Peddling Panaceas: Popular Economists in the New Deal Era

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Peddling Panaceas: Popular Economists in the New Deal Era by Gary Dean Best Transaction Publishers * 2005 * 273 pages * $49.95

Reviewed by Burton Folsom, Jr.

The Great Depression of the 1930s marked a sharp turn in American economic thought. Orthodox economists, who argued for free markets and limited government, seemed to be discredited-even though most of their solutions remained untried under President Hoover. Instead, Americans were readier than ever to listen to new ideas about how government could be used to restore economic growth. Stuart Chase, in the last line of his 1932 book A New Deal asked: "Why should the Russians have all the fun of remaking a world?"

In Peddling Panaceas Gary Dean Best ably describes the thinking of three popular and influential economists during the 1930s-Chase, Edward Rumely, and David Cushman Coyle. Not one of these three men had advanced degrees and formal training in economics, but each one latched onto and popularized various ideas for government planning in the 1930s.

Rumely was an inflationist; he promoted his views as executive secretary of the Committee for the Nation to Rebuild Prices and Purchasing Power. He and his Committee argued that economic recovery would occur if the United States went off the gold standard and artificially raised the price of gold. If the price of gold went up, Rumely said, the price of commodities would do so as well. That price hike, in Rumely's calculations, would break the deflationary spiral and lift American farmers and businessmen out of the economic doldrums.

The problem was that Roosevelt took the United States off the gold standard and raised the price of gold, but the prices of commodities did not rise as well. By 1934 Rumely was discredited and the President turned to other advisers.

Chase, trained as an engineer and an accountant, had his own recipe for prosperity: "[P]ut at least five billion dollars in ultimate consumers' hands during the next few months. Such an amount in such a place has an excellent chance of definitely ending deflation." But where was the $5 billion to come from? Sharply raise the progressivity of the income tax, Chase said, and ask the recipients of the $5 billion to spend it as quickly as they can.

Chase wrote an average of one book a year from 1929 to 1936, and his ideas-which also included a plea for collectivizing much of American industry-clearly influenced President Roosevelt's public-works programs, especially the Works Projects Administration (WPA). …