The Shock Doctrine

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

The Great Depression was the Katrina of the 1930s. Like a natural disaster, it hit in waves, making everyone feel helpless. First came the crash of the stock market, then the failure of the local banks, then the failure of larger ones, then joblessness, and more joblessness, and hunger. By the time the country elected Franklin Roosevelt on his New Deal platform in 1932, one in four was unemployed. In that moment, economists diagnosed a mismatch of supply and demand. Overly efficient factories, they said, were producing too many goods for a market that could not keep up. Factories therefore had to lay off workers. It all amounted to “vicious industrial Darwinism,” as Nick Taylor terms it in “American-Made: The Enduring Legacy of the WPA: When FDR Put the Nation to Work” (Bantam, 640 pages, $27).

Roosevelt’s response was almost biblical: “Let them build.” His New Dealers jumped in with a number of what we would today call infrastructure projects, designed to improve the quality of life generally, spur demand, and occupy the idle. The most dramatic of these was the Tennessee Valley Authority, a program so vast it changed an entire region. Nominally the TVA was about flood control, job creation and the generation of hydropower.

Then there was the Public Work Administration, which create much of our modern infrastructure-scape, from the Triborough to the San Francisco-Oakland Bay Bridge. The PWA was a billion dollar program when that actually meant something; federal budgets ran only as high as five or ten billion dollars. (For New York in 1935 alone, the PWA granted funds for nine projects, including the sewage plant on Ward’s Island, construction of four buildings at Brooklyn College, and the construction of high schools at Jamaica Avenue and Elderts Lane in Brooklyn and Queens.) Yet another program was the Civilian Conservation Corps, which gave city men under 25 a new chance, working outdoors, mostly in the country. In the case of the TVA, for example, CCC men cleared the hundred-plus square miles of reservoir area for the lake behind the Norris Dam and lived, at least for time, in the TVA’s planned community, Norris. CCC men laid paths and trails for hundreds of state parks — Starved Rock in Illinois to Lily Bay, in Greenville, Maine.

The Works Progress Administration, Mr. Taylor’s subject, featured projects that were individually smaller but also added up to billions. WPA workers built the terminal at LaGuardia Airport and one at Jackson, Miss., the Denton baseball stadium at Miles City, Mont., the Forest Hill Park in Cleveland, the National Guard Armory in San Jose, Calif., the Civic Center of Hammond, Ind., the Brookfield Zoo outside Chicago, and a yacht basin at Fort Myers.

Harry Hopkins, a former social worker, headed the WPA, and his agency emphasized employment and quality of life. It was the WPA that created the Federal Writers Project, as well as jobs projects for photographers and one for painters. The great murals at Ellis Island — now partly on view in the Eastern District Court Building in Brooklyn — and those gracing the foyer at Brooklyn Tech, as well as Weequahic High School in New Jersey, are all WPA projects as well. Propaganda for the New Deal was something Hopkins viewed as part of his job. In 1935 Sinclair Lewis had published a play on European fascism titled “It Can’t Happen Here,” the implicit thesis being that it could if democracy were not protected by moderates such as Roosevelt. In the autumn of 1936, when FDR was finishing his re-election campaign, the WPA’s Federal Theatre Project premiered a stage version of “It Can’t Happen Here” in multiple cities.

Republican opponents applied their partisan jackhammers to these projects from time to time — the House Committee on Un-American Activities hauled Hallie Flanagan, the Federal Theater Project head, in for testimony in 1938. At another hearing, as Mr. Taylor notes, lawmakers ridiculed WPA craft classes as a waste of time. Hopkins constantly saw his budget threatened. When a WPA instructor explained carefully that the small scouting items he taught his students to make —belts and sleeping bags, for example — were known as “boon doggles,” he unwittingly coined a pejorative for make-work. The New York Sun itself, seizing the opportunity for fun, began a new feature mocking the New Deal “Boon Doggle of the Day.”

But mostly the critics were either perceived as hyperbolic or off the mark. When, in March 1936, rivers flooded from New England to the Ohio River, leaving 171 dead and 430,000 without homes, WPA quickly deployed 100,000 workers to help. Even in calmer moments, the physical evidence of the good of the projects could be simply too pleasant to overlook. In 1935, for example, Senator Lester Dickinson of Iowa convened a meeting of anti-New Dealers at Starved Rock, and railed against the New Deal, likening it to the Nazi regime. But the fact that the green paths to the lodge where he spoke had recently been cut by those CCC workers hurt his credibility.

Today scholars of all political backgrounds attribute some economic growth to the New Deal programs. Economic historian Alexander Field of the University of California at Santa Barbara has done work showing that productivity grew strongly in the 1930s and suggests that New Deal roads and airports increased the overall efficiency, and productivity, of the economy. A private bus company, for example, might use a New Deal paved road to deliver its goods faster. This makes sense.

Nonetheless the positive reputation of the New Deal tends to obscure some problems as fundamental as WPA concrete. The first is their premise. Depression was not caused by “vicious industrial Darwinism,” as per Mr. Taylor. The downturn’s trigger was monetary — deflation in conjunction with bank collapses and a number of policy errors made first by Herbert Hoover and then by FDR. The Depression’s duration, its “greatness,” had to do with other factors, including FDR’s habit of intervention.

The second is that these same programs may actually have stalled recovery. One of the private-sector industries that had the capacity to jump-start recovery was the most exciting sector of the era: the electricity industry. The internet of its day, electric power produced by private companies was in demand even during a downturn.

But David Lilienthal, a TVA executive with a mind so binary it recalls that of Eliot Spitzer, believed that to succeed, his TVA must annihilate private power. For years Lilienthal battled the TVA opponent Commonwealth and Southern in the courts, until C & S gave up and sold part of itself to the government. Lilienthal’s ally Roosevelt joined hands with progressives to pass the Public Utilities Holding Company Act, a law that so vastly limited private utilities that it became known as the “death sentence act.” At the PWA, Interior Secretary Harold Ickes meanwhile busied himself bribing municipalities into contracting with public power companies instead of private ones. New Dealers were similarly aggressive in other sectors to similar result.

The New Deal conveyed the message that only government could do “big” — that the private sector was simply incapable of marshalling the financial resources to build serious infrastructure. Today we know that that is not true — the Internet offers a powerful counterexample. But in those years, sandwiched between wars as the country was, the argument sounded plausible, especially given the New Dealers’ propaganda. In his second inaugural address of January 1937, Roosevelt told listeners that his administration was “fashioning an instrument of unimagined power” to bring about a more morally responsible nation. It is hard to imagine even John Edwards making this statement today.

Roosevelt used a creepy combo of anti-wealth rhetoric, justice department prosecution, and high taxes to justify his infrastructure projects. Many business leaders retreated to the porches of their second homes to drown their sorrows in martinis, just as the New Yorker magazine cartoons suggest. This “capital strike” — Roosevelt himself termed it that — helped cause the “Depression within the Depression” of 1937 and 1938. Year after year, the Depression refused to go away. Public works could not distract from that fact or compensate for it.

Today our own fears of an economic Katrina give us a morbid interest in that original Katrina, the Depression. But our interest does not mean this period and that one are truly analogous, or that many New Deal remedies did not fail. We can admire the New Deal from afar, while still finding little cause to replicate it.

Miss Shlaes is senior fellow in economic history at the Council on Foreign Relations and a Bloomberg columnist.


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