FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression

by Jim Powell

The Great Depression and the New Deal. For generations, the collective American consciousness has believed that the former ruined the country and the latter saved it. Endless praise has been heaped upon President Franklin Delano Roosevelt for masterfully reining in the Depression’s destructive effects and propping up the
country on his New Deal platform. In fact, FDR has achieved mythical status in American history and is considered to be, along with Washington, Jefferson, and Lincoln, one of the greatest presidents of all time. But would the Great Depression have been so catastrophic had the New Deal never been implemented?

In FDR’s Folly, historian Jim Powell argues that it was in fact the New Deal itself, with its shortsighted programs, that deepened the Great Depression, swelled the federal government, and prevented the country from turning around quickly. You’ll discover in alarming detail how FDR’s federal programs hurt America more than helped it, with effects we still feel today, including:

• How Social Security actually increased unemployment
• How higher taxes undermined good businesses
• How new labor laws threw people out of work
• And much more

This groundbreaking book pulls back the shroud of awe and the cloak of time enveloping FDR to prove convincingly how flawed his economic policies actually were, despite his good intentions and the astounding intellect of his circle of advisers. In today’s turbulent domestic and global environment, eerily similar to that of the 1930s, it’s more important than ever before to uncover and understand the truth of our history, lest we be doomed to repeat it.


From the Hardcover edition.

Genres: History, Politics, Economics, Nonfiction, American History, Presidents, Audiobook

352 pages, Paperback

First published January 1, 2003

About the author

Jim Powell is Senior Fellow at a libertarian think tank, the Cato Institute in Washington, D.C., with which he has been associated since 1988. He has also done work for the Manhattan Institute, the Institute for Humane Studies, Citizens for a Sound Economy, the National Right to Work Committee and Americans for Free Choice in Medicine.

Powell is an author on the history of liberty. He wrote three books that reported findings about the unintended consequences of major presidential policies. Altogether he has written eight books and is perhaps best known for FDR's Folly, which has been praised by Nobel Laureates Milton Friedman and James M. Buchanan, Harvard historian David Landes and historian Thomas Fleming. Powell's books have been translated into Japanese.

Reviews

[Amora · Rating 4 out of 5]

An interesting book by a historian that changed the way I saw the Great Depression. Jim Powell argues that the monetary and fiscal policies enacted by Herbert Hoover caused the Great Depression and that the New Deal programs set in place by FDR prolonged it. I was quite impressed with how scholarly this book was. I’m glad the author called out Keynesians economists for arguing that the Great Depression was caused because the Federal Reserve didn’t do enough. The author also calls out early biographers of Roosevelt like Arthur Schlesinger.

Edit (6/23/20): I incorrectly said Milton Friedman believed the Fed caused the Great Depression by not lowering interest rates. That was a different economist

[Patrick Peterson · Rating 4 out of 5]

2021-10-25 Finished this yesterday morning. Wonderful book. Soooooo many important facts and highlights about FDR and the Great Depression that far too few folks know &/or understand.

Since FDR was probably the most consequential politician of the 20th century in the US, this book was written, and fulfills a massive gap in understanding.

The number and substantial effects of FDR's policies, personnel choices, morality, and enforcement of his pro-big government bias are well explained here.

From very neat little bios of FDR's closest associates who came up with &/or implemented so many of his policies, to the clear, down-to-earth explanations of so many of these hair-brained, often contradictory and harmful schemes, this book is really essential.

I found the footnotes and references to be highly enlightening and usually spot-on accurate and helpful.

So many good things about this book - HIGHLY recommended, since the Great Depression was such a terrible economic, social and political tragedy of the 20th century. Isn't preventing a repeat of such suffering worth it?

2023-05-14 Just reviewing this review and I feel the need to add a little statement. Though I agree with the vast majority of the book, I was disappointed in it's monetarist perspective in analyzing the great depression. I would have vastly preferred the author to have used Austrian Economic theory insights, from Mises, Rothbard, and Hayek.

[Teechbiz · Rating 4 out of 5]

This book is like a college course except for the fact the professor doesn't worship at the altar of FDR. You will be amazed to learn of the practices and laws designed to keep us deeply entrenched in a depression in which millions went to bed without food while farmers were forced BY LAW to destroy food. So much more. You will never look at FDR the same way again.

[Kim · Rating 2 out of 5]

As it happens, I agree with Mr. Powell's overall premise that FDR's policies did indeed prolong the Great Depression and has had far reaching negative economic consequences. However, I find his review lacks perspective and ignores important influences of the era.

For example, Mr. Powell views the socialist undertones of the FDR era through the 20/20 lense of hindsight. Those wacky FDR folks should have known better. Socialism became such a strong political force throughout the world because it was claiming to respond to the burdens and injustices faced by the poor and powerless. Of course we know today it is a seriously flawed philosophy that spawned dictators, evil doings, and economic chaos but at the time, it had ideological components that offered possible relief to millions of people.

Which leads to his union bashing. He is absolutely correct in his condemnation of the violence and tactics of union activity. But again, he fails to put these events fully in perspective. To read him, employers were innocent, benificant bystanders being picked on by those nasty union people. As if. Unions were a socialistic response to the exploitation of many employers lest we forget child labor, the extremely dangerous working conditions of the day, the low pay and long hours. Employers often employed dirty and violent tactics of their own. It was, in fact, a war and both sides have culpability. Yes, there was some bad judgment shown by the FDR admininistration in how it treated employers and unions. However, Mr. Powell's argument to this effect lacks teeth needlessly because of his failure to address both sides of the labor issue. He also fails to provide an alternative scenario as to how some much needed labor reform would have happened otherwise.

I was also highly amused at his brief anecdote regarding the clash between Robert Moses and FDR. Robert Moses was equal to and possibly surpassed FDR in his desire for power and control. He was a manipulative, power hungry man who destroyed people and entire communities to get what he wanted in the name of progress for New York City. But to read Powell, you would think he was a sweet innocent beaurocrat that FDR tried to crush simply out of personal dislike. True, they hated each other but there was much more to the story than that.

I could go on...others have ripped apart his statistics and challenged his presentation of "facts". I am not so smart in those areas to do that. Suffice it to say that the book is an interesting read if you are looking for a purely economical perspective on FDR that ignores the social and societal contexts of the problems and proposed solutions.

[Elyse · Rating 5 out of 5]

I'm giving this book 5 stars because even though some parts were eyes-glazed-over boring (especially the chapter on labor unions) the information is breath-taking. Powell's lessons about unintended consequences and the dangers of government restrictions on economic liberties are powerful. And his more subtle lesson about the importance of judging policy outcomes and not intentions is ever more crucial.

Each chapter title is a question, such as "Why did the Supreme Court strike down early New Deal laws?" which is then answered. When new players are introduced, a biographical paragraph or two is included to give background and feeling. I liked that, but the first chapter which consisted only of profiles, was pretty mind-numbing. Still, it's nice to know the information is there if I'd ever like to refer to it.

Read it if you want to stay up nights being furious and wondering what crack-pot experiments the anointed (hat tip Sowell) will think up next.

[Andrew Sternisha · Rating 1 out of 5]

It is obvious that this book was written before the Great Recession. I went into this book with high hopes, but ended up being disappointed. The last two chapters make clear that the author wrote this as a propaganda piece for small government.

There were some interesting sections, such as FDR's targeting of New Deal funds to areas where he needed help electorally. However, his argument that government taxation killed business is incredibly weak given that only about 5% of the population actually paid taxes. He also argues that there was little interest in increasing plant capacity because of government interference. However, he later points out that manufacturing plants were operating at 25% capacity, which means that there would obviously be no interest in increasing manufacturing plants until the current plants were back at full capacity.

He praises the repeal of the Glass-Steagall Act because the regulations of this act supposedly hurt competition among banks and caused private banks to be at a disadvantage. However, we have seen all too well what crossing investment and commercial banks does when the complexities of investment banking are tied in with the real life loans made to a first time homeowner. Powell also criticizes the deposit requirements on banks, but again, forcing banks to hold more capital (and be less leveraged) would have mitigated the disaster of 2008. Powell does not like the FDIC Insurance because banks are then not held accountable by individuals (his theory is that people would remove their money from banks that were making irresponsible loans, etc). The reality is that NO ONE knew what the banks were doing behind closed doors with the CDOs and credit default swaps until Lehman collapsed in 2008. Thus, how could an individual have the available information to be able to make an informed decision about where to keep his/her investments? The answer, of course, is that they can't under the no regulations system Powell prefers. Therefore, it is a necessary public service that the FDIC provides.

Powell ends with a free market discussion on wages and states that "having a job with a low wage is better than not having a job at all." There are many studies that show the dubious nature of such a claim and Powell's idea that the "invisible hand" will drive market wages to a natural level is pure bunk.

I am perfectly happy to read a book that criticizes FDR's New Deal, but I recommend that readers skip this vapid piece of propaganda and look for academic research on the topic.

[Kimberly · Rating 4 out of 5]

Ok, so this happened to be part of the reading for my econ class, but it might have been a book I would have picked up and read regardless. I've never really had any formed opinion about FDR and the new deal, but most high school history books are in favor of everything he did. This book is AMAZING in that it breaks down every single policy and mistake that he and his administration did which ultimately prolonged the Great Depression. Powell is very vocal and VERY biased against FDR (obvi) but he does have a lot of good points.

[Rod · Rating 5 out of 5]

(Virtually) everything you've been told about FDR and the New Deal by the media and mainstream historians isn't true. Read this book for the actual story about how Roosevelt and the New Deal prolonged the Depression by nearly a decade and may have contributed to the rise if fascism abroad (and, to some degree, in the US).

A might-have-been: The US experienced a depression in 1920, but the government keep its hands off the financial controls and the economy soon recovered. The Depression that started in 1929 became "Great" under Roosevelt, and his wrong-headed attempts to control the economy (e.g, forcing wages higher while unemployment was 12-20%) greatly prolonged the crisis. Imagine if the government had allowed the private sector (with an assist from the Fed's management of monetary policy) to generate the number of jobs normally associated with a recovery. The US would have been a prosperous, fully employed country by the mid-30's, and an example to others overseas. National Socialism and Communism both would have had much less appeal, Franco and Mussolini less popular, etc. Perhaps no WWII at all!

This may be a little farfetched, but actions have consequences....

Must reading.

[David · Rating 5 out of 5]

Reading this book will expose you to many little known facts about FDR’s handling of the economy during the Great Depression. It may even change your opinion of him, as well it should. Facts presented make a case that if FDR had done nothing, the GD would have ended much sooner. It’s as if he wanted to be seen as doing something regardless of the true impact and the public generally found him likable. But several of his proposals were shot down by the Supreme Court until he looked into how he could stack the court in his favor by adding judges. A lot of his tactics borderline illegal if not actually across the line. The recent Obama presidency calls to mind many of these same tactics. Yet somehow FDR remains to this day in many people’s minds a sort of savior for America from the ravages of the Great Depression. This book as well as The Forgotten Man by Amity Shlaes May start to correct that. Excellent book and hard to put down. Final chapter presents a great summary of major points!

[Drtaxsacto · Rating 5 out of 5]

Jim Powell has amassed a ton of data, well organized, making the case that instead of the narrative that most people heard about the New Deal, that all those alphabetic entities (AAA,NIRA,WPA) ending the depression - they actually extended the duration and severity of the largest economic crisis in US history.

But the story is even more compelling. Many of the laws adopted without thought or care (starting with several programs that Hoover instituted - including the two 1932 tax bills) may have hurt the very people who they claimed to be helping. Add to that the Brain Truster's obsession with using federal power to advance their politics (why in the world did the South get very little of the bounty from New Deal programs - because they were unlikely to change their votes to the GOP) and you have notion of why many modern economists laugh at the claims of FDR as the savior.

Powell does an excellent chapter on the TVA and its cartel like performance which continues today.

This book is well worth the time.

[Andy · Rating 4 out of 5]

Seemed an appropriate book to read with everyone comparing the President Elect to FDR. Does a fabulous job of explaining exactly what the title says: FDR didn't fix the Great Depression, he caused the uncertainty, fear, and financial disasters that turned a major downturn into the Great Depression. Powell explains in great detail (too much, that's why I rated 4 stars - TOO DRY) how the chaotic, disorganized, and people (not policy) driven decision style of FDR, and his authoritarian style and proclivities completely shut down the economic engine of the U.S.
Highly recommended as Obama and his brain trust seek to do some of the same things that FDR's administration did (that didn't work) and Pres Bush's administration did (that didn't work).

[Jared Painter · Rating 5 out of 5]

A damning indictment of the New Deal that thoroughly and convincingly shows how the federal government prolonged the misery of the American people. Also includes key lessons for policy makers to reflect on for the future and what to do during the next crisis

[Urey Patrick · Rating 5 out of 5]

FDR and the New Deal have taken become an historical glorification of progressive political activism and expanded government power for the "common" good of mythical proportions that reverberates through American governance, society and economic policies ever since. Sadly - none of what actually transpired, and what was actually done, and the actual effectiveness of those policies supports this whatsoever. Roosevelt was a terrible domestic President (although a superb war leader, to be sure) whose capricious nature and arbitrary policy impulses were the basis for all of the policies and programs that comprised the New Deal. The New Deal was an exercise in centralized (and frequently contradictory) government control over every aspect of American economic life that would have done the Soviet Union proud in its heyday. As one small example, US currency was based on gold and the price of gold was thus critical to monetary values and consumer wealth. FDR would set the price of gold based on how he felt that day.. one morning setting it three times higher than the previous valuation because that was his lucky number. FDR was not a reader, or a thinker - he was a revolutionary whose preconceived notions were his motivations. The New Deal was not a recovery program - it was a reform program intended to refashion the very institutions and underlying fundamentals of the United States... and as a recovery program, it failed dismally. As a reform program, its is still having an effect on the economic and personal liberty of Americans.

As Powell asks in his introduction (and proceeds to answer in the main text): "Scholarly investigators have raised some provocative questions. For instance, why did New Dealers make it more expensive for employers to hire people? Why did FDR's Justice Department file some 150 lawsuits threatening big employers? Why did New Deal policies discourage private investment without which private employment was unlikely to revive? Why so many policies to push up the cost of living? Why did New Dealers destroy food while people went hungry? To what extent did New Deal labor laws penalize blacks? Why did New Dealers break up the strongest banks? Why were Americans made more vulnerable to disastrous human error at the Federal Reserve? Why didn't New Deal securities laws help investors do better? Why didn't New Deal public works projects bring about a recovery? Why was so much New Deal relief spending channeled away from the poorest people? Why did the Tennessee Valley Authority become a drag on the Tennessee Valley?"

The New Deal not only extended the first Great Depression, it created a second one on its heels. People lacked jobs, money and food... the root causes of the continuation of the Depression... and the New Deal made all three more expensive, more scarce and harder to come by among the very people most in need. This is a compelling and fascinating history and analysis, fully foot-noted and substantiated - it is not a politically partisan screed. And it is pertinent to the political/economic issues of today, perhaps even more than it was then.

[Mark O'mara · Rating 4 out of 5]

Excellent summation of FDR’s economic policies, their effect on the economy and the prolonging of the Depression.
Well measured, not abrasively polemic, however it does portray how little FDR & his appointees knew or cared about sound economic & business theory. A clear picture emerges of FDR’s preference for the power and role of government (and unions) in people’s lives having primacy over that of freedom of choice & free enterprise.
As a man born into privilege I was surprised at FDR’s contempt for business and disregard for policies that kept unemployment high through the 1930s.
Audiobook - excellent narrator.

[Anne Keckler · Rating 5 out of 5]

This was a difficult book to read, especially at this time. Our country's leaders are currently repeating the same mistakes that led to and extended the Great Depression.

The book is very well researched with exhaustive notes and bibliography. If anyone with the authority to do something truly good for the people would read this book and learn from it, we might all be better off.

[Mark · Rating 5 out of 5]

An excellent dive into the cause of the Great Depression and FDR's "New Deal" programs. FDR is lauded as one of the greatest presidents for his administration's actions during the Great Depression. When the reality of FDR's policies are examined however, one will see that the opposite is true. Jim Powell makes the case that the FDR administration's bureaucratic takeover of the American economy was counter productive and prolonged the Great Depression, a narrative which runs counter to what was taught to me in my public education. Mr. Powell provides overwhelming evidence for the detrimental effects of the new deal programs, 33% of this book is footnotes! As Socialist policies return to the forefront of American politics, FDR's Folly is a must read.

[Alan Marchant · Rating 5 out of 5]

The Raw Deal

If recent event's hadn't made the New Deal such a deadly serious topic, I would have suggested that Jim Powell's book should have been titled "the FDR Follies." The book addresses the depressingly perverse effects of Roosevelt's policies with understated good humor. But with the current government doing its best to resurrect every wrong-headed appeal of the New Deal, one can only hope that people will give the most serious attention to the economic history of the Great Depression.

FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression has been derided as revisionist history. It is not. In fact, Powell's generation grew up with no serious history of the Great Depression. We were presented only with the most callow hagiography of Roosevelt and his cronies.

Powell's book is essentially free of invective and personal judgement. The book simply describes the planning, implementation, and outcomes of the major New Deal economic policies. It is left to the reader to conclude that FDR's administration was well-meaning, but tripped up by the same arrogant mindset that infected Roosevelt's European contemporaries.

[Sean Rosenthal · Rating 4 out of 5]

Interesting Quote:

"A government will best promote a speedy business recovery by making recovery the top priority, which means letting people keep more of their money, removing obstacles to productive enterprise, and providing stable money and a political climate where investors feel that it's safe to invest for the future."

-Jim Powell, FDR's Folly


"The Great Depression was a government failure, brought about principally by Federal Reserve policies...Hoover's tariffs...Hoover's taxes...and Hoover's other policies...High unemployment lasted so long...because...New Deal policies...took more money out of people's pockets,...restricted production, harassed employers, destroyed jobs, discouraged investment, and subverted economic liberty."

-Jim Powell, FDR's Folly

[Sharon · Rating 3 out of 5]

This was such a good book, I'm going to purchase the actual book so I have it in addition to the audiobook. I wish it were required reading for all of those who have tendencies toward Keynesian economics and view government as the solution to everything. It took me a while to finish because I had several fiction reads in between, but it was well worth the time.

[Daniel Moss · Rating 4 out of 5]

Very insightful book. It's a bit dry as it churns out dates, names, and events continually. The information is stellar though. I would highly recommend at least reading the last two chapters as they sort of give a brief review and present solutions/lessons going forward.

[Luka · Rating 5 out of 5]

By far the most well-researched book on FDR and the New Deal

[Carol Haldy · Rating 4 out of 5]

Can't believe this book was written in 2003. Could have been 2020.

[Matthew Gagnon · Rating 5 out of 5]

I love arguments that take on sacred cows of conventional wisdom, and there is nothing more universally believed than the idea that FDR was a great president that saved the country from the hell of the Great Depression. For those that actually study the period with a non-political lens and objectively analyze what happened in the nine years prior to America's entry into World War II, though, it is fairly clear that FDR's economic policies were a failure.

What is beautiful about this book is that it gives detail and depth to the case against FDR's New Deal policies, which has always been a rather amorphous and anecdotal minority opinion for a long time. Powell expertly writes about exactly what FDR did, who did it, why they did it, and what happened afterward, allowing a detailed analysis of the period.

Incredibly well researched and damning in its condemnation of FDR, it is also, if you can believe it, non-political and absent are the typical partisan jabs or populist hot air you would often find in a criticism of a political figure. This was academic and intelligent and I very much enjoyed it.

[Pastor Greg · Rating 5 out of 5]

I grew up hearing people (some family, some friends and almost always on TV and in school) credit FDR with, at the very least, of "bringing us out of the Depression." Some credited him with "saving America from destruction".

But as I studied history, politics, economics and even Scripture, I came to believe that FDR was not the "savior" some made him out to be but, in reality, one of the most influential presidents moving us away from a free market economy and toward the centralized, government-controlled Socialistic economy that we now have. And which is ever growing.

All I can say in a short review is that IF you mistakenly think of FDR in such terms, or if you are like me and know better but have never read a clear, well-written case proving the matter, then I recommend this book to you.

I only know one liberal, personally, who ever read anything critical of FDR (or the Clinton or Obama, etc.). And he simply refused to believe what he read. He didn't refute the information in the book. He really didn't try. He just smiled and laughed mockingly, accusing us "right wingers" of just "making things up". Yes. Things called facts. And a little thing called REALITY.

[Kipi (the academic stitcher) · Rating 4 out of 5]

I'm not an economist, and I don't claim to understand all the finer economic points discussed in this book; however, what I did grasp was that many of the New Deal policies were more political than economic. This was not a new revelation to me, but the supporting details the author provides support that conclusion very well. The Great Depression lasted longer in the US than in other countries, mostly due to New Deal policies that prolonged the financial suffering of millions rather than putting the nation on the road to recovery. Neither FDR nor most of his advisors had any knowledge of or experience in business and knew nothing of how business works. What they all did understand was politics and how to influence voters before the next election. I admire FDR's leadership during WW2, but I've never been a fan of his socialist-leaning takeover of the American economy during the 1930s. Thankfully, the Supreme Court struck down many of the most extreme policies.

If this book does nothing else, it offers a counter perspective to the gushing praise that most historians heap on FDR and the New Deal.

[Nate · Rating 2 out of 5]

Great stuff although it reads like an extended powerpoint presentation. The books goes something like this: ch 1. introduction to relevant characters - basically FDR is an incredible politician but ignorant and uninterested in economics, he surrounds himself with socialists. ch 2. outlines why the depression happened. then for chapters 3-17 the author devotes a chapter to a specific error made by the Roosevelt administration. Finally chapters 18 & 19 summarized the issues and lessons to be learned.

A few interesting anecdotes federal government put a dry cleaner in jail for reducing his price to dry clean a suit. FDRs NIRA of 1933 attempted to boost prices and thus wages, was struck down by the supreme court as unconstitutional. Months later the federal government prosecuted oil industry for price fixing...

[Lee · Rating 2 out of 5]

I had worried that this was going to be a partisan hit job. I was pleasantly surprised when it was not. However, it turned out to just be a poorly written book. The book is too meandery, going off on topics that did not answer the main task of the book, proving FDR’s policies were responsible for prolonging the Great Depression. In the first quarter of the book, he focuses on talking more about what happened before FDR got there, the Smoot-Hawley Tariff, and the bank holidays started by governors before FDR assumed power. A more focused book would have gotten into its main argument faster. If an author makes a controversial claim, such as FDR made the Great Depression worst, I expect them to get into the meat of the argument right away. I made it through 20% of the book without having the main topic address, so I gave up on this one.

[Brenda · Rating 4 out of 5]

This book provided much insight into FDR and the Great Depression. I learned a great deal. I liked reading about so many specific policies, how they were instituted, & the long-term effects. It's a little horrifying to see how devastating some of these policies have been & then to watch history repeat itself in some ways with modern politicians. Most people introduced in the book were described for their physical appearance & I thought that was a little weird. I don't care what they look like, I care how they impacted our country. Some information seemed to go a little off-roading but overall, I liked the book, learned many things, & would recommend it.

[Farhan Sinha · Rating 5 out of 5]

100% worth a read, this book systematically dismantles nearly all of the fallacies of the FDR administration and shows how FDR essentially

1. Cartelized the economy through the NIRA
2. Allowed for the 1938 economic depression
3. Was an open economic fascist
4. Taxed everyone to the moon and back, further increasing unemployment
5. Advocated and passed the FLSA leading to higher unemployment rates among blacks

And far more. The point of this book is very well said by the title, FDR was not a man of a great vision, he was an elitist midwit, who advocated for policies without actually caring about their effects.

[Todd · Rating 5 out of 5]

This excellent book lays bare that most of the New Deal programs were ill-conceived. They forced higher wages and higher prices leading to higher unemployment. Higher taxes robbed the economy of investable and spendable dollars.New Dealers had the hubris to believe they could control the economy to produce desired results - intellectuals who “knew better” than millions of citizens.

And then there are the failures of the Federal Reserve, tariffs, and more.

For those who wish to understand that FDR’s policies worsened and lengthened the Great Depression this book well lays out the case.