The Forgotten Failures of FDR

by Martin Morse Wooster - October 9, 2007

Reprinted with permission.

The Forgotten Man: A New History of the Great Depression

Amity Shlaes; HarperCollins; 390 pages.

Reviewed by Martin Morse Wooster

If you want to see President Franklin D. Roosevelt's legacy, look around you. Scores of agencies created during his tenure are still around, including Social Security and welfare. But FDR's most important legacy is the welfare state, the notion that government must provide a safety net to protect everyone from the vicissitudes of life.

As we seek to reform the agencies Franklin D. Roosevelt created, it's important to understand how these programs got started and just what their designers were thinking. Amity Shlaes's The Forgotten Man is an important attempt to re-examine the ideas and the legacy of the New Deal. Though marred by choppy writing and a wrong-minded emphasis on unimportant stories, Shlaes's book should inspire a debate about what lessons future generations should learn from this era.

Shlaes, a fellow at the Council on Foreign Relations and a columnist for the Bloomberg news service, is best known as an economics commentator. She is clearly more comfortable writing about numbers than people. Indeed, the Dow Jones Industrial average is quoted so often that the index is a major character in the book – sometimes rising, frequently falling, but mostly stagnating.

However, Shlaes realizes that most of us prefer reading stories rather than tables, so she has recurring sections on four characters: African-American preacher Father Divine, Treasury Secretary and philanthropist Andrew Mellon, Alcoholics Anonymous co-founder William Wilson, and utility executive and presidential candidate Wendell Willkie.

Shlaes does a good job in telling Andrew Mellon's story. But it's far from clear why her other characters matter. Father Divine helped provide his congregation with food, clothing, and jobs. But his only role on the national stage was to personally irritate FDR by trying (and failing) to buy land near the President's Hyde Park estate. William Wilson helped to create one of America's great charities, but his story has nothing to do with government policy.

Most problematic is Shlaes's defense of Wendell Willkie. For most of the 1930s, Willkie was the head of Commonwealth and Southern, a utility involved in lengthy and tedious battles with the Tennessee Valley Authority. Shlaes describes all the battles, but never manages to make utility regulation very interesting. And although she tries to make Willkie an anti-statist hero, she fails to dispel the more familiar story of Willkie – that he was a liberal who captured the Republican presidential nomination in 1940 because none of the more conservative candidates – Senators Robert Taft and Arthur Vandenberg and New York City prosecutor Thomas Dewey – was able to decisively defeat their rivals.

Despite all this, The Forgotten Man is worth reading because it forces us to re-examine what the Roosevelt Administration was trying to do. The story we were all taught in school, Shlaes writes, is that "FDR saved the country in peace, and then he saved it in war. Or so the story goes."

But what Shlaes shows is that FDR didn't save the country in the 1930s. Despite the massive increases in federal government spending, unemployment remained in the high double digits throughout the 1930s. The Dow Jones average didn't pass its 1929 peak until 1952.

More importantly, the schemes of New Deal planners did little to help the true "forgotten men" – small businessmen and entrepreneurs whose struggle to succeed was checked by an armada of bureaucrats. In her best chapter, Shlaes tells the story of the Schechters, Brooklyn butchers who wanted to kill chickens according to kosher law. One day a government inspector from the National Recovery Administration, who declared that the Schechters were selling "sick chickens" in violation of federal law, confronted them. The Schechters protested that all their chickens died according to strict kosher rules.

Ultimately the government declared that the Schechters had to be prosecuted because one chicken was killed in violation of federal rules. The Schechters took their case to the Supreme Court – who ruled the National Recovery Administration unconstitutional.

"The big question about the American depression," Shlaes writes, "is not whether war with Germany and Japan ended it. It is why the Depression lasted until that war." Both Hoover and Roosevelt, Shlaes showed, had faulty cures for the economic slump. Hoover raised taxes on corporations and drastically hiked tariffs, moves that punished industry at a time when tax relief would have done the most good. Roosevelt's New Deal policies did nothing to reduce unemployment and did little to stimulate the economy. For small

businesses like Schechter Poultry, the New Dealers offered no help – and a great deal of red tape.

Martin Morse Wooster's reviews have appeared in the Washington Post, Wall Street Journal, and the Washington Times.