The Forgotten Man by Amity Shlaes is a timely new history of the Great Depression that has just been published in paperback. Barack Obama now bids to launch a great programmatic expansion of the federal government following in the footsteps of the New Deal and the Great Society. I asked the author if she would reflect on the current campaign in light of the history she explores in The Forgotten Man. She has kindly responded:
Barack Obama has a large infrastructure investment plan of $60 billion stretching over 10 years. His idea is to put the country to work as FDR did in the New Deal.
But such plans rest on a fallacy. The fallacy is that public-sector jobs are just as good as, or better than, private-sector jobs. The reality is that is not true. Private-sector jobs tend to be the ones in fields where innovation happens. Public-sector projects have done some famous innovating — velcro, DARPA’s role in the creation of the internet — but that innovating tends to be the exception that proves the rule. A lot of public sector jobs are just a weight on the economy. And people instinctively know this.
Think of your train of thought as you watch someone x-ray your shoes in an airport security check: I hate this. But, hey, at least it gives someone a job. But is that job worth it even to that person? And is this process really useful?
The burden of public jobs came through really clearly in the Depression and I talk about it a lot in The Forgotten Man. Government often claims it is the only one that can do something, or fund something. People loved the individual government programs — the PWA, the New Dealers’ infrastructure program. But capital is always scarce, and even in that period the government crowded out the private sector, which might have done some of the necessary tasks better. In order to justify large government programs the New Dealers had to criminalize the private sector. Or believed they did.
Obama talks as though his plan would end pork. But as the New Deal’s PWA and its Works Progress Administration demonstrated, infrastructure programs and other public job programs are pork factories. They rank right up there with agriculture in terms of politicization.
The etymology of the word or phrase “boon doggle” illustrates this. It first became familiar when a New Deal public jobs program paid underemployed teachers to teach children and adults to make craft projects for home use, “boon doggles.” The term became a synonym for silly make work and the scandal of New Deal spending.
Upon the publication of her book in hardcover last year, Shlaes discussed the need to revisit the New Deal in her Wall Street Journal column “The real deal.” This past December Shlaes reflected on the New Deal experience with public employment in her Wall Street Journal column “The New Deal jobs myth.”
PAUL adds: Having recently (finally) read Shlaes’ outstanding book with the serious possibility of an Obama presidency looming, the phrase in her statement above that strikes me is “the New Dealers had to criminalize the private sector.” As a candidate, Obama has been quick to demonize the private sector. However, that’s something Democrats frequently do, and demonization is not the same thing as criminalization (although it is a neccessary first step).
If Obama is elected with the economy in a downturn, the most sensible and obvious option would be to do what Bill Clinton did — take minor measures to give the appearance of executive energy, but essentially wait for the business cycle to produce a recovery, as it always has in modern history, and then take the credit. The least sensible option would be to use the downturn as a pretext for a huge expansion of the government. Would Obama embrace this option? I don’t think anyone, including Obama, knows the answer.
Were he to do so, it would probably condemn the country to a sustained period of slow or no growth. And unlike in FDR’s time, the present American electorate won’t easily be persuaded that this is the natural order of things. Thus, Obama would likely resort, as Roosevelt did, to persecuting capitalists. This is also the probable scenario if Obama waits relatively passively for a recovery and one doesn’t occur.
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