Hauenstein Center for Presidential Studies

Nothing to Fear? Debating the 1929 Economic Collapse

Amity Shlaes vs. Jonathan Alter, October 12, 2009

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On October 12, 2009, the Hauenstein Center for Presidential Studies and the Seidman College of Business at GVSU co-hosted a debate between Bloomberg's Amity Shlaes and Newsweek's Jonathan Alter.  The debate was titled "Nothing to Fear? Debating the 1929 Economic Collapse," and was hosted at Fountain Street Church in Grand Rapids, Michigan.

Gleaves Whitney, director of the Hauenstein Center for Presidential Studies, began the evening by offering an introduction of each of the speakers.

Ms. Shlaes began the debate with an ten minute oral argument explaining why FDR's actions worsened the Great Depression: "[FDR] did something that we never talk about, but I have been studying lately, which is he let the price of labor get too high.  What does that have to do with depression?  There is a lot of scholarship on this topic, and I tried therefore to lay it out in the book.  The NRA, that monopoly law I spoke of, and then the Wagner Act, the big union law, that you know both pushed up labor prices.  Maybe people will pay more than the economy could stand, more than a fragile economy could stand.  There are two scholars, Harold Cole and Lee Ohanian – and I say their names carefully because they have meant so much to me in my studies – who showed that labor prices in the 1930s were 20% above the trend for the century.  That is extremely weird given the level of unemployment.  Those phrases that we heard from our parents and grandparents, “nice work if you can get it.”  It was okay if you had a job about the 1930s.  They were true.  By helping organize labor and overpaying it, we were creating a second forgotten man, the man who did not happen to be in the union and get that benefit.  The man, whom the employer who was relying on government to set the prices, could not longer afford to hire.  This was the ultimate jobless recovery -- the 1930s."

During Mr. Alter used his first ten minutes to defend FDR's approach to the Great Depression: "I saw Senator Mitch McConnell on television recently and he was saying he had been doing some reading about the New Deal.  Perhaps he was reading Amity’s book and some others…  And he said he was arguing against stimulus programs and he said that he found that history showed us that Roosevelt’s stimulus, big government spending, did not get us out of the Depression.  It was World War II that got us out of the depression – ha, ha, ha he was saying.  It wasn’t the New Deal, it wasn’t those big spending programs, and I did something I probably shouldn’t have.  I started yelling a bit at the television.  I said, 'What do you think World War II was?'  It was massive government spending, Keynesian economics on steroids.  It got us out of the Depression.  That massive government spending is what brought us out."

The economists featured in the breakfast panel the next morning watch the debate between Ms. Shlaes and Mr. Alter.

Ms. Shales responded to Mr. Alter's argument during the rebuttal period: "I wonder whether you could have had the CCC and all the wonderful things we do feel nostalgic about that did employ our parents and our grandparents, maybe when they had nothing else to do that week, and also not have high taxes and not attack business and not change the rules all the time and not try to run the economy with strange schemes.  But I have a sense they go together.  That you are going to be dramatic, so you create great social employment programs, and you also do great big things to the economy.  A crisis is a terrible thing to waste.  You try the experiments you had in your mind already."

Mr. Alter responds to a question from the audience about the economics of income disparities: "You know, coming out of the ‘20s, there were huge income disparities, the likes of which we have not seen until the present day.  And then in the ‘30s, what happened was you had a creation of a very large middle class coming out of the Depression.  You had a tremendous reduction in income disparities, and I am one of these – I’m like a big bourgeois guy – I’m like a big believer in the power of the middle class to advance the country’s interest.  And if you look at the post war period where we became this unbelievable economic engine and where we created good jobs for a lot of people here in Michigan – good high paying jobs that could support a family and a robust middle class – that was partly the result of government policy coming out of the New Deal and the post-New Deal period which continued a lot of policies that had the effect of bolstering the middle class, raising wages.  I don’t believe with Amity that a race to the bottom in terms of wages is the way to go.  And so one of the things that is arguably the biggest domestic challenge for President Obama and his successors is to restore a robust middle class to the United States."
 
Ralph Hauenstein visits with Amity Shlaes at the end of the program.
 
Gleaves Whitney poses for a photograph with the evening's debaters, Amity Shlaes and Jonathan Alter at the end of the program.

Ralph Hauenstein visits with Hauenstein Center staff member Kayleigh Fehsenfeld on the way in to the program.
 
Chairman and CEO of Meijer Inc., Hank Meijer, visits with Dr. Tom Haas, president of Grand Valley State University at the reception prior to the debate.
 
Mark Kubik visits with Jean Enright and Peter Turner at the reception.