Necessary Roughness

Amity Shlaes evokes Georges Santayana in her book, The Forgotten Man: A New History of the Great Depression.

The Forgotten Man is a retelling of the years before World War II, the stock market crash of 1929 and the government expansion that followed it. By involving itself more and more into private business, the federal government actually slowed the recovery of the private sector, to the point where the GDP didn’t match that of 1929 until there were a million more people in the United States.

Shlaes takes the reader on a trek with the Americans who traveled to Russia to view the communist experiment. President Calvin Coolidge adhered to Constitutional principles and to a fault was isolationist. President Herbert Hoover the engineer wanted to tinker and fix the economy he’d run in to. President Franklin Roosevelt would deliberately set competing policies until he decided which one he liked, even to the point of undermining his diplomats. Roosevelt was the first president to create his own permanent constituencies through the creation of Social Security and the implementation of labor unions. Finally, the author takes us through the rise of Wendell Willkie, the Republican who probably would have been president were it not for the war.

Some of the ideas that were implemented in the 30s and 40s are back in the playing field today. One may recall a certain Senator from New York wanting to take all the profits of the oil companies and redistribute them. That was actually done, in the form of an undistributed profits tax. Companies could not save money to pay people in economic downturn. They couldn’t purchase new equipment to improve their own products. As a result, their productivity stalled. Income taxes on the wealthy were 75% and higher; some people want to do that again.

The government’s war against big companies had to be put on hold once Germany began its expansion. Manufacturers became defense contractors. The unemployed became soldiers. Thus the economy finally could grow again. FDR’s attempt to pack the Supreme Court is documented, as the suits that challenged the constitutionality of FDR’s alphabet soup of agencies.

The author writes very well, avoiding much of the boredom in today’s high school economics classes. The history is an interesting case study in monetary supply, government intervention, tariff protectionism, and what happens when the Republican candidate for president runs to the left of his base: lessons that are sorely needed today.