explains why it didn't work. It wasn't tried.

However, as it happened, the war created the same effect on consumption that Tugwell had advocated.
Tugwell's recovery program was gradual. Whether, over a period of years, it would have had the same effect as the tidal wave of releasing $140B in savings in 1945 is unknowable.

There may have been some extra push from the non-gradual nature of the consumer boost the US actually got.

Posted by: Harry Eagar at October 10, 2003 4:40 PM

The problem with Kennedy is that he doesn't know what he's talking about.

When he says "nobody" understood it was an unusual event, he ignores the Columbia economists, who had been predicting it all along.

Furthermore, merely increasing government spending is not the issue, except to people wedded to failed theories. It matters what the spending was for.

The RFC was intended to increase production. The problem was not lack of production but lack of consumption.

I forgot to respond to Mr. Choudhury question about Smoot-Hawley. It was more in the nature of a coup de grace. The world economic system was already collapsing before that, the US was not the first and not alone in raising tariffs.

It is not clear to me that the world economy -- the 1920s was the first time when such a concept meant much -- could have evolved without some severe dislocations. It is clear that the international system did plenty to make things worse, and that US policy was at least a local disaster.

But the problems of India and China were not caused by Coolidge.

Posted by: Harry Eagar at October 10, 2003 10:36 PM

Reagan was not constrained by the judiciary? What do tax cuts and (I presume you also mean deficits) have to do with interpretation? Interesting that your statement also implies that Reagan's program worked.

Posted by: jim hamlen at October 10, 2003 11:23 PM

Ah, Harry's been talking to his steel guy again for the secret dope on the Depression.

Posted by: oj at October 10, 2003 11:32 PM


Mindbending logic and inconsistancy. You gotta be a journalist.

Posted by: Tom C., Stamford,Ct. at October 11, 2003 2:58 PM