I have read in a number of Roosevelt's biographies that as Governor of New York, Roosevelt was not so aware of how economics works. He recognized that radical change was needed to respond to the Great Depression, but did not know what changes were needed. How were the reforms that FDR proposed as Governor of New York indicative of how he was "trying out" policies? I read that his policies contradicted each other, but which reforms specifically were contradictory and why?
** Question: ** I have read in a number of Roosevelt's biographies that as Governor of New York, Roosevelt was not so aware of how economics works.
I think that this is accurate. FDR did not have a modern nor a contemporary understanding of how the economy worked either as Governor of New York or for much of the period marked by the "New Deal". This can be excused by the fact that economic experts did not agree or well understand what was happening to the economy in that period either. Herbert Hoover's disastrous economic policies which deepened and broadened the Great Depression every quarter he was in office were not his own prescription. They were the consensus recommendations of respected conservative economic advisors. FDR realized these policies were failures early on but himself did not immediately understand what policies would work. FDR created and economic "brains trust" of experts while governor of NY to advise him on economic policy. The fact FDR had his own economic advisors does not diminish this question. FDR took advise from a broad array of people on economics and they rarely agreed. His brains trust were such a group. That left it up to FDR to pick and choose which paths to follow among the contradictory paths he was scouting. During this period FDR made mistakes as he tried many things to get the economy working and keep it working.
Hoover's Disastrous Economic Policies
Hoover basically believed the ship would right itself and it was the governments job to stay out of the way of the economy. Fundamentally he did not believed the government should play a role in regulating the economy. Among the steps which Hoover took which deepened and widened the Great Depression.
Hoover ran government surpluses in 1928, 1929, and 1930 when modern fiscal policy would inform him to deficit spend.
When Hoover finally did run a deficit in 1931 it was modest and an order of magnitude lower than FDR's first new deal budget.
- Hoover put tariffs on imports, sparking a trade war where our trading partners responded in kind which severely prolonged and exasperated the crisis. In a 1995 survey of American economic historians, two-thirds agreed that the Smoot–Hawley Tariff Act at least worsened the Great Depression.
- Hover tightened the money supply, modern fiscal policy would inform us to put more money into the economy. When companies were desperate for credit, their was none to be had. .
So It's true that FDR didn't know what he was doing economically. But it's also clear with 20/20 hindsight that Hoover and his consensus of respected economic experts didn't understand the economy either. What's also clear was FDR understood what he didn't know and was fast to make corrections when his policies failed. Hoover took years to question his failed policies. Not until re-election pressures forced his hand did he alter his economic approach in 1931.
Question: How were the reforms that FDR proposed as Governor of New York indicative of how he was "trying out" policies?
As governor of New York FDR understood bold action was required. His policies which brought him the most attention were interventionist and thus consistent with his Presidential policies. FDR's approach contrasted Herbert Hoover who had the government passively running a surplus for 3 of his 4 years in office (1928, 1929, 1930) during the great Depression.
As Governor of New York FDR:
- Used the State's resources to try to stabilize the Job Market
- Organized a series of NY sponsored conferences where multiple states strategized with various economic experts in how to pool and apply their resources more efficiently/effectively.
- collective multi state, state run unemployment insurance fund
- collective state run employment strategies
- Hired economic experts to come up with simplified explanations for what was happening which resulted in FDR giving clear explanations for questions other politicians fumbled over.
- FDR built upon the support for his NY Conferences by addressing the 1930 Conference of Governors in Salt Lake City and established himself as a man with new ideas to address the widening crisis
- He formed the Temporary Emergency Relief Administration (TERA) in NY
- Large public works projects just like the new deal
- Provided food and clothes for the poor who could not be employed on public work projects
- Harry Hopkins FDR's right hand man and primary white house advisor was chairman of TERA
- FDR spoke as a national leader and attracted national attention for his interventionist policies.
- FDR assembled groups of experts “brains trust.” to think up new ideas on national topics while still Governor of NY. These groups rarely came to consensus agreements but had broad often contradictory recommendations.
- FDR funded his programs by deficit spending leaving office after piling up 90 million dollars farther in debt, compared to Hover who left the federal government positive 1.9 billion surplus and 20% of the workforce on its back.
I read that his policies contradicted each other, but which reforms specifically were contradictory and why?
FDR made some mistakes while he was in office, economically speaking. Perhaps his worst was cutting government spending in order to try to balance the budget in 1938 bringing about a double dip recession and hurting/reversing the recovery for a time. However, as I said FDR was listening to many experts and was trying combinations of things to see what would work. It is understandable that not all his moves worked. It's not like he was following a plan or treading a path others had blazed for him; FDR was literally making it up as he went. When something didn't work, he tried something else. The result was a new understanding of how the economy worked. In the 2008 downturn both both President's Bush and President Obama returned to FDR's policies of government intervention and deficit spending.
Just two more thoughts to further color/inform your perception of Roosevelt.
The formal definition of a depression is a severe recession. The formal definition of an economic recession is a decline in gross domestic product (GDP) for two or more consecutive quarters. By definition a recession is over when the economy(GDP) shows quarterly growth. Every quarter of Herbert Hoover's Presidency the GDP had gotten worse. In FDR's first six month in office, FDR had the GDP going in the right direction again. Formally given the definition, the Great depression ended in FDR's first six months in office when GDP began to grow again.
Not only did FDR turn around GDP in his first six months in office but he turned around every major economic indicator within his first 12 months in office except two. Banking foreclosures took him a second year to solve, and the DOW Jones stock market did not return to it's 1928 high water mark until during the Eisenhower Administration in the mid 1950's.
Wikipedia: The Great Depression
Wikipedia: Governorship of Franklin D. Roosevelt
Miami of Ohio University: A Presidential Governorship: The FDR Years as New York Governor
Herbert Hoover Policies
Federal Government Spending
Herbert Hoover on the Great Depression and New Deal, 1931–1933
Wikipedia: Herbert Hoover