Political Science

n 1932 the United States economy stood at its lowest ebb in modern history. An army of out- of-work military veterans camped and marched in Washington, DC. Unemployment stood at around 25 percent. Indeed the entire world seemed to have ground to a halt. Facing this crisis, Franklin D. Roosevelt accepted the Democratic nomination for president, pledging himself to “a new deal for the American people.”1 In that speech alone, elements of the “new deal” included increasing public works, supporting agricultural prices, creating new mortgage markets, shortening the working day and week, regulating securities, restoring international trade, reforesting the countryside, and repealing Prohibition. After taking office in 1933, Roosevelt worked with Congress to get laws passed for all these measures and more: by the end of the decade, the New Deal had grown to include social insurance against old age, unemployment, and disability; watershed management; support for unionization; deposit insurance; and a strengthened Federal Reserve System, among other innovations.

The New Deal included a variety of sometimes contradictory components that scholars still struggle to summarize. Often historians agree with Isaiah Berlin, who said in 1955 that the New Deal was an impressive balancing act, able “to reconcile individual liberty . . . with the indispensable minimum of organising and authority.”2 But as David M. Kennedy notes, we can see the New Deal thus only when it is “illumined by the stern-lantern of history.”3 Listening to Roosevelt’s pledges in 1932, watching Congress pour reforms forth in the first one hundred days of his administration in 1933, seeing the White House reply to challenges from the Supreme Court and political opponents in 1935, hearing Roosevelt campaign as “the master” of corporate interests in 1936, it would have been hard to discern in advance what seemed clear in the wake of the decade’s passing. And indeed, there is little proof that Roosevelt or anyone else set out to create the carefully balanced system that the New Deal became: it evolved as the president and Congress responded to the judiciary, the electorate, and the changing world of the Depression.

In this very short introduction to the Great Depression and the New Deal, I offer some basic ideas for a first understanding of this profound crisis and America’s still-influential legislative response. The world that broke down in 1929 broke down for reasons that astute observers had predicted in advance. The subsequent and nearly total failure to repair the damage owed to clear errors of judgment and action, and the prolonged misery that millions of people suffered could therefore have been lessened. Roosevelt and the Democratic Congresses of the New Deal era achieved a marked historical success by correcting those errors. They also committed errors of their own, and I do not slight them here. But in the 1936 election, the American voters overwhelmingly asked their leaders to forge forward with their experiments, mistakes aside, rather than return to the old and, to their minds, wholly discredited ways. This spirit of pragmatic experimentation became the basis for a generation’s faith in the new American way, not just in the United States but around the world.

Rauchway, E. (2008). Great depression and the new deal : A very short introduction. Retrieved from http://ebookcentral.proquest.com Created from washington on 2020-03-23 12:00:36.

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Now, if you doubt the story is quite so simple, and if you insist that these simple statements require qualifications and nuance, I shall have to concede the point—beyond the confines of this brief book, I greatly respect the complexity of this era and the scholarship covering it. On the principle that you will go on from here if you wish fully to appreciate the period, the book concludes with recommendations for further reading. But the body of the book sticks to these simpler lines of argument on the grounds that they serve as a useful introduction to the subject.

The Great Depression began in the late 1920s, not necessarily with the Great Crash of 1929 but around that time, and afflicted a world tied together by specific kinds of debts, both within and between countries. Chapter 1 outlines that world and America’s peculiar place in it, explaining how it differed from the world before World War I, and emphasizing the vulnerabilities of the system as outlined by contemporary critics: the web of debt binding that world together looked fragile to its keenest observers.

Chapter 2 discusses the reactions to the crisis, first of the Federal Reserve System, which serves the United States as a central bank, and second of President Herbert Hoover and the Republican majority in Congress. Contrary to Democratic accusations, the Republicans did not do nothing—but Hoover’s own principles prevented him from doing nearly enough, and the crisis worsened appallingly under his leadership.

Chapter 3 shows that the greatness of the Great Depression owes to its widespread impact. It afflicted all sections of the American economy and much of the world. Perhaps most importantly, it encouraged middle-class American taxpayers and voters to identify themselves with the unfortunate many, rather the fortunate few.

The discussion here of the New Deal, like all such discussions, requires a selective principle to explain what belongs under that rubric and what does not. You will find two in this book. The first is chronological. While writers sometimes use the term “New Deal” to refer to the modern Democratic Party’s agenda, or indeed the expansion of the American state under any administration for any purpose after the Roosevelt era (a concept that sometimes goes under the name, “the New Deal order”), I concern myself in this book chiefly with the 1930s—after which Roosevelt and his contemporaries thought the New Deal ended—and look only briefly to its legacy in the war years.4 The second is functional. I divide the New Deal here into three parts: (1) those measures that appear to have worked to reverse the Depression; (2) those that did not; and (3) those that had little to do with fighting the current disaster but served to prevent or soften future ones.

Beyond Roosevelt’s core conviction that “[n]ecessitous men are not free men,” little held the New Deal together.5 New Deal programs embodied no single approach to political management of the economy. They originated in no single book, speech, or person’s thoughts. In some instances, Roosevelt himself had little to do with, or even opposed, ultimately important and successful legislation. The New Deal emerged over time from the fights between the president, the Congress, the Supreme Court, all of them influenced by the electoral returns that time after time supported this continuing conflict, in the interests of creating a stronger country.

Chapter 4, “Reflation and Relief,” covers the New Deal stabilization and shoring-up of

Rauchway, E. (2008). Great depression and the new deal : A very short introduction. Retrieved from http://ebookcentral.proquest.com Created from washington on 2020-03-23 12:00:36.

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America’s banks, currency, and credit, and the simultaneous effort to supply immediate relief to the Depression’s suffering millions while still keeping American traditions and institutions intact. These efforts alone, pursued vigorously, might eventually have ended the Depression, but New Dealers had greater ambitions.

Chapter 5, “Managing Farm and Factory,” explains New Deal attempts to re-create the managed economy of World War I for the peacetime crisis of the 1930s. These efforts generated controversy at the time and in retrospect appear considerably ill-advised. But they had roots deep in American politics, and their failures helped turn the New Deal into the balanced mechanism it became.

Chapter 6, “Countervailing Power,” considers the ways New Dealers tried to redistribute influence in the American economy. They did not use state redistribution of wealth through tax policy and welfare payments; rather, they used law to encourage interest groups and individual actors to act independently of their employers.

By 1936, the use of countervailing power had become a distinctive hallmark of the New Deal. Never so efficient as direct state action, the strategy of countervailing power allowed Roosevelt to, in Berlin’s words, “establish new rules of social justice . . . without forcing his country into some doctrinaire strait-jacket, whether of socialism or State capitalism, or the kind of new social organisation which the Fascist regimes flaunted as the New Order.”6 By such methods the New Deal gave weaker groups in society the ability to negotiate better deals in a marketplace it left substantially intact.

The book’s final chapter shows that the American electorate ratified Roosevelt in the landslide victory of 1936 and explains why the New Deal nevertheless ground to a halt within a few years after that. The Supreme Court played its part, and so did Franklin Roosevelt’s overreaching ambition. But so too did the results of their first experiments change some New Dealers’ minds. And finally, the impending war in Europe and America’s response to it set aside the New Deal’s fiscal caution and experimental care.

The New Deal did not end the Great Depression. As one American who lived through the 1930s told Studs Terkel, “industries needed to make guns for World War II made that happen.”7

Unemployment did not return to its 1929 level until 1943.8 But while we can therefore say that the New Deal did not finish the job, we cannot say that it was not working. Throughout the 1930s, with the exception of the recession in 1937–38, the economy was improving—growing on average 8 percent a year from 1933–37 and 10 percent a year from 1938–41, while unemployment fell steadily as well.9 This impressive rate of recovery reminds us how far the United States had to go to recover from the Hoover era. It also helps explain why the New Deal achieved such political success.

As a program to reform the American and global political economy, the New Deal met with more ambiguous fortune because it blurred into the war. The New Deal started and mainly stayed a purely American set of solutions to a problem of global importance, although the Anglo-American trade agreement of 1938 pointed toward an international method of reviving the world economy. And while the postwar order that Roosevelt in his last years helped secure

Rauchway, E. (2008). Great depression and the new deal : A very short introduction. Retrieved from http://ebookcentral.proquest.com Created from washington on 2020-03-23 12:00:36.

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for the world owed much to New Deal methods of pragmatic experimentation and shifting power away from states, because the war began before the lessons of the New Deal had made themselves quite clear, observers could not readily disentangle the two great events. The moral clarity of the 1940s obscured the hard choices, partial successes, and political bargains of the 1930s.

In the conclusion I discuss the New Deal’s influence on the postwar world through the Bretton Woods system of international agreements for economic stability, which endured until the 1970s. Not until then did the United States begin to retreat from its New Deal at home and abroad. And even after several subsequent decades during which politicians have led a revival in America’s pre-1929 beliefs, claiming repeatedly that government is a problem, not a solution, for modern economies, the New Deal’s basic commitment to shared responsibility for economic security and its skepticism toward the complete reliability of bankers, brokers, and corporate executives has not quite died.

Throughout this book, the reader will find these interpretations guided not only by the easier wisdom of scholarly hindsight, but also by the perceptive assessments of contemporary observers. Just as Americans enjoyed the great good fortune of Franklin Roosevelt’s unique presidential competence in both peace and war, they had also among them a remarkable generation of social scientists and other political analysts. The book relies on them as much as on those who have followed them and profited from their vision. And on the advice of one of the most acute among them, we begin with a description of the world that came limping to a halt in the Great War of 1914–18.

Notes 1. “Text of Governor Roosevelt’s Speech at the Convention Accepting the Nomination,” New York Times, January 3,1932, 8.

2. Isaiah Berlin, “President Franklin Delano Roosevelt,” in The Proper Study of Mankind: An Anthology of Essays, ed. Henry Hardy and Roger Hausheer (London: Chatto and Windus, 1997), 636–37.

3. David M. Kennedy, Freedom from Fear: The American People in Depression and War, 1929–1945 (New York: Oxford University Press, 1999), 365.

4. Steve Fraser and Gary Gerstle, eds., The Rise and Fall of the New Deal Order, 1930– 1980 (Princeton: Princeton University Press, 1989). On the New Deal’s contribution to the later growth of the executive branch, see Theodore Lowi, The End of Liberalism: The Second Republic of the United States (New York: W. W. Norton, 1979).

5. Cited in Kennedy, Freedom from Fear, 280. See also Berlin, “President Franklin Delano Roosevelt.”

6. Berlin, “President Franklin Delano Roosevelt,” 629–30. 7. Studs Terkel, Hard Times: An Oral History of the Great Depression (New York: The New Press, 2000), 57.

Rauchway, E. (2008). Great depression and the new deal : A very short introduction. Retrieved from http://ebookcentral.proquest.com Created from washington on 2020-03-23 12:00:36.

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8. Susan B. Carter et al., eds., Historical Statistics of the United States, Earliest Times to the Present, Millennial Edition (New York: Cambridge University Press, 2006), series Ba475. Unemployment as a percentage of the civilian labor force was 2.9 percent in 1929; 3.1 percent in 1942 and 1.8 percent in 1943.

9. Christina D. Romer, “What Ended the Great Depression?,” Journal of Economic History 52, no. 4 (1992): 757.

Rauchway, E. (2008). Great depression and the new deal : A very short introduction. Retrieved from http://ebookcentral.proquest.com Created from washington on 2020-03-23 12:00:36.

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