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Customer Review

1,007 of 1,135 people found the following review helpful
5.0 out of 5 stars Brings You Back to the 1930's, June 15, 2007
This review is from: The Forgotten Man: A New History of the Great Depression (Hardcover)
The Forgotten Man (TFM for short) is not a polemic. It is not an argument for a particular theory or economic interpretation of the Depression. Instead, the author steps back and lets the story tell itself. She has sifted through memoirs and contemporaneous accounts in order to carry the reader back into the mindset of the 1930's. She focuses on a diverse selection of protagonists from that period, including opponents of Roosevelt like Andrew Mellon and Wendell Wilkie as well as members of Roosevelt's "brain trust" like Paul Douglas and Rexford Tugwell. Note that in the context of that time, "trust" meant the same thing as cartel (as in anti-trust laws). Roosevelt was claiming that with his advisers he had cornered the market on brains. If so, then after reading TFM, my sense is that there was not much value in this particular monopoly.

I came away with three major conclusions.

1. For better or worse, much of the country saw the Depression as something akin to a natural disaster, and people accordingly lowered their expectations for their standard of living.

2. Economic ignorance among policymakers was much worse than I had realized. I was steeped in the myth that the reason the Depression was so bad was that only Keynes had the answer, and he had to overcome the resistance of "the classical economists," such as Irving Fisher. But the differences between Fisher and Keynes seem small when compared to the differences between the policymakers and both economists. In physics, it would be like watching an academic debate over the meaning of quantum mechanics while policymakers are unable to grasp the simple concept of gravity.

3. The struggle over economic policy in the 1930's was really an episode in the long, historical conflict between business participants in the market and anti-business academics. Roosevelt gave free rein to the professors, until the start of the Second World War led him to realize that he would need the tycoons to help mobilize to defeat Hitler. I suspect that one reason that Roosevelt and the New Deal come off so well in the conventional wisdom is that history books are written by professors, not by entrepreneurs.

I should stress that these are my own views, and that TFM is much less prone to making generalizations and drawing conclusions. Readers with a variety of backgrounds and predispositions can appreciate the book and learn their own lessons.
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Showing 1-10 of 60 posts in this discussion
Initial post: Jul 14, 2007 9:31:27 AM PDT
P. Fontaine says:
It was very helpful because of its short, objective view. In the end, it suggest that each person read the book and decide for themselves about forming any conclusions, based on their own abiltity to understand. Unfortunately, many times people are too often influenced by: emotion, lack of knowledge, the influence (or likability) of the messenger, as well as many other human frailties.

In reply to an earlier post on Jul 14, 2007 9:19:21 PM PDT
Last edited by the author on Oct 3, 2009 10:34:07 PM PDT
Todd 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.

In addition, the Dow climbed 353% from the time FDR took office in early 1933 to August of 1937, four years and five months later! If you invested $2,850 at the time FDR took office in 1933, it would have grown to over $10,000 by mid-1937. CHECK THE NUMBERS! The Dow was 53.84 the day before he took office in 1933 and it rose to 190.02 in early August of 1937. Year after year the market kept going up in FDR's first term. The market LOVED FDR! CHECK THE NUMBERS! You should read Nobel Prize winning (in economics) Paul Krugman's "Conscience of a Liberal," which details the enormous growth in middle class wealth for the middle class because of the New Deal. Today's middle class was created after the gilded Age and 1920s with policies from the New Deal. Read Krugman. (This one paragraph only was added with the last edit.)

After taking office, 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 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!

Posted on Aug 24, 2007 7:56:45 PM PDT
[Deleted by Amazon on Apr 13, 2008 2:22:34 PM PDT]

Posted on Dec 5, 2007 7:40:45 PM PST
Last edited by the author on Dec 5, 2007 7:41:06 PM PST
jape55 says:
The third point you made hit the nail on the head. I love the way you stated it. And I believe that many of our economic woes over the seven decades since the 30's have been in large part due to the very same thing.

Posted on May 2, 2008 5:12:55 AM PDT
Diane says:
The comment said: "It is not It is not an argument for a particular theory or economic interpretation of the Depression. ." Um, sir, I must disagree with you; this book is precisely "an argument for a particular theory or economic interpretation of the Depression". The author has cherrypicked her information to write a history that supports her ideological bias that government intervention in the economy is always bad, conveniently leaving out information that does not support her ideology. Useful to read to find out what the anti-FDR Republican party believes; not useful to read if one desires a true history of the 1930s.

In reply to an earlier post on Jul 22, 2008 4:06:25 PM PDT
Dear Diane,
You are correct .The author of the review is a libertarian economist who views any role for government in the macro economy as dangerous .His reference to Keynes is ambiguous,vague,unclear,and dubious.The author has no idea about what Keynes was doing in the GT because he lacks the mathematical competence to figure out what Keynes is doing in chapters 20 and 21 with his D and Z model of the theory of effective demand.It is very simple to discover " what Keynes meant ".All the author of the review has to do is integrate(take the anti derivative) of the derivatives on pp.55-56,ft.2 and any of the derivatives on pp.283-284 of the GT.However,there is not a single economist in the 20th century who has done this.Instead ,one is presented with unsupported claims that Keynes was a proponent of deficit finance,demand management,inflationary finance,etc.Anyone who has actually read the GT knows that Keynes was OPPOSED to deficit finance,demand management,or inflationary finance.It's all there on pp.225-410 of Volume 27 of the CWJMK.Its also in the GT.Simply go and read what Keynes actually said in ft.1 on p.128.Keynes is a supporter of loan expenditure and NOT deficit finance

In reply to an earlier post on Nov 24, 2008 5:39:01 PM PST
M. Gordon says:
Thanks for taking the time to share your perspective. It was very informative.

In reply to an earlier post on Dec 6, 2008 7:01:25 PM PST
Last edited by the author on Dec 6, 2008 7:05:07 PM PST
I agree. I used to teach the New Deal and Modern America. When I first came across a review of this book in the Washington Post, I was amazed at how distorted the historical record was. There was a reason that Roosevelt was elected to the Presidency four times. At the time of this death, common people felt as though someone they knew personally had passed away. The entire nation mourned. The New Deal was more than a set of economic policies. To understand that you have to study the nation's history and it's international challenges. In that context, this book is nothing more than a monograph based on distorted and incomplete information.

In reply to an earlier post on Jan 3, 2009 8:32:23 AM PST
Last edited by the author on Jan 4, 2009 1:08:50 PM PST
T. Carlsen is absolutely correct. The numbers in this book are distorted and cherry picked as we have come to expect from neo cons.

Posted on Jan 22, 2009 1:33:41 PM PST
Arnold Kling's review, posted June 2007, is the last of the positive, 5-star reviews. And that's no accident. Since then, we've seen one of the
biggest financial crises of all time! In just 18 months, Amity Shlaes's "new history" has become yesterday's ideological ax-to-grind. I can only say,
"Ha!"
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