AMITY SHLAES: Sorkin Rounds Up the Usual Suspects.
According to [John Kenneth Galbraith], quoted approvingly as “seminal” [in Andrew Ross Sorkin’s new book, 1929], the worst day of the Great Crash — Tuesday, October 29 — was “the most devastating day in the history of the New York stock market,” and “may have been the most devastating day in the history of markets.”
The stunning story of the market’s plummet, however, also emboldened Galbraith to moot, without seeing any necessity of proving, a second thesis relating to years outside the scope of his title: that the 1930s policy applied by President Roosevelt, the New Deal, somehow made matters better, or could have, had the crash not been so violent.
The 1929 frame likewise enabled Galbraith to establish villains of speculation, and hero rescuers such as President Roosevelt. Roosevelt rated the damage of the national “fever of speculation” as so devastating that, at his inauguration in 1933, he announced that his presidency would begin a new, post-speculation era.
“The money changers have fled from their high seats in the temple of our civilization,” the new president proclaimed. (Yes, FDR, talking like Tucker Carlson, actually said “money changers.”) “We may now restore that temple to the ancient truths.”
By titling his book 1929, not 1929-1940, Galbraith skated past the inconvenient truth of the record of the 1930s. The New Deal honored Roosevelt’s anti-market “ancient truths.” Fueled by its own rage against Wall Street and a wrongheaded notion that Main Street would return to prosperity if it took lessons from planning boards, the Roosevelt administration never allowed either to find its footing. The result was that one in ten Americans remained jobless for a full decade. That is a level that today looks worse than inconvenient: It looks incomprehensible.
Galbraith’s primary thesis, that speculation caused the crash, was questionable. The second thesis, that the crash rendered the Depression “Great,” was spectacularly wrong.
One can make like [William F. Buckley], smile indulgently at Galbraith as a man of his time, and move on. But Sorkin is publishing in 2025, after a number of market drops that have not been followed by a depression, including the October 19, 1987, “Black Monday” drop and the Covid drop on March 16, 2020 — both statistically larger than the single-day drops of 1929.
Mark Steyn once wrote that “Lots of other places — from Britain to Australia — took a hit in 1929 but, alas, they lacked an FDR to keep it going till the end of the Thirties. That’s why in other countries they refer to it as ‘the Depression,’ but only in the U.S. is it ‘Great.’” For those who want to explore why, there’s FDR: A New Political Life, by David T. Beito, which Reason’s James Bovard dubs, “An Antidote to the FDR Cult:”
Rexford Tugwell, Wallace’s no. 2, idolized Soviet dictator Josef Stalin’s collective farms, declaring in 1934: “Russia has shown that planning is practical….The success and enthusiasm of Sovietism almost guarantees an unlimited rise in Soviet standards of living.” This was after an artificial famine in Ukraine killed millions of peasants who had not surrendered their land. Tugwell also lauded fascism as “the cleanest, neatest, most efficiently operating piece of social machinery I’ve ever seen. It makes me envious.” In 1934, the top Nazi newspaper, the Völkischer Beobachter, hailed “Roosevelt’s adoption of National Socialist strains of thought in his economic and social policies….The president’s fundamental political course still contains democratic tendencies but is thoroughly infected by a strong national socialism.'”
Roosevelt sought to leave no vote unbought. Priming for the 1936 election, he launched the Works Progress Administration (WPA), which paid more than 4 million people in 1935. The WPA, popularly known as “We Poke Along,” aimed to hire as many people as quickly as possible for labor-intensive projects. The agency quickly gave leaf raking a bad name.
Beito highlights the WPA’s role in constructing concentration camps for Japanese-American detainees, noting that this was “perhaps the most gigantic single ‘WPA project’ of all time.” The agency’s employees built guard towers and spotlights to prevent any escapes, and they helped staff the camps. After World War II ended, the Japanese-American roundup was recognized as one of the greatest civil liberties atrocities of the 20th century. The fact that it took only a few memos to shift legions of WPA workers from leaf raking to concentration camp guards should be a red flag for future mass employment schemes.
In 2007’s Liberal Fascism, Jonah Goldberg wrote:
Many New Deal agencies, the famous “alphabet soup,” were mostly continuations of various boards and committees set up fifteen years earlier during the war. The National Recovery Administration was explicitly modeled on the War Industries Board of World War I. The Securities and Exchange Commission was an extension of the Capital Issues Committee of the Federal Reserve Board. The Reconstruction Finance Corporation was an updated version of the War Finance Corporation. FDR’s public housing initiative was run by the architect of World War I–era housing policies. During the war, public housing had been a necessity for war laborers. Under FDR, everyone became in effect a war laborer.
Presumably it is not necessary to recount how similar all of this was to developments in Nazi Germany. But it is worth noting that for the first two years of the American and German New Deals, it was America that pursued militarism and rearmament at a breakneck pace while Germany spent relatively little on arms (though Hitler faced severe constraints on rearmament). The Public Works Administration paid for the aircraft carriers Yorktown and Enterprise as well as four cruisers, many smaller warships, and over one hundred army planes parked at fifty military airports.
As Jonah concluded, “Perhaps one reason so many people believed the New Deal ended the Depression is that the New Deal’s segue into a full-blown war economy was so seamless.”
UPDATE: More on Sorkin’s new book from John Tamny at Real Clear Markets:
What makes 1929 relevant today isn’t Sorkin’s history, but the legislative errors that followed and that turned a major market drop into a near decade long period of economic sluggishness. It’s a long way of saying that while Sorkin’s #1 bestselling book is largely about 1929 (to be fair to the author, he covers some of the aftermath), what to this day gives life to Sorkin’s 1929 is what happened after. Put another way, barring the egregious mistakes of intervention made by Presidents Herbert Hoover and Franklin Delano Roosevelt, the 1930s are a time of booming economic growth such that Sorkin has no book.
Evidence supporting the above claim can most notably be found in 1987. Stocks started to sputter earlier in the month of October, all of it leading to a monstrous, 24 percent correction on October 19, 1987. That’s the bad news, though the bad news largely ended right there.
The good news is that as 1987 closed, the DJIA ended the year largely flat. Ronald Reagan was president then, and Reagan’s favorite president was Calvin Coolidge. Like Coolidge, Reagan leaned toward non-intervention. The markets plainly preferred Reagan’s approach to that of Hoover and FDR, which means that the meaning of 1987 sadly shrinks by the year precisely because there was no brutal aftermath to a correction that varying market pundits attributed to Treasury secretary James Baker’s talking down of the dollar on the Sunday talk shows on October 18, 1987, rising protectionism within Congress (see Richard Gephardt most notably), separate legislation meant to substantially tax the M&A activity that had given equity markets so much life in the 1980s, along with the rise of “program trading.”
This review or analysis of Sorkin’s book won’t dig deeper into speculations about what may or may not have caused 1987, but the fact that 1987 doesn’t rate the ink spilled on 1929 should loom large in the minds of those reading this review, and more importantly, in the minds of the many who will read Sorkin’s book. Just as the meaning of 1987 sadly shrinks by the year, the jejune and errant meaning of 1929 sadly grows by the year, including in 2025 as stocks sit at or near all-time highs. It’s sad once again because to this day the lessons of 1929 elude most economists, historians and market pundits, and since they do, attempts to tie 1929 to 2025 invariably fail.
I remember the D-word being uttered a lot on October 19th, 1987; the fact that it didn’t happen (and that the market had spent the previous seven years making up for treading water during the inflation-ravaged 1970s) is a reminder of the failure of both Keynesian economics and FDR’s “bold persistent experimentation.”
