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The Forgotten Man By: David Forsmark
FrontPageMagazine.com | Wednesday, July 25, 2007

The Forgotten Man: A New History of the Great Depression by Amity Shlaes (HarperCollins, $26.95, 464pp.)

Everybody has impressions of the Great Depression and many talk glibly about it, but most people have little substantive knowledge of the era or its causes. Our images come from black-and-white photos and grainy newsreels of Dust Bowl farmers and bread lines, Grandma’s stories and pop culture references ranging from John Steinbeck to Laurel and Hardy.


We also have some kind of general outline in our heads of events that we gained from that boring part near the end of the school textbook that was rushed through so the teacher could say the course had been completed — a curriculum which holds that a stock market crash caused the Depression, President Herbert Hoover did nothing to help people recover from it, and Franklin Delano Roosevelt saved the day with a lot of government programs.


But in her surprisingly readable book, The Forgotten Man: A New History of the Great Depression Wall Street Journal economics reporter Amity Shlaes shows that most of what is generally "known" about the Great Depression is filtered through partisan politics-- and it’s dead wrong.


Even the famed term, "the forgotten man," has a source that is the direct opposite of what it came to symbolize in the public imagination. You might remember the callous scavenger hunt item in the classic Depression comedy, "My Man Godfrey," where the rich kids have to find a "forgotten man" -- basically a hobo. But FDR’s speechwriter lifted the phrase from a speech by Yale philosopher William Graham Sumner, who essentially said that when A and B want to help X, and force C to go along with them to pay for it, A and B get all the credit and X gets all the attention.


So C, the fellow who pays for government programs against his will, is the "forgotten man." The New Dealers called X the forgotten man, even though every program in the 1930s was essentially addressed to him, and he got about as much attention as Babe Ruth.


The purpose of Shlaes’s book is to restore some focus to the real forgotten man — the people who had to pay for FDR's New Deal — including some who were relentlessly persecuted (and prosecuted in near Stalinesque fashion).


Shlaes tells the stories of the titanic personalities who clashed at a crossroad of history and makes the great political and ideological battles of the era come alive. The Forgotten Man is gripping narrative history; best of all, there's not a graph or a chart to be found on any page.


Besides Hoover and FDR, Shlaes restores the importance of some vitally important men that the American public have largely forgotten, including:


·       New Dealers Rex Tugwell, Stuart Chase and David Lillenthal -- all greatly influenced by a highly publicized junket to the Soviet Union in 1927 -- who aggressively pushed a planned economy model while in the Roosevelt administration.

·       Harold Ickes, the father of the Clinton political hack, who ruthlessly advocated the jailing of business leaders and led the effort to pack the Supreme Court.

·       Power company executive Samuel Insull, whom FDR tried to put out of business to advance a TVA power monopoly and the Justice Department tried to jail for economic crimes and phony tax law violations.

·       Wendell Wilkie, another utilities giant who finally had enough and became a prominent spokesman against the New Deal. Wilkie eventually ran against Roosevelt for president in 1940. Though he lost in the shadow of an impending war, Wilkie helped pull the Republicans away from isolationism and toward a more free enterprise — not just pro-big business — position.

·       The real giant of this story, Treasury Secretary Andrew Mellon who not only shamed the New Dealers in court when they tried to prosecute him for taking advantage of legal tax loopholes but also outclassed the big government spenders with his gift of the National Gallery, setting an example for private enterprise to follow.


All of this is great stuff. But no story in the book compares to the New Deal effort to nationalize the poultry business by jailing the two Jewish immigrant brothers who ran a modestly sized poultry wholesale business in New York.


That’s right. We all know about the nationalization of large segments of the electrical power industry with Hoover Dam (which Ickes pettily renamed Boulder Dam, Shlaes notes) and the Tennessee Valley Authority, plus the domination of pensions with the Social Security Act. But it’s largely forgotten that, at one point, the New Dealers decided it was a vital national interest for the government to take over the chicken business.


The best example of "forgotten men" in Schlaes’s account has to be the incredible story of the Schechter brothers, who were prosecuted under the National Recovery Act for allegedly violating "the Code of Fair Competition for the Live Poultry Industry of the Metropolitan Area in and about the City of New York." These first-generation Jewish immigrants who paid themselves salaries of $35 per week were basically prosecuted for giving customers too much choice and for engaging in "keen competition."


They lost their case in federal court and were actually headed for jail time, but they eventually were vindicated by the Supreme Court, where FDR crony Felix Frankfurter argued against them.


The defeat in the Supreme Court was a stinging slap to the NRA and the first shot in FDR’s subsequent war with the high court, which ultimately led to his effort to pack the nation's highest bench. This overreach was one of the few missteps FDR made with American public opinion.


But The Forgotten Man is not just a story of New Deal excess. Shlaes has plenty of criticism for Hoover, as well. While FDR is lionized to this day, most have forgotten what a giant that Hoover was considered in his day. In fact, it was the hubris from his spectacular successes in private life that led to his downfall as a president.


Hoover was an engineer and had an engineer’s belief that the right plan, the right technology and the right leadership could rescue any situation. He had proved it in his famine relief plan in postwar Germany, in a massive relief effort after the great flood of 1927 and spectacular successes as a mining engineer all over the world.


Hoover succeeded Calvin Coolidge to the presidency, who had overseen huge expansion in the economy. Coolidge was a believer in Adam Smith’s "Invisible Hand," Shlaes writes; but Hoover thought he could take that one better. Government should wield a "beneficent hand" toward American business.


When the stock market crashed in 1929 -- which today would be considered merely a large correction --  Hoover's reaction was a policy of severe deflation. That meant, Shlaes writes, that businesses could not borrow money to cover their losses. At the same time, Hoover was trying to pump money into the economy by pressuring businesses to raise wages.


The nail in the economy’s coffin was the Smoot-Hawley Tariff, which compounded the problem by denying Americans access to foreign markets and trade—and took the Depression worldwide.

The New Dealers took the opposite approach to Hoover’s Beneficent Hand and openly declared war on business, especially the rich, in order to enforce their socialistic vision on the country.


The New Dealers, Shlaes writes, were convinced that the economic conditions of the Depression were a permanent part of the American economy. That market economy had come to its logical end, and massive and permanent government programs were needed to right the ship.


Perhaps even worse for the economy than his policies, Shlaes asserts, was FDR’s role as the Great Experimenter. Not only was Roosevelt willing to try seemingly any and all government-centered schemes to boost the economy, but he also took great glee in surprising even his advisers (once yanking the rug out from trade negotiators in England trying to undo the damage of Smoot Hawley).


This kept the markets antsy and businesses worried about investing in an uncertain — and often hostile — market.


But while Shlaes makes the irrefutable case that FDR deepened and prolonged the Depression, she also makes the point that the market "crash" would not have precipitated the decades of crisis without Hoover’s reaction to it. While Mellon and Coolidge urged calm, the "something needs to be done" crowd carried the day, playing into Hoover’s own confidence in his abilities to "help" the economy. Doing nothing might have been costly politically in the short run, but might have saved a decade of misery and entitlement costs that burden the economy to this very day.


If you think these lessons have been learned today, just think of all the media reporting over the "lost" value of the NASDAQ under Bush-- and the longing for the good old days of the Robert Rubin-maintained tech bubble.


If there is a lesson our current president could take from this book, it is that false bravado didn’t play well even before people saw their chief executive every day on TV. You don’t have to surrender and do the wrong thing to satisfy the polls; but some gravity now and then—and something new to say once in a while—would probably help avoid disaster.


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