passing along my answer to a question from a reader about the New Deal...
A SchansBlog reader wrote:
Have you by any chance read Amity Shlaes' The Forgotten Man? If you haven't, I would highly recommend the book.
It's a somewhat "revisionist" history of the Great Depression that looks at how a lot of the policies of the New Deal made the situation worse, and (by interesting extension) how some of the New Deal true believers came to realize this before Roosevelt even ran for reelection and became disillusioned, particularly as FDR created mechanisms like Social Security explicitly as a way to funnel money to constituencies he needed to buy to support his otherwise chancy reelection bid.
I ordered that for the IUS library awhile back, but have not read it or picked it up. I'm already familiar with the general problems with and general politics of the New Deal-- but not so much with the more specific political variables behind it. It looks like a good read, but I probably won't get to it until at least 2009. I'll be pretty busy until at least then! ;-)
Understanding the failures and water-treading of the New Deal is a key argument within macroeconomics. If the Great Depression was caused by markets, then we must be wary of markets doing it again. To the extent that the Great Depression-- its length and depth-- was caused by govt policy, then one draws quite different conclusions. The quick summary of the latter is to point to the Smoot-Hawley protectionism, the Fed allowing the money supply to drop by 30% or so, four tax increases, wage and price floors, and legislation that strengthened unions.
As far as funneling money to constituencies, our political contemporaries in both parties have sadly continued to build on FDR's strategy.