Episode 6: Amity Shlaes

Full Episode 6 Transcript

Michael Hanson (00:00):

Hello everyone and welcome to another episode of the Well-Read Investor, the podcast that profits your mind and your money.

Today my guest is the ever-engaging Amity Shlaes here to talk about her most recent bestseller, Great Society: A New History. The title of course reflects the era of American politics where President Lyndon Baynes Johnson pursued a set of social policies designed to help the underprivileged called “the Great Society”. Of Course, this all happened in the late 60s—a time in so many ways applicable to now, and we talk about the ways today is similar and different.

Anyway, I mentioned Amity is a bestselling author, and in fact she has four New York Times bestsellers including The Forgotten Man: A New History of the Great Depression, and Amity’s book Coolidge, and a full-length biography of President Calvin Coolidge. National Review called the Forgotten Man "the finest history of the Great Depression ever written." The Economist made Coolidge an editor's choice for 2013.

But many readers know Miss Shlaes from the Wall Street Journal, where she served on the editorial board among many other duties, and her syndicated columns for years appeared in the Financial Times and Bloomberg. Currently Mrs. Shlaes’ work appears in Forbes and in National Review. 

You can learn more about Amity and her work at Amityshlaes.com or follow her on Twitter @amityshlaes.

Lastly, as Labor Day approaches I certainly hope you’re able to listen to this podcast with a few moments of relaxation as we start looking toward the final part of what’s been a tragic and eventful year—we all need a little rest these days and we all need to take care of ourselves sometimes and I hope you are doing that for yourself when you can. Ok, no more time to waste: here’s our conversation with Amity Shales.

Michael Hanson (01:53):

Amity first. I just want to say thank you so much again for being here and it is really our honor to have you on the show.

Amity Shlaes:

I'm thrilled to be here!

Michael Hanson:

With your books, Great Society, and then of course The Forgotten Man, which, are two huge topics about the great depression and then the idea that the new deal and the great society, why should every well-read investor read your book?

Amity Shlaes (02:13):

Well, right now, America is very idealistic. People don't want a little bit less poverty, they want no poverty. People aren't seeking a little bit higher earnings for lower earners. They're talking about broad research redistribution. And that feels very new, but of course it isn't new. The two periods where there was this much idealism, the thirties and the sixties, the period of the great progressive effort, the new deal and the period of the great progressive effort, the great society. So these are analogous periods. And I picked them even before now because I was interested in events that have consequences. And when you look at who we are, we live in Lyndon Johnson's America. That's what Joe Califano once said. And we also live in Franklin Roosevelt's America. So, to inform ourselves about where we are, the basics, it helps to go back and figure out what institutions exactly were established and why we bump up against them so often.

Michael Hanson (03:13):

Now I have to tell you, I mean, reading The Great Society: A New History currently is quite a thing because you can just read into so many parallels, but also differences of today. What are some of the parallels that you see? I mean, and as we think about this election coming up, do you see things happening in a similar way as they did in the past?

Amity Shlaes (03:32):

Great society was written a couple of years ago now, it's a new book, but books have lags. So, there was no, COVID, not on the horizon for me anyway. And there was no statue tearing down on the scale that we have now. The big parallel from the sixties was the expectation of payments from government. The idea that people are owed, not just their rights, their freedoms, but also assets. And, what is also parallel is the idea that you sideline police because they are bigoted and occasionally really do wrong. That was certainly the rule in the 1960s and the culture of the Great Watts riot started out with a back and forth with officers just as it might today.

Amity Shlaes (04:18):

And the question again, is whether the problem is bigoted police who have been trained improperly, or whether our society is systemically rigged against one group, very similar. In the sixties, what happened was the federal government funded community action efforts, a pretense of helping out federalism in the States. But what I found in the research of The Great Society about the sixties was that the federal funds that float into the locales didn't help the poor people. Didn't enfranchise them particularly and caused great frustration and a lot of infighting. So, it became a fight over money instead of an effort to help people or permit them to help themselves.

Amity Shlaes (05:00):

So, what we know from the sixties vis-a-vis community action, federally supportive is it doesn't necessarily make people who are supposed to be the beneficiaries happier. That's a good start. I think you're hinting at your second question, that we had a law and order candidate in 1968 in the United States. And president Trump is thinking about being a law and order candidate. It's true. That culture changes when you have riots or violence in cities, people vote differently. The law and order candidate then was Richard Nixon. And what's interesting to me, because I am no Nixon fan, is the quality of the Nixon campaign was very high.

Amity Shlaes (05:36)

Every time Nixon got up and spoke, you thought that's right, he wasn't too crazy. He was not a crazed authoritarian. He was just an intelligent analyst on the more moderate to conservative end of it. Nixon, the president was a different guy. So, I guess the lesson for now, sir, about law and order candidates is the guy who wins on law and order is not necessarily the guy you met when he campaigned. Beware of law and order candidates, would be the takeaway from the sixties experience.

Michael Hanson (6:08):

That's fascinating. Would you say that the presidency clearly changes a person once they've come through it?

Amity Shlaes (06:15):

Yeah. The crucible of the presidency is a bore for the rest of us. I mean, how many books about presidents are there? And we all kind of think it's neat because they're powerful. And we read about every time they got their toenails clipped, I’m telling you. And, for historians, it's like a vacuum that sucks you in. Of course, people change, but the real issue is what kind of ship does his captain of the ship have to navigate? And that has to do with the structure of our government, which shifted. And in the sixties, we had expanded our government. So, the president had more room for error than he might've had in another era.

Amity Shlaes (06:15)

In my book, Great Society, I tried very hard not to concentrate too much on the beguiling, horrible LBJ, Lindon Baynes Johnson, but rather on the system that made impossible and the poor souls who worked for him. And one after the other kind of had a little harder story because it's agony to be an intelligent policy person and working government with the tide so strong. What you hope for say, Sergeant Shriver, the head of our poverty office at the time, never comes to pass because of legislative or other compromise. And then you're blamed for the result of something you never recommended. And this agony is interesting and important for us to know about. So, I focus more on the best and brightest who work for presidents rather than the chief executives themselves.

Michael Hanson (07:42):

Yeah. I noticed that, I know it was quite an interesting collection of people throughout the book. And one of the things I've heard you say now once or twice is: great ambition and a desire to be loved is one way to think of populism. And it's one of the ways these folks can get themselves into some of these policies. And I had actually heard you speak about Arthur Burns relative to these topics. And that of course is of some interest to us here in the economic and investing world. Is the fed very politicized and do you think the fed is still politicized today?

Amity Shlaes (08:09):

I’m wondering where we met… but anyhow…Burns, the story of Burns. The reason he's interesting, he's he was such a respected economist. He was the guru. He was not only a respected economist, he had essentially built out the national Bureau of economic research, which is an important institution to economists. He was friends with Democrats. He was friends with Republicans particularly, and he also had Richard Nixon's ear. So, imagine someone who's a superstar economist, invented whole areas of the field. And there he was, fed chairman, and he knew inflation was bad. That's what he taught his students. But his vanity overcame his knowledge, his desire to please his president and stay in power, which is always the way, permitted him to convince himself he should compromise principle.

Michael Hanson (09:00):

Is that basic structure still intact in your mind today? Is the fell still

Amity Shlaes (09:05)

Absolutely. Yeah. I mean, what is the, because of the fed chairman has discretion. The fed can do a lot and because every fed chairman wants to please the president, whether he can or not, or she can or not. The president can do nasty things to bother the fed, right? The Treasury's in play, the fed is different from the treasury. It's supposed to be more independent, but the fed laws itself flawed. And that's what I try to get at. I mean, the Fed's mandate is too large. I wrote a piece in the New York Times about this. You want to blame all the fed laws, which just gave the fed too much license and too much responsibility.

Michael Hanson (09:40):

I know also I've heard you say Nixon went along with certain programs in the name of being reelected you know, he wanted to rattle the chain of China, so as to stoke his reelection chances, it seems very parallel to what we see today. Our expectation of course, is you'll see plenty more of that leading up to election day. Is that what that is to you in some ways today, this kind of a political phenomenon geared towards reelection or do you see real conflict with China happening?

Amity Shlaes (10:07):

I don't know anything about China and I can't comment on that, but I can say, Nixon basically saw all domestic policy and all economic policy as negotiable. What was important to Richard Nixon was foreign policy. If we won the war in Vietnam, if we settle with China and he became superstar who opened China, only Nixon could go to China while the rest would all fall in line, including the currency. That's not illogical. But anyway, in the meantime, what he did was trash everything domestically, for the sake of getting reelected. So he could pursue his Vietnam slash China policy. And turned out to be much more expensive than he thought. He sort-of created a great populist package for the country. Very much in the way any populist president would, a package that felt great, like a shot in the arm.

Amity Shlaes (10:58):

That was an upper for the economy, the package there, there were tax breaks to help us businesses. The list went on and he closed the gold window. But, it was a counterproductive package and everyone who worked on it at Camp David in summer of 1971 for Nixon knew it, it was a deal with the devil to get Nixon and reelected. Very, very interesting.

Michael Hanson (11:19):

You know, I've seen you speak several places and one of the things that you lament at times is that we just don't seem to have taught history very well to the current generations. Given the current circumstances and everything going on in the world, social unrest and COVID - what's your current perspective on that? Do you think that's even more acute a problem than it has been?

Amity Shlaes (11:38):

Yeah. You know, if you say we haven't taught well enough that understates it, we have failed teach history because we have failed to show history's relevance, apparently, and we can't just blame it all on teacher unions or something. It's very interesting, I think in a moment of introspection warranted.

Michael Hanson (11:58):

One of the ways I became a huge fan of yours, in fact, was not just for The Forgotten Man, but for the comic book adaptation to The Forgotten Man, done by Chuck Dixon in particular. And I'm just wondering, how did you come to agree to that project? We're just interested in the lore of it.