------------ EH.NET BOOK REVIEW --------------  
Published by EH.NET (June 2006)  
  
Eliot A. Rosen, _Roosevelt, the Great Depression, and the Economics   
of Recovery_. Charlottesville, VA: University of Virginia Press,   
2005. xii + 308 pp. $39.50 (hardcover), ISBN: 0-8139-2368-9.  
  
Reviewed for EH.NET by Elmus Wicker, Department of Economics, Indiana   
University.  
  
  
The title of Rosen's book can easily create the impression that it is   
about the economics of recovery from the Great Depression. Rather it   
is a history of Roosevelt's New Deal and the story of how it came   
into being. The reader will not find an economic assessment of New   
Deal policies; there are no references to recent contributions to the   
debate either in books or professional economic journals.[1] After   
having read the book we still may ask: what does the evidence tell us   
about the success or failure of the many New Deal initiatives?  
  
But Rosen is not an economist, and it would be unfair to hold his   
feet to the economist's fire. His work must be judged by the   
standards of the historian. It is the very first task of the   
historian to describe what happened from a comprehensive examination   
of the surviving archives. And for the New Deal these records are   
numerous. Rosen lists over sixty sources of the papers of New Deal   
policymakers. What a grueling and time consuming ordeal! His account,   
however, is richer for the effort to uncover the origins of the NRA,   
AAA, and PWA, as well as the other agencies. His description is   
authoritative, sometime original, and always scholarly.  
  
The first four chapters describe Roosevelt's monetary experiments   
both domestic and international including the temporary departure   
from the gold standard, the gold buying policy and the repudiation of   
a debt settlement with our allies during World War I. The author   
details the growing tension within the new administration between   
those who would rely on a purely domestic stimulus and those who,   
like Cordell Hull, opted for free trade and the maintenance of the   
gold standard. Rosen denies that Roosevelt's policies were   
exclusively responsible for the beggar-thy-neighbor policies of the   
30's. In his view Neville Chamberlain, the British Chancellor of the   
Exchequer, pushed Roosevelt toward his nationalist outlook. Tension   
accelerated when Roosevelt proceeded to detach the dollar from gold,   
terminating with the resignations of Dean Acheson and Lewis Douglas.  
  
In at least two instances Rosen has suggested revisions of the   
conventional interpretation of the Roosevelt-Hoover relationship and   
the cause of the failure of the London Monetary and Financial   
Conference in 1933. The stand-off between Roosevelt and Hoover during   
the transition period, usually attributed to Roosevelt's   
intransigence and general unwillingness to cooperate, was the result   
of Hoover's efforts to obtain Roosevelt's assurance "that there will   
be no tampering or inflation of the currency, that the budget will be   
unquestionably balanced even if further taxation is necessary." It   
was Hoover's guile to expect the incoming president to continue his   
failed policies.  
  
In the second example, Rosen denies that Roosevelt was solely   
responsible for the failure of the London Monetary and Economic   
Conference, originally convened for the purpose of exchange stability   
after Roosevelt's gold buying experiment. Rosen maintains that there   
was no longer any reason for the Conference. James Warburg,   
Roosevelt's chief negotiator and Leith Ross, his British counterpart,   
had already agreed to a dollar discounted in a range of 15 to 25   
percent, considerably less than what Roosevelt desired and   
effectively sealing the decision of the president to abruptly   
terminate further monetary policy negotiations.  
  
If the old gold standard was no longer regarded as sacrosanct,   
neither was the balanced budget principle. New Deal fiscal policy   
required the abandonment of the balanced budget principle. Rosen   
attributes the initial stimulus for the policy shift to Laughlin   
Currie, Marriner Eccles, and Alvin Hansen, all of whom subscribed to   
the view of countercyclical budget deficits in contraction and   
surpluses in expansion. The Currie-Eccles approach implied active   
management of the economy. Countercyclical policy predated Keynes's   
_General Theory_. This revolutionary shift in fiscal policy is   
described in chapters five and ten. Chapter Ten is labeled "The New   
Economics" but that term had already been appropriated to refer to   
the advent of Keynesian economics.  
  
What is missing in an otherwise balanced account is any attempt to   
summarize current evidence on the extent of the stimulus provided by   
the unbalanced budgets. The countercyclical budget debate generated   
another debate on planning -- how extensive it should be and where it   
would be most effective. The limits of planning is the subject of   
chapter seven, and the responsibilities of the National Resources   
Planning Board for planning in chapter 11.  
  
Roosevelt rejected the principle of an independent Federal Reserve.   
For the first and last time the President of the United States   
assumed full responsibility for U.S. monetary policy. And Federal   
Reserve officials acquiesced without precipitating a crisis.[2]  
  
Rosen has accomplished successfully the task of describing what the   
New Deal was about and how it came into existence. He is less   
successful, however, in providing an economic evaluation of the New   
Deal policies, especially what caused the economic recovery, an   
exercise requiring deeper penetration into the territory of the   
economist.  
  
Notes:  
1. See, for example, Michael Weinstein, "Some Macroeconomic Impacts   
of the National Industrial Recovery Act, 1933-1935." In _The Great   
Depression Revisited_, edited by Karl Brunner (1981) and Frank G.   
Stendl, _Understanding Recovery in the 1930s: Endogenous Propagation   
of the Great Depression_ (2003).  
  
2. Elmus Wicker, "Roosevelt's 1933 Monetary Experiment," _Journal of   
American History_ (1971).  
  
  
Elmus Wicker is Professor Emeritus of Economics at Indiana   
University. His most recent book is _The Great Debate on Banking   
Reform: Nelson Aldrich and the Origins of the Fed_ (Ohio State   
University Press, 2005).  
  
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