Bryan Caplan  

American Mugabe?

Normal Criticism of the New De... Moral and Mental Development...

Brad thinks it's a little crazy for me to compare Roosevelt to Mugabe:

To get to somebody willing to argue that the entire New Deal taken as a whole made things worse, you have to go to somebody like Arnold's intelligent and energetic co-blogger Bryan Caplan, who writes:

>[Robert] Mugabe has made people afraid to invest in Zimbabwe. Why should [Brad] doubt that - on a smaller scale, of course - Roosevelt made people afraid to invest in the U.S.?

And I think that I am safe in classifying somebody who sees Robert Mugabe as Franklin Roosevelt writ large as not entirely normal.

I can see someone finding my claim a little crazy. But I think I can make it more plausible.

Think about it this way: Out of all the presidents the U.S. has ever had, which one had the scariest rhetoric and policies from the point of view of investors and the rich? As far as I can tell, Franklin Roosevelt is clearly at the top of the list by a wide margin. Who else is even in the running? Cousin Teddy? He was a lot more balanced, and the country wasn't in a crisis.

Note: To buy my argument, you don't have to think that Roosevelt really did pose a serious threat to investors and the rich. All you have to think is that investors and the rich were in fact scared by him.

In evaluating my claim, it's vital to avoid hindsight bias, to imagine that whatever happened was obvious before it happened. We know that Roosevelt didn't expropriate the rich. But how secure could the rich have felt on the March 4, 1933, when he gave his First Inaugural Address?

Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

If Brad had been living through the New Deal era, and belonged to one of these classes, he probably would have been scared too. Personally, I would have been looking around for a way to convert my assets into gold.

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COMMENTS (22 to date)
Scott Scheule writes:

We at Catallarchy wish to communicate that reading that quote caused all our scrotal skin to simultaneously and audibly shrivel. Perhaps you heard it.

John Thacker writes:

Personally, I would have been looking around for a way to convert my assets into gold.

And of course less than a year later private ownership of gold became illegal in the United States, thanks to Roosevelt.

Steve Sailer writes:

Remember, Mugabe wasn't Mugabe for the first 15 years of his reign. He was fairly reasonable before turning into a catastrophe.

Did lots of businessmen worry that FDR would turn into a Mugabe?


We're they wrong?


But did their fears of FDR slow recovery?


Jo Esperanto writes:

Remember, Mugabe wasn't Mugabe for the first 15 years of his reign. He was fairly reasonable before turning into a catastrophe.

Grep for "Mugabe" and "Fifth Brigade". Mugabe was Mugabe from day one. And he could only be considered "reasonable" by African standards (he was not Bokassa, for example).

And since when did Brad, of all people, become a water carrier for mere normal people?

Ray G writes:

Think of Milton Friedman's Free To Choose. FDR's rhetoric wasn't too far removed in time or content from that of what we find Friedman's appendix A; the Socialist party platform for 1928 I believe it was.

What was truly radical just a few years before, was knocking on the front door with FDR's ascension to the White House, and yes, anyone with substantial amounts of private property or even the hope of gaining more of it, would have to have been very nervous.

Dan Klein writes:

Robert Higgs beautifully developed the "regime uncertainty" angle on how the New Deal deepened and prolonged the Great Depression. He uses standard macro data, bond-spread data, and most importantly public opinion data, as well as his rich knowledge of the period. One of the most impressive aspects of the article is how it transcends the categories "theoretical," "empirical," and "historical," by combine all at the highest levels. More than any other work, the article advances the theory of "regime uncertainty" (I would prefer the term "rules uncertainty"), that is the idea that it isn't just the static level of government obstruction that matters, but the trend and expectation of future intrusion. The point helps explain why countries with only modest economic freedom but very stable and predictable administration can do well, eg the Scand countries.

The article is a classic and Higgs deserves a Nobel prize. It is actually one of a suite of great articles that offer a compelling, integrated interpretation of 1930-1970 or so period.

The article is:

Robert Higgs,
"Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War"
The Independent Review, Spring 1997

This article is one of Higgs' best, but there is plenty more where it came from. Please see his great recent book:

Depression, War, and Cold War
Studies in Political Economy (Oxford UP, 2006)

The book includes the great 1997 article.

Jason Briggeman writes:

Someone needs to create an "Order of the Not Normal".

B. Horrigan writes:

The timing of this dustup about FDR and the New Deal in the blogosphere has curious timing. This upcoming November will be the 75th anniversary of the election of FDR. New Speaker Nancy Pelosi is an admirer of FDR, wants to preserve its legacy, and wants to make the 3rd stage of the New Deal. (LBJ gave us the second stage.)

First, it was Social Security in FDR. Then it was Medicare under LBJ. (Truman tried for national health insurance, but failed. Same with Ted Kennedy.) And the next round of Democratic rule will be nationalized medical system. The real reason that Democrats went bonkers over Bush's fairly reasonable proposals for Social Security reform is that it was a challenge to the legacy of the New Deal.

Democrats still sing "Happy Days Are Here Again," the anthem of FDR, ever time they win an election. That won't change.

As for the rhetoric, the fight goes right to the ocre of the greatest debate of the last 150 years. What is the nature of capitalism? For FDR and his allies, capitalism (esp. corporate capitalism) is about greed, selfishness, shortsightedness, and hostility; it is about "dog eat dog" competition. Capitalism produced wars, depressions,and chronic poverty. John Kennedy would quote his gangster (and Democratic) father to the effect that all businessmen were "s.o.b.'s" Even leftish professional academic economists, who coolly publish models of constrained optimization, show moral disdain towards business people. Hollywood typically displays such attitudes: in how many movies and tv shows is the villain a capitalist? Most of the time.

Such attitudes carry over to partisan politics. The venom shown toward the Republican Party is rooted in the belief that Republicans are simply the hired agents of the ruling capitalist class. Republicans are perceived, unlike Democrats, as having no ideas but only selfish interests.

To attack the great godlet FDR is to strike at the root of the Democratic Party and the anti-capitalist mentality. You are in for a tough fight.

dearieme writes:

Expropriation would be one reasonable name for "The American Defult".

Barkley Rosser writes:

B. Horrigan,

You are probably right that most Dems reacted to Bush's social security proposals for the reasons you cited. However, it remains a fact that the pessimistic forecasts about social security put forth both then and now are based on ridiculously pessimistic assumptions. There is no good reason to believe that social security will suffer the finanicial problems so forecast. If it does, it means that the economy will be performing very badly also, which does not augur well for the stock market, the supposed great alternative solution.

Snark writes:

Dr. Rosser,

There is no good reason to believe that social security will suffer the finanicial problems so forecast.

In light of the many (seemingly credible) studies contradicting your position on the future solvency of social security, I'm inclined to believe there's considerable cause for concern.

Please explain to me why my concerns are unfounded and, therefore, why I should dismiss these studies out of hand and laminate my SSN card?

Barkley Rosser writes:


You need to go look at the actual report of the Trustees of the Social Security Trust Fund, better yet, the whole series of reports since the mid-90s that have been pushing the same silly argument. In all of these reports they have a low cost scenario, a mid-range scenario, and a high cost scenario. Of course the media and the pundits are always quoting/citing the mid range scenario, the latest of which says that the fund will start to run a deficit in 2017 and will use up its assets in 2041. For the last decade these reports have made similar gloomy scenarios, except that the problem dates were going to hit earlier, and they have kept being moved further out.

Why? Consistently the low cost scenario's projections have proven right and the mid range have been wildly pessimistic. Under the low cost scenario, 2017 never arrives. The fund runs a surplus forever with nothing being done.

The mid range scenario assumes that economic growth in the US will shortly drop to half its recent, and historical, rate, 1.8%. Also, immigration is assumed to drop soon to near zero. I, and a lot of other economists, contend that these are ridiculous assumptions. It does not take much improvement over these assumptions to get the low cost scenario outcome, that the fund never runs a deficit.

Barkley Rosser writes:

While I am at it, let me ask why if the Great Depression was prolonged by FDR scaring investors and fiscal policy did not pull the US out of the GD, why is it that Germany under Hitler got out of its even deeper depression substantially sooner than did the US?

Jim Glass writes:
...let me ask why if the Great Depression was prolonged by FDR scaring investors and fiscal policy did not pull the US out of the GD, why is it that Germany under Hitler got out of its even deeper depression substantially sooner than did the US?

Peter Temin of MIT, a rather liberal economic historian, addresses this exact issue in his "Lessons from the Great Depression: The Lionel Robbins Lectures for 1989", MIT Press.

In short, FDR's New Deal followed an overt policy of encouraging monopolies, cartels, legally mandated price floors, output restrictions and unionization to increase prices and wages above the market level (mistakenly taking price and wage declines to be the cause of the Depression rather than the consequence of it, and thus imposing price and wage increases as a remedy).

Germany, a specific example of Temin's, and for that matter the rest of the world did not -- thus the recovery from the Depression was slower in the US than anyhwere else.

Nathan Smith writes:

Some support for Bryan's thesis from a source that Brad DeLong should trust: John Maynard Keynes.

"This means, unfortunately, not only that slumps and depressions are exaggerated in degree, but... economic prosperity is excessively dependent on a political and social atmosphere which is congenial to the average business man. If the fear of a Labour government or a New Deal depresses enterprise, this need not be the result either of a reasonable calculation or of a plot with political intent; -- it is the mere consequence of upsetting the delicate balance of spontaneous optimism." (The General Theory of Employment, Interest and Money, p. 162

Why "unfortunately?" Why not just say "let's restore a political and social atmosphere congenial to businessmen?" Because Keynes was a leftist; but he still recognized that the New Deal depressed business confidence.

TGGP writes:

A recent book indicates that the Germany Nazi economic miracle may have been a mirage like the Soviet one.

Emugab writes:

It's pretty idiotic to define a leader's "Mugabe-ness" primarily over his potential to scare of investors.

Barkley Rosser writes:

Another problem with the "Mugabe" label, aside from the fact that Mugabe has effectively become a dictator, is that Zimbabwe is running by far the world's highest rate of inflation now. Nothing like that happened on FDR's watch, even if he overdid it on some of his pro-monopoly practices.

I have not read Temin's lecture, but it is my understanding that the Hitler regime was marked by even greater cartelization and concentration than anything done in the US. Breaking up those entities, such as IG Farben, was one of the major policies that happened in the late 1940s in the FRG, under the influence of the Ordo-Liberals, and part of the Wirtschaftswunder.

Kief writes:

Perhaps both Mugabe and Roosevelt did scare investors. But Roosevelt took over a disastrous economy and attempted to improve it, albeit using ideas that turned out to be counter-productive. Mugabe took an economy that was relatively strong - it produced a food surplus that was a cornerstone of its economy - and drove it into the toilet, in order to maintain his grip on power. Painting Roosevelt with the same brush as Mugabe is Limbaugh-quality logic.

Dean Moriarty writes:

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).

Kaplan's comparison to Mugabe has to be 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.

Nathan Smith writes:

Um, some of these commenters are missing the point. We're only comparing Roosevelt to Mugabe in one respect. Nobody's claiming Roosevelt was a "miserable dictator."

Dean Moriarty writes:

Nathan: if that's the case, why choose Mugabe? Surely there are other leaders in the world today and historically that could be used as examples of "not-highly-regarded-by-investors" that do not come with the all the rest of the baggage. Saying it is "only in one respect" is a lame excuse to get away with a clear effort to create an inflated negative association in the minds of the readers.

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