It is difficult to grasp the rapid expansion of government programs in the early months of the Roosevelt administration. His advocacy and implementation of government social entities redefined the role of government in the U.S. for coming generations. He saw his New Deal policies not only central to his legacy but to his re-elections.
Franklin D. Roosevelt’s governmental activities, however, cannot be fully understood or appreciated without an understanding of his relationship with John Maynard Keynes. The rest of the world was intrigued and abuzz about the economic and political philosophies of Karl Marx and Vladimir Lenin. Hot new ideas of centralized governments and controlled economies were being touted across Europe and Great Britain. Scuttlebutt had it that capitalism, free market economies, and even democracy could be lumped together in a heap and considered failed relics of another day.
Keynes did not see himself as just another author of economic ideas. His writings portray himself as an historic individual who had the answers to the inadequate and seemingly failed economic systems especially of the UK and America. His confidence and insistence almost spilled over into an elitist position as he endeavored to guide and mentor Roosevelt through the social and economic changes in America.
Much of the Roosevelt and Keynes relationship for years had been left to conjecture. More recently, however, letters between Keynes and Roosevelt have surfaced and been made available to the viewing public. My response, as I study the era more closely, is that of surprise that the U.S. did not travel more quickly and farther down the road of progressive socialism than it did. FDR was never defeated in a presidential election. In history’s supermarket of dictators, eyebrows are usually raised when the Castros, Kim Il Sungs and Robert Mugabes approach that mark of continuous control.
When FDR ran into opposition over his programs of deficit spending, regulation, and unparalleled politics, he sought to enlarge the Supreme Court to guarantee theproper legal interpretations. He lost the battle of direct takeover but was still able to appoint eight of the nine Supreme Court Justices. What followed was a pattern of presidential Executive Orders and a constitutional law revolution that ultimately resulted in the government legally being able to regulate the economy.
I would encourage you to read some of the Keynes/Roosevelt correspondence for yourself. The personal letter, from which I will be quoting here as an example, can be located at www.fdrlibrary.marist.edu/about fdr/pdfs/smFDR-Keynes_1938.pdf. I love it because it was hand-typed on King’s College stationery, Cambridge, UK
In Keynes’ letters he does not hesitate to put pressure on FDR to take control and move America to a centralized, government controlled, economic system. Allow me to share some direct excerpts from the 1938 personal letter from John Maynard Keynes:
- Can your administration escape criticism for the failure of these factors to mature? Take housing. When I was with you three and a half years ago the necessity for effective new measures was evident. I remember vividly my conversations with Riefler at that time. But what happened? Next to nothing. The handling of the housing problem has been really wicked . . . I should advise putting most of your eggs in this basket, caring about this more than about anything, and making absolutely sure they are hatched without delay . . . If a direct subsidy is required to get a move on . . . it should be given without delay or hesitation.
- Next, utilities . . . Why not tackle the problems by insisting that the voting power should belong to the real owners of the equity, and leave the existing organizations undisturbed, so long as the voting power is so rearranged . . . that it cannot be controlled by the holders of a minority of the equity . . . Personally I think there is a great deal to be said for the ownership of all the utilities by publicly owned boards.
- Finally, the railroads. The position there seems to be exactly what it was three or four years ago . . . Nationalize them if the time is ripe.
- Businessmen have a different set of delusions from politicians, and need, therefore, different handling. They are, however, much milder than politicians, at the same time allured and terrified by the glare of publicity, easily persuaded to be “patriots,” perplexed, bemused, indeed terrified, yet only too anxious to take a cheerful view, vain perhaps but very unsure of themselves, pathetically responsive to a kind word. You could do anything you liked with them, if you would treat them (even the big ones) not as wolves and tigers, but as domestic animals by nature, even though they have been badly brought up and not trained as you would wish . . . If you work them into the surly, obstinate, terrified mood, of which domestic animals, wrongly handled, are so capable, the nation’s burden will not get carried to the market . . .
- I accept the view that durable investment must come increasingly under state direction.
- I regard the growth of collective bargaining as essential.
- I approve minimum wage and hour regulation.
- But I am terrified lest progressive causes in all the democratic countries should suffer injury because you have taken too lightly the risk to their prestige, which would result from a failure measured in terms of immediate prosperity. There need be no failure.
It is easy to see how Roosevelt needed Keynes to accomplish his political aspirations, and Keynes needed Roosevelt to accomplish his grand international economic dreams. It was almost as if Keynes was afraid that FDR would not act quickly and completely enough to allow Keynes’ grand ideas to be implemented into America’s economic and political system as true answers sufficient to save the economy and culture. Keynes was trying to establish the shining light of a controlling centralized government, and to extend across the ocean the new titillating socialist experiment.
It seems to me that Keynes saw himself as the economic maestro who was afraid that his pupil would not quite get the scope and importance of the performance and mess up the whole concert, thereby disallowing the maestro his deserved place in history. What a lucid example of cultural economics, where historic transformation was taking place at the intersection of culture and economics.
Next Week: So long, FDR and Keynes
(Research ideas from Dr. Jackson’s new writing project on Cultural Economics)
© Dr. James W. Jackson
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