What has the Great Depression got to do with a Dying Europe?

I just finished reading two excellent books dealing with the two topics in the title: Amity Shlaes new study of the Great Depression, The Forgotten Man (HarperCollins, 2007) and Walter Laqueur’s The Last Days of Europe (St. Martin’s Press, 2007). The former contains a close examination of several key players in Roosevelt’s New Deal, what motivated them, what they wanted to achieve, what they actually did, and a penetrating look at the consequences of their actions. The latter presents an objective description of some of the severe problems that plague European society at the beginning of the twenty first century—problems which have been declared insoluble by some writers and which promise to radically transform the continent, perhaps forever. These include: a startling low birth rate accompanied by the explosive growth of a Muslim immigrant community; the failure to assimilate those immigrants; a crumbling welfare system that is exacerbated by the aforementioned demographic trends; barren churches in comparison to crowded mosques; the inability to project military strength; weak labor productivity, which, together with other ominous business indicators, portends a precarious economic future; and the surrender of sovereignty to an unelected, unresponsive and authoritarian European Union.

There are two disparate features that tie the books together in my mind. First, they are both written in a curiously dispassionate style with an extremely limited amount of editorializing, personal opinion and prescriptions for solutions. Both authors state the facts as they see them and largely leave it to the reader draw his own conclusions. The second feature they share is an enormous undercurrent of collectivism, a powerful political and economic force, which, both authors reveal, motivates and animates the main protagonists in both books.

The story of the Great Depression and the consequent New Deal that FDR unleashed to tame it has been etched, indeed burned into the consciousness of any American who was educated in the United States since the 1940s. The story asserts that: the Depression was a phenomenon brought on by the excesses of business, the greed of corporations and the individuals that controlled them, and unsavory practices in the financial industry; the inability of the little or ‘forgotten man’ to deal with the cataclysmic events that overwhelmed him was total; therefore, the need for a counterweight was compelling and that role was naturally assigned to the US Government; in fulfilling that role, the imaginative and heroic programs instituted by the New Deal—which reversed the disastrous policies of Herbert Hoover—conquered the Depression and turned the economy around; and finally, its proven success legitimized the paradigm of the modern welfare state in which the government—through taxation, regulation, borrowing and spending, and jawboning—serves as a powerful check on the excesses of big business and helps to ensure the prosperity of the country, but in a much more fair and equitable fashion than an unrestricted free market could deliver. All of us absorbed these ‘truths’ from our teachers, from the media, and from the politicians—of both parties, until they became self-evident and beyond dispute. There have been some lonely voices crying out over the years that it was all a myth—Milton Friedman comes to mind—but by in large this interpretation of the Great Depression and the New Deal survives virtually unchallenged in the educational and media institutions of the United States.

Ms. Shlaes clearly does not accept this received wisdom. But she undercuts it not via a political polemic, or through the presentation of mountains of contrary data or by citing experts or higher authorities; rather, she offers an in-depth and fascinating portrayal of some of the key players in both the Hoover and Roosevelt administrations. Through a dispassionate presentation of their professed beliefs and, more importantly, their actions, she leads the reader to some unmistakable conclusions: while it was true that Hoover’s actions were disastrous (e.g., his support of the horrendous Smoot-Hawley tariffs), he in fact engaged in the same kind of interventionist, aggressive regulatory, business-bashing and collectivist schemes that his successor deployed; Roosevelt did not have a firm game plan in mind, instead he made it up as he went along and many of his schemes were mutually contradictory—but a constant throughout his first two terms was an extreme animus for business and businessmen; contrary to the myth it seems highly probable that not only did Roosevelt’s laws, agencies and programs not alleviate the Great Depression—they in fact deepened it and prolonged it; the so-called ‘depression within the depression’ that hit the country in the mid/late 30s was a direct consequence of his policies (e.g., the undistributed profits tax) and is clear proof  that the New Deal prolonged and intensified the economic downturn, rather than rescued our country; and finally, by the end of the thirties, large segments of the public and even members of the administration—inspired by the arguments of people like Wendell Wilkie, who were originally sympathetic but could not ignore the damage the New Deal was doing—turned against the failed policies of the New Deal, leading to a gradual ease up on the regulation, business bashing and collectivist approach. If not for that late 30s ‘course correction’ and if the world had not clearly been descending into a major war, Roosevelt might very well have been defeated in 1940. The point is not made in Ms. Shlaes’ book, but others have asserted that the national emergency of World War II in the 1940s, in which the federal government played a dominant role, institutionalized the phenomenon of massive government intervention in society—a phenomenon whose roots were established in the collectivist policies of the New Deal in the 1930s. By the end of the War, the expansive government that we know today was a permanent fixture, and since then it has gone almost unquestioned that the federal government has a vast role to play in the economic and social life of the American nation.

Ms. Schlaes says virtually none of this explicitly. Rather, by letting the movers and shakers of the New Deal, as well as certain private citizens, act and speak for themselves, she makes the conclusions I’ve indicated painfully evident. It is amazingly understated and very subtle, yet crystal clear; quite a feat to bring off.

Much of the same can be said of the book by Mr. Laqueur.  He examines the history, movements and trends over the last generation that have brought to its current perilous state. He highlights: the carnage that Europe inflicted upon itself in two world wars; the determination not to ever subject themselves to a repeat performance; the intention to achieve that goal by creating economic, social and political structures that would guarantee it; the overwhelming impulse to establish a virtually utopian welfare state—very long on social guarantees, very short on hard work, profit, competition and military capabilities.  Furthermore, their idealism led Europeans to divest themselves of their empires and to the desire to do well by their former subjects, including inviting them into their home and asking little from them in the way of good behavior. Mr. Laqueur engages in no screaming about demographic calamities, racial and religious polarization, indigestible minorities, stagnant economies held back by a poor work ethic, burning jealousy of the United States, or appeasement of the Soviet Union followed by an equally appalling appeasement of Islamofascism. There are only cool presentations of facts, attitudes and trends, descriptions of relevant organizations in European minority communities (factually done without obsessing about the fact that many are seditious and traitorous), and a somewhat laudatory explanation of attempts to build a more enlightened and peaceful European society. Once again the understatement is remarkably effective. The reader is left to draw his own conclusions, but the path Mr. Laqueur leads them down doesn’t leave a lot of room for diverse conclusions. The title of the book indicates clearly what Mr. Laqueur sees as Europe’s destination.

Thus we have two books dealing with very different subjects, but very much alike in writing style and in underlying theme. And both are important books for Americans to read. How can we understand where we want to go and how to get there if we misunderstand where we have been? School children are ignorant of the names Adam Smith, Milton Friedman, Friedrich Hayek and Ludwig von Mises, but they learn a great deal about John Dewey, John Maynard Keynes, Sinclair Lewis and even Karl Marx. The views of the latter crew would be anathema to our founders and if we set our sails according to the charts laid out by these collectivists, we will create a society vastly different from what has been the nature of American society from its inception until the twentieth century. The exhortation toward collectivism and aggressive state power embodied in the ideas of the men who concocted the New Deal and the European Union represent a mortal threat to the nature of the American society that our forefathers created. The lack of respect for individual freedom and liberty also constitute a violation of the principles of the Declaration of Independence. Ms. Schlaes book, in its understated way, makes a powerful case for reexamining the Great Depression and the New Deal. Similarly, Mr. Laqueur’s book should cause the bureaucrats in Brussels and the citizens of the continent to rethink their course of action over the last generation. Much of Europe’s dilemma is due to its collectivist mentality, its utopian philosophies, and its fear of rugged individualism and laissez faire economics. (Its fear and betrayal of its classic Christian religious heritage is playing a role too, but that is not addressed in Mr. Laqueur’s book and I shan’t say more on that here.). These forces are also present in the United States although we have resisted them more effectively than has Europe. For how much longer? If we pay attention to the cliff off of which Europe is about to plunge, and if we correctly assay the philosophy and legacy of the New Deal, then maybe we can avoid Europe’s fate.