Dominoes

The Economic Consequences of the New Deal

Dominoes

Benjamin Stolberg and Warren Jay Vinton wrote The Economic Consequences of the New Deal in 1935. Benjamin Stolberg was a journalist and writer, who mainly focused on the issues of American labor. Warren Jay Vinton worked at the US Embassy in Paris during World War One and was a research administrator for the Federal Housing Administration in the 1930s.

At the time of the book's publication, the Great Depression was pressing down on the United States, and times were tough. There was mass unemployment, people were in debt over their heads, and the stock market was a fraction of what it was at the peak of 1929. In the midst of the chaos, President Franklin Delano Roosevelt offered a solution for the country. He enacted the New Deal and created a swarm of new federal agencies. The New Deal sought to fix our economic problems by stimulating the economy with a mass addition of public funds, i.e. "priming the pump." This idea of using government money to fund private industry is a classic example of the Keynesian economic approach.

The Economic Consequences of the New Deal attacks the New Deal and makes the argument that it actually hurt the country. The beginning of the book talks about the supposed cause of the Great Depression. The book blames the wealthy for the economic trouble of the time. It says that economic issues are the result of the class struggle between the bourgeoisie and the proletariat. "Big Ownership" (bourgeoisie) is responsible for economic ills and high prices, so the power of "Big Ownership" must be curtailed.

The book says that FDR didn't help the class struggle at all by creating the New Deal, and Roosevelt tried to reconcile both sides. In other words, the New Deal "sought to make us all rich without disturbing the rich."

In chapter two, the book discusses the class struggle in great detail, and it essentially follows the Marxist model. The book says that technological advances create increases in production efficiency and capacity. For example, there is a clothing factory, and there are currently a thousand workers employed who produce ten thousand shirts per day. Then, the factory owner upgrades the equipment and mechanizes the plant. Now only three hundred workers are employed who produce twenty thousand shirts per day. This line of thinking is very similar to Marxist principles.

Next, the book talks about the three different classes: the upper class, the middle class, and the lower class. According to the authors, the goal of the New Deal was to help all the classes, but instead it just helped the upper class. The book talks about how both Hoover and Roosevelt bailed out the banks in the Great Depression, and the authors say that helped "Big Ownership." My ideology differs from the authors' ideologies, but I agree that the banks shouldn't have been bailed out. I agree with this for different reasons than the authors though. The authors are opposed to helping the banks on the grounds that "Big Ownership" is bad in itself. I believe that giving any class an unfair advantage hurts the economy. Bailing out the banks in the Great Depression was akin to what happened in the 2008 Recession. People often like to think, "Things are different this time," but they rarely are.

The book also talks about how the country is digging itself deeper and deeper into debt. The authors say there are giant amounts of both private and public debt. People are underwater on their mortgages, and banks are closing left and right. In addition, the government is borrowing more and more money to pay for public works, federal agencies and new projects. Once again, these issues are the same as today, yet people like to think of them as something new.

The book gives general ideas on how to fix the economic situation and implies that there should be socialized medicine and the nationalization of industries. The authors also reject the Keynesian model of government spending to jump-start private industry. The book implies that private industry is the problem, so the Keynesian strategy is counter-productive.

The authors never explicitly say that they wanted the U.S. to move in the direction of socialism (or even communism), but I believe that's what they hoped for. After reading this book, I think the authors' views fell somewhere on the ideological scale ranging from left to very far left. I agreed with the book in a few specific instances, such as when the authors said the banks shouldn't have been bailed out, but overall, I disagree with the book. The Economic Consequences of the New Deal shares several of the same ideas as The Communist Manifesto, and I am sure that the authors were profoundly influenced by socialist ideologies.