As the current financial crisis has unfolded, Franklin D. Roosevelt has been frequently traduced for the economic policies he used to lead the country out of the Great Depression.
In 1933, there was great disagreement about how to deal with an economic recession or depression, and Roosevelt’s administration, and the president himself, had conflicting impulses. Herbert Hoover had made the worst possible selection of policy options: higher taxes and tariffs and a shrunken money supply. The unemployment rate was approximately 33 percent, more than four times what it is now (not the 25 percent the revisionist Right now claims), and there was no direct relief for the unemployed. They could beg, steal, or starve, though Hoover claimed that they prospered selling apples.
On Inauguration Day 1933 (then March 4), there were machine-gun nests at the corners of the great government buildings in Washington, for the only time since the Civil War. Almost all banks in 38 states had been closed sine die. In most of the other states and Washington, D.C., withdrawals were limited to 5 percent of deposits, and in Texas to $10 per day. The New York Stock Exchange and the Chicago commodity exchange had been closed, indefinitely. The financial system had effectively collapsed. In a fever of activity, Roosevelt guaranteed bank deposits, made the federal government a temporary non-voting preferred shareholder in thousands of suddenly undercapitalized banks (more than half the banks in the country), refinanced millions of residential and farm mortgages, put millions of people to work in relief programs, tolerated cartels and collective bargaining in order to raise prices and wages, increased the money supply, effectively departed the gold standard, repealed Prohibition of alcoholic beverages (wrenching one of the nation’s largest industries out of the hands of the underworld), and legislated reduced working hours and improved working conditions for the whole work force. In the next two years, he set up the Securities and Exchange Commission, created the Social Security system, broadened the powers of the Federal Reserve to equal those of other nations’ central banks, and imposed some entirely political tax changes to stave off Huey Long and other extremists, in what became known as the Second New Deal.
The Hoover agricultural policy had been to dump surpluses abroad, lend foreign governments the money to buy them, and then pursue the debtor countries aggressively when they defaulted. Roosevelt had farmers vote, by category of what they produced, on agreed production cutbacks, assuring sustainable agricultural prices, and compensated farmers for the production they had curtailed. The more extreme revisionists now claim that Roosevelt should not have stabilized food prices and financed, through public-works projects, flood and drought control and rural electrification, because it would have been better to starve these people off the land and to the cities, where, a generation or more later, they would have had higher standards of living. Apart from the fact that the resulting human misery would have been morally and politically unacceptable in the United States, the already militant farm unions would have disrupted the nation’s food supply. Such a policy would have put Roosevelt in the same general category of agrarian reformers as Stalin and Mao.
The key to evaluating Roosevelt’s performance at combating the Depression is the statistical treatment of many millions of unemployed engaged in his massive workfare programs, which were called “internal improvements” in Jackson’s time, and are called “infrastructure” now. The government hired about 60 percent of the unemployed in public-works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York City’s Lincoln Tunnel and Triborough Bridge, the Tennessee Valley Authority, and the heroic aircraft carriers Enterprise and Yorktown. They also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. They employed 50,000 schoolteachers, rebuilt the entire rural school system of the country, and employed 3,000 writers, musicians, sculptors, and painters, including the young Willem de Kooning and Jackson Pollock.
Even pro-Roosevelt historians such as William Leuchtenburg and Doris Kearns Goodwin have meekly accepted the characterization of millions of people in the New Deal workfare programs as “unemployed,” while comparable millions of Germans, Japanese, and eventually French and British also, who were dragooned into the armed forces and defense-production industries in the mid and late Thirties were considered to be employed. This made the Roosevelt administration’s economic performance appear uncompetitive, but the people employed in government public-works and conservation programs were just as authentically (and much more usefully) employed as were draftees in what became the European and Japanese garrison states, while Roosevelt was rebuilding America at an historic bargain cost. If these workfare Americans are considered to be unemployed, the Roosevelt administration still reduced unemployment between 1933 and 1936 from 33 percent to 12.5 percent, to less than 10 percent by the end of 1940, and to less than 1 percent a year later when the U.S. was plunged into war. If the federal workfare employees are accepted as employed, the corresponding numbers are 33 percent, 7 percent, 3 percent, and 0.5 percent. Virtually all the genuinely unemployed received basic social-benefit payments from 1935 on.
After the Second New Deal, in 1934–35, came a period of relative inertia and reduction of welfare spending, to test traditional capitalist theory, which provoked what Republicans tried to promote as a “Roosevelt Recession” (having noisily demanded the measures that led to it). The Third New Deal, in 1938, involved a massive return to workfare programs, whereupon economic progress resumed. The Fourth New Deal was the greatest defense build-up in history, starting in 1939, including the first peacetime draft in U.S. history in the midst of the 1940 election campaign. Finally, there was the GI Bill of Rights in 1944, which, posthumously as to Roosevelt, transformed the American working class into a middle class. In the late Forties, half the students in U.S. universities were on GI Bill of Rights student grants.
In the vacuum created by Roosevelt’s unexpected death in office, without memoirs or a literary executor, a spontaneous coalition of McCarthyite Republicans, disgruntled British imperialists, and Euro-Gaullists propagated the Yalta Myth — i.e., that Roosevelt had been swindled by Stalin at Yalta into handing over Eastern Europe to the USSR. In fact, the Yalta agreement promised freedom and independence for Eastern Europe, as Eisenhower pointed out to Khrushchev at the Geneva Conference in 1955. If Roosevelt and Churchill had given Stalin everything he wanted, he would not have felt the need to violate every clause of that agreement, as he did. FDR had no sooner been acquitted on that score than some supply-side economic purists started alleging that he actually prolonged the Great Depression in the United States.
Roosevelt expressed frustration to Felix Frankfurter and others that his opponents didn’t recognize that he was “the greatest friend American capitalism ever had.” He wanted to, and did, make America safe for people who lived in 40-room houses on 1,000-acre estates, as he did. He directed all the anger and frustration of the Depression into a cul-de-sac of mythological characters — economic royalists, war profiteers, monopolists, malefactors of great wealth, money changers, and speculators — and preserved the moral integrality of the nation to focus hostility on its real enemies: Nazism and Japanese imperialism. He was no bleeding heart, and he reduced welfare outlays in the summer, explaining, “No one ever dies of starvation in this country in the summer.”
It is, to say the least, unrigorous for current spokespeople of the intelligent Right to claim that Roosevelt’s peacetime elimination of unemployment was a failure, that war-mongering was his real antidote to economic depression, and that the grateful electors of the most successful politician in the country’s history were hoodwinked, as FDR would have said, “again and again and again.” Instead of trying to debunk FDR, Amity Shlaes, Holman Jenkins, and even Jim Powell should complete his liberation from leftist kidnappers and claim him for themselves. He was a reformer, and also one of the very greatest conservatives in American history.
Editor’s note: This has been amended since posting.