Wednesday, October 01, 2008

I just finished The Forgotten Man: A New History of the Great Depression by Amity Shlaes

The Forgotten Man of the title comes from this passage from an essay by William Sumner :

The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C's interests, are entirely overlooked. I call C the Forgotten Man.

During the 1930's, "The Forgotten Man" was a commonly used phrase in political speeches, but it was transformed from referring to the victim of welfare schemes to the recipient. Amity Shlaes' book tries to reverse some of that by re-examining the Great Depression from the point of view of those who were affected by Roosevelt's New Deal schemes.

It's a well written book, and I learned a few things about the Great Depression that I didn't know before. For example, I had read about how the gold standard didn't help, and may have hurt the economy at the start of the crisis but I didn't know that the Hoover administration was practicing what is known as "sterilization", where the effects of the gold inflows that would have naturally helped inflate the economy out of it's deflationary problems were artificially limited because Hoover's team incorrectly thought the problems were actually inflationary.

The one obvious weakness is the large cast of characters, from Roosevelt's brain trust to the founder of Alcoholics Anonymous. The chapters are organized by time, so they necessarily skip around from person to person which leads to easy confusion about who is being discussed.

Overall, very interesting, particularly in light of the current financial meltdown. Whether this crisis ends up being handled better, or lingers and drags down the rest of the economy like happened in the Great Depression will be interesting to see.

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