THIS 1989 PHOTO is of a bridge built from 1936-41 as part of a Works Progress Administration (WPA) project in Coleman County, Texas. Many Americans saw such projects as helpful, without considering their high cost and the corruption that plagued the program.
Library of Congress
Crisis gripped the banking
system when the new president assumed office on March 4, 1933. Roosevelt's
action to close the banks and declare a nationwide "banking holiday" on March 6
(which did not completely end until nine days later) is still hailed as a
decisive and necessary action by Roosevelt apologists. Friedman and Schwartz,
however, make it plain that this supposed cure was "worse than the disease."
The Smoot-Hawley tariff and the Fed's unconscionable monetary mischief were
primary culprits in producing the conditions that gave Roosevelt his excuse to
temporarily deprive depositors of their money, and the bank holiday did nothing
to alter those fundamentals. "More than 5,000 banks still in operation when the
holiday was declared did not reopen their doors when it ended, and of these,
over 2,000 never did thereafter," report Friedman and Schwartz.
MICHIGAN SENATOR Arthur Vandenberg argued that a sound economy could not be restored through FDR’s punitive tax and regulatory measures.
Economist Jim Powell of the
Cato Institute authored a splendid book on the Great Depression in 2003, titled
"FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression".
He points out that "Almost all the failed banks were in states with unit
banking laws" — laws that prohibited banks from opening branches and thereby
diversifying their portfolios and reducing their risks. Powell writes:
"Although the United States, with its unit banking laws, had thousands of bank
failures, Canada, which permitted branch banking, didn't have a single failure
..." Strangely, critics of capitalism who love to blame the market
for the Depression never mention that fact.
gave the president the power first to seize the private gold holdings of
American citizens and then to fix the price of gold. One morning, as Roosevelt
ate eggs in bed, he and Secretary of the Treasury Henry Morgenthau decided to
change the ratio between gold and paper dollars. After weighing his options,
Roosevelt settled on a 21 cent price hike because "it's a lucky number." In his
diary, Morgenthau wrote, "If anybody ever knew how we really set the gold price
through a combination of lucky numbers, I think they would be frightened."
Roosevelt also single-handedly torpedoed the London Economic Conference in
1933, which was convened at the request of other major nations to bring down
tariff rates and restore the gold standard.
Washington and its reckless
central bank had already made mincemeat of the gold standard by the early
1930s. Roosevelt's rejection of it removed most of the remaining impediments to
limitless currency and credit expansion, for which the nation would pay a high
price in later years in the form of a depreciating currency. Sen. Carter Glass
put it well when he warned Roosevelt in early 1933: "It's dishonor, sir. This
great government, strong in gold, is breaking its promises to pay gold to
widows and orphans to whom it has sold government bonds with a pledge to pay
gold coin of the present standard of value. It is breaking its promise to
redeem its paper money in gold coin of the present standard of value. It's
Though he seized the country's
gold, Roosevelt did return booze to America's bars and parlor rooms. On his
second Sunday in the White House, he remarked at dinner, "I think this would be
a good time for beer." That same night, he drafted a message
asking Congress to end Prohibition. The House approved a repeal measure on
Tuesday, the Senate passed it on Thursday and before the year was out, enough
states had ratified it so that the 21st Amendment became part of the
Constitution. One observer, commenting on this remarkable turn of events, noted
that of two men walking down the street at the start of 1933 — one with a gold
coin in his pocket and the other with a bottle of whiskey in his coat — the man
with the coin would be an upstanding citizen and the man with the whiskey would
be the outlaw. A year later, precisely the reverse was true.
first year of the New Deal, Roosevelt proposed spending $10 billion while
revenues were only $3 billion. Between 1933 and 1936, government expenditures
rose by more than 83 percent. Federal debt skyrocketed by 73 percent.
Congress into creating Social Security in 1935 and imposing the nation's first
comprehensive minimum wage law in 1938. While to this day he gets a great deal
of credit for these two measures from the general public, many economists have
a different perspective. The minimum wage law prices many of the inexperienced,
the young, the unskilled and the disadvantaged out of the labor market. (For
example, the minimum wage provisions passed as part of another act in 1933
threw an estimated 500,000 blacks out of work). And current
studies and estimates reveal that Social Security has become such a long-term
actuarial nightmare that it will either have to be privatized or the already
high taxes needed to keep it afloat will have to be raised to the stratosphere.
secured passage of the Agricultural Adjustment Act, which levied a new tax on
agricultural processors and used the revenue to supervise the wholesale
destruction of valuable crops and cattle. Federal agents oversaw the ugly
spectacle of perfectly good fields of cotton, wheat and corn being plowed under
(the mules had to be convinced to trample the crops; they had been trained, of
course, to walk between the rows). Healthy cattle, sheep and pigs
were slaughtered and buried in mass graves. Secretary of Agriculture Henry
Wallace personally gave the order to slaughter 6 million baby pigs before they
grew to full size. The administration also paid farmers for the first time for
not working at all. Even if the AAA had helped farmers by curtailing supplies
and raising prices, it could have done so only by hurting millions of others
who had to pay those prices or make do with less to eat.