FDR's Raw Deal Exposed

Chicago Sun-Times ^ | 9.30.03 | Thomas Roeser

[Cathryn Crawford]

FDR's Raw Deal Exposed

August 30, 2003

BY THOMAS ROESER

For 70 years there has been a holy creed--spread by academia until accepted by media and most Americans--that Franklin D. Roosevelt cured the Great Depression. That belief spurred the growth of modern liberalism; conservatives are still on the defensive where modern historians are concerned.

Not so anymore when the facts are considered. Now a scholar at the libertarian Cato Institute has demonstrated that (a) not only did Roosevelt not end the Depression, but (b) by incompetent measures, he prolonged it. But FDR's myth has sold. Roosevelt, the master of the fireside chat, was powerful. His style has been equaled but not excelled.

Throughout the New Deal period, median unemployment was 17.2 percent. Joblessness never dipped below 14 percent, writes Jim Powell in a preview of his soon-to-be-published (by Crown Forum) FDR's Folly: How Franklin Roosevelt and His New Deal Prolonged the Great Depression. Powell argues that the major cause of the Depression was not stock market abuses but the Federal Reserve, which contracted the money supply by a third between 1929 and 1933. Then, the New Deal made it more expensive to hire people, adding to unemployment by concocting the National Industrial Recovery Act, which created some 700 cartels with codes mandating above-market wages. It made things worse, ''by doubling taxes, making it more expensive for employers to hire people, making it harder for entrepreneurs to raise capital, demonizing employers, destroying food . . . breaking up the strongest banks, forcing up the cost of living, channeling welfare away from the poorest people and enacting labor laws that hit poor African Americans especially hard,'' Powell writes.

Taxes spiraled (as a percentage of gross national product), jumping from 3.5 percent in 1933 to 6.9 percent in 1940. An undistributed profits tax was introduced. Securities laws made it harder for employers to raise capital. In ''an unprecedented crusade against big employers,'' the Justice Department hired 300 lawyers, who filed 150 antitrust lawsuits. Winning few prosecutions, the antitrust crusade not only flopped, but wracked an already reeling economy. At the same time, a retail price maintenance act allowed manufacturers to jack up retail prices of branded merchandise, which blocked chain stores from discounting prices, hitting consumers.

Roosevelt's central banking ''reform'' broke up the strongest banks, those engaged in commercial investment banking, ''because New Dealers imagined that securities underwriting was a factor in all bank failures,'' but didn't touch the cause of 90 percent of the bank failures: state and federal unit banking laws. Canada, which allowed nationwide branch banking, had not a single bank failure during the Depression. The New Deal Fed hiked banks' reserve requirement by 50 percent in July 1936, then increased it another 33.3 percent. This ''triggered a contraction of the money supply, which was one of the most important factors bringing on the Depression of 1938--the third most severe since World War I. Real GNP declined 18 percent and industrial production was down 32 percent.''

Roosevelt's National Recovery Administration hit the little guy worst of all, Powell writes. In 1934, Jacob Maged, a 49-year-old immigrant, was fined and jailed three months for charging 35 cents to press a suit rather rather than 40 cents mandated by the Fed's dry cleaning code. The NRA was later ruled unconstitutional. To raise farm prices, Roosevelt's farm policy plowed under 10 million acres of cultivated land, preventing wheat, corn and other crops from reaching the hungry. Hog farmers were paid to slaughter about 6 million young hogs, protested by John Steinbeck's The Grapes of Wrath. New Deal relief programs were steered away from the South, the nation's poorest region. ''A reported 15,654 people were forced from their homes to make way for dams,'' Powell writes. ''Farm owners received cash settlements for their condemned property, but the thousands of black tenant farmers got nothing.''

In contrast, the first Depression of the 20th century, in 1920, lasted only a year after Warren Harding cut taxes, slashed spending and returned to the poker table. But with the Great Depression, the myth has grown that unemployment and economic hardship were ended by magical New Deal fiat. The truth: The Depression ended with the buildup to World War II.

[Elliott Jackalope]

Lawrence Reed of the Mackinac center for public policy wrote a paper titled "Great Myths of the Great Depression" that you can find at http://www.mackinac.org/article.asp?ID=4013 - I highly recommend reading it.

[ElkGroveDan]

Thank you for posting this.

[Cathryn Crawford]

For 70 years there has been a holy creed--spread by academia until accepted by media and most Americans--that Franklin D. Roosevelt cured the Great Depression. That belief spurred the growth of modern liberalism; conservatives are still on the defensive where modern historians are concerned. Not so anymore when the facts are considered. Now a scholar at the libertarian Cato Institute has demonstrated that (a) not only did Roosevelt not end the Depression, but (b) by incompetent measures, he prolonged it.

Ping...

[jmc813]

The drug war is another product of the New Deal.

[Cathryn Crawford]

You're welcome. And nice tagline. :-)

[MayDay72]

...BUMP...

[Chad Fairbanks]

Thanks for posting this - the part about how Black Farmers were never reimbursed was pretty telling, actually.

The inherent racism of the Democratic Party never ceases to amaze me...

[liberallarry]

Roosevelt didn't end the Great Depression. War did.

The author hasn't "demonstrated" anything. He argues - not very convincingly in my opinion - for a certain interpretation. An example of a weakness in his argument; he neglects to mention that the Federal Reserve in the period 1929 to 1933 - Hoover's presidency - acted in accord with sound Conservative principles of the time.

[Allan]

For 70 years there has been a holy creed--
spread by academia until accepted by media
and most Americans--
that Franklin D. Roosevelt cured the Great Depression.

Is that true?
I was born in 1940
and I never have met a single person
who lived through the depression
who thought that FDR ended it.

Most people seem to think WWII did it.

[Cathryn Crawford]

Roosevelt didn't end the Great Depression. War did.

Exactly.

I believe the author states your point in the last line:

The truth: The Depression ended with the buildup to World War II.

[patton]

Tip of the iceburg. FDR, in effect, was in charge of a coup'd'etat that ended the US republic.

[Mears]

Same here,and I'm a few years older than you. I always thought it was the war.

[Montfort]

We are also taught that FDR and his new deal saved us from communism. That may be so, but it seems like a lot of these policies contributed to suffering and increased the numbers of displaced workers.

Perhaps someone wanted us to go communist, but simply did not quite pull it off. The role of the Federal Reserve in all this certainly gives support to the conspiracy theorists throughout US history who have preached against the centralized power of a central bank. Perhaps they were(are) right.

[Jack Black]

thanks. I think the tight money supply is generally accepted to have been a huge contributor to the depression. I was taught this 20 years ago at a liberal college. Still more debunking of the socialist hero is always called for.

[eno_]

You put your finger on the true test of conservatism: If you ask a "conservative" if they would repeal the New Deal laws, close the departments, and roll-back the decisions of the packed court, they are NOT a real conservative.

[eno_]

So good to hear from another who knows the truth!

[<1/1,000,000th%]

Great post!

This was in the SunTimes?

[Cathryn Crawford]

Yes. I was a bit surprised to find it there.

[eno_]

I meant to say if they hem and haw about it they are not a real conservative.

[Cathryn Crawford]

Isn't FDR generally accepted by most conservatives to have been socialistic?

[Bon mots]

I've always said that Roosevelt had nothing to do with solving the Great Depression.
Adolf Hitler did.

(This does not mean that I support either of these fiends...)

[demlosers]

A good read very interesting.

[ninenot]

Interesting read, albeit very short on evidence.

[Bon mots]

Roosevelt also lost WWII to Stalin.

Yes we beat Germany and Japan. But Stalin got everything he wanted from the war and more.

Roosevelt lost the most important battle of the war. The battle of Yalta. It was disguised to look like negotiations. Without a shot being fired, the weasel handed all of East Germany, Poland, Czechoslovakia, Hungary and more to the disbelieving Stalin - who could not believe what a stupid man he was negotiating with.

If only he died a couple of weeks earlier, millions would have missed fifty years of slavery.

[patton]

LOL. Does the sun rise in the east?

[demlosers]

Without a shot being fired, the weasel handed all of East Germany, Poland, Czechoslovakia, Hungary and more to the disbelieving Stalin - who could not believe what a stupid man he was negotiating with.

Or he was ideologically sympathetic toward the communist system.

[elbucko]

The inherent racism of the Democratic Party never ceases to amaze me.

The Democratic Party was, after all, the party of the white slave owner in the South. FDR did not want to offend the white Southerner's during the "Depression"(?) by helping the black farmers in the South. Franklin sent Eleanor to go fly with the Tuskeegee Airman, generate some headlines and con the black voter to vote Democrat. (sigh)

Now, the Democratic Party is simply out to enslave everyone.

[conservatism_IS_compassion]

To really flesh out your understanding of FDR you really should read The New Dealers' War by self-identified (on a Booknotes interview) Truman Democrat Thomas Flemming.

Neville Chamberlain's appeasment policy was popular in Britain, and Winston Churchill railled helplessly against it from a back bench. Likewise 80% of Americans opposed entry into WWII before Pearl Harbor. Against that backdrop the efforts of FDR to inflame war between the US and Germany just didn't get any traction before Pearl Harbor.

Of course we now know that FDR was informedat the end of November 1941 that the Japanese Embassy had been ordered to destroy its diplomatic codes and end negotiations with America at a certain time on Dec 7, 1941--but at the time, that was a closely guarded secret. Had the public known that in December 1941, FDR would have been impeached--for FDR had mousetrapped the 80% of the public who, before Pearl Harbor, opposed entry into WWII. Because somebody--somebody who was never punished or even had his career ruined--leaked information which created a sensation of antiwar agitation just when the Japanese were launching their attack on Pearl Harbor.

FDR's antiGerman policy hardened in the summer of 1941, which just happens to coincide with the invasion by Hitler which started June 22, 1941--the invasion of the USSR.

FDR was hostile to the British Empire, and didn't take suggestions very well from the British Navy--part of the reason that 400 US merchant ships in US coastal waters were lost to U-boats by June 1942.

Oh, and did I mention that FDR's first diplomatic move as POTUS was to recognize the Soviet Union?

[elbucko]

he neglects to mention that the Federal Reserve in the period 1929 to 1933 - Hoover's presidency - acted in accord with sound Conservative principles of the time.

True, but they were not considered "Conservative" at the time, but "Progressive" actions by the Fed. You also fail to mention that many of the programs credited to Roosevelt, were actually started during Hoover's administration. The WPA being one of them.

[Allan]

FDR, in effect, was in charge of a coup'd'etat that ended the US republic.

The US republic ended in 1913 with the passage of the 16th amendment.

[eno_]

Oh yeah, another piece of FDR history:

"Loose lips" never sank one ship. THAT was a propaganda campaign to turn Americans against one another and blame anyone who spoke out against the merchant ship carnage as a possible "loose lips" traitor.

[Cicero]

Nothing new here, unfortunately. FDR was an enormously destructive force, but the liberal press will never admit it. The average American still thinks FDR was a great president, and for that reason even Republicans like Reagan invoke his name.

Unfortunately, you can't reason with a liberal. They are impermeable to logic.

[RaceBannon]

http://www.rooseveltmyth.com

Great web site

you must read the book, I have a hard copy, but they have it online!

[norwaypinesavage]

One of the strongest arguments I've ever heard that proves Rosevelt did not cure the depression has to do with timing. He enacted many of his strongest programs the first year after he was elected, 1933. If these programs cured the depression, why did it take 10 years for them to become effective?

[stop_fascism]

Unfortuantely, Yalta only confirmed the give-away that was agreed to in Teheran. Yalta usually gets blamed because it allows Roosevelt's supporters to claim that Stalin took adavantage of Roosevelt's ill-health. The truth is that Roosevelt had spent the entire war selling out the free world to "Uncle Joe".

[marron]

FDR is the guy who failed to end the depression in two terms as president (he served three terms and was elected to a fourth). Despite the fact that Hitler took power in 1933, about the same time FDR took office, and the Japanese started their march about the same time, by the end of his second term when we were hit at Pearl Harbor FDR had done nothing to prepare us for war. Our guys were still training with sticks and our ships were sitting in harbor to save fuel.

FDR is the guy that sent refugee Jews back to be slaughtered in Hitler's camps. He's the guy that handed half of Europe over to Stalin, who easily bested Hitler in the butchery department by a factor of at least 3.

FDR is the guy who rounded up US citizens by the thousands and interned them in camps, and allowed their property to be seized. He is the guy that refused to outlaw the lynching of Negroes.

A more miserable excuse for a president has never sat in the White House.

[stop_fascism]

These two things are not mutually exclusive. It took a stupid man to be idelogically sympathetic toward the communist system.

[elbucko]

Thanks for the link. Interesting stuff.

[SJackson]

If you'd like to be on or off this middle east/political ping list, please FR mail me.

[billbears]

FDR, in effect, was in charge of a coup'd'etat that ended the US republic.

The US republic ended in 1913 with the passage of the 16th amendment.

Sorry you're both wrong. The Republic died in April 1865. Wilson and FDR both used the imaginary powers vested upon them by the unconstitutional actions of one man. When people start to face up to this fact and admit, then and only then will be able to start the return to a truly Constitutional Republic

[Scenic Sounds]

Must the libertarians always chip away at our nation's history? Must every American icon be torn down?

History is an argument! ;-)

[Cathryn Crawford]

History is an argument! ;-)

Of course it's not! It's facts. Pure and simple.

The analysis of history may be an argument, but not history itself.

[liberallarry]

You also fail to mention that many of the programs credited to Roosevelt, were actually started during Hoover's administration. The WPA being one of them.

More reasons to discount what this author has to say.

Nobody really knows what caused the Great Depression to be so much worse than previous occurances. Nobody know or knows how to end them once they begin (except by war).

Roosevelt's contribution was as much psychological as anything else. He was a fresh face trying new things. Sometimes that's the best humanity can expect.

[Scenic Sounds]

Of course it's not! It's facts. Pure and simple.

The analysis of history may be an argument, but not history itself.

Why do the libertarians so hate America? ;-)

[elbucko]

The truth is that Roosevelt had spent the entire war selling out the free world to "Uncle Joe".

Yes, I believe that's true, as well as most of the "New Deal Communist's" in FDR's administration. In some ways, the Korean War was a God send. Truman mucked it up so bad the Republicans could take the government away from the Democrats and keep the White House for 8 years.

[Cathryn Crawford]

Why do the libertarians so hate America? ;-)

They don't hate America. They just want to see America become a more pure republic.

[B Knotts]

FDR was the American Dictator.

The sad thing is, we now have a fair amount of "conservatives" who admire FDR and his socialistic policies.

[Scenic Sounds]

They don't hate America. They just want to see America become a more pure republic.

Sure - just tear down all of our icons! Burn all of our traditions!

Our Founding Fathers weep when they read a column like this one. ;-)

[Cathryn Crawford]

Our Founding Fathers weep when they read a column like this one. ;-)

Well, that's an overreaction.