Friday, October 22, 2010

Who Was the Real "Forgotten Man?"

By Douglas Jamiel
"The Forgotten Man" -
A Revisionist Look at the Great Depression
by Douglas Jamiel

While the symbol of the "forgotten man" has long been remembered as a touchstone for the plight of the impoverished and dispossessed of America's Great Depression, it is for author Amity Shlaes quite the opposite. In her book, "The Forgotten Man - A New Look at the Great Depression," the itinerant worker who rode the rails, the guy who pushed a broom for the WPA and the farmer who hung on to his property for dear life are merely refugees of the government's war waged against the true victim of the Great Depression: the American business owner.

At once a hagiography of economic elites and an argument for economic royalism, "The Forgotten Man" is the Depression in a parallel, right-wing universe where men like Andrew Mellon and Samuel Insull - the captains of industry who fed the speculative bubble - are victims, locked in an epic struggle with Franklin Roosevelt and his New Dealers. Men like Rexford Tugwell, Harry Hopkins and Harold Ickes are, for Shlaes, communist sympathizers, quasi-fascists, political opportunists, and narcissistic academicians more concerned with vindicating their theories than with the welfare and well-being of the American populace. "The Forgotten Man" is "Amity Through the Looking Glass," and her revisionist world looks "curiouser and curiouser" with each chapter.

On the whole, Shlaes follows the basic chronology of every other Depression history: the swollen pre-Crash market, the New Deal programs, the labor unrest, and the pivotal court decisions like Schecter (which was the death knell for the National Industrial Recovery Act, or, N.I.R.A.) and Ashwander (which gave FDR's Tennesse Valley Authority, or T.V.A., the thumbs-up to produce electric power). However, she is like an armchair quarterback reviewing plays after the game, recommending this or that laissez-faire remedy she believes the New Dealers should have called into play to fix the ailing economy. But this makes sense; the real world tells a different story. Given the fact that those very same laissez-faire principles provided the philosophical underpinnings for the gross inequities and predations of the Gilded Age before the Great War, and the very real failure of supply-side economics many years later under Ronald Reagan, it is understandable that Shlaes would seek refuge in the safe harbor of criticizing others' decisions in another time.

Stylistically, Shlaes crafts metaphors which leave a brackish aftertaste from the water of false association and innuendo they are forced to carry. In a chapter titled "The Junket," for example, Shlaes recounts an actual voyage to Soviet Russia by some of the left-wing intellectuals who would come to form the core of FDR's brain trust. Aboard a ship aptly named The President Roosevelt (after Teddy, himself a reformer), the author portrays their vessel as a sort of left-wing "Flying Dutchman." Ideologically isolated and cast adrift from the "prosperity" presided over by Harding and Coolidge, the "pilgrims" float uncertainly toward a nascent Soviet Union, in search, Shlaes suggests, of a place more hospitable to their ideas. The author plays this "red" card repeatedly throughout the book, conflating the group with the Soviets. But that was okay because, Shlaes says with tongue in cheek, "If one squinted, things looked almost reasonable in Soviet Russia."

However, as author Kevin Phillips reminds us in his book "Wealth and Democracy," Shlaes' rosy assessment of the roaring twenties requires its own squinting. Citing a 1929 report by Wesley Mitchell, a popular economist of the day, Phillips puts the lie to Shlaes' statement that "The Gilded Age was generally proving gilded for the average, even the poor man." Technological improvements did indeed increase productivity, but the fruits of that productive engine were far from equally distributed and went overwhelmingly to profits rather than wages. And while Shlaes would further try to convince us of the distributive triumph of the bubble market, claiming that the earnings of workers between 1923 and 1929 increased by 16 percent, a little more squinting is needed to discover that the value of common stocks increased by that amount, not wages. For the average man or woman in the workplace, wages increased only about 1.4 percent.

The ill-fated frenzy of stock buying - made easy by lax credit, tons of cash liberated by Treasury Secretary Mellon's tax cuts, and liberal margin calls - was a pastime reserved for 42 percent of families making over $2,000 a year. "But," according to historian Howard Zinn (A People's History), "six million families, 42 percent of the total, made less than $1,000 per year. One tenth of one percent of the families at the top received as much income as 42 percent of the families at the bottom." And in this time before OSHA and the Wagner Act, life was dangerous in the workplace as well. In every year before the Crash, about 25,000 workers were killed on the job and 100,000 permanently disabled from industrial accidents and wretched conditions.

Gains in productivity made possible by technology were, furthermore, used to displace workers rather than enrich them as holders of capital undercut their own markets in the mad scramble for more profits with less costs. In short, businesses were making more and more with fewer and fewer workers. "The supply of new jobs," wrote economist Mitchell at the time, "has not been equal to the number of new workers plus the old workers displaced. Hence, there has been a net increase in unemployment between 1920 and 1927 which exceeds 650,000." Shades of things to come.

And where were the unions in all this? They too had been lulled by the illusion of abundance and sat on the sidelines through the early twenties, still smarting from the constant clubbing at the hands of the corporate-government alliance in the decades before the Great War. Besides, everything would be okay, Shlaes constantly implies, if only workers would stop their nagging preoccupation with subsistence and just let the market "correct itself" at their expense.

One of the most disturbing and revealing passages of Shlaes' book is her reaction to the Supreme Court's overturning of the Frazier-Lehmke Act, legislation enacted early in Roosevelt's administration to stem the hemorrhage of farm foreclosures by putting a moratorium on them. "Even a contract between a starving farmer and a nasty banker had to be honored," she writes in a tone almost ringing with schadenfreude over the farmers' fate, "and the government did not have the power to intervene." Or consider her reaction to the Schecter - the "Sick Chicken" - decision that effectively scuttled the N.I.R.A. by invalidating its code-making and price-fixing powers. By exploiting the subtle semantic difference between the words inter- and intra- state commerce, the Supreme Court ruled that the federal government could not interfere with intra-state commerce and dictate how customers of the Shecter brothers' poultry business picked their chickens. The federal government was, thereby, plucked of its regulatory power. "The market," Shlaes proclaims, "had its own natural laws, the laws of chicken blood, competition and profits. It was neither good nor evil."

For Shlaes, the rules of the market are made on the fly and the winners make the rules. This is William Graham Sumner's market in which, like Darwin's jungle, there are no moral imperatives. As certain as the grazing herds exist to appease the lion's appetite, the great mass of toiling society must serve the proven predators of the human species. It is, for Shlaes and for Sumner, an immutable law of economic science.

But in economics there are no immutable laws, and as the Depression itself proved, economies do not perform with Newtonian certainty. The speed of a falling object, for instance, is something quite different than a theory that sanctions a government's indifference to its starving citizens; a government that holds the surplus of a minority above the sustenance of the majority. "The Forgotten Man" begs the question, "What is government's role when Adam Smith's Invisible Hand is palsied." For the author the answer is simple: nothing. It is no surprise, then, that those who did do something - FDR and the New Dealers - are to be mocked, vilified and discredited as enemies of capitalism.

As quantifiable proof of the New Deal's failure, Shlaes begins each chapter with the Dow Jones Index and the unemployment rate for each increment of time about which she's writing. With numeric consistency the numbers seem indeed to show little or no increase in jobs nor any enthusiasm for stocks. But in a collapsed economy ordinarily driven by the profit motive - an economy concocted, manipulated and bankrupted like a bad night at the casino on the floor of a stock exchange - it is absurd to even consider a stock index to be a reliable indicator of anything. Indeed, to measure the unemployment rate under such circumstances is simply to measure the very failure of a system which holds the well-being of many hostage to the self-interest of a few. "In the relief business," wrote Harry Hopkins, "where our finished product is nothing more than amelioration, effectiveness has to be measured in less ambitious terms than success. That word applies better to marginal profit, cash or otherwise. Relief deals with human misery."

Born of necessity -of crisis - the New Deal never quite reconciled its own identity. Was it conceived to fix the ailing capitalist order or, as some in the business community feared, to replace it? Notwithstanding Shlaes' characterization of Franklin Roosevelt as a power hungry opportunist, to depict him as a natural social engineer is simply false. He was, frankly, conservative by nature and only the dire circumstances the country confronted led him to entertain the advice and counsel of a more radical element. As the fulminations of the 1932 election faded, he was, at the New Deal's inception, quite conciliatory with the business community and saw the N.I.R.A. as a voluntary government-business alliance forged in the interest of the country. Had his ambitions, as Shlaes asserts, been more akin to Hitler or Mussolini, then the Blue Eagle would have had real talons to enforce its mandates instead of the quibbling committees with no real power of enforcement.

In the face of constant attack, it seemed like a no-win situation for Roosevelt and the heads of the alphabet agencies for whom the plight of the indigent was immediate and all consuming. There was little time for head scratching and second guessing. When programs used low-tech tools - i.e., two hundred people with shovels rather than a bulldozer - they were accused of being "inefficient." When they put the destitute to work producing the necessities they could not otherwise afford to buy in the private market, they were labeled "unfairly competitive."

The cries of "boondoggle" and "wasteful" leveled at the New Deal ring hollow when one gets to the core of the real fear business owners felt in the face of these programs. In contrast to an amoral corporate structure which, without the promise of a fistful of money to inspire it, proved itself incapable of making anything, there arose on the periphery of society a whole separate, self-contained economy based not on the aggrandizement of a few, but on the real needs of many - a frightening prospect for free marketers and Social Darwinists like Shlaes. It was a use economy based not on the plunder of consumer society like cars, radios and gadgets, but on things that everyone needed and things that would benefit everyone like bridges, dams, schools and roads. It was run without commissars and politburos. Such a thing could not be tolerated; not in America where, as Coolidge proclaimed, "The business of America is business."

Considering the forces arrayed against it and its somewhat confused and conciliatory agenda, she is, in part, correct. With its nebulous identity unresolved and with more and more of its programs chopped away as 1940 neared, the New Deal was absorbed into the ultimate jobs program - war. Every aspect of the economy from prices to production came under government control, and its obvious efficiency went unchallenged by the usual right-wing detractors as long as the agenda was to wage war rather than to help others. The free market, it seems, is not the preferred weapon of Mars.

In the end, the failure of conservatives to privatize Social Security in our own time and the country's continued willingness to entrust their government with matters of collective welfare is in great part a legacy of FDR and his minions. There are, of course, alternate views. For these, one need only follow "Amity Through the Looking Glass."


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