The Danger of Forgetting Again
Novak, Julie, Review - Institute of Public Affairs
The danger of forgetting again The Forgotten Man: A New History of the Great Depression by Amity Shlaes (HarperCollins, 2007, 480 pages)
Julie Novak looks back at the book that has everybody suddenly talking about the Great Depression.
The quick deterioration in die economic fortunes of western countries seems to have taken many by surprise.
The latest federal government budget expects real GDP growth at -0.5 per cent for 2009-10, after predicting three per cent growdi in the budget released a year ago. If Treasury officials had their remuneration determined by the accuracy of their forecasts, they'd receive a hefty pay cut by now.
Naturally, this turnaround has spawned a flood of research interest by academics and commentators in an effort to uncover its chief causes, and seeking answers about what to do about it.
When the state of the world's economies looked particularly ugly late last year, commentators were openly talking about a re run of the 1930s Great Depression. Walk into any major bookstore even today and one can see a proliferation of books variously titled Depression Economics, Back to the Depression, and How to Survive the New Great Depression.
With so many pundits likening current economic conditions with the Great Depression, it is of no surprise that serious treatments about this particular episode in history have emerged in recent times.
One of the more heralded analyses of the Great Depression in the United States was die work by economic historian Amity Shlaes titled The Forgotten Man: A New History of The Great Depression.
At the centre of Shlaes' account of the decade long Depression is the competing conceptions of the 'forgotten man' narrative, and how this played out in terms of actual policies during mat era.
Prior to his inauguration as US President in 1933, Franklin Delano Roosevelt said in a radio address that he would act in the name of 'the forgotten man at the bottom of the economic pyramid.' In the view of FDR, it was for the sake of this individual diat the government should spend, tax and regulate.
This notion of the forgotten man stood in stark contrast to that offered by the American classical liberal William Graham Sumner. In his 1876 book, The Forgotten Man and Other Essays, Sumner wrote:
As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X... what I want to do is look up C... I call him the Forgotten Man... He is the man who is never thought of. He is the victim of the reformer.
Inspired by collectivist economic models overseas and advised by staffers, some of whom met Stalin in 1927, FDR established a new wave of government interventions in the US economy.
These included the National Recovery Administration, which set prescriptive 'codes of fair competition' for industry and employee minimum wages, and the Agricultural Adjustment Administration that gave taxpayers' dollars for farmers to reduce cropping.
FDR went even further, showing a penchant for make work programs such as the Works Progress Administration. He also established the Tennessee Valley Authority that built dams and generated electricity covering up to seven states, but also crowded out existing private sector utilities.
He also secured for himself a reputation for experimenting with the economy, adjusting gold prices on a whim and ordering citizens to hand in dieir stocks of the precious metal to the Treasury under the infamous Executive Order 6102.
As the opening of each chapter of Shlaes' book illustrates, the outcomes of FDR's intrusions were underwhelming with the unemployment rate remaining at least ten percentage points above experienced during the prosperous 1920s. …