Writing at The Daily Beast, Mason Williams, a history professor at The New School, claims that Franklin Delano Roosevelt’s New Deal “saved America.” And from Prof. Williams’ perspective, an important consequence of this alleged success of the New Deal was that “people came to believe in the power and benefit of the government.” What Williams admires about the New Deal era was its “political culture in which public institutions were trusted and esteemed far more than they are today.” Indeed, his entire article reflects his overriding concern with “trust,” “belief,” and “faith” in government. That’s because for true believers like Williams, statism is a kind of religion, with Big Government worshiped as a kind of powerful god that can deliver the goods, make or break people, and if necessary, move mountains.
With the national government’s support, New York built the Triborough Bridge, the Lincoln and Queens-Midtown tunnels, the West Side Highway, FDR Drive, and LaGuardia Airport. It also created two new college campuses, launched a program of working-class public housing, opened 11 monumental swimming pools and hundreds of neighborhood playgrounds, and opened and staffed neighborhood health clinics…
But despite all that, Americans have nonetheless lost faith in Big Government.
Today, the story of the New Deal seems almost foreign. Now, bridges are not raised; they collapse. The vast ambitions of the 1930s are gone: not since the Great Society declared war on poverty and provided health insurance to all over the age of 65 has the United States government attempted to solve a domestic social problem on the scale of the mass unemployment of the 1930s. Although the polling-place apathy of the 1990s has been reversed somewhat in recent years, Americans’ faith in public institutions has rarely been lower.
Of course, the reason why faith in Big Government has diminished is because is it has so manifestly failed to deliver on its promises. The Great Society was supposed to eliminate poverty, crime, delinquency, and all the other social pathologies of the underclass. Instead, despite the spending of literally trillions of dollars, all the problems got worse, as carefully documented by Charles Murray in his book, Losing Ground.
And regarding the attempt of “the United States government…to solve…the mass unemployment of the 1930s,” two points are in order. First, that mass unemployment was created by a government-sponsored institution: The Federal Reserve. Second, the unemployment crisis created by the Fed was then greatly prolonged by the actions of the federal government. As usual, government was the problem, not the solution.
The first point above was demonstrated by the great Milton Friedman in some of the research for which he was awarded the 1976 Nobel Prize in economic science. Friedman showed that, during the early 1930s, the Federal Reserve permitted the stock of money to contract by one-third, a shocking and unprecedented decline. This occurred despite the fact that the U.S. enjoyed an influx of gold from abroad. Under the workings of the classical gold standard, the influx of gold should have enlarged the U.S. monetary base. But for reasons that are not entirely clear, the Federal Reserve screwed up by not permitting the monetary base to expand. As a result, what might have been an ordinary recession, like the one that had occurred in 1920, was turned into an economic crisis of unprecedented severity.
After the economy reached its nadir in 1933, the economy for a few years started to improve, until a setback occurred in 1937-38 as employment and industrial production fell sharply. Hence the Depression was not a single recession, but a double-dip. The cause of the double-dip was again government intervention, in two ways. First, the government sharply raised taxes on investment income. Second, the government pursued policies that empowered organized labor to obtain wages that were too high to sustain employment. According to UCLA economist Lee Ohanian,
The tax rate on dividends also rose to 15.98% in 1932 from 10.14% in 1929, and then doubled again by 1936. Research conducted last year by Ellen McGratten of the Federal Reserve Bank of Minneapolis suggests that these increases in capital income taxation can account for much of the 26% decline in business fixed investment that occurred in 1937-1938.
Meanwhile, after the 1935 National Labor Relations Act, union membership rose to about 25% in 1938 from about 12% in 1934. The increase in unionization was fostered by the sit-down strike.
In late 1936 and early 1937, for example, members of the United Auto Workers (UAW) occupied a General Motors auto body plant in Flint, Mich. Without auto bodies, production plummeted, and the company was forced to settle the strike and recognize the union.
The GM strike effectively unionized the auto industry, as UAW membership rose more than 15-fold the following year to about 500,000 members. Just the threat of a sit-down strike by steelworkers led to a unionized U.S. Steel in 1937. An unprecedented increase in union power increased manufacturing wages by nearly 10% between 1936 and 1938, which increased costs and reduced employment.
Several years into the New Deal, the economy remained depressed, and observers at the time concluded that the New Deal had failed. Indeed, FDR’s own Treasury Secretary, Henry Morgenthau, essentially acknowledged the failure:
We have tried spending money. We are spending more than we have ever spent before and it does not work…I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises…I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot!
Furthermore, there is considerable evidence that the public at large became extremely frustrated with the New Deal, so much so that they reconciled with the Republican Party, which voters had previously cast into the wilderness. In the wake of the Depression, the GOP had been devastated in the elections held between 1930 and 1936. But in the mid-term election of 1938, the GOP gained an astonishing 70 House seats, seven Senate seats, and governorships of key states like Ohio and Michigan (when those states were relatively more important than they are today.)
Even the vast majority of the online commenters to Williams’ article acknowledge that the New Deal and Great Society were failures. These are mostly laypersons who cannot cite Friedman, Murray, or Ohanian, but they nonetheless arrive closer to the truth than does the professional historian. Of course, they have the advantage of not having their judgment clouded by statist religious belief.
And so Williams, a paid priest of statism, does what religious leaders have always done to advance their sectarian beliefs–spin mythical tales about miraculous events. But those of us with a relatively stronger commitment to evidence-based thinking have reason to doubt that FDR’s New Deal “saved America” any more than Moses literally parted the Red Sea or than St. Francis silenced the swallows.