1/04/2009

The Forgotten Man by Amity Shlaes



On Roadkill's recommendation, I read The Forgotten Man by Amity Shlaes. Shlaes is a columnist for Bloomberg and a senior fellow on the Council on Foreign Relations. She writes on political economy and taxes.

I found this book very interesting and an excellent example of how hindsight can be somewhere around 20/20 vision -- especially if you have a free market optometrist. From a free market perspective, Shlaes weaves an interesting story that basically says nothing FDR did help shorten or reduce the impact of the Great Depression.

As I read this history, I kept thinking of something my Old Man used to say concerning having kids -- "Kids aren't born with instruction books." As we are seeing today, no one really knows what to do to fix our ailing economy. The Big Government experts are calling for big government remedies for the cure. Throw big piles of money at the sick economy. Lets hope that works. At the same time, a lot of former free-marketeers have their gloves open and are yelling for Big Gov to pitch a pile of cash their way. Quietly sitting in the Bull Pen are the free marketeers spitting their disgust at the economic game being played and telling us to just like the economy run its course.

I found it interesting the FDR kept throwing ideas at the economic wall and seeing what would work and what would get past the legal umpires. It something didn't work or ran into a Constitutional wall, he dropped it and tried something else. Personally, I admire FDR for having the political guts to try different things. Obviously it wasn't the case in the 1930s where our leader just sat on his hands and let the economic nature take its course. It sure isn't today.

Even Hoover didn't sit on his has. He tried thinks like putting tariffs in place that caused foreign competitors to play the same game. This game led to a deterioration of the economy's health. Hoover received a lot of ink in this book and I found it interest to get past the caricature of Hoover we are so often fed.

Hoover was an impress individual. As Secretary of Commerce under Presidents Harding and Coolidge, he championed government intervention and pushed for economic modernization. Coolidge called Hoover "Wonder Boy," because he was always coming up with big ideas. Hoover's story is a rags to riches story. Before entering public service, Hoover was probably one of the richest non-capitalists in the country. When he was elected President in 1928, Hoover had never been elected to any previous office.

The book also discussed Andrew Mellon and his run-ins with FDR. Mellon must be considered one of the founding neocons. He advocated cutting the income tax rate, cutting taxes on low incomes, reducing the federal estate tax and making government more efficient. Hoover too was big on making government more efficient. However, I think the two came at it from different angles. Hoover was coming more from the "scientific management" school for Fredrick Winslow Taylor and Mellon from the "keep you hands off of my pile" school of business.

Another interest book on Mellon is Mellon: A American Life by David Cannadine. It covers the Mellon family history and details the building of an American dynasty and world behind the Mellon money. Likewise, another related book about Henry Clay Frick titled Meet You In Hell by Les Standiford. Both these books give you a detail look into two of the big robber barons and how the smell of money make Pittsburgh the major driving wheel in America's industrial engine in the late 1800s and early 1900s.

Another book in checked out was FDR by Jean Edward Smith. It gave a cradle to the grave overview of FDR's life and added addition insights into the touch points between Hoover, Mellon and the economic tinkering of the 1930s. As I stated earlier, it's great to be an armchair quarter reliving the what-if game that hindsight provides.

I don't pretend to be any expert on the economic perspectives of the Great Depression, but I am very interested in the big names and no names involved in that time in our nation's history.

4 comments:

Anonymous said...

Amity Shlaes has been discredited by more than one economic historian. A more than decent rebuttal to the conservative bunk being pushed about the failure of the New Deal can be found in David Sirota's article at Campaign for America's Future at http://www.ourfuture.org/print/32872.

Roadkill said...

Sunny,

I’m glad to see that you read the book and I appreciate the fair review you provided your readers. Your point that, in Shlaes view, nothing FDR did helped shorten or reduce the impact of the great depression is accurate, but its worth pointing out that Shlaes does find that FDR’s establishment of the Securities and Exchange Commission, banking reforms, and Federal Reserve reform all had a stabilizing effect on the economy. She also lauds his efforts to undo some of the damage of the Smoot-Hawley tariff.

My concern is how you see FDR’s feckless and capricious economic initiatives as “”having the political guts to try different things.” The problem here is that FDR obviously was in uncharted territory and really did not know what he was doing. I find it hard to admire someone like that, because it smacks of arrogance and a willful disregard for consequences. Makes you wonder how FDR’s legacy would have been written had we not been plunged into WWII, where his strengths as a politician (as opposed to an economist) clearly benefited the country. (And the industrial ramp-up, by-the-by, which also helped to pull the economy out of depression).

As for anonymous’s assertion that Shlaes’s work has been discredited, which be backs up with a link to David Sirota’s opinion piece, I must say that a disagreement with the thesis is not, ipso facto, a discrediting of it. Sirota’s focus and critique of the unemployment statistics used by Shlaes is itself interesting in that the alleged overestimation of unemployment numbers (due to counting as unemployed those who had part or full time work in make-work programs such as the WPA) was first questioned by conservative economists to discredit the magnitude of the depression’s unemployment problem (politics makes strange bedfellows, doesn’t it)). But it should be noted that Shleas herself acknowledges this issue of unemployment statistics in her bibliographic notes, and states that she has used the numbers traditionally used by political and economic historians of the great depression. By the way, Sirota is a journalist and political activist, not an economist or an historian. He has worked on a number of Democrat campaigns; his interests are political, not economic, and those interests are and always have been of the left. He is the one whose objectivity should be in question.

Sirota does provide some interesting statistical information regarding unemployment and job creation across presidential administrations from FDR to GW Bush. If true, its useful stuff; and I’m going to look into it further. Then again, I’m going to keep Mark Twain’s adage regarding statistics in mind as I do…

Thanks again for looking into “The Forgotten Man.”

Sunny B. said...

RK:

One thing about FDR that struck me as scary was the part about adjusting the gold standard rate or the price of gold. It sounded like he changed it on a lark just to see what would happen. Maybe that's a good thing and maybe it's bad.

Maybe WWII was a God send for FDR. Maybe it would have taken decades to pull things out. Having WWII in the Great Depression model makes an interesting variable for today's equation makers. To me, it's obvious that they too are just throwing things against the economic wall.

I've yet to hear anyone speak confidently about the steps that are being taken -- either way. I discount the Rush's and Jason Lewises -- although not totally. I don't believe anyone who tells me things will be on the uptick later this year. Maybe next year or maybe 2011. Time will tell, it's only specualtion now and, coincidendtly, it's speculation that got us here.

I checked out Anon's link to the Sirota piece. It's interesting information, but I consider the source. I'm not really trying to pin the blame on anyone. I'd prefer to work towards fixing it. FDR is no more of a saint the George W. Bush. I can't honestly say the country would have been better off with Gore as President. We don't know. Those that say that assume that the label Democrat will make everything better.

I believe there were plenty of Democrats (Hillary, Pelosi, Reed, etc.) who voted for war in Iraq. I believe those names are tied to the Yes voting for the $700 billion TARP that those same names are squacking about now.

When it comes to asking where the money went to the banks and what are they doing with it, it is obvious that they haven't watch It's A Wonder Life in a while. I all gets explained during the run on the bank. They just can't go into the backroom and get Tim's $15 that he deposited and they can't exactly traced where that $15 has went.

Maybe our Senators and Congress people should tell the banks that they gave the money to -- hopefully they kept track of that -- to give the money back if they can't figure out how the money has been used. From what I've read, many of the banks didn't even want it.

CANRAC said...

I'm just wondering what Mark CRYbonics take is on all of this. You know the guy who'd been burying change in his backyard waiting to say "I told you so".