Taking A Closer Look at FDR's Legacy

Steve Lohr has a very worthwhile story in the NYTimes today taking a hard look at the true economic legacy of FDR.  Titled "F.D.R's Example Offers Obama Cautionary Lessons, " it begins:

In 1933, as today, a new president stepped into the White House,
vowing change and decisive action at a time when a banking crisis posed
a grave threat to the nation’s economy.

The economic morass that confronted Franklin D. Roosevelt 76 years ago was undeniably deeper and more ominous than the trouble President Obama
is facing. Yet, according to economists and historians, there are also
some telling similarities and cautionary lessons to be drawn from the
experience of the Roosevelt years in the 1930s.

Roosevelt had his triumphs. He stemmed panic and stabilized the
banking system with a combination of deposit insurance, government
investment in banks, restrictions on banking practices and his
“fireside chat” radio addresses, which repeatedly steadied the national
mood and bought Roosevelt time to make changes.

Still, even after the government assistance, the surviving banks
were shaken and lending remained anemic — much as the nation’s banks
today are reluctant to make loans again, despite receiving more than
$300 billion of taxpayers’ money in Round 1 of the federal banking

So, throughout the 1930s, economic recovery remained frustratingly
elusive and arrived only with the buildup for World War II in the 1940s.

The shorthand verdict on Roosevelt, economists and historians say,
is that he was an eloquent and skillful politician, and an innovator in
jobs programs like the Civilian Conservation Corps and in regulatory
steps like the creation of the Securities and Exchange Commission to
police Wall Street. But Roosevelt, they say, while brilliant in many
ways, did not have a sure grasp of how to guide the economy as a whole.

“Roosevelt had some successes, but we hope that Obama is going to do
better,” said Kenneth S. Rogoff, a professor of economics at Harvard. “Otherwise, we’re in trouble.” 

I've been a little suprised that so much of the discussion in recent months on FDR's legacy has focused on his first 100 days, or some of the jobs programs which had marginal impact on the economy at the time.  A truer read of his legacy would show that America remained in an economic slow down until we went to war; that perhaps his most lasting legacy was not domestic but international, in defeating fascism and in fashioning a new liberal international order that has kept the world peaceful and prosperous for 60 years; and that of all of this was done over time, a long time - the FDR-Truman Administrations were in power for 20 years. 

As I wrote in a recent essay, Progress Not Motion, those in power now have to start coming to terms with the most challenging part of the FDR legacy - the unpleasant reality that solving the great challenges in front of us will certainly take more than the 2 years before the next election and the 4 years before the President's reelection.   There is a very real chance that the economy will still be in recession in 2010, and even 2012.  To me what this means is that our leaders need to stop raising expectations that things will get better quickly; to stop suggesting that there is no time to waste; to resist short term fixes that will not hasten the transition of America into the new economy of the 21st century.   As our new President said in his Inaugural speech last week this is a time for us to act responsibly, which means many things but certainly it means that we cannot confuse motion and progress in these vital days ahead.  It is more important at this critical time for our leaders to be right than fast - and to make it clear to the American people that the messes left behind by our recent era of terrible leadership will take many years, a lot of money, a great deal of effort and a lot of patience to fix. 


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