Bloomberg financial columnist and senior fellow at the Council on Foreign Relations Amity Shlaes questioned the common conceptions of the Great Depression in her lecture, “The Forgotten Man: A New History of the Great Depression.”
During his introduction, Dean and Vice President for Academic Affairs Larry Breitborde recalled personal stories told by his parents and grandfather which referenced Franklin Delano Roosevelt’s name with a “sigh of admiration.” After Breitborde read Shlaes’ book, The Forgotten Man, he discovered a perspective that greatly differed from the recounts of his family.
Shlaes began the lecture listing the traditional views of the Great Depression. The first thing people learned was the Depression was terrible. “What we have now would be a little rain storm next to a [Hurricane] Katrina in terms of unemployment. This, to Depression people, would almost be a good time.” To Shlaes, the main thing about the Depression was its duration, lasting from 1929 to 1940.
The second thing people learned was that Herbert Hoover, the president before FDR, was a “goofball” whose “laissez-faire politics made [the Depression] worse.” He greatly contrasted with FDR, who was thought of as being able to find the problem, understanding its magnitude, and explaining how to solve it. People also thought the “forgotten man” phrase came from Roosevelt, as he stated, “I want to help the forgotten man in the bottom of the economic pyramid,” during his presidential campaign in 1932.
Another conception was the Depression was a “mysterious, difficult challenge” which needed “clever brains” to figure it out. Credentials, especially those from the Ivy League, played a big role in assuring people that the country that the government could fix the problem.
Furthermore, Shlaes said, the government felt a need to clean up corrupt Wall Street and that it was better than the private sector. It was thought that raising taxes was a solution to social inequality, as making society more level would, in turn, make society healthier.
During Hoover’s presidency, taxes were raised from 29 percent in 1920s for the top income, up to 62 and then around 90 percent by World War II. Property rights were not thought to matter because they were “subordinate to the general economic stress.” Organized labor was going to be part of the solution and was benign for the economy as strong labor was thought to make for a strong economy.
The final concept of the Depression was that inaction was fatal. Action for action’s sake was good, as illustrated by the common phrase, “somebody had to do something.” As Shlaes discussed the popular economic theory of Keynesianism during the Depression, under which spending would jumpstart the economy, she told of a story in which economist John Maynard Keynes was in the bathroom with another economist, knocked all the towels onto the floor, and said making a mess is better than nothing.
After Shlaes did research, she discovered just how terrible the Depression was. She read about how Knox College reduced faculty salaries by 20 percent in 1933 because it was absolutely necessary to adjust the budget to the financial situation. She discovered that some of the things the government did were good, such as having deposit insurance and creating the National Youth Organization, which created work study jobs.
However, she found a different Hoover who did not follow laissez-faire politics but was actually a control freak and liked to diagnose problems. He followed policies of protectionism, despite knowing it would be bad for economy overall. As the tariffs were placed, foreign countries retaliated, making foreign goods more expensive and slowing down the economy. Hoover thought raising wages would improve the economy. Hoover and Roosevelt were much more similar than people thought. Roosevelt was also not the only person defining “the forgotten man.” William Graham Sumner, in his book, The Forgotten Man, had “a different forgotten man also relevant to 1930s.”
In this algebraic formula, he said A wants to help X. B wants to help X. Shlaes continued, “When A and B get together to pass a rule, a law that coerces C, a third party, into funding their perhaps good, but perhaps questionable project for X, C is the forgotten man.” C is ultimately the man who pays for what the government is doing and yet not thought of.
Shlaes discussed how credentials and brains produced a certain arrogance and resulted in the New Deal having a “criminal component,” as it enforced rules by “using class and credentials to belittle people.” Central to dealing with the Great Depression, the National Recovery Administration, created in FDR’s first 100 days, thought the economy should be run top down. It had views of economic policies, such as competition causing depression, as prices were too low so people had no money to spend. It couldn’t let a customer pick his product because it slowed down the sale and was not efficient. People had to pay high wages because low wages slowed down recovery.