Amity Shlaes Review

With talk of new taxes, new union powers, continued bailouts, and more federal controls of business, now is the perfect time to review the damage that similar controls caused under Hoover and FDR.

The Spring Objective Standard has published my review of Amity Shlaes’s book, The Forgotten Man: A New History of the Great Depression. The beginning of the article is available online at no cost; the journal sells the article singly and offers online and print subscriptions.

I summarize, “As president, Hoover pursued six main types of political controls that devastated the economy: protectionism, wage controls, interference with the money supply, scapegoating of businessmen, expansion of public works, and increased taxation.” By the time Hoover left office, unemployment was somewhere between 20 and 30 percent. By extending and expanding such controls, FDR prolonged the Depression and impeded economic recovery.

Obviously I recommend Shlaes’s book. However, as I mention in the review, Shlaes does not offer a good account of Federal Reserve policy especially before the Depression. While others, including Milton Friedman and Murray Rothbard, have written about monetary policy of the time, I don’t think the matter has been definitively settled. (The economic analyses of both Friedman and Rothbard are influenced by political preconceptions that I believe are significantly faulty.) I still have much reading to do in that area, though my sense is that I will search in vain for a definitive account that fully explains the historical facts and points the way to a free market alternative.

But Shlaes does a great job of reviewing the other sorts of controls imposed by Hoover and FDR. I hope my review serves to crystalize some of the key historical events as well as to generate more interest in Shlaes’s book.