------------ 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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Published by EH.Net (June 2006). All EH.Net reviews are archived at
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