Governor Mitch Daniels and historian Amity Shlaes discuss misconceptions about the Great Depression and the New Deal; reevaluate the reputations of Presidents Coolidge, Hoover, and FDR; and consider the idea of the Forgotten Man.
Governor Mitch Daniels and historian Amity Shlaes discuss misconceptions about the Great Depression and the New Deal; reevaluate the reputations of Presidents Coolidge, Hoover, and FDR; and consider the idea of the Forgotten Man.
Intro (00:02):
Welcome to The Future of Liberty, a project of Liberty Fund, hosted by Mitch Daniels.
Mitch Daniels (00:19):
Greetings to our viewers and welcome to the latest edition of The Future of Liberty, the Liberty Fund's attempt to examine that subject with the help of some of the best minds available and the most erudite people on such topics. We certainly have that today, and my favorite historian and someone who has illuminated various corners of the history of free institutions in this country and particularly its economy, and who has a lot to say, to us in the times in which we're living, by virtue of our command of the times through which we've lived. Please join me in welcoming Amity Schlaes. Amity, thanks for being with us.
Amity Shlaes (01:05):
Glad to be with you, Governor Mitch.
Mitch Daniels (01:09):
It’s hard for me to pick my favorite book of yours. They're all tied for first, but your biography of President Coolidge, for whom I think we share an enormous admiration, is certainly one of those. You defined him in your inimitable way, in two words, the Great Refrainer. We can talk about him a little later, but thinking ahead to today, I have come to think of you as the Great Debunker, because much of your economic history has taken a fresh look at understandings that at least many Americans have had about big chapters in our economic life. So let's start with the New Deal, because we all learned that it was caused by unfettered capitalism in the 1920s. Do I have that right, or is there another explanation?
Amity Shlaes (02:14):
The Great Depression was caused by unfettered capitalism. That is what we learned, Governor.
Mitch Daniels (02:21):
But you taught us something different.
Amity Shlaes (02:26):
I did. The reason we care about the Great Depression is that it was the occasion for a large intervention by the government, the largest peacetime intervention. It was also the justification. The Depression was dark, our parents told us. It was so long, that was the thing about the Depression. Not its sharpness, though it was sharp, but its duration. Imagine a period in which 20 percent of people, one in five, are unemployed, often and sometimes always at least one in ten, for a decade. That is entirely different from 100 percent of people being unemployed for a month. It was that duration that also gave it an aspect of mystery. “Oh, we do not go there. Only star economists go there. It is so hard to understand.”
(03:18):
So when I went back and looked at it, I did find a few things. One is that the 20s did not cause the Great Depression. They may have caused the crash in the sense of a business cycle. The boom is followed by the bust. We know that in any economy. But they did not cause the duration, that grinding, miserable duration. And I also discovered, by and large, that I am just writing an essay about this, Mitch, so we will see that we should think of the economy as a person, as a woman. You invite her back every year, and every year she makes a choice. Economies make choices. And every year, for a different reason, she stays away. She does not come back. Why is that? All those years, ten years.
(04:11):
And the reason she stayed away so many times, those were various. But if you wanted to look for an overarching reason, it was because the government was playing God. I didn't write that line. That came from an economist from that period named Benjamin Anderson, and I would guess Governor Mitch didn't study Benjamin Anderson, and I didn't, did you? Benjamin Anderson, Economics and the Public Welfare.
Mitch Daniels (04:37):
I confess I have not.
Amity Shlaes (04:38):
We never heard of him. But Benjamin Anderson was the chief economist of Chase Bank. He was just like those fellows you see on TV now. Every night in the papers, in those days, commenting about the economy. He was a real mainstream figure because he was the chief economist of Chase Bank. And he was the one who said, "This all has to do with the tendency of the government to play God." And then he had a second line, which I'll paraphrase, which I like very much. He said, "And when playing God failed, we just played God a little harder." Which is absolutely the correct way to capture the government intervention in the '30s. So I think Anderson said it. It’s a pity we never read him.
Mitch Daniels (05:31):
Yes, I was going to say, if I could have learned what makes women stay away, I wish I'd read him a long, long time ago.
Amity Shlaes (05:38):
Oh, I could say a male too, but I happened to pick a female since you are a male. But why did she stay away? Well, she had a different reason every year, at least a nominal reason. And then she had the big reason. And the way that I learned about Anderson, maybe some of it had been on the Liberty Fund’s excellent site. The Mises Institute has them too, but I want to mention this. One time I was talking to a Russian advisor, actually, to leader Putin, but very early in the Putin period.
(06:12):
And this advisor said to me, and it may even have been before Putin, I want to be sure, “The best American economist is Enderson.” I could not understand what he said at first, but he meant Anderson. I said, “Well, who is that?” He replied, “How can you be from the Wall Street Journal and not know who Anderson was?”In Russia, in Communist times, they had read Benjamin Anderson in secret, and we had not. And that tells you something about our university education.
Mitch Daniels (06:46):
He's probably studying economics in the Gulag somewhere now.
Amity Shlaes (06:50):
No, no, that fellow is in the United States now.
Mitch Daniels (06:57):
Reading Anderson in safety. Well, that's good.
Amity Shlaes (06:59):
In safety, yes. But that was it. And that was a transatlantic line saying, "Anderson, Anderson." I was like, wow.
Mitch Daniels (07:06):
So I think that one thing a student of yours, like me, learns very clearly is that Herbert Hoover got a bad rap that he deserved, but he got it for the wrong reasons. If he is remembered as some sort of flinty champion of free enterprise who stubbornly adhered to those principles until the economy went off the cliff. What did you teach us instead?
Amity Shlaes (07:38):
Well, what did I discern instead? Oh, by the way, that Russian economist was Andrey Illarionov, who some people have met, who was at Cato for a while. He also is a global warming skeptic. Brave man.
Mitch Daniels (07:57):
Probably in more danger here than he was preaching free enterprise in Putin's Russia.
Amity Shlaes (08:02):
It can be, right? So the thing about Hoover that we learned was that he was a solid free marketeer and that he was unkind to the Bonus Marchers and let the generals drive them back. The riot army reacts. And I think that is about all we learned, but definitely the laissez faire Hoover. So he is paired with Coolidge, and this is a poor characterization of Hoover, first, Mitch, because of his temperament. He was a hands on, energetic guy. If I were to compare him to a modern politician, I would definitely pick Mitt Romney, or even his father, for those who remember him, George Romney. This is a very clever person who has done amazing things in the private sector and who expresses that energy through government rescues.
(09:04):
And that was Hoover by temperament, whereas Coolidge by temperament, well better do nothing, first do no harm, very different type of guy and he was awfully charismatic in his younger years. Hoover's been so mocked that we forget he was much admired. He was one of the best paid men in the private sector in his generation when he was researching energy. He was a mining engineer from Stanford. And he fed the starving Belgians during World War I and after, and he fed the starving Russians. But he did intervene when he became president in '29, not so much out of ideology, if we put it that way, but out of political positioning.
(09:45):
He saw people were in trouble. Out of understanding, he understood the banking crisis better than many. He'd been at Versailles and Cain said of Hoover, "He's the only guy who understands what we're doing to Germany, what we're doing with Versailles and all these treaties. We're guaranteeing future instability by imposing too many punishments on Germany." Hoover understood that. He understood about debt and international banking. He was very skilled in that area. He kind of thought maybe a little more taxes would be good, maybe a little more control would be good. And it was a little bit too much all about Herbert. So he knew tariffs were wrong, he knew that because he'd worked internationally. Anyone who's worked internationally has seen the cost of tariffs. However, he allowed a bad tariff to go through. We studied that, Smoot Hawley, and he kind of fiddled with it and told his own vanity that the fiddling made it all right, that he'd signed off on Smoot Hawley.
(10:50):
He raised taxes. The reasons he had to do so were tied to the gold standard period, when it was much harder to run deficits, but he did it a little too quickly. He was also a bit too gimmicky. I do not know if you know this, Mitch, but Hoover actually had a tax cut. Hoover’s tax cut was, at one point, a desperate one year cut that dropped the top marginal rate to 24 from 25. It was very manipulative, an effort to advance consumption by encouraging people with lower taxes and pulling transactions forward. That was Herbert Hoover. He was a tinkerer. It did not work very well, but there he is on the record. For a while, he had a lower tax rate than Calvin Coolidge. He also beat up markets and officially berated short sellers.
(11:42):
And the last thing I will say, which to me is worse than Smoot Hawley, is that he pressured businesses to pay high wages. And we know the reasoning. Pay high wages and workers will have money to spend and buy the car. That is what Henry Ford said about his workers. But businesses could not afford high wages. So when you tell an employer to pay high wages when profits are down, what does the employer do? The employer lays people off or fails to rehire, because it does not want to offend the president.
Mitch Daniels (12:16):
Thank goodness we learned that lesson. Except in about two dozen states we could name.
Amity Shlaes (12:24):
Yes, sir. And that was carried on, in fact, episodically, but kind of persistently throughout the '30s. They would say, "Let wages be up." And the companies would say, "Sure." But that contributed to the devastating duration of the unemployment of which I spoke of earlier.
Mitch Daniels (12:43):
Yeah. Well, so if we had it wrong about Herbert Hoover, the laissez-faire champion, surely we had it right that FDR fixed all this and his policies saved the country and therefore need to be replicated and expanded in the modern age. Or do I have that wrong too?
Amity Shlaes (13:04):
Well, that is what our parents told us, right? And there are certain lovable things about the New Deal. Certain people, in fact many people, were employed through government programs when they had no jobs. That is not even so expensive, and it is not so terrible. The sense of human dignity that the New Deal made work jobs provided was important. The sense of confidence that Franklin Roosevelt gave should not be dismissed. He was more of an admiral than a domestic economic leader. And when the war came, he was a Navy president, and he did pretty well there because that was his strength, leading people through hardship. His economics, though, were quite poor. Therefore the New Deal, which was his project, did not really help the economy, and the evidence suggests that it hurt the economy repeatedly. And of course, there were many New Deals. The New Dealers altered their policies again and again and twisted in the wind.
Mitch Daniels (14:09):
Unemployment at the end of the '30s. I mean, there may have been a certain virtue in the make work jobs, but unemployment was, as you recorded, 18%, something like that in 1938.
Amity Shlaes (14:22):
Yes, there was the so-called depression within the Depression and that related to the labor price. For the geeks, I'll say what happened was we passed a strong labor law from which I believe Indiana probably liberated itself through the right to work, Wagner Act, and then Taft Hartley.
Mitch Daniels (14:44):
Only in 2011.
Amity Shlaes (14:46):
Yes, very late. All right. Strong labor law, the Wagner Act, which included the closed shop. That meant you likely had to be in the union even to apply for a job, and certainly to work there, and you had to pay dues. In those days, they cared whether you were in the union or not, and whether or not you shared the politics. That law was much stronger than it became later, after it was scaled back by the Taft Hartley Act, and it terrified business. And John L. Lewis, the big labor leader of the mine workers, said, “You are going to pay us a lot, and we are going to occupy your factories.” This was what they called a sit down strike, something no longer common today and terrifying to an employer, because it is his property. People are on his property occupying it until he pays them what they want.
(15:35):
In the background was the president, who supported the workers. Organized labor was very important for President Roosevelt’s reelection in 1936. So businesses gave in. They paid very high wages, and they did not even know, Mitch, how high. Why? Because neither did John L. Lewis, for all his faults, since there was deflation. So businesses were paying wages far higher than they were used to, far higher than a century long trend. If you go back and look, and there are full time economists who have studied this and taught me a great deal, notably Lee Ohanian and Harold L. Cole, whom I recommend, you can see it clearly. One is at UCLA, I believe, and the other used to be at Penn. In any case, the wage level was official and more or less mandatory, and it was extremely high. That pushed up unemployment in a tragic and unnecessary way. I never understood that labor side until I went and did the research. Mitch is making me pull out all these things I have not thought about in fifteen years, so here we go.
Mitch Daniels (16:47):
Well, you've helped some of the rest of us think about it. I'll drop the sarcasm and go straight to a reality, which you depict so beautifully in The Forgotten Man, which is that FDR was, correct this if you see it differently, but to me, far less an ideologue than a constant improviser. There's a beautiful quote in your book somewhere, someone said that attempting to divine order in his economic policies as they unfolded was like looking at the room of a teenage boy and imagining that an interior decorator had planned it that way.
Amity Shlaes (17:28):
Exactly right. I think that was probably Ray Moley. Ray Moley was involved in, I believe, the founding of AEI and the Tax Foundation. He was the editor of Newsweek. He is the one who hired Henry Hazlitt. Ray Moley was one of those key behind the scenes figures you want to know about, someone who shaped your intellectual life. I think it was Ray Moley who said this. It was a long time ago. But I love that description of Roosevelt. They said first class temperament, and the unkind people said second class intellect. The part of his intellect that we can fairly describe as second class, even without wanting to insult him, is that he was incredibly inconsistent.
(18:10):
So when they had tariff policy and Cordell Hall, who's a relatively consistent figure, said let's reduce tariffs, and then someone else wanted something with more tariffs, Roosevelt took his hands and said why don't you just weave the two together? Opposing policies. But he was essentially a political animal. He's a happy guy, the kind of guy you'd want in the room, a brave guy, one of those people who pulls rooms together with compromise. So that was that.
Mitch Daniels (18:48):
According to Churchill, though, he made a terrible martini.
Amity Shlaes (18:51):
Well, they had different conceptions of a martini. I think that's ethnocentrism on the part of Churchill.
Mitch Daniels (18:57):
So let me ask you this question. Who is the greater threat to liberty? Or put it this way, is a crafty politician, if that's the best way to look at FDR, less a threat long-term than the committed ideologue, of whom we have plenty today?
Amity Shlaes (19:22):
I don't know. I mean, they take turns. The ideologue gets the crafty guy into office, then tells him what to do. There was a very murky ideologue whose influence I didn't truly recognize in the writing of The Forgotten Man, that's the book, which was published in 2007 now. There's a writer at the Council on Farm Relations, an economist named Ben Steil, S-T-E-I-L. And he just did a profile of Henry Wallace, the agriculture secretary, and Henry Wallace was way weirder than we thought. He talked to spirits above and set agriculture policy off that. I'd say he was an ideologue, but he played the role of ideologue, and he basically wrote the Ag Acts.
(20:19):
He believed in resettling people. That was a Soviet type idea that he embraced. He liked to move large populations around. We had a Resettlement Administration, and then we had something called the Farm Security Administration that carried out those efforts. Much of this came from Morgenthau, who traveled to Russia and China. He was badly misled by Potemkin villages and reported glowing things back to Washington. And my general view of the New Deal, Mitch, is not that the major New Dealers were all spies. That is not the case. They were men who were overly influenced by Russia. In a sense, they were the fools of Russia.
Mitch Daniels (21:02):
Well, let me venture a theory that the ideologue alone is rarely successful. We could name Wallace, and we could also name people from the contemporary day who are so rigid and so extreme in their views that they do not often prevail. But when the ideologue gets hold of a crafty politician, someone who puts a more moderate face on these policies and has greater skill at carrying them out, that becomes a dangerous combination. Is that a useful way to think about a threat to liberty today?
Amity Shlaes (21:44):
Yes, sir, I concur. I think that's brilliant. So the crafty person here, or let's say the brilliant politician to be was Roosevelt, wanted to win. And he had a nice leaderly demeanor. People fell on their knees in front of him just because he was this affable, happy guy and kind of American royalty in terms of the Roosevelt family. But it's a bit strange.
Mitch Daniels (22:24):
Another thing that, leafing back through the book, I had frankly forgotten, or at least had not associated with current events, is what we now call lawfare, namely the use or abuse of legal processes in politics. That practice has a clear predecessor in the New Deal period. I am thinking of the selective prosecutions of Andrew Mellon and Samuel Insull, which you describe so well. And while we are at it, there is also the release of tax data, something many people would be shocked to learn was not illegal until much later. Both of these practices have recurred recently, and it is hard to think of a greater menace to freedom than actions like these.
Amity Shlaes (23:24):
Well, I think the story, or rather the stories, are important. Samuel Insull is a name worth remembering. He was from Chicago, yet people there often do not know his name, even though he built the electricity network. It was very modern. He also built the Opera House. I never once heard his name, even though I went to the Opera House every year with my father. In that sense, he has been erased from history. Insull, I N S U L L. He ran a large company, which went by various names, including Peoples, and he used holding companies. It was very hard to raise capital for electricity projects because they required enormous investment. You can question the methods he used, but at the time it was extremely difficult to raise capital. When the Depression came, his business began to fail, and eventually he lost it.
(24:23):
All right, do you ruin his life for that reason or do you help him to keep going, because he was the innovator who wired Chicago. And the government chose to prosecute him. That was first Illinois and then the federal government, even before the Roosevelt administration, and then under Roosevelt. And he spent the rest of his life in court defending himself. There's a nice cartoon of him jumping on a jungle gym from one loop to the next, trying to get ahead. And his life was effectively ruined. He died in Paris.
(24:58):
He was a bit of a rogue, but entrepreneurs sometimes are. And his essential hypothesis was brilliant, namely that a network of wires could power an entire city, rather than each family needing its own generator or something similar, which other electricity innovators were experimenting with in New York. He gave his employees shares, which was a good idea and very progressive. But when those shares became worthless, that policy ended up working against him in a perverse way. But the real hero of the book, the businessman who truly warrants our attention, was Mellon. Imagine Mellon as the superstar of the 1920s. He was like, I do not know, Warren Buffett or Sergey Brin.
Mitch Daniels (25:47):
What president said that Hoover was the third of three presidents who served under Andrew Mellon?
Amity Shlaes (25:53):
Exactly. He knew everything and it was kind of intrepid. He had three presidents and he was rather careful with his taxes, as successful business people tend to be because they don't want to waste the time of the audit. Most people are reasonably saying they don't want to spend years in audit. So they'll pay or even overpay a bit in order to reduce the likelihood of attention from tax authorities. And Mellon was such a case. So nonetheless, the Roosevelt administration went after him. This wasn't the revenue authorities. In fact, Mr. Irey, who was the head of the forerunner to the IRS, didn't want to go after Mellon particularly. It was the administration, the Justice Department and the president, and the president said to a young lawyer, who happened to be Robert Jackson, "Go get him." And Morgenthau said, "Go get him."
(26:50):
Robert Jackson was from New York, like Roosevelt, and they had a bit in common, so Roosevelt went to get him. According to Morgenthau, the young Robert Jackson, who later became a Supreme Court justice and a prosecutor at Nuremberg, said, “Thank God I have such a boss. I’m going to go after this bad man, Mellon.” And they did, for years and years. Mellon was old, and going after an old man like that always raises a question for me: is this more theater than justice? When you pursue someone who is over eighty, no matter what they may have done, it invites that question. And in Mellon's case, he didn’t do anything illegal. They had a great deal of trouble finding any betrayal in his taxes or any illegal tricks. He took deductions, but they were legal deductions.
(27:43):
This whole episode colored his last five years. But there is a moment I very much like, and one I think is worth recommending and remembering. I believe it was Mr. Mellon’s birthday. He was in court in the middle of the Great Depression, in the midst of his endless prosecution, when reporters asked him, “Mr. Mellon, a comment on your birthday?” Mellon replied, “Oh, this period is just a bad blip in the glorious progress of American economic growth.” In that response, he brushed aside the New Deal’s premise that the economy fundamentally did not work. Instead of saying, “I’m innocent,” which he was, he said, in effect, “This is just a passing problem.” That quality of gentlemanliness is worth a great deal.
Mitch Daniels (28:30):
Can you think of an example of these abuses in the period between Insull and Mellon and, very recently, it would've seemed we'd learned this lesson, that these really are illicit practices, but they've reemerged.
Amity Shlaes (28:50):
They tend to reemerge when the cases are personal, particularly with innovators, because innovators are always partly rogue by temperament. My children always laugh and say that I side with the criminal. But when I think about it, I try to ask: who really didn’t deserve what they got, or the sustained attention they received? I’m not always sure. Sometimes you can also say that the market will punish an executive, so the government doesn’t have to. There were certainly absurd cases, like the antitrust case against Microsoft years, even decades, ago. You remember that one. We prosecuted, or persecuted, Microsoft for years because of a deal involving a browser that was supposed to make them a monopoly.
(29:50):
And the name of that browser is something we don’t even remember now, because Google came along and proved that we didn’t even need Microsoft, let alone the little browser it was bundled with. The idea that Microsoft could gain lasting control was clearly overblown. There was also, of course, an ad hominem element directed at Bill Gates.
Mitch Daniels (30:15):
It didn't have the same political character, though, as the ones you wrote about, which I think were political foes of the administration as we have seen also more recently.
Amity Shlaes (30:34):
I think a good example would be Arthur Andersen and its involvement with Enron. Enron made serious errors, and people at Enron lied to their board. Arthur Andersen was the accounting firm, and it, too, made errors. As the accountant, it should have known better. It was responsible for determining whether the data and books were accurate. Somehow, though, the entire firm became a casualty of the mistakes made by a group of people in the Houston office who were working with Enron. In one sense, that outcome was defensible, because the partnership structure reduces moral hazard. If you are partners with people in Houston working for Enron, it is in your interest to make sure they are not making serious errors. But it was also bad, because the punishment did not fit the scale of the crime.
Mitch Daniels (31:33):
Let me ask you about the title of your book on the New Deal, The Forgotten Man. You point out that this term has been used in two very different ways, and I’d like you to describe those to our audience. I’d also like you to comment on its current use, and whether there may now be a third category that deserves that label. Who is the forgotten man, or person, and how might that figure have changed over time?
Amity Shlaes (32:18):
It’s a very important question. I don’t know as much about its use today, and I’d say it’s now mostly just a good phrase. But going back historically, let’s take this chronologically. There was a Yale professor named William Graham Sumner. We don’t learn much about him today, much like Benjamin Anderson. He’s been somewhat sidelined because he said some eugenicist things, but he was a remarkable figure. He was a strong advocate of free trade, very solid in economics, and he liked to explain ideas through what he called a bit of algebra. This wasn’t a one-year influence. Like Benjamin Anderson, he was known to everyone in his generation. He taught for thirty years, and his ideas were widely discussed. One of his famous examples was his “little algebra.” He said that A and B get together to help X, the poor man, the man in need, and there is nothing wrong with that.
(33:05):
Then comes the problem. A and B get together and coerce C into co-funding, supporting, or living with their perhaps well-intentioned, but possibly dubious, project for X. C is the forgotten man: the man who pays, the man who prays, the man who is not thought of. That forgotten man could be the taxpayer, or anyone drawn into a project simply because of where he lives, where he works, or the jurisdiction he happens to be in. I like that formulation a great deal. In the graphic novel version of The Forgotten Man, which I have right behind me, there’s a cartoon illustration that captures this idea very well. It’s not stupid, but it is definitely a cartoon. I sometimes teach with it, and there are many images depicting the forgotten man.
(33:56):
So Roosevelt took that phrase, not really thinking about where it came from, though he probably at some point heard about C, the taxpayer, and turned it and said, "I want to help the forgotten man at the bottom of the economic pyramid." So he was referring to X. Fine, but he forgot about C. And in the '30s, they were better educated than we were, and they remembered Sumner and they remembered the whole thing, so they would debate who has the right forgotten man? Maybe President Roosevelt has the wrong forgotten man, C is the forgotten man, and certainly towards the end of the Great Depression. For example, in Muncie, in Muncie in the paper, there was an interview with a guy who said, "Who is the forgotten man? I know him as well as my own undershirt. He is the guy who is trying to get through working and is watching while others are on the dole." It was a little bit of a harsh statement, but there it is and that's in the Middletown book. Isn't it Muncie? Am I right?
Mitch Daniels (34:59):
It is. It is.
Amity Shlaes (35:00):
Yes, it’s Muncie. It’s called Middletown, but it’s actually Muncie. It’s a beautiful portrait by progressives of America in the 1930s, and there is a lot of truth in it. I think they did an honest job, and it’s a wonderful book. Middletown, by the Lynds. Those are the forgotten men. Another forgotten man is the army. And today, I would say the forgotten men President Trump refers to are people who are, in Sumner’s sense, roped into projects they may not agree with. This is very topical, isn’t it, Mitch, because I saw “the forgotten man” at the top of the GOP document that serves as their platform last night. Whether those are social projects, unconventional medical policies, or economic projects like high taxes, I think that is who President Trump is referring to.
Mitch Daniels (36:05):
Probably, I mean, to the extent that it has a substance, it may have a more cultural and economic context today. People who feel that they're at liberty to live lives as they've chosen are constantly under pressure. With regard to the A, B, C, and X formulation, with the most progressive tax code in the OECD, with 1% of American income taxpayers at least paying half, roughly, of all the income taxes, and you know those statistics, C's not really as much on the hook as he might've been before.
Amity Shlaes (36:57):
I would say C would be the following. A good example is when inflation in California drove property taxes up, which gave rise to the famous proposition and related reforms. That forgotten person was someone no one ever explicitly considered. Arthur Burns did not say to himself, “If I accommodate President Nixon to save democracy, I will hurt first-generation California homeowners.” But that was the unintended consequence. Another example of a forgotten group, which I’ve been studying recently, is students who once participated in gifted programs in secondary school, or even earlier, such as in eighth grade.
(37:42):
I'm not a huge fan of gifted programs because they segregate kids, but sometimes with a kid who needs extra attention to learn a lot and gets bored, a gifted program prepares him for high school. We've by and large abolished gifted programs in many places because they sound snobby to us, and as a result, we've hurt many of those students. Students, I'm thinking, who could learn trigonometry in ninth grade or eighth grade, and instead only get to it in 11th, and by then they're too distracted by other projects outside school and they don't learn trigonometry. That would be a small forgotten man. Who do you think is the forgotten man?
Mitch Daniels (38:30):
I think it is the person whose values have been trampled, or at least disparaged and marginalized, not only by the government but also by like-minded people who now control the so-called commanding heights of the information world.
Amity Shlaes (38:57):
Can I say one more thing or are we out of time?
Mitch Daniels (39:00):
No, I have a couple more questions, so say it quickly and I'll move on to something else.
Amity Shlaes (39:01):
There's a mean thing people say about older women. They call them Karens. Have you heard that expression?
Mitch Daniels (39:12):
Yes.
Amity Shlaes (39:12):
Well, I was like, well, who are these Karens? They're older women. They're not poor. They're not rich, necessarily, but they're the kind of bossy ladies who say to the kid in the supermarket, "Don't lie on the belt because your hair might get caught." I mean, a bossy lady who's bossy in a room. And there's a whole culture of nastiness. I think the Karens are the keepers of the flame of civilization, these older moms. Maybe that's because I'm one. And the other day, someone was a little bit irritated with me and he said, "What's your name?" I said, "Karen, I'm going to be Karen." Because these older women, they're the keepers of the flame and they have a lot of knowledge. Nobody listens to them. They're not new, they're not young.
Mitch Daniels (40:02):
I want to ask you about younger people. Another of your great books, your book on the great society, Reexamining the Great Society, begins with the line, "Why not socialism?" And many of our younger people, at least according to surveys we all read, think socialism, however they understand it, sounds like a swell idea. Where does that come from and what's the antidote?
Amity Shlaes (40:34):
Thank you for noticing that, Mitch. It's always a pleasure to be with Governor Mitch because he notices the parts I care about, like the story about the boys' room and now this. Well, I believe that book has a little epigram at the beginning, and it's actually from Coco Chanel. She said, "Nothing is new. It's just forgotten." That is, you bring in a new fashion, it looks new, but that's because it's just long enough that enough people don't remember that it was there before, whatever it is. And we always forget the importance to young people of being new and different, of rebellion. One reason socialism is popular is it's fun to support the thing that older people seem to dislike, and you don't really have the evidence anymore of why they dislike it because you didn't experience it yourself. You didn't go to East Germany in 1989. You weren't even born in 1989. So unlike us older people, they didn't have that experience of seeing the damage of socialism. So it's a combination of ignorance and just a generational rebellion.
Mitch Daniels (41:53):
Our old friend, PJ O'Rourke, and how I miss him, had a fairly economical diagnosis of this problem. He said, "Young people, like people everywhere, wish the world was nicer. They want somebody to make the world nice," He said, "But they're broke, and so they want to make the world nice with your money and your time." And it may not be much more complicated than that, but in any event, none of them will have read your books, very likely, let alone some of the greats that you have cited during our conversation here.
Amity Shlaes (42:36):
I think many people have read these books. Or rather, many people are familiar with them. Even when they have read them, the content is often so foreign to their assumptions. It really isn’t outrageous to say that Franklin Roosevelt was a mediocre economist. About half of economic historians who are trained in economics, as opposed to those trained primarily in history, acknowledge this, and have done so repeatedly. But that conclusion remains foreign to many people. Some of these misunderstandings are our fault. This situation is, in part, our responsibility.
(43:18):
Why? I think we failed to understand how important it is to teach straightforward history in schools. That’s essentially all I try to do with Coolidge: teach straightforward history. By that I don’t mean right-wing history. I mean fair, balanced history that explains both sides and the reasons behind them. For example, many people opposed the New Deal, even though Roosevelt won elections. I recently published a small book with the American Institute for Economic Research that collects critiques of the New Deal, and they were numerous and, in some cases, quite brilliant. This is our fault. We failed to get through institutions like the teachers’ unions. Teachers’ unions tend to favor the government, and they play a major role in selecting teachers. We failed to inform students. To me, that is a major failing.
Mitch Daniels (44:12):
I was fortunate enough to spend more than a decade in higher education, and a professor said to me one time, "It used to be that students would come to college and you would worry that they might be indoctrinated while there." He said, "Now they arrive indoctrinated, or maybe they simply arrive uneducated." You're a graduate of Yale University, one of the most prestigious that we have, and they've had some trouble there recently where it appears that a large percentage, anyway, of young people aren't imbued with passion for freedom and free institutions as we've known them, whether it's free markets or a republican form of government. What gives there?
Amity Shlaes (45:06):
Well first I want to say I agree with your professor. And at Coolidge, we work basically with high schoolers and beginning college. That's when we get them anyway.
Mitch Daniels (45:15):
You're talking about the Coolidge Foundation?
Amity Shlaes (45:16):
Yes, the Coolidge Foundation.
Mitch Daniels (45:18):
I neglected to ask you about it, but please say a word about the Coolidge Foundation because it's a fascinating project.
Amity Shlaes (45:21):
Calvin Coolidge had a few core values, and he lived by them. He didn’t constantly enunciate them or give great speeches about them, but he embodied them. He believed in restrained government, civility, debate, low taxes, and the individual, especially individual liberty. The reason we exist is to introduce Calvin Coolidge to young people. We do that through a scholarship program, on whose jury Governor Mitch has served. That scholarship is currently the most popular of its kind in the United States, almost as innovative as what Mitch did at Purdue. The scholarship honors Coolidge, and this year we had 4,200 applicants for five awards. Every applicant for that scholarship has to write two research essays on Calvin Coolidge’s policies.
(46:20):
So it’s a way of teaching a large number of young people. Imagine two or three essays, sometimes three, on Calvin Coolidge written by 4,200 students in a single year. Over time, we’ve accumulated many tens of thousands of essays, and that’s how we reach high school students. That is the purpose of the foundation. Speaking about Yale, or really any university, I think the situation is tragic, though I don’t believe in writing these institutions off entirely. I do think that giving to them may not be a great idea right now, since they already have ample resources. Universities change. A university is not just what it is at a given moment, but what it has been over time. The particular tragedy of these schools, and it’s not just Yale, is that the world invested enormously in creating communities like Yale, Princeton, and Harvard, with beautiful dormitories and quadrangles designed so that students could meet, debate with one another, and temporarily shut out the wider world.
(47:25):
And what has happened is that when you go to Yale or Princeton or Harvard, or frankly any other school, including many in Indiana, you look around and think, “That’s a lot of horticulture. How many gardeners did it take to care for these magnolias, these pines? This is a beautiful place.” Yet what the political correctness movement, and the broader student protest culture, has done is trample those spaces without regard for what the institution is trying to do, and without any sense of affection for the institution itself.
(48:03):
I think what bothers many undergraduates at all these institutions, and certainly Yale, is not just the content of what the protestors might be saying. Their disloyalty is what bothers them. So I hate Yale. Why should I be respectful of Yale? It gave me financial aid, but it's a crook. No thankfulness. Coolidge was a very thankful man and he taught gratitude. The net effect is the century old effort to create commons where there can be interesting discussion and where we can learn, is so undermined and dashed by this.
Mitch Daniels (48:41):
Have you been invited back to talk about your work or any of your books?
Amity Shlaes (48:45):
Yes, a number of times. I’ve been invited by the colleges, by Saybrook, and by the Buckley Program, which is an outside group, but also within Yale itself, including a seminar on the history of economics told through unconventional books. So I don’t think Yale is awful. The economics department, in particular, is interesting. Last year, Mitch, I won the Buckley Prize, which led me to take a closer look at Buckley’s work. I went back and read God and Man at Yale, which I had never read before. I hadn’t read it because I wasn’t sure about the “God” part, and because I’m a woman who attended Yale, and Buckley was famously critical of coeducation. I knew that from personal interactions, and I had thought, “I don’t really need to read that.”
(49:35):
But I finally went back and read it after winning this prize that honors both him and me, and it is a phenomenal book. A large portion of it focuses on the teaching of economics. I don’t know if you’ve looked at it recently, but two or three chapters describe the revolution in economics instruction that came to Yale around 1945. Many of the earlier figures, like William Graham Sumner, were pushed aside. Much of the free-market material was dropped, and it was replaced by a more fashionable but ultimately misguided approach.
Mitch Daniels (50:11):
People who thought the New Deal was a swell deal. They hadn't read your book.
Amity Shlaes (50:12):
Bogus Keynesianism. And to Buckley’s credit, he doesn’t just list course titles. He actually examines the syllabi. As an undergraduate at Yale, he obtained them and analyzed both the courses and the instructors, not to be mean-spirited, but to show how quickly and how dramatically Yale shifted between 1945 and 1955. I remember thinking, “This is really good.” Unfortunately, the university largely stayed on that path afterward. But so did most other institutions, which is why I would never single out Yale in particular.
Mitch Daniels (50:48):
Well, I didn’t expect you to, and I wouldn’t want you to. And if they’re inviting you back on a regular basis, there’s certainly hope for them. Amity, I’ve made it a practice to close these conversations by asking our guests to speculate a bit. You’ll be there to see it; I won’t. In 2050, do you think America will be more or less free than it is today, and why?
Amity Shlaes (51:15):
Well, Mitch always flatters people. I doubt I'll be there, but I will be optimistic about 2050. I think that particularly because I worked on the Great Depression, nobody ever thought we'd get out of the Great Depression some years, '35. So I think we'll get out of our confusion too, and we've got to train new leaders not what to think, but how to think. And I'm so glad to work with Mitch in that endeavor.
Mitch Daniels (51:47):
Well, we are delighted to work with you and so grateful for your time today, but more for your life of illuminating the rest of us, and we know there's much more of that to come. So Amity Schlaes, congratulations on all you've achieved. Thank you once again for joining us here, and we look forward to seeing and reading you frequently in the years ahead. Thank you.
Amity Shlaes (52:12):
Thank you.
Mitch Daniels (52:14):
And thanks to all our guests for joining us. We'll continue this series and hope that you will provide us with your feedback and your suggestions for guests as delightful as the one you just listened to. Thank you very much.
Outro (52:30):
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