Boris Johnson, FDR and the failed concept of the New Deal

“Build, build, build!” Apart from an unfortunate echo of Colonel Saito in The Bridge on the River Kwai, it appears the Johnson premiership is evolving from its Brexit stage into its Lego phase – serendipitously, the company is already marketing a Lego figure of the Prime Minister.

Boris the Builder, however, would prefer the programme he announced in his speech at Dudley College of Technology on Tuesday to be characterized in different terms: “I am conscious that it sounds like a prodigious amount of government intervention – it sounds like a New Deal – and if that is so, then it’s how it’s meant to sound and how it’s meant to be, because that is what the times demand.”

That broad hint was a gift calculatedly aimed at newspaper sub-editors, waiting urgently like seals to be thrown a fish in the shape of material for a slick headline (“It’s Franklin Delano Johnson”). Conscious that this “prodigious amount of Government intervention” might provoke unease among conservatives, Boris hastened to reassure his audience: “I am not a communist – I believe it is also the job of the Government to create the conditions for free market enterprise.”

Well, that is a relief; less reassuring is the revelation that the Prime Minister does not find incompatible with creating the conditions for free market enterprise his admission that tax increases might be on the cards. So, how should we assess Boris’s New Deal?

The problem with essaying any objective analysis of public policy today is the extravagant polarization of public comment. On the one hand, we are assailed by the complaints of those extreme libertarians aggrieved because their inalienable right to cough in the faces of octogenarians from a distance of six inches has been repressed by pandemic lockdown rules; on the other, statue-demolishing nihilists would denounce the allocation of 101 per cent of GDP to subsidise Marxist street theatre as “too little, too late”.

So, is Boris a communist or a free-enterprise icon? Neither, is the evident answer. His programme may be a New Deal, but at £5bn it is hardly a Big Deal. The cost of the white elephant HS2 has already covertly run past £100bn. While scrapping that would still mean forfeiting a proportion of the cash committed, it would also free up resources for genuine, serious infrastructure projects. The fact is, though it may not be acknowledged in the Palace of Westminster, this government will not be taken seriously unless and until it shuts down the HS2 black hole.

In principle, there is nothing communist about the government taking economic measures to help recovery following so severe a crisis as the current pandemic: the same common-sense realism that legitimized its intervention in infection control validates its role in rebuilding the economy. Adam Smith would have recognized that – within reason. There are good things, too, in Boris’s package.

Developing residential accommodation out of redundant properties on non-greenfield sites is something that should have been undertaken with more vigour long ago, helping to regenerate urban centres. There are, too, sensible exemptions for such structures as community pubs and libraries. Upgrading schools, hospitals and transport is genuinely an “investment” – the term frequently abused to sanitise public-sector prodigality – politically as well as structurally if it is particularly targeted at former Red Wall areas.

There are also some bad parts in Boris’s curate’s egg. Relaxing planning permission – other than the sensible reduction of extravagant red tape – is a dangerous move. Beware the vengeance of the angry Nimby at the ballot box. The most crass proposal is for a fast-track approval process to enable owners to construct “additional space above their properties”.

That looks like a charter for a proliferation of eyesore developments providing little additional accommodation to compensate for environmental damage. It smacks of a bolt-on, cobbled-together plan that should be deleted from the back of the envelope on which it was first inscribed. That, however, is a minor quibble. More disturbing is the possible mindset betrayed by Boris’s invocation of the term “Rooseveltian”. Is Franklin Delano Roosevelt’s New Deal a valid template for economic recovery?

Roosevelt was not a communist, despite being married to one, though at Yalta he could not have served Stalin more faithfully if he had been first secretary of the Ural Soviet. His instincts were patrician liberal, arguably socialist. But did his New Deal work?

The New Deal did achieve a degree of success, for a very simple reason: it is not possible to throw $780bn (in today’s money) at a problem without somebody benefiting. During the “Great Contraction” of 1929-1933, US manufacturing output reduced by one-third. Unemployment reached 25 per cent, but with one-third of those employed working part-time for less money, in aggregate almost 50 per cent of America’s work-power was redundant.

Realistically, the alternatives were government intervention or revolution. Roosevelt’s solution was the “New Deal”, appropriately a term originally coined by Mark Twain in his novel A Connecticut Yankee in King Arthur’s Court. Controversy attends not the principle of state intervention in an exceptional crisis, but the specific policies of the New Deal.

It rewarded some interests at the expense of others, not necessarily capitalist fat cats. New Deal farm programmes helped large farmers, but disadvantaged tenants, share croppers and farm workers. It damaged the free-enterprise business culture, multiplied bureaucracy and, above all, massively increased the federal debt, in the decade preceding a world war. More constructively, regulation of financial institutions and insurance of bank deposits helped capitalism to survive a unique depression.

Despite popular mythology, it was not even Keynesian. John Maynard Keynes offered his services and had one meeting with Roosevelt which provoked mutual incomprehension and dislike. Keynes said he had “supposed the President was more literate, economically speaking”. The New Deal was an incoherent mélange of heavyweight expedients. In May, 1939 Henry Morgenthau Jr, Roosevelt’s Treasury Secretary, told the House Ways and Means Committe: “I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot!”

This admission was later reinforced by Ben Bernanke, after Milton Friedman had traced the origins of the Depression to the Federal Reserve having allowed the money supply to fall by one-third between 1929 and 1932. Addressing Friedman’s criticism live on air, Bernanke, then Governor of the Federal Reserve, apologised to him: “Regarding the Great Depression, you’re right. We did it. We’re very sorry. But thanks to you, we won’t do it again.”

The New Deal was well-intentioned, but it was a package of mostly wrong solutions to an unprecedented problem. FDR did not restore American prosperity: that achievement should be credited to General Hideki Tojo who, by ordering the attack on Pearl Harbor, re-galvanised the US economy on a war footing, raising it back up to the prosperity experienced in the 1950s.

So, Boris, with his own assortment of expedients, should beware of following the “Rooseveltian” path. The question must also be asked: how far is the Conservative party’s growing infatuation with state intervention a crossover from the socialist/Marxist climate dominating the cultural arena? Are the Tories still a party of free enterprise? Are woke corporations, for that matter, any longer truly capitalist? Where are the tax cuts that would help re-energise the economy?

Franklin D Roosevelt is not a Pied Piper for any sensible politician to follow. The economic illiteracy diagnosed in him by Keynes was just a pale reflection of his ideological naivety. On his return from Yalta where he had baited Churchill for Stalin’s entertainment and sold out half of Europe, including Poland for whose freedom Britain had entered the war, Roosevelt told his cabinet of his admiration for Stalin and that, due to the dictator’s early training for the priesthood, “I think that something entered into his nature of the way in which a Christian gentleman should behave.”

A man with that level of insight was unfit to run the dog-catcher’s department in Peoria, let alone the most powerful nation on earth.