David Kennedy on the Great Depression and the New Deal
Aug 16 2010

David Kennedy of Stanford University and the author of Freedom from Fear talks with EconTalk host Russ Roberts about the Great Depression and its political and economic relevance. Kennedy talks about the economic policies of Hoover and Roosevelt, and how the historical narrative was shaped and evolved over the decades. The conversation concludes with Kennedy's thoughts on the nature and value of history.

Eric Rauchway on the Great Depression and the New Deal
Eric Rauchway of the University of California at Davis and the author of The Great Depression and the New Deal: A Very Short Introduction, talks with EconTalk host Russ Roberts about the 1920s and the lead-up to the Great Depression,...
Amity Shlaes on the Great Depression
Amity Shlaes, Bloomberg columnist and visiting senior fellow at the Council on Foreign Relations, talks about her new book, The Forgotten Man: A New History of the Great Depression. She and EconTalk host Russ Roberts discuss Herbert Hoover, Franklin Delano...
Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.


Robert Kennedy
Aug 17 2010 at 10:20am

Fascinating that there have been no posts on this episode so far. I guess that is a reflection that Kennedy is a reasonably objective historian and is more interested in telling history than trying to prove a particular point of view that might get our juices going!

I did appreciate the insights of comparing the timeframes of the Hoover to Roosevelt transition to today’s transition. As Kennedy pointed out, we can’t compare yet the various actions that have been taken since 09/2008 with the response of Hoover & others from 10/1929 until 1931. We will find out soon.

It seem that Kennedy was suggesting that the Federal Reserve had little influence in responding to 1929 downturn. That seems like a mis-characterization. I understood that the Fed was very active in contracting the money supply and those actions ended up contributing to the subsequent problems with the banking sector.

Some of the insights that I appreciated:

  • The agriculture sector was very much in a downturn long before 1929
  • Roosevelt’s success in exploiting the newish medium of radio
  • The possibility that Roosevelt was less interested in resolving the Depression and more interested in implementing various institutions to improve security: Social Security & such
  • How the public reacted to Roosevelt’s attempts to expand the Supreme Court in 1937

All in all, I appreciated Kennedy’s reasonably objective perspectives here.

Mike Montchalin
Aug 17 2010 at 12:53pm

I didn’t know that agricultural prices had been depressed the entire decade preceding Hoover’s call for a special session of congress in 1929 to do something about this victory in production & pricing.

This is the exact ‘problem’ Stalin wanted.

According to the internet, Hoover as Commerce Secretary opposed agricultural price supports and as President still opposed them. As president he wanted & got his Federal Farm Board which would loan money to farmers to create and strengthen farm cooperatives in the hope that these entities would control production and bring crops to market more efficiently.

The more I hear about Hoover, the greater my respect for him. He anticipated problems. He had activist solutions for them. Which puts him front & center as an example of why non-market solutions are not optimal and will probably have unintended consequences and failure,…. even if one is as prescient as Hoover.

Mort Dubois
Aug 17 2010 at 12:57pm

Whenever I hear one of your podcasts on the Great Depression, I am struck by how it is assumed that free market capitalism is superior to socialism and fascism, and implied that this was apparent to Western politicians in the 30s. I don’t think we can take that for granted at all. Sure, it turned out that way, but isn’t it reasonable to assume that a lot of American policy was driven by a fear that capitalism, as a system, wasn’t going to survive the crisis? And that planned economies were the wave of the future? I’d love to hear someone address this point specifically.


Mark Crankshaw
Aug 17 2010 at 2:15pm

While I agree that Professor Kennedy’s narrative was reasonably objective, he states that the driving force behind Roosevelt’s New Deal policies were to spread stability and security for working Americans, and while not stating it explicitly, he left one with the impression that the this was done out a sense of care, goodwill or benificence. I find this impression wholly implausible.

The New Deal policies adopted by the Roosevelt administration resembled almost exactly those fashioned by Otto von Bismarck nearly a half century earlier. Bismarck developed Health Insurance, Old-Age Insurance, and publicly financed education but certainly not out of benificence. His attempts to create economic stability and security for his Prussian subjects were adopted to stave off revolution and to coopt the loyalty of those subjects–to bind them in dependence to the State. The Prussian State provided services to some working class members (financed on the backs of other working class members)in exhange for strict obedience and the preservation of the ruling hierarchy. The real stability and security that Bismarckian Welfare State policies were (as are all welfare state policies today) designed to protect are the political stability and security of the ruling elites. And in bribing people with their own money–the opportunity arose to create a massive bureaucracy wholly dependent on the State making the preservation of the ruling hierarchy that more secure.

At the onset of the Great Depression, the American ruling class had already witnessed the Russian Revolution and the rise of European fascism. The notion that the ruling order could be violently swept away was certainly not far-fetched at that time.

The idea that a plutocrat like Roosevelt would care a whit about the American peasantry seems, to me, absurd. The idea that a plutocrat like Roosevelt would favor a system that preserved the existing political statis quo and diminished threats to the established ruling order– that however makes perfect sense. That he would find ready allies who would benefit from the cartelization of industry, restrictions to foriegn import, subsidy to agricultural interests, and restrictions to job market entry (trade unions)follows for the same reason. Those at the top of the economic and political hierarchy are generally in favor of restrictions to economic and political competition.

The much-lauded Welfare State that was put in place as a result of the Great Depression is no different in its purpose today then it was when Bismarck designed it. The New Deal (and the Great Society) programs in the US and the European Welfare States have been wildly successful achieving their intended result: while show-piece elections swing from time to time from Party to Party–the real ruling elites have maintained uninterrupted and nearly absolute political and economic control of their respective countries. The Welfare State has ended revolution and cemented the ruling elite at the top of the political hierarchy permanently.

Aug 17 2010 at 7:54pm

@Robert – the only thing that got my blood boiling was his snide comment about how “some” folks who talk about freedom and liberty don’t really know what they are talking about.

@Mort – I think you are looking for the Socialist Calculation Debates.

@Mark – Did you mean _a_ ruling elite as opposed to _the_ ruling elite? I can’t imagine how many such folks would still be alive today.

Otherwise, I found his elaboration on Hoover very interesting. I also found his take on how Roosevelt transformed the constituency of the Democratic party fascinating. Dr. Roberts didn’t press too hard on his economic analysis, but from what little he volunteered, I suspect it would not have stood up under much.

Mark Crankshaw
Aug 17 2010 at 9:53pm

BZ: But of course I am referring not to individuals but to a number of prominent families— and more specifically to the prominent figures which control key political and economic institutions. Most of these individuals are drawn disproportionately from the same social strata. There is a significant hereditary element to membership in this elite but it is certainly not an absolute. This ruling elite may actually shuffle its membership to a small extent over time.

Further, as I see it, this ruling elite is comprised of various competing factions (split along religious/ethnic lines) that fight bitterly over the top positions of those key institutions, and fight and bicker bitterly over the extent to which it showers its particular faction with public money and politically derived privileges. Yet all the factions abide by the terms and structure of this limited competition and most especially to a system that keeps the other more numerable groups from competing effectively for power. The infighting is meant to be exclusively “in-house”. Think of two lions fighting over the carcass of their kill. They are the lions–we are the prey.

The democratic party systems that have developed in the West concurrently with the rise of the Welfare State are a safe and effective means for elite factions to vie for increasing shares of public plunder without having to resort to a destabilizing (and lethally competitive) process such as war. Voters merely choose which faction of elites get the bigger share of the booty for the moment.

John Berg
Aug 18 2010 at 12:53pm

In the first couple of minutes, this quote, “Part of the Progressive agenda was to built governmental institutions that were on a scale that equaled what the economy had become since the Constitution was written in the 18th century.” The “Progressive agenda” has become more suspect of late but one can increase government with out breaching the enumerated powers of the “18th century” US Constitution. I hope that we’ll find no suggestion that Socialism is a beneficial expansion of our Constitution as we listen further.

John Berg

Robert Kennedy
Aug 18 2010 at 2:06pm

Very strong & provocative comments from Mark Crenshaw. I tend to be cynical of the motives of folks who support stronger government institutions but I’m not sure if I am as cynical as Mark. I do need to think about his Bismarck association.

In terms of Kennedy’s remarks about Roosevelt’s motives, I did find them to be reasonably objective, though I can understand the interpretation. I suppose that most astute politicians have a longer view of the policies that they are proposing at any given moment. The current media has gotten a lot of mileage from Rahm Immanuel’s famous utterance of “Never waste a good crisis”

Aug 19 2010 at 8:00am

On the Roosevelt Memorial: If you visit DC take a few minutes to visit the original Roosevelt Memorial. It is a slab of granite, about the size of Roosevelt’s desk, just to the right of the Archives building as you look from the Navy Memorial. It is hidden in the bushes today. Hopkins asked Roosevelt what he wanted for a memorial, and he described exactly a piece of granite the size of his desk. Russ’s point about the memorials being built for political means (and the hypocrisy embodied in them) is even more fully demonstrated when contrasted with the original Roosevelt Memorial.

Aug 20 2010 at 12:32pm

Russ, thanks for another great podcast. I enjoyed Professor Kennedy’s interview. I was intrigued when he mentioned the course he took on the American Character. I wonder if you could have him back sometime to discuss that subject.

Rich Ailes
Aug 22 2010 at 9:30am

I appreciated  Kennedy’s analysis of the Roosevelt push to mitigate risk in the market for working class people. It’s an interesting counterpoint to a previous podcast with Higgs where it was shown that Roosevelt’s leftist policies wound up causing a lot of uncertainty in the market, thereby causing a lengthening of the depression. From Kennedy’s perspective, it seems like the risk mitigation was successful in bringing about a higher level of prosperity to folks down at the lower parts of the food chain in the post war period. Russ did not challenge this and I’m wondering why. What would Friedman’s response to this have been?  

Aug 22 2010 at 3:54pm

There seems to be a kernel of truth in Crenshaw’s contribution. It may be appropriate that FDR be compared to Bismarck, considered by many to be the father of the modern welfare state. There certainly was a deep cynicism in FDR’s creation of the huge New Deal bureaucracy, along with his use of New Deal programs to carry out blatant political patronage, in order to make people more dependent on government, and to seek and maintain interest group relationships, so that FDR could stay in power.

E.g., books about the Great Depression by non-progressive authors (Shlaes, Powell, Murphy) describe to varying degrees the use of the WPA & other programs to get votes and create dependence on the New Deal in important “swing” states. If you wanted to work, you had to vote for FDR. This also fits into the observation that perhaps FDR didn’t want the Depression to end just yet…

It is really refreshing that Dr Kennedy recognizes his own progressive bias. Another great podcast—thanks so much Russ!

Aug 22 2010 at 4:07pm

Correction on above: Crankshaw. Sorry, Mark!

Aug 27 2010 at 1:54am

Neal Gabler of the LA Times just put out an article entitled

Now I’ve heard that the great way is not difficult for those who are not for or against but Gabler’s article brought out a certain sentiment in me…

He noted the 90% tax rate for the rich through much of the last century. He brought up the price of having the extreme end of a leisure class and alluded to the notion that in a nation we all fall or rise together. Of course we still some wealthy people but We must ask the question of what societies return on investment is for having a extreme end of a leisure class. If earning “it” is the measure did billionaires and billionaire silver spooners really earn it such that they have a right to it and are entitled to it. Roosevelt and Eisenhower et al didn’t seem to think so. It seems that we have two choices, we can tax the rich or tax the poor. On some level it seems we all move into the liesure class or almost non of us do.

The cost of the leisure class seems to entail:

Loss of middle class
Loss of real social mobility
Loss of safety net
Political unrest and instability
Necessity of taxing the poor vice the rich
Society based on fraud and toll roads
Society based on extracting wealth vice contributing to and building wealth.
Loss of a good base for democracy and democratic principles
The erosion of citizenship.

All these problems are compounded in a society that has mass automation and knows how to easily extract energy. A society that also has great information processing capabilities and the ability to use electronics to do things vicariously. We can see this kind of corruption at work when there are those who can openly oppose the full internet being able to go wireless because it might disrupt obsolete toll roads. How is it that they are openly able to argue against competition and progress and be taken seriously? It shows how far we have fallen. We can bring back a proper tax code and include provisions that effectively convert large corporations to full employee ownership.

Aug 31 2010 at 10:09pm

@anonymous — Gabler … wants to blame the Great Recession on Reagan’s 1981 tax cuts… “It was just a matter of time before Wall Street went wild.” A quarter century??? … And, “The top marginal tax rate … Roosevelt promptly raised … to 94%, and … it was this rise … that played the primary … role in curbing abuses by attacking greed at its source, without, by the way, damaging the economy.” We know this, apparently, because the Great Depression went away so promptly…

90% marginal tax rates don’t do tremendous damage because the …politicans… always see the opportunity to sell (over and over) the creation of tax shelters, and do so. So after the wealthy pay off the pols their marginal incentive to greed is unaffected…”

The Great Recession happened because bad underwriting drove out good. It was partly an agency problem — the former paid extravagantly, the latter not so much — but agent greed is forever. How the bad incentives came to be is the question, but low marginal tax rates is not the answer.

[Comment elided with permission.–Econlib Ed.]

Richard W. Fulmer
Sep 1 2010 at 2:34pm

I disagree with David Kennedy’s statement that World War II ended the Great Depression. World War II ended the New Deal; ending the New Deal ended the Depression. The end of the war brought tax cuts and cuts to federal spending. It also brought the repeal of the Smoot-Hawley tariffs along with the end of a number of New Deal programs. These changes combined to pull the nation’s economy out of its long and painful slide, and all of the changes could have been made without the war.

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Podcast Episode Highlights
0:36Intro. [Recording date: August 3, 2010.] Great Depression to present, economic and political situation; nature of history. One view of the Great Depression, 1930s, is that Hoover stood by doing nothing as the economy collapsed, paralyzed by his free market principles; Roosevelt came to the rescue with the New Deal, saved the economy and democracy. What's true or false about this view? That view does capture a lot of our folkloric understanding of that passage in our history. The fact is that Herbert Hoover was the legatee of the old early 20th century progressive tradition. He cast his first presidential ballot for the Bull Moose Party of Theodore Roosevelt in 1912. Served in Woodrow Wilson's party as the wartime food administrator. Sought by both parties as a progressive presidential candidate; in 1920 ended up declaring himself a Republican. Very much inherited that progressive era impulse to try to use the power of government to solve social and economic problems. Part of the Progressive agenda was to built governmental institutions that were on a scale that equaled what the economy had become since the Constitution was written in the 18th century. Interestingly, Hoover's very first act as President in 1929 after his inaugural in March, well before the Depression had appeared on the horizon was to call a special session of Congress--emergency session, quite out of the ordinary. Purpose was to address what he regarded as the chronic, by then nearly decade-old depression in agriculture. The agricultural sector had been deeply depressed since rural commodity markets recovered after WWI. What we know historically is the Great Depression--the onset is usually dated to the stock market crash of 1929--that was old news in the American countryside by 1929 because virtually all farm prices had been drastically depressed for the decade. Just one sign of his Progressive instincts--really wanted to use whatever power there was in the Federal government to address these problems. When the Depression came, first thing to remember is that nobody in the first months or even the first two years of that event knew what they were witnessing was what we know as the Great Depression. If we think of our current Great Recession as a black swan--a phrase that is now almost a cliche--the Great Depression was the biggest, baddest black swan ever. To this day, regarded as the singularity in economic history; nothing really approaching it. History remembered backward but lived forward; people can't see into the future. Hoover and his contemporaries thought they were witnessing yet another of these cyclical downturns in the economy. They'd had a severe one in 1920. Hoover had been Secretary of Commerce in the earlier recession, 1920-1921, and he had taken the lead in using what power the government had, wasn't much but it had some, to persuade employers to maintain payrolls and not lay off people, reduce hours but not fire people, maintain demand and consumption in the economy. That recession was turned around relatively quickly, at least in the industrial and urban sector; not in the agricultural sector. Hoover had good reason to believe that this was another crisis on that scale and of that general nature, and that remedies he'd tried as Secretary of Commerce would be effective. So he jaw-boned; called industrial and financial leaders in and tried to persuade them to liquify the banking system, maintain payrolls. Leaned on the banks to create an emergency loan fund. Encouraged private banks to come together and create a pool to bail out their weaker sisters. Which they'd often done in the past. J.P. Morgan had led initiatives of that kind in the 1890s and early 1900s. These were relatively well-proven methods for dealing with an ordinary downturn in the business cycle, and Hoover took the lead. Widely regarded in the press in 1930 and even 1931 as the lead figure in the battle against this economic downturn. As we know, benefit of hindsight, the thing got away from him terribly; became a much grander, greater bigger catastrophic crisis. He proved inadequate; but so did Franklin Roosevelt. Roosevelt inaugurated in March of 1933; eight years later the unemployment rate is still 15%; it was 25% when he came into office, yes, some improvement; but getting rid of the Great Depression, down to 0 unemployment, getting the economy fully working again eluded him until WWII came along. The standard history was Hoover was a failure and Roosevelt a big success, on strictly economic grounds is distorted on both sides.
6:41When the economy worsened sharply, in 1931 and 1932, Hoover got more aggressive. Sometimes made mistakes, as did Roosevelt; but he was very aggressive, certainly for his day, in terms of tariff policy, which backfired for him. What was the mix of political and economic thinking Hoover had in mind when he supported that? In that same emergency session of Congress that Hoover called to deal with the chronic agricultural crisis, Congress ran away with the agenda and enacted the Smoot-Hawley tariff, which Hoover to his discredit did sign. But he didn't like it, didn't initiate it. Cut across the grain of what he believed was the root cause of the Depression itself, the disruption of international trade, international capital markets, international exchange rates in the great disruption that was the aftermath of WWI. The biggest single difference between Hoover and Roosevelt in terms of what had actually caused this crisis was the Roosevelt chose to believe that this was an all-American crisis and it should be addressed within an all-American context. Hoover believed, and I think most economic historians would agree with him, that this was a global crisis, an international crisis. Required some kind of international address. Hoover tried several times to get Roosevelt to get on board with that kind of analysis. During the inter-regnum between Roosevelt's election and his inauguration, an extraordinary 5-month period, the government was essentially headless, lame duck period. United States like every other country proceeded to go its own way on nationalistic, autarkic grounds to try to deal with the crisis. As an historian, why do you think that caricature of Hoover is the only picture they have of him> At the end of the day, cannot avoid the conclusion that Hoover's was a failed presidency. He failed rather spectacularly to get a grip on the major issue of the time, which was the onset of the Great Depression. There are some other reasons. The Democratic Party hired a publicist, in 1932, Charles Michelson, to demonize Hoover. Michelson very successful. First negative campaign. Not even close. Back to Jefferson. Very effective, forever left this impression in the general public of Hoover as this mossback, do-nothing, laissez faire conservative who would not budge in the face of this crisis. As time went on, Hoover got more crotchety and curmudgeonly in his later years and set in his ways, said a lot of impolitic things that even contradicted his earlier beliefs--added to this caricature of him as this irretrievable, troglodytic conservative.
10:44Roosevelt, although the economy did quite well in his first administration, unemployment spiked again in 1938, what we would today call the double-dip. They called it the Roosevelt Recession. What were Roosevelt's political prospects at that point? In 1938, he was not as popular as he ended up being, certainly after his death. No, and the even that seems to mark the significant decline of his charmed political popularity occurred almost immediately after his second inaugural in January of 1937, when he announced this plan to augment the membership of the Supreme Court--the so-called court-packing plan. Though it might be too much to say that's what caused him to lose popularity, people seized on that to oppose any further augmentation of New Deal experimentation. Significant conservative block emerged in the Congress in 1937-1938, rallied around the court-packing plan. Roosevelt begins to look like a two-term president; had never been a third term president. Polling was an even more inexact science in that day; but with the best polling data that we have seen pretty strongly suggest that had it not been for the great crisis of WWII in 1939-1940, particularly the surrender of France in June of 1940, that Roosevelt might well not have won election to a third term. People didn't want to change horses in mid-stream. Masterful leader in wartime. Disagreements with his policies as an economists, but effective as a leader in war. Among the reasons why even to this day WWII is so enshrined in our collective memory as the good war, not the least of which is because of the way he fought it, defined it to the public, it's objectives and purposes, and the means he used to get the victory. His memorial in Washington, D.C., which is extremely large in acreage, covers a lot of ground, a low monument, tried to capture all the different parts of his administration. He's shown in a wheel chair, which in his life he was careful not to be seen in. He is not smoking--but he was an ardent smoker. There's a great quote about his pacifism--he was eager to take America into war, and he certainly wasn't a pacifist--great quote about the evils of weapons. "I have seen war, I hate war," referring to a whirlwind inspection tour he made of the Navy to the Western Front; saw war from a great, sanitary distance. Of all the presidential monuments in Washington, D.C., it's the least about a person; all about an era. Historical context. Amusing: think the Jefferson memorial built during one of the Roosevelt administrations; the quotes chosen for it seem to be suggestive of a flexibility of the Constitution. Roosevelt built that particular memorial to serve his political ends; same with modern politicians.
16:08Stereotype of Roosevelt has since been supplanted among pundits at least by the New Deal not as effective--it was the war that got us out of the Depression. What is your take? Among historians, there is no headline that the New Deal did not end the Great Depression; that it took WWII to do that. This has been understood clearly since the 1930s. So much recent scholarship has this air about it that now it can be told; badly mistaken, presumes ignorance. Deeper story; try to develop a thesis. I think I can make a case that Roosevelt's top priority was not ending the Depression as soon as possible. His top priority was to use this moment of political, sociological, ideological disruption to accomplish reforms that he had thought well before the Great Depression came along were necessary to make modern American life viable. Single word that sums up. Social Security Act. Unmistakably the touchstone and core of everything he wanted to accomplish: take the risk out of old age, mortgage lending, securities trading--or at least reduce the risk in all these sectors; and to make American life across the board for individuals and institutions more predictable and less susceptible to these wild ups and downs that had been characteristic of the American economy since the early 19th century, since the United States had entered the early industrial revolution era. He got a lot of that accomplished. Small amount that grew. He established the Securities and Exchange Commission, passed Unemployment Insurance, created Fannie Mae, created the Federal Housing Authority--worked well for half a century. Have to keep in mind what his real priorities were; ending the Depression in a hurry was not one of them. There is a document that goes a long way toward convincing me I've got this right: Roosevelt's second inaugural address, January 1937, where he says something extraordinary in the annals of presidential speeches. Been re-elected for the second time. Begins by talking about the progress about getting out of the Depression since he took office in 1933, boasting as you would expect about his accomplishments. Then he says "These times of returning prosperity could be portents of political disaster." Truly astonishing thing for a president to say, for prosperity to be politically disastrous. It's then, immediately after that, is when he gets off this line that many people know, without the context: "I see one-third of a nation ill-housed, ill-clad, ill-nourished." Not talking about the transient victims of this Depression. Has just painted a picture where things are improving. Sees this one-third that is still left out of the core of national life, chronically in trouble; those are the people he's trying to lift into the mainstream of American life, and he's afraid that if the economy improves too quickly, he won't get that finished. Think he had a more ambitious agenda than people give him credit for. Theme runs through Democratic presidents; just like Ronald Reagan has become the person the Republican nominees have to pay homage to, Democratic politicians use a similar theme to this day, the haves and the have-nots. Democratic leaders since Roosevelt's time that there is so much potential volatility that it is the job of government to stabilize things, buffer people against the workings of the free and unbridled market; whereas the Republican party is the party that wants to unlock and release entrepreneurial energy, less concerned with stability and security. Don't talk about it as much; seem to be interested in creative destruction though don't often do much about it.
21:57Another theme about the cause of the Great Depression: the role of inequality. Insecurity: economic life has always been risky, probably riskier for many Americans in the 1930s. There is a common argument made that inequality was a cause of the Great Depression itself. What do you make of that argument? Where does it come from? It's in a lot of high school text books. The argument that inequality or imbalance--the term in the 1930s--was the root cause of the Great Depression in the United States is a theory that was given a lot of currency in the 1950s, especially by writers like John Kenneth Galbraith and Arthur Schlesinger. Reading that stuff now you can see easily and transparently how those writers were trying to use a certain narrative about the Depression and the New Deal to establish their own political agenda in the 1950s and 1960s when the War on Poverty and the notion of economic inequality was front and center. Not to say there wasn't any inequality in the 1930s and before--there was plenty of it. The premise that underlay both Hoover's and Roosevelt's attempts to try to restore health to the agricultural sector, which was way bigger than it is today, was that there is this chronic imbalance in American society. Farmer aren't making enough income to buy the product of the output of American factories and cities and industrial workers, and if we can restore some kind of balance we'll put the whole economy on more prosperous and sustainable footing going forward. Something to that but if you dwell on that explanation we miss something very important. All explanations of the Great Depression that dwell too exclusively inside the house of the United States are going to get the thing wrong, because this was a global catastrophe; struck the entire world economic system. We have some share of the responsibility, but not totally. This is where Hoover at some philosophical analytic level had it right. The proper remedy for this crisis had to be international in character. If you look at what happens in the world after 1945, the end of WWII, what does the United States do? It steps forward and creates a new international order, with institutions in it that didn't exist before--the International Monetary Fund, the World Bank, the General Agreement on Tariffs and Trade, which becomes the World Trade Organization. Conscious and deep realization that the international environment had to be better integrated, better monitored, better managed; more institutional structure if the world was not to go south again. Certainly monetary policy, which is tangled up in the gold standard and exchange rate regimes that were in place before the war and after the war, different; recognition that that played a crucial role that it was a global event. Don't think we fully understand monetary policy, but we know some things we didn't know then.
26:01Parallels between those times and these. More phone calls, questions. History lived forward; no idea. Relevance of the 1930s for now? Until a couple of years ago, most people thought the Great Depression about as relevant historically as the Peloponnesian War. Situate ourselves today at a relatively comparable point. The natural thing people have been doing for the last year or more is to compare Barack Obama to Franklin Roosevelt. And Hoover to Bush. Two failed Republican presidents and here come these aspirational, charismatic Democratic presidents. Comparison suggests itself. But if we date the onset of the Great Depression from the stock market crash of October, 1929 and the onset of this crisis from the collapse of Lehman Brothers in September 2008, then the proper point of comparison is not now and the spring of 1933 when Franklin Roosevelt became president. It's some date in 1931--roughly two years into the crisis, when things looked like they do not--things getting a little better. Things looked a little worse but not dramatically; they didn't look worse than the onset. The real slide, descent down the chute into the pits of economic hell came at the end of 1931. If we want to be responsible about this historical comparison, we should compare comparable points. That means we really don't know if we will see a second round. One difference is monetary policy--the Central Bank in 1931 was pretty lost and helpless. Ben Bernanke is a lot more aggressive--may turn out problematic--but some difference there. The collapse of the banks in the Great Depression was a disastrous set of consequences--1931. Nothing like the Troubled Asset Relief Program (TARP); the bank bailouts, nothing that matches the bailouts of Freddie and Fannie and GM. Both administrations have clearly learned. Bush and Obama: lessons, government had to punch early and hard if there's going to be any possibility of avoiding a catastrophic downturn. On balance, we're unlikely to have as big a crisis as before because we have learned some lessons from history. Another point: international scene. What passed for a mechanism of economic regulation, monitoring, equilibration in the 1930s was the gold standard; and virtually everybody abandoned it. So the one thin mechanism that worked to integrate the world economy was kaput. In 1931, Britain goes off the gold standard; we go off shortly thereafter. Today, much more densely international environment with functioning institutions that work to keep the world more or less in synch. We also have a history, last 50-60 years, of pretty substantial economic cooperation. Informal but still-powerful things like the G-8 and the G-20; we've developed habits of economic cooperation that were not there in the 1920s and 1930s. Talk by Jean-Claude Trichet, head of the European Central Bank, all about how closely he and the other Central Bankers in the world, including Chairman of the Fed, Ben Bernanke, had consulted on a daily basis as this crisis was gathering steam. We live in a world that understands the character of its own interdependence.
32:03You talked about the necessity that both Bush and Obama recognized a strong government counterpunch. Yet about 800 yards from here, John Taylor's office over at Hoover is outspoken critic of both the Bush and the Obama interventions. There are similar respected voices coming out of Harvard--Alesina, Robert Barro. We have this feeling that when Roosevelt intervened so creatively for his time that everyone just said Yeah, we've got to try this. Only kooks and people who saw Roosevelt as a Red stood up to him intellectually. Was there much of an intellectual backlash against Roosevelt's policies? The systematic articulation of a critique against Roosevelt and his policies really awaited the end of WWII and the post-war period--works like Friedrich Hayek's The Road to Serfdom, and later Friedman's Capitalism and Freedom. There's a kind of inchoate political polemical opposition, but largely lost to memory because minority. A big element of modern-day conservatism of the Republican Party really crystallizes at that moment in the 1930s when elements of the party take on being against big government. That was not as well-identified a position before the 1930s. Government gets bigger. There was opposition to Roosevelt, but confined to inchoate minority. If the blogosphere had been invented, Fox News, Roosevelt would have had as hard a time as Obama had getting his stuff through maybe. Talk about the political skills of Roosevelt. Economic success a mixed bag, but political skills important. Roosevelt was, in his time, a great communicator. Mastered the fairly new medium of the radio. Radio had been around for about a decade; Hoover had campaigned on the radio, 1922, 1938. But Hoover, Coolidge, Harding never really figured out how to use the medium in a way that was really effective. Roosevelt did. Fireside Chats were a stroke of political communications and public relations genius. Cultivate a sense of intimacy. Anecdote: At Roosevelt's funeral in 1945, as the funeral cortege was making its way through the streets of Washington, D.C., there was an old man weeping. Someone asked: Did you know the President? Old man replied: No, I didn't know him; but he knew me. Tells something about the way Roosevelt related to the public at large; mechanism of the radio. A lot of method to this, too--not just moments of inspiration. For example, the great immigrant communities that entered this country in the late 19th century and early 20th century--southern and eastern Europe--differed culturally from earlier Anglo-Saxon, north European immigrants. Their political loyalties were not very well set. Didn't vote as much commensurate to their numbers. Vote tended to be up for grabs. Roosevelt understood this; here was a constituency that he could mobilize and attach to the Democratic Party for a generation. That's the core of the New Deal coalition that dominates national politics well into the 1960s, 30-year long political cycle at least. Built on labor, trade unions, ethnic communities that really entered the political scene in the 1930s under Roosevelt's tutelage. Number that tells us how calculating and shrewd: The three Republican presidents who preceded Roosevelt--Harding, Coolidge, and Hoover--over their 12 years in office, appointed exactly 8 Catholics to the Federal Bench. In Roosevelt's first 8 years in office, he appointed over 50 Catholics. Not an accident. Deliberately reaching out to the communities. It worked. Reciprocal, joke that used to circulate in the 1950s and 1960s, was that the Episcopal Church was the Republican party of prayer. The Catholic communities found their way into the Democratic party and stayed there. And Jews. Changed after that. George W. Bush was the first Republican to get a majority of the Catholic vote since Roosevelt's day--election of 2004. That coalition eventually unravels. Think of Catholics as being associated with immigration, but Poles and Italians, magnitude was a new phenomenon.
39:23Recent podcast with Daniel Okrent about Prohibition. You talk in the book about what Prohibition did to the Democratic Party; how Roosevelt took advantage of it as it ended. Democratic Party had been extremely ineffective, lost preceding elections, and Prohibition was one reason. Repeal of Prohibition had a lot of appeal to various segments of the Democratic Party--complicated political issue, appeals to different people in different ways. Ethnic groups on their way into the Democratic Party, old-world drinking habits; Prohibition prevented them from exercising cultural rights and practices. A lot of bad feeling through the 1920s in those communities. On the conservative side of the Democratic Party, the business wing, there were those who felt that if we could bring back the excise taxes on alcohol, it would reduce the pressure for higher marginal income tax rates. Convergence of interests. Adds up to a sufficiently large bloc that we get rid of Prohibition. What did Roosevelt do to sustain it? Also put his weight behind the efforts of trade union leaders like John Lewis to build the trade union movement. Something less than 10% of the non-farm workforce was unionized going into the Depression. About what it is now; and a lot of that is government unions. By the 1950s, unionization about 50%, the high point. Development that begins in the 1930s. Roosevelt's strategy: attach the passions and interests of those interested in strengthening the labor movement. A lot of overlap between those labor institutions and the ethnic and immigrant communities we've been talking about. Overlapping strategies. Takes a while for the political payoff of this to play itself out. Gestured to the African-American community about its interest and friendliness. Some substantial and concrete items in that. Not many blacks were voting in the 1930s--most still lived in the segregated South and did not have voting rights. But it starts to turn the black vote to the Democratic Party, where it remains ever since; since WWII, 90% or so of blacks have voted for the Democratic Party. Great historical reversal--the Republican Party was the party of Lincoln, emancipation. Martin Luther King's father voted Republican, for example. Want to put Lyndon B. Johnson (LBJ) in that sequence at all? Johnson ideologically very much in this genealogy we've been talking about. Godfather of it all is Franklin Roosevelt, who commits the Democratic Party to more stability for more people, safety net or floor for more people. Home-ownership goes up from about 40% in the 1920s to over 60% by 1960. Major social accomplishment. Lyndon Johnson in that same vein. Signature accomplishment was that of Medicare and Medicaid. Unfinished business from the New Deal, indeed from the Progressive era; in the Bull Moose Party Platform in 1912, some form of universal health care. Instructions to the drafting team, came up in the Social Security Act of 1935: original instructions were to come up with a plan for old age insurance, unemployment insurance, and universal health care. Roosevelt early on concluded that if he kept the health care in it he risked sinking the whole bill. So he excised them before the hopper. Johnson clearly in that vein, said: I used to think of Franklin Roosevelt as my Pappy. Other great accomplishment that Lyndon Johnson is known for is signing into law the Civil Rights Act of 1964, Voting Rights Act of 1965--first time since Civil War that the government bestirred itself in a meaningful way in the name of racial inequality. Johnson knew something Roosevelt didn't: Once the Democratic Party got attached, or any party, to that issue, it was going to lose political strength in the South. Story: when he signed it in 1964, he turned to one of his aides and said: I believe we have just lost the South for the next generation. Turned out to be absolutely accurate. South goes Republican. Interesting question is whether the economic security parts of those administrations, the whole philosophy, will merely have had a good run that has to be adjusted; much harder to change them to repair them. Interesting political times. Fannie and Freddie, which worked well for decades, they now are so weirdly ensconced in our housing market that politicians won't even use the words "Fannie" or "Freddie." We don't have a very flexible political system. Moves slowly. We are not alone in this; a lot of societies have over-committed themselves. Hard to grasp, but we are not the worst off; could put a number to that. The percentage of our GDP that goes to taxes at all levels, city, county, state, Federal, is about 30%. Most of the developed, Western countries: in the 40%-50% range. To this day we have a much smaller public sector than other industrial societies. Yes, we have problems, but more soluble and somewhat lesser scale than places like Germany, France, Italy, Britain. They've got other challenges.
48:28Parallel: immense fight today over the narrative of what caused the current crisis. May turn out to be a relatively small economic tragedy; may be much larger. We don't know. Already economists are fighting to see if they can get their story--government's fault, the markets' fault. As an historian, interesting? Believe we are hardwired to understand the world in comprehensible stories. Understood since Herodotus, Thucydides. Contest over the narrative is perfectly understandable kind of contest. How they will play out not clear. Unbridled offenses of the private sector or meddling encroachments of the public sector--don't think we fully know yet. John Taylor, colleague: heart of John's argument in his highly polemical book about this, about how government caused and exacerbated the crisis--his basic argument is the original sin--the first crime--was the action of the Fed under Alan Greenspan in commodifying credit, making credit so easy for so long that it became just another commodity. You could argue that what we are witnessing is a familiar history of commodity crises, except the commodity just happens to be credit. Could be. If he were here he would say it's not a polemical work--it's a work of economic science. Skeptical of economic science, though respect John a great deal. So do I.
50:38General question of history and narrative. What works have influenced you as an historian? Reflect on why I became an historian in the first place--may be self-glorifying imperative--like figuring out how things work, how the world works. I think narrative is the way we do this; how we communicate with each other; how the world works and how we understand it. Crafting artful narratives that map onto the world and are convincing--that's the task of the historian. Weave and craft those kinds of stories. Complaint of students: History is just one damn thing after another. If it were that simple, my working life would be a lot simpler. Greatest influence on me: my undergraduate teacher, and as chance would have it, chairman of the history department at Stanford when I was hired to teach here many years later--David Potter. Extraordinary teacher, human being. Course on The American Character. Not a traditional history course--try to understand whether the question: Is there such a thing as a national character? was even a legitimate question. Interrogating its own premises on a daily basis. Finding responsible statements is the kind of question that has kept me going. When I wrote Freedom from Fear, was very conscious that I was working with a small slice of American history, but I adopted a conscious practice when writing that book of whenever I reached for a metaphor, or an analogy, always reached for one out of the American inventory. Rarely if ever reached for one from somebody else's historical experience. Trying subtly to make the point that there were deep structures to American history; repetitive events--not exactly repetitive--but in a stream of behavior that is characteristic of our American society over time. Russ: worry about own biases. Romance about history, misplaced about economics, maybe history as well: We are just trying to figure out what happened! Just trying to study the data! How do you keep your biases at bay? Time worrying if your narrative is right? Is right a meaningful question? Historians notoriously argue with each other. If we didn't have those arguments there would be no such thing as the professional or academically based study of history. It's on those grounds of argument that the real grounds of intellectual argument lie. A lot of inert facts that explain themselves--history would be like a telephone book, a timeline. It's finding patterns, proper context where the real art comes into the historical analysis, and maybe some science, too. An account that's right, that can never be argued with again--rare; suspicious about any work that attempts to make that claim. Elected representative government--mostly a Democrat, sometimes vote Republican. Bias I'm conscious of. Must inform my work, but not unaware when that starts to exert its influence. Tempting to play to your friends--you know what an audience is going to find appealing. How does the historian, given a lot of plausible narratives--how do you choose among them? Literally structuring a book with this much detail--tumultuous 15 or 20 years, could have been much longer book. How do you choose? Conscious choice to focus on those things that endured, that had consequences in history. A lot less in my book than the Civilian Conservation Corps, National Recovery Act, than in other books--very short shelf life, colorful stories but not what deeply affected the nature of society going forward. Deliberate choice not to lay much emphasis on popular culture. Colorful stuff, fun, movie plots and figures that made the headlines and never recurred again--not much consequence for the larger society.
59:26A lot of bemoaning that Americans don't know much history; current generation, anything before three years ago. What are your thoughts on how important history is for high school. Daughter, world history exam; couldn't answer the first economics question on discovery of gold in the New World leading to productivity increases or decreases among workers. What do you think about the teaching of history at the high school level? A society whose members don't know their own history is like an individual that loses his own memory. Don't know who you are unless you have some memory of who you've been, where you've come from. Past is the only sector of human history from which we have any data. We don't have any data from the future. If we want to study human behavior, we have to look to the past. Pleasantly pleased: publishing industry, several best-selling books on 200-year old political figures. Served on test development committee that wrote the Advanced Placement (AP) exam; teach summer workshops to high school history teachers. In the 1990s, over 100,000 students took the AP history exam. Today, over 400,000. Tells us something about the effort that is being made at the high school level around the country. Picking World History exam, happened to have seen the question; American History exam equally. Do you think it's useful that the last history class Americans take is in high school, as opposed to college? Some states--Texas--cannot get a degree without one year in courses in history. Community colleges, public in the Texas system.