Making the Depression worse

The New Deal began 75 years ago this month, but its mythology is still fresh. Many Americans still believe that when Franklin Roosevelt was inaugurated on March 4, 1933, the United States began to come out of Depression. Not so, declares Amity Shlaes's The Forgotten Man: A New History of the Great Depression (HarperCollins, 2007), a splendidly-written history of governmental economic intervention during the 1930s.

Shlaes, a senior fellow in economic history at the Council of Foreign Relations, told WOW that the thesis of her book "is not especially controversial for economists, but it is controversial for historians who have not kept up with the economic findings. The argument is that the government made the depression worse." Shlaes makes that argument based on abundant research and thoughtful analysis.

Roosevelt's most famous line was "We have nothing to fear, but fear itself," yet Shlaes writes about government officials intimidating business during the 1930's and experimenting so much that they "scared the markets. Today, we watch business television and know unknowns are bad for the stock market. Roosevelt was king of the unknowns. One day he would be for big business, the next day he hates big business." Roosevelt, she says, was "mercurial," and that's no way to run a White House. The result was a petrified market, year after year through the 1930s, with Washington misspending funds that could have been used by business to create more jobs.

The standard apologetic for FDR, of course, is that he saved America from revolution, but Shlaes as she did her research "had no sense that Americans wanted revolution. The Democratic platform in 1932 was as placid and moderate as could be. Americans didn't really want revolution; they just wanted to have growth back."