For more than half a century, America’s political leaders — Republican and Democrat — have sought to wrap themselves in the legacy of Franklin Delano Roosevelt, the man credited with replacing fear with hope and ending the Great Depression. But in recent years some writers and economists have been telling a version of this story that is quite different from the one generally taught in school or seen on the History Channel.
In this interpretation Roosevelt is a well-meaning but misguided dupe who not only prolonged the Depression but also exacerbated it. For many people, it’s like hearing that Little Red Riding Hood’s grandmother and not the wolf is the rapacious killer.
Since the financial crash this fall, the revisionist look at the Great Depression has attracted new attention; it even recently made its way onto Stephen Colbert’s television show. But more than that, it has become an intellectual banner for Republican opponents of the Obama administration’s ambitious bailout and stimulus proposals.
Amity Shlaes, a syndicated columnist who works at the Council on Foreign Relations, helped ignite this latest revisionist spurt with her 2007 book, “The Forgotten Man: A New History of the Great Depression.”
“The deepest problem was the intervention, the lack of faith in the marketplace,” she wrote, lumping Herbert Hoover and Roosevelt together as overzealous government meddlers.
The current financial crisis, as well as continuing praise from conservatives, helped propel the book back onto the Times best-seller list in November. Jonathan Alter, an editor at Newsweek and the author of “The Defining Moment: FDR’s Hundred Days and the Triumph of Hope” — which has also benefited from the renewed fascination with the 1930s — calls Ms. Shlaes’s book a “taste badge,” flaunted by Republicans looking for a way to oppose the administration.
This week competing theories about the Depression and the New Deal were once again on display at a conference at the Council on Foreign Relations’ New York headquarters, co-hosted by the Leonard N. Stern School of Business at New York University, and partly organized by Ms. Shlaes.
She and other critics of the New Deal credit Roosevelt with some important innovations, like restoring confidence in banks and establishing social insurance. Nonetheless, they argue that most of his mucking about in the economy crowded out private investment and antagonized the business world, and thus delayed recovery.
Unemployment remained high throughout the decade until World War II, Ms. Shlaes told conference attendees, because the uncertainty created by Roosevelt’s continual tinkering paralyzed private investors.
When the federal government keeps changing the rules, it’s like having Darth Vader in control, John H. Cochrane, a professor of finance at the University of Chicago Booth School of Business, said during a panel. “I have changed the deal,” he intoned like Vader, the “Star Wars” villain. “Pray I don’t change it any further.”
Many of the economists who were invited to speak were similarly skeptical of the New Deal, even if they disagreed on the Depression’s causes. “No episode in American history has been so misinterpreted as the Great Depression,” declared Richard K. Vedder, an economist at Ohio University. By artificially keeping prices and wages high, he argued, both Hoover and Roosevelt prevented the economy from adjusting, which is why unemployment remained in double digits until the United States entered the war.
Anna Schwartz, who collaborated with Milton Friedman on a classic study of the Depression, and the Nobel Prize winner Robert E. Lucas Jr. argued that the idea of stimulating the economy with federal spending is a fairy tale. Government spending just crowds out private investment, they asserted; the money supply is the only thing that matters.
To Roosevelt’s defenders, the speaker list seemed stacked with attackers.
“I’m wound up here,” said Jeff Madrick, as he tried to cram in a wide-ranging defense of the New Deal during his brief remarks. Mr. Madrick, who directs policy research at the Schwartz Center for Economic Policy Analysis at the New School, pointed out that considering the deep pit the economy had fallen into during the Depression (when production fell by nearly one-third), the government’s deficit spending (just 5 percent of the gross domestic product) was actually quite modest. Even so, he said, it managed to reduce the official unemployment rate from a high of 25 percent in 1933 to just under 10 percent by 1936.
Nick Taylor, the author of “American-Made,” a history of the Works Progress Administration, said Roosevelt’s flurry of activity restored confidence. Not only did his administration rapidly create jobs for legions of jobless Americans, Mr. Taylor said, it also simultaneously built bridges, roads and dams, and brought light, electrical power and water to large swaths of the country. That 20th-century infrastructure laid the groundwork for the country’s phenomenal growth in the 1950s and ’60s.
Yes, unemployment bumped up in 1937, but it was caused by Roosevelt’s ill-advised attempt to balance the budget, he said. When Roosevelt reversed that policy, unemployment began to inch down again.
By the day’s end, Robert E. Rubin, who was secretary of the Treasury during the Clinton administration, mentioned that he was struck by “how vivid the discussion over the causes of the Depression is 80 years after it occurred,” though he also noted that “a lot of it is seen through ideological and political eyes — on both sides.”
At the final panel, a questioner asked at what point on the 1930s timeline is the United States right now. Economically we’re at 1930, Mr. Alter said, referring to the very start of the downturn, but politically we’re at 1933. Mr. Obama, he explained, “is following in F.D.R.’s footsteps,” moving quickly with significant government action to restore confidence and get the economy moving.
To Ms. Shlaes, the best analogy is 1937 — “the depression within the Depression” — when the unemployment rate shot back up to the middle and high teens after falling. “The economy wanted to recover,” she said, but the government’s interventions ended up paralyzing the business world.
Yet despite the abundance of analogies and lessons thrown out, some were cautious about drawing too close a link between then and now. The Depression was about 10 times as severe as what the nation is currently experiencing, with only 25 percent of the population working full time, they pointed out. In addition, there was no Social Security or unemployment insurance, and no federal deposit insurance.
To ask at what point on the 1930s timeline the United States is right now, Harold L. Cole, an economics professor at the University of Pennsylvania and a consultant to the Federal Reserve Bank of Philadelphia, said with some exasperation, “really shows a misunderstanding of the severity of what went on there and the depths of the crisis.”
Mr. Vedder playfully offered another analogy: the recession of 1920. Why was that slump, over and done with by 1922, so much shorter than the following decade’s? Well, for starters, he said, President Woodrow Wilson suffered an incapacitating stroke at the end of 1919, while his successor, Warren G. Harding, universally considered one of the worst presidents in American history, preferred drinking, playing poker and golf, and womanizing, to governing. “So nothing happened,” Mr. Vedder said.
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