The New Deal began with Franklin Roosevelt’s presidency and it dominated the administration’s agenda until sometime in his second term when, if it did not altogether end, it yielded priority to war mobilization. Roosevelt’s inauguration marked the end of three and a half years of economic contraction. Afterward, real GDP rose rapidly, and unemployment fell for four years, until spring 1937, when a recession began that lasted about a year. Then, growth resumed.

Traditional explanations of this pattern attribute the turnaround and first growth period mainly to the national bank holiday and New Deal policies that reversed the 1929–1933 deflation by encouraging Americans to expect rising prices. Chief among these was going off the gold standard and dollar devaluation, but scholars point also to the price-fixing National Recovery Administration and Agricultural Adjustment Administration, to wage-raising provisions of the National Industrial Recovery Act and the National Labor Relations Act, and sometimes also to the repeal of Prohibition. For the 1937–1938 recession, scholars generally blame tight monetary policy (reserve requirements and gold sterilization) plus tight fiscal policy (reduction of public works spending) and ascribe the end of that downturn to the administration’s resumption of expansionary policy in both areas.

As that description of the 1937 collapse suggests, historians regard the Roosevelt administration as entirely capable of poor decisions. Moreover, many programs worked inequitably or weakly: Farm policy helped landowners more than tenants. Industrial policy helped large businesses and cartels. Housing policy discriminated against Black Americans. Public works policies were slow to start and never generous enough to provide fiscal stimulus.

George Selgin’s False Dawn largely follows these traditional explanations, with modifications emphasizing his critique of the Roosevelt administration. He allows that dollar devaluation might have helped but says it should have come sooner. And anyway, Selgin says, the person really responsible for salutary inflation in the United States was not Roosevelt but Adolf Hitler, who chased gold out of Europe and into the United States. “These huge European capital exports weren’t just unconnected to dollar devaluation: no New Deal policy was responsible for them”—not even, apparently, those policies making US banks and the dollar a safe haven (p. 89). Selgin also follows Christopher Hanes, as well as Harold Cole and Lee Ohanian, in arguing that New Deal policies encouraging unionization and setting minimum wages inhibited recovery by ensuring employment of fewer workers at fewer hours and higher wages, rather than allowing for “more workers at going [i.e. lower] wage rates” (p. 107).

Selgin also supports the “regime uncertainty” explanation associated with Robert Higgs and Gene Smiley—the idea that fear of radical policy inhibited private investment. Selgin says this thesis is “hard to dismiss,” even while acknowledging Gabriel Mathy’s study showing “the New Deal only generated uncertainty in its early phases through 1934 and not for the rest of the Roosevelt presidency” (pp. 250–251); Selgin fairly says Mathy “shouldn’t be the last word.”Footnote ¹

Notably, Selgin argues that “indulging” big business during the war years ended “regime uncertainty” and promoted recovery: “when economists today say that World War II ended the Great Depression, most have in mind the consequences of massive wartime spending, not the government–business détente the war inspired. Yet that détente mattered more, for it endured, whereas the spending didn’t” (pp. 300–303). Selgin is aware of Mark Wilson’s Destructive Creation, but does not address Wilson’s argument that the war was neither “a vindication of free-market capitalism” nor the birth of a “military-corporate alliance.”Footnote ² Selgin also knows about Alexander Field’s argument that New Deal public works made postwar prosperity possible but does not meaningfully grapple with it either.Footnote ³

False Dawn concludes that policymakers should ignore the New Deal: “many New Deal policies held back recovery, while those that helped most—such as insuring bank deposits and relaxing gold standard limits on monetary expansion—are as unrepeatable as losing one’s virginity” (p. 305).

Selgin is frankly interested in the New Deal only as a laboratory for policies to promote recovery, defined as proximity to full potential: “one can’t simply look at the number of persons doing any sort of work or the amount of stuff being produced. One must ask how close the economy is to making full use of its valuable resources, including its labor force” (p. 12). On this measure, he argues, the New Deal failed.

Of course, many New Deal measures failed to wring maximum output from the nation’s laborers because they aimed at other goals, among them a higher quality of life for the people of the United States and the world. Selgin does know this; he declares honestly that he is uninterested in relief or reform, saying whether those projects were worthwhile “is for others to decide” (p. xii). In consequence Selgin’s New Deal has no Civilian Conservation Corps, Civil Works Administration, or Tennessee Valley Authority—still less a Virgin Islands Company; it has no Federal One or Federal Writers’ Project. Social Security features fleetingly, as a tax, and unemployment insurance hardly at all. Labor legislation appears only as an impediment to the fullest utilization of the labor force.

Roosevelt anticipated and rejected Selgin’s definition of recovery. The nation should not seek “merely to restore,” it must “restore and at the same time remodel.” Recovery could not mean “a return to old methods,” it had to entail “a permanent readjustment of … our social and economic arrangements.” Roosevelt especially wanted to demonstrate that the US government could assist Americans in living better lives and that therefore US democracy—flawed as it was—deserved to survive the era of fascist dictatorships.Footnote ⁴

Selgin’s book updates Gene Smiley’s 2002 Rethinking the Great Depression, incorporating some (though, as noted above, not by any means all) of the relevant economic scholarship published since then; as Selgin says, Smiley’s book “might serve as a digest of my own effort” (p. xii). A reader familiar with Smiley could catch up by reading a few insightful studies, including Price Fishback’s 2017 “How Successful was the New Deal?” and works by Field and Mathy, giving Selgin a pass. But they would miss the liveliest portions of this book.

For the most part, Selgin ignores scholars who disagree with him, noting contrary arguments briefly if at all. I feel peculiarly compelled to inform the journal’s readers that he makes a special exception for me. I would not ordinarily mention an author’s opinion of me, but I was surprised to find I play a nontrivial (and villainous) recurring role in this book. I worried I was being vain in thinking this, so I sought an objective metric: Selgin’s index has a longer entry for me than for major New Dealers Harry Hopkins, Harold Ickes, Rex Tugwell, or Henry Wallace; I actually rate an index entry, whereas scholars such as Field, Fishback, and Mathy do not. (Gauti Eggertsson and Christina Romer each get a short one.)

Why? Selgin expresses what I can only call outrage (reader, he believes me “ungenerous” and “willfully perverse” [pp. 20, 309]) because, when faced with a contradiction between someone’s later recollection and contemporary sources, I prefer the latter. Historians may regard this as standard practice (and if you do not, you might take a quick look at Marc Bloch’s discussion of the memoirs of Marcellin Marbot). Really, though, one need not be a historian; one need only have the sense required to serve on a jury.

But Selgin thinks it is bad manners not to take someone at their retrospective word. He has a whole section titled “Dissing Frances Perkins” devoted to my lack of respect for the labor secretary’s powers of recall (p. 19). For the record, historians know Perkins’s memory was unreliable; Elisabeth Israels Perry wrote about it in The Challenge of Feminist Biography: Writing the Lives of Modern American Women (Champaign, 1992). But honestly, you do not have to be immersed in primary sources to know that Perkins tended to say undependable things. Consider, for example, her 1955 remark, “Nobody ever heard that segregation was wrong until about five years ago. I never heard such a thing.” Even a casual reader would probably raise an eyebrow at that. Anyway, it is hard to imagine Perkins would feel especially respected by Selgin’s deference to her recollections when it comes coupled with his disapproval of her work to raise wages.

Selgin is at a double disadvantage: Not only does he want to believe after-the-fact reminiscence over contemporary records, he also wants to believe broad negative assertions, which are easily disproved. If someone says, “there is nothing,” and you can point to something, that is pretty much it for the “nothing” hypothesis.

So, for example, Selgin quotes the banker James Warburg saying of the decision to go off gold, “No one, so far as I know, in the Administration circles, unless it was the President himself, had any idea at that time of embarking upon the course which we subsequently followed” (p. 25). But against that recollection we could set the following: Henry Wallace wrote in August 1932 that Roosevelt told journalists he favored inducing inflation by manipulating the volume of currency. Adolph Miller said in 1934 that Roosevelt asked him in December 1932 about using the Trading with the Enemy Act to devalue the dollar and raise prices. Rex Tugwell’s diary of January 1933 says Roosevelt asked aides to research laws and procedures for this method. In February 1933 the economist Rene Léon testified to Congress at Roosevelt’s request about the legality and desirability of going off the gold standard. Also in February, Tugwell outlined to the businessman James Rand the incoming administration’s plan: halt gold exports and transactions, and then pursue inflation. Rand told Herbert Hoover by telephone of this proposal. Once in office, Roosevelt took these steps. People in administration circles and elsewhere knew what course Roosevelt intended. Warburg did not know: but historians do.

Moreover, Tugwell’s diary of May 1933 has Roosevelt explaining that the banking crisis provided him the opportunity to begin management of the dollar, laying out his next steps, and predicting that an international crisis would soon give him the chance to begin international cooperation on currency management—as Léon had suggested to Congress. As Max Harris’s Monetary War and Peace: London, Washington, Paris, and the Tripartite Agreement of 1936 (Cambridge, UK, 2021) shows, this is what happened to permit the 1936 agreement among Britain, France, and the United States.

Selgin opposes any suggestion that Roosevelt had a plan for the New Deal because, he says, “the ‘coherent plan’ view informs portrayals of the New Deal as a well-oiled economic recovery machine” (p. 17). He incorrectly attributes this view to me. I do think Roosevelt had a plan, as I say in Winter War, “to perpetuate and reinvigorate the admittedly grubby, frustrating, discriminatory, and often grossly unfair institutions and practices of representative democracy in the United States, lest they be replaced by fascism.” I admit that is a lot of adjectives, but none is “coherent.” And it is not about Selgin-style recovery but about preserving and extending democracy (as John Maynard Keynes, alongside many others, appreciated at the time).Footnote ⁵

In emphasizing the New Deal’s aim to preserve and extend democracy, I agree with a line of scholars stretching from Arthur M. Schlesinger, Jr., to Ira Katznelson. Roosevelt wanted the New Deal to introduce a “broadening conception of social justice.” To judge it a failure because it did not extract maximum use from the labor force is odd. I suppose one could call it willfully perverse, but if I were to express disapproval, I would cite consequence rather than character and suggest that insisting we regard the New Deal as a subpar effort at business recovery, while ignoring its aim of broadening social justice in defiance of fascism, probably accounts in no small measure for the state of our democracy today.