Day By Day

Monday, February 02, 2009

The Historians' War Over the New Deal

Franklin D. Roosevelt was the founder of the modern Democratic Party. His political success became the standard against which subsequent Democrats measured their own accomplishments. You can see it in little things and great. FDR gave rise to HST, to JFK, to LBJ, to HHH -- it was not until Jimmy Carter that Democrat Presidential aspirants felt comfortable displaying a nickname rather than initials. Similarly Roosevelt's New Deal gave rise to the Fair Deal, the Great Society, and is today invoked by the present occupant of the White House as a template for his own proposed policies.

A generation of liberal historians, led by the great sycophant Arthur Schlesinger Jr, produced a narrative that held Roosevelt to be the greatest of the Twentieth Century Presidents, perhaps the greatest of all time -- the man whose wise stewardship of the economy led America out of the Depression and whose political skills saved it from radicalism [historians disagreed as to whether the primary threat came from the left or the right, but whatever Roosevelt saved us from it]. And then, to cap it all off, he defeated Hitler and saved the world from racist tyranny. This naive and self-serving narrative was the standard account presented to generations of students in the middle decades of the Twentieth Century. Sure, in the Seventies it began to be challenged by left wing scholars, and foreign writers questioned the primacy of American actions in WWII, and finally in the Eighties conservatives began to question the essential character of Roosevelt's economic reforms. But the cult of FDR still dominated American history texts right up to the 1990's.

In the new conservative narrative Roosevelt's economic policies, rather than being wise and rooted in sound Keynesian economic theory, were incoherent, contradictory and counter-productive. They retarded, rather than facilitated economic recovery. The conservative narrative is summarized in Sunday's Washington Post by Amity Schlaes, whose book The Forgotten Man is an excellent popular critique of the New Deal based on current scholarly understandings. Read her article here. Go ahead, do it -- it's not long.

Shlaes points out that Roosevelt's New Deal policies did not do much to reduce unemployment; did not stimulate the economy; marked a massive intrusion of government into the private sector, crowding out investment capital; represented a sustained attack on capitalism and capitalists that discouraged investment; and instituted a formal and legalistic hostility between labor and capital that seriously inhibited economic growth. As for government spending -- after eight years of government intervention Roosevelt's advisor Henry Morgantheau could sum up the results this way:
"We have tried spending money.... We are spending more than we have ever spent before and it does not work. . . . I say, after eight years of this administration, we have just as much unemployment as when we started . . . and an enormous debt to boot."
Despite the historians' assault on Roosevelt's record Democrats remain true to his vision. They have been forced to admit that the New Deal did not bring recovery, but assert [as Obama did recently] that the failure was because Roosevelt did not push his reforms far enough and that sufficient government regulation and spending did not come until World War II [which Paul Krugman recently characterized as a massive public works project], when the economy really did recover. This is the argument being put forth by supporters of the current administration which has announced its intent to emulate FDR's policies.

Who is right? My sense is that the conservative critique is far more accurate than the standard narrative on which current political leaders were raised. But consideration of who is right or wrong are largely irrelevant to the current debate. Democrats have a narrative that justifies all that they have done or sought to do over the course of the past eight decades. They will not abandon it anytime soon. Conservatives have a counter-narrative that will inform their critiques of Obama's administration. It, too, is not likely to change much. In today's political climate history is not used as a guide, but rather as a justification, for current policies and political postures. But then, as any serious student of historiography can tell you, it has always been so.


Also see this column by Penn economist Harold Cole and UCLA economist Lee Ohanian in the Wall Street Journal.

The New Deal is widely perceived to have ended the Great Depression, and this has led many to support a "new" New Deal to address the current crisis. But the facts do not support the perception that FDR's policies shortened the Depression, or that similar policies will pull our nation out of its current economic downturn.
I agree with Instapundit who writes that current nostalgia "isn’t based on the New Deal helping the country. It’s based on the New Deal helping politicians."