Did the New Deal deal with the Depression or was it a case of political manipulation?

Answer 1

THE NEW DEAL

The New Deal, with the exception of the Civil War, is one event in America that provokes intense partisan feelings. On one hand, leftists historians such as Paul Conkin, bemoaned that the New Deal was an old story "of might have beens." On the other hand, Arthur M. Schlesinger Jr and Carl Degler praised the New Deal as revolutionary. What relative merits do each view holds?

This paper will argue that the New Deal is a liberal achievement from a conservative government acting for a traditional society. As FDR was a Progressive, his reforms aimed primarily in preserving the system by tinkering with it. Although many of the reforms fall short of their goals, the New Deal should be seen as an unfinished process with much room for latter improvements. This paper would further suggest that the key to a deeper understanding of the policies is in the persona of FDR himself. It was this "great communicator's" distinctive management that made it possible for the Americans to trust their values and their political system again.

Labour

Without a doubt, the passing of the National Industrial Recovery Act (1933) and Wagner Act (1935) effectively legalised the unionisation of workers. To understand its significance, one needs to be awed by the opposition aroused by the act. Almost immediately, employers started to challenge section 7a of NIRA. Major companies started their company unions and employee representation plans. Next, major employer groups such as National Association of Manufacturers brought the labour laws to the courts and they won their first major battle when the supreme court declared NIRA unconstitutional. The final threat came from within when AFL expelled CIO unions in 1938 when CIO's president, John Lewis refused to reconcile with AFL. Positive labour relations looked very bleak indeed.

Hence, it was not far fetch to claim that without the support of the government, American workers' right to participate in collective bargaining and the unions might not have survived. The industrial working class was organisationally weak and its lobbying pressure was not enough to push for any pro labour laws. In fact, both NIRA and Wagner Act were products of political lobbying by the AFL and legislative efforts by senator Robert Wagner. When seen in this light, the federal government did play an important role in developing American collective bargaining system.

Nevertheless, rather than proclaiming this as watershed in labour reforms these should be seen as a extension of a trend after a 12 year hiatus. The US Commission on Industrial Relations had already suggested a similar bill before WWI, but it was rapidly crushed right after the war by big business as represented by Judge Gary. While inroads were made in wage determination, implications for the political economy as a whole were less than revolutionary. Production, pricing and resource allocation decisions were out of reach. Hence, unionisation did not bring about the redistribution and restructuring of the big business. Nor did CIO unions want to, for most part the unions were contented to be converted into a conservative element once they were given the status and recognition. Small wonder that leftist historians such as Howard Zinn saw this development as sophisticated ways of controlling direct labour action.

Interestingly, as typical of most New Deal's "achievements", labour relations reform was largely unintended results of policies designed to advanced other ends. Initially, presidential support were not readily given as Roosevelt regarded Social Security Act, not section 7a of NIRA, as the cornerstone of the New Deal. Wagner Act itself was pushed around the legislative chambers for a year without winning Roosevelt's interest. Roosevelt only began to pay attention to it when labour coalitions looked attractive in terms of electoral potential. This came about in the wake of Huey Long's popularity and the unwarranted hostility from the big business such as Dupont Chemical and General Motors. His vexation towards the big business sprang out of what he perceived as ingratitude of the group for whom the New Deal had done so much, rather than any anti business beliefs.

For Roosevelt, the first New Deal was supposed to be for recovery. NIRA was the tool intended for a government-protected business commonwealth. It was therefore unsurprising that NIRA should be seen as for the big business rather than the common labourer. The main purpose was for a better regulated atmosphere for open and fair competition. The bureau responsible for the enforcement, National Recovery Administration, was based on the archaic War Industrial Board model and it aimed solely for maximum hours and minimum wages. The irony was that at the same breath, it also promised the right for workers to join unions. It raised hopes for unions, but in practice the NRA was constantly on the side of businesses against unions. It also frightened the big business because section 7a was a radical threat. Thus, NRA managed to antagonise both the businesses and the workers and failed to achieve economic recovery. Brookings economists even concluded that the most sustained period of growth under the New Deal happened in the two years after NRA was scrapped.

Another perspective useful in investigating the big business slant of NRA and its failure was America's traditionally weak bureaucracy. The "state of courts and parties" was sufficient for a decentralised capitalist society in the Progressive era. Administration expansion came in piecemeal and Congress proved a formidable obstacle. Beginning in the 1900s, this state of affairs came apart, when the parties weakened and were unable to enforce party discipline to provide co-ordination through patronage. As administration domains stood apart from parties' patronage, conflict for power between the president and the congress resulted. As a result, even WWI was not sufficient for the formation of a true centrally coordinated, executive-dominated national bureaucratic state. The Republicans maintained this system through the 1920s and the government bureaucratic structures were badly off dealing with the Depression when it hit America.

Consequently, the NIRA had to be started from nowhere and the only way to stuff the administration and write up industrial codes was by recruiting business leaders. The same people from their respective industries, strongly influenced by personal interests, were made to negotiate codes with their own industries and enforced these for their industries. Only the interests represented by the code writers were satisfied. Of course, these were short term benefits as the codes became increasingly difficult to enforce as underrepresented interests opposed it. This was the main reason why a small poultry processing company's suit was able to overturn the NIRA codes in 1935. Obviously, its interests were overridden! This was exactly the same reason why the AAA was also declared unconstitutional. Novel reforms were difficult to sanction, given the structural weaknesses. Given these constraints, it was to FDR's credit that he was able to initiate and sustain reforms at all.

Welfare

Closely tied in with the labour relations reform was a series of social reforms that climaxed with the Social Security Act(1935). It was ground breaking as it was the first national system of old-age system pensions and initiated a federal-state program of unemployment insurance. If such measures did not benefit more than one third of the nation, it was at least a beginning. The herald of the welfare state signalled a break from the Jeffersonian tradition of guaranteeing conditions of happiness. Instead, Roosevelt believed in establishing the conditions as well as achieving the greater happiness for the greater number. This in turn meant that welfare was a responsibility of the government.

However, as a governor of New York, Roosevelt earlier decried that "dangers lies in taking the government into partnership." And he advocated," …the complete separation of business and government." This, of course, made a complete nonsense of the assertions in the previous paragraph. Such verbiage and later policies turnabout flagged much of the New Deal reforms' nature. It must be borne in mind that reform elements and humane measures of immediate relief were subsidiary to the major aim of the first New Deal. The core agencies of the first New Deal dealt mainly with economic recovery through scarcity.

Beginning with the Civilian Conservation Crops, the first and longest lived New Deal unemployment relief agency, this was quickly followed by the Federal Emergency Relief Act (1933) with the Federal Emergency Relief Administration giving grants to the states up to $500 million. The NIRA established the Public Works Administration with a fund of $3.3 billion to hire unemployed to build roads, sewage, public buildings, ships and other public projects. A later Emergency Relief Appropriation Act (1935) authorised Works Progress Administration another $5 billion. Over the next eight years the WPA received a total of $11.4 billion in appropriations and gave work and wages to 8.5 million people.

In reality, the spirit of relief was encumbered by a host of obstacles. The rise and ignominious death of the Civilian Works Authority could illustrate this. With its formation in November 1933, it ambitiously aimed at taking 4 million persons off relief rolls and convert them into "self -sustaining employees" on small public works projects. Although most of the jobs were in the construction, there were also white-collar jobs such as teachers, engineers and architects. The whole package cost $1 billion. Its price tag spelled its doom as within weeks after CWA was created, Roosevelt announced its termination. Despite a general protest in the Congress and pleas from the left, Roosevelt was firm. Relief work was never considered by the New dealers as a permanent fixture in America. While Roosevelt was concerned that such program "might become a habit with the country", Hopkins treated it only as an extraordinary measure for a crisis. The administration's preconceived conservative idea of the America Way was a major obstacle.

Opposition from the budget conscious, conservative coalition too was becoming louder as each relief package passed through the Congress. Businessmen resisted the government competition for surplus labour and workers feared that work relief would undermine the private industry's jobs and wages. This expression of conservatism was evident in the Fortune survey in 1937 which erroneously concluded that the depression was over and alleged that "the despised WPA" had done its job rather expensively. Roosevelt read the economy wrongly and enacted a drastic curtailment of relief expenditures and the termination of the PWA. Just when the flickering flame of the economy was picking up and needed the extra boost from governmental expenditure, it was doused with a pail of water. Thus, the 'great spender' was in spirit a truthful descendent of the frugal Dutch Calvinist forebears. Ultimately, this reflected the effect of political pressure for a balanced budget as well as the cautious conservatism of the New Dealers. Therefore, the longevity of any reform policies lay in their abilities in performing a conservative function in a crisis situation.

Even if Keynes managed to convinced Roosevelt fully about the theoretical benefits of deficit spending, the PWA's bureaucratic structure might not be able to weather such influx of administrative duties. Herbert Stein found that, "Federal construction expenditures were only $210 million in 1930 - a small base on which to erect a program of several billion dollars…even combined federal, state and local construction expenditures in 1930 were less than $3 billion." So much for the historian's dream of a quick Keynesian fix for the New Deal. Even then, ERA's billions only had a temporary stimulating effect as it was too small and short-lived to pull the economy out of the depression.

Thus by 1938 unemployment shot up to 10.4 million, and innovative policies such as CWA, which made use of the unemployed's talents, was an effective dead letter and work relief remained more relief than work, more charity than employment. By contrast, the relative smooth passage of The Social Security Act (1935) stood in sharp relief. Roosevelt shrewdly recognised the enormous political leverage of this legislation. Claiming that it benefited the elderly and the unemployed, Roosevelt threw in his lot. Not forgetting the looming elections, Roosevelt sought to "steal (Huey) Long's thunder." And steal that thunder he did, by using his personal appeal and standing on issues that cut across parties lines, Roosevelt picked up 523 electorate votes and 61% of the popular vote. Schlesinger concluded that Roosevelt "stay in power only by attracting to itself non-Democratic groups."

The Social Security Act was in essence built on the efforts of states during the Progressive era. Its employee tax take up a significant portion of the already low payrolls. It offered no medical insurance and was largely similar to a compulsory insurance system. On one hand the state initiated old age pension scheme, on the other hand compelled the workers to pay for themselves, in the process denying financial responsibility neatly. Similarly, unemployment insurance provision delegated most responsibility to the states. Although it marked a movement towards the welfare state, this crowning jewel of welfare was more hailed as a landmark than for its substance.

Agriculture

To Roosevelt, his cabinet and the Congress, there was no greater heresy than deficit spending. When compared to the budgets after WWII, New Deal's spending never approach the orders of magnitude necessary for a test of Keynesian theory. However, to solve the problem of the farmers, Roosevelt talked often about the restored purchasing power. He really meant bolstering agriculture prices and various manipulation of the dollar to spur higher prices. Hence, the Agriculture Adjustment Administration (1933) sought to accomplish Roosevelt's vague aims by price controls, production controls, soil conservation and an up-keep of an ever-normal granary. To a certain degree, it broke away from the past. AAA started the process of granting large-scale subsidies to growers, and it refinanced 1/5 of all farm mortgages within 18 months the Farm Credit Administration (1933) came into effect.

Again Roosevelt's perpetual policies inconsistencies flushed out here as well. As a presidential candidate, he criticised Hoover's farm policies as, "the cruel joke…to allow 20% of their wheat lands to lie idle…and shoot every tenth dairy cow." He optimistically promised that he would instead act on reforestation and aid to the farmers by reducing tariffs through bilateral negotiations. That did not turn out to be. The product which consisted of price and production controls had its origins in the earlier McNary-Haugen plan in the 1920s. The New Deal emphasised on the idea that the farmer's decision was similar to that of a businessmen. Since the typical businessmen would benefit from the corporate form of organisation, the federal government could devise plans for the farmers to achieve profit. In reality, the first AAA was a 'Beggar Peter to pay Paul' kind of policy. It was not benefiting the poorest of farmers; in fact by encouraging farmers to plant less, it forced tenants and sharecroppers off the land.

One could sardonically point out that it seemed rather unfair that the AAA should be accused of not doing enough for the dispossessed when really it was not meant to do so. This point was made sufficiently clear by Chester Davis' opposition (head of AAA), when AAA's legal division ruled that the landlords should keep the same tenants. This independent ruling, mostly the work of reformers in AAA such as Jerome Frank, was helping the Southern Tenant Farmers' Union in their December 1934 court case against the big landowners. Davis, with Henry A. Wallace's blessings, purged Frank and his minions. Wallace now ruled that the cotton contract did not bind landowners to keep the same tenants. For one, Davis firmly believed that it was his job to bring about economy recovery through price control. Whether to reform the southern social system or to help the tenants was out of his jurisdiction. More importantly, Wallace was not about to sacrifice his decade worth of effort in his feasible price rising program and his close ties with commercial farmers for some hare brain scheme by Frank, an easterner.

Singling out the follies of AAA's administrators as the cause for it limited success is convenient. Especially in the above case study, Wallace's act further reinforced the dominant position of the landowners in the AAA. Thereafter, they would receive most of the benefits. But this would ignore the strong prevailing attitudes in the rural areas and the Department of Agriculture. Many believed that if the rural poor received too much assistance, they would prove too difficult to deal with. Worse if they became owners, they would be potential competitors. The Department of Agriculture also held the view that there were too many farmers and the dispossessed farmers should seek employment in the cities. Politically speaking, the rural areas occupied exerted a disproportionate influence in the congress and Senate and sat in strategic communities. Lastly, the county agent usually selected those farmers who served on the local communities. These seldom included the rural poor. Historians of the rural poor, Cantor and Grubbs, concluded that, " The New Deal definitely preserved more than it changed."

The issue of relief for tenants could not be avoided for long and the formation of Resettlement Administration(1935) under Rexford G. Tugwell illustrated that. Hencefore, Roosevelt's agriculture economic policies might seem to be in contradiction. While, AAA represented co-ordinated planning and limited production, RA represented increased production and reforming the system. But it really showed the undercurrents of Roosevelt's politics of broad consensus. Roosevelt wanted a near classless conglomerate of disparate people supporting him. Tugwell, however, was an uncompromising person and soon with little help antagonised every vested interest. Tugwell strongly believed that rural poverty should be attacked from its causes. Pure relief was insufficient. Government should take action and do more than just increase profits.

Unsurprisingly, such a program of conscience, came under withering attack from all sides. First, it was forced to tackled insurmountable problems with a small fund. Next, its extended loans to drought stricken farmers (1934) and subsidiary medical services were frowned upon. Critics voiced that these needy families had done nothing to deserve assistance. RA had little support in Congress and the embittered Tugwell resigned after the 1936 elections. RA became Farm Security Administration and its orientation shifted to rural rehabilitation instead of resettlement and housing. Although FSA soon achieved more than RA, it managed to survive as it worked quietly and had less novel and spectacular reforms.

Such political consensus also meant that deficit spending was done half heartedly and aimed primarily at the commercial wealthier and more substantial members of the middle class. Keynes's theory assumed that every dollar the government spent would be circulated thus satisfying the multiplier effect of his theory. However, it was this middle class that was least inclined to spend. More damaging, even if the big farmers really did share their wealth with their tenants, one doubts it would make much difference. In 1938, 46% of the 5 250 000 farmers receiving payments under AAA received less than $40 a year, 33% received less than $100 and only less than 2% received more than $1,000 to $10,000! With or without coercion, there were precious little incentives in the program for a small farmer to remain on the land.



Frankin D. Roosevelt

So far this paper has examined the various conflicts that had existed in the three areas that The New Deal was concerned with. It has been shown that reforms could not reach very far because it was meant to a tinkering with the system not wholesale overhauling of American capitalism. More importantly, the reformers' conservative attitudes and the weakness of the governmental bureaucracy prevented thorough reforms. Indeed, some of the programs were contradictory. However, structural explanations could only provide an understanding of the forces at work, but could not explain the character of the policies and the direction they took. As hinted in various sections of the paper, the New Deal's "disparate programs were only unified by the personality of FDR." In other words, "The New Deal was an exceedingly personal enterprise."

Most historians unanimously agreed that Roosevelt gave Americans courage to hope again. Even Paul Conkin have to concede that this was "Roosevelt's only unalloyed success as president." This was important because in the 1932 elections, the two party platforms differed little. In fact, probably any Democrat would have defeated Hoover. In face of Hoover's seemingly inaction and paralysis, Roosevelt conveyed a sense of optimism and activism. First, he calmed the nation with his indispensable 'fireside chat'. Perhaps, there never was such a fortunate consonance of personal talent with technological availability. This New York aristocrat was able to speak to the American penchant for optimism. Next, prompt action was shown by the prompt passage of Roosevelt's Emergency Banking Act which by the middle of March helped to overcome the bank crisis. Never mind the fact that the Banking Act was conservative in nature and that the subsequent Economy Act was deflationary. Never mind that the panicky Congress "did not so much debate the bills it passed…as salute them as they went sailing by." The point was that Roosevelt had acted and had done so daringly.

Not only had the nation's back stiffen by his encouragement, the relationship between Washington and the people changed as well. Americans became more concern about politics in Washington and they felt that the government was a promoter of welfare. After Roosevelt's death, People would stop Eleanor Roosevelt to tell her that "He used to talk to me about my government." This was unsurprising given as Roosevelt at one stage remarked "I want to be a preaching President."

Rather than restricting himself to the old Democratic vehicle in the 1936 elections, Roosevelt appealed to the larger public that of the lower-income groups. He wanted to act in the public interest and he took the mandate given to him by the public in the 1936 elections seriously. This mandate was a traditional one that rejected the extremes of left and right. Most voters signalled the want of a non revolutionary change. If the voters had wanted revolutionary change they could have voted the revolutionary parties available at that time. However the realities in 1930s were for a man with limited ambitions. Roosevelt shared the nonrevolutionary desire of nearly all politically active Americans. He actively intervened in what he believed to be in the interest of the people. For example, his vetoes took up 30% of all presidential vetoes since 1792!

The lack of a clear line of thought as shown from the programs was the result of Roosevelt's astute political skills. The only unity to be found in his programs was in political strategy, not economics, much less socialist ideology. Thus, it was unsurprising that Roosevelt's leftist critics had been most damning in this respect. Bernstein criticised the New Deal as "out of ideas." It was no secret that Roosevelt was an intellectual lightweight. A clear ideological stand or economic philosophy would have enlightened the intellectuals and could have made the historians' job perhaps easier, but it would have ensured the alienation of devotees and a Democratic defeat in 1938 or 1940. Also Roosevelt's inconsistency appealed to a broad range of otherwise mutually hostile groups. Tugwell observed correctly that Roosevelt could not be induced to think and act outside a political context. Perhaps derogatory comments that Roosevelt was a "chameleon on plaid" was missing a crucial point. In the business of politics, Roosevelt could ill afford to be another Lillian Ward.

Certain Neo-Marxists New Deal historians, such as Ronald Radosh, had emphasised that the capitalist class exercised conscious control over the government. So much so that concessions to labour were clever strategies to take away the fire of impending rebellions. Such a view failed to account for the failure of NIRA and the initiatives of Wanger. Most importantly, Roosevelt proved to be uncontrollable by anyone nor any group. The people recognised that Roosevelt was no Hardings but an executive that sought to channel power back to White House. Executive Order 8248 was a direct result of a firm executive. Schlesinger also pointed out that another Roosevelt's favourite tactic, which was to "keep the grants of authority incomplete, jurisdictions uncertain, charters overlapping…to ensure…that the power to make decisions would remain with the President." Hence, this accounts for the incoherence of various policies and continuous friction between his top lieutenants, such as Hopkins and Ickes, Hull and Welles. Yet this should not obscured the fact that Roosevelt's New Deal was able to arouse America to be again that "City on the Hill" It should not be just celebrated as a piece of clever politicking.

Conclusion

In the final analysis, the New Deal was at best a halfway revolution. As the New Deal so tightly tied together with the personality of Roosevelt who was committed to capitalism, there could be no full revolution. This was in full accordance with the conservative electorate. American values such as self-help, individual liberty, localism and business orientated individualism persisted among the people despite the hardship suffered in the Depression. Being a shrewd politician, Roosevelt could not have missed that.

Moreover, given the structural limitations imposed by the political system such as the party system, this often limited the extent of the already conservative state interventions. Despite these limitations, Roosevelt was able to steer deftly among various disaffected groups and came up with a series of political settlements. This was the main reason for the "improvisation" nature of the New Deal's reforms. Hence, the Depression era might have revolutionary potential, but a strongly conservative President, government and society cancelled out any possible revolutionary response.:-)

Answer 2

The New Deal was more or less socialist. Similar plans, such as in Germany, worked fine because the people were used to a powerful government taking control. This, however, did not happen in the US because most of the people and government hated socialism and free hand-outs and fought the idea. This meant that most of the New Deal had to be guised in some way or another, hindering the true potency. The New Deal could have fixed the problem much more effectivly if people were more accepting. This never mattered, though, because WWII came along and let the "American Spirit" fix itself. The ideas of the New Deal after WWII, however, have just become a case of politics (this includes Social Security, welfare, etc) and a way for the democrats to win votes. The economy has been doing very well since WWII, in comparison to everyone else, and socialist ways just don't work when people aren't at the end of their rope, even though a good portion of America has switched their mentality and are now very dependent on others.

Answer 3

It was marginally effective, mostly a bandaid to stop the total meltdown of the American economy.

The lazy historian loves to blame the entire Great Depression on Stock Market Crash. While that certainly contributed to the problem, what nobody talks about was that terrible government policy made a difficult situation worse, the equivalent of pouring a cannister of gasoline on a small brush fire.

For starters, the Federal Reserve tightened credit, rather than loosened it. In the most recent stock market crash in 2000 and 2001, the Federal Reserve did exactly the opposite, which probably averted a far more severe economic downturn.

Then there was the Hawley Smoot Tariff Act which effectively destroyed foreign trade.

Finally, the New Deal program was paid for by jacking up the tax rate to punitive levels. Little did anybody realize the effect that high taxation rates would ultimately have on capital investment and consumer spending. In fact, this Keynsian approach to stimulating the economy was continually prescribed for the fifty years after FDR, reaching its climax in LBJ's Great Society program. We now know that the New Deal had the opposite effect of what was intended. Unemployment remained extremely high until World War II. Yet we continue to portray FDR as the savior of the American economy.

Answer 4

The New Deal was a program meant to help with or overcome the Great Depression. It ushered in the era of the welfare state and government work-fare. It was also politically motivated to show the people that the government was doing something to 'fix' the problems. However, the results were often mixed and questionable at best. We will never know whether or how long these programs would have taken to restore the economy, as WW II intervened.

Answer 5

The New Deal was a system of the government raising taxes to provide public works at a modest level. It, as was noted, provided largely a bandaid for the problem. It did not fix the economy, it simply alleviated some of the worst problems.

It took the massive taxation, governmnet borrowing, and government expenditures of World War II, which were many times greater than the New Deal to fix the economy.

It is ironic that conservatives decry the New Deal for ineffective socialism and point out that WWII fixed the economy without realizing that WWII was effectively socialism on a vastly grander scale.

Answer 6

No no no. The New Deal saved America. Now there'll be some who will tell you WWII brought the country out of the Great Depression, but the truth is President Roosevelt, by political cunning and the sheer strength of his personality pushed reforms through Congress and got much needed help to people who were living in desperate conditions. My own Father worked in the CCC camps. Many went to work for the Tennessee Valley Authority, many others found employment in public works projects. Roosevelt was definitely THE MAN of his times.

My Parents used to tell me stories of the deprivations they faced on a daily basis. When my Dad went to the CCC camps he got paid about $50.00 a month. He kept $5.00 for his personal needs and sent the rest to my Grandparents. He then went right from the CCC to the army to fight Nazis. But he still only kept $5.00 for himself and sent the rest to his folks. That doesn't seem like a lot of money to us today, but it made the difference between starvation and survival for my Dad's parents and siblings.

So yes, the New Deal did directly affect the entire country for the better. Did FDR use "political manipulation" as you put it to get what he needed passed? You bet, and he was a master at it! Thank God!

Answer 7

Can't separate the two, because you can't separate economics and government. Your question is akin to asking, "Which came first, government or economics?"

Most historians say that the Great Depression ended with WW2. Certainly the US was involved with lots of military production in the years leading up to Pearl Harbor, both for US consumption as well as Lend-Lease.

If you want to impress the teacher / prof, throw in the fact that Hitler came to power the same time as FDR, and his solutions to cure Germany's woes (much worse than the USA's in 1932) certainly was tied to politics, and did allow him to literally get away with murder (in millions of instances).

Answer 8

1

Answer 9

That's a good question, I was wondering the same thing myself

Answer 10

Both.