New York Review of Books Review

IN the 1930s, the Schechter brothers ran a chicken business in Brooklyn. The name Schechter is derived from the Yiddish word for "butcher," and this is what the brothers did: they slaughtered chickens and sold them to shops. The brothers seemed to be typical immigrants, at once struggling and succeeding. But in 1934, they became famous thanks to Schechter Poultry Corp. v. United States. Only months after Franklin Roosevelt had signed a code regulating the chicken business, the brothers were accused of violating it. Prosecutors said they had sold an unfit chicken, one with an egg lodged inside it, and had also tried to undercut their competitors' prices. It was the latter charge that cut to the core of the new law. With the Great Depression under way and deflation causing economic ruin, the Roosevelt administration had outlawed "destructive price cutting." The brothers were found guilty, given a harsh fine ($7,425) and sentenced to between one and three months in jail. They fought back, however, all the way to the Supreme Court, and they won. In a unanimous ruling the court found the code to be an unconstitutional expansion of federal authority. On the day of the ruling, Justice Louis Brandeis took aside one of Roosevelt's aides and told him, "This is the end of this business of centralization." The National Recovery Administration, the agency that had gone after the Schechters, soon dropped hundreds of similar cases and closed its doors. The story of the Schechters remains a powerful one, even if it did not mark the end of centralization. By outlawing chicken discounts, Roosevelt overreached, much as he later did in trying to pack the Supreme Court (motivated by decisions like Schechter). But beyond that, his economic meddling failed to accomplish his larger goal of ending the Depression. The "sick chicken case" thus became a useful précis of the argument that the New Deal's reputation deserves to be more complicated than it is. No wonder, then, that Amity Shlaes, a former editorial writer at The Wall Street Journal, now at the Council on Foreign Relations, has made the brothers heroic figures in her book "The Forgotten Man: A New History of the Great Depression." Her argument is somewhat more subtle than the usual critique from the right. She sees both Roosevelt and his Republican predecessor Herbert Hoover as inveterate economic tinkerers. Hoover, the engineer turned politician, never lost his instinct to fix things and, as a result, signed the disastrous Smoot-Hawley tariff bill. His biggest sin, and Roosevelt's, was a "lack of faith in the marketplace," Shlaes writes. "From 1929 to 1940, from Hoover to Roosevelt, government intervention helped to make the Depression Great." The book opens in 1937, eight years after the stock market crash, with a story about another Brooklyn resident, a 13-year-old boy named Williant Troeller, who hanged himself in his bedroom one evening. His father was unemployed, and William, as a New York Times headline reported, "Was Reluctant About Asking for Food." For all the frenzied activity of Roosevelt's first term, the country had yet to emerge from its slump. It wouldn't fully do so until the war spending of the 1940s. The length of the Depression is one of Shlaes's two main criticisms of the New Deal. The victims of Roosevelt's centralization campaign are the second: the Schechters; titans like Andrew Mellon, who were also hounded by prosecutors; shareholders; and corporate managers, including a utilities executive named Wendell Willkie. The book's title is an ironic allusion to these victims. In a 1932 campaign speech, Roosevelt referred to "the forgotten man at the bottom of the economic pyramid." But the phrase had a very different origin. In the late 19th century, the philosopher William Graham Sumner had used it to describe the average citizen "coerced," as Shlaes writes, "into funding dubious social projects." With 75 years of hindsight, surely we can all agree that Roosevelt's vision was imperfect. Yes, he helped build many pillars of the modern economy - Social Security, the Securities and Exchange Commission, the modern Federal Reserve and more. He also understood the folly of Hoover's protectionism and pursued a more open trade policy. And his public works slowly, if unevenly, provided employment (As the historian Eric Rauchway has noted in Slate, Shlaes exaggerates joblessness in the 1930s by counting many people who worked in relief programs as unemployed.) Welfare state: Homeless men line up for a place to sleep, New York, 1930. But other attempts to fine-tune the economy truly did fail. From today's vantage point, the worst of them may have been farm subsidies, which essentially live on, giving a handout to agribusiness while raising the cost of food for everyone else and hurting poor farmers around the world. Roosevelt did not seem to grasp that the judgment of millions of businesses and consumers - that is, the market - was, more often than not, better than the judgment of a single man. Given what had happened in 1929, this blind spot was perhaps understandable, but it's a fair point of criticism. The great challenge for his critics has always been to come up with an alternate vision that might plausibly be said to have done more good with fewer downsides. Shlaes likes the model offered by Willkie, the Republicans' 1940 presidential nominee, in which the New Deal would have been scaled back and business would have filled the void. She builds her case mostly by implication, through a series of sketches of self-starters who embodied what the free market could have accomplished. There is Bill Wilson, for example, the stock trader who founded Alcoholics Anonymous and in the process "taught Americans that the solution to their troubles lay not with a federal program but within a new sort of entity - the self-help community," as Shlaes puts it. Mellon shows the power of charity by donating his unrivaled art collection to the country, thereby creating the National Gallery. Even the Good Housekeeping Seal of Approval has a role to play, as an example of how the private sector once took care of quality control. Roosevelt, however, preferred government institutions like the Food and Drug Administration. IN a way, Shlaes's book has come just a little after its time. In the early years of George W. Bush's presidency, conservative critiques of the New Deal served a larger political purpose, as a rationale for the administration's attempts to remake Social Security. Those plans failed, of course, mostly because they found little support among voters. There is a historical parallel here. Roosevelt may be an icon now, but he faced enormous opposition when he was president. Americans at the time heard the arguments that he was insufficiently capitalist. They saw his missteps and, above all, they lived through the long Depression. Yet in four separate elections, when given a choice between his ideas and those of his critics, they overwhelmingly chose his. Based on what followed - the great economic boom of the postwar years - it is hard to doubt their decision now. They understood that the Good Housekeeping Seal of Approval wasn't quite up to defeating the Great Depression. Among Roosevelt's supporters, evidently, were a family of chicken butchers in Brooklyn named the Schechters. "Their major political concern in the 1930s was anti-Semitism," Shlaes's appendix quotes one of their descendants as saying. "They believed that if Roosevelt had not solved the problems of the Depression, the U.S. could have gone the way of Nazi Germany." The Schechters apparently voted for Roosevelt every time he ran. From Hoover to Roosevelt, Shlaes writes, government intervention helped make the Depression Great. David Leonhardt writes the Economic Scene column for the Business Day section of The Times.