Lessons from the Great D

And no, FDR did not turn the economy around, certainly not to the extent that many of us had been taught. The economy of the 1930s was actually quite sluggish, with the surviving banks often reluctant to lend. It wasn’t until the World War II buildup that things turned around. The NYT's Steve Lohr provides a Cliffs Notes version of the New Deal's successes and failures. “We hope that Obama is going to do better,” says Kenneth S. Rogoff, a Harvard prof. “Otherwise, we’re in trouble.”

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 bailout.

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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.

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In 1934, the British economist John Maynard Keynes visited Roosevelt in the White House to make his case for more deficit spending. But Roosevelt, it seems, was either unimpressed or uncomprehending. “He left a whole rigmarole of figures,” Roosevelt complained to his labor secretary, Frances Perkins, according to her memoir. “He must be a mathematician rather than a political economist.” Keynes left equally disenchanted, telling Ms. Perkins that he had “supposed the president was more literate, economically speaking.”