POWER OF STORY: SO LONG, FDR AND KEYNES

by Dr. James W. Jackson

Founder, Project C.U.R.E.
Author, The Happiest Man in the World: Life Lessons from a Cultural Economist

There is a lot more to share about the intriguing saga of Franklin Delano Roosevelt and John Maynard Keynes. I think for now, however, when we consider these brief comments, we will have spent enough words out of the bag of history to shed some light on one of the most defining periods of the American story. Every story has a spine. The spine of the American story certainly took a bend during the decades of the late1920s through the end of the 1940s.

Europe and parts of Asia had become mesmerized by the economic and cultural models that included the breaking up of the dynasties, the overpowering of the royalties, and the reshuffling of the world properties. The political models of Communism, Nazism, and Fiat regimes became the vehicles that carried the economic and cultural models down the road of reality.

The ideologies of the rest of the world could not help but influence the American story forever. Progressive socialist thinkers like Keynes really believed that they had the answers for America. The experiment with free market enterprise and capitalism was viewed with disdain. The new game in town was government controlled production and distribution of goods, and also ownership of public resources and services.

The strange story of Roosevelt and Keynes becomes a classic tragedy of success as we continue to discover more information from the 1930s. Each character was becoming more and more co-dependent on the other to find fulfillment of his personal dreams. Roosevelt was willing and eager to keep Keynes’ bathtub of deficit spending full in order to assure his position in history as the world’s preeminent political leader and supplier of great free gifts and, eventually, military supplies and soldiers. Keynes saw his opportunity to use Roosevelt’s unusual political position and the economic aspects of the Great Depression to thrust himself into the position of perhaps history’s most influential evangelist of the economic philosophies of Marx, Engles, and Lenin.

Before we wrap up Keynes and Roosevelt and tuck them away in their crypt of history, there is just one more insightful episode I want to share with you.

Roosevelt, who had run his presidential campaign on balanced budgets, frugality, and the elimination of bureaucratic largess, had been inaugurated March 4, 1933. Somewhere, his economic thinking processes had been restructured, and he had fully bought into the Keynesian economic bathtub thinking. But by late December, 1933, Keynes hit the panic button. Roosevelt was not complying with the implementation of the program quickly enough. He decided that subtle and quiet tutoring of Roosevelt was not going to be enough.

Keynes decided to take his bully pulpit to the whole bully American nation. He would use an open letter to the president to explain what he knew was needed to cure America. He would utilize the invitation of the New York Times to publish his message. The New York Times would publish the article in the December 31 Sunday Edition in a syndicated article that also would be simultaneously printed in newspapers around the country. Keynes could articulate how brilliant he was with his views of curing America, and at the same time force Roosevelt into an open position of accountability to the American people for implementing the programs that would give them more of what they wanted.

That weekend, Roosevelt was on the ship Bremen headed across the Atlantic Ocean. Here are some of the direct quotes from Keynes’ open letter to President Roosevelt:

• You have made yourself the Trustee for those in every country who seek to mend the evils of our condition . . . If you fail, rational change will be gravely prejudiced . . . But if you succeed, new and bolder methods will be tried everywhere, and we may date the first chapter of a new economic era from your accession to office . . .
• At the moment your sympathizers in England are nervous and sometimes despondent. We wonder whether the order of different urgencies is rightly understood, whether there is confusion of aim, and whether some of the advice you get is not crack-brained and queer . . . The average City man believes that you are engaged on a hare-brained expedition in face of competent advice, that the best hope lies in your ridding yourself of your present advisers
• It will be through raising high the prestige of your administration by success in short-range Recovery, that you will have the driving force to accomplish long-range Reform.
•  . . . public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money.
• I lay overwhelming emphasis on the increase of national purchasing power resulting from government expenditure . . .
• That is why a war has always caused intense industrial activity. In the past, orthodox finance has regarded a war as the only legitimate excuse for creating employment by government expenditure.
• The set-back which American recovery experienced this autumn was the predictable consequence of the failure of your administration to organize any material increase in new Loan expenditure during the first six months of office. The position six months hence will entirely depend on whether you have been laying the foundations for larger expenditures in the future.
• With these adaptations or enlargements of your existing policies, I should expect a successful outcome with great confidence. How much that would mean, not only to the material prosperity of the United States and the whole world, but in comfort to men’s minds through a restoration of their faith in the wisdom and the power of Government!

As oddly as it may sound, that article by Keynes was exactly what Roosevelt needed and what he keyed on for the rest of his life. Now, the smartest economist in the whole world, Dr. John Maynard Keynes of King’s College in Cambridge, England, had just told the people of America that they would be better off if their president would keep the bathtub full to the brim with deficit expenditures and debt. If he didn’t perform, they, along with the rest of the world, could blame Roosevelt for not taking care of them.

As we can now observe, there could not have been a better set up of circumstances imaginable. The circumstances fatefully allowed each man to find fulfillment of his dream in the actions of the other man. Roosevelt could go on to become the war-time hero and most powerful leader in the world. He had to keep the spending programs going, which would ensure his continued re-elections, because John Maynard Keynes had not only told him, but the entire nation, what he had to do.

Keynes could become the smartest and most respected economist for years to come. He had even predicted that it would take World War II to pay for the extravagant cost of keeping the bathtub full of debt. Roosevelt could continue on with his image of the reluctant president extolling neutrality and isolationism, and still ramp up for war and continue to give away our naval ships to Great Britain at the same time. As Keynes had said, “. . . orthodox finance has regarded a war as the only legitimate excuse for creating employment by government expenditure.”

America would never be quite the same again following the market crash of 1929, the Great Depression, The Roosevelt/Keynes socialist saga, and World War II. That really shouldn’t be all that surprising, since all global transformation takes place at the intersection of culture and economics.

Next week: What in the world is Cultural Economics?

         (Research ideas from Dr. Jackson’s new writing project on Cultural Economics)

© Dr. James W. Jackson  

Permissions granted by Winston-Crown Publishing House

 

Dr. James W. Jackson often describes himself as "The Happiest Man in the World." A successful businessman, award-winning author and humanitarian, Jackson is also a renowned Cultural Economist and international consultant, helping organizations and governments to apply sound economic principals to the transformation of culture so that everyone is "better off."

As the founder of Project C.U.R.E., Dr. Jackson traveled to more than one hundred fifty countries assessing healthcare facilities, meeting with government leaders and "delivering health and hope" in the form of medical supplies and equipment to the world's most needy people. Literally thousands of people are alive today as a direct result of the tireless efforts of Project C.U.R.E.'s staff, volunteers and Dr. Jackson. 

To contact Dr. Jackson, or to book him for an interview or speaking engagement: press@winstoncrown.com

POWER OF STORY: LETTERS BETWEEN KEYNES AND FDR

by Dr. James W. Jackson

Founder, Project C.U.R.E.
Author, The Happiest Man in the World: Life Lessons from a Cultural Economist

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 the proper 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  

Permissions granted by Winston-Crown Publishing House

  

Dr. James W. Jackson often describes himself as "The Happiest Man in the World." A successful businessman, award-winning author and humanitarian, Jackson is also a renowned Cultural Economist and international consultant, helping organizations and governments to apply sound economic principals to the transformation of culture so that everyone is "better off."

As the founder of Project C.U.R.E., Dr. Jackson traveled to more than one hundred fifty countries assessing healthcare facilities, meeting with government leaders and "delivering health and hope" in the form of medical supplies and equipment to the world's most needy people. Literally thousands of people are alive today as a direct result of the tireless efforts of Project C.U.R.E.'s staff, volunteers and Dr. Jackson. 

To contact Dr. Jackson, or to book him for an interview or speaking engagement: press@winstoncrown.com

POWER OF STORY: ROOSEVELT AND KEYNES

by Dr. James W. Jackson

Founder, Project C.U.R.E.
Author, The Happiest Man in the World: Life Lessons from a Cultural Economist

Herbert Hoover was president when the stock market crashed in 1929. Franklin Delano Roosevelt, the charismatic governor of the state of New York was elected president in November, 1932, and inaugurated March 4, 1933. For three years the country had been traumatized by the worst economic crisis imaginable. The international scramble over gold supplies and debt repayments had involved and embroiled the economies of most of the world.

Roosevelt was a new face with a voice of hope. He was the only man to ever be elected president of the U.S. for four consecutive four-year terms. The irony of his election campaign in 1932 is worth a short review. Looking back over what transpired in the past seventy years it would almost seem as though Hoover and Roosevelt had somehow switched their campaign speeches and each delivered the lines of the other.

During the campaign it was Roosevelt who reiterated the old line party speeches promising reductions of all public expenditures, doing away with useless commissions and offices, consolidating departments and bureaus, and eliminating extravagances. Roosevelt even promised to balance the budget. Hoover was castigated for running huge deficits, his inability to halt the effects of the depression, or restore any semblance of prosperity. Roosevelt at one point even stated, “Our industrial plant is built; the problem just now is whether under existing conditions it is not overbuilt. Our last frontier has long since been reached.” Strange philosophical words when compared to what was set into motion over the dozen years that followed the election. (1)

Roosevelt spent the time between his election and inauguration at his Governor’s Mansion in Albany, New York with his Brain Trust, a group of intellectuals gathered from the universities, primarily Columbia University. Big change was on its way. The intellectual atmosphere on campuses around the world had changed over recent years. Now, we can look back and measure just how big that change was to become. From 1860 until Roosevelt’s election in 1932 the Republicans had held the presidency fifty-six of the seventy-two years. Democrats held for sixteen years. From 1932 to 1980 it was reversed: Democrats held the presidency for thirty-two years and the Republicans for sixteen.

Running against both the Democrats and Republicans in the 1928 election was the Socialist Party. Following is a listing of planks in their political platform:

• Nationalization of our natural resources beginning with coal mines
• A publicly owned giant power system (Tennessee Valley Authority)
• National ownership and management of railroads and other means of transportation and communication
• An adequate national program for food control, food relief, reforestation, irrigation, and reclamation
• Immediate relief of the unemployed by the extension and program of all public works
• Loans to states and municipalities without interest
• A system of unemployment insurance (part one of Social Security system)
• Nation-wide extension of public employment agencies (U.S. Employment Service)
• A system of health and accident insurance and of old age pensions (Social Security 2)
• Shortening the workday and forty- hour work per week
• Federal anti-child labor amendment
• Abolition of brutal exploitation of convicts
• Increase of taxation on high income levels, corporation taxes, and inheritance taxes
• Appropriation by taxation of all land held for speculation

The economic and cultural pendulum had internationally swung and was nationally swinging from belief in individual responsibility and a decentralized and limited government to a model of social outcome equality and a centralized and powerful government. The model relied on the government to protect the citizens from misfortune and to control the operation of the economy, even if that meant the government’s ownership and operation of the means of production.

Behind those closed doors of the Albany, New York Governor’s Mansion, between Roosevelt’s election and inauguration, a philosophical coalition had formed. The Brain Trust was ready to view the depression as a failure of capitalism, and to believe that active intervention by centralized government was the appropriate prescription for rapid remedy. Relief, recovery, and reform would be the theme of the game plan.

By March 4, 1933, Roosevelt was fired up and ready to lead the charge with his inaugural speech. He began by blaming the crash, depression, and economic crisis on bankers and financiers and their quest for profit, and the greedy self-interest of capitalism, never allowing once that the problem had also been the responsibility of the U.S. government itself and the inaction of the empowered Federal Reserve System:

Primarily this is because rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence . . . The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit. (2)

The new president then called for a Bank Holiday and closed all the banks that still remained open. They would be reopened after the Emergency Banking Act and the Federal Deposit Insurance Corporation (FDIC) bills were passed by Congress. It was understood that successful economic systems must be based on confidence and convenience. There wasn’t a lot of confidence left in the system. The tacit message was that no longer would the depositors have to depend on the reliability of the bank, but could rest on the assurance of the government to protect their deposits. “The only thing we have to fear is fear itself.”

President Roosevelt’s First 100 Days witnessed a record number of bills being sent to Congress for approval during a special emergency session. Soon there were so many Relief, Recovery and Reform bills in existence it was hard to keep track of the action. Any programs that failed to pass or were held up for some reason were re-instituted by the President’s Executive Orders. Congress would then have to override the orders or it would be necessary for the Supreme Court to strike them down as unconstitutional. Especially in Roosevelt’s second term, the conflict with the Supreme Court led to their unanimously ruling that the National Recovery Act (NRA) was an unconstitutional delegation of legislative power to the president.

In response, Roosevelt proposed a shocking law that would allow him to appoint up to six new justices of the Supreme Court so that he could have a “persistent infusion of new blood.” Even his own Vice President Garner led an intense protest, claiming that he was violating the very separation of powers that would give Roosevelt absolute control over the Supreme Court by Court Packing. Eventually, however, Roosevelt appointed eight of the nine justices of the Supreme Court. They began to ratify his policies with ease.

On other issues, it was ranking members of his own Democratic party that began taking issue with Roosevelt’s power and policies. Democrats led by Al Smith organized the American Liberty League and vociferously attacked Roosevelt by equating him with Karl Marx and Vladimir Lenin. But, people were going back to work, and once again businesses were beginning to reopen their doors. No one had expected that the depression would have lasted for ten years.

(Next week: More about Bathtub economics)

            (Research ideas from Dr. Jackson's new writing project on Cultural Economics) 

© Dr. James W. Jackson  

Permission granted by Winston-Crown Publishing House

Dr. James W. Jackson often describes himself as "The Happiest Man in the World." A successful businessman, award-winning author and humanitarian, Jackson is also a renowned Cultural Economist and international consultant, helping organizations and governments to apply sound economic principals to the transformation of culture so that everyone is "better off."

As the founder of Project C.U.R.E., Dr. Jackson traveled to more than one hundred fifty countries assessing healthcare facilities, meeting with government leaders and "delivering health and hope" in the form of medical supplies and equipment to the world's most needy people. Literally thousands of people are alive today as a direct result of the tireless efforts of Project C.U.R.E.'s staff, volunteers and Dr. Jackson. 

To contact Dr. Jackson, or to book him for an interview or speaking engagement: press@winstoncrown.com