1932 & You get what you voted against

Harry Truman once said, “The only thing new in the world is the history you don’t know.” That observation applies especially well to what tens of millions of Americans have been taught about Franklin Delano Roosevelt, the man under whom Truman served as vice president for about a month. Recent scholarship (including a highly acclaimed book, New Deal or Raw Deal, by FEE senior historian Burton Folsom) is thankfully disabusing Americans of the once-popular myth that FDR saved us from the Great Depression.

Another example is a 2004 article by two UCLA economists—Harold L. Cole and Lee E. Ohanian—in the important mainstream Journal of Political Economy. They observed that Franklin Roosevelt extended the Great Depression by seven long years. “The economy was poised for a beautiful recovery,” the authors show, “but that recovery was stalled by these misguided policies.”

In a commentary on Cole and Ohanian’s research, Loyola University economist Thomas DiLorenzo pointed out that six years after FDR took office, unemployment was almost six times the pre-Depression level. Per capita GDP, personal consumption expenditures, and net private investment were all lower in 1939 than they were in 1929.

“The fact that it has taken ‘mainstream’ neoclassical economists so long to recognize [that FDR’s policies exacerbated the disaster],” notes DiLorenzo, “is truly astounding,” but still “better late than never.”

Part of the Great FDR Myth is the notion that he won the presidency in 1932 with a mandate for central planning. My own essay on this period (“Great Myths of the Great Depression”) argued otherwise, based on the very platform and promises on which FDR ran. But until a few months ago I was unaware of a long-forgotten book that makes the case as well as any.

Hell Bent for Election was written by James P. Warburg, a  banker who witnessed the 1932 election and the first two years of Roosevelt’s first term from the inside. Warburg, the son of prominent financier and Federal Reserve cofounder Paul Warburg, was no less than a  high-level financial adviser to FDR himself.  Disillusioned with the President, he left the administration in 1934 and wrote his book a year later.

Warburg voted for the man who said this on March 2, 1930, as governor of New York:

The doctrine of regulation and legislation by “master minds,” in whose judgment and will all the people may gladly and quietly acquiesce, has been too glaringly apparent at Washington during these last ten years. Were it possible to find “master minds” so unselfish, so willing to decide unhesitatingly against their own personal interests or private prejudices, men almost godlike in their ability to hold the scales of justice with an even hand, such a government might be to the interests of the country; but there are none such on our political horizon, and we cannot expect a complete reversal of all the teachings of history.

What Warburg and the country actually elected in 1932 was a man whose subsequent performance looks little like the platform and promises on which he ran and a lot like those of that year’s Socialist Party candidate, Norman Thomas.

Who campaigned for a “drastic” reduction of 25 percent in federal spending, a balanced federal budget, a rollback of government intrusion into agriculture, and restoration of a sound gold currency? Roosevelt did. Who called the administration of incumbent Herbert Hoover “the greatest spending administration in peace time in all our history” and assailed it for raising taxes and tariffs? Roosevelt did. FDR’s running mate, John Nance Garner, even declared that Hoover “was leading the country down the road to socialism.”

Copying Hoover and the Socialists

It was socialist Norman Thomas, not Franklin Roosevelt, who proposed massive increases in federal spending and deficits and sweeping interventions into the private economy—and he barely mustered 2 percent of the vote. When the dust settled, Warburg shows, we got what Thomas promised, more of what Hoover had been lambasted for, and almost nothing that FDR himself had pledged. FDR employed more “master minds” to plan the economy than perhaps all previous presidents combined.

After detailing the promises and the duplicity, Warburg offered this assessment of the man who betrayed him and the country:

Much as I dislike to say so, it is my honest conviction that Mr. Roosevelt has utterly lost his sense of proportion. He sees himself as the one man who can save the country, as the one man who can “save capitalism from itself,” as the one man who knows what is good for us and what is not. He sees himself as indispensable. And when a man thinks of himself as being indispensable . . . that man is headed for trouble.

Was FDR an economic wizard? Warburg reveals nothing of the sort, observing that FDR was “undeniably and shockingly superficial about anything that relates to finance.” He was driven not by logic, facts, or humility but by “his emotional desires, predilections, and prejudices.”

“Mr. Roosevelt,” wrote Warburg, “gives me the impression that he can really believe what he wants to believe, really think what he wants to think, and really remember what he wants to remember, to a greater extent than anyone I have ever known.” Less charitable observers might diagnose the problem as “delusions of grandeur.”

“I believe that Mr. Roosevelt is so charmed with the fun of brandishing the band leader’s baton at the head of the parade, so pleased with the picture he sees of himself, that he is no longer capable of recognizing that the human power to lead is limited, that the ‘new ideas’ of leadership dished up to him by his bright young men in the Brain Trust are nothing but old ideas that have been tried before, and that one cannot uphold the social order defined in the Constitution and at the same time undermine it,” Warburg lamented.

So if Warburg was right (and I believe he was), Franklin Delano Roosevelt misled the country with his promises in 1932 and put personal ambition and power lust in charge—not a very uncommon thing as politicians go. In any event, the country got a nice little bait-and-switch deal, and the economy languished as a result.

In the world of economics and free exchange, the rule is that you get what you pay for. The 1932 election is perhaps the best example of the rule that prevails all too often in the political world: You get what you voted against.