A Very Short Introductory Post
Good morning (from the West Coast, anyway), this is Eric Rauchway and I'm delighted to be asked to talk about my book, The Great Depression and the New Deal: A Very Short Introduction. I'll use this post as an even shorter introduction.
If TPM readers have heard of me in connection with the New Deal before (which I don't assume you have) it might be because Paul Krugman or maybe Tim Fernholz sent you my way in connection with the series of "New Deal Denialist" posts on The Edge of the American West.
This book doesn't sound anything like those posts, I think. I wrote it in a very different political climate; in fact, I had just finished writing it when I got asked to review Amity Shlaes's sympathetic account of Liberty League talking points, which has since enjoyed astonishing success at influencing public discussion of the New Deal. So this is an extreme case of someone writing a book in a very different world than the one in which it was published.
And while I'm happy to use our time here to talk about why the conservative critique of the New Deal is wrong, I do need to say that that's not the discussion I meant to have because of this book, at all. In fact, apart from these ridiculous political arguments, the performance of the economy under the New Deal is probably the least controversial point in the literature on the period: everyone knows the economy did immediately better once Roosevelt took office and rescued the banks, and it recovered at a rapid rate under the New Deal (with the exception of the 1937-38 recession) but did not return to normal levels of employment till the 1940s.
I think there are a couple of potentially much more interesting points, to do with the best recent work of both economic and political historians.
First interesting point begins with the question, why was there a Great Depression in the first place? In the book, I've presented a twofold explanation, pointing to the system of debt left over from World War I, in which everybody owed everybody else money, and in turn everyone owed money to the United States. John Maynard Keynes took a look at this system in 1919 and predicted civilization-shattering depression, because there were "no provisions for the economic rehabilitation of Europe ... or to adjust the systems of the Old World and the New." Pair this internationally shaky system of debts with a US economy newly driven by consumer borrowing, add a stock-market crash to suddenly give those borrowers pause, and down it all comes.
So the question one might ask here is, what if anything could the US have done differently to avoid this disaster?
Second interesting point begins with the question, what kind of government did the New Deal leave us, and why? You hear a lot about what FDR wanted, but FDR's intentions are famously difficult to divine, and in the book I took pains to show that we need not necessarily bother to try: the New Deal didn't spring fully formed from Roosevelt's forehead, rather it took its final shape because Congress, the Supreme Court, and the electorate pushed and pulled at Roosevelt. Some of the New Deal's most successful measures -- FDIC, the Wagner Act -- Roosevelt didn't like, at first.
And in the end -- and here I've borrowed John Kenneth Galbraith's concept of "countervailing power" -- the New Deal produced a state that, rather than trying to arrogate decisionmaking power to itself, worked to make sure that individuals and associations had greater bargaining power for themselves than they otherwise would have. As Robert Wagner said, you make sure the unions have power so the government doesn't; "[W]e intend to rely upon democratic self-help by industry and labor instead of courting the pitfalls of an arbitrary or totalitarian state."
So the question one might ask here is, what happened to the principle of countervailing power after the New Deal? Did it remain a core concept of American politics, and if so, for how long?
I'm looking forward to seeing what the other participants have to say.
Countervailing power or in other terms: institutionalized adversarialism. And that as opposed to the enlightened leadership of a technocratic elite. But both Paul Krugman and Newt Gingrich grew up dreaming of being Hari Seldon, the intellectual hero of Isaac Asimov's 1950's intellectual trash fiction Foundation novels. Celebrations of academic rationalism, dreams of technocratic utopia and the fire under the ass of Sputnik all moved us away from adversarialism.
All that was left by the late 50's was a fetishizing of rebellion. But adversarialism is gamesmanship, and gamesmanship seems noncommittal and unserious. There was a real disconnect between the lower middle class rank and file of the black civil rights movement and its middle class white fanbase. As there was a disconnect, a break, between the early and late 60's.
Read George Santayana on the Genteel Tradition in American culture. The liberal elite tends to be more well intentioned than interested in democracy.
Enlightened reason is still their model, and the recent victory over idiocy has given the "enlightened" more authority than ever. Who's their countervailing power now?
February 9, 2009 5:20 PM | Reply | Permalink
Written on the fly and not very well.
The early civil rights movement was nuts and bolts before it was abstraction: King was a minister not a college professor. Putting the philosophy before the practical came later, along with the violence. Bill Ayers was always a rationalist and an idiot.
February 9, 2009 5:31 PM | Reply | Permalink
Well, to play devil's advocate, the conservative answer would be that it turned our political system into a "patronage system" where dependent constituencies were given government benefits in exchange for votes. And that system was administered by a "managerial elite" that was only indirectly accountable for how well it governed, and tended to have an entrenched ideological bias toward more government. (That's not what I'd say, but again, playing devil's advocate based on what I heard from this lecture, which was quite good, by the way): http://www.aei.org/publications/pubID.27181/pub_detail.asp
February 9, 2009 5:23 PM | Reply | Permalink
"Participatory Fascism"
A description of our political structure I've just recently learned and one which intrigues me.
The twentieth century offered three choices in political organization: liberal, fascist and communist. We tell ourselves that we opted for liberalism -- perhaps, not nineteenth century liberalism but certainly not fascism.
As Charlotte Twight has shown, the essence of fascism is nationalistic collectivism, the affirmation that the “national interest” should take precedence over the rights of individuals. Robert Higgs, Crisis and Leviathan, p.241. Excerpt is here.
Now that the elites have absorbed Walter Lippmann's teachings and learned, in Chomsky's terms, how to manufacture consent, they have found, as Robert Higgs says, "that the political system can easily be corrupted so that the power elite retains a firm hold on the state, despite the appearance that they rule only with the consent of the governed."
When the masses cried for succor and security in a harsh and dangerous world, did Roosevelt answer those cries with the gift of "participatory fascism"?
February 9, 2009 6:12 PM | Reply | Permalink
You supported Ron Paul, didn't you?
February 10, 2009 12:01 AM | Reply | Permalink
relevance of your question?
February 10, 2009 1:08 AM | Reply | Permalink
A similar criticism from a left perspective.
N.B. The writer, Chris Hedges, has done some original and interesting thinking on war and our garrison state.
February 10, 2009 7:59 AM | Reply | Permalink
Political philosopher Sheldon S. Wolin calls it Inverted Totalitarianism.
It is often said that FDR saved capitalism by which we really mean he saved the elites who then, went on to capture the national ("nationalist"?) state and put it to work ("rent seeking") to their own benefit.
Rauchway asks whether it was the failure of the state to maintain the classes' "countervailing power" which put the quietus to such democracy as the New Deal retained. I ask whether the seeds of this post-1932 turn to fascism were planted by Roosevelt.
February 10, 2009 8:12 AM | Reply | Permalink
By that standard, it seems like it would be the Founding Fathers, not FDR, that gave us the gift of fascism.
Where do you draw the line? We always give up some of our rights when we form societies. Is the delineation the point where the precedence of rights is split 50/50?
The power elites though have definitely gotten better at throwing their weight around without looking like complete thugs.
February 10, 2009 2:17 AM | Reply | Permalink
.
Expanding on Professor Rauchway's position...
This article at Slate will help many put in context Eric's overview.
This is an excellent overview, bringing together where the country was, where it's been, and where we are today.
Thanks Professor Rauchway.
~OGD~
February 9, 2009 7:09 PM | Reply | Permalink
A few examples of FDR's work--
Triborough (now RFK) Bridge, Astoria Park Pool (Queens), Bonneville Dam, Lincoln Tunnel, Norris Dam of the Tennessee Valley Authority, Appalachian Trail improvements, the Cooperstown National Baseball Hall of Fame, Lousiana State University and La Guardia Airport
Oh, and the USS Yorktown aircraft carrier, built with WPA money.
February 9, 2009 8:46 PM | Reply | Permalink
Leap Forward to Now Doable
The Greatest Stimulus to return breath into the US and International econonomy hasn't woken up yet.
French bread makers know that recession is not the only R Word, and that the odds that all individuals with Stalled up Wealth will soon Quickly use some of it to free up the Financial System, are shortening.
Deluded?I'M RICH I’M THERE,I'M ABOVE the problem!. That personal think is an indulgent DELUSION! YOURE THERE YOU ARE THE SOLUTION , is a a smarter volition.
Metaphor or feasable Portent? ?Soon, from wherever alps it is collectively sitting out(at 0 percent return) the: "someone elses crisis"; the personal frozen anonymous trillions will begin to release more than the niggardly business as usual personal ration which supplies no more than comfortable thyself ...reliabled?as always from the civilized secure?usury line which sustains irrespective of anyone elses reality?.
Melt some of it quickly , get the chardonnay out..use the network chat line about it. What if the whole system is gone ..all bets are off.What a silly waste .Act now!
This will get people back onto beer and circuss's new better less cybical version Nah? I'M RICH, I'M THERE, I"M UNTOUCHABLE ?
Was it a movie? next Rodney King riots will look like an economic based walk in the park!
Simple ground level investment by "I"M RICH AND CHOSEN FROZEN", is a quickly and much needed reminder to millions of people that designer lipstick is not somethin gettin in the way of a hungry belly lookin at a bastille day biscuit.
February 9, 2009 9:30 PM | Reply | Permalink
I am coming into this 7 weeks or so after the fact, so I may be writing to the wind. . . but what the hell...
seth edenbaum says
All that was left by the late 50's was a fetishizing of rebellion. But adversarialism is gamesmanship, and gamesmanship seems noncommittal and unserious.
seth is trivializing something that is very important and very serious indeed. I could not disagree with him more. It is not gamesmanship, not when people's economic well being is hanging in the balance. Capital's battle with labor over the fruits of the labor of employees is serious business. In decades past, shots have rung out and people have fallen.
The very first thought that came to my mind about countervailing power is the balance of power spelled out in the Constitution. And listening to seth say adversarialism is gamesmanship completely trivializes the Founding Fathers' bequeathing of powers in what has turned out to have been very equal measures. It is perhaps worth reiterating that the bequeathers of such powers are We The People - in the 1790s in the persons of Jefferson, Adams and Franklin in particular, but speaking with OUR voice. And they knew it. As much as I disagree with some of his positions, I have to give much credit also to Alexander Hamilton - as an adversary to what we now would call the Liberal persuasion.
Eric says above
So, in government we have the adversarial relationship of the three branches, and then in our everyday lives there is the adversarial relationship of worker-vs-businessman. That, in itself, need never have been a contentious relationship, IMHO. Not at all. It is and seemingly has always been such, but there is nothing written in stone that there is no alternative. Every once in a while one hears about a particularly harmonious relationship between a businessman and his employees, so one may dream of a utopia some day wherein harmony prevails.
In the interim, reality is contentious. One can ask many questions as to why (and I imagine many a dissertation has been penned on just that subject). My own two cents is that it has its genesis in excess harboring of profits by businessmen - not sharing the proceeds in an equitable way (i.e., paying his employees too little while stuffing his pockets). If there is some magical level of compensation, then the adversarial relationship of capital-vs-labor would dissipate to a large degree. (Not that there wouldn't be some who would still rail against it not being like 'back in the good old days.')
The twos sides are, after all, both contending together - on the same side - against the company's competitors for sales which will translate into profits and better wages if all goes well enough. Having a common foe should and does bridge the gap between the two sides. That the workers show up each day and the doors are not locked means there is some level of cooperation. But not enough, evidently.
Wagner had the right idea, in giving over that power that would have had to be exercised by the government at some point. Inequitable compensation will always lead to disputes, if the weaker side comes to realize just just how unequal things really are.
Whereas Jefferson, Adams and Franklin split powers so evenly, on the labor front no such bequeathing NOR LIMITING of powers was forthcoming, not in the Constitution, and not to a large enough extent in the law, not until the Wagner Act.
In the absence of such an apportionment, it was inevitable that such things as anarchists and populism and communism and unions and strikes and walkouts and slowdowns and lockouts and scabs and all the violence, physical or not, between parties would occur, sooner or later. How could they not?
The underlying seed of it all is the greed of the businessmen. I am myself a businessman at the moment, and if I could pay my workers more, I would. As it is, my company may not last out the spring and summer.
And it is the greed of such men today who bring the wrath of reality down upon our heads, again - although in today's meltdown it is financial businessmen, not industrialists who have done the nasty to our world's economy.
The impetus for it all is that some group decided that, having first dibs on a pile of money, sought ways to rake as much of it as humanly possible into their pockets, and damn the rest. It is ever so, it seems. (Though I wish it were not - I do think that there was plenty enough to go around, for several decades. Why the managers and businessmen had to go and muck it all up, I do not understand.)
Eric asks at the end
I am a mechanical engineer, un-degreed, who worked his way up from draftsman in an era when such things were possible. The world when I entered the job market was, IMHO, balanced - almost as well as the writers of the Constitution balanced the governmental powers. The mean income in 1968 (the year after I graduated high school) was at its highest, when adjusted for inflation, from claims I have heard. And business was VERY good. A populace with money is a good market to sell in. I always find it an amazing "coincidence" that the height of the union movement just happened to coincide with the highest prosperity.
It is somewhat debated whether the Powell Memo of 1972 was the catalyst that I believe it was, but the facts are that following that memo the right found ways of implementing just what it advocated - think tanks (pseudo, in my opinion), a concerted program to weaken the Liberalism on college campuses and in the news and popular media, and the emplacing of many conservative judges on the bench at all levels, along with the considerable weakening of the union movement.
The balance that existed after World War II continued more or less through about 3 decades. Since then the balance has shifted massively in the favor of capital. All the evidence shows that it did not happen by accident.
It is not possible to avoid comparing it all to The Goose That Laid the Golden Egg. Capital, apparently believing that all the prosperity came from their wonderful management, kept on undercutting the people who were, week in and week out, producing hard goods that made the cash registers ka-ching. The undercutting came in many forms - laws and court rulings that weakened collective bargaining, outsourcing to non-union vendor companies, off-shoring, plant closings, moving production to more tax-friendly locales (usually in low-pay areas). The balance became a tilt, and then the tilt became an avalanche.
Caught in the middle, one-paycheck families became two-paycheck families, and families splitting up brought an upward supply-and-demand push on home costs. But the American Dream was still being sold to everyone, and we all bought into it.
Until we couldn't buy into it anymore. When savings went to zero, credit cards became ATMS. When those topped out, home equity was raided. When that was tapped out, well, there was nothing left. Lower wages, zero savings - the Goose is now on its deathbed.
The irony is that it is taking so many businessmen down with it. Oh, there were many who sold off their holdings and rode off into the sunset - but many of those are also hit, because those declined stocks are across the board. Many a millionaire is no longer a millionaire.
There is a direct link to it all, IMHO.
The only REAL long term prosperity is widespread prosperity.
When capital ever wakes up to that, they will see that a balance of that adversarial relationship is better for all.
It took a Great Depression for the balance to be forged, and it took 30 years of concerted effort to destroy that balance - and in the end it destroyed the destroyers in large part. But in doing so, it has taken We The People with it.
Now we are at another juncture like 1933. Maybe it is more correct to say 1930. By 1933, even though things were still in decline, people had had 3 years to get their bearings. I believe that was an important factor in the success of the New Deal (which I have read a lot about lately). Though we have a new leader, we have not bottomed out and we have not taken drastic enough measures yet. So, Obama so far is somewhere between FDR and Hoover. Hoover believed that the intrinsic nature of the indomitable American spirit was going to straighten things out. Obama seems to be buying into the notion that some tweaks (if you call $780 a tweak) will right the economy. By March 1933, FDR and the Congress had become certain that doing nothing and doing something reasonable wasn't enough.
At some point in the next 3 years we will have to start the economy all over again, from scratch. And at some point after such hard decisions are made, it will be recognized that the capital-labor balance had better f___ing be more even, or revolution may be a lot more on people's minds than anyone now would believe.
March 21, 2009 1:13 AM | Reply | Permalink