New Deal or Raw Deal? How FDR’s Economic Legacy has Damaged America
I am wrapping up my reading modules on the 1930’s with this weeks book of the week: New Deal or Raw Deal? How FDR’s Economic Legacy has Damaged America by Burton Folsom Jr.
So, I knew I wanted to round out my study of the Great Depression and FDR, whose policies likely expanded the impact and length of the Great Depression, with Burton Folsom’s book, which I read many years ago, but of course re-read so I could give a fresh review. Up until the first time I read Folsom’s book, I went with the historian line: FDR was one of the greatest president’s. It’s what you’re taught in school. It’s how every history book reports on him. Even last weeks book, which seemed to go out of it’s way to bring up his failings, used those failings to highlight his absolute humanity, and not as an object lesson for what an abject failure he was as both a president and as a human. This book....is not that.
This book critically exams the New Deal in general, and FDR specifically, and tells a different story entirely. Amity Shlaes addresses part of that in her book, The Forgotten Man. Folsom provides even more detail, specifically highlighting the failings of the New Deal policies, the failings of FDR as a president and as a human, and as a legacy. The immortal JK Rowling has famously said “I do not walk around my house, thinking about my legacy, what a pompous way to live.” After reading this book, I doubt that thought ever crossed FDR’s mind. Pretty sure, he LOVES the legacy of being the Greatest President ever.
Folsom does address the myth of FDR, FDR’s rise to power, and what caused the great depression....basically a cliff’s notes version of the books I read last months. I literally could have saved myself a month of reading by STARTING with this book, including the 774 pages I read last week.
Folsom’s breakdown of what caused the Great Depression includes a solid breakdown of exactly why the Smoot-Hawley Tariff was so catastrophic, the industries that were impacted, and the global impact of the tariff.
The NRA (National Recovery Act...not the NRA that people love to hate, although they SHOULD hate THIS NRA). The NRA allowed bureaucratic coalitions to fix prices. And if you charged LESS than the prices set by the NRA, you could and would be jailed. This is beyond the Schecters has outlined in Shlaes book and who managed to get the NRA overturned by the Supreme Court. See, it was the large corporations that set the prices for which products could be sold, so the little guy had no chance to compete.
In the 1930’s, the example from the book for the NRA was...the tire industry. 100 years ago, the major tire manufacturers were the same as today...Goodyear, Goodrich, Firestone. Those three wrote the NRA tire code, which resulted in the price of tires soaring. This resulted in the cost of cars soaring, which in turn hurt American car exports and also meant that fewer Americans could afford to BUY a car. In the meantime, locally owned tire companies, like Pharis Tire and Rubber Company in Ohio, which locally employed 1,000 people. This company had managed to survive the first several years of the depression because they were a well known, locally owned and operated, company.
Then came the NRA, which demanded the tires be sold at a fixed price. Since Pharis could no longer sell at a discount, because discounts were legally prohibited, the big national tire chains....the ones who set the price....advised everyone to buy THEIR products, because they could be replaced anywhere in the country. Direct quote from the book: “Pharis put it this way: The Government deliberately raised our prices up towards the prices at which the big companies wanted to sell, at which they could make a profit....where more easily, with much less loss, they could come down and “get us” and where, bound by NRA decrees, we could not use lower prices, although we could have lowered them and still made a decent profit.”
So the NRA actually raised prices. And everyone suffered for it.
The Agricultural Adjustment Act...AAA....not the AAA everyone loves, the AAA that benefits, to this day...an extremely select group of people. Farmers. Nothing against farmers, I love farmers, I enjoy food, and they provide it. The AAA was the next step in Hoover’s Federal Farm Board. The FFB set the price of wheat at 80 cents per bushel and cotton at 20 cents per pound. Can anyone guess the “unintended consequence” that occurred as a result of the government setting of prices on a private industry? I mean....we saw with the NRA how price fixing upset the industrial sector. In the farming sector, once farmers knew they would be paid for the crops regardless....they ALL started planting cotton and wheat. Which led to a massive surplus that could not be sold. Because the Smoot-Hawley Tariff resulted in retaliatory tariff’s wherein no country would BUY our surplus wheat and cotton.
The AAA continued those policies, and of course paid farmers not to farm land, at a whopping $10 per acre not to farm. So if a farmer had a 200 acre farm, and accepted AAA funding NOT to farm 40 acres of it, that was a guaranteed $400 to just let the land lay fallow....that’s $9,548 in today’s currency, and an absolute FORTUNE in the 1930’s.
The Works Progress Administration, the Federal Emergency Relief Administration, the Tennessee Valley Authority....the lists go on.
The WPA was used to literally buy votes. The FERA was used to send out of work vets to build bridges in the Florida Keys...during hurricane season. Many people died. The TVA....here’s another fun quote from the book: “the concentrating of benefits among the 2 percent of the population living in the Tennessee Valley had to be done by taxing away wealth from the other 98 percent.” As a result of this, Tennessee has actually lagged behind nearby states in economic development. So....THANK YOU, big daddy government.
Folsom brings some harsh truths about social security, minimum wage, labor relations, FDR’s tax plans...he addresses all of these. And he addresses FDR’s lying. This was addressed in last weeks book, only the author of last weeks book downplayed it, like FDR only really lied to his mother, and that only because she was so overbearing and Oedipal.
Apparently, FDR’s penchance for playing with the truth was well known to his cabinet members and those nearest and dearest to him. And they all just rolled with it in the name of party unity. Folsom covers how FDR basically bought the election of 1936, and then immediately blew the goodwill with his court packing scheme. The book last week made it seem like the reason the democrats fell apart following the 1936 election is that they broke into factions that couldn’t pull together for the good of the party. Folsom makes it very clear that what the party was not united behind was FDR’s blatant power grab in his court packing scheme.
Let’s talk about that minimum wage thing….with Amazon backing a $20 per hour minimum wage. This will not impact Amazon’s bottom line in any way shape or form. It’s easy for Amazon to say, yes, we support this minimum wage, because Amazon gets the good will of all the people saying that the minimum wage should be $20/hour. But then the locally owned bookshop can’t afford to pay $20 per hour. They can barely afford to pay $10 per hour. So the local shop goes out of business and everyone wonders why the only place you can buy books anymore is Amazon.
Quite a bit of this book covers the “unintended” consequence. Except….I’m not so sure they ARE unintended. He covers one of the first minimum wage laws, the Minimum Wage Act of 1918, which mandated that women MUST be paid a minimum of $71.50 per month (approximately $1,469 in todays currency). Sounds great, right? Except that the law only applied to women. The logical outcome of this, which is why I’m not convinced that it was unintended, is that women were laid off in droves, and men were hired in their place for half of that wage. And as the author points out, and we’re seeing play out in real time on the nightly news, when the law is applied to both men and women, a la a mandated $20 per hour, then people are fired because the company goes under, as it cannot afford to pay those wages, or the company automates….which is a lot of how Amazon offsets that $20 per hour they support.
Ok, off the soapbox now and back to the book.
He covers FDR’s use of the IRS to persecute those who displeased him and how his overhaul of the patronage system...the patronage system that resulted in the assassination of President Garfield.... yeah, FDR used that to secure his next election. Buying even more votes. He covers how FDR’s policies paralyzed the economy and by extension the country....hence the cocktail....paralyzer. Was NOT a reference to him being paralyzed. Although it could be. I almost made this last week, til Rum Swizzle fell in my lap.
Anyways....this book provides a whole lotta food for thought. It’s a very fast read, Folsom is an engaging author, he cuts through alot of the background noise that surrounds FDR and his legacy and shines a very bright light on things that should be used to damn FDR to the bottom of the presidential rankings. And actually do place him at the bottom rankings. If you’re an economist. Historians still worship at his alter. And unfortunately, historians write the history books, that are used to teach history in school. You have to get out of school and find your own books to read to get the other side of the story. And I highly recommend THIS book, to get that other side of the story.
