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Wednesday, December 1, 1999

The Political Economy of the New Deal

A Work That Ought to Shift the Burden of Persuasion to FDR's Defenders

In this work, Professors Jim Couch (University of North Alabama) and William Shughart (University of Mississippi) employ public-choice theory to provide an insightful look at the New Deal. The authors mix examination of historical evidence and econometric analysis of recently rediscovered data on the spending patterns of New Deal programs to argue that the Roosevelt administration used the massive spending for political purposes. Written in a lively and engaging tone, the book also provides a thorough summary of the extensive literatures on the Depression and the New Deal. Economists will welcome its thorough exploration of the data; non-economists will appreciate its clear presentation of both the statistical and nonstatistical material.

The first chapter of the book surveys the academic literature on the causes and impact of the Great Depression and the critiques of the New Deal. Concisely summarizing multiple theories about those causes (business cycle, monetary policy, underconsumption, and a range of others), the authors effectively convey the basics of a complex and voluminous literature. Among the most compelling features of this chapter is a chart portraying the growth of the New Deal programs over time. This fascinating diagram makes clear the vast scale of New Deal spending.

The next three chapters offer similarly well-written and thorough descriptions of the New Deal programs. Although primarily summarizing prior work on the New Deal, the authors add a market-oriented critique to the literature survey. For example, they make a point of noting that the Roosevelt administration’s approach in the “first New Deal” (1933-1935) was built around an “anti-market ideology” that “placed much hope in the central government’s ability to produce favorable results” and attributed the Depression to the market. Well-chosen examples of New Deal-era political cartoons enliven these chapters. My favorite, titled “The Sower,” shows New Dealer Harry Hopkins scattering cash from a sack labeled “WPA” across a map of the South, remarking to Agriculture Secretary Henry Wallace “Shucks Henry, You’ve never seen a bumper crop! Wait ‘til you get a look at this beauty!” In a sense, the remainder of the book is a thorough analysis in support of the message of that cartoon.

Couch and Shughart provide extensive historical evidence to show that New Deal legislation lacked the checks and balances necessary to restrain political use of the programs. For example, they quote Michigan Senator Arthur Vandenberg’s comment that the bill establishing the Works Progress Administration (WPA) could be “simplified by merely striking out all the text and substituting two brief sections: Section 1. Congress hereby appropriates $4,880,000,000 to the President of the United States to use as he pleases. Section 2. Anybody who does not like it is fined $1,000. That is approximately the net result of this proposed legislation.”

The unique contribution of the book lies in the remaining chapters. Here Couch and Shughart deploy public-choice analysis to understand the spending patterns of the New Deal programs. Relying both on data unearthed in 1969 on New Deal spending across states and additional data the authors discovered in the 1939 Congressional Record, Couch and Shughart conclude that “political self-interest was perhaps the most important motive underlying the administration’s spending decisions. A state’s popular vote for FDR in the 1932 election and its importance to the President’s electoral college strategy are consistently [statistically] significant determinants of the amount of federal aid it received.”

While the authors build on and challenge earlier empirical work on the New Deal, their analysis is more complete. While space does not permit a complete survey of either the methods or the statistical results here, Couch and Shughart have produced a work that at least ought to shift the burden of persuasion to FDR’s defenders.

Although various quibbles are possible with some features of Couch and Shughart’s number crunching and their review of prior literature, none is important enough to detract from their overall accomplishment of recasting the New Deal in public-choice terms. From Lyndon Johnson’s Great Society to Hillary Rodham Clinton’s communing with the ghost of Eleanor Roosevelt, statists have sought to hide in the shadow cast by the “success” of the “Relief, Recovery, and Reform” programs of the New Deal. Revealing the blatantly political nature of those programs is an important step in restoring balance to our political and historical dialogues.

  • Andrew P. Morriss is the D. Paul Jones, Jr. & Charlene A. Jones Chairholder in Law and Professor of Business at the University of Alabama. He is coeditor (with Roger E. Meiners and Pierre Desrochers) of Silent Spring at 50: The False Crises of Rachel Carson, forthcoming from the Cato Institute.

  • William F. Shughart II is Research Director and Senior Fellow at The Independent Institute, the J. Fish Smith Professor in Public Choice at Utah State University, and past president of the Southern Economic Association. A former economist at the Federal Trade Commission, Professor Shughart received his Ph.D. in economics from Texas A&M University, and he has taught at George Mason University, Clemson University, the University of Mississippi and the University of Arizona.