The New Deal, as Roosevelt’s program came to be known, began 90 years ago, in the spring of 1933. Later that year, one of the Americans who feared that Roosevelt was taking the country in the wrong direction, Col. Edward Harwood, founded the American Institute for Economic Research (AIER) to be a voice for sound economic thinking. So, it is fitting that AIER has now published New Deal Rebels, assembled by historian Amity Shlaes, containing a fascinating and diverse array of historical material from critics of the New Deal. The book is arranged chronologically, beginning with a prescient essay by William Graham Sumner written in 1919, continuing with critical commentary published during Roosevelt’s four terms, and ending with several post–New Deal writings. There is a wealth of material here for scholars to delve into this little-explored aspect of American history.
The forgotten man / Sumner, a Yale University sociologist, foresaw the philosophy of the New Dealers and, in his essay “The Forgotten Man,” he warned of the damage it would do. Who was the forgotten man? Sumner explained:
He is the man who is never thought of. He is the victim of the reformer, social speculator, and philanthropist, and I hope to show that he deserves your notice both for his character and for the many burdens which are laid upon him.
Sumner’s description is deadly accurate, but he couldn’t have imagined just how great those burdens would become during the New Deal—or that Roosevelt would adopt the term “the forgotten man” to refer to the people he claimed the New Deal would help.
President Calvin Coolidge similarly understood the danger to American liberty and prosperity from government intervention into people’s lives. In a 1923 speech that anticipates the concept of spontaneous order, Coolidge said:
What no government was ever able to do for its subjects, the people have done for themselves. The strength of this whole movement, the virility of this entire principle, is revealed in the fact that it is not imposed upon the people, but results from their own deep and abiding convictions.
Coolidge died in 1933, before he could witness what transpired once Roosevelt and his theorists set out to transform the country.
Republicans were not the only critics of the New Deal. Some prominent Democrats challenged Roosevelt’s agenda, including the party’s 1928 presidential candidate, Alfred E. Smith. Prior to the 1932 campaign, Smith could see the looming class warfare that Roosevelt would often resort to. In a 1932 speech, Smith said, “I will take off my coat and fight to the end against any candidate who persists in demagogic appeals to the masses of working people of this country to destroy themselves by setting class against class and rich against poor.” Roosevelt shamelessly did exactly that and, ever since, unscrupulous politicians have used divisive class warfare to win elections.
One of the most surprising pieces included in the book is a 1933 letter from British economist John Maynard Keynes to Roosevelt. Keynes wrote politely to say that he thought the president’s signature policy, the National Industrial Recovery Act, was impeding economic recovery and the administration’s obsession with restoring prices to pre-crash levels was a mistake. Wrote Keynes, “But too much emphasis on the remedial value of a higher price level as an object in itself may lead to serious misapprehension as to the part which prices play in the recovery.” Keynes was enough of an economist to grasp that you can’t pull an economy up to full employment and prosperity by engineering higher prices for certain goods, but that was a key element in the New Deal plan.
Keynes also advised Roosevelt that prosperity would not be restored by increasing the money supply, writing: “Some people seem to infer that output and income can be raised by increasing the quantity of money. But this is like trying to get fat by buying a larger belt.” AIER’s Harwood subsequently penned an open letter to Keynes, published in 1934, where he agreed that trying to force up prices arbitrarily would accomplish no good. He observed that the Depression had its origins in inflation from 1922 to 1929, which led to unwise investments. Here we see a glimmer of Austrian theory, locating the roots of economic instability in government policy, not in the market itself.
How did New Deal policies affect American business owners? Many found it extremely damaging, as we read in a 1934 letter by Carl Pharis, owner of Pharis Tire and Rubber Company, to Idaho Sen. William Borah, a critic of Roosevelt’s policies. Among Pharis’s complaints was the government’s insistence that small firms not undercut the price levels dictated by the National Recovery Administration. Referring to the large national tire companies like Firestone, Pharis wrote, “If we are compelled to sell our tires at exactly the same price as they sell their tires, their great national consumer acceptance would soon capture our customers and ruin us.” Of course, cartelization and price fixing were a central aspect of Roosevelt’s strategy for economic revival.
What about the effect of the New Deal on Black Americans? In the popular mind, big government activism is assumed to be advantageous to minority populations, but we read that many Blacks found themselves far worse off as a result. John P. Davis was a Black lawyer and activist who wrote an essay, “A Black Inventory of the New Deal,” that excoriated Roosevelt’s agenda. The New Deal, Davis wrote, led to severe job losses among Black workers who had little seniority and was especially harmful to Black farmers. “For them,” Davis wrote, “reduction of acreage for cotton and tobacco, with the quantum of such reduction controlled and regulated by local boards on which they had no representation, has meant drastic reduction in their already low income.” Once again, great harm was done to the forgotten man.
Repugnant scheme / The Supreme Court was very busy during the New Deal. A decision rendered in 1935 upheld the government’s policy of reneging on contracts obligating it to pay in gold. The Court accepted the idea that, because the country was facing an emergency, the government could stop honoring its contracts. Dissenting, Justice James McReynolds wrote:
Just men regard repudiation and spoliation of citizens by their sovereign with abhorrence; but we are asked to affirm that the Constitution has granted power to accomplish both. No delegation of such power exists, and we cannot believe the far-seeing framers who labored to establish justice and secure the blessings of liberty intended that the government have authority to annihilate its own obligations.
While the Court bowed to Roosevelt in the gold clause case, it rebuked him in another key case, Schechter Poultry. Justice Benjamin Cardozo blasted the National Recovery Act for illegally delegating to bureaucrats the power to dictate commercial rules and obliterating the distinction between interstate and intrastate commerce. To underscore the benefits of reining in federal administrative authority, Shlaes includes an editorial from the Chicago Defender, a Black newspaper, applauding the decision. Wrote the editorialist, “The whole scheme represented the ultimate cordiality of campus opinions by men whose ideas of economic and social security found life in a dissembling mirage of old-world viewpoints.”
How did the New Deal use the tax money taken from workers? Some was used for blatant propaganda. Writer Garet Garrett blew the whistle on that, excoriating the production of a pro-government play paid for by the federal government. That expense was approved by Roosevelt. As Garrett observes, “What Congress did was to surrender control of the public purse to the President, under a law authorizing him to spend it in his own discretion.” The New Deal opened the door to the unconstitutional business of executive branch spending, and it has only opened wider since.
Readers may be surprised at the depth of opposition to the New Deal from some Democrats. Sen. Carter Glass of Virginia, despite co-authoring one of the era’s signature banking laws, denounced Roosevelt’s Court-packing threat as “frightful” and “a repugnant scheme to disrupt representative government in the nation.” Another Democrat who was appalled at the administration’s abuse of power was New Mexico Sen. Carl Hatch, who sponsored legislation in 1939 to prevent federal employees from engaging in partisan political activity.
Some of the articles strike a philosophical tone. Garrett, in a 1940 Saturday Evening Post column, wondered why most Americans had been so passive as the New Deal trampled upon their rights. He concluded that they had been seduced by government handouts and promises, saying, “Political freedom is heavy, too heavy for soft people.” Much in the same vein, Shlaes includes F.A. Hayek’s 1940 essay in which he explained how government economic planning leads inevitably to tyranny.
Reading the assembled criticisms of the New Deal, one cannot help but notice the parallels with the situation we face today. Just as Roosevelt’s administration relentlessly expanded the powers of unelected bureaucrats, so do today’s presidents. Just as reckless spending during the New Deal helped Roosevelt’s political allies but damaged the nation as a whole, so do today’s politicians spend money with political expediency in mind. And just as judicial independence was threatened in the 1930s, so is it again today. Reading New Deal Rebels, it’s easy to think, “If only we could have avoided those terrible mistakes.