Monday, June 25, 2007

The New Deal Revisited

Amity Shlaes says we should not rever FDR's New Deal. John Updike disagrees.

Updike's concluding paragraph is telling:
My father had been reared a Republican, but he switched parties to vote for Roosevelt and never switched back. His memory of being abandoned by society and big business never left him and, for all his paternal kindness and humorousness, communicated itself to me, along with his preference for the political party that offered “the forgotten man” the better break. Roosevelt made such people feel less alone. The impression of recovery--the impression that a President was bending the old rules and, drawing upon his own courage and flamboyance in adversity and illness, stirring things up on behalf of the down-and-out--mattered more than any miscalculations in the moot mathematics of economics. Business, of which Shlaes is so solicitous, is basically merciless, geared to maximize profit. Government is ultimately a human transaction, and Roosevelt put a cheerful, defiant, caring face on government at a time when faith in democracy was ebbing throughout the Western world. For this inspirational feat he is the twentieth century’s greatest President, to rank with Lincoln and Washington as symbolic figures for a nation to live by.
My view: When evaluating political leaders, it is better to trust "the moot mathematics of economics" than "the impression of recovery."

Update: Amity emails me some thoughts:

If we are all so concerned about consumer sentiment, and FDR's famous statement that the only thing we have to fear is "fear itself," then we should take Robert Higgs's argument of the effect of uncertainty on sentiment seriously. Higgs said that FDR caused fear itself with his relentless experimentation. I came to appreciate Higgs a lot writing this book. Keynes too was concerned abt the arbitrary aspect of FDR's policy, telling FDR that he should either nationalize the utilities or leave them alone, but not chase them around the lot every week or so.

What else? Going over the period came to like three people, Irving FIsher, Ray Moley and Benjamin Anderson, a lot. Also Rex Tugwell. His profile is the profile of the economist in government and in policy agony. The policy agony of economists is a big part of the 'thirties story. That period is not much different from today in that regard. Politicians surrounded themselves with name economists and then didn't listen to the economists. Or should I say listened only intermittently.