FDR at breakfast.

Brannon, Ike

THE FORGOTTEN MAN: A New History of the Great Depression By Amity Shlaes 464 pages; New York, N.Y.: HarperCollins, 2007

The Great Depression is a topic that, much like Abraham Lincoln or World War II, raises the question: What can another book tell us that we don't know already? The answer, in the case of The Forgotten Man by Amity Shlaes, is plenty. Shlaes eschews a deep analysis of the macroeconomic issues of the day (save for a succinct and dead-on analysis of the Federal Reserve's myriad blunders as well as the debate and passage of the Smoot-Hawley Tariff) to focus on the regulatory policies that developed during the period and did a preponderance of harm to the economy. Her approach is not only entertaining but also relevant: In the last 60 years, monetary policy has improved; we no longer cut the money supply in the teeth of a recession. But many Depression-era regulatory policies remain intact and popular, including the Davis-Bacon Act and the minimum wage.

Shlaes, a fellow at the Council on Foreign Relations and a columnist for Bloomberg (full disclosure: Shlaes is an acquaintance of mine, for whom I have occasionally been a source), takes us through the fallow years of the Depression at a breakneck pace, pausing only occasionally to explore some of the particularly vivid characters and tribulations of Franklin D. Roosevelt's administration and examine some its more egregious decisions, as well as how they came to be. It is not pretty.

FDR AT WORK Economists have had a field day detailing how monetary and fiscal policy were absolute disasters during the 1930s (none more memorably than my former professor, Elmus Wicker, a foremost authority on the history of monetary policy). There have also been plenty of words written about the tax and regulatory changes that drastically worsened the economic landscape. In contrast, Shlaes helps us understand the political milieu of the 1930s and how Roosevelt and his advisers arrived at so many of their decisions. The answer, then as always, is that policy is made with faulty information and for reasons of narrow self-interest, self-aggrandizement, myopic political goals, or sheer spite more often than anyone would care to admit.

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The emphasis is not on the policies that resulted from Roosevelt's tenure, but on how he and his advisers arrived at the policy decisions of the day. In order to explore this fully, a lot more attention is given to the machinations of individuals fighting for FDR's ear as well as the president's own motivations and calculations than in any standard discussion of the Depression. His daily habit of setting the price of gold while having his morning breakfast, based on nothing more than a hunch, will exasperate the policy wonks reading this, while his astonishment that wealthy Americans would deliberately arrange their finances so as to lower their tax burden seems almost quaint to us today.

Shlaes relates the Depression to present political reality in a number of ways. First, the book does a nice job of delving into the complex relationship Roosevelt had with Congress. Despite the fact that his party controlled both the House and Senate for his entire tenure (at times, overwhelmingly), his ability to get his legislation through eventually became quite difficult. Of course, early in his tenure his major pieces of legislation were enacted easily, thanks in part to the gravity of the economic morass. But that honeymoon gave way to a general wariness on the part of Congress toward the president, usually quite warranted. His attempt to force through a major piece of tax legislation (that increased marginal tax rates, corporate income taxes, and the tax on investment and capital gains) by attaching it as a rider to an unrelated piece of legislation without so much as giving a courtesy call to the chairman of the Senate Finance Committee is a case in point.

Shlaes also suggests that Roosevelt is the first modern politician in the sense that his strategy for getting and remaining in office was to put together a coalition of interest groups. Cultivating the union vote (and passing the Wagner Act, ensuring this would grow mightily for his subsequent elections) and the black vote began a and counting) dominance of those groups by the Democrats. She makes a convincing argument that this approach to campaigning set the standard for how modern politicians do their campaigning--with a particular nod to fellow New Yorker Sen. Hillary Clinton.

RUSSIA TO WASHINGTON While Shlaes is quite critical of the Roosevelt administration, she portrays its members fairly, given the world they inhabited. For example, her discussion of a 1927 junket to Stalin's Russia taken by several men who later became Roosevelt's advisers captures intensely how Russia must have appealed to intellectuals dissatisfied with the progress in the United States and searching for a better way, yet she does not tar any of the travelers as naive or ignorant. The six-hour meeting they had with Stalin and Paul Douglas's side trips (and professed doubts) were parts of a fascinating and important trek for these men and the future Roosevelt administration as well.

The visitors to Russia chafed at the inaction by Coolidge (and later Hoover) at the time, an impatience with the federal government that grew exponentially when the Depression hit. The inaction was mistaken by many as indifference rather than what it really was, namely a sheer cluelessness as to what to do. Of course, once in office, Roosevelt's people didn't have a good idea about how to cure the Depression either, but FDR assumed the presidency with political capital and the intention to use it to experiment with policy to attempt to end the downturn.

Two distinct themes emerge: First, Roosevelt felt the need to be doing something so as to let people know that their government cared and was marshalling as many resources as it could to help them. Second, Roosevelt believed that what needed to be done was to centralize economic regulation within the federal government.

Shlaes gives no truck to either notion. There were plenty of people (Keynes included) telling FDR that his reforms were not what the situation required, but Roosevelt was not looking beyond his re-election in 1936, like any good politician. By November of that year, his policies got the unemployment rate down to the lowest level since early in the Hoover administration--but it crept back up soon afterward, as any good economist today could have predicted.

And while Roosevelt's fireside chats and relentless optimism undoubtedly made many people feel better about their lot, the notion that this was an acceptable substitute for getting off of the back of business and letting it create jobs makes little sense, she argues. The sheer uncertainty created by his meddling in the economy led to all kinds of anxiety on the parts of many people, not just businessmen.

The book's breezy tone makes it an easy read, but is also its main flaw. The focus of the narrative often jumps quickly from person to person, across an entire range of economic (and geographic) activity, sometimes within a single paragraph. We begin a vignette at the Tennessee Valley Authority and then the next paragraph we jump to Nevada and then we are treated to a White House discussion before heading to New York to see Wendell Wilkie's reaction to all this action. The style both captures the frenetic pace at which Roosevelt and his people tried to move as well as the broader notion that he did not have any grand plan and that what was labeled "the New Deal" was really an agglomeration of grand economic experiments, personal fiefdoms, and muddled bureaucracy that carried the faint whiff of socialism but had little connection to anything FDR intended. This writing style comes at the cost of making it difficult at times to follow the story at the rapid pace Shlaes sets out.

The book is at its strongest when it narrows its focus down to specific vignettes, such as the memorable story of the Schichters--poultry men from Brooklyn whose adamant refusal to follow the New Deal's convoluted laws caused them to be convicted and sentenced to prison, only to have their judgment set aside by the Supreme Court in one of the Roosevelt administration's biggest political losses. Shlaes' description of their District Court trial, replete with the thinly veiled anti-Semitism that came from the prosecuting attorney, and Shlaes' uncanny ability to capture the halting speech of the Yiddish-accented Shlichter brothers, is the highlight of the book.

There are many such stories in this book and Shlaes sets them out masterfully. While C.S. Lewis suggests we read to know that we are not alone, we read policy books about the past, ideally, to learn about the universality of the problems we face today and how some of them are a direct result of what happened way back when. With The Forgotten Man, it is difficult to miss either lesson.

Ike Brannon is an economist in Washington, D.C.