The Forgotten Man

1. The Great Depression was not solely caused by the 1929 crash, but exacerbated by government intervention.

American capitalism did not break in 1929.

Crash as a correction. The stock market crash of 1929 was a necessary correction of an overinflated market, not the root cause of the Great Depression. The American economy was fundamentally strong and capable of recovery. The real damage came from subsequent policy decisions.

Deflation's role. Deflation, not inflation, was a major problem both early on and in the mid-1930s. The loss of international trade played an enormous role. If the United States had not raised tariffs at the beginning of the decade and Europe had not collapsed in the 1930s, the United States would have had a trading partner to help sustain it.

Intervention's impact. Government management of the late 1920s and 1930s hurt the economy. Both Hoover and Roosevelt misstepped in a number of ways. Hoover ordered wages up when they wanted to go down. He allowed a disastrous tariff, Smoot-Hawley, to become law when he should have had the sense to block it. He raised taxes when neither citizens individually nor the economy as a whole could afford the change.

2. Both Hoover and Roosevelt, despite good intentions, implemented policies that hindered economic recovery.

Still, Hoover and Roosevelt were alike in several regards. Both preferred to control events and people. Both underestimated the strength of the American economy.

Hoover's missteps. Hoover's interventions, though substantial, were constrained by his constitutionalist principles. He ordered wages up when they needed to fall, signed the disastrous Smoot-Hawley tariff, and raised taxes during an economic downturn.

Roosevelt's errors. Roosevelt's remedies were on a greater scale and often inspired by socialist or fascist models abroad. He created regulatory, aid, and relief agencies based on the premise that recovery could be achieved only through a large military-style effort.

Shared mistrust. Both presidents overestimated the value of government planning and doubted the ability of the American economy to right itself. They both mistrusted the stock market and favored community over the individual.

3. The 1920s were a period of genuine economic growth, fueled by individual initiative and limited government intervention.

The first reality was that the 1920s was a great decade of true economic gains, a period whose strong positive aspects have been obscured by the troubles that followed.

Laissez-faire benefits. The 1920s was a decade of true economic gains, a period whose strong positive aspects have been obscured by the troubles that followed. Those who placed their faith in laissez-faire in that decade were not all godless. Indeed religious piety moved some, including President Calvin Coolidge, to hold back, to pause before intervening in private lives.

Individual success stories. The decade saw the rise of figures like Henry Ford, Thomas Edison, and Sam Insull, who revolutionized industries and improved the lives of millions through innovation and entrepreneurship.

Limited government role. The federal government played a relatively small role in the economy, allowing the private sector to flourish and drive economic growth. This hands-off approach fostered innovation and created opportunities for individuals to succeed.

4. Roosevelt's New Deal created a new form of interest-group politics, benefiting specific constituencies at the expense of others.

That year Roosevelt won because he created a new kind of interest-group politics.

Systematized interest groups. Roosevelt systematized interest-group politics more generally to include many constituencies—labor, senior citizens, farmers, union workers. The president made groups where only individual citizens or isolated cranks had stood before, ministered to those groups, and was rewarded with votes.

Entitlement challenge. It can even be argued that one year—1936—created the modern entitlement challenge that so bedevils both parties only. The first peacetime year in American history in which federal spending outpaced the total spending of the states and towns was that election year of 1936.

Shift in language. Before the 1930s, the word “liberal” stood for the individual; afterward, the phrase increasingly stood for groups. Roosevelt also changed economics forever. Roosevelt happened on an economic theory that validated his politics and his moral sense: what we now call Keynesianism.

5. The New Deal's emphasis on consumers led to the neglect of producers, hindering long-term economic growth.

Yet focusing on consumers meant that Washington neglected the producer.

Keynesian economics. Keynesianism, named after John Maynard Keynes, emphasized consumers, who were also voters. The theory gave license for perpetual experimentation—at least as Roosevelt and his administration applied it.

Neglect of producers. Focusing on consumers meant that Washington neglected the producer. Focusing on the fun of experiments neglected the question of whether unceasing experimentation might frighten business into terrified inaction.

Short-term vs. long-term. Admiring the short-term action of spending drew attention away from its longer-term limits—economies often go into recession when the spending disappears. Supplying generous capital to government made government into a competitor that the private sector could not match.

6. Fear and uncertainty, generated by constant government experimentation, froze the economy and prolonged the Depression.

But Roosevelt’s commitment to experimentation itself created fear.

Bold experimentation. One of the most famous Roosevelt phrases in history, almost as famous as “fear itself,” was Roosevelt’s boast that he would promulgate “bold, persistent experimentation.”

Unintended consequences. The resulting hesitation in itself arrested growth. Where the private sector could help to bring the economy back—in the arena of utilities, for example—Roosevelt and his New Dealers often suppressed it.

Business intimidation. The New Yorker magazine’s cartoons of the plump, terrified Wall Streeter were accurate; business was terrified of the president. But the cartoons did not depict the consequences of that intimidation: that businesses decided to wait Roosevelt out, hold on to their cash, and invest in future years.

7. The influence of Soviet and European collectivist models on New Deal policies was significant and detrimental.

A number of New Dealers, Tugwell included, had been profoundly shaped by Mussolini’s Italy and, especially, Soviet Russia.

Collectivist influence. A number of New Dealers, Tugwell included, had been profoundly shaped by Mussolini’s Italy and, especially, Soviet Russia. That influence was not parenthetical.

Naivete about collectivism. Overall, the problem of the New Dealers on the left was not their relationship with Moscow or the Communist Party in the United States, if indeed they had one. The problem was their naïveté about the economic value of Soviet-style or European-style collectivism—and the fact that they forced such collectivism upon their own country.

Fear of scrutiny. Fear of being labeled a red-baiter has too long prevented historians from looking into the Soviet influence upon American domestic policy in the 1930s.

8. The debate over the New Deal is not a simple battle between good and evil, but a complex power struggle between the public and private sectors.

The period was not one of a moral battle between a force for good—the Roosevelt presidency—and forces for evil, those who opposed Roosevelt.

Public vs. private. It was a period of a power struggle between two sectors of the economy, both containing a mix of evil and virtue. The public sector and the private sector competed relentlessly for advantage.

Shifting dominance. At the beginning, in the 1920s, the private sector ruled. By the end, when World War II began, it was the public sector that was dominant.

Public choice theory. Today we even have an economic theory, public choice economics, that sheds light on this. Public choice economics says that government is not higher than the private sector but rather a coequal combatant.

9. The "Forgotten Man" is not just the recipient of government aid, but also the taxpayer and entrepreneur burdened by its costs.

This book is the story of A, the progressive of the 1920s and ’30s whose good intentions inspired the country. But it is even more the story of C, the American who was not thought of.

Sumner's forgotten man. In 1932, a member of Roosevelt’s brain trust, Ray Moley, recalled the phrase, although not its provenance. He inserted it into the candidate’s first great speech. If elected, Roosevelt promised, he would act in the name of “the forgotten man at the bottom of the economic pyramid.”

New Deal's forgotten man. Whereas C had been Sumner’s forgotten man, the New Deal made X the forgotten man—the poor man, the old man, labor, or any other recipient of government help.

The man who pays. He was the Depression-era man who was not part of any political constituency and therefore lived the negatives of the period. He was the man who paid for the big projects, who got make-work instead of real work. He was the man who waited for economic growth that did not come.

10. The economic policies of the New Deal were often driven by political considerations rather than sound economic principles.

Roosevelt’s move was so profound that it changed the English language.

Political validation. Roosevelt happened on an economic theory that validated his politics and his moral sense: what we now call Keynesianism. Keynesianism, named after John Maynard Keynes, emphasized consumers, who were also voters.

Perpetual experimentation. The theory gave license for perpetual experimentation—at least as Roosevelt and his administration applied it.

Neglect of producers. Yet focusing on consumers meant that Washington neglected the producer. Focusing on the fun of experiments neglected the question of whether unceasing experimentation might frighten business into terrified inaction.

11. The Great Depression offers valuable lessons about the limits of government intervention and the importance of free markets.

From 1929 to 1940, from Hoover to Roosevelt, government intervention helped to make the Depression Great.

Intervention's role. The deepest problem was the intervention, the lack of faith in the marketplace. Government management of the late 1920s and 1930s hurt the economy.

Market's strength. The period was not one of a moral battle between a force for good—the Roosevelt presidency—and forces for evil, those who opposed Roosevelt. It was a period of a power struggle between two sectors of the economy, both containing a mix of evil and virtue.

Public vs. private. The public sector and the private sector competed relentlessly for advantage. At the beginning, in the 1920s, the private sector ruled. By the end, when World War II began, it was the public sector that was dominant.

Last updated: April 13, 2025