One of the heroes in The Forgotten Man is Andrew Mellon, who was Secretary of the Treasury under Presidents Warren Harding, Calvin Coolidge and Herbert Hoover. Mellon is someone from whom we can learn a great deal in part because of how he was able to place the events of the Great Depression into the context of American economic history.
“He was under assault by the federal government for tax reasons, for antitrust reasons, and for various other pretexts that governments prosecute during downturns,” said Ms. Shlaes. "He wasn’t a bad man. Most of what he did was totally within the law. One of the themes of the New Deal is that crisis is forever and there would always need to be more programs. Reporters approached Mellon when he was turning 80 during one of his trials and said, ‘Mr. Mellon, a comment on your 80th birthday.’ They may have expected something really negative – here he was an old man and in court during the Depression. Instead Mellon said, that The Great Depression is just 'a bad quarter hour' in the glorious history of American economic growth. That was a rebuttal to those who were saying crisis was permanent and therefore required permanent bailout. Mellon was also saying I will not have my context altered by the political elite. Mellon was thinking to himself: I feel proud to say the Depression is just a little part of the American story because that is my forecast, and I have a pretty good record of forecasts."
“We often talk about how FDR was a light in the dark. Mellon was also a light – to those who thought about business, about the small entrepreneur. It was a wonderful thing for Mellon to say at that gloomy moment in the mid-thirties.”
When asked, Ms. Shlaes also offered a few thoughts for President Obama on how to deal with the current economic crisis based on the lessons learned from the New Deal.
“Crisis perpetuates itself. To assume that all the laws of economics no longer hold just because of this crisis is probably not the right move. What we’re after is a format for growth of the economy. Politically this argument will be considered absurd, but the reality is if we made the U.S. relatively competitive by cutting the capital gains tax, the corporate tax and lower income taxes, and by establishing thorough, reliable regulation of financial markets, you would see growth. We would be able, at least conceivably, to put this period in context as our own ‘bad quarter hour’ as Mellon said. What we run the risk of with the current policy, Democrat or Republican, is prolonging the current downturn by treating the whole experience as a national crisis, almost a personal crisis. It is New Deal narcissism to turn this into something about us as if we’re alone in the world. We’re not alone in the world. We have to compete with Europe and Asia and to indulge all our desires for reform when we need to stay relatively competitive is probably unwise and too costly.”
Click here to listen to the interview with Amity Shlaes.
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