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Thursday, July 8, 2010

For the Survival of Democracy: Franklin Roosevelt and the World Crisis of the 1930s

A Step Forward, Albeit Weak in Economic Analysis

The latest New Deal synthesis is For the Survival of Democracy by veteran historian Alonzo Hamby of Ohio University. What makes Hamby’s research design different is that he describes the development of Franklin Roosevelt and the New Deal in an international context. Specifically, he weaves the American narrative with events in Britain and Germany in the 1930s.

Hamby is at his best developing the characters of Churchill, Stanley Baldwin, Hitler—and of course those New Dealers who surrounded President Roosevelt. His brief biographies help make the book readable and interesting.

In interpretation, Hamby’s book is a bit of a puzzle. He does not fully accept the laudable accounts of Roosevelt that have dominated American historiography; but neither does he really reject them. He concedes that the New Deal failed to improve the American economy, but he finds Roosevelt to be a capable president. “Reduced to paper,” Hamby concludes, “the Roosevelt record was hardly impressive. . . . But Roosevelt was impressive. His charisma, rhetorical talents, and dynamism made the New Deal more than the sum of its parts.” Such separating of the President from his record is strange, but it is a step up from exalting both Roosevelt and his record (which is more consistent, but wrong on two counts, instead of just one).

Part of the problem here may be Hamby’s weakness in economic analysis. “Whatever else the [Roosevelt] administration had done,” Hamby observes, “however many benefits it had delivered to Americans, it had not ended the Depression.” When Hamby says this he seems surprised—as though New Deal programs clearly delivered “benefits” but did not inflict costs as it did so.

Henry Hazlitt, a New York Times columnist during the 1930s, repeatedly reminded Americans that whenever a New Deal program conferred cash on a lucky recipient, it had to secure the cash from an unlucky taxpayer. Thus all jobs created by the WPA, CCC, or PWA took capital from consumers that could otherwise have been used to build factories or to buy sweaters or radios or paint for the house.

So when Hamby asks, “Did not governments engage in a social good by giving employment to those who needed it?” the answer is not “yes,” as he implies, but “maybe not,” because cash given to employ, say, street pavers in Ohio lost the chance to employ radio makers in New Jersey or textile workers in South Carolina. In other words, jobs were merely transferred from one group to another.

What this means in terms of analyzing policy is that when Hamby writes in one paragraph that the federal subsidy to veterans in 1935 “pumped about $2 billion into [the] economy,” maybe he should let the reader see in the next paragraph that a tax hike that same year raised the tax rate on top incomes to 79 percent (four years earlier, the top rate had been only 24 percent). The two events need to be discussed together because they function together. Hamby discusses the programs, but rarely bothers with the taxes that transferred the money out of taxpayers’ pockets to pay for them.

The task of those who would defend Roosevelt and the New Deal is to address these transfer payments with all of their ramifications. When Hamby concludes, “The WPA would endure until 1943, doing far more good than harm,” he should explain why Americans were allegedly better off with the WPA and higher income taxes and higher excise taxes on cigarettes, tires, bank checks, movie tickets, and telephone calls than they would have been with no WPA and lower income and excise taxes.

According to the League of Nations World Economic Survey 1938/39, the recovery rates from the Great Depression were much better in France and Britain than in the United States. In 1938 U.S. unemployment, which was barely under 20 percent, was higher than France’s 8 percent and Britain’s 12.6 percent. In that international context, Roosevelt’s New Deal seems to be less, not more, than the some of its parts.

Nonetheless, For the Survival of Democracy is a step forward because Hamby, a mainstream historian, is willing to criticize much of the New Deal and some of Roosevelt’s actions and motives. In his bibliography, he even praises Gary Dean Best, whose book Pride, Prejudice, and Politics is the best modern critique of the New Deal that we have. As we move away from the New Deal era, the quality of history written about it is beginning to improve.