Demystifying the New Deal
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Bibliographic details
- Authors: CAROLA BINDER
- Published: September 3, 2025
Overview
- Title: False Dawn: The New Deal and the Promise of Recovery, 1933–1947
- Author reviewed: George Selgin
- Reviewer: CAROLA BINDER, associate professor of economics and economic historian at the University of Texas at Austin’s School of Civic Leadership.
- Publication: F&D Magazine, September 2025
- Book details noted in the review: University of Chicago Press, Chicago, 384 pp., $35
- Review emphasis: careful evaluation of evidence on New Deal policies and recovery from the Great Depression.
Main arguments in the review
- Selgin avoids offering a simple overall verdict on the New Deal’s effectiveness because its projects and regulations were wide-ranging in aims and scope.
- Selgin challenges the idea that the New Deal was a coherent plan designed before Roosevelt took office; many key components were cobbled together after his inauguration and sometimes without his initial support.
- Selgin examines components individually, including the 1933 bank holiday and the gold programs, and agencies such as the Federal Deposit Insurance Corporation (FDIC), the Reconstruction Finance Corporation (RFC), the Agricultural Adjustment Administration (AAA), the National Recovery Administration (NRA), and the Home Owners’ Loan Corporation (HOLC).
- Each chapter describes: the conventional wisdom, challenges to the conventional wisdom, and challenges to those challenges, culminating in Selgin’s clear statement of where he stands and the strength of evidence supporting that position.
Evidence gaps and research agenda
- Selgin pinpoints where evidence is shaky or missing, making the book a "treasure trove of research ideas for economic historians."
- Specific empirical need highlighted: improved empirical studies estimating the effects of policy uncertainty on investment.
- Contemporary relevance noted: policy uncertainty is an especially important topic today, with some measures of economic policy uncertainty at record highs.
Keynesian myth and policy implications
- Selgin debunks what he calls the “Keynesian myth,” the tendency to identify the New Deal with Keynesian economics.
- He disputes claims (cited in the review as from Eric Rauchway’s 2015 book The Money Makers) that Roosevelt “conducted an active monetary and fiscal program of recovery…working along lines suggested by Keynes.”
- Selgin’s conclusions reported in the review:
- Roosevelt was not influenced by Keynes.
- Roosevelt was firmly committed to fiscal conservatism until after 1937.
- The Federal Reserve did not deliberately use monetary stimulus in response to the Depression.
- Keynes’s warning about expectations is emphasized: Keynes recognized that Roosevelt’s antibusiness attitude and New Deal policies, especially the National Industrial Recovery Act, bred fear and uncertainty that precluded an investment-led recovery.
- Business leaders’ perspective: policy uncertainty generated by the New Deal was seen as highly counterproductive.
Notable quote and illustrative example
- Lammot du Pont II (president of Dupont), quoted by Selgin in the review, in 1937: “uncertainty rules the tax situation, the labor situation, the monetary situation and practically every legal condition under which industry must operate…The whole future is a gigantic question mark.”
- Selgin’s explanatory note quoted in the review: “it isn’t simply bad outcomes that frighten investors; it’s also not knowing what’s in store.”
International Monetary Fund. Demystifying the New Deal. F&D Magazine, September 2025.
Content in this bundle
- Demystifying the New Deal