Sunday, January 31, 2021
Pooh Author AA Milne on This Day in History
Saturday, January 30, 2021
Franklin Delano Roosevelt on This Day in History
FDR was born on this day in 1882
Textbooks galore point out that President Franklin Roosevelt left a permanent stamp on the American economy. But no textbook in print explains how Roosevelt promoted what is probably the greatest economic myth of the twentieth century: the view that capitalism caused the Great Depression.
During the 1932 campaign against Herbert Hoover, Roosevelt repeated in speech after speech his view that free markets had failed America. During that election year, the U.S. economy was in tatters: 25 percent unemployment, a plummeting stock market, and rampant pessimism sapped American morale. To audiences all over the nation, Roosevelt expounded his theory of why capitalism had failed.
The boom of the 1920s had created a maldistribution of wealth, Roosevelt alleged. The rich were getting richer and the poor poorer. "Corporate profit resulting from this period was enormous," Roosevelt argued, but "very little of it went into increased wages; the worker was forgotten."1
In fact, the poor were getting so poor they could no longer consume enough to support a robust economy, and so naturally it collapsed into depression. The solution, Roosevelt pledged, was New Deal programs for the purpose "of meeting the problem of underconsumption, of adjusting production to consumption, of distributing wealth and products more equitably."2 Economists called Roosevelt’s diagnosis the "underconsumption" thesis.
During the campaign Roosevelt often flayed the capitalists, whose power had "become so disproportionate as to dry up purchasing power within any other group. . . . It is a proper concern of the Government to use wise measures of regulation which will bring this purchasing power back to normal."3 In another speech, he said that "if the process of concentration goes on at the same rate, at the end of another century we shall have all American industry controlled by a dozen corporations, and run by perhaps a hundred men. Put plainly, we are steering a steady course toward economic oligarchy, if we are not there already."4
The underconsumption thesis was not original with Roosevelt, but he acted on it and did more to popularize it than anyone else. But is it valid? Does the evidence support the view that (1) wealth was becoming increasingly concentrated during the 1920s, and (2) that industrial workers were not able to consume adequately because they were receiving a steadily smaller share of corporate earnings during the 1920s?
The economic statistics collected during the 1920s and 1930s give little support to Roosevelt’s ideas. In 1921 the percentage of national income received by the top 5 percent of the population was 25.5. That share remained stable throughout the decade, and by 1929 the top 5 percent received 26.09 percent of the national income.5 Does that microscopic increase really suggest, as Roosevelt charged, that we were "steering a steady course toward economic oligarchy, if we are not there already"?
On the second issue of worker earnings, the evidence directly refutes Roosevelt’s charges. The employee share of corporate income did not decline, but instead steadily increased during the 1920s-from under 70 percent in 1920 to well over 70 percent during the last years of the decade.6
As Peter Temin, an economist at MIT, concluded, "The ratio of consumption to national income was not falling in the 1920s. An underconsumption view of the 1920s, therefore, is untenable." As of 1976, Temin observed, "the concept of underconsumption has been abandoned in modern discussions of macroeconomics."7 In other words, the economic idea that inspired Roosevelt to launch the New Deal was so discredited it was no longer even discussed by economists just one generation after Roosevelt’s death.
Consumption Boost
But the damage was done. To boost consumption, the New Deal had given some kind of government subsidy to farmers, factory workers, veterans, and even silver miners. The era of big government in America was launched.
Why did Roosevelt err? It is tempting to argue that he manipulated data and words to win votes in the short run with an idea that had no resilience in the long run. And, too, many of his Brain Trusters urged him to promote underconsumptionist thinking.
Another possibility is that Roosevelt popularized underconsumptionist ideas because he never understood free markets in particular or economics in general. He came from a wealthy family, and his mother said they never discussed economic ideas at home. When he went off to school he apparently never studied economics seriously or disciplined his mind to study subjects logically. At Groton, the rector, Endicott Peabody, voted for Hoover in 1932, readily conceding that Roosevelt was "not brilliant." At Harvard, Roosevelt was only a C or C-plus student. He showed little interest in his introductory economics course, which he took in his sophomore year.8
Afterward, at Columbia Law School, his professor for a public-utilities course, Jackson E. Reynolds, said, "Franklin Roosevelt was no good as a student. He didn’t appear to have any aptitude for law, and made no effort to overcome that handicap by hard work. . . . He passed both of my courses, but he never received a degree because he flunked. Afterwards in offices downtown he made the same kind of records."9
Once Roosevelt was president, many of those who worked with him were startled by his undisciplined mind and economic ignorance. In a secret diary Brain Truster Raymond Moley wrote in May 1936 after a discussion with the president: "I was impressed as never before by the utter lack of logic of the man, the scantiness of his precise knowledge of things that he was talking about, by the gross inaccuracies in his statements. . . ."10
Moley suggests that both economic ignorance and political calculation shaped Roosevelt’s criticism of free markets. In any case, what we can learn from this historical episode is that bad economic ideas, if not effectively challenged, can sweep an ill-prepared man into the presidency, and permanently change the nation’s economic direction.
Burton Folsom, Jr., is historian in residence at the Center for the American Idea in Houston, Texas, and author of The Myth of the Robber Barons. He is currently working on a history of Franklin Roosevelt and the New Deal.
Notes
- 1. Samuel I. Rosenman, ed., The Public Papers and Addresses of Franklin D. Roosevelt (New York: Random House, 1938), I, p. 650.
- 2. Ibid., pp. 751-52.
- 3. Ibid., p. 784.
- 4. Ibid., p. 751.
- 5. Bureau of Census, Historical Statistics of the United States (Washington, D.C.: U.S. Department of Commerce, 1975), p. 302.
- 6. Peter Temin, Did Monetary Forces Cause the Great Depression? (New York: W.W. Norton and Co., 1976), p. 4. See also Thomas B. Silver, Coolidge and the Historians (Durham, N.C.: Carolina Academic Press, 1982), p. 136.
- 7. Temin, pp. 4, 32.
- 8. Geoffrey C. Ward, Before the Trumpet: Young Franklin Roosevelt, 1882-1905 (New York: Harper & Row, 1985), pp. 180, 207, and Daniel R. Fusfeld, The Economic Thought of Franklin D. Roosevelt and the Origins of the New Deal (New York: Columbia University Press, 1954), p. 23.
- 9. Jackson E. Reynolds interview, Columbia Oral History Project, p. 42. I would like to thank Gary Dean Best for calling this interview to my attention.
- 10. Raymond Moley diary, May 4, 1936, Hoover Institution.
Burton W. Folsom
Burton Folsom, Jr. is a professor of history at Hillsdale College and author (with his wife, Anita) of FDR Goes to War. He is a member of the FEE Faculty Network.
This article was originally published on FEE.org. Read the original article.
Wednesday, January 27, 2021
Lewis Carroll on This Day in History
Algebra in Wonderland
The Hidden Math Behind Alice In Wonderland
The Best Victorian Literature, Over 100 Books on DVDrom
Tuesday, January 26, 2021
Wayne Gretzky on This Day in History
Monday, January 25, 2021
Disney's 101 Dalmatians on This Day in History
Sunday, January 24, 2021
German Gothic Horror & Fantasy Author E.T.A. Hoffman On This Day in History
Saturday, January 23, 2021
The Deadliest Earthquake in History on This day in 1556
Friday, January 22, 2021
Crime Writer Joseph Wambaugh on This Day in History
Thursday, January 21, 2021
Soviet Leader Vladimir Lenin on This Day in History
Wednesday, January 20, 2021
Johnny Weissmuller (Tarzan) on This Day in History
Tuesday, January 19, 2021
The Once Useful ACLU on This Day in History
Former ACLU Head Ira Glasser on Why You Can't Ban Hate Speech
Monday, January 18, 2021
The Boston Strangler on This Day in History
This Day in History: Albert DeSalvo, the "Boston Strangler", was convicted of numerous crimes and was sentenced to life imprisonment on this day in 1967. He had killed 13 women. He was never charged for the murder of those women because there was never any physical evidence to link DeSalvo to those crimes at the time. He was however charged with different crimes and sentenced for those. One month after this, DeSalvo and two other inmates escaped from Bridgewater State Hospital. He then disguised himself as a US Navy Petty Officer Third Class, but he actually gave himself up the next day.
However, some to this day still have problems accepting Albert DeSalvo as the lone Boston Strangler. "One of the problems with the confession that DeSalvo gave was the theory that he would have confessed to just about anything if it gave him enough notoriety. He was an egomaniac who wanted people to believe he was far more vicious and calculating than he was, and criminal profilers have argued that his profile fits exactly with someone who would lie and claim ownership of crimes that they did not commit. Indeed, there was also some confusion over his identification. Gertrude Gruen was the one woman who survived an attack by the Strangler. After his confession, she was brought in to ID him. She did not think DeSalvo was her attacker, but when she saw his cellmate, George Nassar, she felt “something upsetting, something frighteningly familiar about that man.” Could it be that Nassar told DeSalvo about the crimes in detail and then allowed him to confess in his place? Perhaps the last murder of Mary Sullivan was nothing more than a copycat crime, the only one which DeSalvo was responsible for." Rhiannon_D
Sunday, January 17, 2021
The Saint Marcellus' Flood on This Day in History
A Distant Mirror: The Calamitous 14th Century by Barbara W. Tuchman
Saturday, January 16, 2021
The Greatest Family in History (Medici) on This Day in History
Friday, January 15, 2021
The Black Dahlia Murder on This Day in History
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Thursday, January 14, 2021
The Most Watched TV Events on This Day in History
Wednesday, January 13, 2021
Bible Translator Edgar J Goodspeed on This Day in History
Tuesday, January 12, 2021
The Buffalo Ripper on This Day in History
Monday, January 11, 2021
Murder on the Orient Express on This Day in History
Sunday, January 10, 2021
The Spindletop Oil Gusher on This Day in History
Saturday, January 9, 2021
Japan's Drug Laws on This Day in History
Friday, January 8, 2021
Adam Worth, the Napoleon of Crime on This Day in History
See also 19th Century Crime Boss Adam Worth and the Pinkertons 1905
Thursday, January 7, 2021
Nikola Tesla on This Day in History
Wednesday, January 6, 2021
Bjorn Lomborg on This Day in History
Tuesday, January 5, 2021
The Golden Gate Bridge on This Day in History
Monday, January 4, 2021
Lucy in the Sky with Diamonds on This Day in History
Today in History: Elton John's cover of "Lucy In The Sky With Diamonds" hit #1 in the US on this day in 1975. The Beatles' original, released in 1967 on the Sgt. Pepper's Lonely Hearts Club Band album, was never actually released as a single. John Lennon played guitar and backing vocals on this cover, he was credited as Dr. Winston. Lennon even admitted that this version was superior to the Beatles original. Elton's cover of "Pinball Wizard" was better than the Who's original as well.
There are a number of cover songs that are infinitely better than the original. For instance, Whitney Houston's version of "I Will Always Love You” was better than Dolly Parton's. Johnny Cash's “Hurt” was better than the Nine Inch Nails original. Janis Joplin did a better job on “Me and Bobby McGee” than Roger Miller. The Byrds did a better version of “Mr. Tambourine Man” than Bob Dylan. Rod Stewart did better versions of two Tom Waits songs (Downtown Train and Waltzing Matilda). Elvis did a better Hound Dog than Willie Mae “Big Mama” Thornton. Manfred Mann’s Earth Band made a better version of Springsteen's “Blinded by the Light”. Sinead O’Connor improved on Prince's “Nothing Compares 2 U”. Then there's UB40's "Red, Red Wine" which is better than Neil Diamond's version, just as Quiet Riot's version of “Cum On Feel the Noize” was better than Slade's.
See also LSD on This Day in History
Sunday, January 3, 2021
J.R.R. Tolkien on This Day in History
Saturday, January 2, 2021
The Yorkshire Ripper on This Day in History
Friday, January 1, 2021
Country Music Legend Hank Williams on This Day in History