Amity Shlaes – The Forgotten Man: A New History of the Great Depression

Amity Shlaes – The Forgotten Man: A New History of the Great Depression

It’s in part about FDR’s presidency, but more about the country and the times than the man himself. William Graham Sumner first coined the term “The forgotten man” in 1876 to describe people who neither voted for nor benefited from spending programs, but paid for them anyway. FDR later used the term in a very different way, to describe people who were hurting during the Depression and not getting the help they needed. This sharp change in direction is a theme of the times, and of Shlaes’ book.

FDR wasn’t particularly ideological, and as a result many New Deal policies were scattershot and worked against each other, rather than with each other. The result was absurdities such as crops being plowed under to raise food prices for farmers, even as people were hungry and cash-poor.

Despite their contradictions, many New Deal policies have common themes. They tend to increase federal power relative to state and local power; they grow government on net far more often than they shrink it; and they emphasize top-down direction rather than bottom-up adaptation. This even led to officially sanctioned cartels, after forty years of antitrust policy enforcement intended to break them up. This cartel approach was openly acknowledged to have been inspired by Mussolini.

But there is far more to the story of the Depression than FDR. Just as he gets more praise than he deserves, so too does he get more criticism than he deserved. The single biggest cause of the Depression was a one-third contraction in the money supply during the 1920s. The resulting deflation led prices to change for reasons completely unrelated to supply and demand, and led to all kinds of mistaken financial decisions and investments. The 1930 Smoot-Hawley tariffs, passed shortly after the stock market crash, killed international trade and raised international tensions at the worst possible time. President Herbert Hoover, usually remembered as a free market supporter, doubled federal spending in real terms in just four years.

All this happened before FDR took office. He and his brain trust inherited an amazing mess, which might partially explain their general ethos of throwing spaghetti at the wall until something sticks. They had no precedent to work from, people were scared, and nobody knew what to do.

Politics also played a role, and in the usual negative way. For example, demographers knew from the start that the 1935 Social Security Act would create a program that was not sustainable in the long run.  The worker-to-retiree ratio would lower over time, and would cause massive structural deficits for future generations. FDR acknowledged this in writing, dismissing it for the same reason President Trump waves off deficit concerns today: he’ll be out of office by the time it becomes a problem.We are that future generation, and Social Security’s present value deficit is measured well into the tens of trillions of dollars—in part because a presidential election was coming up more than 80 years ago.


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