A review of New Deal or Raw Deal?: How FDR's Economic Legacy Has Damaged America, by Burton W. Folsom, Jr.
and Traitor to His Class: The Privileged Life and Radical Presidency of Franklin Delano Roosevelt, by H.W. Brands
Dead and gone for 64 years, Franklin Roosevelt remains vividly among us in spirit at a time of financial collapse and widespread fears of another Great Depression. No American president save perhaps George Washington so thoroughly imprinted his personality on his own era. Only Abraham Lincoln has rivaled him as a biographical subject equally attractive to scholars and popularizers. (I am at work on my own FDR biography, grappling with the same issues that emerge in the books discussed here.) Since Roosevelt's death in April 1945, liberal Democrats have hoped for his reincarnation, only to be disappointed to one extent or another by successors from Harry Truman to Bill Clinton.
As we face an uncertain economic future, policy wonks argue the relevance of FDR's New Deal and politicians strive to emulate his charisma. Editorial cartoonists have already depicted President Obama sporting a jaunty FDR-style cigarette holder. Obama and the people around him appear to have given serious study to Roosevelt's presidency and hope to profit from its example. Conservatives retort that the New Deal was a crashing failure. Both sides, however, agree that a political agenda which sputtered to an end 70 years ago has considerable relevance to the world of today.
Burton Folsom, Jr.'s New Deal or Raw Deal—introduced by Stephen Moore of the Wall Street Journaleditorial board, and blurbed by George Gilder, Walter Williams, and the late William F. Buckley, Jr.—charges into the fray with the zeal of free market evangelism. Folsom is a professor of history at Hillsdale College and senior historian at the Foundation for Economic Education. The latest in a series of New Deal critiques from the Right, his book scores policy points with abandon, but, relying heavily on the invocation of classical economic theory, it lacks the contextual richness of Gene Smiley's Rethinking the Great Depression (2002) and the human interest of Amity Shlaes's The Forgotten Man: A New History of the Great Depression (2007). Folsom's ultimate goal—the destruction of the myth of Franklin Delano Roosevelt-remains a stretch.
By the strict definition of an economic turndown—a decline in Gross Domestic Product—the Great Depression began in 1930, bottomed as Roosevelt took office in 1933, and, depending on the mode of measurement, did not end until 1939 or 1940. Double-digit unemployment, according to estimates by economists Richard Vedder and Lowell Gallaway, began in November 1930, and did not end until the third quarter of 1941. Clearly, if the New Deal is to be judged as an economic recovery program, it was a debacle.
Liberals generally have admitted that the New Deal failed to end the Great Depression but assert that it at least reduced unemployment, gave vital assistance to millions of needy individuals, and acheived far-reaching reforms to establish a more equitable society. Roosevelt's great mistake, they argue, was a fiscal conservatism that led him to recoil from pumping sufficient Keynesian stimulus into the economy.
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Of course, no one can accuse Roosevelt of starting the Depression. Folsom delights in using the ear-grating phrase "Democrat Party" whenever he is forced to mention the dark side, but he is no mindless partisan. Writing as a principled free-market conservative, he indicts Herbert Hoover for making a recession into a depression by signing the Smoot-Hawley tariff, attempting to support agriculture through the expensive and ineffective Federal Farm Board, trying to revive the industrial and financial sectors with the equally ineffective Reconstruction Finance Corporation, and enacting a major tax increase. He also criticizes Hoover's Federal Reserve for raising interest rates as the economy tanked and for remaining passive amid the waves of bank failures that wiped out so much of the savings of the middle class. (Surprisingly, he does not go after Roosevelt's Fed for its mistakes, which contributed to the economic downturn of 1937-38.) Essentially he accepts the premise that much of the early New Deal was, as someone quipped long ago, Hooverism on steroids.
Still, Folsom is aggressively prosecutorial toward Roosevelt, and he makes numerous good points. His easiest target is the National Recovery Administration. Its attempt to organize American industry degenerated into egregious overregulation that tied the economy in knots, allowed large operators to squeeze out small ones, and stymied recovery by fixing prices and wages at unrealistically high levels. In general, he shows that the New Deal programs generated winners and losers along lines that bore scant relationship to the divisions between rich and poor. Successful at raising the prices of farm commodities and employing a processors tax to pay for the agricultural program, for example, the Agricultural Adjustment Administration also made the price of food higher for ordinary people and did little for subsistence farmers. Various New Deal attempts to establish minimum-wage levels made life a bit easier for the employed but shrank the supply of jobs.
Jobs and consumers took hits also, as a result of the decision to maintain Smoot-Hawley as the nation's basic tariff. The New Deal's major international trade initiative, a reciprocal trade agreements program, was more hype than substance. At no time in the 1930s did the volume of U.S. foreign trade exceed that of 1929. In addition, Folsom might justly have attacked Roosevelt's scuttling of the 1933 World Economic Conference's effort to stabilize currencies and restart international trade.
The New Deal ostentatiously soaked corporations and the rich, but it also quietly tapped the pockets of the poor and the middle class. By 1935, invisible federal excise taxes produced a bit more than two and a half times as much federal revenue as did the income tax. The Undistributed Profits Tax of 1936 dealt another blow to recovery by implicitly rejecting the common-sense maxim that businesses needed to retain cash reserves. The Social Security program was funded by a regressive payroll tax that sucked worker purchasing power out of the economy.
Folsom convinces with his economic argument but runs into trouble when he wrestles with the problem of how and why economic failure translated into enormous political triumph. He is as much a moralist as an economist, motivated by a mainstream conservative ethic that appears to be derived about equally from 17th-century Calvinism and from Adam Smith. He indicts Roosevelt for deception, alliances with shady political machines, and, above all, the lavish use of "patronage" in the form of jobs and benefits. "FDR + $ in patronage = reelection," he tells us. The equation is a neat one, expressed in a way calculated to generate reader disapproval. But it, and much of the narrative, is an exercise in abstraction, disassociated from the reality of economic catastrophe. Roosevelt took office amidst 28% unemployment. A democratic electorate demanded big federal relief programs and cared little if they were politicized.
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There is a common tendency among historians to describe Franklin Roosevelt as a non-ideological pragmatist, so unsystematic in his policy thinking as scarcely to merit a philosophical characterization. Yet from the beginning of his political career, FDR embraced the terms "progressive" and "liberal." Not a theorist, he had a clear sense of direction and a strongly felt ideological identity. The New Deal, in both its successes and failures, was a faithful representation of the main tendencies of American liberalism in the first half of the 20th century.
Roosevelt's New Deal could have profited from a greater appreciation of market theory, but it did rightly grasp that the free market, if more efficient than bureaucratic management, is also pitiless and amoral. In times of economic distress the market inflicts damage on the just and unjust alike. Folsom averts his eyes from these unfortunate consequences. Despite mountains of evidence to the contrary, he insists that private charity was meeting the needs of the unemployed and dispossessed. He misses the common denominator of American citizenship when he attacks the way in which relief programs in effect took money from "frugal and thrifty states" and redistributed it to "inefficient and manipulative states." He even appears to assume, without any case law to support his position, that the federalization of relief was unconstitutional. He asserts that New Deal relief "profoundly changed the American work ethic," but provides little evidence for the declaration.
Folsom is critical of Rooseveltian monetary tinkering. During the first year of his administration, FDR mandated the forced exchange of privately held gold coins and bullion for paper money. For nearly three months he capriciously changed the Treasury price of gold on a daily basis, finally effecting a major dollar devaluation by revaluing gold from $20.67 per ounce to $35. He abrogated clauses in commercial contracts mandating payment in gold at the older value. Traditional moral instincts tell us that these practices were not right, but they failed to have the inflationary impact that might have been expected and do not appear to have prolonged the Depression. The author correctly deplores the egregious Silver Purchase Act but has to admit it was foisted on the administration by Congress.
Roosevelt, Folsom tells us, should simply have balanced the budget, cut taxes, and lowered the tariff. Presumably the free market would then have taken care of the Depression. The specific advice on taxes and tariffs is good, but budget-balancing with more than a quarter of the labor force out of work is a non-starter. The New Deal pretty clearly over-regulated and overtaxed; its leaders were too prone to resort to a business bashing that got in the way of recovery. Nevertheless, it aided millions of people attempting to deal with hard times for which they were not responsible and which they did not understand. This does not excuse its failure to restore prosperity, but does explain why the opposition remained on the outside.
Roosevelt himself was a moral mixture—charismatic and caring, self-centered and power-grabbing, alternately a uniter and a divider. Folsom amply displays the president's unattractive side in such issues as the effort to prosecute former Secretary of the Treasury Andrew Mellon for tax evasion, the attempt to pack the Supreme Court, and the failed "purge" of the Democratic Party. He might also have given attention to executive reorganization efforts that would have brought quasi-independent regulatory agencies under White House control.
Still, the author goes far over the top with a chapter that purports to show "how FDR's deception tarnished the presidency forever." It is graced by dubious stories from the memoirs of Roosevelt-hating crank Walter Trohan. The most entertaining anecdote involves alleged trysts in the presidential private railway car with Princess Martha of Norway, who would emerge clad "invariably in high-heeled slippers and black silk hose." The policy implications are unclear.
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In sharp contrast to Folsom's focused policy study, H. W. Brands's Traitor to His Class is yet another large one-volume comprehensive biography of Roosevelt—although at 896 pages it does not present as great a threat to a careless reader's foot as Conrad Black's 1,296-page tome. A professor of history at the University of Texas, Brands is the author of around 20 books, spanning three centuries and widely diverse in topic. His introduction poses some important questions about Roosevelt's personality: Why did he become a radical critic of the established order? What were the sources of his governing philosophy? His enormous confidence? His apparent serenity in the face of personal and national crisis? For the most part, however, these queries are left unanswered and are perhaps unanswerable.
What we do get is a nice enough narrative, a bit light on detail and sometimes careless. Its coverage of Roosevelt's pre-presidential life is peppered with enough small errors to make one uncomfortable about the depth of the author's research. A very glaring omission is the absence of almost any information about FDR's accomplishments and failures as governor of New York. The account of his first two terms as president is adequate, if generally uncritical, and seems to be guided by the idea that the reader should not be confused by a deluge of facts.
The best developed and most successful part of the biography is its coverage of Roosevelt's years as a war leader. Roosevelt, Brands believes, needs to be understood primarily as a foreign policy realist in the pursuit of idealistic goals—one who knew that power was the basis of international diplomacy and possessed an acute long—range view of the world.
The president early recognized the threat of Nazi Germany and did what he could to warn an isolationist nation. After war began in Europe, he moved the United States steadily, if gingerly, toward an alliance with Great Britain, and steered aid to the Soviet Union after it was invaded in June 1941. He correctly saw Germany as a threat of the first order and discounted Japan as a second-class power. Not a Pearl Harbor conspiracy theorist, Brands admits there was a lot of deception in Roosevelt's maneuverings. By the fall of 1941, he convincingly asserts, the president wanted to provoke a war with Germany, but not with Japan.
After Pearl Harbor had taken the United States into the war, American industrial might and military power allowed Roosevelt effectively to take control of the Anglo-American alliance and shape a vision for the postwar world that juggled two concepts. To Americans and a larger international public, he justified the war in neo-Wilsonian rhetoric as a struggle for a new day in which liberal-democratic values fostered by a United Nations organization would achieve global supremacy. In his private diplomacy, he understood that democracy would not flower everywhere with the defeat of the Axis and envisioned a world order managed by Four Policemen—the United States, the Soviet Union, Britain, and China.
He pretty clearly also realized that there would be only two truly great postwar powers—the U.S. and the USSR. Thus he put great stock on developing a personal relationship with Soviet dictator Joseph Stalin and was clearly willing to concede him a sphere of dominance in Eastern Europe. At one level, the goal seems to reflect Roosevelt's realistic appreciation of power balances; at another, it appears hopelessly clueless about the character of Stalinist Communism. The author, like most historians who have written on this difficult topic, is better at laying out Roosevelt's attitude than at explaining its persistence through the frequently difficult relationship with the Soviet Union during the war.
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There is an obvious answer that liberals have averted their eyes from and that conservatives have asserted with an air of categorical moral condemnation. Roosevelt was surely a foreign policy realist, but he was also the personification of the liberalism of his day as much in his diplomacy as in his domestic policies. In the fevered atmosphere of World War II, most American liberals considered the Soviet Union a great ally against the fascist menace and, by implication, a progressive force in the world. The burden of the available evidence is that Roosevelt shared this view. Whether he would have retained it after 1945 or, like the bulk of American liberalism, have moved reluctantly into a Cold War with the USSR, can only be a matter of speculation.
Winston Churchill, the conservative hero, was more farsighted, but, for all his courage and eloquence, incapable of winning World War II. Only Roosevelt, however flawed his vision, was capable of exercising the charismatic leadership, commanding the resources, and making the compromises necessary to save Western civilization. His success in this endeavor deserves our respect and appreciation.