The Great Depression

Part II  The New Deal

 

 

The Election of 1932

·        Describe Franklin D. Roosevelt’s political career prior to his nomination for the presidency.

·        Why was Roosevelt able to win a landslide victory in 1932?

 

By 1932, America was in the third year of the Great Depression.  Most of the American people looked to the presidential election as their most effective vehicle of protest against the hopelessness of their economic situation.  Almost no one had any doubts about the outcome.  The Republican Party faithfully renominated Herbert Hoover for a second term in office but few delegates believed he could win the November election.  The Democrats, in the meantime, gathered jubilantly in Chicago to nominate a candidate who, they were certain, would be the next president of the United States.  Their choice was the governor of New York, Franklin Delano Roosevelt.  Roosevelt had been a well-known figure in the party for many years.  The son of a wealthy Hudson Valley railroad tycoon, schooled at Harvard and Columbia Law School, Roosevelt had begun his political career in 1910 in the New York State Legislature.  He was handsome, charming, and articulate; and because he was a distant cousin of Theodore Roosevelt (a connection strengthened by his marriage in 1904 to the president’s niece, Eleanor), he attracted increasing national attention.  After serving as assistant secretary of the navy under Woodrow Wilson during World War I, in 1920 he received his party’s nomination for vice president, but was defeated in the Harding landslide.

Less than a year later, however, his public career appeared to come to an end when he was stricken with polio and lost the use of his legs.  For seven years, Roosevelt worked hard at his recovery, but he was never again able to walk without the use of crutches and braces, a condition that he took great pains to conceal from the public.  Despite his paralysis, he built up sufficient physical strength to make a courageous appearance at the 1924 Democratic Convention to nominate Al Smith for president.  In 1928, when Smith finally received the Democratic nomination and left Albany to run for president, Roosevelt succeeded him as governor.  In 1930, he easily won reelection.

Roosevelt worked no miracles in New York as the state suffered through the first years of the Depression.  He did, however, initiate enough positive programs of government assistance to be able to present himself as a more energetic and imaginative leader than Hoover.  At least as important to his political future was his astute effort to win support from both the urban and rural wings of his party.  By avoiding such divisive cultural issues as religion and prohibition that had bitterly divided Democrats in the 1920s, and by emphasizing the economic grievances that most Democrats shared, he assembled a coalition within the party that enabled him to win his party’s nomination.  Roosevelt’s nomination did not spark enthusiasm in all quarters.  Journalist Walter Lippmann called Roosevelt, “a pleasant man without any important qualifications for the job.”  H.L. Mencken described the convention as “ a great convention ... nominating the weakest candidate before it.”  The day after receiving the nomination, in a dramatic break with tradition, Roosevelt flew to Chicago to address the convention in person and accept the nomination.

In the course of his acceptance speech Roosevelt aroused the delegates with his ringing promise: “I pledge you, I pledge myself, to a new deal for the American people,” giving his political program a name that would long endure.  Neither at this time nor in the remainder of his campaign did Roosevelt give much indication of what the “New Deal” would be.  In part, of course, it was because there was no need to be specific.  Hoover’s unpopularity virtually ensured Roosevelt’s election; his only real concern was to avoid offending any voters unnecessarily.  In part, however, this vagueness was because Roosevelt had no firm program to describe.

There was, however, evidence of important differences between Roosevelt and Hoover.  Drawing from the ideas of a talented team of university professors (whom the press quickly dubbed the “Brains Trust”), Roosevelt advocated an mixture of ideas that combined old progressive reform principles with some newer ideas (although he also called for a balanced budget and attacked Hoover for his failure to provide one).  Hoover liked to insist that the Depression was international in origin and that any attempt to combat it must be international as well.  Roosevelt, in contrast, portrayed the crisis as a domestic (and Republican) problem and argued that the most important solutions could be found at home.  Above all, Roosevelt’s style, his dazzling smile, his cigarette holder held at a jaunty angle between his teeth, his skillful oratory, and his lively wit, all combined to win him a wide personal popularity.

In November, to the surprise of no one, Roosevelt won by an enormous landslide.  He received 57.4% of the popular vote to Hoover’s 39.7%.  The Socialist Party, in this year of despair, garnered only 1.2% of the ballots.  The Communist Party polled only 103,000 votes.  In the Electoral College, the result was even more overwhelming.  Hoover only carried five states—Pennsylvania, Connecticut, Vermont, New Hampshire, and Maine.  Roosevelt won every other state.  Democrats won majorities in both houses of Congress.  It was a broad and convincing mandate (grant of authority), but it was not yet clear what Roosevelt intended to do with it.

Launching the New Deal

·        What immediate problem faced FDR when he was inaugurated?

·        What was the main philosophy of the New Deal?

·        Describe the three main goals of the New Deal.

·        How was the banking crisis handled?

·        What was the 21st Amendment?

 

The period between the election and the inauguration (which in the early 1930s still lasted more than four months) was traditionally a time of quiet planning and federal inaction.  The winter of 1932-1933, however, was a season of growing economic crisis.  Hoover tried to exact from the president-elect a pledge to maintain traditional economic policies.  Roosevelt refused and remained relatively silent as to his plans.

In February, only a month before the inauguration, the American banking system began to collapse.  Public confidence in the banks was plummeting; depositors were withdrawing their money in panic and one bank after another was closing its doors, declaring bankruptcy.  In mid-February, the governor of Michigan, one of the states hardest hit by the panic, ordered all banks temporarily closed.  Other states soon followed, and by the end of the month banking activity was restricted drastically in almost every state.

The United States stood at the absolute economic bottom on inauguration day, March 4, 1933.  The nation waited anxiously as Herbert Hoover, convinced that the United States was headed for disaster, rode glumly down Pennsylvania Avenue with a beaming, buoyant Franklin Roosevelt, who would shortly be sworn in as the thirty-second president of the United States.  As an anxious country listened on the radio, the new president proceeded to speak boldly and confidently:

I am certain that my fellow Americans expect that on my induction into the presidency I will address them with a candor (honesty) and a decision, which the present situation of our nation impels.  This is preeminently the time to speak the truth, the whole truth, frankly and boldly…. This great nation will endure at it has endured, will revive and will prosper.  So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself-nameless, unreasoning, unjustified terror, which paralyzes needed efforts to convert retreat into advance.  In every dark hour of our national life a leadership of frankness and vigor had met with that understanding and support of the people themselves, which is essential to victory.  I am convinced that you will again give that support to leadership in these critical days.

In such a spirit on my part and on yours we face our common difficulties.  They concern, thank God, only material things.  Values have shrunken to fantastic levels; taxes have risen, our ability to pay has fallen; government of all kind is faced by serious curtailment (lessening) of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lies on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.

More important, a host of unemployed citizens face the grim problem of existence and an equally great number toil with little return.  Only a foolish optimist can deny the dark realities of the moment….

This nation asks for action and action now.  Our greatest primary task is to put people to work.  This is no unsolvable problem if we face it wisely and courageously.  It can be accomplished in part by direct recruiting by the government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources….

With this pledge taken, I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems...

It is to be hoped that the normal balance of executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.

I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require….

But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis-broad executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe….

We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it….

 

Roosevelt realized that his first task was to alleviate (ease) the crisis that was threatening in early 1933 to bring the financial system and the economy as a whole to its knees.  In particular, he had to stop the panic that was rapidly gripping the nation.  He did so remarkably quickly in part by sheer force of personality and in part by constructing, in a few months, an ambitious and diverse program of legislation.  This “First New Deal,” as many historians have called it, embraced many different approaches to reform.  Roosevelt was never firmly committed to any particular philosophy of government.  Pragmatic (willing to do whatever would work), experimental, and not committed to any single set of social or economic beliefs, the New Deal defied easy classification or neat description.  Roosevelt himself gave perhaps the clearest statement of the New Deal’s political philosophy.  “Try something,” he once exhorted the nation.  “If it works, keep doing it.  If it doesn’t, try something else.”  Scholars who have studied the New Deal usually have identified three broad goals of the program, although they were not clearly articulated (stated) at the time: Relief—temporary measures to ease the immediate suffering of those hurt most by the Depression; Recovery—measures designed to end the Depression; and Reform—measures designed to change the economic and governmental system to help prevent future depressions.  Many measures were enacted to attempt to accomplish each of these goals.

Much of Roosevelt’s success was a result of his enthusiastic personality.  Beginning with his inaugural address in which he assured the American people that “the only thing we have to fear is fear itself,” he projected an infectious optimism that helped dispel the growing despair.  He was the first president to make regular use of the radio, and his friendly “fireside chats,” during which he explained his programs and plans to the people, helped to build public confidence in the administration.  Roosevelt was also a master at handling his relations with the press.  He held frequent informal press conferences, and he won both the respect and the friendship of most reporters.  Their regard for him was such that by unwritten agreement, no journalist ever photographed the president getting into or out of his car or being wheeled in his wheelchair.  Much of the American public remained unaware throughout the Roosevelt presidency that their president’s legs remained completely paralyzed.

Image alone, however, could not solve the serious economic problems of March 1933.  Within twenty-four hours of his inauguration, Roosevelt moved forcefully to construct a program that would restore at least momentary stability to the nation.  With the banking crisis at a fever pitch and with Congress apparently in a mood to do virtually anything the new president suggested, Roosevelt might well have taken drastic steps, such as nationalizing (putting under government control) the banking system.  Instead, he worked to shore up existing financial institutions and to revive business faith in the economy.  On March 6, two days after taking office, he issued a proclamation closing all American banks for four days until Congress could meet in special session.  Under other circumstances shutting down the nation’s banks would have created wide alarm.  But since many states had already closed their banks before Roosevelt’s proclamation, the “bank holiday,” as the president euphemistically (labeling something in a way as to conceal its meaning) described it, created a general sense of relief.  Finally, the federal government was stepping in to stop the alarming pattern of bank failures.

Three days later Roosevelt sent the Emergency Banking Act to Congress.  This was designed primarily to protect the larger banks from being dragged down by the weakness of smaller ones.  The bill provided for Treasury Department inspection of all banks before they would be allowed to reopen, for federal assistance to some troubled institutions, and for a thorough reorganization of those in the greatest difficulty.  A frightened Congress passed the bill within four hours of its introduction.  “I can assure you,” Roosevelt told the public on March 12, in his first fireside chat, “that it is safer to keep your money in a reopened bank than under the mattress.”  The public apparently believed him.  Three-quarters of the banks in the Federal Reserve System reopened within the next three days and $1 billion in hoarded currency and gold flowed back into them within a month.  The immediate banking crisis was over.

Roosevelt also moved in his first days in office to put to rest one of the divisive issues of the 1920s.  He supported and then signed a bill to legalize the manufacture and sale of beer with a 3.2% alcohol content an interim (time between events) measure pending the repeal of prohibition, for which a constitutional amendment (the 21st) was already in process.  The amendment was ratified later in 1933.

The Growth of Federal Relief

·        What was the FERA?  What was its purpose?

·        What was the CCC?  What was its purpose?

·        What was the FHA?  What was its purpose?

 

The most important purpose of the New Deal, Franklin Roosevelt and his colleagues believed, was to revive the economy so that general prosperity would return.  In the meantime, however, millions of Americans were in desperate need of assistance, and the administration recognized the necessity of providing them with emergency relief.

Like his predecessor, Roosevelt believed that aid to the indigent (poor) was primarily a local responsibility and should remain so.  But he also recognized that, with poverty so widespread, most localities were now unable to fulfill that responsibility.  Among his first acts as president, therefore, was the establishment of the Federal Emergency Relief Administration (FERA), which provided cash grants to states (rather than loans, as the Hoover administration had favored) to prop up bankrupt relief agencies.  To administer the program, he chose the director of the New York State relief agency, Harry Hopkins, who was ultimately to become one of the most important members of his administration.  Hopkins realized the importance of speed in distributing government funds, and he disbursed the FERA grants widely and rapidly.  Even he, however, shared Roosevelt’s basic misgivings about establishing a government dole (charity handouts).  “It is probably going to undermine the independence of hundreds of thousands of families,” Hopkins once lamented (moaned).  Both Roosevelt and Hopkins felt more comfortable with another form of government assistance, work relief.  Unlike the dole, Hopkins believed, work relief “preserves a man’s morale.  It saves his skill.  It gives him a chance to do something socially useful.”  Thus when it became clear that the FERA grants would not be sufficient to pull the country through the winter, the administration established a second program, the Civil Works Administration (CWA).  In its first six months the CWA put more than four million people to work on temporary projects, some of them of real value, such as the construction of roads, schools, and parks; others little more than make-work.  The important thing, however, was that the 400,000 CWA projects (with a budget of $1 billion) were pumping money into an economy badly in need of it and were providing assistance to people with nowhere else to turn. 

This use of government spending to stimulate the economy, later to be known as Keynesian Economics (after the British economist John Maynard Keynes), was one of the New Deal’s most important contributions to public policy.  But in 1933, members of the administration were only vaguely aware of the broad effects of this spending on the economy as a whole; most thought of it more as a way to help particular people than as a way to stimulate a broader recovery.  Evidence of this limited view of the value of government spending was that most of these early relief programs had short lives.  Like the FERA, the CWA was intended to be only a temporary measure.  In the spring of 1934, the president began to dismantle the agency, and he ultimately disbanded it altogether.  Many economists now agree that massive and sustained government spending would have been the most effective way to end the Depression, but few policymakers in the 1930s shared that belief.

Of all the New Deal relief projects, the one Roosevelt had the least difficulty reconciling with his conservative beliefs was the Civilian Conservation Corps (CCC).  Established in the first weeks of the new administration, the CCC was designed to provide employment to the millions of urban young men who could find no jobs in the cities and who, in many cases, were moving restlessly from one region of the country to another in search of work.  At the same time, it was intended to advance the work of conservation and reforestation, goals Roosevelt had long cherished.  The CCC created a series of camps in national parks and forests and in other rural and wilderness settings.  There young men worked in a semi-military environment on such projects as planting trees, building reservoirs, developing parks, and improving agricultural irrigation.  Although, as with the CWA, many of the CCC projects were of only marginal lasting value, but the president took great pride in the success of the corps in providing jobs to over 500,000 young men.  The program offered them not only incomes but an opportunity to work in a “healthy and wholesome” atmosphere.

Mortgage relief was a pressing need of millions of farm owners and homeowners.  The New Deal provided assistance to farmers in danger of losing their land and within two years the government had refinanced one-fifth of all farm mortgages in the United States.  Despite such efforts, however, small farmers continued to lose their property in many regions.  By 1934, 25% of all American farm owners had lost their land.

Homeowners were similarly in danger of losing their property.  In June 1933, the administration established the Home Owners’ Loan Corporation, which, in a three-year period, loaned out more than $3 billion to refinance the mortgages of more than a million householders.  Altogether, it carried about one-sixth of the nation’s urban mortgage burden.  A year later, Congress established the Federal Housing Administration (FHA) to insure mortgages for new construction and home repairs, a measure that combined an effort to provide relief with a program to stimulate the lasting recovery of the construction industry.

The relief efforts of the first two years of the New Deal were intended to be limited and temporary.  Few of these early programs survived as a permanent part of the federal government (with the FHA a notable exception), but they did help to stimulate interest in other forms of social protection.  Ultimately, the creation of a permanent welfare system would be one of the New Deal’s most important and lasting accomplishments.

Agricultural Reform

·        What was the AAA?  What was its purpose?

·        Why did the AAA encourage the destruction of crops and livestock?  Why was this controversial?

·        Why did the Supreme Court declare the AAA unconstitutional?

·        What was the REA?  What was its purpose?

 

Roosevelt realized that the initial relief actions were nothing but stopgaps and that more sweeping government programs would be necessary.  The first such program was on behalf of the troubled agricultural economy, and it established an important and long-lasting federal role in the planning of the entire agricultural sector of the economy.

The Agricultural Adjustment Act, which Congress passed in May 1933, reflected the desires of leaders of various farm organizations and the ideas of Roosevelt’s Secretary of Agriculture, Henry A. Wallace.  It included scraps and reworkings of many long-cherished agricultural schemes, but its most important feature was its provision for crop reductions.  Producers of seven basic commodities (wheat, cotton, corn, hogs, rice, tobacco, and dairy products) would choose production limits for their crops to combat overproduction.  The government would then, through the Agricultural Adjustment Administration (AAA), tell individual farmers how much they should plant and pay them subsidies (cash payments) for leaving some of their land idle.  A tax on food processing (for example, the milling of wheat) would provide the funds for the new payments.  Farm prices were to be subsidized up to the point of parity (farmers would make at least as much as they would have had under full production).

Because the 1933 agricultural season was already under way by the time the AAA began operations, the agency oversaw a large-scale destruction of existing crops and livestock to reduce surpluses.  Over six million pigs were slaughtered.  Cotton farmers plowed under a quarter of their crop.  In a society plagued by hunger, it was very difficult for the government to explain the need for destroying surpluses, and the crop and livestock destruction remained controversial for many years.  Beginning in 1934, however, crop and livestock limitations were accomplished less provocatively through reduced plantings.

The results of the AAA efforts were largely successful.  Prices for farm commodities (products) began to rise in the years after 1933, and gross income increased by half in the first three years of the New Deal.  The Rural Electrification Administration, created in 1935, worked to make electric power available to farmers through utility cooperatives.  Because of the REA, thousands of rural families gained access to electricity for the first time.  The relative position of farmers in the nation, therefore, improved significantly for the first time in twenty years; and the agricultural economy as a whole emerged from the 1930s much more stable and prosperous than it had been in the past.

Despite the apparent success of the New Deal agricultural program, in January 1936 the Supreme Court declared the Agricultural Adjustment Act illegal, arguing that the government had no constitutional authority to require farmers to limit production.[1]  The essence of the AAA programs, however, survived.  Within a few weeks the administration secured passage of new legislation that permitted the government to pay farmers to reduce production so as to conserve soil, prevent erosion, and accomplish other secondary goals.  The new law apparently met the Court’s objections.

The NRA

·        Explain the goals of the NRA.  How were these goals to be accomplished?

·        Why was the NRA’s publicity campaign important?

·        What effect did the NRA have on organized labor?

·        What problems did the NRA encounter?

·        Why was the NRA declared unconstitutional?

The industrial economy in 1933 was, as it had been for nearly three years, suffering from a vicious cycle of deflation.  Ever since 1931, leaders of the U.S. Chamber of Commerce and many others had been urging the government to permit trade associations of businesses to work together to agree upon or set prices within their industries.  Existing antitrust laws clearly forbid such practices, but businessmen argued that the economic emergency justified a suspension of the restrictions.  Herbert Hoover had long been a supporter of the trade association movement, but he had refused to endorse suspension of the antitrust laws.

The Roosevelt administration was receptive to the idea of cooperation among producers, and carried the concept even further with the belief that the government should enforce trade association agreements on pricing and production.  In addition, New Dealers insisted on additional provisions that would deal with other economic problems as well.  Businesses would have to make important concessions to labor to ensure that the incomes of workers would rise along with prices.  And lest consumer buying power lag behind and defeat the scheme, the administration added another ingredient: a major program of public works spending designed to pump needed funds into the economy.  The product of these goals was the National Industrial Recovery Act, which Congress passed in June 1933.  Roosevelt called it “the most important and far-reaching legislation ever enacted by the American Congress.”  Businesses hailed it as the beginning of a new era of cooperation between government and industry.  Labor leaders praised it as a “Magna Carta” for trade unions.  There was, it seemed, something in the bill for everyone.

At first, the new program appeared to work miracles.  At its center was a new federal agency, the National Recovery Administration (NRA); and to head it, Roosevelt chose the flamboyant and energetic Hugh S. Johnson, a retired general and successful businessman.  Johnson envisioned himself as a kind of evangelist whose major mission was to generate public enthusiasm for the NRA.  He did so in two ways.  First, he called on every business establishment in the nation to accept a temporary “blanket code” containing a minimum wage of between 30 and 40 cents an hour, a maximum workweek of 35 to 40 hours, and the abolition of child labor.  The result, he claimed, would be to raise consumer purchasing power, increase employment, and eliminate the infamous sweatshop.  To generate enthusiasm for the blanket code, Johnson devised a symbol, the famous NRA Blue Eagle, which employers who accepted the provisions could display in their windows.  Soon Blue Eagle flags, posters, and stickers, carrying the NRA slogan “We Do Our Part,” were decorating commercial establishments in every part of the country.

At the same time, Johnson was busy negotiating a more specific set of codes with leaders of the nation’s major industries.  These industrial codes set floors below which no company would lower prices or wages in its search for a competitive advantage, and they included agreements on maintaining employment and production.  Although participation in the NRA was voluntary, the extraordinary public support Johnson managed to generate for the blanket code gave him substantial bargaining strength.  In a remarkably short time, he won agreements from almost every major industry in the country.  A nation eager for positive action gave the NRA its fervent support:

Nothing like it had ever before been seen in the U.S. in peacetime. It was a “war” measure designed to mobilize the entire nation and march it patriotically forward into the biggest and perhaps the final battle with its old enemy, the Depression.

Signed by the President were orders for setting up a man-to-man partnership between himself and each of the country’s 5,000,000 employers “to raise wages, create employment and thus increase purchasing power and restore business.”

The “partnership” between the President and every employer from the corner grocer to the biggest tycoon was to be voluntary (no law existed to force it upon all industry & business) and run until Jan. 1. Approval of regular trade codes before that date would release all “partners” in the subscribing industry. Excepting household servants and farm hands, all employees were divided into two groups: 1) those who worked with their hands in factories and shops; 2) those who worked with their heads in offices and stores.  Employers of Group 1 were asked not to work their help more than eight hours a day or 35 hours a week, not to pay them less than 40 cents per hour.

Employers of Group 2 were asked not to work their help more than 40 hours a week or pay them less than $15 to $12 per week depending upon the size of the community.

Out from the Government Printing Office poured millions and millions of copies of the “partnership agreement.” They were loaded into freight cars and shipped to distributing points throughout the U.S. Beginning July 27, postmen were to deliver a copy to every employer of three or more persons along his route. The employer was to sign on the dotted line and mail it back to the Government. In return he would be given a bundle of signs and placards with which to advertise his compliance with the President’s program. Insignia: a blue eagle over the inscription: “Member N.R.A. We Do Our Part.” The blue eagle (General Johnson called it a hawk) could be painted on factory chimneys, printed on letterheads.

To get 5,000,000 employers to sign up and regiment public opinion behind them, General Johnson organized the biggest and loudest propaganda campaign out of Washington since War days. The agreements were “voluntary” but the Government was ready to put the screws on balky employers. Consumers, particularly housewives, were to be asked to sign this pledge: “I will cooperate in re-employment by supporting and patronizing employers and workers who are members of N.R.A.” Thus the way was open for boycott of firms that refused to fall into line. If patriotism did not work, a sharp pinch in the pocketbook might.[2]

From the beginning, however, the New Deal’s bold experiment in economic cooperation encountered serious difficulties, and the entire effort ultimately dissolved in failure.  The codes themselves were hastily and often poorly written.  Enforcement of them proved to be a bureaucratic nightmare, far beyond the capacities of federal officials with no prior experience in administering so vast a program.  Large businesses consistently dominated the code-writing process and ensured that the new regulations would work to their advantage and to the disadvantage of smaller firms.

A closely related problem was that attempts to increase consumer purchasing power did not progress as quickly as the efforts to raise prices.  The Public Works Administration (PWA), established by the bill to administer spending programs, only gradually allowed the $3.3 billion in public works funds to trickle out.  Not until 1938 was the PWA budget pumping an appreciable amount of money into the economy.  For the first time in the nation’s history, the federal government was committing itself to protecting the rights of workers to organize because section 7(a) of the National Industrial Recovery Act gave legal protection to the right of workers to form unions and engage in collective bargaining.  As a result, many new workers joined unions in the ensuing months but many employers refused to bargain with them and thus the significant wage increases the unions were committed to winning did not follow.

For a while, most Americans enthusiastically supported the NRA experiment, expecting a major industrial revival to result.  But the revival did not come.  Indeed, industrial production actually declined in the months after the establishment of the NRA from an index of 101 in July 1933 to 71 in November despite the rise in prices that the codes had helped to create.  By the spring of 1934, therefore, the NRA was besieged by criticism.  Businesses were beginning once again to cut wages and prices or to violate agreements on levels of production claiming as they did so that the wage requirements of the codes were making it impossible to earn adequate profits.  They were also openly ignoring the provisions requiring them to bargain with unions, which attracted increasing labor hostility to the NRA.  A National Recovery Review Board, chaired by the famous criminal lawyer Clarence Darrow, reported in the spring of 1934 that the NRA was excessively dominated by big business and unduly encouraging monopoly.

Like the AAA before it, the Supreme Court declared the NRA unconstitutional in 1935.  The constitutional basis for the NRA had been Congress’s power to regulate commerce (trade) between the states, a power the administration had interpreted very broadly.  The case before the Court involved alleged code violations by the Schechter brothers, who operated a wholesale poultry business confined to one locality: Brooklyn, New York.  In the “sick chicken case” the Court ruled unanimously that the Schechters were not engaged in interstate commerce and, further, that Congress had unconstitutionally delegated legislative power to the president to draft the NRA codes[3]

The TVA

·        Explain the goals of the TVA.

 

The AAA and the NRA largely reflected the beliefs of New Dealers who favored economic planning but wanted private interests (farmers or business leaders) to dominate the planning process.  In some areas, however, other reformers believed that the government itself should be the chief planning agent in the economy.  One of the most celebrated accomplishments of the New Deal as a whole, was an unprecedented experiment in regional planning, the Tennessee Valley Authority (TVA).

The TVA had its roots in a political controversy that had surfaced repeatedly in the 1920s.  Throughout that decade, one of the cherished goals of progressive reformers (above all Senator George Norris of Nebraska) had been public development of the nation’s water resources as a source of cheap electric power.  In particular, they had urged completion of a great dam at Muscle Shoals on the Tennessee River in Alabama that had begun during World War I but was left unfinished when the hostilities concluded.  The nation’s utility companies, opposed to the concept of public power in any form, had fought desperately against completion of the project.

In 1932, however, public support for the private utilities had lessened in the wake of the Depression and the companies were no longer able to block the public power movement.  The result was legislation supported by the president and enacted by Congress in May 1933 creating the Tennessee Valley Authority.  The TVA was intended not only to complete the dam at Muscle Shoals but to build others in the region to generate and sell electricity to the public at reasonable rates.  It was also to be the agent for a comprehensive redevelopment of the entire region—for stopping the disastrous flooding that had plagued the Tennessee Valley for centuries and encouraging the development of local industries.

On the whole, the TVA was a success.  The project revitalized the region in numerous ways.  It improved five existing dams, built twenty new ones, and constructed an extensive (and heavily trafficked) system of inland waterways.  It managed to virtually eliminate flooding in the region and provide electricity to thousands.  The TVA soon became the greatest and least expensive producers of electric power in the United States.  Throughout the country, largely because of the example provided by the TVA, private power rates soon declined as well.  The TVA also produced inexpensive fertilizers, helped farmers to prevent soil erosion, and generally raised agricultural productivity and through it the standard of living for the entire region.  Unfortunately, however, the success of the TVA was limited to specific improvements.  The Tennessee Valley remained a generally impoverished region despite its efforts.

Financial Reforms

·        What was the significance of the government’s abandonment of the gold standard?

·        What was the purpose of the FDIC and the SEC?

·        What role does the Federal Reserve Board play in the economy?

 

For more than half a century, many Americans concerned about the health of their economy had believed that the nation’s monetary system was the key to solving most problems (witness the great gold standard controversy of 1896).  In the early days of the New Deal, this preoccupation with the currency continued to affect the economic debate.  In April of 1933, the administration made the controversial decision to take the country off the gold standard.

Roosevelt made the shift off the gold standard official with an executive order over the warnings of his budget director, Lew Douglas, who had predicted the action would lead to “the end of Western civilization.”  A few weeks later, Congress passed legislation confirming his decision.  The resort to government-managed currency, to a dollar whose value could be raised or lowered by government policy according to economic circumstances, was a strong departure from the tradition of the money supply being limited by the supply of gold reserves.  This action (still in effect today) did not, however, have any immediate impact on the depressed American economy.

Through other legislation, the early New Deal increased federal authority over the economy. The Glass-Steagall Act of June 1933 gave the government authority to regulate many activities of banks.  More importantly, in the public mind at least, it established the Federal Deposit Insurance Corporation (FDIC), which guaranteed all bank accounts up to $2,500.[4]  In other words, even should a bank fail, depositors would be able to recover their money (up to the dollar limit).  Finally, in 1935, Congress passed a major banking act that transferred much of the authority once wielded by the regional Federal Reserve banks to the Federal Reserve Board in Washington, whose seven members now exercised direct control over interest rates, and thus the nation’s money supply.  By lowering the rates, the board could make it easier to borrow money from banks and thus, in most cases, encourage prices to rise.  To protect investors in the once popular and now mistrusted stock market, Congress passed the so-called Truth in Securities Act of 1933, requiring corporations issuing new securities to provide full and accurate information about them to the public.  In June 1934, Congress went further and established the Securities and Exchange Commission (SEC) to police the stock market.

Opposition to the New Deal

·        Define the political terms “right” and “left.”

·        What were the main conservative criticisms of the New Deal?  What were the main liberal criticisms of the New Deal?

·        What was the Townsend Plan?

·        What was the Share Our Wealth Plan?  Why did Huey Long’s threat to the Roosevelt administration end?

·        How did the New Deal change in 1935?

 

Seldom has an American president enjoyed such remarkable popularity or encouraged Congress to pass as much important legislation as Franklin Roosevelt during his first two years in office.  By early 1935, however, the New Deal was faced with serious problems.  The Depression continued, softened by government programs, but generally unabated (not stopped).  And as a result, the New Deal was beginning to find itself the target of fierce public criticism.

In the first heady days of 1933, critics of the New Deal had difficulty finding any substantial public support for their position.  But by the time two years had passed and the economy still had not revived, the situation had changed.  Attacks on the New Deal were now generating a large response.

Some of the most strident (harsh) attacks came from critics on the political right.  Roosevelt had for a time tried to pacify conservatives and had allowed corporate leaders to play a major role in shaping some of his early policy initiatives, most notably by allowing business executives themselves to control most aspects of the NRA.  By the end of 1934, however, it was clear that the American right, and much of the corporate world in particular, had become irreconcilably hostile to the New Deal.  Indeed, so intense was conservative animosity toward the New Deal’s “reckless spending,” “economic crackpots,” and “socialist” reforms that some of Roosevelt’s critics could not even bear to say the president’s name.  They called him, simply and bitterly, “that man in the White House.”

In August 1934, a group of the most fervent (and wealthiest) Roosevelt opponents, led by members of the Du Pont family, formed the American Liberty League designed specifically to arouse public opposition to the New Deal’s “dictatorial” policies and its supposed attacks on free enterprise.  The new organization generated wide publicity and caused some concern within the administration.  The League, however, was never able to expand its constituency (base of support) much beyond the Northern industrialists who had founded it.  At its peak, membership in the organization numbered only about 125,000.  The real impact of the Liberty League and other conservative attacks on Roosevelt was not to undermine the president’s political strength.  It was, rather, to convince Roosevelt that his efforts to satisfy the business community had failed.  By 1936, he no longer harbored any illusions about cooperation with conservatives.  The forces of “organized money,” he said near the end of his campaign for reelection, “are unanimous in their hate for me and I welcome their hatred.”

Roosevelt’s critics on the far left also managed to produce alarm among some supporters of the administration; but like the conservatives, they proved to have only limited strength.  The Communist Party, the Socialist Party, and other radical organizations were at times harshly critical of the New Deal, claiming that the New Deal did too little to stimulate the economy and alter the basic structure of capitalism.  These arguments, however, failed to attract widespread support.  With conservatives increasing their criticism of the New Deal, most Americans with leftist sympathies spent much of the 1930s supporting the Roosevelt programs.

More menacing to the New Deal than either the far right or the far left was a group of political movements that defied easy classification.  Some were marginal “crackpot” organizations with little popular following, but others gained substantial public support within particular states and regions.  Three men, in particular, succeeded in mobilizing genuinely national followings.

Dr. Francis E. Townsend, an elderly California physician, rose from obscurity to lead a movement of more than five million members with his plan for federal pensions for the elderly.  According to the Townsend Plan, all Americans over the age of sixty would receive monthly government pensions of $200, provided they retired from their current employment (thus freeing jobs for younger, unemployed Americans) and spent the money in full each month (which would pump needed funds into the economy).  The movement expanded quickly from its founding in 1933, and within two years it had attracted the support of a formidable block of voters, most of them older men and women.  The Townsend Plan made little progress in Congress, but the public sentiment behind the plan helped build support for the Social Security system, which Congress did approve in 1935.

Charles E. Coughlin, a Catholic priest in the small Detroit suburb of Royal Oak, Michigan, achieved even greater renown by means of his weekly sermons broadcast nationally over the radio to an estimated audience of ten million people.  At first a warm supporter of Franklin Roosevelt, he had by 1934 become disheartened by what he claimed was the president’s failure to deal harshly enough with the “money powers.”  Father Coughlin’s attacks on bankers became increasingly anti-Semitic (anti-Jewish), but he attracted public support throughout much of the nation, primarily from Catholics, but from others as well.

Most alarming of all to the administration was the growing national popularity of Senator Huey P. Long of Louisiana.  Long had risen to power in his home state through his harsh attacks on the banks, oil companies, and utilities, and on the conservative political elite allied with them that had for decades dominated the Louisiana government.  Elected governor in 1928, he launched an assault on his opposition so thorough and forceful that they were soon left with virtually no political power whatever.  Long dominated the legislature, courts, and executive departments, and tolerated no interference with his desires.  When opponents accused him of violating the Louisiana Constitution, he brazenly replied, “I’m the Constitution here now.”  Many claimed that he had, in effect, become a dictator.  If he was a dictator, he nevertheless maintained the overwhelming support of the Louisiana electorate, in part because of his flamboyant (flashy) personality and in part because of his record of accomplishment—building roads, schools, and hospitals, as well as revising the tax codes, distributing free textbooks, and lowering utility rates.  Barred by law from succeeding himself as governor, he ran in 1930 for a seat in the U.S. Senate, won easily, and left the state government in the hands of loyal allies.

Once in Washington, Long soon became harshly critical of Herbert Hoover’s ineffectual policies for dealing with the Depression.  Like Coughlin, he supported Franklin Roosevelt for president in 1932.  Far more rapidly than the priest, however, Long broke with the New Deal, a break that was all but complete within six months of the inauguration.  As an alternative, he advocated a drastic program of wealth redistribution, a program he ultimately named the Share Our Wealth Plan in which “every man could be a king.”.  According to Long, the government could end the Depression easily and quickly simply by confiscating through taxation the surplus riches of the wealthiest men and women in America, whose fortunes were, he claimed, so bloated that not enough wealth remained to satisfy the needs of the great mass of citizens.  By limiting incomes to $1 million annually and by limiting capital accumulation and inheritances to $5 million, the government would soon acquire enough assets to guarantee every family a minimum “homestead” of $5,000 and an annual wage of $2,500.

Long made little effort to disguise his interest in running for president.  In 1934, he established his own national organization, the Share-Our-Wealth Society, which soon attracted a large following not only in Long’s native South but in New York, Pennsylvania, parts of the Midwest, and above all California.  There were no accurate figures to indicate the movement’s precise size, but even Long’s critics admitted it might have as many as four million members.  Long even wrote a book entitled My First Days in the White House, and FDR was concerned with Long’s potential challenge to his renomination.  This threat was eliminated when Long was assassinated by the son-in-law of a political opponent in September of 1935.[5]

These popular movements seemed in 1935 to have become a genuine threat to the established political parties.  An increasing number of advisers were warning the president that he would have to do something dramatic to counter their strength.  In response both to the growing political pressures and to the continuing economic crisis, Roosevelt embarked in 1935 on a set of new initiatives that together became known as the “Second New Deal.”  In some respects, the new proposals were simply an attempt to steal the thunder of the administration’s critics.  But they also represented, if not a new direction, at least a more liberal emphasis of New Deal policy.

Perhaps the most conspicuous change in New Deal policy in 1935 was its new attitude toward big business.  The president now openly attacked corporate interests.  Equally alarming to affluent (wealthy) Americans was a series of tax reforms proposed by the president in 1935, a program conservatives quickly labeled a “soak the rich” scheme.  Apparently designed to undercut the appeal of Huey Long’s Share Our Wealth Plan, the Roosevelt proposals called for establishing the highest and most progressive peacetime tax rates in history. Rates in the upper brackets reached 75% on income, 70% on inheritances, and 15% on corporate incomes (in comparison, the highest income tax rates today are less than 40%).  In addition, the administration moved to enact landmark legislation that would provide increased security to the elderly, disabled, and unemployed.

Social Security

·        Describe the various programs contained in the Social Security Act.

 

From the first moments of the New Deal, important members of the administration, most notably Secretary of Labor Frances Perkins (the first female cabinet member in the country’s history), had been lobbying for a system of federally sponsored social insurance for the elderly and the unemployed.  The popularity of the Townsend movement added strength to their cause, and in 1935 Roosevelt gave public support to what became the Social Security Act.  It established a variety of programs.  For the elderly, there were two types of assistance.  Those who were presently destitute (poor) could receive up to $15 a month in federal assistance (depending on what matching sums the state might provide).  More important for the future, Americans presently working were incorporated into a pension system, to which they and their employers would contribute by paying a payroll tax.  Social Security would then provide them with an income upon their retirement.  There were severe limits on the program.  Pension payments would not begin until 1942 and even then would provide only $10 to $85 a month to recipients.  Broad categories of workers (including domestic servants and agricultural laborers, many of whom were blacks and women) were excluded from the program.  But the act was a crucial first step in creating the nation’s most important social program for the elderly.  In addition, the Social Security Act expanded the government’s activities on behalf of the unemployed and dispossessed.  It provided for a system of unemployment insurance, to which employers alone would contribute and which made it possible for workers laid off from their jobs to receive government assistance for a limited period of time.  It also established a system of federal aid to disabled people and to dependent children.

New Dealers did not like to think of Social Security as a “welfare” system.  They insisted, rather, that Social Security was an “insurance” system, most of whose recipients would earn their benefits.  Programs of this type eventually became known as entitlements because everyone who met the qualifications was entitled to draw benefits regardless of economic need.  Even the wealthiest retired Americans would be entitled to their Social Security payments. Unemployment insurance, similarly, was not to be “welfare,” with benefits based on economic need.  Any unemployed person would be eligible to receive assistance, no matter what his or her financial situation.  Where the Social Security Act did provide direct assistance based on need to the elderly poor, to the disabled, to dependent children it was servicing groups widely perceived to be small and genuinely unable to support themselves.

In the years to come, however, Social Security was to evolve in ways its planners neither foresaw nor desired.  The old-age pension program would ultimately become far more expensive (and far more generous) than the founders of the system had expected.  Aid to Dependent Children, envisioned as a relatively modest program to aid a small number of needy people, would in the 1960s (renamed Aid to Families with Dependent Children) expand to become one of the cornerstones of the modern welfare system.[6]  However one evaluates the long-range effects of Social Security, however, it is clear that the 1935 act was the most important single piece of social welfare legislation in American history.

New Directions in Relief

·        What was the purpose of the WPA?  What impact did it have on the arts?

 

Social Security was designed primarily to fulfill long-range goals.  Of more immediate concern were the millions of Americans who remained unemployed and who had not yet found relief through existing government programs.  To meet their needs and replace such early New Deal programs of direct relief as the FERA, the administration established in 1935 the Works Progress Administration (WPA).  Like the Civil Works Administration and other earlier efforts, the WPA established a system of work relief for the unemployed.  It far surpassed all earlier agencies, however, both in the size of its budget ($5 billion at first) and in the energy and imagination of its operations.

Under the direction of Harry Hopkins, the WPA employed an average of 2.1 million workers at any given moment between 1935 and 1941.  The agency was responsible ultimately for the erection or renovation of 110,000 public buildings (schools, post offices, office buildings) and for the construction of almost 600 airports, more than 500,000 miles of roads, and over 100,000 bridges.  More important, however, the WPA provided incomes to those it employed and helped stimulate the economy by increasing the flow of money into it.

The WPA also displayed remarkable flexibility and imagination in offering assistance to those whose occupations did not fit into any traditional category of relief.  The Federal Writers Project of the WPA, for example, offered unemployed writers support to pursue their own creative endeavors and to work on projects initiated by the agency itself.  The Federal Art Project, similarly, provided aid to painters, sculptors, and others to continue their careers.  The Federal Music Project and the Federal Theater Project oversaw the production of concerts and of plays creating work for unemployed musicians, actors, directors, and others.  Other relief agencies emerged alongside the WPA.  The National Youth Administration provided assistance to those between the ages of sixteen and twenty-five, largely in the form of scholarship assistance to high-school and college students.  The Emergency Housing Division of the Public Works Administration began federal sponsorship of public housing.

The New Deal and Organized Labor

·        What was the purpose of the National Labor Relations Act (Wagner Act)?

·        What factors led to the increased militancy of labor during the thirties?

·        How did the basic structure of labor unions change during the thirties?

·        Describe the tactics that unions used to force companies to engage in collective bargaining.

 

The emergence of a powerful American trade union movement in the 1930s was perhaps the most important social development of the decade and one of the most significant political developments as well.  It occurred in part in response to government efforts to enhance the power of unions; but it was primarily a result of the increased militancy (combativeness) of American workers and their leaders.

During the 1920s, most workers had displayed relatively little success in challenging employers or demanding recognition of their unions.  They had faced the opposition of a powerful and highly popular business establishment and the open hostility of the conservative national government.

In the 1930s, these inhibiting factors began to vanish.  As a result of the Depression, business leaders and industrialists lost both the high public standing they had previously enjoyed and the automatic support of the government.  When the Supreme Court struck down the NRA in 1935, it solved some problems for the administration, but it also eliminated the important clause guaranteeing workers the right to organize and bargain collectively.  Supporters of labor, both in the administration and in Congress, advocated quick action to restore that protection.  With the president himself slow to respond, a group of progressives in Congress, led by Senator Robert F. Wagner of New York, introduced what was to become the National Labor Relations Act.  The new bill, popularly known as the Wagner Act, was passed over the strong objections of corporate leaders and provided workers with far more federal protection than the National Industrial Recovery Act had offered.  It specifically outlawed a group of “unfair practices” by which employers had been fighting unionization and created a National Labor Relations Board (NLRB) to police employers, with the power to force them to recognize and bargain with legitimate unions.

Even though the American Federation of Labor increased its activities in response to the Depression, it proved in most cases inadequate to the task at hand.  The AFL remained committed to the idea of the craft union: the idea of organizing workers on the basis of their skills.  As a result, the AFL offered little hope to unskilled laborers, even though it was the unskilled who now constituted the bulk of the industrial work force.  During the 1930s, therefore, another concept of labor organization challenged the traditional craft union ideal—industrial unionism.  Advocates of this approach argued that all the workers in a particular industry should be organized in a single union, regardless of what functions the workers performed.  All autoworkers should be in a single automobile union; all steelworkers should be in a single steel union.  Workers divided into many small unions would lack the strength to deal successfully with the great corporations.  United into a single great union, however, they would wield considerable power.

Leaders of the AFL craft unions for the most part opposed the new concept, but industrial unionism found a number of important advocates, most prominent among them John L. Lewis.  Lewis was the talented, flamboyant, and eloquent leader of the United Mine Workers the oldest major union in the country organized along industrial rather than craft lines.  He was also a charismatic public figure, whose personal magnetism alone helped win thousands of recruits to his cause.  At first, Lewis and his allies attempted to work within the AFL, but friction between the new industrial organizations and the older craft unions grew rapidly as a result.  At the 1935 convention, Lewis finally split with the AFL.  Later, he created the Congress of Industrial Organizations (CIO) as an organization directly rivaling the AFL, and became its first president.

The CIO also expanded the constituency of the labor movement in many important ways.  Membership in most AFL craft unions had been limited not only to skilled workers, but to white male workers.  The CIO, in reaching out to the great mass of unskilled laborers, was much more receptive to women and to blacks than the AFL had been.  CIO organizing drives also reached out to new, previously unorganized industries where women and minorities constituted much of the work force—textiles, laundries, tobacco factories, and others.  The labor schism (split), in short, involved issues of race and gender as well as questions of economics.

Major organizing battles were now under way, in particular, in the automobile and steel industries.  Out of a myriad (multiple number) of competing auto unions, the United Auto Workers (UAW) was gradually becoming dominant during the early and mid-1930s.  But through 1936, although steadily gaining recruits, it was making little progress in winning recognition from the auto companies.  In December 1936, however, autoworkers employed a controversial and dramatically effective technique for challenging corporate opposition—the sit-down strike.  Employees in several General Motors plants in Detroit simply sat down inside the plants, refusing either to work or to leave, thus preventing the company from making use of replacement workers as strikebreakers.  The tactic quickly spread to other locations, so that by February 1937 strikers had occupied seventeen GM plants.  The strikers ignored court orders to vacate the buildings, and they successfully resisted efforts by local police to remove them.  When Michigan’s governor, Frank Murphy, a liberal Democrat, refused to call out the National Guard to clear out the strikers, and when the federal government refused as well to intervene on behalf of employers, the company had little choice but to relent (give in).  In February 1937, General Motors became the first major manufacturer to recognize the UAW, other automobile companies soon did the same.  The sit-down strike proved effective for rubber workers (who actually had been the first to use the technique in 1936) and workers in other industries as well.

In the steel industry the battle for unionization was less easily won.  In 1936, the CIO had appropriated $500,000 to support the Steel Workers’ Organizing Committee (later United Steelworkers of America) in a major campaign.  Over the next few months the onslaught began, with the SWOC quickly recruiting tens of thousands of workers and staging a series of prolonged and often bitter strikes.  The conflicts were notable not only for the militancy of the (predominantly male) steel workers themselves, but for the involvement of thousands of women (often wives or relatives of workers), who provided important support for the strikers and who, at times, took direct action by creating a buffer between strikers and the police.

In March 1937, to the amazement of almost everyone, United States Steel, the giant of the industry, relented.  Rather than risk a costly strike at a time when it sensed itself on the verge of recovery from the Depression, the company signed a contract with the SWOC, the new organization’s first important victory.  But the lesser companies (known collectively as “Little Steel”) were not ready to surrender.  On Memorial Day 1937, a group of striking workers from Republic Steel gathered with their families for a picnic and demonstration in South Chicago.  When they attempted to march peacefully toward the steel plant, police opened fire on them.  Ten demonstrators were killed; another ninety were wounded.  Despite a public outcry against the “Memorial Day Massacre,” the harsh tactics of “Little Steel” ultimately proved successful.  The 1937 strike failed.

The victory of Little Steel was, however, the exception rather than the rule and proved to be one of the last gasps of the kind of brutal strikebreaking that had proved so effective in the past.  In the course of 1937, one of the most turbulent years in the history of American labor, there were 4,720 strikes with over 80% of them settled in favor of the unions.  By the end of the year, more than eight million workers were members of unions recognized as official bargaining units by employers (as compared with three million in 1932).  By 1941, that number had expanded to ten million and even included the workers of Little Steel, which had finally relented.  Workers were slower to win major new wage increases and benefits than they were to achieve union recognition but the organizing battles of the 1930s had established the labor movement as a powerful force in the American economy.  In return for the New Deal’s support for organized labor, unions became a key supporter of the Democratic Party, offsetting the support industrialists had always afforded to the Republicans.

The 1936 “Referendum”

·        What factors contributed to FDR’s landslide victory in 1936?

·        What groups made up the Democratic coalition?

 

It was clear from the start that the presidential election of 1936 was to be a national referendum (demonstration of popular opinion) on Franklin Roosevelt and the New Deal.  And whereas in 1935 there had been reason to question the president’s political prospects, by the middle of 1936 there could be little doubt that he would win a second term.

The conservative opposition to Roosevelt had always been intense but never large.  In 1936, it was not even strong enough to win control of the Republican Party.  Ignoring the anguished pleas of Herbert Hoover and others who detested (hated) all aspects of the New Deal, the party nominated the moderate governor of Kansas, Alf M. Landon, who had supported Theodore Roosevelt’s progressive candidacy in 1912.  The Republican platform promised, in effect, to continue the programs of the New Deal but without as much “reckless” government spending or concentration of power in Washington, D.C.

The strength of the other critics of the New Deal seemed to evaporate as quickly as it had emerged.  One reason was the violent death of their most effective leader, Huey Long.  Another reason was the ill-fated alliance among several of the remaining dissident leaders in 1936.  Father Coughlin, Dr. Townsend, and Gerald L. K. Smith joined forces that summer to establish a new political movement the Union Party.  The incessant (constant) squabbling among them, combined with their presidential candidate a mediocre North Dakota congressman, William Lemke, made the new party a sorry spectacle.  It polled less than a million votes.  The most important reason for the dissidents’ collapse, however, was their failure ever to turn their supporters fully against Franklin Roosevelt, who had skillfully undercut the appeal of his critics by adopting many of their ideas.

The campaign was a lopsided contest.  Roosevelt drew huge crowds and evoked widespread enthusiasm with his impassioned attacks on the “economic royalists.”  Landon’s muted rhetoric and moderate platform could not effectively compete.  The result was the greatest landslide in American history to that point.  Roosevelt polled just under 61% of the vote to Landon’s 36%.  The Republican candidate carried only Maine and Vermont.  The Democrats also increased their already large majorities in both houses of Congress.

In addition to ensuring Roosevelt a second term, the election displayed the fundamental party realignment that the New Deal had managed to produce.  The Democrats (a party that had won only three national elections between 1860-1928) now controlled a broad coalition of Western and Southern farmers, the urban working classes, the poor and unemployed, the black communities of the Northern cities, as well as traditional progressives and committed new liberals.  This coalition constituted a substantial majority of the electorate, and it would be until the 1980s and the candidacy of Ronald Reagan before the Republican Party could again muster anything approaching a true majority coalition of its own.

The New Deal in Disarray

·        What factors led FDR to attempt to change the structure of the Supreme Court?

·        Why was Roosevelt’s plan defeated?

·        Why did FDR’s problems with the Court decline dramatically in 1937?

·        What factors led to the recession of 1937?

·        Why did the recession seem to justify the Keynesian analysis of the New Deal?

 

Roosevelt emerged from the 1936 election at the zenith (highest point) of his popularity.  Within months, however, the New Deal was mired in serious new difficulties, a result of continuing opposition, the president’s own political blunders, and major economic setbacks.  His administration would never fully recover.  Throughout Roosevelt’s second term, recovery from the Depression remained elusive and the New Deal was never able to regain the momentum it had immediately after the 1936 elections.

If the 1936 election had been a mandate for anything, Franklin Roosevelt believed, it was a mandate to do something about the Supreme Court.  The Court had already struck down the NRA and the AAA and threatened to cancel even more legislation.  Foes of such New Deal measures as the National Labor Relations Act and the Social Security Act were openly ignoring the new laws, confident that the Supreme Court would soon rule them unconstitutional.[7]  Early in 1937, Roosevelt proposed a solution—expanding the Supreme Court through the addition of new justices that he would appoint and whose liberal views would presumably counterbalance the conservatism of the existing justices.

It was a bold measure, but not, the administration insisted, a radical one.  The Constitution called for no specific number of Supreme Court justices, and Congress had from time to time changed the size of the Court in the past (although not since the early nineteenth century).  Nevertheless, the plan aroused a great public furor.  Conservatives throughout the country expressed outrage at the “court-packing plan,” warning that such constitutional shortcuts were the common route by which dictators seized power.  And while in the past few Americans had been inclined to listen to such warnings from the president’s conservative critics, now, as a result of his heavy-handed tactics, much of the public seemed to agree.  Still the president had considerable political clout at his disposal; and he might well have forced Congress to approve at least a compromise measure had not the Supreme Court itself intervened in the controversy.

Even before the court-packing fight began, the ideological balance of the Court had been an unsteady one.  Four conservative justices could be relied on to oppose the New Deal on almost all occasions.  Three others were generally inclined to support it.  The remaining two tended to waver, with Chief Justice Charles Evans Hughes often siding with the liberals and Associate Justice Owen J. Roberts more often voting with the conservatives.  Were Hughes and Roberts both to side with the liberals, there would be a 5-to-4 majority in support of the New Deal without the appointment of additional justices.  That is precisely what happened.  On March 29, 1937, Roberts, Hughes, and the three liberal justices voted together to uphold a state minimum wage law thus reversing a 5-to-4 decision of the previous year invalidating a similar law.  Two weeks later, again by a 5-to-4 margin, the Court upheld the National Labor Relations Act; and in May, it validated the Social Security Act.  The necessity for Roosevelt’s judicial reform bill had vanished.  The Supreme Court had prudently (thoughtfully) moderated its position in order to avoid the possibility of a radical weakening of its power through the appointment of additional judges.

On one level, the affair was a significant victory for Franklin Roosevelt.  No longer would the Court serve as a roadblock to New Deal reforms, particularly after a group of older justices began retiring in the following months, to be replaced by Roosevelt appointees.  On another level, however, the court-packing episode was a serious defeat for the president, and one that did lasting damage to his administration.  By generating public suspicion of his motives, he had reinvigorated the conservative opposition, which only months before had been humiliated in the 1936 elections.  By giving members of his own party an excuse to oppose him, he had helped destroy his congressional coalition.  From 1937 on Southern Democrats and other conservatives voted against his measures in increasing numbers.  Never again would the president enjoy the freedom of legislative action he had possessed during his first years in office.  Although its original purpose was no longer necessary, Roosevelt was even forced to suffer the embarrassment of having his Court plan publicly voted down by Congress.

Hard on the heels of the court-packing fiasco came another economic crisis.  A severe recession began in the fall of 1937, continued for more than nine months, and plunged the nation into its worst suffering since 1932.  It was a bitter pill for a society that was just beginning to believe that true recovery was under way, and it was a particularly painful for Franklin Roosevelt whose policies seemed to have contributed to the new collapse.

By the summer of 1937 it had seemed possible to finally believe that the Depression was virtually over.  The national income, which had dropped from $82 billion in 1929 to $40 billion in 1932, had risen to nearly $72 billion.  Other economic indicators showed similar improvements.  To the president, the time seemed ripe to listen to his more conservative advisors, cut government spending, and balance the budget whose mounting deficits had never ceased to trouble the president.

As a result, the administration moved on several fronts to cut back its recovery programs.  Roosevelt persuaded the Federal Reserve Board to tighten credit by raising interest rates.  At the same time, he reduced government spending by slashing the budget for one relief program after another.  Between January and August 1937, for example, he cut the WPA in half, sending 1.5 million relief workers on unpaid “vacations.”  A few weeks later, the fragile boom collapsed.  The index of industrial production dropped from 117 in August 1937 to 76 in May 1938.  Four million additional workers lost their jobs.

The recession of 1937 was a result of many factors.  But to many observers at the time (including, apparently, Franklin Roosevelt), it seemed to be a direct result of the administration’s unwise decision to reduce spending.  The Keynesian advocates of government spending as an antidote to the Depression had always had to struggle for the president’s favor against those who believed in more conservative monetary policies.  Now, the Keynesians stood vindicated.  As a result, the notion of using government spending to stimulate the economy had established a foothold in American public policy.  In April 1938, the president asked Congress for an emergency appropriation of $5 billion for public works and relief programs, and government funds soon began pouring into the economy again. Within a few months, another tentative recovery seemed to be under way, and the advocates of spending pointed to it as proof of the wisdom of their approach.

By the end of 1938, the New Deal had essentially come to an end.  Congressional opposition now made it difficult for the president to enact any major new reform programs.  But more importantly, the threat of world crisis, brought about by the aggressive acts of Italy, Nazi Germany, and Japan, made Roosevelt more concerned with persuading a reluctant nation to prepare for war than with pursuing new avenues of reform.

Black America and the New Deal

·        What actions did the New Deal take on behalf of Black Americans?

·        In what ways did the New Deal fail to address the needs of Black Americans?

·        Why was FDR reluctant to be more aggressive on the issue of civil rights?

Many New Deal leaders were sympathetic to the plight of Black Americans; however, relatively little was done to improve their lot.  The cause of racial equality did have one of its greatest champions in the White House itself, the first lady.  Eleanor Roosevelt spoke throughout the 1930s on behalf of racial justice.  She put continuing pressure on her husband and others in the federal government to ease discrimination against blacks.  She was also in part responsible for what was, symbolically at least, one of the most important events of the decade for Black Americans.  When the black opera singer Marian Anderson was refused permission in the spring of 1939 to give a concert in the auditorium of the Daughters of the American Revolution (Washington’s only major concert hall), Eleanor Roosevelt resigned from the organization and then helped secure government permission for Anderson to sing on the steps of the Lincoln Memorial.  Anderson’s Easter Sunday concert attracted 75,000 people and became, in effect, the first modern civil-rights demonstration.

The president himself made some important gestures to blacks as well.  Most blacks had voted Republican, “the Party of Lincoln,” since the Civil War and, despite the Depression, had generally supported Hoover over FDR in 1932.  Despite this and unlike his Democratic predecessor Woodrow Wilson, Roosevelt did not move to increase government discrimination against blacks.  On the contrary, he worked to repeal certain particularly glaring racial restrictions within the federal government.  He appointed a number of blacks to significant second-level positions in his administration, creating a network of officeholders that became known as the “Black Cabinet.”  Blacks also benefited from New Deal relief programs.  Eleanor Roosevelt and Harry Hopkins made efforts to ensure that such programs did not exclude blacks.  By 1935, approximately 30% of all blacks were receiving some form of government assistance.  One result of all this was a historic change in black voting patterns.  By 1936, more than 90% of Black Americans were voting Democratic, the beginnings of a political alliance that endures to this day.

Blacks supported Franklin Roosevelt because they knew he was not their enemy.  They also supported him because the New Deal created relief agencies and other programs of public assistance that were of great economic importance to this particularly impoverished group.  Blacks, however, had few illusions that the New Deal represented a dramatic change in American race relations.  The president was generally sympathetic to the plight of blacks, but he believed that other problems were far more pressing.  He was never willing, therefore, to risk losing the support of Southern Democrats by becoming too much identified with the issue of race.  Typical of his attitude was his harsh criticism of lynching combined with his refusal to support legislation making lynching a federal crime.

Similarly, Roosevelt refused to use the relief agencies he was creating to challenge local patterns of discrimination.  On the contrary, he permitted them to reinforce such patterns.  The Civilian Conservation Corps established separate black camps.  The NRA codes tolerated the widespread practice of paying blacks less than whites doing the same jobs.  Blacks were largely excluded from employment in the TVA in the segregated states of the South. The Federal Housing Administration refused to provide mortgages to blacks moving into white neighborhoods, and the first public housing projects financed by the federal government were racially segregated.

Women and the New Deal

·        In what ways did women make political progress during the 1930s?

·        Describe the ways that the New Deal was hostile to working women.

·        Why was the New Deal reluctant to make greater efforts to support women’s political needs?

 

American women, too, failed to emerge in the 1930s as an interest group powerful enough to challenge the obstacles to their advancement.  This was not because the New Deal was especially hostile to feminist aspirations but more that those aspirations did not yet attract enough support to make it politically necessary for the administration to back them.

There were some important symbolic gestures on behalf of women.  Roosevelt appointed the first female member of the cabinet in the nation’s history, Secretary of Labor Frances Perkins.  He also named more than one hundred other women to positions at lower levels of the federal bureaucracy.  These appointees created an active female network within the government and cooperated with one another in advancing causes of interest to women.  Several women received appointments to federal judgeships.  Such appointments were in part a response to pressure from Eleanor Roosevelt, a committed advocate of women’s rights and a champion of humanitarian causes.  Also during the New Deal, Hattie Caraway of Arkansas became the first woman ever elected to a full term in the U.S. Senate (She was running to succeed her husband who had died in office.). 

The New Deal also generally supported the prevailing belief that in hard times women should withdraw from the workplace to open up more jobs for men.  Frances Perkins herself spoke out against what she called the “pin-money worker,” the married woman working to earn extra money for the household.  Such women, the secretary of labor said, were a “menace to society.”  The hiring practices of the work-relief programs reflected these attitudes.  The WPA did provide some jobs for women, although usually in such domestic settings as sewing rooms, nursery schools, and handicraft programs.  Even these few jobs tended to be quickly eliminated when WPA funds became tight.

The principal government aid to women, therefore, was not work relief but cash assistance, most notably through the Aid to Dependent Children program of Social Security, which was designed largely to assist single mothers.  This disparity in treatment reflected a widespread assumption that was already in conflict with economic reality, that men constituted the bulk of the paid work force and that women needed to be treated only within the context of the family.  In fact, millions of women were already employed by the 1930s, and many millions more would enter the work force thereafter.  The tension between the nature of the welfare system and the realities of employment would, therefore, trouble American society for decades.  Similar to its dealings with Black Americans, the New Deal was not actively hostile to the aspirations of women; in many ways, it was unusually supportive.  It did, however, accept prevailing cultural attitudes.  There was not yet sufficient political pressure from women themselves to persuade the administration to do otherwise.

Evaluating the New Deal

·        What were the main criticisms of the New Deal?

·        What arguments can be made to support the success of the New Deal?

·        Explain the concept of the “Broker State.”

·        How did the New Deal make lasting changes in the American political and economic systems?

 

Evaluating the New Deal is still controversial well over a half century after its inception.  To some of Roosevelt’s embittered conservative contemporaries, the New Deal was a dangerous, radical break with the past; a time in which constitutional safeguards were abandoned and the president sought to establish a dictatorship in which the American economy fell under the control of a bloated and intrusive federal bureaucracy.  In addition, many current conservatives believe that the relief efforts of the New Deal set a dangerous precedent of federal welfare that diminished the desire of individuals to help themselves.  To critics on the left, both in the 1930s and since, the New Deal was little more than a painfully timid defense of traditional capitalism, against demands for more fundamental change.  Liberals criticized the president for his reluctance to expand jobs programs as well as his reticence (unwillingness to act) on civil rights.  Nor did the New Deal substantially alter the distribution of wealth among the American people as many on the left had hoped.

Despite these criticisms, the New Deal and Franklin D. Roosevelt maintain a generally warm place in American’s hearts.  During the worst crisis since the Civil War, FDR gave the nation hope and its people the feeling that the federal government had compassion for their plight.  The nation did, indeed, “endure” as Roosevelt had predicted on that gloomy day inauguration day in 1933.  The 1930s were a decade of political extremism throughout the world as leftists and rightist battled for power.  It is testimony to Roosevelt’s political skill that he was able to maintain his vast popularity with the majority of the American public while fighting off criticism from both ends of the political spectrum.

Just as significantly, the New Deal had many important and lasting effects on both the behavior and the structure of the American economy.  In some ways the New Deal was simply a continuation of the progressive movement of two decades earlier.  Minimum wage, limited hours, abolishment of child labor, and government control of the money supply were not revolutionary ideas.  The Great Depression simply permitted opponents of laissez faire to go further than public opinion would have permitted before.  In many other ways, however, the New Deal did mark a revolution in American government.  Roosevelt not only served longer as president than any man in American history, he became more central to the life of the nation than any chief executive before him.  With the advent of radio, he became the first president to visit the homes of his constituents on a regular basis.  Most importantly, his administration constructed a series of programs that permanently altered the federal government, expanding its reach into segments of society never before imagined.  During the 1930s the government took over, in large part, responsibility for the aged and unemployed, as well as safeguarding the rights of most workers to join labor unions.  In addition, the government assumed the responsibility of stabilizing the economy through regulation of the stock market and the manipulation of the nation’s money supply.

The New Deal created something that in later years would become known as the “Broker State.”  Instead of attempting to unite all elements of society into a single, harmonious unit, as fascist regimes in Europe did, the effect of the New Deal was to elevate and strengthen new interest groups so as to allow them to compete more effectively for political influence and power.  The federal government then became a mediator in the constant competition between these interest groups.

Prior to the New Deal, there had been only one great interest group with genuine power in the national economy: the corporate business world.  By the end of the 1930s, American business found itself competing for influence with an increasingly powerful labor movement and an organized agricultural economy.  In later years, the Broker State idea would expand to embrace other groups as well: racial and ethnic minorities, women, and many others.  The experience of the New Deal suggests that attention goes largely to those groups able to exercise enough political or economic power to demand it.  Thus in the 1930s, farmers, after decades of organization and agitation, and workers, as the result of militant action and mass mobilization in order to form strong industrial unions, won from the government new and important protections.  Other groups, less well organized but politically important because they were so numerous and visible, won more limited assistance as well: homeowners, the unemployed, and the elderly.  By the same token, the interest-group democracy that the New Deal came to represent offered much less to those groups either too weak to demand assistance or not visible enough to arouse widespread public support.  One of the important limits of the New Deal, therefore, was its very modest record on behalf of several important social groups, most notably Black Americans and women.

The “broker state” approach to reform, therefore, provided important opportunities for some groups to advance their interests.  But for other, less politically powerful but at least equally threatened interests (blacks, women, Native Americans, Hispanics, small farmers, small businesspersons, and many others), the New Deal offered relatively little.  It did, however, help establish a pattern in American politics of individual interest groups mobilizing themselves to demand assistance from the government that would govern the nation’s public life for many decades.  Eventually, those groups too powerless to demand government attention during the New Deal were able to use the model established by the successful interest groups of the depression era to assert their rights after the Second World War.

Much of the on-going debate about the size of government, the power of the presidency, and the balance of power between the federal and state governments had its origin in the New Deal.  It created a large array of protections, the “social safety net,” and it helped prevent the economy from decaying further.  It may not have changed the structure of capitalism, but it helped elevate new groups workers, farmers, and others to positions from which they could on occasion effectively challenge the power of the corporations.  It increased the regulatory functions of the federal government in ways that helped stabilize previously troubled areas of the economy: agriculture, the stock market, and the banking system, among others.  It created the foundation of the American welfare state, through its many relief programs and above all through the Social Security system.  The welfare system that ultimately emerged would be limited in its impact in comparison with those of other industrial nations, but it marked a historic break with the nation’s traditional reluctance to offer any public assistance whatever to indigent citizens.  The New Deal also presided over the birth of the modern labor movement.  And politically, it created a powerful Democratic coalition of the working class, farmers, the poor, blacks, and intellectuals that would dominate American politics until the 1980s.

One thing the New Deal did not accomplish, however, was to end the Great Depression.  It had helped stabilize the economy in the desperate early months of 1933 and had kept things from getting worse; and there had been a limited, if erratic, recovery in many areas of economic life.  By the end of 1939, however, many of the basic problems of the Depression remained unsolved.  Approximately 15% of the work force remained unemployed.  The gross national product was no larger than it had been ten years before.  New Dealers never fully recognized the value of government spending as a Keynesian vehicle for recovery, and their efforts along other lines never succeeded in ending the Depression.  Only the military buildup prior to World War II brought a return to full employment and an end to the Depression.[8]

 

Jeffrey T. Stroebel, The Sycamore School, 1995. Revised 2001.


[1] United States v. Butler (1936).

[2] Time 31 July 1933

[3] Schechter Poultry Corp. v. United States (1935)

[4] It is now $100,000.

[5] Long’s brothers and son Russell remained active in Louisiana politics until the late 1980s.

[6] Most federal welfare programs ended in the late 1990s.

[7] Roosevelt became increasingly irate at the “Nine Old Men” on the Court, all of whom had been previously appointed by laissez faire, conservative presidents.

[8] Some portions have been adapted from Compton’s Encyclopedia of American History, Compton’s NewMedia, 1994.