This New Yorker review of Amity Shlaes’s new book on the Great Depression, The Forgotten Man tries to substitute a writer’s sentiment and assertion for informed economic analysis. Brad DeLong reads it and shakes his head, noting that there are some claims on Shlaes’s part that could be refuted with a greater understanding of economics or history:
That Updike thinks that Roosevelt spent the 1930s clinging to the gold standard to control “a nonexistent inflation” is the first sign that he has lost the game of intellectual three-card monte Amity Shlaes is playing with her readers. If Milton Friedman were here, he would blow the whistle at that point.
Updike also tries to place business against government in a “abstract greed” vs. “human striving” equation as his concluding rejoinder:
Business, of which Shlaes is so solicitous, is basically merciless, geared to maximize profit. Government is ultimately a human transaction, and Roosevelt put a cheerful, defiant, caring face on government at a time when faith in democracy was ebbing throughout the Western world. For this inspirational feat he is the twentieth century’s greatest President, to rank with Lincoln and Washington as symbolic figures for a nation to live by.
There are two big problems with this formulation: 1) Business is also a human transaction (it’s made up of many human transactions) and 2) It merely asserts the nobility of government, as if it’s inspirational quality is sufficient to call it a success. The debate is whether or not the New Deal prolonged the Great Depression, and thus some measure of human suffering. If we’re to believe Shlaes, allowing the market to work its magic by following Mellon’s hands-off policy would have brought greater prosperity to all. That wouldn’t have been the case, but the response to “The New Deal made a lot of people worse off” isn’t “But it made a lot of people feel good about democracy.” If Shlaes is right, a reinvigorated American economy would have gone a long way toward making people comfortable with democracy (and American-style capitalism). But Updike let’s the core issue go unchallenged. Better that they would have sent DeLong:
I, at least, think that as far as recovery was concerned the macroeconomic good done by the New Deal vastly outweighed the structural bad. Any reasonable counterfactual involving no New Deal that I can see has things a good deal worse in the middle and late 1930s than they were in our reality.
Hey, counterfactuals! What a neat idea!