Thursday, March 22, 2012

James Q. Wilson good, James Q. Wilson not so good, Part II

Yesterday I had mostly good things to say about the late John Q. Wilson; today, mostly not so good, taking off from his May 22, 1995 review of Alan Brinkley’s The End of Reform: New Deal Liberalism in Recession and War in the New Republic (subscription only). Confronting FDR, the liberal god himself, Wilson doesn’t resist indulging in a good deal of schadenfreude over the failure of New Deal liberals to maintain their dominance of American society, which they took as their birthright only a few decades before.

FDR certainly presents a ripe target. He is deified to this day by liberals, and the first “Hundred Days” of his Administration remain, in liberal eyes, the touchstone for legislative greatness. Yet almost all of the Hundred Days legislation was “very bad,” as Walter Lippmann said, and most of it was declared unconstitutional. During his second term, when he had, on paper, overwhelming majorities in both houses of Congress (75 out of 96 senators, and 333 out of 435 representatives), he staggered from one self-inflicted disaster to another, doing absolutely nothing right on the domestic scene, his one victory—the capitulation of the Supreme Court on the power of the federal government to regulate the nation’s economy via the Interstate Commerce Clause—handed to him by his supposed greatest foe. If it hadn’t been for the catastrophe in Europe, Roosevelt surely would not have dreamed of running for a third term, and the Republicans surely would have won the White House in 1940, leading to who knows what.

Handed such a ripe target, Wilson does a very poor job of demolition. It’s a little hard to define what Wilson’s arguments are, because he’s presenting his critique of what Brinkley said, and, according to Wilson, Brinkley relies on The New Deal and the Problem of Monopoly, “the splendid book by Ellis Hawley.” Wilson sums up the thesis of this “splendid” book as follows:
Hawley described three alternative proposals for rescuing the nation from the apparent failures of big business: vigorously enforcing the anti-trust laws; suspending those laws and encouraging instead business-government cooperation; and creating devices for centralized economic planning. The trust-busters found their champion in Thurman Arnold and their support in the legacy of Louis Brandeis; the associationalists had their brief and ill-starred moment of fame with the National Recovery Administration and its Blue Eagle symbol; the planners were led by Rexford Guy Tugwell, Adolph Berle and Gardiner Means and had important allies in Henry Wallace’s Department of Agriculture.

This synopsis leaves me confused, because I don’t know who’s got it wrong, Wilson, Brinkley, Hawley, or a combination of the three. The trust-busters were never really in the game. The leading trust-busters, Assistant Attorney General Thurman Arnold and SEC Chairman William O. Douglas, didn’t start operating until 1938, and made more headlines than anything else. The real game was with the “associationists” and planners, who worked together (more or less) in the First New Deal, with the goal of reducing production, reducing hours, increasing prices, increasing wages, and increasing profits. Their two great legislative monuments, the National Recovery Act and the Agricultural Adjustment Act, were both declared unconstitutional and are now universally regarded as among the very worst major pieces of legislation ever to pass into law.

Wilson, presumably speaking in his own voice, summarizes the path of the New Deal this way:
Roosevelt, naturally, almost never gave a clear signal to any of these factions [trust-busters, associationists, and planners]. The early New Deal emphasized direct relief and hasty improvisation, all quickly endorsed by Congress. The NRA failed to be replaced by the view—defended, though without either skill or success by Treasury Secretary Henry Morgenthau—that restoring business confidence was essential to any lasting recovery. If associations and codes supported by business, labor and government could not do this formally, then the president ought to do it by rhetoric (replace anti-business with pro-business speeches) and deregulation. Antitrust prosecutions were led (implausibly) by Arnold, despite his having published The Folklore of Capitalism, a book critical of antitrust law. Though he reinvigorated what had often been a moribund part of the Justice Department, by the end of the 1930s it seemed clear that breaking up monopolies was not enhancing economic growth; indeed, to the associationalists, it was just another blow to business confidence.

The planners tried to build a program around the National Resources Planning Board (NRPB) and its predecessors. (The NRPB was not created until 1939, but it grew out of the National Planning Board formed in 1933 by Interior Secretary Harold Ickes.) “Planning” meant different things to different people, but to its intellectual leaders it meant, among other things, “rationalizing” the market so as to remove its “uncertainty.” Just how this was to be accomplished was not entirely clear. By the early years of World War II, in any event, the leading NRPB documents were urging policies that fell far short of any direct planning of investment or production. In Security, Work, and Relief Policies, published in 1943, the NRPB called for something very much like what we now know as American liberalism: an expanded program of social insurance, more generous public assistance, a Keynesian fiscal policy and an extensive federal jobs program. The goal was a full-employment economy and a safety net.

I find Wilson’s introduction of the notion of restoring business as essential to “lasting recovery” a complete canard, which means “duck.” What was business confidence like in late 1933, when unemployment was 25 percent, when Roosevelt had taken the U.S. off the Gold Standard, almost universally regarded as an act of complete insanity, and now, through the NRA, was going to tell you how to run your business? Does that sound like a confidence booster to you? Yet during Roosevelt’s first term, the U.S. GDP, which had dropped 25 percent under Hoover, falling from $800 billion and change in 1929 to $600 billion in 1933, surpassed Hoover’s high point in early 1936, which is why Roosevelt won re-election and why he rolled up such huge margins in Congress.

It was, in fact, FDR’s big attempt to “restore” business confidence that led to the humiliating “Roosevelt Recession.” After winning re-election, Roosevelt eliminated the Harry Hopkins’ WPA, loathed by business for coddling workers and supposedly increasing labor costs (though why, with unemployment still over 10 percent after seven years of deep depression, no unemployment insurance, social security, workman’s compensation, etc., the country would be rife with lollygaggers is hard to imagine), and massively reduced the deficit, engaging in an entirely unnecessary anti-inflation campaign in concert with the Federal Reserve. The result was a sharp economic downturn, of which Wilson is glad to make much: “The Roosevelt Recession, as it came to be called, was of a magnitude that rivaled the Depression of 1929-1932: in just a few months, industrial production fell by 40 percent and corporate profits by 78 percent; unemployment increased by 4 million; stock prices dropped by 48 percent.” But these figures, dramatic as they sound, exaggerate what was little more than a sharp, brief hiccup, as the GDP graph shows. GDP remained higher than Hoover’s height, which was a brief bubble rather than a plateau.

What cured the Roosevelt Recession? Wilson has the answer:
By 1942, of course, all these issues were swept aside by the war and its extraordinary success in ending unemployment and stagnation. It accomplished these miracles despite inept government efforts to plan wartime production, efforts that became the object of growing criticism as one mobilization czar succeeded another in a futile effort to manage production. Brinkley does not attempt to explain the reason why the war effort ended a depression that the New Deal not only could not cure, but by 1937 had duplicated. The answer, I suspect, is the restoration of business confidence.

This is dissimulation and/or deceit on Wilson’s part. It’s laughable that a man who fancies himself a scientist, or at least would be fancied as one, can claim to answer a question as disputed as the cause for the end of the Great Depression by saying “The answer, I suspect, is the restoration of business confidence.” Why, pray, is the advent of a world war a cause for business confidence, other than that businesses could be “confident” that the government would make enormous, continuing purchases of all kinds of goods and services, without the slightest regard for that once-sacred totem, the balanced budget?

Wilson, of course, was a sociologist, not an economist,* but being a sociologist does not, or at least ought not, to authorize one to select facts at one’s convenience, mingling them with suspicions and snickers. He could have obtained a consistent economic argument from his Friedmanite or Hayekian friends, but apparently that was too much bother.

Wilson justly points out that the dreams of the New Deal planners like Rexford “Roll up my sleeves/And make America over!” Tugwell never came true—they planned to plan, or dreamed of it, but very little ever came to fruition. And, to this day, liberals still dream of planning. Obama, with his dreams of turning the American economy “green”—“if only we had high-speed rail and solar panels like they do in China! Everything would be so cool!”—is a classic example. But the world that Wilson and the other neo-cons feel the liberals destroyed—the “good” America of the Fifties and Sixties, was the world that Roosevelt made. This was the America that elected Democratic Congresses from 1930 to 1980 (with two hiccups in 1946 and 1952) a remarkably long time. It was an America that sealed over its great sore—the massive crime of racial oppression—and it was the liberals who unsealed that. That Roosevelt, twenty-five years in the grave when things fell apart, had no answer to the Fires of ’68, is hardly surprising.
*Neither, of course, am I. For a bristlingly technical investigation of what did end the Depression, go here.