Why The Great Depression Wasn't Inevitable
THE FORGOTTEN MAN: A NEW HISTORY OF THE GREAT DEPRESSION
BY AMITY SHLAES
HARPERCOLLINS, 480 PAGES, $26.95
WAS the Great Depression inevitable? Not according to Amity Shlaes. Instead of forcing us to look at the era through hindsight, Shlaes' "The Forgotten Man" puts us in the company of the people who made the decisions that changed America. In turn, she offers us important lessons for our own times.
Shlaes argues that the 1929 stock-market crash wasn't a well-deserved punishment for Roaring '20s greed. Many profits that drove up the market in those days were real - the result of private-sector managers' ingenious exploitation of new technologies.
Nor did the crash guarantee that a decade of depression would follow. Decision-makers, beginning with Herbert Hoover, helped to make it so.
Hoover wasn't unfeeling or incompetent. Before he was president, he'd been a successful businessman, and had won praise as commerce secretary for his compassion and management expertise when he aided the victims of the 1927 Mississippi flood.
After the market crashed, President Hoover immediately applied this same can-do attitude to the economy. To protect workers, he called upon big businesses not to cut jobs or wages. And to protect big business, he gave in to protectionist sentiment and signed into a law a huge tariff on imported goods.
Hoover wanted to help, but instead, he hurt. The tariff ignited a trade war that harmed companies and consumers. Encouraging employers to keep wages and employment up when the economy couldn't support such measures ensured stock prices' continued fall.
After Hoover, President Franklin D. Roosevelt launched his own wave of economic experiments, detailed by Shlaes, ranging from ambitious public-works programs to fiddling with the dollar's value.
Shlaes makes a good case that Roosevelt didn't do any one thing that protracted the Depression. Instead, with his bold and oft-changing ideas, he created an air of economic uncertainty that was deadly to private-sector recovery. Investors had no idea what might come next, so they were afraid to move on.
Roosevelt also scared investors by creating government bodies that competed with once-thriving private industries. FDR's Tennessee Valley Authority, for example, forced the power industry to compete with heavily subsidized electricity.
Shlaes engagingly tells stories not through programs or statistics but through sympathetic, lively accounts of real people. We meet many intellectuals who later become FDR's advisers through the fascinating tale of their 1927 trip to Soviet Russia, for example.
We also meet real Americans who understood they couldn't rely on government to help them through the Depression: the Schechters of Brooklyn, an immigrant family of poultry butchers who fought some of FDR's most absurd new business regulations all the way to the Supreme Court; the self-styled Father Divine, a black leader who scared his white Long Island neighbors by opening his home to the needy, and Bill Wilson, a stock analyst whose battle with alcoholism taught him to rely on himself and his fellow sufferers. (Wilson's ideas became Alcoholics Anonymous.)
We also meet the "forgotten man." In a 1932 radio address, FDR introduced him as "the forgotten man at the bottom of the economic pyramid" who needed a strong government to help him up. But 50 years before FDR, Yale philosopher William Graham Sumner had written an essay called "The Forgotten Man." As Shlaes writes, Sumner described such men as the "unwitting average citizens" coerced by "well-intentioned social progressives . . . into funding dubious social projects."
In today's New York, the forgotten man is the one who loses his job because his upstate employer moves elsewhere to escape the high taxes levied to create public-sector jobs for special-interest voting blocs.
"The Forgotten Man" provides another contemporary lesson. During a crisis, people in almost any post-FDR government naturally want to do something to help. But before it acts, the government should be humbled by its hidden power: the power to make things worse instead of better.
Original Source: http://www.nypost.com/seven/06102007/postopinion/postopbooks/dumb_decisions_postopbooks_nicole_gelinas.htm