Challenging assumptions

Amity Shlaes graduated from Yale, became a journalist, and is now a Forbes columnist and the author of five books, including The Forgotten Man: A New History of the Great Depression and her latest, Great Society, which spotlights the cracks in Lyndon Johnson’s War on Poverty and Richard Nixon’s attempts to expand it. Her reporting-honed ability to tell a good story, with human interest and specific detail, makes those history books a delight to read. Here are edited excerpts from our February interview, just before COVID-19 upended our society and economy.

I suspect you learned a lot about economics through writing for The Wall Street Journal, but was this an interest of yours before? My father built buildings in Chicago. He was a small entrepreneur amid big power interests. I learned the difference pretty early between rent-seekers—institutions that appear to be capitalist but are just interest groups—and true entrepreneurs. I’m very proud to say some of the buildings my father built are very beautiful. He used high-quality brick with good masonry and all the pride of the individual Midwestern entrepreneur.

Did you think of majoring in economics? I probably wouldn’t have been the best econ student, and I thought I had to be the best in the class. I should have just majored in econ or double majored in econ so I had the knowledge, even if I got the occasional B. This is a reason to go to a university that is not tip-top in its reputation. It’s intimidating to go where everyone else is way better at something—nationally ranked dancer, ice skater, concertmaster in the best orchestra at age 14.

I talked with a Harvard economist years ago who said he was deliberately not having any children because he felt each child would lose him a book. You and I each have four children, and yet we’ve written books. Did you ever do a calculation like this foolish Harvard economist? Well, I’m very lucky in the husband department. He wanted lots of children and didn’t mind the work. But the main thing is: Children enrich life, they don’t impoverish it. You’d often be richer in dollars if you’d had no children, but with kids you’re richer in social capital, in happiness. Children keep one abreast: Without my children I’d be pretty isolated as to what’s going on among people in their teens or 20s. Also, it’s very gratifying to see a child do something you hoped to do but never were able to. I have four; I wish I had five, maybe six.

That’s how I feel. Let’s turn to Great Society. You start out with a discussion of the 1960s TV show Bonanza. Why? It was an enormously popular series that challenged the cowboy assumption up until then: You ride in, you ride out. In Bonanza the question is: Once you are rich, what do you do with your wealth, what do you do for your community? That was also the question of the 1960s. We are the affluent society. What do we do with the money? Do you share it? Do you teach people how to earn money? These are the questions we ask when we talk about society.

Reuther bet that his student wing would be reasonable. Instead it turned out to be violent, anarchist, and silly.

We’ll touch on people, places, and things. People: Who’s the hero of the book? Jane Jacobs. Brilliant writer. She saw that a neighborhood that is called a slum can un-slum—she used that verb, un-slum—if it’s left to its own devices and has enough opportunity and traffic. There’s no limit to what a community can do for itself if left alone and not disturbed with wrong incentives or perverse incentives imposed from far away.

You’re positive about Walter Reuther, which surprised me. He was a good man. He was the head of the powerful United Auto Workers. He was not corrupt. The existence of such a powerful union was, I would argue, legally corrupt, but that wasn’t really his fault. I liked him. He was not a Communist. He was against Moscow, he was against bad totalitarian governments, but he thought neat social democracy could occur in America. And he worked very hard on the Great Society, which had a socialist component.

I know how in writing history books we can like people who are wrong. Reuther was wrong. He made a number of wrong bets. He bet that no competition would ever threaten the U.S. auto and he could take the prosperity of the U.S. auto industry for granted. That turned out to be a terrible, fatal mistake. Finally, he bet on the social democratic utopia. He tragically dies when flying to a union retreat he was building, Black Lake. He dies on the way to a utopia he’ll never build and never get to.

He was almost like a father to Tom Hayden. Hayden was one of the founders of Students for a Democratic Society. He and others met on a property owned by the union and put out a manifesto called the Port Huron Statement. It’s rambly and hard to understand with a little bit of Hegel mixed in. Basically it’s “we are a new generation, and we’re going to do what we like because the world looks disappointing to us.” Reuther bet that his student wing would be reasonable. Instead it turned out to be violent, anarchist, and silly—the Weathermen. When a project turns out to support an end that is opposite yours, you’re infuriated. Reuther was furious.

Isn’t this in microcosm almost the history of socialism? You get into it with ideals. You don’t get the results you want. You become thuggish to get people to do what you want them to do. Right. You double down and become thuggish. That’s the story of the unions too. So, I found it enormously instructive. We’ve been running a natural experiment since the 1940s and learning that if you live in the state with a right-to-work law you’re more likely to have employment and more jobs are likely to be created there than in a non-right-to-work state. The AFL-CIO in the 1960s made repeal of right-to-work its primary goal, but Lyndon Johnson ended up being too tired to push through legislation repealing the option for a state to opt out of heavy unionism.

Your portrayal of Johnson is different from Robert Caro’s. Caro in his books portrays him as a master user of power. In your book he’s a little befuddled. A master user of power is often befuddled, because it’s all about the power. You can’t remember why you’re doing something. Johnson had some principles. He really believed in education spending, in government. He really believed old people should have medical care, and probably from the government. But most of the time he just operated out of sheer ambition and legacy. He was trying to complete the New Deal for the hero of his youth, Franklin Roosevelt, and to show what a great legislator he was. All presidents are a collection of impulses, and the overwhelming impulse of Johnson is ambition.

We often hear the ’60s portrayed as the good old days of bipartisanship, as opposed to today’s polarization. I’m not really thrilled with those days. Should Everett Dirksen be our role model? I like Everett Dirksen, but I’m from Illinois. Everett Dirksen supported civil rights laws that Johnson pushed, but on repealing right-to-work so every state would be under unions, Dirksen said I don’t think so. He’s very old, very ill, and he said I don’t think so. Illinois was a union state, so it took a lot of guts for Dirksen to take that position.

You’ve raised my estimation of him a bit. Now we need to help the Everett Dirksen library and society. Maybe we need a film.

Or a Broadway play like Hamilton: We’ll just call it Dirksen. Oh, that would be great, yeah.

Let’s talk about Robert McNamara. I want WORLD reporters to operate at street level, not suite level. Robert McNamara seems like the ultimate suite-level guy. It seems he did not really want to hear what was going on at ground level in Vietnam. I am not an expert on the Vietnam War, but we clearly did plan from above: Who dared to dispute McNamaraland and its positions? What I will say is the error on the foreign policy side—arrogance, an unwillingness to take in evidence—was mirrored on the domestic side. We had any number of geniuses who thought their intelligence was better than everyone else’s.

Let’s turn to places. Government housing projects where if you earn more money the rent goes up. Did anyone think what this did to incentives to work more and raise your pay when you’ll have to turn it over to the government? There were terrible, terrible incentives at work. Incentivizing families to break up. If the dad didn’t leave, and he was hiding in the closet—this actually happened—the mom taught her kids to lie and deny the father was present. Incredibly perverse. Public housing encouraged dependence. In the case of heavily unionized St. Louis, economic growth that would have made housing project arithmetic work was missing. Growth migrated to other states, sometimes right-to-work states.

And government housing was supposed to break even. With growth, the Pruitt-Igoe project might have been able to pay for the repair of its elevators so the poor people would not be stuck in the elevators and be mugged by children there. Or had St. Louis produced enough jobs, more dads might have stayed in St. Louis and the boys would have been less likely to join gangs. The problem wasn’t just a crazy welfare law, though it was crazy.

You see property rights as crucial. The residents of Pruitt-Igoe would do better if they owned their houses—however dilapidated the house, however much of a sweat equity project it was. Those housing projects were the opposite of property rights. And to build them, the government bulldozed down whole parts of cities, included shops owned by the people who lived there, churches they attended, and so on.

A lot of displacement. Black families were displaced when they were brought to the United States as slaves. Black families were displaced voluntarily but roughly sometimes when they came north for jobs. They were moved into the projects. That’s a lot of displacement. When I teach this I talk about a case involving a little guy who had a variety store. The government came and said we’re mowing you down because you’re blighted. He said, I’m not blighted. This is a going concern. He had a couple of friends who went to the Supreme Court—and they lost.

One more place: Camp David. You have a hilarious chapter about Arthur Burns, Paul Volcker, Herb Stein, Paul McCracken, all the big name economists—and Richard Nixon plays them. Why did Arthur Burns, the Fed Chairman, care so much about getting pats on the back from Nixon? “Played” is the right verb. The president wanted to win the 1972 election. He decides he’s going to loosen money so people have easy credit before the election. Inflation might come after but that will be after the election and he will be back in office and can make it all better, he tells himself. Nixon was a nominal Republican, but he behaved like Juan Peron—looser money before the election.

As in Argentina: inflation and disruption in the economy. The Fed Chairman is supposed to say “stop.” I’m going to raise interest rates to offset your inflationary fiscal policy. Instead Arthur Burns went along. He wanted to stay in the game, too. The other economists all wrote memoirs about it, apologies for their lies in a way, because this was the worst moment for many of them. They all went along and as a result we got purgatory, a.k.a. the ’70s, when people couldn’t afford houses they deserved because they worked hard. When companies couldn’t borrow money and get going. When we began to believe that America was going to run out of energy and everything else, and that our period of expansion was over. All as a result of these perverse policies of the ’60s culminating in Camp David.

People, places, and we just have a moment left for things—and a sad thing, intergenerational poverty. You mention that in the 1960s we had almost a mystical belief in the infinite potential of American society: Poverty, like polio, would be defeated when the right vaccine was found. Yes: One day polio was a problem, then it wasn’t because of Jonas Salk and the other doctors. That’s how we viewed poverty: It was going to be zeroed out. Didn’t happen that way. Poverty dropped in the Great Society, but it’d been dropping just as fast before, and then the drop slowed at around 10 percent. Now, we’ve anesthetized poverty. I don’t disparage food stamps, but I do disparage the expectation that it is okay for a family generation after generation to have food stamps. Because if the parents have that expectation, they are hurting their children. It’s not okay to cut your kids off from hope—and that’s what thinking about benefits instead of thinking about achievement does.

Another ugly thing: adding a trillion dollars of debt every year. When does that end? Eventually we will pay for that. We just don’t know when. Even if our interest rate stays low, our children will have higher taxes because they will have more old people to take care of in Medicare, Medicaid, and Social Security. So, before you even talk about what will happen to the currency or interest rates, you can see the heavy taxes that someone born today will carry.

—Read more from this interview with Amity Shlaes at “Delving deeper into liberal failure”