------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (July 2007)
Jason Scott Smith, _Building New Deal Liberalism: The Political
Economy of Public Works, 1933-1956_. New York: Cambridge University
Press, 2005. xiv + 283 pp. $75 (cloth), ISBN: 0-521-82805-8.
Reviewed for EH.NET by Price V. Fishback, Department of Economics,
University of Arizona.
Jason Scott Smith offers a very useful narrative history of the
public works programs during the New Deal and World War II. In the
introduction and conclusion he argues that most major historians have
not sufficiently appreciated the importance of public works programs
like the Public Works Administration (PWA) and Works Progress
Administration (WPA) when they evaluate the New Deal. Most historians
treat the public works programs as failures because they did not
succeed at ending unemployment during the 1930s. Smith contends that
his is the first historical study that treats the public works
programs as the centerpiece of the New Deal. By reevaluating the New
Deal in this light he highlights the central importance of the WPA
and PWA in determining the development of the national highway system
and the large-scale public and military works built to support
America's Cold War policy at home and abroad.
Smith starts by making a case that major historians of the New Deal
have not sufficiently appreciated the importance of the public works
programs. He then develops extensive discussions of the development
of the PWA run by Harold Ickes. He does a fine job of documenting the
internal bureaucratic struggles in the PWA about how best to develop
the organization and what role the PWA should play. He extends the
discussion developed by Arthur Schlesinger, Jr. about the battles
between Harry Hopkins of the WPA and Ickes of the PWA to obtain
resources within the administration. Hopkins' philosophy was to put
people to work quickly while Ickes was more focused on the long-term
success of the project, which led to longer lead times. The PWA has
long been noted for being well run and relatively free of political
patronage activity and internal corruption. Ickes ran the PWA with an
iron fist and established an investigative division that worked to
limit corruption. But there still remained problems as Smith
describes the patronage nature of a number of appointments, chicanery
in expense accounts, a number of administrative oversights, and
various officials' use of their PWA position for their own ends. He
suggests that the PWA was overstaffed and not very effective in
evaluating programs. Similarly, he talks about boondoggling in the
WPA and the efforts by the WPA to combat the boondoggling image with
their own investigative division. Harry Hopkins has been charged with
saying that the WPA was designed to "tax and tax, spend and spend,
and elect and elect," which fits the boondoggling image. Although
Hopkins claimed that he had never made the statement, Smith has
carefully gone through the historical record and makes a reasonable
case that he did. At any rate many people at the time thought of the
WPA in those terms. Smith provides a fine discussion of the factors
leading to the passage of the Hatch Act. He uses the charges and
countercharges about the misuse of power in the WPA to influence the
results of the Senate race between Alben Barkley and A. B. "Happy"
Chandler in Kentucky as a case study that illustrates many of the
issues and then provides extensive inside information about
Roosevelt's and his advisors' thinking about whether to veto the act
or sign it.
One of the most fascinating chapters deals with the winding down of
the WPA during World War II and the efforts of PWA administrators
during the War in seeking funding for public works projects that
would prevent a recurrence of the Depression upon the end of the War.
Although Smith doesn't specifically emphasize the lessons I draw from
the chapter, his work shows well how administrators of programs that
have outrun their usefulness actively seek new ways to keep the
programs alive and make them relevant. The WPA shifted towards
training workers during the War and even was involved in providing
workers to help manage the procedures for placing Japanese-Americans
in internment camps, certainly a sad end to such a major emergency
program. Given that the unemployment rate had fallen below 5 percent
by April 1941, it seems ludicrous that the WPA was paying relief
workers 50 to 70 percent of a market wage to be trained for
employment at that time. Similarly, the head of the PWA was running
around the country in 1944 seeking to make a case for the necessity
of a major push toward government works to stave off the possibility
of a return to the Depression after the War. Robert Higgs (1999,
2004) has recently shown quite well how the private sector broke free
at the end of the War and such government spending was not needed.
The book provides a series of narratives that help flesh out the work
on the New Deal by economic historians. The information on the
patronage and politicking issues associated with the public works
projects fits in well with the large cliometric literature on the
role of electoral politics in determining the geographic distribution
of funds written by Gavin Wright, Robert Fleck, John Wallis, Jim
Couch, William Shughart, and a host of others. For a survey of that
literature with additional results see Fishback, Wallis, and Kantor
(2003). The collection of quotes from luminaries by Harold Ickes,
Harry Hopkins, and John Kenneth Galbraith on the purposes of the
public works projects provides a narrative background for some recent
studies that I have done with Shawn Kantor, William Horrace, Ryan
Johnson, and Michael Haines on the impact of public works and relief
programs on various measures of socioeconomic welfare. These studies
came out while the book was in press, so were too new to be
considered in Smith's book. We find that an additional dollar of New
Deal public works and relief spending in a county during the 1930s
raised 1939 income by nearly a dollar; not a large multiplier effect
but a pretty strong flypaper effect. In addition, relief spending in
the cities contributed to lower crime rates, higher birth rates,
lower infant mortality, and lower death rates due to suicide,
disease, and diarrhea. Greater public works and relief spending also
contributed to greater in-migration from other parts of the country
(see Fishback, Horrace, and Kantor (2005, 2006), Fishback, Haines and
Kantor (2007), and Johnson, Kantor, and Fishback (2007)).
Smith makes one major claim that I don't believe that he has
documented very well. He argues that the WPA and the PWA, despite
their status as temporary emergency agencies, led to major changes in
the way that the federal government built public works in the United
States. He argues that the building of the interstate highway system,
many military projects, and public works in foreign lands after World
War II were strongly influenced by the New Deal public works
agencies. My sense is that had the Depression and New Deal never
occurred the later projects would have been built in pretty much the
same way as they were built. The federal government had been building
forts and other military facilities throughout the nineteenth
century. The Bureau of Reclamation was actively building dams before
the New Deal and the federal grants to states for highways were more
active before 1930 than Smith suggests. No one was following the WPA
practice of using work relief and the PWA was more of an extension of
past federal building practices than the development of a new way of
doing things. Smith notes that the contractors who cut their teeth on
the PWA projects built many later projects, but I see that more as
path dependence that would have taken place under any regime. I do
agree that the PWA and WPA had long-lasting effects in that they
built a huge array of public works, many of which are still standing
today. Robert Leighninger (2007) has documented this nicely in both
words and pictures for the PWA in Louisiana.
I was surprised at how little discussion Smith offered of the public
works projects run under the Civil Works Administration (CWA) from
November 1933 through March 1934 and the Federal Emergency Relief
Administration (FERA) from 1933 through the middle of 1935 (with some
trailing expenditures through March 1937). While Smith devotes a
chapter to the struggle for resources between Hopkins's fast hiring
WPA and Ickes's slower moving PWA, he only briefly mentions the FERA
and CWA as predecessors of the WPA. This is a significant oversight
because a large part of the battle for resources was fought in 1933
and 1934 when Hopkins used the FERA and CWA to rapidly put people to
work and grab a large share of the funds for public works projects.
Spending on the FERA and CWA programs from 1933 through 1935 exceeded
the loan and spending totals for the PWA for the entire period from
1933 through 1939 and both built a large number of public works. For
a more extended discussion of how the organization of the WPA
developed as a response to problems that arose under the FERA and
CWA, see Wallis, Fishback, and Kantor's (2006) recent paper on
corruption and reform during the New Deal.
Smith's literature review in the introduction suggested that major
historians had considered the public works projects to be a failure
in dealing with unemployment during the 1930s. It is true that the
public works, like most New Deal policies, failed to prevent
unemployment rates from staying above 10 percent through 1939. The
historical literature has been almost entirely narrative and based on
impressions and quotes from contemporaries. There is a statistical
economic history literature related to the issue of the impact of the
public works programs on employment and unemployment by Robert Fleck
(1999), John Wallis and Dan Benjamin (1981, 1989), and Todd Neumann,
Shawn Kantor and Fishback (2007). Wallis and Benjamin (1989) find the
highest degree of marginal crowding out in the form of the loss of
one private job for every two relief jobs created. In that sense we
can say that the provision of millions of public works and relief
programs did soak up a great deal of unemployment. Since Roosevelt
did not follow John Maynard Keynes's advice and run large deficits,
it is possible that he might have reduced unemployment still more had
more public works been built. In making such an argument, however,
there are several factors to consider. Maybe by running larger
deficits Roosevelt could have made the WPA jobs real jobs that paid
full wages, like the PWA jobs instead of the low-paying survival jobs
under the Federal Emergency Relief Administration (FERA) and the WPA.
Since the WPA employed far more people than the PWA, there might have
been much stronger ripple effects through the rest of the economy as
WPA workers would have had much higher incomes and could have
purchased a much broader array of consumer items. On the other hand,
given the crowding out going on even at the low levels of relief pay,
an improvement in WPA pay might have led to more crowding out of
private employment by making it harder to attract workers to the
private workforce. It might have been the case that no level of
public works would have been enough to eliminate unemployment during
the 1930s. Remember that there were other New Deal policies
contributing to higher unemployment. Harold Cole and Lee Ohanian
(2006) suggest that the National Recovery Administration cartel-like
policies and high-wage labor policies contributed a great deal to the
inability of the economy to eliminate unemployment during the New
Deal. In the agricultural sector, the rental and benefit payments to
farmers to take land out of production likely contributed to an
increase in unemployment among farm workers.
In the final analysis Jason Scott Smith provides us with a
well-written narrative history that offers a tremendous amount of new
information carefully gleaned from archival sources. Economic
historians, general historians, and students of the New Deal will
learn a great deal from reading it.
References:
H. Cole and L. Ohanian. 2004. "New Deal Policies and the Persistence
of the Great Depression: A General Equilibrium Analysis," _Journal of
Political Economy_ 112 (August): 779-816.
J. Couch and W. Shughart III. 1998. _The Political Economy of the New
Deal_. New York: Edward Elgar.
P. Fishback, M. Haines and S. Kantor. 2007. "Births, Deaths, and New
Deal Relief during the Great Depression." _Review of Economics and
Statistics_ 89 (February 2007): 1-14
P. Fishback, W. Horrace and S. Kantor. 2005. "The Impact of New Deal
Expenditures on Local Economic Activity: An Examination of Retail
Sales, 1929-1939." _Journal of Economic History_ 65 (March): 36-71.
P. Fishback, W. Horrace and S. Kantor. 2006. "Do Federal Programs
Affect Internal Migration? The Impact of New Deal Expenditures on
Mobility During the Great Depression," _Explorations in Economic
History_ 43 (April 2006): 179-222.
P. Fishback, J. Wallis and S. Kantor. 2003. "Can the New Deal's Three
R's Be Rehabilitated? A Program-by-Program, County-by-County
Analysis." _Explorations in Economic History_ (October): 278-307.
R. Fleck. 1999. "The Marginal Effect of New Deal Relief Work on
County-Level Unemployment Statistics." _Journal of Economic History_
59 (September): 659-87.
R. Higgs. 1999. "From Central Planning to Market: The American
Transition, 1945-1947." _Journal of Economic History_ 59 (September):
600-23.
R. Higgs. 2004. "Wartime Socialization of Investment: A Reassessment
of U. S. Capital Formation." _Journal of Economic History_ 64 (June):
500-520.
R. Johnson, S. Kantor and P. Fishback. 2006. "Striking at the Roots
of Crime: The Impact of Social Welfare Spending on Crime During the
Great Depression." National Bureau of Economic Research Working Paper.
R. Leighninger. 2007. _Building Louisiana: The Legacy of the Public
Works Administration_. Oxford, MS: University Press of Mississippi.
T. Neumann, P. Fishback and S. Kantor. 2007. "The Dynamics of Relief
Spending and the Private Urban Labor Market during the New Deal."
Working paper.
J. Wallis and D. Benjamin. 1981. "Public Relief and Private
Employment in the Great Depression." _Journal of Economic History_ 41
(March): 97-102.
J. Wallis and D. Benjamin. 1989. "Private Employment and Public
Relief during the Great Depression." Department of Economics,
University of Maryland working paper.
J. Wallis, P. Fishback and S. Kantor. 2006. "Politics, Relief, and
Reform: Roosevelt's Efforts to Control Corruption and Manipulation
during the New Deal" in _Corruption and Reform_, edited by E. Glaeser
and C. Goldin. Chicago: University of Chicago Press.
G. Wright. 1974. "The Political Economy of New Deal Spending: An
Econometric Analysis." _Review of Economics and Statistics_ 56
(February): 30-38.
Price V. Fishback is the Frank and Clara Kramer Professor of
Economics at the University of Arizona and a Research Associate at
the National Bureau of Economic Research. He recently published a
chapter that summarizes much of the cliometric research on the New
Deal in P. Fishback, R. Higgs, G. Libecap et. al, 2007, _Government
and the American Economy: A New History_. Chicago: University of
Chicago Press. A shorter summary will soon be available in the new
edition of the _New Palgrave Dictionary of Economics_. It is
currently available as a working paper at the University of Arizona.
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Published by EH.Net (July 2007). All EH.Net reviews are archived at
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