The Forgotten Man, by Amity Shlaes. HarperCollins, 2007, 464 pages.

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A Low, Dishonest Decade

by Timothy Sandefur

Franklin Roosevelt famously kidnapped William Graham Sumner's "forgotten man," the silent taxpayer whose earnings are taken to empower the government's compassion industry. Roosevelt used the term to refer to the poor man who needed government aid, thus forgetting, just as Sumner had anticipated, the worker who produces the wealth that the government redistributes. This was all too typical of the New Deal, which consisted for the most part of rhetorical, even propagandistic, disguises for bureaucratic gimmicks that were actually perpetuating unemployment, stifling innovation, and chasing wealth into hiding. Yet with a few minor exceptions — notably Jim Powell's "FDR's Folly" and Hadley Arkes' "The Return of George Sutherland" — historians have clung to the Roosevelt Myth, insisting that the New Deal — or worse, World War II — somehow cured the Great Depression. In fact, it was neither; it was the gradual elimination of official obstructions, most of all in the demilitarization following 1945, that restored prosperity and gave birth to the modern consumer culture.

But the Roosevelt Myth is more than a simple error of fact; it has a normative component that makes it one of the most pervasive and harmful in contemporary America. Forty years ago, historian Arthur Ekirch, Jr., wrote that "the years 1929 to 1941 transformed the traditional values and attitudes of the American people, conditioning them to look, as never before, to the national state as the basic arbiter and fundamental factor in their lives." And indeed, the notion that government planning rescued the economy — or the almost equally perverse notion that it "saved capitalism" — is firmly embedded in the catechism of untruths that rationalizes the ambitions of both Left and Right. It does not appear that any politician since Ronald Reagan has seriously questioned the success of the New Deal, and even he did not challenge its theoretical assumptions or moral pretensions.

Meanwhile, "agricultural adjustment" and similar schemes, allegedly devised to rescue America from a temporary economic emergency, remain in place more than half a century later, hurting producers, benefiting agitated constituencies, and redistributing wealth fast enough to provide the illusion of fostering prosperity (the real meaning of Keynes' "velocity of circulation"). Social Security steams undeterred toward bankruptcy, the "Rural Electrification Administration" keeps its doors open, long after the last outhouse in Appalachia was wired, and bureaucrats operating under the Agricultural Marketing Agreement Act still confiscate tons of fruits and vegetables in order to raise the prices consumers pay and benefit agribusiness.

The most dramatic effects of this creaking, rusty machine of government meddling are on individual entrepreneurs who ask nothing more than that the government leave them alone to earn an honest living for themselves and their families. Take, for example, Marvin Horne, the Fresno-area raisin grower who was fined $275,000 three years ago under a Depression-era law that forbids farmers from selling all the raisins they grow. They are required instead to hand over a large portion — usually a quarter, sometimes half — of their raisin crop to government regulators so as to increase the price of raisins and "stabilize" the market.

"This is America," a bewildered Horne told reporters. "I don't owe anybody any portion of my crop. The government cannot confiscate any of my produced raisins for the benefit of their program." But of course they can, and they got away with it. When other growers demanded just compensation for the raisins they lost, a federal trial court told them that the confiscation was the price they had to pay for the "privilege" of selling their raisins in "interstate commerce." The notion that selling the (literal) fruits of your labor is merely a government-created privilege is the most insidious of all the New Deal's awful legacies.

In his book on Justice Sutherland (Roosevelt's great legal opponent), Arkes called for someone to write a "people's history of the New Deal," which might detail the many ways in which FDR's reign oppressed workers who wanted nothing more than to earn their living without unreasonable interference. Regular entrepreneurs like the Schechter family of New York, for instance, who found themselves subject to federal "codes of competition" under the National Industrial Recovery Act — the most extensive and authoritarian attempt ever floated for controlling the economic activity of Americans — were deprived of their right simply to work, free from absurd meddling by alleged economic "experts" engaged in "bold, persistent experimentation." These codes, among other things, required poultry sellers to charge above certain minimum prices, and prohibited consumers from choosing the chickens they bought. The theory was that low prices harmed producers, so the law should require buyers to pay more for lousy chickens than they otherwise would.

Obviously this increased food prices for buyers who were already suffering, in order to transfer wealth to private interests. Moreover, it encouraged wasteful practices by industries whose productive capacities were desperately needed. The restrictions were particularly harsh on family-owned businesses, such as the Schechters' poultry company, that lacked political influence and the market dominance that allowed larger companies to suck it in and survive under the NIRA's regime. The Schechters challenged the law in the Supreme Court, and in 1935 the justices unanimously annulled the Act, precipitating Roosevelt's infamous showdown with the judiciary. The case is a high drama that focuses attention where it ought to be focused: on the serial anticompetitiveness of bureaucrats who toyed with the livelihoods of the nation's persevering workers.

Amity Shlaes' new history of the Great Depression aims to address these issues. Her chapter on the Schechter case is one of very few in-depth treatments of the case. She accurately describes the way muddleheaded plans — like the "undistributed profits tax" imposed on corporations — obstructed recovery and even worsened economic conditions. Shlaes describes the failed "resettlement" experiments in which federal authorities, led by Stalin admirer Rexford Tugwell, moved poor farmers onto government-managed communes, and the drag on the economy produced by Roosevelt's rhetorical attacks on the wealthy, his increases in taxation, and his coddling of labor union activism.

Shlaes is right in arguing that restrictions on firing employees blocked businesses from increasing their efficiency and led them to close down instead. Meanwhile, the growth of the welfare state sapped ambition and initiative, and encouraged citizens and businesses to look to government to solve their problems — diverting time and energy that could have been spent creating jobs and satisfying consumer demands.

Perhaps worst of all, the vacillating policies of FDR — a man who changed course rapidly and often without warning — deterred businesses from investing and expanding. Roosevelt, Shlaes writes, "could not make up his mind which problem was the worst, or which must be addressed, and in what manner. And he could not see that it was important to be consistent." History shows that economies can find ways around almost any obstacle, even if transactions end up highly inefficient or are driven underground. But when the obstacles shift their positions, investors become less willing to run risks. And FDR didn't merely vacillate; he also took investment capital away, giving it to shareholders or welfare recipients, or transferring it to government make-work projects that served the politicians' own interests rather than consumer need. Most blatant were the projects for writers and artists, who spent government largesse glorifying Roosevelt and his administration in plays, photographs, and murals.

To put this simply: FDR was no hero; his New Deal was unconstitutional and wasteful, a deterrent to recovery and a major assault on American values that has left this generation chained to an awful legacy it cannot seem to shake off. All of this is prime material for a correction of the record. But although eagerly anticipated by many libertarians, Shlaes' book disappoints. It is not a narrative history, or a precise detailing of the intellectual developments of the period; it is written in an almost impressionistic style that is not really suited to history. Shlaes skips back and forth between different focuses of action so quickly that it is exceedingly hard to keep track, and she often drops in details that, instead of illuminating, merely intrigue or confuse.

Briefly describing a Supreme Court case in which the Agricultural Adjustment Act was held unconstitutional (her entire discussion takes up four sentences), Shlaes mentions that "Stanley Reed, the lawyer for the government — the same one who had argued Schechter — became ill and had to stop his argument and sit down." What was his illness? How does it relate to the case? Shlaes says nothing more. Another paragraph begins, "That month, 'Migrant Mother' was published for the first time. At the Tennessee Valley Authority, Arthur Morgan was still seeking a territorial truce with the private companies. To him the war with them was a distraction . . ." Shales goes on to discuss the conflict between the TVA and private utility companies. But what does this have to do with the publication of Dorothea Lange's famous "Migrant Mother" photograph? Nothing at all.

These may seem minor infractions. But 454 pages of such quick glimpses and rapid-fire changes of subject leave one dizzy, not enlightened. Shlaes' book never resolves into clarity, compelling narrative, or systematic argument.

To succeed, a period history relying on representative characters simply must tell a story; Louis Menand's "The Metaphysical Club" or H.W. Brands' "The Age of Gold" come to mind. Rather than tell an integrated story, however, Shlaes piles characters and incidents upon one another, with a bewildering effect. To take one example at random: in the five paragraphs on pages 198–99, she describes Tugwell's confirmation hearings before the Senate, the signing of the Reciprocal Trade Treaty, the formation of the Securities and Exchange Commission and the choice of Joseph Kennedy to lead it, and a meeting between Roosevelt and John Maynard Keynes, who criticized some aspects of the New Deal. (The Keynes meeting occurred in May, and the treaty was in June, but Shlaes tells them out of order.) The SEC isn't mentioned again for a hundred pages, and the treaty never again. If readers can absorb a theme and remember an argument from such shotgun details, they must be better students than I.

Of course, one can write a scholarly history that is not narrative, but then it must be structured as a logical and systematic argument, as in "FDR's Folly" or G. Edward White's marvelous "The Constitution and The New Deal." This style requires the writer to stick with a theme, assemble evidence to fit the argument, and carefully cite his sources. Shlaes doesn't do that, either. In fact, her style seems much more suited to interviews (such as her very interesting appearance on a recent "Econtalk" podcast) or short articles in The Wall Street Journal. There, her brief idiosyncratic closeups on detail are helpful since the format does not call for stamina.

Alas, the flaws of Shlaes' book are fatal, because her interpretation of the New Deal is still unfortunately in the minority. The generally accepted tale of the New Deal is still that Roosevelt and his witch doctors really did save the country. Overturning the Roosevelt Myth requires a powerful argument and a "people's history" that will tell moving human stories to a large audience. For that, we readers still have to wait.

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