Hard to make this stuff up department

Daniel Gross’s best argument for FDR is that FDR was better than Hitler. 

Roosevelt scared investors and businessmen? Did he scare them as much as, oh,
Stalin, who controlled one of the world’s largest economies and was expanding
his influence? or as much as Mussolini? Or as much as the fascist government of
Japan? Or as much as Hitler, who was confiscating property of Jewish
investors and businessmen?

So there you have it.  FDR not as bad as Hitler, therefore, FDR a good president.  Compare with Bryan Caplan’s actual argument.


I gather that FDR appointed lots of Jews to office but liked to tell nasty anti-semitic jokes in private. One explanation might be that his appointments were dictated by politics but his jokes were sincere. A nasty suggestion, perhaps, but he does seem to have been a pretty nasty piece of work.

Unfair and very badly out of context. What Gross wrote:

Roosevelt scared investors and businessmen? Did he scare them as much as, oh, Stalin, who controlled one of the world's largest economies and was expanding his influence? or as much as Mussolini? Or as much as the fascist government of Japan? Or as much as Hitler, who was buys confiscating property of Jewish investors and businessmen? On a comparative basis, the U.S. was certainly the country in the 1930s that was the most hospitable to private investment and capital formation. Economic history unfolds in real history, not in some imagined world. The New Deal was a success if only because it kept the U.S. from sliding into the type of horrific fascism that infected half of Europe and the pathetic weakness that affected the other half.

And leaving quotes aside, what is the evidence that investors were scared out of their wits by FDR?

It is pretty crazy (not to mention A-historical) to suggest
that the alternative to the New Deal was fascism or communism in the United
States. The realistic alternative to the New Deal was more free market
policies suggested by Republicans.

At the election closest to the bottom of the Depression 40% of Americans still voted for Hoover, compared with 2.5% for Communists/Socialists and 57% for liberal but anti-socialist Roosevelt.

What kind of idiot believes 80-85% of the people who voted for Roosevelt were closer to Communists than Republicans? Only those who have replaces history with mythology take seriously the notion that the US would have become Authoritarian without the New Deal. The American people simply had a much healthier ideological tradition than Germans, Italians, the Spanish (or for that matter the Japanese).

Of course people like Gross and Delong refuse to acknowledge this. This is partially because that would require acknowledging that the American public are not somehow less enlightened than Europeans. Another more important reason is that they would almost certainly have become communist in 1932, so they can’t imagine how some unemployed factory worker in Ohio without an Ivy Leauge Phd:s would remain committed to the constitution.

Yet they did, as the opposition to Roosevelt’s policies shows.

The second half of the quote says,

the U.S. was certainly the country in the 1930s that was the most hospitable to private investment and capital formation.

That's a far cry from just, "better than Hitler."

How did the market do in 1933, by the way? Did investors all rush to convert assets to gold, as Caplan says he would have?

The stock market is a discounting mechanism and stock prices (to use that
as a proxy for investment expectations) are determined by interest rates
and expected free cash flows. U.S. real interest rates were at historically
high levels just before FDR took office, and cash flows were weakly positive
to negative. Ken Fisher has a good graphic of real rates in his book The Wall
Street Waltz.
FDR's demagoguery was more an effect of economic conditions than a cause;
stock prices discounted his speeches and reflected the above economic
Gross's assertion that the New Deal succeeded because it prevented
a European-style fascism is wrong on two counts.
Much of the U.S. economy under FDR exhibited fascist characteristics.
Cartellization of industries and price controls were part of Il Duce's
program were they not? This was also true of some U.S. manufacturing
industries; agricultural production was also heavily regulated.
Then too, the view that the New Deal was successful is true only if you
define an economy with 25% unemployment as a success.
Going back to an earlier post, maybe by Bryan Caplan at his blog, Brad
DeLong's definition of the New Deal wouldn't get a passing grade on a 6th
grade history test.

The second half of the quote is just a variant on the same argument: FDR good because the New deal was better than Fascism.

It says more than that: it says that FDR was good because the New Deal prevented the US from becoming fascist. That may be wrong, but it's not insane.


First, it's a "q," not a "g." Jesus, when I tap my fingers randomly across the keyboard I expect you to get it right!

Second, has it occurred to you that there are reasons why Fascism, Bolshevism, Nazism, and various other extremist ideologies flourished in some countries during the Great Depression, but not in others? Reasons why Huey Long only came to power in LA? Reasons why Father Coughlin never backed a winning candidate? When I say "Bolshevism is a serious political movement and corporatism is the right-wing answer," of course I mean internationally; I wasn't aware of an organized U.S. Fascist party, although perhaps I am just ignorant. If FDR (or Hoover) had made laissez-faire the centerpiece of his reaction to the Great Depression, the populist positions of Longs and Coughlins would not have been marginal. To think otherwise is to completely ignore the experience of non-American states enduring roughly similar conditions. (And, by the way, the communists in America did gain a great deal of strength in the thirties, although not as much as in the European countries. McCarthy wasn't entirely crazy when he said State was crawling with Reds...)

Third, you misunderstood what I meant when I said "confidence is a relative affair." I was unclear. The point is not international capital flows... certainly in less troubled times those play a role, but that wasn't my point. When I say "confidence is a relative affair," I mean that an entrepreneur in a given sector has a broad set of concerns. If you invest in a cruise ship you'll worry about hurricanes, if you invest in agriculture you worry about freak weather patterns, and so on. Given the gross uncertainty involved in most ventures, when certain concerns are on a different order of magnitude than other concerns, the less significant concerns do not come into calculations, much as one drops insignificant figures.

Today, entrepreneurs and traders might reasonably become less optimistic if a president delivered a speech expressing not only substantive disagreement with laissez-faire idea, but condescension to them. In the 1930s, there were far more horrible things FDR could have suggested in a speech.

And by the way, public fool yourself: I would expect a student (or what, lecturer?) at UChi to know that Japan did not have a "bad business climate" during the Great Depression (relative to every other industrial nation, that is). My understanding is that Japan didn't experience a "great" depression at all, just a normal one. Can you point me to a different interpretation?

But look: it's certainly not crazy to think that, *if FDR hadn't gone the New Deal route*, support for the extremist movements that were 'fringe' by European standards would have become a lot less fringe. Long and Coughlin were both lurking out there, and if neither was a partisan Communist or Fascist, they were plenty bad enough. And Wallace, after all, really was a Communist.

From the perspective of the 1930s, as best as I can enter into it, liberalism propser looked doomed, and the question of the hour was whether it would be replaced by totalitarian ideologies or by something else. FDR made 'something else' work. Compared to the liberal constitutionalist ideal, FDR was genuinely a frightening president. But the 30s were a frightening time. The US came through the crisis of the 20s-40s with its economic and constitutional systems damaged, but 'damaged' was a lot better than a lot of European countries (not only German, Italy, and Spain, but also France, Portugal, and all of Eastern Europe) managed. Both the counterfactual history and the from-the-perspective-of-the-30s forecasting are hard. But in both there's something to be said on behalf of the thesis that 'better than Mussolini' was both real success and maybe the best to be hoped for.

This is one of the cases that always makes me as a libertarian political scientist-theorist feel divided from libertarian economists and libertarian con-lawyers. I'm interested in questions of political sustainability, not just questions of best policies or legally best outcomes. Sometimes the best policies and the legally best laws can't be sustained, and lesser evils are necessary to stave off greater ones.

The worst thing about Caplan's argument is that he advances it untroubled by any actual facts beyond a quote or two.

Leave Hitler and Stalin and Mugabe and everyone out of it. Were investors frightened by Roosevelt? If they were maybe Caplan can show some evidence, like capital flight, or markets crashing, or something. Surely he understands the kinds of things that happen when investors panic. Did those things happen? My impression is that they did not.

I'm with Kief: this whole Mugabe thing is a three-card monty. Sure, you can say that investors were perhaps scared (although business investment went from $11.5 billion in 1932 to $91.1 billion in 1937, and one could reasonably argue that bad monetary policy had more to do with the problems in the recovery during the 1937 recession).

Caplan's comparison to Mugabe is intended to have a broader reach than just talking about investor confidence. It is transparently an attempt to smear FDR by associating him with a miserable dictator who ran his relatively prosperous country into the ground. Big deal if you can move the goalposts to help you put forth the case that FDR scared some investors. Congratulations. This is a cheap imitation of the old compare-your-opponent-to-Hitler game that plagues the blogosphere.

If he wants to hate liberal/progressive involvement in economic affairs, then good on him. But this is silly.

TGGP is right to say that the idea that FDR saved us from US fascism is absurd - there were no fascist parties in the United States. Look instead to actual presidential candidates or important political figures. Wendell Wilkie or even better Robert Taft would have been far superior to Roosevelt.

Bernard - evidence of uncertainty is in the works I linked to in my post by Higgs and Best. See also the recent work of Cole and Ohanian.

One more point about Higgs. He assures us, on the basis of the polls he cites, that in 1939 a majority of the public thought Roosevelt's policies were delaying recovery. Odd, then, that FDR was reelected with 55% of the vote in 1940.

Wallace! I am supposed to thank FDR because FDR's vice President was bad?

Wallace! I am supposed to thank FDR because FDR's vice President was bad?

Yep-- if it might plausibly have been the case that, in FDR's absence, he would have been a terrible president instead of an evil but impotent vice-president. But the point wasn't about thanking him-- it was about the claim that there were no serious political figures running around the US who posed the kind of threat that brought down European democracies.

Statist big spending policies consistently worked to pull Western countries out of the worst of the Great Depression -- war production in the U.S. in WWII, which triggered the greatest economic boom in the country's history, Hitler's military Keynesianism in Germany in the 30s. One could say FDR was not statist enough.

And the great depression didn't affect the Soviet Union, since it was not linked to the Western economy. Russias troubles were of its own manufacture.

It's absurd and a slander to compare Roosevelt to Mugabe or Hitler. Roosevelt may not have been as successful a President as the fantasy Presidents living in Alex Tabaroks or Bryan Caplan's head. But by real-world standards he was a very good, perhaps great President. In the end he left his country much stronger and more prosperous than he found it.

I hate to be the umpteeth person dumping on Alex, but not enough to forgo dumping on Alex. Daniel Gross made a reasonable point. Given the nature of world leadership at the time, FDR doesn't look so scary to investors, and the scaring of investors story just doesn't have legs. I'm pretty certain investment deamdn had collapsed before FDR.

I think it's wrong to misrepresent Daniel Gross's fair point here, partly because Daniel Gross usually makes such bad and untrue arguments, that we need to give him as much support as possible when he makes a true and good one.

This makes absolutely no sense. How can you print money with nothing to back it up and think it is a good thing? Yes it is good for people to work and have a purpose it gives them something to put their energy into but building roads with money which is not present will not happen. If it does it will take months in prep first and the funny money will eventually cause the new problem of inflation. Unless we change the concept higher taxes and printing money will help we are doomed to repeat our past mistakes. I though reporters should also spend time investigating their stories and not just printing someone words or their interpretation of those words.

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