Must-Read: Jeffry Frieden: ‘The Money Makers,’ by Eric Rauchway

Must-Read: Few people today realize the extent to which the New Deal was not ideological or theoretical but rather their opposites: pragmatic. And where the New Deal was ideological or theoretical, it tended to be the least successful–witness Thurman Arnold and utilities, or Roosevelt’s austerian turn in 1937-1938:

Jeffry Frieden: ‘The Money Makers,’ by Eric Rauchway: “In 2008, the international economy came within weeks of catastrophic collapse…

…Concerted action by the world’s monetary authorities staved off disaster. Although stagnation continues to plague much of the globe, especially Europe, a major depression was avoided. The world was not so lucky in 1929…. The policies of the world’s major governments helped turn the recession that began in 1929 into a full-fledged depression…. [But[ the sooner countries left the gold standard in the 1930s, the more quickly their economies rebounded. Britain went off gold in September 1931, followed by most of the rest of the world. America’s path out of the Depression was slowed by the Hoover administration’s gold-standard orthodoxy. When Roosevelt took office in 1933, he almost immediately took the United States off gold and devalued the dollar. The result, as Rauchway shows, was a robust recovery. By 1936, the world had left gold behind. For the next 10 years, even as war clouds gathered and then as war raged, American and British policy makers, led by John Maynard Keynes and the United States Treasury official Harry Dexter White, planned a new international monetary order…. Rauchway tells this important story with passion, intelligence and style….

The major players come alive in ‘The Money Makers.’ Rauchway’s archival research gives depth to Roosevelt and Treasury Secretary Henry Morgenthau Jr., showing that both men understood the economic and political implications of their monetary policies, even if they were uninterested in the theoretical foundations for them that Keynes and others were building. The book also gives great detail about the practical involvement of the two principal economists involved, Keynes and White. Rauchway places the political context front and center, especially in addressing the issue of White’s contacts with Soviet agents…. Perhaps today’s policy makers — especially contemporary advocates of orthodox austerity sitting in Berlin — can learn something from the story Eric Rauchway tells so well.”

November 27, 2015


Brad DeLong
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