NEAL CONAN, host:
This is Talk of the Nation. I'm Neal Conan in Washington. Since 1933, the first benchmark of every new presidency is 100 days. Like Franklin Roosevelt, President Obama faces a severe financial crisis, and he and his advisers have repeatedly cited the New Deal as a model both for the proposed recovery package and for its urgency.
When we talk of this new New Deal, historians and economists are re-visiting Roosevelt's program to see what worked and what didn't. And while many believe the New Deal provided relief, reform, and recovery, others point out that the Depression lasted until the start of the second World War, and some argue that the - all that government spending and new taxes made the situation worse. The lessons of the New Deal and why historians and economists tell different stories.
Later in the program, we'll talk with some of you who visited Washington, D.C. yesterday for the inaugural. You can email us your stories now. The address is email@example.com. But first, what were you taught about the New Deal? Our phone number is 800-989-8255. Email us, firstname.lastname@example.org. And you can also join the conversation on our Web site, go to npr.org, and click on Talk of the Nation.
Jonathan Alter joins us here in studio 3A. He's the author of "The Defining Moment: FDR's Hundred Days and the Triumph of Hope." He also senior editor and columnist at Newsweek. Nice to have you back on the program.
Mr. JONATHAN ALTER (Author, "The Defining Moment: FDR's Hundred Days and the Triumph of Hope"): Thanks, Neal.
CONAN: And with us from our bureau in New York, Bloomberg columnist Amity Shlaes, the author of "The Forgotten Man: A New History of the Great Depression, and thanks to you for coming in. Ms. AMITY SHLAES (Author, "The Forgotten Man: A New History of the Great Depression"): Thank you.
CONAN: And so, let's begin. Are there enormous similarities between what we face now and what Franklin Delano Roosevelt faced in 1933? Let's begin with you, Jonathan Alter.
Mr. ALTER: The similarities are eerie. It's true that things were worse in 1933. We had 25 percent unemployment instead of eight percent. We had the market down as much as 90 percent, even shuttered at one point when Roosevelt took office. And today, what is it, down 30 to 40 percent. So, you could say it was more severe then. We didn't have a social safety net, which was largely the product of the New Deal.
But in terms of the crisis in our financial sector, the foreclosure crisis, the sense of that the future will be worse on the part of many Americans, and the thirst for new leadership after the failure of conventional conservative economics. I could go on and on, but it's quite striking how similar things are and also how similar Barack Obama is to Franklin Roosevelt in his approach.
Just to give you one very quick example, in his famous first inaugural address, we tend to remember the only thing we have to fear is fear itself. But actually, the most important line for my money was, the American people demand action and action now, and he used the words six times in his inaugural address. Obama actually said those words almost exactly a couple of weeks ago, and then he used the word action again yesterday in his speech. So, he knows that he's to move very, very aggressively like Franklin Roosevelt to confront the crisis.
CONAN: And Amity Shlaes?
Ms. SHLAES: Well, of course, there are similarities. We're in a deflationary moment and so were they. That's what they misunderstood at that time. We have a banking crisis, so did they. We have a housing crisis, so did they, which is unusual for the United States.
But I would differ from John here. I think the periods are fundamentally different. If what we have now is a rainstorm, that was a Katrina, and it's not clear we're going to get to a Katrina here at all. And two, there's an understanding of the markets in the United States now - in the middle class, in the working class, in all classes of the country that there simply wasn't then.
With so few shareholders, capitalism was under suspicion. Capitalism is not under suspicion. Now, you heard in the president's speech where he said markets do better than anything else at securing freedom. And I would compare him to Roosevelt maybe, but also to Eisenhower, who built the Interstate to calm down the 1950's big infrastructure, and to Kennedy.
Mr. ALTER: I just wanted to make it clear. I don't disagree with any of that. But what's ironic is that Roosevelt was actually a piker compare to George W. Bush and Barack Obama when it comes to government spending, particularly at this point. Later, of course, Roosevelt invested heavily, but in the early part of the New Deal, he wasn't nearly as interventionist in the American economy as Bush and Obama...
CONAN: And Obama has been since September, in any case.
Mr. ALTER: Yeah.
CONAN: But let's talk about that intervention. Did it work, Amity Shlaes? Did the New Deal get the country going again? Of course, the revival of hope is one thing. Psychology is another thing, but those economic numbers did not approve.
Ms. SHLAES: That's right. I learned what everyone else learned in school, but when I went back to look at the period for the "Forgotten Man" book, I found some data that were hard to contradict, such as the unemployment, which, you know, some people say it averaged 15 percent, some 13 - that's where debate is. Either way, it's a number going all the way, you know, more than just about a decade that we could not live with. President Obama would run screaming from 14 percent unemployment or 13.
And also, of course, the Dow, which is something we have like, a pulse to us. There are televisions stations that broadcast President Obama with the market movement underneath, so you could watch it second by second. The Dow did not come back from the Depression period until 1954.
So those are the two data points that we lean on most nowadays, and GDP, of course, wasn't so great either. It just about touched its 1929 level and then crawled back. So you look at 1937 or 1938, many years in, long, late in the story, and you'll see unemployment in some months of two and 10. We can't even imagine that.
Mr. ALTER: Just quickly. You know, I write in "The Defining Moment" about many of the mistakes that Franklin Roosevelt made, and so quite of the number of them, we'll agree, but it's not true that there was no improvement. If you go from 25 percent unemployed down to 13 percent unemployed...
CONAN: And that's about half.
Mr. ALTER: Pretty dramatic movement in a relatively short period time, and certainly, if there hadn't been any improvement, Franklin Roosevelt would not have been elected, re-elected three times and be the most - by overwhelming margins - and be the most popular president in American history.
So, I think there's a very interesting kind of, you know, myth that has developed in recent months that somehow, Roosevelt, you know, was not a successful president, didn't do anything to confront the crisis in an effective way. And it's a nice idea that there's only problem. It's not true because if he had been ineffective, he would have been tossed out on his ear the way Herbert Hoover was.
CONAN: Well, let's hear from listeners about what they learned about the Great Depression and Franklin Delano Roosevelt's New Deal. 800-989-8255. Email us at email@example.com. We'll begin with Yale(ph), Yale with us from Denver.
YALE (Caller): Hi.
CONAN: Yale, you're on the air. Go ahead, please.
YALE: You know, they've been selling buttons in Washington. I was there. Well, I was there at the inauguration of Franklin D. Roosevelt on March 4th, 1933.
CONAN: My gosh. I hate to point out, that was a long time ago, Yale.
YALE: 75 years ago. And the reason it was on March 4th instead of January was that my patron, Senator George Norris, was being congratulated on his success in getting passed the 20th Amendment, which moved the inauguration date from March 4th back to January 20th because the senator was suspicious of that long lame-duck session that enables so many people to do so much mischief.
CONAN: Indeed, people are suspicious of the length of the interregnum in these days, too, and we may yet see another change.
YALE: But I always - I took satisfaction as I watched the inauguration that the senator's amendment saved us two months of George Bush.
(Soundbite of laughter)
Mr. ALTER: That's a real George Norris kind of comment. He was a progressive Republican from Nebraska and the father of a great deal of social reforms, as you know. I am so delighted to hear from you. I had trouble when I was researching "The Defining Moment" in finding too many folks who witnessed that event 76 years ago. How old were you at the time?
YALE: 16. I was a freshman at George Washington University, and I had a job on Capitol Hill. I was a riding page. My job was to carry messages from senators to the White House and the embassies and the departments.
CONAN: Well, Yale, I'm sure you hope never to see another financial crisis on that scale again in your lifetime. It's not on that scale but, and let's hope that remains the truth.
YALE: Well, I think - I agree that the remedy was the bill introduced with these various agencies. And a much swifter response than it was. Now, it's suggested by some Republicans that he really didn't do that much good.
CONAN: Mm hmm.
YALE: By 1935, 36 things were back to what would be generally considered as normal.
CONAN: And let me ask, Amity Shlaes, that's been pointed out by a lot of people in the papers of late, and indeed, that it was the suspension of sort of that government intervention that had reduced those numbers in that 36, 37 period that caused a relapse and brought the Great Depression back.
Ms. SHLAES: Well, we're all looking at '35 to 1940. That's the forgotten depression, where the recovery just didn't come back, but you can't lay it off to just monetary. Monetary was a component with a tightening of reserve requirements, a technical thing in banks. We had the social security payments.
But when you go back and listen to the people of the period, I listen quite a bit, so to speak, to Benjamin Anderson, who was the chief economist at Chase. He pointed out some factors about which there was also consensus generally. For example, the Wagner Act raised the price of labor way above trend at a time when many were unemployed, and companies could not afford a strong labor law, big wages. And that helped sustain the unemployment at that two and 10 mid level, 19 percent, 18 percent. They knew it, and they wrote it in the New York Times.
CONAN: Senator Wagner of New York.
Ms. SHLAES: Senator Wagner of New York.
Mr. ALTER: I wanted to just ask...
Ms. SHLAES: So let me just - say one other thing, John.
Mr. ALTER: Well, before - just before we get to the end of the segment, I wanted to just - is the caller still there?
CONAN: Very quickly.
Mr. ALTER: We have almost no one in this country who remembers Huey Long. Were you in the Senate as page when Huey Long was there and...
YALE: Well, I'm not intimately familiar with Huey Long because by a couple of connections, I was...
CONAN: Well, Yale, I'm afraid we're running out of time in the segment, so let's put you on hold, and we'll get some information so that Jonathan Alter could call you back at a later time that would be - thanks very much. We're talking about the new New Deal. It's the Talk of the Nation from NPR News.
(Soundbite of music)
CONAN: This is Talk of the Nation. I'm Neal Conan in Washington. Few question the U.S. economy is in crisis, but few agree on what to do about it. President Obama looks to the New Deal as one model. Some argue, well, the New Deal didn't work all that well. Today, the lessons of the New Deal.
Our guests are Jonathan Alter, author of the book "The Defining Moment: FDR's Hundred Days and the Triumph of Hope." - Barack Obama has been reading that book - and Amity Shlaes, the author of the book "The Forgotten Man: A New History of the Great Depression."
What were you taught about the New Deal? Give us a call, 800-989-8255. Email, firstname.lastname@example.org, and you can join the conversation at our Web site, go to npr.org, click on Talk of the Nation. And here's Natine(ph) via email. What I learned is that it was the suspension of laissez-faire capitalism that caused and perpetuated the Great Depression. Jonathan Alter?
Mr. ALTER: Well, in some ways, the caller is right - or the emailer is correct. There were some quite dumb things that were done at various points in the New Deal that Amity and I would agree on. For instance, the National Recovery Act, which was arguably the centerpiece of the first hundred days, which cartilized the American economy, price fixing, restraint of trade, regular - over regulation to a point where they even regulated the burlesque industry from Washington as to how many times a night a stripper could take off her clothes.
So there were some stupidities therein, but the Securities Act of 1933, the first time we ever regulated Wall Street. We now know that financial transparency - we learn this lesson anew - is the absolute foundation of our prosperity, and when it - and this was the beginning of financial transparency, tremendously important development in American life. The Civilian Conservation Corp, they planted three billion trees. They saved the topography of the United States. Rural Electrification Administration electrified 90 percent of the country.
And I could, you know, I could go on and recite for you some of the tremendously positive developments that put people to work and restored their hope and saved - I would argue saved both capitalism and democracy at a time when a lot of people had given up on capitalism.
So, yes, laissez-faire capitalism was hurt in some ways by the New Deal, but it was saved by the New Deal because even the head of the Harvard Business School said that capitalism might be at an end in this period. We were on a barter economy when Franklin Roosevelt took office. The banks were all closed. A lot of people weren't sure they were going to reopen. So capitalists owed their fortunes to Franklin D. Roosevelt, and they were never appreciative enough of that.
CONAN: Amity Shlaes?
Ms. SHLAES: I didn't find America on the brink of socialism or Marxism or fascism when I went back to look. In fact, the country was a good deal more phlegmatic than we did learn in school. Huey Long was important. Father Codwyn was important, yes, but not that important.
And, you know, the European scholar, the journalist Odette Poin(ph) came over to see flaming American radical labor, and she wrote in her diary, the flabbergasting thing that I have found is that American labor is conservative, even then, in the 1930s. The idea was hyped that we were going to have revolution. I did not find that, I have to say, Neal, in the data.
I also want to make one other point about laissez-faire from the emailer. There was a problem with laissez-faire with the Roosevelt administration, which was Roosevelt was too laissez-faire. He could do what he liked. And in that letter, half of the '30s in addition to the labor cost problem, there was also a problem per se of uncertainty, which I think Obama is quite aware of, by the way, and reducing uncertainty.
That is, the administration was so unpredictable. One day, they were with - in love with big business, and next day, they were prosecuting it. The next day, a war was coming and big business was in the White House again - that that very uncertainty scared business, so that the New Yorker cartoons of the rich man, the (unintelligible) crying into his martini were accurate.
He just said, I'll wait it out in my country house, and I won't spend, and therefore, did not create new jobs. So laissez-faire can be bad when it's on the part of the government doing what it wants, and that was the characterization of the 1930s that made sense to me when I looked at what really happened.
Mr. ALTER: Well, I was just going to say that a visitor approached FDR and said, you'll either be the greatest president if you succeed or our worst president if you fail. And he said, if I fail, I'll be our last president, and he may have been self-dramatizing there, and I agree that there was no imminent threat of communist revolution.
But there were an awful lot of people who wanted a dictator, which was a positive word at that time. Studebaker even built a car called the Dictator that sold well. And so, the idea that we would have just sailed through if we had only, you know, applied some conservative economics like cutting taxes, even though people weren't, you know, making profits, so I'm not sure that would have helped much or done other kinds of things.
Even today, people like Martin Feldstein, Ronald Reagan's chief economic adviser, argue that, you know, the New Deal is the only way. They and John McCain's economic advisers said the same thing. In the short-term we have no choice, but to go back to some of these big-government policies.
CONAN: Let's get a caller on the line. This is Mary Kaye. Mary Kaye with us from Augusta, Georgia.
MARY KAYE (Caller): Hi. How are you?
CONAN: I'm very well, thank you.
MARY KAYE: I wanted to say that I lived in eastern Kentucky for a couple of years, and I can really see the benefit of the REA and the TVA in the lives of the people there. There's a big difference between having running water and electricity and indoor plumbing and not having it.
CONAN: REA, of course, Rural Electrification, and the TVA, the Tennessee Valley Authority.
MARY KAYE: Yes, yes, sir. And my brother grew up in Hawaii, and a lot of the bridges there on Maui were built by the WPA, and my dad grew up in a coal mining town, (unintelligible), Pennsylvania. And if it hadn't been for the WPA, a lot of the people there would have been destitute.
MARY KAYE: And that was in Pennsylvania. It's part of the Appalachians.
CONAN: And those are were the kinds of infrastructure, a word being talked about an awful lot in the start of the Obama administration, Amity Shlaes, infrastructure projects, the same kinds of things we're talking about now.
Ms. SHLAES: The infrastructure...
MARY KAYE: Need to be rebuilt.
CONAN: Yeah, hold on, Mary Kaye.
MARY KAYE: 20 years...
CONAN: Mary Kaye, hold on. We're just trying to get a response here.
MARY KAYE: Sure.
Ms. SHLAES: Oh, infrastructure can be very useful, and we certainly need some in this country. But the model you want to look at to see whether it's the greatest focus for recovery is Japan and not the U.S. in the 1930s. I believe they had over 10 infrastructure programs in Japan in the 1990s when they faced a problem like what we face and a veritable tsunami of concrete in that decade.
And yet, at the end of the decade, it became a lost decade for Japan. Unemployment was doubled, and the nikei was not back. They spent and spent and spent. They ruined their debt record. They were down there with third world places they had never imagined they'd be in terms of their debt picture, and they didn't get the recovery they sought.
So the argument for infrastructure is, do it if you need it. Maybe the private sector can do it. Maybe the public sector can do it. OK, we do need it, just as we needed the interstate, and we needed things that Roosevelt did in the '30s, but don't do it as a substitute for growth per se. Growth has to happen in the private sector, and it has to go in areas, you know, where productivity gains are going to happen, where we get the greatest advantage, where capital finds the best returns and not just because a certain politician says we need a certain road or bridge.
CONAN: Mary Kaye, thanks very much.
MARY KAYE: OK, I'd say we tried that for the last eight years. That sure didn't work. I'm willing to try Obama's plan.
CONAN: (Laughing) OK, thanks very much. I suspect a lot of people...
Ms. SHLAES: No, thank you.
CONAN: In Congress agree with you. Here's an email from Mark in Madison, Ohio. I just asked my grandparents who are in their late 80s about the Depression. The most poignant stories from my grandmother who told of how one Christmas, they would not of had a tree if someone would not have left one on their porch in Cleveland. I also grew up hearing about how my grandmother, who grew up in Mississippi, would not have had anything if they wouldn't have lived on a farm. Stop looking it just the stock market, and look how the programs helped real people. As a social studies teacher, I tend to believe them and the Federal Reserve chairman over the anti-Roosevelt crowd.
And this from Doug in Colorado. As a sixth grade student in Westlin, Oregon, my teachers kept talking about the Timberline Lodge on Mount Hood as being an example of the New Deal'a success. Timberline Lodge is a stately mountain lodge about the 9,000-foot level of Mount Hood still used as a skiing and mountaineering lodge. Many of the trails I hiked at the time in the Cascade mountain range were also created by the New Deal CCC, the Civilian Conservation Corps. Now, living in Colorado, many of our public works projects, water works projects, and mountain destinations were created by CCC projects. I've never heard the downside of the projects and given that they enjoyed, a wonder is (unintelligible)...
Ms. SHLAES: Would you like me to answer that about the downside?
CONAN: There you go.
Ms. SHLAES: In "The Forgotten Man," I tell the story of an electricity company called Commonwealth and Southern that was put together very carefully with a social aim, which was to light up the South. And the chief executive there was a man named W.W. we'll call him for now. And he had put a lot of energy into raising that capital because, as we say, the South was tired of living in the dark, the 1920s Appalachia. And when the government came in, the Tennessee Valley Authority, to light up the South, it crowded out that private company and took it to court and regulated it and prosecuted it and tortured it until it gave up.
And the head of that TVA, one of them, David Lilienthal, met with the head of the private company at the Cosmos Club in Washington. And the guy from the private company said, let's make a deal. You'll be out of government soon just like Obama's lobbyists. You'll want a real job, so why don't you make the power and I distributor, or why don't you take one state in the South, and I'll take another because the private sector and the public sector have to get along. And David Lilienthal said, no. Basically, we own the world because we are the new New Deal.
It's the 1930s and W.W., who was Wendell Wilkey, the man who later became a politician, enraged, said, you know, he went out on the sidewalk and just about threw up because they were being crowded out by the government. Such crowding out isn't theoretical. It really happens. Those were jobs that were also lost in the private sector when the government took over, and the outcome still, those many many unemployed at the end of the '30s was not humane. So you want to consider that even if we're talking about presidents. We love Roosevelt. He did the right thing in World War II. He was our leader, but you want to consider the actual record of the New Deal in the 1930s when you talk about redoing it.
Mr. ALTER: OK. Let's talk about the actual record. You know, you make a big thing about this, Amity, but the REA, the Rural Electrification Administration, electrified 90 percent of the country, not the private sector. Government could succeed in doing something. The Civilian Conservation Corps planted three billion trees. The road that most listeners drove in on today, many listeners, was built by the WPA or one of the work projects that restored people's hope in the future. It gave them a job and something to live for.
We are at a pivot point now in the country, a hinge, as it was described yesterday, that's very similar to where we've been before and why Barack Obama has said this is a new defining moment for our nation. Herbert Hoover and George W. Bush believed that if your home was about to be foreclosed upon, it was none of the government's concern. You are on your own.
Franklin D. Roosevelt and Barack Obama take a different view. There is a psychological breakpoint here, and we are about to see the American public say, it's good enough for greedy bankers, it's good enough for average Americans. So we are in many, many ways back to where we were in those days.
CONAN: Jonathan Alter's book is the "The Defining Moment: FDR's Hundred Days and the Triumph of Hope." Amity Shlaes's book is "The Forgotten Man: A New History of the Great Depression." You're listening to Talk of the Nation from NPR News.
Let's get Darryl(ph) on the line, Darryl from Cape May in New Jersey.
DARRYL (Caller): Thank you for taking the call.
CONAN: Go ahead, Darryl.
DARRYL: I was taught in school that it was not the Roosevelt policies that pulled the United States out of the Great Depression, but also ultimately, World War II. Would your people comment on that, please?
CONAN: Jonathan Alter?
Mr. ALTER: Yes. That's quite true, and I do want to say, you know, there's much in Amity's book that I admire. There were big flaws in the New Deal. I think, too, what's happened recently is that because it took World War II to pull us fully out of the Depression, there is this sense that the New Deal didn't accomplish anything. And as usual, in these sorts of debates, you know, the truth lies somewhere in the middle, and I try to give a complete, you know, demarblelized view of FDR where he - I don't want to hold him up as a saint because he made some mistakes, but he saved a lot of people's livelihoods, and he restored their spirit.
And we haven't talked at all about his, you know, his own experience with polio and how that changed him and allowed him to lift people up and the psychological dimension of this, that the confidence that he inspired, the hope that he inspired and that weekend hope Barack Obama will inspire is not to be taken lightly and not to be swept away in our discussion of economic statistics.
CONAN: Darryl, thanks very much. I wanted to end by asking - we're going to get to you, Amity, in just a second - was the New Deal - and we'd sometimes thought that this was - you know, we're just going to be practical. We're going to try a whole bunch of different things, and what works, we're going to stay with. What doesn't work, we're going to go way. Was it, in fact, that, or was it ideologically driven, and what lessons do we need to derive from that now, and let's go first to Amity to give her a chance.
Ms. SHLAES: Oh, I want to - first of all, note that President Obama's economic adviser, Christina Romer, wrote a giant paper that's important - one reason she's in the office. And she shows it was a monetary event in the later '30s that caused the easing up and perhaps less of the war spending. So that is contested. That's one of those - whether Hoover was humane, he was very humane. He was not loved. He was bad at being humane. But he tried very much and did spend a lot.
The take away here, which is so important, is there's lots for us to learn in the New Deal, especially the inspiring part, how you handle trouble especially, the SCC part. Jon and I agreed that President Obama clearly agrees, you put light on markets so you can see what they're doing.
But you don't want to drown in New Deal nostalgia or New Deal narcissism because there's plenty to look at there that's not so great, and you can certainly see that the Obama team has taken that heart. There was not a lot of fiery New Deal rhetoric in the inaugural at all. It was a very calm, happy speech. So, I think, you know, that's where we are in history, and that's where we are now.
CONAN: Jonathan Alter?
Mr. ALTER: I think it was less ideological than is sometimes assumed, and that Roosevelt was quite pragmatic in many ways, and he believed in what he called bold, persistent experimentation. The idea, as he said, was to, quote, "take one method and try it. If it fails, admit failure frankly," which, as we know, was a kind of a novel idea in the Bush era, and we're going to find out whether the Obama folks admit failure frankly.
And Roosevelt then went on to say, but if it fails, take another method and try that. Above all, try something. So that was the spirit of the New Deal, not some rigid ideology. It was actually quite flexible on the details of many of these questions, and in my conversations with the Obama folks, they've really picked on this from Roosevelt, this kind of practical, pragmatic progressivism, not an ideologically uncompromising form of government.
CONAN: Well, thanks to you both. Appreciate the discussion and the relevance for the days and weeks and months and years to come. Jonathan Alter was here with us in studio 3A. His book, "The Defining Moment: FDR's Hundred Days and the Triumph of Hope." He's a senior editor and columnist for Newsweek. Amity Shales, the author of "The Forgotten Man: A New History of the Great Depression," also a senior fellow in economic history at the Council on Foreign Relations, and we thank them both. She was with us from our bureau in New York.
Mr. ALTER: Thanks, Neal.
Ms. SHLAES: Thank you.
CONAN: Up next, did you make it to Washington yesterday for the inauguration? Was it worth it? Are you warmed up yet? Give us a call, 800-989-8255. Email, email@example.com. This is NPR News.
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