The Relics of Intervention: 3. The New Deal Bent to Inflation

Dr. Carson has written and taught extensively, specializing in American intellectual history. He is the author of several books and a frequent contributor to The Freeman and other scholarly journals.

Government intervention came into its own with the New Deal. Not that the New Dealers invented the notion or developed for the first time the practice of government intervention in the economy. Both the idea and practice have been around for a very long time. Even collectivist ideas of intervention so as to control the economy for social ends had come into increasing prominence over a period of a half century before the New Deal. But the New Deal fostered intervention in such variety and on so large a scale, and much of it so swiftly, that it seemed new and different. In a sense it was. Theretofore, except during World War I, intervention had been piecemeal, scattered, and occasional. With the New Deal, it became central, and much that was done became a permanent part of our economic landscape.

The most prominent of the New Deal programs were supposed to deal with economic problems arising from the Great Depression. Most of them were put forward as remedies for depression-related conditions, many of them in an emergency atmosphere. In consequence, the notion took hold that the programs were shaped pragmatically and eclectically for the occasion. Actually, the depression mainly provided the occasion in which the programs could be enacted. Most of them were not conceived originally as depression remedies, and they certainly did not remedy the depression. The New Deal was not born of the depression; it was made possible by the depression.

The three main sources of the New Deal were: Theodore Roosevelt’s New Nationalism, the war mobilization activities during World War I, and the socialist idea of a planned economy which was in the ascendant in the 1920s.

New Deal in the Guise of Liberalism

The influence of Progressivism on the New Deal came mostly from the earlier Roosevelt’s New Nationalism. New Deal Democrats did not, of course, call themselves Progressives. Although there had been Democrats who identified themselves as progressives, usually with a lower case “p,” the Progressive movement was primarily a dissident move among those who had been, or still were, Republicans. In any case, New Deal Democrats had co-opted the term “liberal” to describe their ideological bent. “Liberalism” came into currency in the nineteenth century as a term to describe those who favored individual liberty, free trade, national independence, expansion of the suffrage, and so on. New Dealers appropriated the term, along with much else, to describe a pro-government interventionist position that had only a residue here and there of traditional liberalism.

This did not deter the New Dealers, however, from borrowing liberally from the earlier Roosevelt’s nationalism. So far as Franklin D. Roosevelt himself was concerned, family ties may have accounted for some of the influence. One historian says that as a young man he “looked up to Uncle Ted, and the relation ship brought Franklin Roosevelt a continuous suggestion that politics was a permissible career for a patrician, that a patrician’s politics should be reform, and that reform meant broad federal powers wielded by executive leadership in the pattern of the New Nationalism.”[1] However that may be, there are many indications of the New Nationalism in the New Deal.

Richard Hofstadter noted that “There are many occasions in its history when the New Deal, especially in its demand for organization, administration, and management from a central focus, seems to stand squarely in the tradition of the New Nationalism . . .”[2] There was the nationalistic fervor emanating from the pronouncements during the first couple of years. The word itself cropped up in such legislation as the National Recovery Act and the National Labor Relations Act. There were the numerous commissions and boards established, such as the Federal Power Commission, the Securities and Exchange Commission, and the National Labor Relations Board. Theodore Roosevelt had been an enthusiast of the commission idea.

Above all, the New Deal had philosophical ]inks to the New Nationalism. Theodore Roosevelt had proclaimed the necessity for regulating and controlling industry and labor so that their actions would be brought in line with the national interest. The New Deal was animated by what was basically the same idea. When New Deal insiders, such as Rexford G. Tugwell, talked of repudiating progressivism what they had in mind was Wilson’s New Freedom, with its opposition to trusts and corporations. For example, Tugwell expressed the fear in 1932 that if “the Brandeis progressives,” i.e., the followers of Wilson, should gain the ascendant the Democratic platform would be filled with “platitudinous and general remarks about free enterprise.”[3] Of course, “the Brandeis progressives” did have considerable influence on the New Deal, especially by way of Felix Frankfurter,[4] but it was rarely in support of free enterprise, and it could hardly rank with that of the New Nationalism.

The Wilson Influence

From a different angle, though, the Wilsonian influence may have been greater than that of the New Nationalism. That is, if the mobilization of the economy during World War I be attributed to Woodrow Wilson, his influence was large in-deed on the New Deal. Twentieth century liberals have been especially enamored of the war motif or war metaphor for their various interventionist and distributionist undertakings. The most famous case was that of President Johnson’s “War on Poverty,” but even when they have not stated the matter so bluntly, it seems to have been lurking around as a kind of archetype for political activity. What impressed them, no doubt, was the collective character of war, the use of government power to coordinate and mobilize the economy, and the apparent productive successes of the efforts. Government mobilization during World War I was the primary source of this idea for the New Deal generation.

The Wilson Administration did not rush headlong into an all out mobilization once war had been declared. However, before the war was over much of economic activity had been brought under the control and direction of the government. The broadest of the organizations which undertook this was the War Industries Board under the direction of Bernard Baruch. Its authority was exceedingly large over manufacturing. As one history points out:



The elastic powers conferred on Baruch as chairman of the War Industries Board made him a dictator over large areas of the war economy. His authority to establish priorities on all materials except agricultural commodities gave him life-and-death power over business. If a manufacturer refused to convert from the production of horseshoes to trench shovels, Baruch could cut off his supplies of iron and shut down his assembly lines. He could even commandeer the plant for the government and operate it. In coop eration with the price-fixing committee, he could exercise further leverage by setting the prices of raw materials at wholesale.[5]


In addition, there was a War Labor Board to settle industrial disputes, a Food Commissioner, Herbert Hoover, with extensive control over food, feed, fertilizer, and fuel, a United States Shipping Board, a Railroads War Board, a War Trade Board, and so on. Moreover, the government took over and ran the railroads for a time.

Franklin D. Roosevelt was in the midst of this massive effort at controlling the economy, for he was Assistant Secretary of the Navy during the war. General Hugh Johnson, first head of the National Recovery Administration (N.R.A.) in the New Deal was even more closely involved in the effort: he served as Army liaison officer to the War Industries Board. The experience was certainly not wasted on him. “The War Industries Board had given him the conviction that it was possible for government to direct the national economy.”[6] His reaction immediately after the war was, “If cooperation can do so much, maybe there is something wrong with the old competitive system.” He was in favor, then, of “self-government in industry under government supervision.”[7]

Indeed, people who had experience in the war mobilization were much in demand in the early days of the New Deal. As one account has it, “Only the veterans of the war mobilization had much experience with the kind of massive undertaking Roosevelt had inaugurated. ‘One cannot go into the Cosmos Club without meeting half a dozen persons whom he knew during the war,’ wrote one New Dealer.”[8]

The War Image

In his First Inaugural Address, Roosevelt evoked the war image repeatedly in his appeal to the American people. He declared that “we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership can become effective.” He threatened that if Congress did not act on the measures he would recommend, “I shall ask the Congress for the one remaining instrument to meet the crisis—broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.”[9]

No commander ever exhorted his troops with greater fervor than did General Hugh Johnson the people to adopt his banner, the blue eagle em-blazoned on the N.R.A. sticker, which bore the legend, “We Do Our Part.” In an appeal to women he proclaimed that “this time, it is the women who must carry the whole fight of President Roosevelt’s war against depression, perhaps the most dangerous war of all. It is women . . . who will . . . go over the top to as great a victory as the Argonne.”[10] While much more evidence could be cited as proof that New Dealers found in war, and especially in World War I, a major set of images and ideas for their programs, perhaps the case has been sufficiently made.

Since the idea of a planned economy as a source of the New Deal will be discussed in detail elsewhere, it can be dealt with summarily here. It may suffice to point out that many American intellectuals in the 1920s were greatly attracted by the idea. The planned economy was what most caught their eyes in what was going on in both the Soviet Union and Fascist Italy. It was that aspect of World War I mobilization, too, that was most appealing to them. As an historian of the New Deal has said, “The New Dealers shared John Dewey’s conviction that organized social intelligence could shape society,” and economic planning was at the forefront of their thinking at the time they came to power.[11]

What did the New Nationalism, World War I mobilization, and a planned economy have to do with remedying the depression? Nothing much, so far as I can see. Indeed, if I may turn the point around and state a conclusion in advance of the evidence for it, these ideas when implemented had much to do with prolonging the depression. But at this place in the discussion, what I want to emphasize is that much of the vast governmental control and regulatory mechanism brought into being by the New Deal is a relic, not of depression remedies, but of enthusiasms for kinds of government activity born and bred in the decades before the depression.

That is not to say that a great deal of mental energy, argument, and oratory was not put into trying to make these notions and programs appear relevant to the depression. It certainly was. Moreover, as a result of the effort most of the programs did have a thrust in the direction that it was claimed would bring the country out of the depression. To be specific, the thrust of the New Deal was to raise prices, and that was what the seers believed needed to be done. Thus, whether the New Deal was authorizing commissions, in the mode of the New Nationalism, setting up agencies patterned after those used during World War I, or attempting to plan the direction of the development of the economy, they were al! pointed toward raising prices and increasing what was called “purchasing power.”

The Hoover Years

Roosevelt was not the first President who sought to end the depression by maintaining or raising prices. Herbert Hoover, who preceded him, had followed a similar course, though less dramatically. Hoover met with business leaders when the depression got underway and urged them not to lower wages. He approved the Smoot-Hawley Tariff, which had as its object the raising of American prices by keeping foreign products out. He undertook an extensive public works program, which was supposed to provide jobs so that workers would be less likely to lower wages by competing for jobs. The Agricultural Marketing Act, passed during Hoover’s Administration, provided for making loans so that farmers could withhold crops from the market to keep prices up.[12]

Roosevelt was undeterred by the failure of the Hoover programs to achieve their object. So far as they considered them in that light at all, the New Dealers thought the Hoover effort was too timid and much too piecemeal. In any case, they were much more convinced of the healing powers of monetary inflation than Hoover had been. Before indicating the course that they pursued, however, some generalizations about what Roosevelt accomplished and some analysis of the causes of the Great Depression are in order.

It has often been alleged that Roosevelt saved American capitalism from its worst debacle.[13] If he did, I suspect it was accidental, but the generalization is too broad, too subject to semantic debates about the meaning of “capitalism,” to be of much use one way or the other. It is reasonably clear, however, that the New Deal rescued numerous banks, saved fractional reserve banking, preserved the Federal Reserve system and credit expansion based in considerable part on monetizing debt, and fixed an inflationary bias on the American government and economy from which they still suffer.

Prolonged Credit Expansion

The basic cause of the Great Depression was a prolonged credit expansion accomplished by monetizing debt. The immediate cause was a credit contraction. This set off the stock market crash which was accompanied and followed by a liquidity crisis that sent a prolonged series of shocks through the world of finance, reaching eventually to almost every credit organization in the United States. One way of describing what had happened was that a severe deflation, or series of deflations, had occurred. Another way of looking at it is to say the credit, investment, and spending declined precipitately. From late 1929 through early 1933 a vast adjustment in prices was taking place to compensate for the deflation. However, government action in general and the Federal Reserve in particular tried to prevent the economic adjustment from taking place. Indeed, this effort continued throughout the 1930s, prolonging the depression.

The New Dealers held generally that the problem was a shortage of purchasing power, or, at the least, a shortage in the hands of those who would spend it. In a speech at Oglethorpe University in 1932, Roosevelt said that there was “an insufficient distribution of buying power . . . .”[14] After attending a cabinet meeting on March 31, 1933, Harold Ickes, Secretary of the Interior, recorded this conclusion: “We are seriously concerned with the problem of creating buying power, which in turn, ‘will have the effect of opening factories and stimulating businesses generally.”[15] In the most obvious sense, there was clearly some sort of shortage of purchasing power by those who had great difficulty in providing for their most direct wants. That is, there was food, clothing, shoes, and other goods available in stores. Huge crops were produced on farms, much of which could hardly be sold. Factories that had the capacity to produce a great variety of goods stood idle, or were operated only occasionally. Yet, many people had to resort to charitable aid to get the wherewithal to live. Surely, they lacked the purchasing power to buy the goods.

Indeed, it may well be that an endemic shortage of purchasing power had plagued the American economy throughout the 1920s. I think so. Moreover, the shortage of purchasing power is closely connected to what I have asserted was the root cause of the depression, i.e., a prolonged credit expansion accomplished by monetizing debt. But before explaining that, let me make clear that I do not mean by shortage of purchasing power a shortage of money. That is an illusion, an illusion to which New Dealers were given and to which the Keynesians succumbed.

Money Defined

Money, per se, is not purchasing power. Money is a medium of exchange. It is, then, a medium through which purchasing power is exercised. To confuse money with purchasing power is akin to confusing postmen with those who have written the letters delivered to one’s mailbox. A person who believes that way might have what he considered to be a letter shortage. In which case, he might reckon that the way to get more mail would be to have more deliveries or more postmen. If this were done, however, it would not increase the amount of the mail. The postman is, in this sense, a medium through which mail is sent, as money is a medium for purchasing power.

What is purchasing power, then? It is goods (or services, if the distinction be made). Ultimately, all exchanges are of goods for goods, as J. B. Say pointed out a good while ago. In a money economy, of course, goods are ordinarily intermediately exchanged for money, and money is then exchanged for other goods. The fact that money can be exchanged for goods gives rise to the illusion that money is purchasing power. But it is not; it is only an instrument through which the purchasing power is conveyed. A shortage of purchasing power, then, is a shortage of goods, either to consume or to exchange for other goods.

Actually, the phenomenon which I wish to describe has no commonly accepted name. Rather, it has a name in international trade, but not in domestic trade. In international trade, it is a trade imbalance. For example, a country which imports more goods than it exports is said to have an unfavorable balance of trade. In general, such a condition could only exist over any extended period of time because of two things. Either the difference would have to be made up in some acceptable currency, gold, for example, or credit would have to be extended from the exporting countries to cover the difference. The imbalance can be described as a shortage of purchasing power in the country with an unfavorable balance of trade. And, in international trade, the reason for the imbalance is ultimately discernible as a shortage of saleable goods.

Monetary Intervention

In the domestic market, however, an imbalance of trade is neither easily recognizable as such nor measurable in such terms. Certainly, it is not recognizable as a shortage of goods with which to trade, nor, in the sense in which I would use the phrase, a shortage of purchasing power. It is not a normal market phenomenon at all. It occurs only as a result of a large scale intervention in the market. Specifically, it occurs as a result of a credit expansion fueled by a massive monetizing of debt. The imbalance comes about in this way. Transactions take place in which goods are advanced, on the one hand, but for which no goods either have been produced or exist, on the other. The transaction is made to appear complete by the promise of the buyer to pay in the future. In economic terms, the transaction will only be actually completed—a balance restored—when compensating goods are produced in the future.

This sounds for all the world like any transaction based on credit. So far as the individuals or organizations involved in the transaction may be aware of it there is no difference. There is a great difference, however, between monetized debt credit and credit based on saving. Savings are accumulations from past production; someone defers his own spending in order to enable another to spend, for a price, of course. Monetized debt credit, by contrast, is based on nothing other than a promise. It is wholly futuristic.

Monetized debt credit expansion introduces a whole set of temporary imbalances in the economy. There is a trade imbalance because the goods to be traded for other goods have not yet been produced. There is a price imbalance because prices are no longer in proportion to the money supply. There is a shortfall of real purchasing power, although the easy credit may give rise to the illusion that there is an excess of purchasing power. In the wake of the credit expansion there will be an imbalance of production, for many producers will be induced to increase their production, and even their facilities for production, for there are many willing buyers with the money, it seems, to pay for their wares.

“It was a vital necessity to restore purchasing power . . . .”


—Franklin D, Roosevelt,
July, 1933

Painful Adjustments

The imbalances resulting from any single monetary expansion, however large, will be only temporary. The market tends always toward balance, and if people are free to operate the market, balance will be restored. Prices will rise to compensate for the increase in the money supply. People will generally pay their debts out of production, if they can, and the trade imbalance will be restored. However, at this stage the shortage of purchasing which was there at the outset will become obvious. Much of production must go into retiring debts. Moreover, even when the debts are retired, there may need to be a further interval for savings to be made before many new purchases can be made. Many plants may lie idle, and there will be a depression. The adjustments that must be made to restore the balance are often difficult and unpleasant.

Let me emphasize that the villain of this piece is the credit expansion. The late Ludwig von Mises stated the case forthrightly and succinctly in these words:

The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome . . . of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved..[16]

Although a currency catastrophe is undoubtedly the ultimate outcome of a persistently prolonged credit expansion, that was not what appeared to loom ahead in the early 1930s. What immediately threatened was the collapse of the institutions that had been the instruments of the credit expansion, namely, the banks. There had been a whole series of credit expansions in the 1920s. A means for monetizing the debt had been established before World War I with the Federal Reserve system. One economist has estimated that the money supply in the United States was increased from $45.3 billion in 1921 to $73.26 billion in June of 1929.[17] Buying on credit became a way of life for many people in the 1920s. “By the latter part of the decade . . . there were some six billions of ‘easy payment’ paper outstanding.”[18] Optimism rose to new heights in the last years of the decade. People were betting on the future as never before, as billions of the easy money were poured into the stock market.

“We had a bad banking situation . . . . It was the Government’s job to straighten out the situation and do it as quickly as possible. And the job is being performed . . . . We have provided the machinery to restore our financial system.”


—Franklin D. Roosevelt March, 1933

The Federal Reserve banks began to try to cool the fervor in 1928, when they began to raise the rediscount rates. They tried to zero in on the stock market bull. On February 2, 1929, the Board declared: “The Federal Reserve Act does not, in the opinion of the Federal Reserve Board, contemplate the use of the resources of the Federal Reserve Banks for the creation or extension of speculative credit.”[19] Apparently, this and other credit tightening policies finally bore fruit. At any rate, the stock market crashed in October, and a drastic deflation ensued. Men were thrusting for liquidity, for the means to meet their debts and obligation. The pressure on banks was great and tended not to decrease with the passage of time. In 1929, 659 banks failed; in 1930, 1,352; in 1931, 2,294, and in 1932, 1,456.[20]

Banking Holiday

When a bank failed, most of the deposits tended to vanish into thin air, as it were, thus reducing the money supply further. But the most frightening aspect of this was yet to come. As Roosevelt’s inauguration approached, the banking crisis worsened. On February 14, 1933, the governor of Michigan declared an extended banking holiday. On February 24, the governor of Maryland declared a three-day banking holiday. “On March 1, the governors of Kentucky and Tennessee proclaimed bank holidays; that night the governors of California, Louisiana, Alabama, and Oklahoma pursued the same course. By March 4, the day of Roosevelt’s inauguration, thirty- eight states had closed their banks, and banks operated on a restricted basis in the rest. Shortly before dawn, Governor Herbert Lehman of New York and Governor Henry Horner of Illinois suspended the banks in the two great states that dominated the financial life of the nation.”[21] Most stock exchanges and futures markets were also closed. American finance might not be out, but it was certainly down.

President Roosevelt proclaimed a national banking holiday and called a special session of Congress, intending primarily to deal with the banking emergency. (The regular, “lame duck,” session had already met for the year and adjourned.) Whether Roosevelt would be an inflationist or not was somewhat confused from the outset. It may be that the confusion arose from his failure to connect government fiscal policy with monetary expansion. Or, he may have deliberately chosen to treat them as if they were quite separate. As a candidate, he had promised economy in government, the cutting of expenses, and a balanced budget. His Budget Director was certainly of that persuasion, and from time to time economy moves were got underway.

What is not in doubt is that overall the monetarists around him won out generally. From the moment he came to office, too, he began to clear the ground for increasing the money supply and to take the steps for credit expansion. There is no doubt, either, that, above all, he wanted to raise prices and that he accepted a course of action which identified money with purchasing power. As soon as Congress assembled on March 9, 1933 in special session, the House of Representatives was presented with an emergency banking bill by the Administration. The bill gave the color of law to actions already taken by the President, such as the bank closing and the halting of gold transactions. More, it gave him extensive authority over gold, provided penalties for hoarding, authorized the issuance of new Federal Reserve notes, and provided for the reopening of those banks adjudged to be sufficiently liquid to do so.

On the same day that the bill was introduced, “With a unanimous shout, the House passed the bill, sight unseen, after only thirty-eight minutes of debate.”[22] By early evening, the Senate had passed the bill by a vote of 73-7, and the President had set his seal upon it well before bedtime. Not even declarations of war have usually been acted on so swiftly, or in such an atmosphere of dire emergency.

Calling All Gold

Roosevelt moved swiftly in the ensuing days and weeks to remove virtually all restraints on credit and monetary expansion. In April, he issued an executive order that all gold was to be turned in to Federal Reserve banks by May 1. On April 20, he ordered an end to the export of gold (usually referred to as going off the gold standard). On June 5, by Joint Resolution Congress repudiated all private or government clauses in contracts requiring payment of gold. Congress declared that such clauses were “inconsistent with declared policy of the Congress to maintain at all times the equal power of every dollar . . . in the markets and in the payment of debts.”[23]

Meanwhile, the government began its move to bail out, shore up, control, expand, and eventually create new credit expanding institutions. A Federal Securities Act was passed May 27, 1933, requiring full disclosure on securities offered to the public and the registration of most of them. The Securities and Exchange Commission was set up the next year to enforce these and re lated regulations. During the special session in 1933, the Federal Deposit Insurance Corporation was set up to insure bank deposits. The act was intended to reassure depositors, and it did much to rescue fractional reserve banking.

The Reconstruction Finance Corporation, which had got under way during the Hoover Administration, was used much more vigorously under Roosevelt. Jesse Jones, a Texas banker, used it to fuel credit expansion through existing banks. “Instead of lending money to banks, and thereby increasing their debt, as had been done in the Hoover regime, Jones sought to enlarge their capital. By buying bank preferred stock, he bolstered the capita] structure of banks, created a base for credit expansion, and made it possible for the deposit insurance system to function.”[24]

Inflationary Measures

The government moved quickly, too, to stop the widespread mortgage foreclosures and to rescue the banks and credit institutions from the burden of carrying them. A Home Owners Loan Corporation was created to refinance home mortgages and make other types of homeowner loans. By the time it went out of business it had made loans on over a million mortgages. A Farm Credit Administration enabled farmers to refinance farm mortgages. The Commodity Credit Corporation was a new agency to make loans on crops. Other new credit expanding institutions eventually set up were the Federal Housing Administration in 1934 and the Farm Security Administration in 1937. The main thrust of these various organizations was either to expand credit or to make it possible for banks to do so.

In 1935, the Federal Reserve system was revamped. The authority of the Federal Reserve Board over Federal Reserve Banks was increased, giving it greater control over rediscount rates, and expanded the kinds of instruments that could be rediscounted. The last remaining bar to flooding the country with Federal Reserve notes had already been so lowered that it was hardly a factor in the 1930s. The gold reserve requirement for backing the notes had been made into more of an invitation to money creation than an immediate restraint on it.

In 1934, the price of gold was pegged at $35 per ounce. This was far above its price when there was a market in the United States as well as above the world market price. Thus, existing supplies could serve as reserves against much greater note issues, and supplies of gold were greatly increased as much of the gold in the world flowed into the United States. Since the gold reserve requirement was only a fraction of the dollar amount of notes to be issued, the Federal Reserve Board could now inflate, if not at will, at least bountifully.

What I have been describing, of course, are the measures taken by the New Dealers to accomplish rein-flation, or “reflation,” as some economists called it at the time. Under the illusion that the cure for the depression lay in raising prices and that money is purchasing power, the New Deal inflated away. This did not succeed in ending the depression in the 1930s. That could only be done by producing what people wanted, not what they might be induced to buy by credit expansion.

What the New Deal did succeed in doing was establish a bent for inflation which has us still in its stranglehold and provide an institutional framework for continuing the inflation indefinitely. Ever since, any slowing up of credit expansion or slight contraction has resulted in recession or depression. The reason for this is that the trade imbalance, or real shortage of purchasing power, which is temporarily obscured by credit expansion, rises to the surface unless there are incremental increases in the money supply. Meanwhile, our money is progressively destroyed, and the credit on which we would live becomes ever more expensive. []

Next: New Deal Collective Planning.

1.   Eric F. Goldman, Rendezvous with Destiny (New York: Vintage Books, 1956), p. 252.

2.   Richard Hofstadter, The Age of Reform (New York: Alfred A. Knopf, 1955), pp. 300-01.

3.   Rexford G. Tugwell, The Brains Trust (New York: Viking, 1968), p. 175.

4.   See Arthur M. Schlesinger, Jr., The Crisis of the Old Order (Boston: Houghton Mifflin, 1957), p. 419.

5.   George B. Mayer and Walter O. Forster, The United States and the Twentieth Century (Bos ton: Houghton Mifflin, 1958), p. 248.

6.   Schlesinger, op. cit., p. 415.

7.   Quoted in Arthur M. Schlesinger, Jr., The Coming of the New Deal (Boston: Houghton Mifflin, 1959), pp. 87-88.

8.   William E. Leuchtenburg, Franklin D. Roosevelt and the New Deal (New York: Harper & Row, 1963), p. 63.

9.   Ben D. Zevin, ed., Nothing to Fear: The Selected Addresses of Franklin D. Roosevelt (New York: Popular Library, 1946), p. 30.

10.   William E. Leuchtenburg, ed., The New Deal (Columbia: University of South Carolina Press, 1968), p. 44.

11.   Leuchtenburg, Franklin D. Roosevelt and the New Deal, p. 33.

12.   For a more complete discussion, see Clarence B. Carson, The Fateful Turn (Irvington, N.Y.: The Foundation for Economic Education, 1963), ch. 9.

13.   New Dealers started this rumor, no doubt. See, for example, Frances Perkins, “The New Deal as Savior of Capitalism” in Leuchtenburg, The New Deal ch. 8; for his version of much the same information, see The Secret Diary of liar-old L. Ickes: The First Thousand Days (New York: Simon and Schuster, 1953), pp. 30-31.

14.   Tugwell, op. cit., p. 172.

15.   Ickes, op. cit., p. 14.

16.   Ludwig von Mises, Human Action (Chicago: Henry Regnery, 1966, 3rd rev. ed.), p. 572.

17.   Murray Rothbard, America’s Great Depression (Princeton, N.J.: D. Van Nostrand, 1963), p. 88.

18.   Frederick L. Allen, Only Yesterday (New York: Bantam Books, 1959), p. 119.

19.   Quoted in ibid., p. 217.

20.   Arthur S. Link, American Epoch (New York: Alfred A. Knopf, 1955), p. 359.

21.   Leuchtenburg, Franklin D. Roosevelt and the New Deal, p. 39.

22.   Ibid., pp. 43-44.

23.   Henry S. Commager, ed., Documents of American History (New York: Appleton-Cen-tury- Crofts, 1963), vol. II, p. 263.

24.   Leuchtenburg, Franklin D. Roosevelt and the New Deal, p. 71.