New Deal, Political Deal

Many consider Franklin Delano Roosevelt to be our third greatest president.  In books such as The New Dealers’s War,  by Thomas Fleming, 2001, and  The Forgotten man, by Amity Shlaes, 2007, FDR receives re-evaluation.

Not all went as well with FDR as has been taught.  Unemployment was still 20% in 1939.  There was a severe recession in 1937, Europe had recovered much faster. Eight years into his presidency, we were not prepared for war, a war easily foreseeable, and building the military would have greatly aided the economic recovery. Churchill was left to oppose Hitler largely alone for a year, and eventually the US had to side with and arm Stalin to beat Hitler.  We were unable to influence the immense slaughter in Poland and Ukraine by Germans and Russians alike. FDR placed Japanese American citizens in detention camps, he prevented Jews from emigrating from Europe.  Ships with fleeing Jews were actually sent back into the clutches of Hitler.

FDR shelved Einstein’s famous warning about the possibility of an atom bomb, and the English had to urge on the Manhattan Project.  FDR did not move to support anti-lynching legislation, or oppose the segregationist southern democrats.  His National Recovery Board supported monopoly price fixing and collusion in markets, favoring big business, placing small businesses at great disadvantage. This was eventually ruled unconstitutional, unanimously, which led FDR to try to ‘pack’ the Supreme Court.  He taxed the ‘little guy’ with excise taxes, and raised taxes overall, and enormously increased government regulation.  The NRA in 2 years created more federal law that all the previous years of the nation since 1789.

The Great Depression turned out to be the one exception of the US ‘boom and busts’ that didn’t quickly resolve, the only one in which government didn’t act to increase the incentives of investment and the small business economy.  The hampered economic recovery served to justify increasing federal power.  And increasing federal power is what he did. He targeted political enemies with IRS investigations, and muscled the elections of congressional leaders.  Far from having a ‘first class temperment’, he manipulated,  frustrated, and infuriated his appointees, and staff.  Many abandoned him.  He was the first to break George Washington’s honor code of serving only two consecutive terms.

But he was a political success.  The New Deal was a political deal.  FDR personally directed New Deal funds for political gain, lavishing his supporters with government funds, denying those that opposed him.   He was a charming public speaker, he cultivated and pressured the press to support him and to gloss over his contradictions.  He spoke a strong populist theme, but he bought elections with New Deal money. In his great electoral victory of 1936, federal spending outpaced all local and state spending for the first time.  He didn’t hesitate to say opposing things to opposing audiences.

FDR died in office, galvanizing his image of victorious service to the nation, but he brought Tamany Hall to Washington, D. C.

Lincoln Economics

In October, 1959, Abraham Lincoln made his way to Milwaukee, on horse back, and gave a remarkable speech to the Wisconsin Agricultural Society.  He went there to respond to charges that northern wage earners were no better off than southern slaves.  This was a time when American industrialization was just beginning, when the entire economy was based on small farms.  People with land had pretty much what they needed to take care of themselves, but this was beginning to change.  Available land was running out.

Something about the southern charges bothered Lincoln.  He may have sensed, as perhaps only he could, that something terrible like the Civil War was coming, and the southern charges would need full rebuttal. He likely had read the Communist Manifesto, with its thesis of wage earner slavery, it was published in English in 1850.  An industrial worker society was already underway in England.  He had been a farmer himself.  Was he answering Karl Marx?

He spoke with great prescience.  He foresaw the application of scientific knowledge to the problems of farming, and the coming of something like the tractor.  He sensed how this would liberate farming from its drudgery and low return and greatly boost its production.  But would this be progress?  Would farm laborers be victims of their own success?  Would they be more and more trapped by the low prices induced by their increased production?

Lincoln rejected what he called the ‘mud sill theory’:

By some it is assumed that labor is available only in connection with capital – that nobody labors, unless somebody else, owning capital, somehow, by the use of that capital, induces him to do it. Having assumed this, they proceed to consider whether it is best that capital shall hire laborers, and thus induce them to work by their own consent, or buy them, and drive them to it without their consent.   Having proceeded so far, they naturally conclude that all laborers are necessarily either hired laborers or slaves.  They further assume that whoever is once a hired laborer, is fatally fixed in that condition for life: and thence, again, that his condition is as bad as, or worse than, that of a slave.   This is the mud-sill theory”.

Labor creates capital, he reasoned, and in America laborers can own their capital, they can be both laborers and owners.  In this way, they can avoid serfdom.   In addition to the return from their labor, they can also receive return from their capital, thus avoiding the low wage effects of increased productivity, and maintaining independence from the power of capital.

Property is the fruit of labor – property is desirable – it is a positive good in the world.  That some should be rich, shows that others may become rich, and hence is just encouragement to industry and enterprise.  Let not him who is houseless pull down the house of another;  but let him labor diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built.”     March 21, 1864    Reply to New York Workingman’s Association