756 of 929 people found the following review helpful
Changes your understanding of the Great Depression,
This review is from: The Forgotten Man: A New History of the Great Depression (Hardcover)Amity Shlaes: The Forgotten Man: A New History of the Great Depression HarperCollins, 2007, 433pp
This is a remarkable book which will forever change your understanding of the Great Depression, Franklin Delano Roosevelt's role and the lessons to be learned from government intervention.
Amity Shlaes makes a compelling case that Hoover and Roosevelt actually lengthened the Depression. They did this, Shlaes argues, by following bad monetary policy, which further deflated the currency, and by raising tariff barriers, which broke up world trade and reduced economic activity everywhere.
Shlaes makes the best case I have seen that business confidence is the key to economic expansion and that each step of the New Deal was a further blow to business confidence.
She also explains the view of the pre-government control entrepreneurs and investors who had created an extraordinarily successful country prior to 1929.
This is a superb book well worth reading, studying and then thinking about for a long time.
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Initial post: Jul 14, 2007 8:37:13 PM PDT
Last edited by the author on Apr 5, 2008 11:56:00 AM PDT
Todd M Carlsen says:
CHECK THE ECONOMIC NUMBERS! This book does not match the facts. The actual economic stats show this book to be inaccurate. Why does this book not include even the most important economic statistics, like GDP? This is not an accurate book. Check the stats! What were the actual effects of the New Deal? As Ronald Reagan said, "Trust, but verify."
If you look up the the economic statistic online (do that now) you will find that, from the time FDR took office in early 1933 to 1937, GDP grew a staggering 63%. In 1933, GDP dropped only 4% to 56.4 billion as FDR stopped the worst of the crisis. The country had been in depression for three years. In 1934 under FDR, GDP grew a robust 17% to 66 billion. WOW! In 1935, GDP grew 11% to 73.3 billion. In 1936, GDP grew 14% to 83.8 billion. In 1937, GDP grew 10% to 91.9 billion. CHECK THE NUMBERS! That is the strongest economic record in American history - that is a fact!
Personal income (money in the hands of consumers after taxes) increased a staggering 45.5% from the beginning of 1933 through 1937. That is a fact! It's no surprise that in 1936 the American people reelected FDR to the biggest electoral landslide in the 20th Century. CHECK THE NUMBERS!
According to Federal Reserve Chairman Ben Bernanke, America's top economist, in his excellent economics book "Essays on the Great Depression" (on page 248), "Between 1933 and 1937, employment in U.S. manufacturing rose by 3.4 percent per QUARTER, and output by 5.0 percent per QUARTER." The economic statistics show, in summary (on page 248), that "the New Deal era, 1933-41, was a period of general economic growth." Real wages, productivity, and employment grew strongly during the New Deal, the statistics show. CHECK THE NUMBERS.
FDR was able to cut the unemployment rate by around two-thirds to only 12% by 1937, which is impressive. What is especially troubling is that the unemployment numbers cited in "The Forgotten" man do not match the unemployment statistics! Check the numbers. Furthermore, if you include government jobs to build tens of thousands of infrastructure structures in the economy, which are not included in the employment stats, the unemployment rate drops even further to around 4%.
Examples of these investments include the Norris Dam, Humboldt River Aqueduct, Los Angeles Aqueduct, Bonneville Navigation Dam, Grand Coulee Dam, Pocatello Reservoir, All American Irrigation Canal, Wyoming Drought Canal, Houston Ship Canal, Denver Water Tunnel, Nebraska Power Project, Fort Peck Dam, Mississippi erosion Mattress, and 26 Dams and Locks on the St. Louis-Minneapolis Waterway. Thousands of schools, bridges and tunnels were also built - too many to list. FDR's massive public investments in energy, water, and credit greatly developed the infrastructure of the Southwest (especially), Northwest, South and to a lesser extent other areas. The investments made the Southwest region viable for private economic investment. L.A. gets its water from an FDR-built aquaduct. These investments helped fuel the decades of booming economic expansion that followed - the great post-war boom. Check the numbers. What were the effects?
A main attack in "FDR's Folly" and "Forgotten Man" is that FDR caused business uncertainty, which retarded private investment. But what do the actual numbers show? Gross private domestic investment increased 37.4% in 1933. It increased a staggering 111.9% in 1934. It increased 81.5% in 1935. It increased 28.9% in 1936. It increased 40.7% in 1937. Gross private domestic investment increased a staggering 880.38% from 1933 through 1938! GO AND CHECK THE NUMBERS. What were the actual effects of New Deal policies? Milton Friedman also refuted in "Monetary History" the idea of business confidence affecting the economic performance. He showed through several different tests from different approaches that the recession of 1937-38 could be completely explained through monetary forces, and business confidence, such as labor unrest, had nothing to do with it.
Ben Bernanke, America's top economist, gave a terrific speech at Washington and Lee University on March 2, 2004, explaining the economics of the Great Depression. Bernanke said, "One of the first actions of President Roosevelt was to eliminate the constraint on U.S. monetary policy created by the gold standard, first by allowing the dollar to float and then by resetting its value at a significantly lower level. The new President also addressed another major source of monetary contraction, the ongoing banking crisis. Within days of his inauguration, Roosevelt declared a "bank holiday," shutting down all the banks in the country. Banks were allowed to reopen only when certified to be in sound financial condition. Roosevelt pursued other measures to stabilize the banking system as well, such as the creation of a deposit insurance program. With the gold standard constraint removed and the banking system stabilized, the money supply and the price level began to rise. Between Roosevelt's coming to power in 1933 and the recession of 1937-38, the economy grew strongly."
The weakly regulated financial system falling like a house of cards was the biggest cause of the Great Depression. Over 10,000 banks collapsed. Half of all mortgages were in default. When the financial system collapses, money stops flowing through the economy, and the economy will not self-correct. (Using the monetarist equation, velocity plunges.) Fed over-tightening of the money supply after speculative excess, the ruinous gold standard, and the financial system falling like a flimsy house of cards caused the Great Depression, and it would not have reversed without intervention to save the financial system (and prevent the collapse from happening again). History shows that New Deal reforms have prevented the financial system from ever collapsing again or the nation from entering a depression again. Before the New Deal, there were many depressions and panics, but never again.
The New Deal saved the financial system and implemented reforms to keep it from collapsing again. The New Deal ended the ruinous gold standard, created the SEC for safer financial markets and transparency in financial reporting, created the HOLC to salvage the collapsed mortgage market, created FDIC to prevent bank panics, FHA to create modern insured mortgages and keep the mortgage market stable, the Glass-Steagall Act created a firewall between the riskiest securities and banks, Open Market Committee to manage the money supply, extensive WPA infrastructure jobs (bridges, dams, roads, aqueducts, libraries, schools, museums, military installations, parks), Social Security has provided a steady stream of fiscal stimulus into the economy, dampening sharp downturns. Unemployment insurance has allowed for a manageable system of job eliminations and then redirects back into the economy. Rural electrification transformed rural communities. The Fair Labor Standards Act banned the worst child labor, created the minimum wage, and included the 40-hour work week, GI Bill has given access to college for millions for the first time).
Before the New Deal, the Republican Party and big business had long advocated the flawed policies of high tariffs, weakly regulated financial markets waiting to collapse like a house of cards, a strictly balanced budget (even during downturns), and a disastrous gold standard that was restored when Calvin Coolidge was president and the Republicans dominated Congress. Four years later the gold standard contributed to a massive contraction of the money supply by the Federal Reserve, related to the gold standard. The Federal Reserve, tied to the gold standard, caused the start of the Great Depression.
One of the many flawed Republican tariffs since the Civil War was the McKinley Tariff of 1890, which raised import taxes to 48% to protect American corporations, and it quickly caused a depression. The bill was named after Congressman William McKinley, who later became president. The Democratic Party back then represented people in the South and Midwest, such as farmers, who opposed high tariffs. (Today Republican policies are different.) In 1930, the Smoot-Hawley Tariff was pushed through Congress by big business and the Republican leadership. The Smoot-Hawley Tariff was named after Republican Reed Smoot and Republican Willis Hawley. Herbert Hoover only reluctantly signed the Smoot-Hawley Tariff. Hoover should not be selectively blamed for the Smoot-Hawley Tariff.
The New fixed all that. He made the fiancial system stronger for the long term. By the way, the New Deal did NOT take over private enterprise or make a large entry into markets, except for the TVA and small-scale misguided experiments that were isolated incidents. NOTHING was nationalized.
Missing from "The Forgotten Man" is FDR's great leadership to restore hope, his successes that brought about a moderate recovery from 1933-37 as expressed in the GDP numbers and other statistics, the long-standing flawed policies in the many decades before the New Deal, and the enduring positive reforms of the New Deal.
In his autobiography "An American Life, "Ronald Reagan wrote of his deep admiration for FDR (on page 66). Reagan wrote, "I cast my first vote for Roosevelt and the full Democratic ticket. And like Jack - and millions of other Americans - I soon idolized FDR. He'd entered the White House facing a national emergency as grim as any the country had ever faced and, acting quickly, he had implemented a plan of action to deal with the crisis. During his fireside chats, his strong, gentle, confident voice resonated across the nation with an eloquence that brought comfort and resilience to a nation caught up in a storm and reassured us that we could lick any problem. I will never forget him for that." FDR restored hope.
Reagan wrote in his autobiography "An American Life" and in "The Reagan Diaries" that he was not trying to undo the New Deal. Instead, he was trying to undo the liberalism of the 1960s-70s, NOT THE NEW DEAL. Don't mix the New Deal with 1960s and 1970s liberalism. Reagan wrote in his autobiography "An American Life" and "The Reagan Diaries" that he voted for FDR four times. FACT: President Reagan worked to have the FDR Memorial built on the National Mall. You can thank Reagan for the FDR Memorial.
John Steele Gordon, an advocate of free markets, wrote a wonderful profile of the New Deal (pages 336-346) in his masterpiece history called "Empire of Wealth: The Epic History of American Economic Power." He wrote," While many of the New Deal programs were unsuccessful and many of its economic principles shortsighted, in its totality it was an enormous success. The country since the New Deal has been a far richer, far more economically secure, far more just society. It has been one that has proved to offer far more opportunity for all and produce far more wealth as a consequence... There has never been a serious political effort to reverse the New Deal." FDR did make mistakes. Yet the achievements of the New Deal greatly outweigh the mistakes, and the many decades of prosperity that followed were far more prosperous that the decades before the New Deal. The American economy could have crashed long ago without the New Deal safeguards working for us today.
The recent meltdown in the mortgage market involved non-FHA mortgages. The repeal of the Glass-Steagall Act has also allowed investment banks to take too much risk with risky securities that previously would have been banned. The weakening of the New Deal has caused the financial system to become vulnerable again.
Sidney Weinberg, senior partner at Goldman-Sachs, served in FDR's first two administrations, and he said, "FDR saved the system... You could have had a rebellion; you could have had a civil war." David Kennedy, Richard Nixon's Treasury secretary, voted for FDR twice. John Hersch, a senior partner of a Chicago brokerage house, said, "It took this guy with the long cigarette holder to do some planning about basic things-like the SEC and the WPA and even the lousy Blue Eagle. It put a new spirit in the country." (Hard Times: An Oral History of the Great Depression, Studs Terkel)
Norman Thomas, the Socialist Labor Party candidate for president, aggressively attacked FDR for undermining socialism and saving capitalism. When a reporter asked Thomas if the New Deal had carried out the socialist program, Thomas replied that the New Deal had carried it out on a stretcher.
J. Paul Getty, the richest man in the world in his time, got incredibly rich during the 1930s. Getty endorsed the reforms for economic stability that came from the New Deal (see his autobiography) and voted to reelect FDR, "whose policies he strongly supported." (The House of Getty, Russell Miller) Getty in the 1970s called FDR "a great president." Forbes Morgan of the Morgan clan worked for FDR.
The American people reelected Franklin Roosevelt by the biggest electoral landslide of the 20th Century, winning with 98.5% of the electoral votes in 1936. Only George Washington and James Monroe received a higher percentage of the electoral votes. FDR also won 60.7% of the popular vote. Americans approved of FDR's performance. They reelected him again with 84.6% of the electoral votes in 1940.
The White House had to hire five people to handle the avalanche of mail after his inauguration. One of those writing to FDR was Elmer Jones, President of Wells Fargo and Co. He wrote, "Although I am a Republican and a friend of those other great presidents Theodore Roosevelt, the late President Taft, and former President Hoover, I desire to avail myself of this opportunity to congratulate you on your sound speech tonight which has just come over the radio in magnificent manner. You are doing a grand job under the most difficult circumstances and justly deserve the individual and collective support and sympathy of every true American who puts his country needs above party politics of personal interests. I congratulate you and wish you success." (The People and the President, Lawrence Lavine and Cornelia Levine)
FDR won World War Two, the biggest war in history, and destroyed Adolph Hitler!
And after you find the statistics online, also buy Fed Chairman Ben Bernanke's rigorous book on the economics of the Great Depression called "Essays on the Great Depression." There are many excellent economic books on the great depression, such as Milton Friedman's "Monetary History of the United States," but the forgotten man is not one of them. CHECK THE NUMBERS!
In reply to an earlier post on Jul 31, 2007 3:16:28 PM PDT
Michael Henshaw says:
Brent, fine post, but I don't find the book to be too negative on FDR. Hoover didn't know what he was doing and FDR obviously didn't either (page 148 is the best example). There was no real rational alternative to FDR (until 1940), but the New Deal didn't help the economy. Black Tuesday in 1938 (9 years after the crash) can attest to the failures of the thirties.
The "moderate recovery" was terrible. The panic had subsided (thanks in part to FDR), but the economy was terrible, and the policies were terrible.
The administration's attacks against Mellon and others were shameful and the attempts at class warfare still taint out politics today.
Posted on Aug 24, 2007 7:55:42 PM PDT
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In reply to an earlier post on Sep 23, 2007 6:14:19 PM PDT
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Posted on Sep 26, 2007 10:51:56 AM PDT
Ms. Schlaes and in particular Mr. Gingrich are partly right. FDR did make some egregious errors including the National Recovery Act and class warfare rhetoric. However there was one big success - the increase in the money supply. Interested persons are advised to access the article Christina D. Romer "What Ended the Great Depression?" in the Journal of Economic History (Vol 32, No.4, December 1992). Ms. Romer demonstrates that the money supply grew by ten percent per annum from 1993 to 1937 and at an even higher rate from 1939 to 1942. Ms. Romer statistically demonstrates that this rate of money increase greatly contributed to a rising Gross National Product in 1930s. The major contibuting case to the money increase was the abandonment of the gold standard in the early days of the Franklin Roosevelt administration.
I am not an FDR idolizer. However I think the factual record should be considered in any historical analysis.
In reply to an earlier post on Nov 27, 2007 7:02:06 AM PST
George Haines says:
What grade are you in right now?
I can tell by your writing style and grammar that you want to be seen as an adult, but you shouldn't listen to whichever teacher told you to hate the government.
I am guessing you are in middle school, so hopefully when you get to high school you will be exposed to other ideas.
I also hope you find a good English teacher your freshman year.
Here is a start:
"Bush is a facist this includes is administration."
These sentences need to be separated by a semi-colon or re-written as two separate sentences. Also, the word "fascist" is spelled with an "s."
"Who is trying to kid who."
Interrogative sentences need to end with question marks. Unless you are making the statement that someone named "Who" is trying to fool someone else named "who" (or possibly himself?) the sentence needs a question mark.
"facist elite went to far"
Unless "far" is a location, you can't go to far. You can, however, go "too far."
"First world war had to be paid for,"
You need to start this sentence with the word "The."
The word contention shows a strong vocabulary for a middle school student, so try to build on your strengths.
"Fed Is Private bank."
This is not a complete sentence and Fed needs to be abbreviated properly. Also, the word "is" should not be capitalized, nor should the word "private." The sentence should read: The Fed. is a private bank.
"Who is Rothschild."
Again, unless you are saying that someone named "who" has the alias "Rothschild," this sentence needs a question mark.
You obviously have an active mind, which I would encourage, but in the future ask your parents to proof-read your posts. People will not take your arguments seriously when they are written in this way.
Hope this helps, Walter!
In reply to an earlier post on Nov 27, 2007 12:38:17 PM PST
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In reply to an earlier post on Nov 27, 2007 2:19:53 PM PST
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In reply to an earlier post on Nov 28, 2007 6:15:17 AM PST
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