Ocasio-Cortez’s Selective Memory on the New Deal

Alexandria Ocasio-Cortez never misses the opportunity to bash capitalism.

At the 2019 South by Southwest festival, the Congresswoman derided capitalism, describing it as “irredeemable.” She says that the U.S. is currently facing the consequences of “putting profits over everything else in our society.” Curiously, the freshmen congresswoman pivoted her rant towards a critique of the New Deal.

How could such a staunch leftist like Ocasio-Cortez — who fashioned her pet legislation as the “Green New Deal” — criticize its 20th-century predecessor? She was able to do so by turning this discussion into a matter of race.

In her view, Roosevelt’s New Deal cut African Americans a raw deal:

“The New Deal was an extremely economically racist policy that drew little red lines around black and brown communities and it invested in white America.”

Ocasio-Cortez continued expanding on the New Deal’s harmful effects: “It allowed white Americans access to home loans that black Americans didn’t have access to, giving them access to the greatest source of intergenerational wealth.”

Misinterpreting the New Deal’s Racist History

The congresswoman is correct about the New Deal’s racist policies, albeit from an observational standpoint. I wrote about this previously, detailing how the federal government promoted segregated housing during the New Deal at the African-American community’s expense.

However, Ocasio-Cortez’s talk about the New Deal flagrantly omits other government interventions that clearly affected racial minorities in a negative way. The Wagner Act of 1935 — which established labor-union monopolies — gave incumbent unions tremendous power to exclude low-wage workers. During this period, union heavyweights discriminated against black workers in order to keep wages artificially high for white workers.

Similarly, the National Industrial Recovery Act of 1933 allowed the executive branch to create industrial cartels to restrict output and enact minimum-wage policies. This resulted in approximately 500,000 blacks being pushed out of the labor market thanks to high, non-market wages.

Despite these overlooked aspects of the New Deal, Ocasio-Cortez continues to race hustle and thinks that more government intervention will somehow “correct” past injustices that the government itself created.

How Limited Government Made African Americans Prosperous

In contrast to the New Deal, markets have historically helped racial minorities. It was during the Gilded Age that the African-American community was able to first establish itself as an economic force. This was an era when there was no welfare state, no federal tax maze, nor an alphabet soup of bureaucracy to impede capital accumulation and business creation.

During this time, African American civil society was at its peak. David Beito’s From Mutual Aid to Welfare State was a seminal work in demonstrating how the African-American community thrived without any form of government assistance before the New Deal. Civic organizations like the Independent Order of Saint Luke and the United Order of True Reformers “specialized initially in sickness and burial insurance,” and became leading institutions in African-American civil society.

The Independent Order of Saint Luke stood out for its entrepreneurial endeavors and ended up establishing the Saint Luke Penny Savings Bank of Richmond, which had the honor of having Maggie L. Walker as the first, black female bank president in American history.

Additionally, prosperous enclaves such as “Black Wall Street ” in Tulsa, Oklahoma’s Greenwood District and Detroit’s Black Bottom neighborhood demonstrated the power of black capitalism. No central planning was needed to establish these business neighborhoods.

Alexandria Ocasio-Cortez and her intellectual cohorts make sure that this history falls down the memory hole. Bashing capitalism is simply too easy and anything that disrupts the narrative, must be cast aside.

Is Capitalism Truly Irredeemable?

So, is capitalism irredeemable and worthy of eternal scorn? Human Progress depicts what capitalism has been able to achieve, even with the fiscal and regulatory shackles imposed on it:

“….in 1820, 94 percent of the world’s population lived in extreme poverty (less than $1.90 per day adjusted for purchasing power). In 1990 this figure was 34.8 percent, and in 2015, just 9.6 percent.”

Human Progress’s findings are in line with Mises’s view in Human Action that economies with nominal degrees of capitalism are still capable of delivering constant improvements in living standards: “The characteristic mark of economic history under capitalism is unceasing economic progress, a steady increase in the quantity of capital goods available, and a continuous trend toward an improvement in the general standard of living.”

Most importantly, capitalism has made us more humane in our treatment of domestic animals and has granted women and children unprecedented access to leisure activities and educational opportunities to improve economically. Sadly, select parts of the world — especially present-day Venezuela — have regressed into barbarism due to their political class’s complete rejection of capitalism and private property rights.

Indeed, Western mixed economies still have work to do, but the direction they must head towards is one of more liberalization, not government control.

The Invisible Iron Fist of Government Bureaucracy

Politicians like Ocasio-Cortez see poverty and working-class people struggling to make ends meet, but they don’t see the mountains of paperwork and regulations in the background that make the cost of living so high and make it difficult to run a small business. They also ignore the minimum wage laws that keep countless unskilled minority workers – their primary constituents – from entering the workforce and getting the experience they need to improve their lives.

Refuting the historical distortions and false narratives surrounding capitalism is incumbent upon on all free-marketers. George Orwell said it best, “Who controls the past controls the future. Who controls the present controls the past.”

Politicians like Alexandria Ocasio-Cortez come and go, but their ideas have staying power. When these ideas are allowed to go unchallenged, they can transform into veritable nightmares in the political arena. The very least we could do is challenge these flawed ideas. If we fail to do so, we are only sowing the seeds for our inevitable defeat.

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