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The New Deal was the name that United States President Franklin D. Roosevelt gave to a sequence of central economic planning and economic stimulus programs he initiated between 1933 and 1938 with the goal of giving aid to the unemployed, reform of business and financial practices, and recovery of the economy during The Great Depression. The enactment of New Deal policies lasted from 1933 through 1939.
When Franklin D. Roosevelt took office, the nation was deeply troubled.
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Fascism was really the basis for the New Deal. It was Mussolini's success in Italy, with his government-directed economy, that led the early New Dealers to say But Mussolini keeps the trains running on time.
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The New Deal was the name that United States President Franklin D. Roosevelt gave to a sequence of central economic planning and economic stimulus programs he initiated between 1933 and 1938 with the goal of giving aid to the unemployed, reform of business and financial practices, and recovery of the economy during The Great Depression. The enactment of New Deal policies lasted from 1933 through 1939.
When Franklin D. Roosevelt took office, the nation was deeply troubled. No one could receive a bank loan. The unemployment rate was 25% and higher in major industrial and mining centers. The agricultural sector was possibly in worse shape than the industrial sector. Farmers were having difficulties selling their products and a part of the country known as the dust bowl was experiencing a long lasting drought. Mortgages were being foreclosed by tens of thousands. Unemployment was still high in 1939, with the tide only turning in 1941.
The "First New Deal" of 1933 was aimed at short-term relief programs for all groups. The Roosevelt administration promoted or implemented banking reform laws, work relief programs, agricultural programs, and industrial reform (the National Recovery Administration, NRA), and the end of the gold standard and Prohibition.
A "Second New Deal" (1935–1938) included labor union support, the Works Progress Administration (WPA) relief program, the Social Security Act, and programs to aid the agricultural sector, including tenant farmers and migrant workers. The Supreme Court ruled several programs unconstitutional; however, most were soon replaced, with the exception of the NRA. The Fair Labor Standards Act of 1938 was the last major program launched, which set maximum hours and minimum wages for most categories of workers.
Most of the relief programs were shut down during World War II by the Conservative Coalition (i.e., the opponents of the New Deal in Congress). Many regulations were ended during the wave of deregulation in the late 1970s and early 1980s. Several New Deal programs remain active, with some still operating under the original names, including the Federal Deposit Insurance Corporation (FDIC), the Federal Crop Insurance Corporation (FCIC), the Federal Housing Administration (FHA), and the Tennessee Valley Authority (TVA). The largest programs still in existence today are the Social Security System, Securities and Exchange Commission (SEC), and Fannie Mae.
Origins
The New Deal represented a significant shift in political and domestic policy in the U.S., with its more lasting changes being increased federal government control over the economy and money supply, intervention to control prices and agricultural production. This was the beginning of complex social programs and wider acceptance of trade unions. The effects of the New Deal still remain a source of controversy and debate amongst economists and historians.
The crash of the U.S. stock market occurred on Thursday October 24, 1929; then, on "Black Tuesday" October 29, the stock market fell even more than it had the week before. These events were the catalyst of a worldwide economic depression.
From 1929–1933, unemployment in the U.S. increased from 4% to 25%, manufacturing output reduced by approximately a third. Prices fell causing a deflation of currency values, which made the repayments of debts much harder. The mining, lumber, and agriculture industries were hit especially hard by the drop in values. The impact was much less severe in white collar and service sectors.
Upon accepting the 1932 Democratic nomination for president, Franklin Roosevelt promised "a new deal for the American people." (The phrase was borrowed from the title of Stuart Chase's book A New Deal published earlier that year):
Roosevelt entered office with more than one ideology or plan for dealing with the Great Depression. The "First New Deal" (1933-34) was, in part, a response to the demands of left-leaning political organizations that had coalesced around Roosevelt's campaign. (Not included was the Socialist Party, whose influence was greatly diminished.) Far from being a typical Social Democratic program, however, this first phase of the New Deal was also characterized by fiscal conservatism (see Economy Act, below) and experimentation with several different, sometimes contradictory, cures for economic ills. The consequences were predictably uneven. (See "Recession of 1937 and recovery," below). Whether the New Deal can be credited with the economy's eventual recovery, or blamed for impeding it––and which of its aspects were most effective––thus remains a complicated, and highly controversial, question.
The New Deal policies drew from many different ideas proposed earlier in the 20th century. Some advocates, led by Thurman Arnold, went back to the anti-monopoly tradition that stretched back to Andrew Jackson and Thomas Jefferson. Supreme Court Justice Louis Brandeis, an influential adviser to many New Dealers, argued that monopolies were a negative economic force, because they produced waste and inefficiency. However, the anti-monopoly group never had a major impact on New Deal policy. Other leaders such as Hugh Johnson of the NRA took ideas from the Wilson Administration, advocating techniques used to mobilize the economy for World War I. They brought ideas and experience from the government controls and spending of 1917-18. Other New Deal planners suggested policy experiments of the 1920s, ideas from efforts to harmonize the economy by creating cooperative relationships among its constituent elements.
Roosevelt formed what he called the Brain Trust, a group of academic advisers to assist in his recovery efforts. Their solutions to the economic crisis called for more extensive government regulation of the economy. Donald Richberg, the second head of the NRA, said "A nationally planned economy is the only salvation of our present situation and the only hope for the future."
The New Deal faced some vocal conservative opposition. The first organized opposition in 1934 came from the American Liberty League led by Democrats such as 1924 and 1928 presidential candidates John W. Davis and Al Smith. There was also a large but loosely affiliated group of New Deal opponents, who are commonly called the Old Right. This group included politicians, intellectuals, writers, and newspaper editors of various philosophical persuasions including classical liberals, and conservatives, both Democrats and Republicans.
World comparisons
Europe
- The United Kingdom was unable to adopt major programs to stop its depression. This led to the collapse of the Labour Party government and replacement in 1931 by a National Coalition Conservative). Partially as a result there was no equivalent "New Deal" in Britain.
- France was in political crisis and its Third Republic very much contested; the "Front Populaire" government, led by Léon Blum, in power 1936-1938, instigated hefty social reforms. As the coalition united representatives from the centre-left to the communist party, right-wing opposition was very strong and social turmoil marred the Front Populaire term. This division left the country sourly divided in 1938-1939.
- In Germany during the Weimar Republic, the economy spiraled down, leading to a political crisis and the rise to power of the Nazis in January 1933. Economic recovery was pursued through autarky, wage controls, price controls, and spending programs such as public works and, especially, military spending.
- In Benito Mussolini's Italy, the economic controls of his corporate state were tightened; economic growth ended.
- The USSR was mostly isolated from the world trading system during the 1930s—although the decrease in demand forced Joseph Stalin to pursue hardline development policies that led to internal famines and other calamities.
- Spain endured mounting political crises that led in 1936 to civil war.
Canada & the Caribbean
- In Canada, the Conservative Prime Minister R. B. Bennett raised tariffs against the U.S. but lowered them on British Empire goods. This exacerbated the Depression and contributed to the growth of Hooverville-like camps of the unemployed in Canada. Belatedly, in 1935, he proposed a series of programs that resembled the New Deal; they met with the disfavor of both the courts and the populace, leading to his defeat in the elections of 1935.
- The Caribbean saw greatest unemployment during the 1930s because of a decline in exports to the U.S., and a fall in export prices.
Asia
- China was at war with Japan during most of the 1930s, in addition to internal struggles between Chiang Kai Shek's nationalists and Mao Zedong's communists.
Australia & New Zealand
- In Australia, conservative and Labor governments applied orthodox economic principles during the 1930s, cutting government spending and reducing the national debt. It was not until World War II that the government (first conservative, then Labor) introduced Keynesian policies similar to the New Deal such as increasing government taxation and spending; imposing economic regulation; and petrol rationing. These and similar measures remained in place after the war. Labor Prime Minister Ben Chifley outlined these policies in his speech, "The light on the hill"
- In New Zealand, a series of economic and social policies similar to the New Deal were adopted after the election of the first Labour Government in 1935.
South America
- In Getúlio Vargas Brazil, a new Constitution in 1934 adopted a series of policies related to labor rights and social investment, giving the country an economic plan with striking resemblances with American New Deal, but also to European Fascist states, like corporatist provisions in order to decimate organized labor and mediating class conflicts.
The First Hundred Days
Having won a decisive victory in the United States presidential election of 1932, and with his party having decisively swept Congressional elections across the nation, Roosevelt entered office with unprecedented political capital. Americans of all political persuasions were demanding immediate action, and Roosevelt responded with a remarkable series of new programs in the “first hundred days” of the administration, in which he met with Congress for 100 days. During those 100 days of lawmaking, Congress granted every "request" Roosevelt asked.
Bank and monetary reforms
With strident language Roosevelt hurled blame at businessmen and bankers: "Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men....The money changers have fled from their high seats in the temple of our civilization."
By March 4, nearly all banks in the country were closed by their governors, and Roosevelt kept them all closed until he could pass new legislation. On March 9, Roosevelt sent to Congress the Emergency Banking Act, drafted in large part by Hoover's Administration; the act was passed and signed into law the same day. It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed. Three-quarters of the banks in the Federal Reserve System reopened within the next three days. Billions of dollars in "hoarded" currency and gold flowed back into them within a month, thus stabilizing the banking system. By the end of 1933, 4,004 small local banks would be permanently closed and merged into larger banks. (Their depositors eventually received 86.14 cents on the dollar of their deposits.) In June came the reform which has proved the most significant; Congress created the Federal Deposit Insurance Corporation (FDIC), which insured deposits for up to $5,000. The establishment of the FDIC ended the era of the bank run.
In March and April in a series of Acts of Congress and executive orders Roosevelt and Congress suspended the gold standard for United States currency. Under the gold standard, the Federal Reserve was prevented from lowering interest rates and was instead forced to raise rates to protect the dollar. Actions to suspend the gold standard included Executive Order 6073, the Emergency Banking Act, Executive Order 6102, Executive Order 6111, the 1933 Banking Act and House Joint Resolution 192. Anyone holding significant amounts of gold coinage was mandated to exchange it for the existing fixed price of US dollars, after which the US would no longer pay gold on demand for the dollar, and gold would no longer be considered valid legal tender for debts in private and public contracts. The dollar was allowed to float freely on foreign exchange markets with no guaranteed price in gold, only to be fixed again at a significantly lower level a year later with the passage of the Gold Reserve Act in 1934. Markets immediately responded well to the suspension, although it was assumed to be temporary.
The economy had hit rock bottom in March 1933 and then started to expand. As historian Broadus Mitchell notes, "Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically." Economic indicators show the economy reached nadir in the first days of March, then began a steady, sharp upward recovery. Thus the Federal Reserve Index of Industrial Production hit its lowest point of 52.8 in July 1930 (with 1935-39 = 100) and was practically unchanged at 54.3 in March 1933; however by July 1933, it reached 85.5, a dramatic rebound of 57% in four months. Recovery was steady and strong until 1937. Except for employment, the economy by 1937 surpassed the levels of the late 1920s. The Recession of 1937 was a temporary downturn. Private sector employment, especially in manufacturing, recovered to the level of the 1920s but failed to advance further until the war.
Economy Act
The Economy Act, drafted by Budget Director Lewis Douglas was passed on March 14, 1933. The act proposed to balance the "regular" (non-emergency) federal budget by cutting the salaries of government employees and cutting pensions to veterans by fifteen percent. It saved $500 million per year and reassured deficit hawks such as Douglas that the new President was fiscally conservative. Roosevelt argued there were two budgets: the "regular" federal budget, which he balanced, and the "emergency budget," which was needed to defeat the depression; it was imbalanced on a temporary basis.
Roosevelt was initially in favor of balancing the budget, but he soon found himself running spending deficits in order to fund the numerous programs he created. Douglas, however, rejecting the distinction between a regular and emergency budget, resigned in 1934 and became an outspoken critic of the New Deal. Roosevelt strenuously opposed the Bonus Bill that would give World War I veterans a cash bonus. Finally, Congress passed it over his veto in 1936, and the Treasury distributed $1.5 billion in cash as bonus welfare benefits to 4 million veterans just before the 1936 election.
At least until John F. Kennedy in 1960, New Dealers never fully recognized the Keynesian argument for government spending as a vehicle for recovery. Most economists of the era, along with Henry Morgenthau of the Treasury Department, rejected Keynesian solutions and favored balanced budgets.
Farm and rural programs
Roosevelt was keenly interested in farm issues and believed that true prosperity would not return until farming was prosperous. Many different programs were directed at farmers. The first hundred days produced a federal program to raise farm incomes by raising the prices farmers received, which was achieved by reducing total farm output. The Agricultural Adjustment Act, created the Agricultural Adjustment Administration (AAA) in May 1933. The act reflected the demands of leaders of major farm organizations, especially the Farm Bureau, and reflected debates among Roosevelt's farm advisers such as Secretary of Agriculture Henry A. Wallace, Rexford Tugwell, Lewis C. Gray and George Peek.
The aim of the AAA was to raise prices for commodities through artificial scarcity. The AAA used a system of "domestic allotments," setting total output of corn, cotton, dairy products, hogs, rice, tobacco, and wheat. The farmers themselves had a voice in the process of using government to benefit their incomes. The AAA paid land owners subsidies for leaving some of their land idle with funds provided by a new tax on food processing. The goal was to force up farm prices to the point of "parity," an index based on 1910-1912 prices. To meet 1933 goals ten million acres of growing cotton was plowed up, bountiful crops were left to rot, and six million baby pigs were killed and discarded. The idea was the less produced, the higher the price for consumers, and therefore a higher income to the farmer. Farm incomes increased significantly in the first three years of the New Deal, as prices for commodities rose. One historian said that consumers bore the brunt of higher food prices and were "horrified with its policy of enforced scarcity." A Gallup Poll printed in the Washington Post revealed that a majority of the American public opposed the AAA.
The AAA established an important and long-lasting federal role in the planning on the entire agricultural sector of the economy. The original AAA did not provide for any sharecroppers or tenants or farm laborers who might become unemployed, but there were other New Deal programs especially for them.
Many people lived in severe poverty, especially in the South. Major programs addressed to their needs included the Resettlement Administration (RA), the Farm Security Administration (FSA), the Rural Electrification Administration (REA), the Tennessee Valley Authority (TVA) and rural welfare projects sponsored by the WPA, NYA, Forest Service and CCC, including school lunches, building new schools, opening roads in remote areas, reforestation, and purchase of marginal lands to enlarge national forests.
The AAA was the first program on such a scale on behalf of the troubled agricultural economy, and it established an important and long-lasting federal role in the planning on the entire agricultural sector of the economy.
In 1936, the Supreme Court declared the AAA to be unconstitutional, stating that "a statutory plan to regulate and control agricultural production, [is] a matter beyond the powers delegated to the federal government..." The AAA was replaced by a similar program that did win Court approval. Instead of paying farmers for letting fields lie barren, this program instead subsidized them for planting soil enriching crops such as alfalfa that would not be sold on the market. Federal regulation of agricultural production has been modified many times since then, but together with large subsidies it is still in effect in 2009.
In 1933, the Administration launched the Tennessee Valley Authority, a project involving dam construction planning on an unprecedented scale in order to curb flooding, generate electricity, and modernize the very poor farms in the Tennessee Valley region of the Southern United States.
Repeal of Prohibition
In a measure that garnered substantial popular support for his New Deal, Roosevelt, on March 13, 1933, moved to put to rest one of the most divisive cultural issues of the 1920s. Just nine days later he signed the bill to legalize the manufacture and sale of alcohol, an interim measure pending the repeal of Prohibition, for which a constitutional amendment (the Twenty-first) was already in process. The amendment was ratified later in 1933. States and cities gained additional new revenue, and Roosevelt secured his popularity in the cities, which were overwhelmingly wet.
Puerto Rico
A separate set of programs operated in Puerto Rico, headed by the Puerto Rico Reconstruction Administration. It promoted land reform and helped small farms; it set up farm cooperatives, promoted crop diversification, and helped local industry. The Puerto Rico Reconstruction Administration was directed by John Flores Sr. from 1935 to 1937.
Reform
Business, labor, and government cooperation
Besides all the programs for immediate relief, the John Flores embarked quickly on an agenda of long-term reform aimed at avoiding another depression. The New Dealers responded to demands to inflate the currency by a variety of means. Another group of reformers sought to build consumer and farmer co-ops as a counterweight to big business. The consumer co-ops did not take off, but the Rural Electrification Administration used co-ops to bring electricity to rural areas, many of which still operate.
From 1929-33, the industrial economy had been suffering from a vicious cycle of deflation. Since 1931, the U.S. Chamber of Commerce, the voice of the nation's organized business, promoted an anti-deflationary scheme that would permit trade associations to cooperate in government-instigated cartels to stabilize prices within their industries. While existing antitrust laws clearly forbade such practices, organized business found a receptive ear in the Roosevelt Administration. The Roosevelt Administration, packed with reformers aspiring to forge all elements of society into a cooperative unit (a reaction to the worldwide specter of business-labor "class struggle"), was fairly amenable to the idea of cooperation among producers.
The administration insisted that business would have to ensure that the incomes of workers would rise along with their prices. The product of all these impulses and pressures was the National Industrial Recovery Act (NIRA) which was passed by Congress in June 1933. The NIRA established the National Planning Board, also called the National Resources Planning Board (NRPB), to assist in planning the economy by providing recommendations and information. Fredric A. Delano, the president's uncle, was appointed head of the NRPB.
The NIRA guaranteed to workers the right of collective bargaining and helped spur some union organizing activity, but much faster growth of union membership came before the 1935 Wagner Act. The NIRA established the National Recovery Administration (NRA), which attempted to stabilize prices and wages through cooperative "code authorities" involving government, business, and labor. The NRA allowed business to create a multitude of regulations imposing the pricing and production standards for all sorts of goods and services. Most economists were dubious because it was based on fixing prices to reduce competition; the NRA was ended by the Supreme Court in 1935, and no one tried to revive it.
To prime the pump and cut unemployment, the NIRA created the Public Works Administration (PWA), a major program of public works. From 1933 to 1935 PWA spent $3.3 billion with private companies to build 34,599 projects, many of them quite large.
NRA "Blue Eagle" campaign
Roosevelt believed that the severity of the Depression was due to excessive business competition that lowered wages and prices, which he believed lowered demand and employment. He argued that government economic planning was necessary to remedy this:
”...A mere builder of more industrial plants, a creator of more railroad systems, an organizer
of more corporations, is as likely to be a danger as a help. Our task is not...necessarily
producing more goods. It is the soberer, less dramatic business of administering resources
and plants already in hand."
To limit competition and raise the bargaining power of labor, the NIRA was created. At the center of the NIRA was the National Recovery Administration (NRA), headed by former General Hugh Samuel Johnson. Johnson called on every business establishment in the nation to accept a stopgap "blanket code": a minimum wage of between 20 and 45 cents per hour, a maximum workweek of 35 to 45 hours, and the abolition of child labor. Johnson and Roosevelt contended that the "blanket code" would raise consumer purchasing power and increase employment.
To mobilize political support for the NRA, Johnson launched the "NRA Blue Eagle" publicity campaign to boost his bargaining strength to negotiate the codes with business and labor. The NRA negotiated specific sets of codes with leaders of the nation's major industries; the most important provisions were anti-deflationary floors below which no company would lower prices or wages, and agreements on maintaining employment and production. In a remarkably short time, the NRA won agreements from almost every major industry in the nation. Six months after the NRA went into effect industrial production dropped twenty-five percent. According to some economists, the NRA increased the cost of doing business by forty percent. Donald Richberg, who soon replaced Johnson as the head of the NRA said:
There is no choice presented to American business between intelligently planned and uncontrolled industrial operations and a return to the gold-plated anarchy that masqueraded as "rugged individualism."...Unless industry is sufficiently socialized by its private owners and managers so that great essential industries are operated under public obligation appropriate to the public interest in them, the advance of political control over private industry is inevitable.
By the time it ended in May 1935, industrial production was 22% higher than in May 1933. On May 27 1935, the NRA was found to be unconstitutional by a unanimous decision of the U.S. Supreme Court in the case of Schechter v. United States. On that same day, the Court unanimously struck down the Frazier-Lemke Act portion of the New Deal as unconstitutional. Some libertarians such as Richard Ebeling see these and other rulings striking down portions of the New Deal as preventing the U.S. economic system from becoming a planned economy corporate state. Governor Huey Long of Louisiana said, "I raise my hand in reverence to the Supreme Court that saved this nation from fascism."
However, soon after, on June 27 1935, the the NLRA was passed, which gave even more power to unions. It forced employees to join unions if a majority of employers voted in favor of unionizing and prohibited business management from declining to engage in collective bargaining with the unions. The Act also established the National Labor Relations Board (NLRB) to enforce the rules of the NLRA and enforce wage agreements.
Employment in private sector factories recovered to the level of the late 1920s by 1937 but did not grow much bigger until the war came and manufacturing employment leaped from 11 million in 1940 to 18 million in 1943.
Legislative successes and failures
In the spring of 1935, responding to the setbacks in the Court, a new skepticism in Congress, and the growing popular clamor for more dramatic action, the Administration proposed or endorsed several important new initiatives. Historians refer to them as the "Second New Deal" and note that it was more radical, more pro-labor and anti-business than the "First New Deal" of 1933-34. The National Labor Relations Act, also known as the Wagner Act, revived and strengthened the protections of collective bargaining contained in the original NIRA. The result was a tremendous growth of membership in the labor unions composing the American Federation of Labor. Labor thus became a major component of the New Deal political coalition. Roosevelt nationalized unemployment relief through the Works Progress Administration (WPA), headed by close friend Harry Hopkins. It created hundreds of thousands of low-skilled blue collar jobs for unemployed men (and some for unemployed women and white collar workers). The National Youth Administration was the semi-autonomous WPA program for youth. Its Texas director, Lyndon Baines Johnson, later used the NYA as a model for some of his Great Society programs in the 1960s.
The most important program of 1935, and perhaps the New Deal as a whole, was the Social Security Act, which established a system of universal retirement pensions, unemployment insurance, and welfare benefits for poor families and the handicapped. It established the framework for the U.S. welfare system. Roosevelt insisted that it should be funded by payroll taxes rather than from the general fund; he said, "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program." One of the last New Deal agencies was the United States Housing Authority, created in 1937 with some Republican support to abolish slums.
Defeat: court packing and executive reorganization
Roosevelt, however, emboldened by the triumphs of his first term, set out in 1937 to consolidate authority within the government in ways that provoked powerful opposition. Early in the year, he asked Congress to expand the number of justices on the Supreme Court so as to allow him to appoint members sympathetic to his ideas and hence tip the ideological balance of the Court. This proposal provoked a storm of protest.
In one sense, however, it succeeded; Justice Owen Roberts, switched positions and began voting to uphold New Deal measures, effectively creating a liberal majority in West Coast Hotel Co. v. Parrish and National Labor Relations Board v. Jones & Laughlin Steel Corporation thus departing from the Lochner v. New York era and giving the government more power in questions of economic policies. Journalists called this change "the switch in time that saved nine." Recent scholars have noted that since the vote in Parrish took place several months before the court-packing plan was announced, other factors, like evolving jurisprudence, must have contributed to the Court's swing. The opinions handed down in the spring of 1937, favorable to the government, also contributed to the downfall of the plan. In any case, the "court packing plan," as it was known, did lasting political damage to Roosevelt and was finally rejected by Congress in July.
Government role: balance labor, business, and farming
During the New Deal period, the federal government evolved into an arbitrator in the competition among elements and classes of society, acting as a force to help some groups and limit the power of others. This elevated and strengthened newer interest groups which allowed these to compete more effectively.
By the end of the 1930s, business found itself competing for influence with an increasingly powerful labor movement, with an organized agricultural economy, and occasionally with aroused consumers. This was accomplished by creating a series of government institutions that greatly and permanently expanded the role of the federal government. Thus, perhaps the strongest legacy of the New Deal was to make the federal government a protector of interest groups and a supervisor of competition among them.
As a result of the New Deal, political and economic life became politically more competitive than before, with workers, farmers, consumers, and others now able to press their demands upon the government in ways that in the past had been available only to the corporate world. Hence the frequent description of the government the New Deal created as the "broker state," a state brokering the competing claims of numerous groups. If there was more political competition, there was less market competition. Farmers were not allowed to sell for less than the official price. The transportation industry was tightly regulated so that every firm had a guaranteed market and management and labor had high profits and high wages, all at the cost of high prices and much inefficiency . Quotas in the oil industry were fixed by the Railroad Commission of Texas with Tom Connally's federal Hot Oil Act of 1935 which guaranteed that illegal "hot oil" would not be sold. To the New Dealers, the free market meant "cut-throat competition" and they considered that evil. It was not until the 1970s and 1980s that most of the New Deal regulations were relaxed.
African Americans
Many leading New Dealers, including Eleanor Roosevelt, Harold Ickes, Aubrey Williams, and John Flores Sr. worked to ensure blacks received at least 10% of welfare assistance payments. There was no attempt whatever to end segregation, or to increase black rights in the South. Roosevelt appointed an unprecedented number of blacks to second-level positions in his administration; these appointees were collectively called the Black Cabinet. Roosevelt and Hopkins worked with several big city mayors to encourage the transition of black political organizations from the Republican Party to the Democratic Party from 1934-36, most notably in Chicago. The black community responded favorably, so that by 1936 the majority who voted (usually in the North) were voting Democratic. This was a sharp realignment from 1932, when most African Americans voted the Republican ticket. New Deal policies helped establish a political alliance between blacks and the Democratic Party that survives into the 21st century.
The WPA, NYA, and CCC relief programs allocated 10% of their budgets to blacks (who comprised about 10% of the total population, and 20% of the poor). They operated separate all-black units with the same pay and conditions as white units.
Recession of 1937 and recovery
The Roosevelt Administration was under assault during FDR's second term, which presided over a new dip in the Great Depression in the fall of 1937 that continued through most of 1938. Production declined sharply, as did profits and employment. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. Keynesian economists speculated that this was a result of a premature effort to curb government spending and balance the budget, while conservatives said it was caused by attacks on business and by the huge strikes caused by the organizing activities of the Congress of Industrial Organizations (CIO) and the American Federation of Labor (AFL).
Roosevelt rejected the advice of Morgenthau to cut spending and decided big business were trying to ruin the New Deal by causing another depression that voters would react against by voting Republican. It was a "capital strike" said Roosevelt, and he ordered the Federal Bureau of Investigation to look for a criminal conspiracy (they found none). Roosevelt moved left and unleashed a rhetorical campaign against monopoly power, which was cast as the cause of the new crisis. Ickes attacked automaker Henry Ford, steelmaker Tom Girdler, and the superrich "Sixty Families" who supposedly comprised "the living center of the modern industrial oligarchy which dominates the United States." Left unchecked, Ickes warned, they would create "big-business Fascist America—an enslaved America." The President appointed Robert Jackson as the aggressive new director of the antitrust division of the Justice Department, but this effort lost its effectiveness once World War II began and big business was urgently needed to produce war supplies.
But the Administration's other response to the 1937 deepening of the Great Depression had more tangible results. Ignoring the requests of the Treasury Department and responding to the urgings of the converts to Keynesian economics and others in his Administration, Roosevelt embarked on an antidote to the depression, reluctantly abandoning his efforts to balance the budget and launching a $5 billion spending program in the spring of 1938, an effort to increase mass purchasing power. The New Deal had in fact engaged in deficit spending since 1933, but it was apologetic about it, because a rise in the national debt was opposite of typical Democratic party policy. Now they had a theory to justify what they were doing. Roosevelt explained his program in a fireside chat in which he finally acknowledged that it was therefore up to the government to "create an economic upturn" by making "additions to the purchasing power of the nation."
Business-oriented observers explained the recession and recovery in very different terms from the Keynesians. They argued that the New Deal had been very hostile to business expansion in 1935-37, had encouraged massive strikes which had a negative impact on major industries such as automobiles, and had threatened massive anti-trust legal attacks on big corporations. All those threats diminished sharply after 1938. For example, the antitrust efforts fizzled out without major cases. The CIO and AFL unions started battling each other more than corporations, and tax policy became more favorable to long-term growth.
When the Gallup poll in 1939 asked, 'Do you think the attitude of the Roosevelt administration toward business is delaying business recovery?' the American people responded 'yes' by a margin of more than two-to-one. The business community felt even more strongly so" Treasury Secretary, Henry Morgenthau, angry at the Keynesian spenders, confided to his diary May 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot."
World War II and the end of the Great Depression
The Depression continued with decreasing effect until the U.S. entered the Second World War. Under the special circumstances of war mobilization, massive war spending doubled the GNP (Gross National Product) Civilian unemployment was reduced from 14% in 1940 to less than 2% in 1943 as the labor force grew by ten million. Millions of farmers left marginal operations, students quit school, and housewives joined the labor force. The effect continued into 1946, the first postwar year, where federal spending remained high at $62 billion (30% of GNP).
The emphasis was for war supplies as soon as possible, regardless of cost and efficiencies. Industry quickly absorbed the slack in the labor force, and the tables turned such that employers needed to actively and aggressively recruit workers. As the military grew new labor sources were needed to replace the 12 million men serving in the military. These events magnified the role of the federal government in the national economy. In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditure tripled, but the national debt as percent of GNP hardly changed. However, spending on the New Deal was far smaller than spending on the war effort, which passed 40% of GNP in 1944. The war economy grew so fast after deemphasizing free enterprise and imposing strict controls on prices and wages, as a result of government/business cooperation, with government subsidizing business, directly and indirectly.
A major result of the full employment at high wages was a sharp, permanent decrease in the level of income inequality. The gap between rich and poor narrowed dramatically in the area of nutrition, because food rationing and price controls provided a reasonably priced diet to everyone. White collar workers did not typically receive overtime thus the gap between white collar and blue collar income narrowed. Large families that had been poor during the 1930s had four or more wage earners, and these families shot to the top one-third income bracket. Overtime provided large paychecks in war industries.
Many economists, including Nobel Laureates, argue that neither the war nor New Deal policies ended the Great Depression. Rather, a return to normality after the war, as the government relaxed wage controls, price controls, capital controls, reduced tariffs and other trade barriers, and eliminated the rationing of goods and the relaxing of Federal control over American industries, ended it.
Critical interpretations of New Deal economic policies
Liberal historians argue that Roosevelt restored hope and self-respect to tens of millions of desperate people, built labor unions, upgraded the national infrastructure and saved capitalism in his first term when he could have destroyed it and easily nationalized the banks and the railroads. Some critics from the left, however, have denounced Roosevelt for rescuing capitalism when the opportunity was at hand to nationalize banking, railroads and other industries. Still others have complained that he enlarged the powers of the federal government, built up labor unions, slowed long-term economic growth, and weakened the business community.
Prolonged/worsened the Depression
According to Gene Smiley, "a number of economists" believe the New Deal delayed economic recovery. A 1995 survey of economic historians asked whether "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." Of those in economics departments 27% agreed, 22% agreed 'with provisos' (what provisos the survey does not state) and 51% disagreed. Of those in history departments, only 27% agreed and 73% disagreed.
UCLA economists Harold L. Cole and Lee E. Ohanian are among those who believe the New Deal caused the Depression to persist longer than it would otherwise have, concluding in a study that the "New Deal labor and industrial policies did not lift the economy out of the Depression as President Roosevelt and his economic planners had hoped," but that the "New Deal policies are an important contributing factor to the persistence of the Great Depression." They claim that the New Deal "cartelization policies are a key factor behind the weak recovery." They say that the "abandonment of these policies coincided with the strong economic recovery of the 1940s." Cole and Ohanian claimed that FDR's policies prolonged the Depression by 7 years.
Lowell E. Gallaway and Richard K. Vedder argue that the "Great Depression was very significantly prolonged in both its duration and its magnitude by the impact of New Deal programs." They suggest that without Social Security, work relief, unemployment insurance, mandatory minimum wages, and without special government-granted privileges for labor unions, business would have hired more workers and the unemployment rate during the New Deal years would have been 6.7% instead of 17.2%.
Contemporary public and business views about the economic effects of the New Deal were mixed and varied. The Gallup Organization's American Institute of Public Opinion (AIPO) polled Americans in May 1936 and March 1939 on whether they belived that the Roosevelt Administration's attitude toward business, in both cases finding that more than a little more than half thought it was. But in its May 1936 AIPO also found that more than half thought that the administration's policies were aiding recovery overall. Fortunes Roper poll found in May 1939 that 39% of American's thought the administration had been delaying recovery by undermining business confidence, while 37% thought it had not. But they found that opinions on the issue were highly polarzied by economic status and occupation. By contrast, AIPO found in the same time that 57% believed that business attitudes toward the administration were delaying recovery, while 26% thought they were not -- emphsizing that fairly subltle differences in wording can evoke substantially different polling responses.
Keynesian and monetarist interpretations
The New Deal tried public works, farm subsidies, and other devices to reduce unemployment, but Roosevelt never completely gave up trying to balance the budget. Unemployment remained high throughout the New Deal years though greatly reduced from the much higher rates before the New Deal; business simply would not hire more people, especially the low skilled and supposedly "untrainable" men who had been unemployed for years and lost any job skill they once had. Keynesians later argued that by spending vastly more money–using fiscal policy–the government could provide the needed stimulus through the "multiplier" effect. Critics of Keynesian economic theories said that would just take money out of the private sector, causing a negative multiplier effect there. However, no economist has written a full-scale Keynesian analysis of the depression, so it is difficult to evaluate how that model would work.
In recent years more influential among economists has been the monetarist interpretation of Milton Friedman, which did include a full-scale monetary history of what he calls the "Great Contraction." Friedman concentrated on the failures before 1933, and in his memoirs said the relief programs were an appropriate response. From 1935 to 1943, Friedman was a Keynesian who was (1941-43) an official spokesman for the New Deal before Congress; he did not at that time criticize any New Deal or Federal Reserve policies.
Historians generally agree that apart from building up labor unions, the New Deal did not substantially alter the distribution of power within American capitalism. "The New Deal brought about limited change in the nation's power structure."
Keynes visited the White House in 1934 to urge President Roosevelt to increase deficit spending. Roosevelt afterwards complained that, "he left a whole rigmarole of figures — he must be a mathematician rather than a political economist."
Fiscal conservatism
Fiscal conservatism was a key component of the New Deal, as Zelizer (2000) proves. It was supported by Wall Street and local investors and most of the business community; mainstream academic economists believed in it, as apparently did the majority of the public. Conservative southern Democrats, who favored balanced budgets and opposed new taxes, controlled Congress and its major committees. Even liberal Democrats at the time regarded balanced budgets as essential to economic stability in the long run, although they were more willing to accept short-term deficits. Public opinion polls consistently showed public opposition to deficits and debt. Throughout his terms, Roosevelt recruited fiscal conservatives to serve in his Administration, most notably Lewis Douglas the Director of Budget from 1933 to 1934, and Henry Morgenthau Jr., Secretary of the Treasury from 1934 to 1945. They defined policy in terms of budgetary cost and tax burdens rather than needs, rights, obligations, or political benefits. Personally the President embraced their fiscal conservatism. Politically, he realized that fiscal conservatism enjoyed a strong wide base of support among voters, leading Democrats, and businessmen. On the other hand there was enormous pressure to act – and spending money on high visibility programs attracted Roosevelt, especially if it tied millions of voters to him, as did the WPA.
Douglas proved too inflexible, and he quit in 1934. Morgenthau made it his highest priority to stay close to Roosevelt, no matter what. Douglas's position, like many of the Old Right, was grounded in a basic distrust of politicians and the deeply ingrained fear that government spending always involved a degree of patronage and corruption that offended his Progressive sense of efficiency. The Economy Act of 1933, passed early in the Hundred Days, was Douglas' great achievement. It reduced federal expenditures by $500 million, to be achieved by reducing veterans’ payments and federal salaries. Douglas cut government spending through executive orders that cut the military budget by $125 million, $75 million from the Post Office, $12 million from Commerce, $75 million from government salaries, and $100 million from staff layoffs. As Freidel concludes, "The economy program was not a minor aberration of the spring of 1933, or a hypocritical concession to delighted conservatives. Rather it was an integral part of Roosevelt's overall New Deal." Revenues were so low that borrowing was necessary (only the richest 3% paid any income tax between 1926 and 1940.) Douglas therefore hated the relief programs, which he said reduced business confidence, threatened the government’s future credit, and had the "destructive psychological effects of making mendicants of self-respecting American citizens." Roosevelt was pulled toward greater spending by Hopkins and Ickes, and as the 1936 election approached he decided to gain votes by attacking big business.
Morgenthau shifted with FDR, but at all times tried to inject fiscal responsibility; he deeply believed in balanced budgets, stable currency, reduction of the national debt, and the need for more private investment . The Wagner Act met Morgenthau’s requirement because it strengthened the party’s political base and involved no new spending. In contrast to Douglas, Morgenthau accepted Roosevelt’s double budget as legitimate–that is a balanced regular budget, and an “emergency” budget for agencies, like the WPA, PWA and CCC, that would be temporary until full recovery was at hand. He fought against the veterans’ bonus until Congress finally overrode Roosevelt’s veto and gave out $2.2 billion in 1936. His biggest success was the new Social Security program; he managed to reverse the proposals to fund it from general revenue and insisted it be funded by new taxes on employees. It was Morgenthau who insisted on excluding farm workers and domestic servants from Social Security because workers outside industry would not be paying their way.
Left-wing criticism
Historians on the left have denounced the New Deal as a conservative phenomenon that let slip the opportunity to radically reform capitalism. Since the 1960s, "New Left" historians have been among the New Deal's harsh critics. Barton J. Bernstein, in a 1968 essay, compiled a chronicle of missed opportunities and inadequate responses to problems. The New Deal may have saved capitalism from itself, Bernstein charged, but it had failed to help—and in many cases actually harmed—those groups most in need of assistance. Paul K. Conkin in The New Deal (1967) similarly chastised the government of the 1930s for its policies toward marginal farmers, for its failure to institute sufficiently progressive tax reform, and its excessive generosity toward select business interests. Howard Zinn, in 1966, criticized the New Deal for working actively to actually preserve the worst evils of capitalism.
Since the 1970s, research on the New Deal has been less interested in the question of whether the New Deal was a "conservative," "liberal", or "revolutionary" phenomenon than in the question of constraints within which it was operating. Political sociologist Theda Skocpol, in a series of articles, has emphasized the issue of "state capacity" as an often-crippling constraint. Ambitious reform ideas often failed, she argued, because of the absence of a government bureaucracy with significant strength and expertise to administer them. Other more recent works have stressed the political constraints that the New Deal encountered. Conservative skepticism about government remained strong both in Congress and among certain segments of the population. Thus some scholars have stressed that the New Deal was not just a product of its liberal backers, but also a product of the pressures of its conservative opponents.
Charges of communism
Certain critics have complained that the New Deal was infiltrated with communists. The most important group (in the Department of Agriculture) was fired in 1934, but Whittaker Chambers and Alger Hiss went deeper underground.
Outside government, the far-left was exerting considerable influence in the labor movement (it dominated the new Congress of Industrial Organizations) and was building a network of membership organizations. Thus the American League Against War and Fascism was formed in 1933 and, in 1937, became the American League for Peace and Democracy. There followed the America Youth Congress, 1934; League of American Writers, 1935; National Negro Congress, 1936; and the American Congress for Democracy and Intellectual Freedom, 1939. All had significant communist connections, and fought furious battles with the anti-communist left.
Charges of fascism
The term "fascism" in the 21st century has connotations of mass murder and death camps. However, in the 1930s it meant the planned economy and corporativism exemplified by the economic plans of Benito Mussolini in Italy. Enemies of the New Deal sometimes called it "fascist," but meant very different things. Communists, for example, meant control of the New Deal by big business. Classical liberals and conservatives meant control of big business by bureaucrats. There is widespread agreement from all points of view that the New Deal greatly expanded the role of the federal government in the economy.
Discontent with the economic downturn in the U.S. had stimulated interest in the fascist programs of Italy. Benito Mussolini praised the New Deal as following his own economic program, saying in the New York Times, "Your plan for coordination of industry follows precisely our lines of cooperation." Ronald Reagan, who had at the time been a strong supporter of the New Deal, later reversed positions and claimed in 1976, "Fascism was really the basis for the New Deal." Journalist John T. Flynn, a former socialist, in his 1944 book As We Go Marching, said that "the New Dealers...began to flirt with the alluring pastime of reconstructing the capitalist system... and in the process of this new career they began to fashion doctrines that turned out to be the principles of fascism."
Former President Herbert Hoover argued that some (but not all) New Deal programs were "fascist," and that there was a presidential dictatorship. [Memoirs 3:420]
"Among the early Roosevelt fascist measures was the National Industry Recovery Act (NRA) of June 16, 1933 .... These ideas were first suggested by Gerald Swope (of the General Electric Company)... [and] the United States Chamber of Commerce. During the campaign of 1932, Henry I. Harriman, president of that body, urged that I agree to support these proposals, informing me that Mr. Roosevelt had agreed to do so. I tried to show him that this stuff was pure fascism; that it was a remaking of Mussolini's "corporate state" and refused to agree to any of it. He informed me that in view of my attitude, the business world would support Roosevelt with money and influence. That for the most part proved true."
In 1934, Roosevelt defended himself against his critics, and attacked them in his "fireside chat" radio audiences. Some people, he said:
will try to give you new and strange names for what we are doing. Sometimes they will call it 'Fascism,' sometimes 'Communism,' sometimes 'Regimentation,' sometimes 'Socialism.' But, in so doing, they are trying to make very complex and theoretical something that is really very simple and very practical.... Plausible self-seekers and theoretical die-hards will tell you of the loss of individual liberty. Answer this question out of the facts of your own life. Have you lost any of your rights or liberty or constitutional freedom of action and choice?
In September 1934, Roosevelt defended a more powerful national government as he believed was necessary to control the economy, by quoting conservative Republican Elihu Root:
The tremendous power of organization [Root had said] has combined great aggregations of capital in enormous industrial establishments... so great in the mass that each individual concerned in them is quite helpless by himself.... The old reliance upon the free action of individual wills appears quite inadequate.... The intervention of that organized control we call government seems necessary.... Men may differ as to the particular form of governmental activity with respect to industry or business, but nearly all are agreed that private enterprise in times such as these cannot be left without assistance and without reasonable safeguards lest it destroy not only itself but also our process of civilization.
Other scholars reject linking the New Deal to fascism as overly simplistic. As a leading historian of fascism explains, "What Fascist corporatism and the New Deal had in common was a certain amount of state intervention in the economy. Beyond that, the only figure who seemed to look on Fascist corporatism as a kind of model was Hugh Johnson, head of the National Recovery Administration." Johnson had been distributing copies of a Fascist tract called "The Corporate State" by one of Mussolini's favorite economists, including giving one to Labor Secretary Francis Perkins and asking her give copies to her cabinet. Johnson strenuously denied any association with Mussolini, saying the NRA "is being organized almost as you would organize a business. I want to avoid any Mussolini appearance—the President calls this Act industrial self-government." Donald Richberg eventually replaced General Hugh Johnson as head of NRA and speaking before a Senate committee said "A nationally planned economy is the only salvation of our present situation and the only hope for the future." Historians such as Hawley (1966) have examined the origins of the NRA in detail, showing the main inspiration came from Senators Hugo Black and Robert F. Wagner and from American business leaders such as the Chamber of Commerce. The main model was Woodrow Wilson's War Industries Board, in which Johnson had been involved.
Contemporary accounts
In 1937, the editors of The Economist published an appraisal of the New Deal in which they concluded that:
"If the criterion be Utopian, the achievements of the New Deal appear to be small. Relief there has been, but little more than enough to keep the population fed, clothed and warmed. Recovery there has been, but only to a point still well below the pre-depression level. The great problems of the country are still hardly touched. There has been no permanent readjustment of agriculture to meet its changed environment. Very little has been done to iron out the fluctuations of industrial production for the future. The monetary structure of the country, on balance, is less under control than formerly."
However, "If the New Deal be compared, not with the absolute standards of Utopia, but with the achievements of other Governments, the former adverse judgement must be modified. If it be compared with either the performance or the promise of its rivals, it comes out well. If its achievements be compared with the situation which confronted it in March, 1933, it is a striking success."
Art and music
The Works Progress Administration subsidized artists, musicians, painters and writers on relief with a group of projects called Federal One. While the WPA program was by the most widespread, it was preceded by three programs administered by the US Treasury which hired commercial artists at usual commissions to add murals and sculptures to federal buildings. The first of these efforts was the short-lived Public Works of Art Project, organized by Edward Bruce, an American businessman and artist. Bruce also led the Treasury Department's Section of Painting and Sculpture (later renamed the Section of Fine Arts) and the Treasury Relief Art Project (TRAP). The Resettlement Administration (RA) and Farm Security Administration (FSA) had major photography programs. The New Deal arts programs emphasized regionalism, social realism, class conflict, proletarian interpretations, and audience participation. The unstoppable collective powers of common man, contrasted to the failure of individualism, was a favorite theme.
Along with these other activities came the Federal Art Project, the Federal Theatre, and the Federal Writers’ Project. Murals, painted by artists in this time, can still be found around the country in government buildings. The New Deal, particularly helped American novelists. For journalists, and the novelists who wrote non-fiction, the agencies and programs that the New Deal provided, allowed these writers to describe about what they really saw around the country.
Many writers chose to write about the New Deal, and whether they were for or against it, and if it was helping the country out. Some of these writers were Ruth McKenney, Edmund Wilson, and Scott Fitzgerald. Another subject that was very popular for novelists was the condition of labor. They ranged from subjects on social protest, to strikes.
Under the the WPA, the Federal Theatre project flourished. Countless theatre productions around the country were staged. This allowed thousands of actors and directors to be employed, among them were Orson Welles, and John Huston.
The FSA photography project is most responsible for creating the image of the Depression in the U.S. Many of the images appeared in popular magazines. The photographers were under instruction from Washington as to what overall impression the New Deal wanted to give out. Director Roy Stryker's agenda focused on his faith in social engineering, the poor conditions among cotton tenant farmers, and the very poor conditions among migrant farm workers; above all he was committed to social reform through New Deal intervention in people's lives. Stryker demanded photographs that "related people to the land and vice versa" because these photographs reinforced the RA's position that poverty could be controlled by "changing land practices." Though Stryker did not dictate to his photographers how they should compose the shots, he did send them lists of desirable themes, such as "church", "court day", "barns". New Deal era films such as Citizen Kane ridiculed so-called "great men", while class warfare appeared in numerous movies, such as Meet John Doe and The Grapes of Wrath.
By contrast there was also a smaller but influential stream of anti-New Deal art. Thus Gutzon Borglum's sculptures on Mount Rushmore emphasized great men in history (his designs had the approval of Calvin Coolidge). Gertrude Stein and Ernest Hemingway disliked the New Deal and celebrated the organic autonomy of perfected written work in opposition to the New Deal trope of writing as performative labor. The Southern Agrarians celebrated a premodern regionalism and opposed the TVA as a modernizing, disruptive force. Under Chief Justice Charles Evans Hughes, the Supreme Court built one of the most architecturally striking buildings; its classical lines and small size contrasted sharply with the gargantuan modernistic federal buildings in Washington. Hollywood managed to synthesize both streams, as in Busby Berkeley's Gold Digger musicals, where the storylines exalt individual autonomy while the spectacular musical numbers show abstract populations of interchangeable dancers securely contained within patterns beyond their control.
Legacies
Some economists argue that although the New Deal did not end the depression, it helped to prevent the economy from decaying further by increasing the regulatory functions of the federal government in ways that helped stabilize previous troubled areas of the economy: the stock market, the banking system, and others. Popular historians, like Thomas Woods in The Politically Incorrect Guide to American History and Jim Powell in FDR's Folly, argue it worsened the depression or delayed recovery. All analysts agree the New Deal produced a new political coalition that sustained the Democratic Party as the majority party in national politics for more than a generation after its own end.
During Roosevelt's 12 years in office, there was a dramatic increase in the power of the federal government as a whole. Roosevelt also established the presidency as the prominent center of authority within the federal government. By creating a large array of agencies protecting various groups of citizens—workers, farmers, and others—who suffered from the crisis, enabling them to challenge the powers of the corporations, the Roosevelt Administration generated a set of political ideas—known as New Deal liberalism—that remained a source of inspiration and controversy for decades and that helped shape the next great experiment in liberal reform, the Great Society of the 1960s, and are widely discussed as the Obama Administration takes office in 2009.
The wartime FEPC executive orders that forbade job discrimination against African Americans, women, and ethnic groups was a major breakthrough that brought better jobs and pay to millions of minority Americans. Historians usually treat FEPC as part of the war effort and not part of the New Deal itself.
Political metaphor
Since 1933, politicians and pundits have often called for a "new deal" regarding an object. That is, they demand a completely new, large-scale approach to a project. As Arthur A. Ekirch Jr. (1971) has shown, the New Deal stimulated utopianism in American political and social thought on a wide range of issues. In Canada, Conservative Prime Minister Richard B. Bennett in 1935 proposed a "new deal" of regulation, taxation, and social insurance that was a copy of the American program; Bennett's proposals were not enacted, and he was defeated for reelection in October 1935. In accordance with the rise of the use of U.S. political phraseology in Britain, the Labour Government of Tony Blair has termed some of its employment programs "new deal", in contrast to the Conservative Party's promise of the 'British Dream'. FDR also made the Social Security Act of 1935 to help many future elderly not be in poverty.
Notable New Deal programs
The New Deal had countless programs, labeled an "alphabet soup" by its detractors. Among the New Deal acts were the following, most of them passed within the first 100 days of Roosevelt's Administration. Most were abolished around 1943; others remain in operation in 2008:
- Reconstruction Finance Corporation a Hoover agency expanded under Jesse Holman Jones to make large loans to big business. Ended in 1954.
- Federal Emergency Relief Administration (FERA) a Hoover program to create unskilled jobs for relief; replaced by WPA in 1935.
- United States bank holiday, 1933: closed all banks until they became certified by federal reviewers
- Abandonment of gold standard, 1933: gold reserves no longer backed currency; still exists
- Civilian Conservation Corps (CCC), 1933: employed young men to perform unskilled work in rural areas; under United States Army supervision; separate program for Native Americans
- Tennessee Valley Authority (TVA), 1933: effort to modernize very poor region (most of Tennessee), centered on dams that generated electricity on the Tennessee River; still exists
- Agricultural Adjustment Act (AAA), 1933: raised farm prices by cutting total farm output of major crops and livestock
- National Recovery Act (NRA), 1933: industries set up codes to reduce unfair competition, raise wages and prices;
- Public Works Administration (PWA), 1933: built large public works projects; used private contractors (did not directly hire unemployed)
- Federal Deposit Insurance Corporation (FDIC) / Glass-Steagall Act: insures deposits in banks in order to restore public confidence in banks; still exists
- Securities Act of 1933, created the SEC, 1933: codified standards for sale and purchase of stock, required risk of investments to be accurately disclosed; still exists
- Civil Works Administration (CWA), 1933-34: provided temporary jobs to millions of unemployed
- Indian Reorganization Act, 1934: moved away from assimilation
- Social Security Act (SSA), 1935: provided financial assistance to: elderly, handicapped, paid for by employee and employer payroll contributions; required years contributions, so first payouts were in 1942; still exists
- Works Progress Administration (WPA), 1935: a national labor program for more than 2 million unemployed; created useful construction work for unskilled men; also sewing projects for women and arts projects for unemployed artists, musicians and writers.
- National Labor Relations Act (NLRA) / Wagner Act, 1935: set up National Labor Relations Board to supervise labor-management relations; In the 1930s, it strongly favored labor unions. Modified by the Taft-Hartley Act (1947); still exists
- Judicial Reorganization Bill, 1937: gave the President power to appoint a new Supreme Court judge for every judge 70 years or older; failed to pass Congress
- Federal Crop Insurance Corporation, 1938: Insures crops and livestock against loss of production or revenue. Was restructured during the creation of the Risk Management Agency in 1996 but continues to exist.
- Fair Labor Standards Act (), 1938: established a maximum normal work week of 40 hours and a minimum wage of 40 cents/hour and outlawed most forms of child labor; still exists
- Federal Surplus Relief Corporation, later changed to the Federal Surplus Commodities Corporation, named the Agriculture Secretary, Administrator of Agricultural Adjustment Administration, and Governor of Farm Credit Administration as its Board of Directors. It was continued as an agency under the Secretary of Agriculture by acts of June 28, 1937 (50 Stat. 323) and February 16, 1938 (52 Stat. 38), consolidated in 1940 with the Division of Marketing and Marketing Agreements into the Surplus Marketing Administration, and finally merged into the Agricultural Marketing Administration by Executive Order 9069 of February 23, 1942.
Depression statistics
"Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically." Economic indicators show the American economy reached nadir in summer 1932 to February 1933, then began recovering until the recession of 1937-1938. Thus the Federal Reserve Industrial Production Index hit its low of 52.8 on 1932-07-01 and was practically unchanged at 54.3 on 1933-03-01; however by 1933-07-01, it reached 85.5 (with 1935-39 = 100, and for comparison 2005 = 1,342).
In Roosevelt's twelve years in office the economy had an 8.5% compound annual growth of GDP, the highest growth rate in the history of any industrial country, however, recovery was slow—by 1939 Gross Domestic Product (GDP) per adult was still 27% below trend.
| Table 1: Statistics | 1929 | 1931 | 1933 | 1937 | 1938 | 1940 |
|---|
| Real Gross National Product (GNP) (1) | 101.4 | 84.3 | 68.3 | 103.9 | 96.7 | 113.0 | | Consumer Price Index (2) | 122.5 | 108.7 | 92.4 | 102.7 | 99.4 | 100.2 | | Index of Industrial Production (2) | 109 | 75 | 69 | 112 | 89 | 126 | | Money Supply M2 ($ billions) | 46.6 | 42.7 | 32.2 | 45.7 | 49.3 | 55.2 | | Exports ($ billions) | 5.24 | 2.42 | 1.67 | 3.35 | 3.18 | 4.02 | | Unemployment (% of civilian work force) | 3.1 | 16.1 | 25.2 | 13.8 | 16.5 | 13.9 |
(1) in 1929 dollars
(2) 1935-39 = 100
|
Table 2: Unemployment (% labor force) |
| Year
|
Lebergott |
Darby |
|
1933 |
24.9 |
20.6 |
|
1934 |
21.7 |
16.0 |
|
1935 |
20.1 |
14.2 |
|
1936 |
16.9 |
9.9 |
|
1937 |
14.3 |
9.1 |
|
1938 |
19.0 |
12.5 |
|
1939 |
17.2 |
11.3 |
|
1940 |
14.6 |
9.5 |
|
1941 |
9.9 |
8.0 |
|
1942 |
4.7 |
4.7 |
|
1943 |
1.9 |
1.9 |
|
1944 |
1.2 |
1.2 |
|
1945 |
1.9 |
1.9 |
|
Darby counts WPA workers as employed; Lebergott as unemployed
source: Historical Statistics US (1976) series D-86; Smiley 1983
Relief statistics
Families on Relief 1936-41
|
Relief Cases 1936-1941 |
|
monthly average in 1,000 |
|
1936 |
1937 |
1938 |
1939 |
1940 |
1941 |
|
Workers employed: |
|
WPA |
1,995 |
2,227 |
1,932 |
2,911 |
1,971 |
1,638 |
|
CCC and NYA |
712 |
801 |
643 |
793 |
877 |
919 |
|
Other federal work projects |
554 |
663 |
452 |
488 |
468 |
681 |
|
Public assistance cases: |
|
Social security programs |
602 |
1,306 |
1,852 |
2,132 |
2,308 |
2,517 |
|
General relief |
2,946 |
1,484 |
1,611 |
1,647 |
1,570 |
1,206 |
|
5,886 |
5,660 |
5,474 |
6,751 |
5,860 |
5,167 |
|
Total families helped |
|
Unemployed workers (Bur Lab Stat) |
9,030 |
7,700 |
10,390 |
9,480 |
8,120 |
5,560 |
|
coverage (cases/unemployed) |
65% |
74% |
53% |
71% |
72% |
93% |
See also
Further reading
- Allswang, John. The New Deal and American Politics (1978), voting analysis
- Alter, Jonathan. The Defining Moment: FDR's Hundred Days and the Triumph of Hope (2006), popular account
- Badger, Anthony J. The New Deal: The Depression Years, 1933-1940. (2002) general survey from British perspective
- Beasley, Maurine H., Holly C. Shulman, Henry R. Beasley. The Eleanor Roosevelt Encyclopedia (2001)
- Bernstein, Barton J. "The New Deal: The Conservative Achievements of Liberal Reform." In Barton J. Bernstein, ed., Towards a New Past: Dissenting Essays in American History, pp. 263-88. (1968), an influential New Left attack on the New Deal.
- Bernstein, Irving. Turbulent Years: A History of the American Worker, 1933-1941 (1970), cover labor unions
- Best, Gary Dean. The Critical Press and the New Deal: The Press Versus Presidential Power, 1933-1938 (1993) ISBN 027594350X
- Best, Gary Dean. Pride, Prejudice, and Politics: Roosevelt Versus Recovery, 1933-1938. (1990) ISBN 0275935248
- Best, Gary Dean. Retreat from Liberalism: Collectivists versus Progressives in the New Deal Years (2002) ISBN 0275946568
- Blumberg Barbara. The New Deal and the Unemployed: The View from New York City (1977).
- Bremer William W. "Along the American Way: The New Deal's Work Relief Programs for the Unemployed." Journal of American History 62 (December 1975): 636-652. online at JSTOR in most academic libraries
- Brock William R. Welfare, Democracy and the New Deal (1988), a British view
- Brinkley, Alan. The End Of Reform: New Deal Liberalism in Recession and War. (1995) what happened after 1937
- Burns, Helen M. The American Banking Community and New Deal Banking Reforms, 1933-1935 (1974)
- Chafe, William H. ed. The Achievement of American Liberalism: The New Deal and its Legacies (2003)
- Charles, Searle F. Minister of Relief: Harry Hopkins and the Depression (1963)
- Cobb, James and Michael Namaroto, eds. The New Deal and the South (1984).
- Cohen, Adam, Nothing to Fear: FDR's Inner Circle and the Hundred Days that Created Modern America (2009)
- Conkin, Paul K. The New Deal. (1967), a brief New Left critique.
- Dubofsky, Melvyn, ed. The New Deal: Conflicting Interpretations and Shifting Perspectives. (1992), reader
- Eden, Robert, ed. New Deal and Its Legacy: Critique and Reappraisal (1989), essays by scholars
- Ekirch Jr., Arthur A. Ideologies and Utopias: The Impact of the New Deal on American Thought (1971)
- Fraser, Steve and Gary Gerstle, eds., The Rise and Fall of the New Deal Order, (1989), essays focused on the long-term results.
- Garraty, John A. "The New Deal, National Socialism, and the Great Depression," American Historical Review, 78, 4 (1973), pp. 907-44. in JSTOR
- Goldman, Eric F. Rendezvous with Destiny: A History of Modern American Reform. New York : Alfred A. Knopf (1952) ISBN 1566633699
- Gordon, Colin. New Deals: Business, Labor, and Politics, 1920-1935 (1994)
- Graham, Otis L. and Meghan Robinson Wander, eds. Franklin D. Roosevelt: His Life and Times. (1985). An encyclopedic reference.
- Grant, Michael Johnston. Down and Out on the Family Farm: Rural Rehabilitation in the Great Plains, 1929-1945 (2002)
- Hawley, Ellis W. The New Deal and the Problem of Monopoly (1966)
- Higgs, Robert. Crisis and Leviathan: Critical Episodes in the Growth of American Government (1987), libertarian critique
- Howard, Donald S. The WPA and Federal Relief Policy (1943)
- Ingalls, Robert P. Herbert H. Lehman and New York's Little New Deal (1975)
- Jensen, Richard J. "The Causes and Cures of Unemployment in the Great Depression," Journal of Interdisciplinary History 19 (1989) 553-83. online at JSTOR
- Kennedy, David M. Freedom From Fear: The American People in Depression and War, 1929-1945. (1999), survey
- Kirkendall, Richard S. "The New Deal As Watershed: The Recent Literature," The Journal of American History, Vol. 54, No. 4. (Mar., 1968), pp. 839-852. , historiography
- Ladd, Everett Carll and Charles D. Hadley. Transformations of the American Party System: Political Coalitions from the New Deal to the 1970s (1975), voting behavior
- Leff, Mark H. The Limits of Symbolic Reform: The New Deal and Taxation (1984)
- Leuchtenburg, William E. Franklin D. Roosevelt and the New Deal, 1932-1940. (1963). A standard interpretive history.
- Lindley, Betty Grimes and Ernest K. Lindley. A New Deal for Youth: The Story of the National Youth Administration (1938)
- Lowitt, Richard. The New Deal and the West (1984).
- McElvaine Robert S. The Great Depression 2nd ed (1993), social history
- Manza; Jeff. "Political Sociological Models of the U.S. New Deal" Annual Review of Sociology: 2000, 26 (2000): 297-322.
- Mathews, Jane De Hart. "Arts and the People: The New Deal Quest for a Cultural Democracy," Journal of American History 62 (1975): 316-39, in JSTOR
- Malamud; Deborah C. "'Who They Are - or Were': Middle-Class Welfare in the Early New Deal" University of Pennsylvania Law Review v 151 #6 2003. pp 2019+.
- McKinzie, Richard. The New Deal for Artists (1984), well illustrated scholarly study
- Meriam; Lewis. Relief and Social Security The Brookings Institution. 1946. Highly detailed analysis and statistical summary of all New Deal relief programs
- Milkis, Sidney M. and Jerome M. Mileur, eds. The New Deal and the Triumph of Liberalism (2002)
- Mitchell, Broadus. Depression Decade: From New Era through New Deal, 1929-1941 (1947), survey by economic historian
- Parker, Randall E. Reflections on the Great Depression (2002) interviews with 11 leading economists
- Patterson, James T. The New Deal and the States: Federalism in Transition (Princeton UP, 1969).
- Powell, Jim FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression (2003) ISBN 0761501657
- Rosenof, Theodore. Economics in the Long Run: New Deal Theorists and Their Legacies, 1933-1993 (1997)
- Rosen, Elliot A. Roosevelt, the Great Depression, and the Economics of Recovery (2005) ISBN 0813923689
- Rothbard, Murray. America's Great Depression (1963).
- Saloutos, Theodore. The American Farmer and the New Deal (1982).
- Savage, James D. Balanced Budgets & American Politics. Cornell University Press. 1988.
- Schlesinger, Arthur M. Jr., The Age of Roosevelt, 3 vols, (1957-1960), the classic narrative history. Online at
- Singleton, Jeff. The American Dole: Unemployment Relief and the Welfare State in the Great Depression (2000)
- Sitkoff, Harvard. A New Deal for Blacks: The Emergence of Civil Rights as a National Issue: The Depression Decade (2008)
- Sitkoff, Harvard. ed. Fifty Years Later: The New Deal Evaluated. (New York; McGraw Hill, 1984). A friendly liberal evaluation.
- Skocpol, Theda, and Kenneth Finegold. "State Capacity and Economic Intervention in the Early New Deal." Political Science Quarterly 97 (1982): 255-78. Online at JSTOR .
- Skocpol, Theda, and Kenneth Finegold. "Explaining New Deal Labor Policy" American Political Science Review (1990) 84:1297-1304 online at JSTOR
- Smith, Jason Scott. Building New Deal Liberalism: The Political Economy of Public Works, 1933-1956 (2005).
- Sternsher, Bernard ed., Hitting Home: The Great Depression in Town and Country (1970), essays by scholars on local history
- Szalay, Michael. New Deal Modernism: American Literature and the Invention of the Welfare State (2000)
- Tindall George B. The Emergence of the New South, 1915-1945 (1967). survey of entire South
- Trout Charles H. Boston, the Great Depression, and the New Deal (1977)
- Ware, Susan. Beyond Suffrage: Women and the New Deal (1981)
- Wecter, Dixon. The Age of the Great Depression, 1929-1941 (1948), social history
- Zelizer; Julian E. "The Forgotten Legacy of the New Deal: Fiscal Conservatism and the Roosevelt Administration, 1933-1938" Presidential Studies Quarterly . Volume: 30. Issue: 2. pp: 331+. (2000)
External links
- Original reports and pictures from The Times
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