The Public and the Private in Critical Approaches to the New Deal

Portraits of an era are necessarily synthetic, but Shlaes very selective use of circumstantial evidence makes the reader think of a very biased reading of the intertwined relationship between the public and the private during the New Deal, where market-based mechanisms are a priori the most optimal form of organizing social life and supply-side economic policies are most conducive for economic growth, both in the short and the long-run.

Does Shlaes have a problem with the incorporation of large constituencies politically ignored, or with the form this incorporation adopted in the American case? The economics of public choice, a rather diluted paradigm that appears in Shlaes’s work, helps the author argue that Roosevelt was deliberately targeting certain constituencies through tailored legislation; however, this does not explain why the turn to the state was happening simultaneously in several nations during the Depression years.
Shlaes’s explanation of the Great Depression as a problem of “lack of faith in the marketplace” caused by an expanding public sector is a rather troublesome account of the worldwide economic downturn of the interwar years (Shlaes 2008, 7). I was particularly surprised to see the lack of consistency in her arguments on the economic history of the period, beginning with the problem of not distinguishing adequately between the crash of 1929, the banking crises and the economic depression of the early 1930s (Shlaes 2008, 5). Another instance occurs when against all economic logic she asserts that “deflation had hurt borrowers”, when in fact a deflationary period increases the real indebtedness of debtors, i. e., the deflated value of debt (Shlaes 2008, 158).

The author seems to be very uncomfortable with a world where the dollar was not the international unit of reserve and most accepted means of payment, a rather recent development that was further strengthened by Roosevelt’s efforts to create a new international monetary system. Shlaes’s characterization of microeconomic remedies against macroeconomic problems is unfair to the available knowledge of historical actors and the development of economics as a science at the time. Historians of economic thought would argue that no economist or policymaker had a “macroeconomic” framework with which to operate until at least the apparition of Keynes’s General Theory.

Radosh and Rothbard’s preface to A New History of Leviathan is a most interesting example of the kind of critiques that can be argued when extreme views of the political spectrum coalesce. Both authors agreed to edit the book with the purpose of determining whether liberalism was pro-business or anti-business, and to challenge “the preeminent  liberal ideology of mainstream corporate America and its academic and intellectual servants” (Radosh and Rothbard 1972, ix). Radosh’s piece places adequately the importance of business interests and the problem of regulatory capture under the Roosevelt administration (Radosh 1972, 151). If anything, the merit of the readings for this week lays in helping us problematize the changing relationship between public and private actors in the Great Depression era.

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