John Maynard Keynes met Franklin Roosevelt on Monday, May 28, 1934. Both afterward said polite things to Felix Frankfurter, who had urged the two to confer: Keynes described the conversation was “fascinating and illuminating,” while Roosevelt wrote that “I had a grand talk and liked him immensely.”
But the best-known account is probably that of Secretary of Labor Frances Perkins, who wrote in her memoir, The Roosevelt I Knew,
Keynes visited Roosevelt in 1934 rather briefly, and talked lofty economic theory.
Roosevelt told me afterward, “I saw your friend Keynes. He left a whole rigmarole of figures. He must be a mathematician rather than a political economist.”
It was true that Keynes had delivered himself of a mathematical approach to the problems of national income, public and private expenditure, purchasing power, and the fine points of his formula. Coming to my office after his interview with Roosevelt, Keynes repeated his admiration for the actions Roosevelt had taken, but said cautiously that he had “supposed the President was more literate, economically speaking.” He pointed out once more that a dollar spent on relief by the government was a dollar given to the grocer, by the grocer to the wholesaler, and by the wholesaler to the farmer, in payment of supplies. With one dollar paid out for relief or public works or anything else, you have created four dollars’ worth of national income.
I wish he had been as concrete when he talked to Roosevelt, instead of treating him as though he belonged to the higher echelons of economic knowledge.
In Perkins’s story, Roosevelt did not grasp economic theory, and would have done better with a less figure-laden account of Keynes’s prescriptions. Historians often recycle her description as evidence of Roosevelt’s “limited understanding of some of the matters he had to deal with as president,” as Adam Cohen writes.
And yet we have evidence that Roosevelt was quite happy dealing with economic theory and a rigmarole of figures.
Consider Roosevelt’s press conference of August 9, 1933, at Hyde Park, where he had recently seen Irving Fisher, George Warren, and other advisers who left him with a sheaf of charts and tables.
When reporters asked what had happened to prices, the president responded, “That is a perfect question,” shuffled some papers until he found the ones he wanted, and proceeded to conduct a brief seminar. “Now the price of gold has gone up,” he began, pointing at the appropriate line. “Seventeen basic commodities were away below the all-commodity level and they have gone up away above the all-commodity level,” he continued, indicating the effect of recent shifts. “Farm prices were lowest of all and they have come back, relatively, more than the all-commodity level.” Other prices were stickier. “[R]etail food prices went down very little and they have gone up very little. And the cost of distributing food was always very, very high and hardly went down at all.… The cost of living, of course, didn’t go down very much and it hasn’t gone up very much.… Then, over here, we have the four main farm crops [cotton, corn, wheat, and hogs] and that shows what must be perfectly obvious, that the things that went down the furthest came back the most.”
None of that sounds like a man generally grumpy about having to discuss the theory or specifics of economic activity and its implication for policy. So how do we explain what he said to Perkins?
It is of course possible that Roosevelt was fibbing about the extent to which he had failed to understand Keynes – he had, by his own acknowledgment, done just that in 1933, when reporters asked him if Irving Fisher’s commodity dollar had influenced his thinking. Roosevelt lied, pretending he did not know what they were talking about, to throw them “off the scent.”
It is also possible that Perkins did not remember substantially what the president said – hers is after all an after-the-fact account.
But let’s suppose the president did find the meeting off-putting. Isn’t it possible that he was annoyed not by the fact of the figures, but of the specifics – isn’t it possible that’s what he meant by saying Keynes was a mathematician rather than a political economist?
After all, Roosevelt’s policy accorded with Keynes’s prescriptions in the 1933 Means to Prosperity: repairing the banks, devaluing the currency, and using a public works program to provide impetus for private borrowing and business expansion.
Or rather, it accorded with Keynes’s prescriptions in every respect except that of scale – Keynes had written the Means that a public works program “probably has to be on a large scale and organized with determination.” Roosevelt’s idea of the appropriate scale was not so large as Keynes’s. On April 19, 1933, Roosevelt told reporters, “entirely off the record, do not write stories about five or six billion dollars of public works. That is wild.”
But when Keynes met Roosevelt just over a year later, he was about to say publicly that while he figured the US had commendably spent about $2.8 billion on recovery and relief since Roosevelt’s presidency began, this spending was now unfortunately on the wane. Keynes would declare the US government needed to spend about $2.4 billion over the next six months – or enough to raise the total into the $5 to 6 billion range that Roosevelt had rejected as “wild.” Keynes would publish this argument in an open letter to the president that appeared in the June 10, 1934, New York Times.1
So it seems quite likely to me that Roosevelt was cross after meeting Keynes not because the president did not understand the economist’s figures, but because he did – because what was mathematically required was not politically plausible.2
As for Keynes, he had staunchly defended the New Deal through 1933, and continued to do so into 1934, though he now had thoughtful reflections on Roosevelt’s personality to add. Back in England after his American sojourn, he spoke in a forum at the Tuesday Club on July 4, 1934 regarding the New Deal. He acidly noted that “this so-called ‘Bolshevik’ administration has saved the capital financial structure.” He remarked that US output was now 20 to 30 percent above its low and observed, “the extent, variety and spread of the recovery is outstanding in economic history.” He critiqued the new bureaucracy but said “Far from harping on its shortcomings, it is rather a miracle that it has not been frightfully bad.” Then he observed, without really analyzing, “And over it all and on top of it is the queer personality of the President, with his sensitive apprehension and floating mind.”
Keynes concluded, “The whole difficulty that confronts this liberal Administration is a world problem: can liberalism and democracy last out, – that is the problem everywhere. Most American business leaders lack imagination and have no apprehension of the problem facing their society, if it is to survive. I want to see a compromise between the old and the new – only the United States is bold and hopeful and has already made a great start toward solving the world problem in liberal terms.”
1I’m not sure exactly where Keynes got his figures, or what categories of spending they include. He says “emergency expenditure” – “excluding refinancing and advances to banks” – was $90 million up to November 1933. He says that “[f]rom November onward, the figure rose sharply and, for the first four months of this year, the month average exceeded $300,000,000.” So figuring a monotonic rise up to around $300 million, and then a falling off into June, that gives us a total expenditure of around $2.8 billion up through June 1934. The Treasury’s annual report for the fiscal year ending June 30, 1935, gives public works and relief spending from July 1, 1933 to June 30, 1934, at $2.5 billion; if you add in $270 million for Apr-May-June, that gives you $2.77 billion, so that’s quite close to my estimate of Keynes’s estimate.
2The same Treasury report gives public works and relief spending from July 1, 1934 to June 30, 1935, at about $3.4 billion, or $283 million per month. So Roosevelt did not then implement Keynes’s prescription.