Amity Shlaes. The Forgotten Man: A New History of the Great Depression. HarperCollins, 2007.
I enjoyed Amity Shlaes’ The Forgotten Man: A New History of the Great Depression. Whereas her biography of Calvin Coolidge was rather heavy, her prose in The Forgotten Man was light, and she explained economics in a manner that even non-economists like me could understand. Moreover, she made the people in The Forgotten Man seem real. Her biography about Coolidge had a lot of information, but I finished that book not really feeling that I knew Coolidge that well. The Forgotten Man, however, was different because it had a stronger narrative and characterization.
Shlaes writes largely from a conservative perspective. She favors lowering the tax rate on the rich and on corporations, since they are the ones who invest and create jobs. She favors more of a supply-side than a demand-side emphasis, favoring the producers rather than assuming that the consumers having more money to spend will lead to economic growth. She leans towards free-trade. On monetary policy, she strikes me as rather flexible. She is not keen on the Federal Reserve tightening the money supply too much, for deflation can lead to problems, especially for people who borrowed money (they essentially owe more than they borrowed). At the same time, she notes that President Franklin Roosevelt’s undermining of the gold standard did not help matters, for other countries thought that destabilized the currency.
Shlaes’ perspective is evident in her narration of the Great Depression. According to her, the tax increases by Herbert Hoover and Franklin Roosevelt hindered economic growth, while attempts by these two Presidents to keep wages up so that consumers would have money to spend did not significantly ameliorate the dire economic situation; neither did their public infrastructure projects, for that matter. The New Deal targeted businesses (big and small), and that discouraged investment, since why would people invest if they did not know what the government would do to them next? The Federal Reserve during the Hoover Presidency was too tight in its monetary policy, according to Shlaes, and that stifled investment. Shlaes also agrees with economists who argue that the Smoot-Hawley tariff was part of the problem, for she contends that this tariff increased production costs, discouraged European countries from buying American products, and hindered Americans from buying European products, which would have helped Europeans earn money so they could pay off their debt to the U.S. While Shlaes is critical of many of President Franklin Roosevelt’s policies, she does praise him for helping to bring about lower tariffs. She also thinks that FDR’s Security and Exchange Commission was a good idea, since that policed Wall Street abuse. She says that many thought that FDR was letting the fox watch over the hen house when he appointed Joseph Kennedy to head the SEC, but that this actually turned out to be a good decision: Kennedy knew the tricks of the trade, so he could do a good job policing Wall Street!
Another problem with the New Deal, Shlaes argues, is that Roosevelt could not make up his mind. Some elements of the New Deal contradicted each other. Roosevelt got tired of people receiving relief, so he created government jobs so that unemployed people could work. He wanted the workers to receive a good wage, and yet he also wanted to balance the budget because he thought that would improve the economy. Meanwhile, he signed the Wagner Act, which promoted unionization and allowed strikes. But that could be pretty problematic when WPA workers decided to strike! There also appeared to be some waffling on whether bigger was better: do we want big business, or do we want smaller businesses (and anti-trust rules) that compete with each other?
Shlaes acknowledges that the economy steadily improved under the New Deal. It just never returned to pre-1929 levels! The Depression lagged on until World War II. At the beginning of each chapter, Shlaes gives readers the unemployment rate for the year, and also the Dow Jones Industrial Average.
I cannot say that I found myself disliking most of the characters of the book. The leftists who were enamored (and, in some cases, later disappointed) with the Soviet Union struck me as well-meaning idealists. The same goes for the New Dealers, who tried to improve people’s situations and came up with innovative ideas, such as living units for migrants. Wendell Wilkie sought to protect private electric companies from Tennessee Valley Authority competition, which was understandable on his part, and yet I cannot say that the TVA came across as that bad in Shlaes’ book (though she did seem to disagree with it), since it provided cheap electricity to poor families. Other characters include Andrew Mellon, who was under investigation for tax evasion yet managed to find a common cause with FDR by helping to establish a National Art Gallery, donating his fine collection of art. The African-American evangelist Father Divine also is prominent in the book: he was critical of New Deal relief programs, but he also helped the poor, pressured Roosevelt to take an anti-lynching stance, and even moved onto what used to be Franklin Roosevelt’s property. (Eleanor Roosevelt said that she welcomed him as a neighbor!)
If there was one character I disliked, it was this one New Deal lawyer who was going after the Schechters, Jewish chicken sellers who were accused of violating National Recovery Administration rules. The lawyer made a big deal about Mr. Schechter’s lack of education, which struck me as cruel and elitist. For that matter, I also did not care for the pro-Roosevelt journalists who exploited anti-Semitism in defending the prosecution of the Schechters (who, it appears, were probably supporters of Roosevelt, notwithstanding the NRA’s attack on them).
The Forgotten Man is an interesting and thoughtful book. Personally, what Shlaes says and what Robert Reich says (about the need for a strong consumer base) both make sense to me, even though they have different perspectives. Investment is necessary, but so are a lot of consumers with money to spend!