For the better part of a century, American economic policy has been influenced far more than it should be by a morality play constructed around the interwar years. The 1920s were, so the story goes, marked by capitalist “excess,” leading to an inevitable reckoning, only for FDR to bring in big government to save the day (eventually).
Judging by the recent photograph of President Donald Trump and New York Mayor-elect Zohran Mamdani posing in front of a White House portrait of FDR, that old myth lives on. And, judging by Amity Shlaes’ review in Capital Matters, it appears that Andrew Ross Sorkin’s new 1929 is yet another piece of evidence proving the persistence of that myth, if not its truth. The title is something of a clue, both chronologically and thematically. Sorkin’s work, writes Shlaes, is “an artful reprise” of “The Great Crash, 1929” by J.K. Galbraith, a concocter of many myths, on the same topic,
Shlaes:
By titling his book 1929, not 1929-1940, Galbraith skated past the inconvenient truth of the record of the 1930s. The New Deal honored Roosevelt’s anti-market “ancient truths.” Fueled by its own rage against Wall Street and a wrongheaded notion that Main Street would return to prosperity if it took lessons from planning boards, the Roosevelt administration never allowed either to find its footing. The result was that one in ten Americans remained jobless for a full decade. That is a level that today looks worse than inconvenient: It looks incomprehensible…
Nearly entirely ignored in both Galbraith and Sorkin are the forces that kept the economy down through the 1930s. Roosevelt exploited the drama of the downturn to mount a government takeover of the industrial economy via his National Recovery Administration, or NRA. The NRA established both price and wage controls so far-reaching that it “retarded” recovery, as the Brookings Institution, not exactly a right-wing outfit, concluded in a 1935 study.
Read the whole thing.
And then do take a look at economist John Cochrane’s assessment of the 1920s in the Coolidge Review.
In 1914, only 30 percent of manufacturing was electrified; by 1929, that number had reached 70 percent.
How did electricity get to homes and factories? Was there a big federal program to build the massive infrastructure of power stations and wires needed? No, private utilities built it.
In 1920, 20 percent of people had automobiles; by 1929, 60 percent of families owned cars. There were 9 vehicles for every 10 households. The automobile revolution happened in one decade…
The transportation revolution didn’t occur because the federal government offered tax breaks and subsidies. There was no federal spending bill to build the network of gas stations motorists needed. No, the filling stations came in on their own when people figured out that they could make money operating them.
And the list goes on . . .