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10.22.08

Why The Right Should Leave FDR Alone

Franklin D. Roosevelt and his policies that led the country out of the Great Depression have been unfairly maligned.

As the current financial crisis has unfolded, Franklin D. Roosevelt has been frequently mentioned, both for his talent at rallying and reassuring the nation in crisis, which all concede, as well as for the economic policies he used to lead the country out of the Great Depression. In this second category, his name and record have often been traduced. Roosevelt’s historic reputation has suffered from his dying abruptly in office, leaving relatively uninformative archives, and not having a literary executor.

In the vacuum created by his death, a spontaneous coalition of McCarthyite Republicans, disgruntled British imperialists, and Euro-Gaullists propagated the Yalta Myth that Roosevelt had been swindled by Stalin at Yalta into handing over Eastern Europe to the USSR. Social Democratic leaders in the West, such as Willy Brandt and Pierre Trudeau, acquired the irritating habit of claiming that Yalta had legitimized the Soviet occupation of Eastern Europe (and their own truckling to successive Soviet leaders). In fact, the Yalta Agreement promised freedom and independence for Eastern Europe. If Roosevelt and Churchill had given Stalin everything he wanted, he would not have needed to violate every clause of that agreement as he did.

FDR had his faults, but he was a great leader at a time when America and the Western world had to have a great leader in the White House, and the American loony right should aim their spitballs elsewhere.

It has taken until the last few years for later historians, working from primary sources, to drive a silver stake through the heart of the Yalta Myth. FDR had no sooner been relieved of that affliction than a new assault has come down upon him like a second wave of incontinent and nasty pigeons fouling a Roosevelt statue. It has been alleged by some supply-side economic purists that he actually prolonged the Great Depression in the US.

In 1933, there was great disagreement about how to deal with an economic recession or depression, and Roosevelt’s administration, and he himself, had conflicting impulses. Hoover had made the worst possible selection of policy options: higher taxes and tariffs and a shrunken money supply. The unemployment rate was approximately 33%, about five times what it is now, and there was no direct relief for the unemployed. They could beg, steal, or starve, though Hoover claimed that they prospered selling apples.

On Inauguration Day, 1933 (then March 4), there were machine gun nests at the corners of the great government buildings in Washington, for the only time since the Civil War. All banks in 32 states had been closed sine die. Six other states had closed almost all their banks. In the other ten states and D.C., withdrawals were limited to 5 percent of deposits, and in Texas to $10 per day. The New York Stock Exchange and Chicago commodity exchanges had also been closed, indefinitely. The financial system had effectively collapsed, and was threatening to take the life savings of millions of people and what was left of the world’s financial system with it.

In a fever of activity, Roosevelt guaranteed bank deposits, made the federal government a temporary non-voting preferred shareholder in thousands of suddenly under-capitalized banks—more than half the banks in the country—refinanced millions of residential and farm mortgages, tolerated cartels and collective bargaining to raise prices and wages, increased the money supply, effectively departed the gold standard, repealed Prohibition of alcoholic beverages (wrenching one of the nation’s largest industries out of the hands of the underworld), and legislated reduced working hours and improved working conditions for the whole work force. In the next two years, he set up the Securities and Exchange Commission, created the Social Security system, and broadened the powers of the Federal Reserve to equal those of other national central banks, in what became known as the Second New Deal.

The Hoover agricultural policy had been to dump surpluses abroad, lend foreign governments the money to buy them, and then pursue them aggressively when the debtor countries defaulted. Roosevelt had farmers vote, by category of what they produced, on agreed production cutbacks, assuring sustainable agricultural prices, and compensated farmers for the production they had curtailed. The more extreme supply-side revisionists now claim that Roosevelt should not have stabilized food prices and financed, through public works projects, flood and drought control and rural electrification, because it would have been better to starve these people off the land and to the cities, where, a generation or more later, they would have had higher standards of living. Apart from the fact that the resulting human misery would have been morally and politically unacceptable in the US, the already militant farm unions would have disrupted the nation’s food supply. This policy would have put Roosevelt in the same general category of agrarian reform as Stalin and Mao Tse-tung.

The key to evaluating Roosevelt’s performance at combating the Depression is the statistical treatment of many millions of unemployed engaged in his massive workfare programs. The government hired about 60 percent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York’s Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority, the heroic aircraft carriers Enterprise and Yorktown, and built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. It employed 50,000 schoolteachers, rebuilt the entire rural school system of the country, and employed 3,000 writers, musicians, sculptors, and painters, including the young William de Kooning and Jackson Pollock.

Even pro-Roosevelt historians such as William Leuchtenburg and Doris Kearns Goodwin have meekly accepted that the millions of people in the New Deal workfare programs were unemployed, while comparable millions of Germans, Japanese, and eventually French and British also, who were dragooned into the armed forces and defense production industries in the mid- and late ’30s were considered to be employed. This made the Roosevelt administration’s economic performance appear uncompetitive, but my contention and that of other recent Roosevelt biographers is that the people employed in government public works and conservation programs were just as authentically (and much more usefully) employed as draftees in what became garrison states, while Roosevelt was rebuilding America at a historic bargain cost.

If these workfare Americans are considered to be unemployed, the Roosevelt administration reduced unemployment from 1933 to 1936 from 33 percent to 13 percent, to less than 10 percent at the end of 1940, to less than 1 percent a year later when the US was plunged into the war. If the federal workfare employees are accepted as employed, the corresponding numbers are 33 percent, 7 percent, 3 percent, and 0.5 percent. Virtually all the genuinely unemployed received basic social benefit payments from 1935 on.

There were five successive New Deals. After the emergency measures of the first 100 days and the Second New Deal in 1934-1935, which included industrial relations and utilities industry changes, and some entirely political tax increases to stave off Huey Long and other economic extremists, came a period of relative inertia and reduction of welfare spending, to test traditional capitalist theory, which provoked what Republicans tried to promote as a “Roosevelt Recession.” The Third New Deal in 1938 produced a massive return to workfare programs, which resumed economic progress. The Fourth New Deal was the greatest defense build-up in history, starting in 1939, including the first peacetime draft in US history in the midst of the election campaign in 1940. Finally, there was the GI Bill of Rights in 1944, which, posthumously to Roosevelt, transformed the American working class into a middle class. In the late ’40s, half the students in US universities were on GI Bill of Rights student grants.

Unemployment declined from about 33 percent when Roosevelt entered office to half of one percent when he died in office 12 years and 39 days later, and had been at that point for four and a half years, since several months before Pearl Harbor. The average per capita income doubled under Roosevelt, and was more equitably distributed, as the United States led the Allies to victory over the Nazis and Japanese imperialists, and the admission or restoration of Japan, Germany, France, and Italy to the democratic and civilized Western Alliance.

Roosevelt won four consecutive presidential elections with an average of more than 56 percent of the vote, and his party, while he led it, won seven consecutive elections of both houses of Congress. These are not the usual rewards for prolongation of economic distress. FDR had his faults, but he was a great leader at a time when America and the Western world had to have a great leader in the White House, and the American loony right should aim their spitballs elsewhere. There is no shortage of deserving targets.