Book Review: C.J. Maloney's Back to the Land

By now most readers are familiar with the essential modern accounts of the Great Depression era; books such as Amity Shlaes' The Forgotten Man which brilliantly expose the myriad government errors that turned what should have been a minor downturn into a decade long economic debacle. The Forgotten Man and others like it are now, and will continue to reshape the discussion of a needless recession authored by government meddling.

What's perhaps been covered less are the up-close accounts of FDR's policies, and what they meant for the average individual. Former Wall Street trader C.J. Maloney has set out to fill the aforementioned breach with his very important book Back to the Land: Arthurdale, FDR's New Deal, and the Costs of Economic Planning, which recounts the Roosevelt administration's (specifically Eleanor Roosevelt) attempt to craft a perfect, semi-autarkic community, all on the taxpayer dime.

Maloney's book capably reveals the certain costs of central planning, thus making Back to the Land an essential story for the political class to understand better. As for the many who view government spending as an economic good in its own right, Maloney's tale of the costly creation of Arthurdale, West Virginia (a town built by the federal government as a model for the nation) will surely give them pause.

Regarding the origins of Arthurdale, it, along with "99 similar colonies across the nation", was conceived in the way that so many allegedly compassionate ideas begin in Washington. Spawned by government officials eagerly spending the money of others given their desire to "do something" about poverty, Arthurdale became Eleanor Roosevelt's pet project after she witnessed up close the destitution of West Virginia coal miners in nearby Scotts Run.

In modern times, those who keep a close eye on Washington are familiar with former Obama chief of staff Rahm Emmanuel's point about not letting a crisis go to waste; specifically that the Obama crowd had ideas on how to transform the U.S., and the 2008 recession would provide the oxygen to support just such an undertaking. Arthurdale and its many copycat communities were similarly hatched in a time of crisis, yet the ideas were hardly new. In short, the Great Depression was the crisis catalyst for the implementation of a concept that had been brewing in the minds of central planners for quite some time.

In this case land economists such as Rexford Tugwell and M.L Wilson had been agitating for planned communities funded by government well before 1933, but it was the pain and suffering of the Great Depression that made their blatantly unconstitutional vision possible. Pictures of terribly impoverished children have a way of softening the more rational stances of the electorate, and they're always and everywhere the author of some truly bad ideas.

"Back to the Land" was one of those stupendously awful ideas, and its currency of sorts was "the deceitful dream of the golden age" (Alexander Hamilton), which is the tendency among individuals to frequently elevate an allegedly simpler, more prosperous, and more wholesome past. In the early, industrializing 20th century, the "tranquil" past was an agrarian one. Tugwell, Wilson and the Roosevelts dreamed of bringing the Americans who'd supposedly suffered the downside of the Industrial Revolution back to nature.

The above is perhaps what entertained and horrified this writer the most about Maloney's book. They say history repeats itself, or at the very least rhymes, so to read Maloney's painstaking accounts of how mostly city-dwelling socialists talked up the advantages of essentially moving back to the farm, was to be reminded of the modern version of this, which is "back to manufacturing". Elevated by politicians of both parties who've most likely never spent a day working in a factory, the political class of today is similarly deceived by the dream of a golden age that never existed, and that if we returned to, would impoverish us.

In the 1930s, even though small family farms were no longer economically viable, as Maloney puts it, "intellectuals gathered in their natural habitat (nicely appointed hotels) and held conferences to discuss how to make all those workers go back to the land in a manner more to their liking." And if they were to return to nature they would need "guidance and control" from the Commanding Heights in Washington, D.C.; the commanders the kind of individuals Americans remain familiar with now who similarly believed then that "the doctrine of laissez-fair is unsafe politics and unsound in morals."

From here it's probably fairly simple to guess what's ahead, but that would cheat the reader out of some history that continues to matter. Indeed, there are some very important lessons in the Arthurdale debacle.

One concerns federal budgeting. Basic logic tells us that the federal creation of a town concept with 165 luxurious houses, a school, a barbershop, a gymnasium and all the rest would as mentioned before seem more than unconstitutional. But much as egregious spending ideas continue to be tucked into appropriations bills in ways that animate the notion of non sequitur, the funding for Arthurdale was "a tiny rider attached to a gigantic piece of legislation that nobody even read." Again, history always repeats itself.

Funded with an initial grant of $25 million, as Maloney notes, "Arthurdale was not conceived and constructed in a calm, rational manner; it was put into action with much haste, amid confusion and heightened emotions"; those emotions of course paid for by others. It seems that the hysteria that led to Arthurdale is the historical equivalent of the "shovel-ready" projects so dear to the Obama administration, those projects in much the same way hatched with great haste, driven by emotion, and fueled by the funds of a powerless base of taxpayers.

For those of us intrigued by the now quaint notion of local governance rather than federal oversight, Back to the Land offers an important lesson there too. Indeed, the initial modular homes that were put up in Arthurdale, though luxurious, were great for the summertime, but as Maloney helpfully points out, "were completely useless in West Virginia's harsh winters", thus the need for more money to fix the initial mistakes.

Arthurdale was a bad idea on its very best day, as all housing projects are, but the story of the inappropriate Hodgson Houses helps explains why the Founders wanted a federal government of very limited powers (the building of planned communities decidedly not one of them). Given the certainty that a distant bureaucracy would have limited local knowledge, mistakes of this kind are and were all too predictable.

Of course the man who oversaw the disastrous set-up and eventual occupation of houses built for racially pure (no blacks in Arthurdale, thus further exposing the absurd belief that men become angels once they enter government) families, Eric Gugler ("I was not sent down here to save money, I was sent to spend money") got promoted to bigger and better things in Washington. In the book's best line, Maloney paraphrases Randolph Bourne in making the hilarious, sad and very true observation "that it is not war that is the health of the state; it is failure."

Bureaucrat Louis Howe bought with federal money the land on which Arthurdale was built, and not only was it improperly located for any kind of business actually in search of profits, Howe, in an act so typical of those spending the money of others, neglected to check the quality of the drinking water. His reward (failure is always rewarded in Washington - think Ben Bernanke), according to Maloney, was $48,000 to fix the water problem.

What about the cost of the luxury homes? There we find that $16,000 was spent her homestead despite the fact that similar houses in the area cost $5,000 to set up. The disparity here can't be stressed enough.

Indeed, while stimulus spending is an economic retardant on its best day given that it redistributes wealth from the productive to the indolent, not considered enough is the sheer waste of it all. At risk of engaging in more cliché, we live in a world of limited capital, and what the creation of Arthurdale makes plain as it applies to government spending is how much capital destruction occurs in the process of building "things". Looked at modernly, assuming the three "stimulus" bills since 2001 bore the U.S. anything of lasting economic significance, what's unknown is how much capital was wasted to get to that point.

Of course once the houses were built and the families moved in, what became apparent quickly was that the dreamy rush to an agrarian past, far from glorious, was arduous and ultimately didn't work. That much was perhaps predictable given the failure of family farms nationwide, but lacking a farm economy, Arthurdale then grew reliant on other forms of federal largess in order to maintain itself.

First up was a factory (apparently the irony of moving back to the land only to manufacture was lost on Arthurdale's architects) meant to produce Post Office equipment (founded on government waste, Arthurdale was reliant on it too), but that idea quickly died when other congressional districts reliant on similar Post Office work made a lot of noise. A vacuum factory soon followed, but unable to win government contracts, it eventually closed.

A shirt factory followed the one for vacuums, but it too closed, and as Maloney notes, this was to some degree inevitable. Thanks to the National Industrial Recovery Act (NIRA), a very cruel law that among other things put a floor under pay, the wages of Arthurdale's willing workers were not allowed to adjust to both national and local realities such that no factory was viable there.

Quite predictably this meant that by 1938, "three-quarters of the homesteaders were still employed by the federal government". The NIRA made setting up shop in Arthurdale an impossibility from a wage standpoint, plus due to the town's location and its sparse population, "the area did not lend itself to anything other than local production". It bears asking at this point if private investors disciplined by profit and loss had sought to build a planned community in West Virginia, would they have chosen the location that eventually became Arthurdale? Probably not.

Arthurdale was built with an eye on a higher standard of living for its citizens, but in attempting to set up a semi-autarkic society, the town's architects ignored the basic economic truth that it's through an expansion of the division of labor that societies achieve higher living standards. As Maloney so rightly points out, "the very division of labor they wished to do away with" is what "makes possible a higher standard of living."

Ultimately this failure to understand both human and economic nature exposed the concept that was Arthurdale as a total failure. Houses built for $16,000 were eventually sold for $750-$1,200, and with the resettlement colonies that Arthurdale represented at the top of the list for sunsetting by Congress, defunding happily began.

And by 1947, Arthurdale as a federal project was over with. What began as "Heaven" eventually collapsed from its myriad contradictions that were anti-human, and certainly anti-growth. Arthurdale on its own was a tragedy, but even worse, we suffer what created it to this day in the form of a federal government that totally disregards the strict limits placed on it by the Constitution.

As for disagreements with the author, like most modern Austrian School thinkers, and quite unlike Ludwig von Mises, Maloney seemingly sees all increases in money supply as inflationary even if the value of the dollar is rising. The contradiction here, and one that Back to the Land helpfully points out, is that commodities (traditionally the best signal of monetary error) were declining in the ‘20s, thus explaining the destitution in West Virginia that eventually led to Arthurdale. Falling commodities, far from signaling an inflation as the author argues, seem to suggest overly tight money during the 1920s.

Maloney also raised the question of whether or not the welfare plan that was assuredly Arthurdale became too ingrained in the people who lived there. This is surely a popular thought on the Right, that handouts change the person, but then what explains a country like China's quick transformation into an economic powerhouse after decades of communism?

There exists this need among policy analysts to view humans as malleable creatures, but it seems the better answer to why West Virginia suffered before and after the New Deal has to do with the anti-work, anti-success attitudes of its citizens. As Maloney makes plain early on, many of the most impoverished individuals in the slum that was Scotts Run didn't work because they chose not to, and then those who did hit the liquor stores each payday.

Not defending the policies that created Arthurdale for even one second, it should be said that failure is often a choice. No doubt the handouts exacerbated the poor instincts of the supposed beneficiaries of New Deal largess, but it can't be stressed enough that they were making foolish, impoverishing decisions well before the handouts began.

All the above is of course nitpicking. Back to the Land is an interesting book, and even better it's an important one for showing up close the bungling ways of government officials. Maloney asks "What were they thinking?", though he might agree that his question is largely rhetorical. They were government workers and politicians is what they were thinking, and Back to the Land skillfully reminds us why we shouldn't entrust our lives or treasure to those who work in government.