The Great Depression & The New Deal: A Very Short Introduction (review)

At a time when historians seem determined to produce monster volumes, Eric Rauchway has courageously undertaken a major challenge. He has squeezed into a slim pocket size volume an analytical account of one of the most complex and widely debated periods in modern US history. He writes about the Great Depression and the New Deal era with great skill and understanding. In doing so he delivers an excellent introduction to a time of serious economic crisis and the response of government to it. This troubled decade has caught the attention of a public reeling from the shock of the current economic and financial malaise. Anyone who wants a full understanding of the last great crisis should start by reading this perceptive study.

Rauchway begins with an investigation of the causes of the downturn which began in 1929. He rightly emphasises the potentially destabilizing level of international and domestic indebtedness during the 1920s and does not neglect the vital role that US foreign trade and lending played in the international economy. It is ironic that Herbert Hoover was forced to confront the disintegration of a seemingly powerful economy. Hoover was intelligent, industrious and had a greater understanding of the work of contemporary economists than any other twentieth century president. He was not unconcerned, nor was he inactive. Rauchway is probably too critical of Hoover's economic management, but he is clear in his account of crucial Federal Reserve interventions.

Hoover was too wedded to economic orthodoxy and had too little political warmth to salvage himself or his party in 1932. Roosevelt knew no economics, but he was prepared to embrace new ideas and cast off orthodoxy in both the economic and social spheres. FDR, for example, was sympathetic to plans for reflation, especially of farm prices. He was prepared to fund initiatives to help the "forgotten man" and, in an act which horrified conservatives but was consistent with a policy of raising prices, the gold standard was abandoned in 1933. However, Roosevelt never embraced the more radical policies espoused in Congress and by pundits everywhere. He wanted to save capitalism, not destroy it. He was concerned that reflation might become inflation, he disliked the persistent budget deficits that his costly programs caused and he was not in favour of the federal insurance of bank deposits. He, and other New Dealers, worried about welfare dependency. Consequently they supported work relief over dole payments, and those fortunate to secure a place on projects had to satisfy social workers that they were not merely out of work but also destitute. What was radical, however, was the historically colossal amount of public funding which became available to support a wide range of relief and recovery agencies. The book concludes with a well-chosen bibliography and a helpful table listing all relevant federal acts, together with a short description of them.

It is astonishing how much information Rauchway has provided without sacrificing clarity. Unlike many of Roosevelt's critics, he places the New Deal firmly in its historical context. This sympathetic account will strike a chord, particularly with those who have become disillusioned with deregulation as a cure for all economic ills, and also with the view that markets always clear satisfactorily. However, all readers will appreciate his astute judgement and masterful handling of the evidence.