Hist 1308 and 104 Week 9_04
The Great Depression and the New Deal
Weaknesses
of the 20s Economy
The economic model was increased efficiency, increased production, increased consumption, and increased profit, but speculation took money out of investment and the distribution of wealth was out of balance.
Increased Production
and Profit
Output 1922-1928
Industrial Index +70%
Output per man-hour +75%
Corporate profits +62%
Dividends +65%
Real Wages +22%
Work Week -4%
Imbalanced Distribution:
Illusion of “New” Mass Market: In 1929, 80% of all families (21 million
households) had no savings. The top one tenth ( .1%)
of one percent held 34% of all savings.
The 2.3% of Americans earning over $10,000 controlled 2/3 of
Source: R. McElvaine, The Great Depression (New York, 1984), 38-9.
“The capitalist genius for production was on a collision course with the capitalist limits on consumption.” One net effect is a contradiction to the economic model of balancing production and consumption.
Prosperity bypassed specific groups of Americans entirely. A 1928 report on the condition of Native Americans found that half owned less than $500 and that 71 percent lived on less than $200 a year. Mexican Americans, too, had failed to share in the prosperity. During each year of the 1920s, 25,000 Mexicans migrated to the United States. Most lived in conditions of extreme poverty. In Los Angeles, the infant mortality rate was five times that for Anglos and most homes lacked toilets. A survey found that a substantial minority of Mexican Americans had virtually no meat, fresh vegetables in their diet; 40 percent said that they could not afford to give their children milk.
The farm sector had been mired in depression since 1921. Farm prices had been depressed ever since the end of World War I, when European agriculture revived and grain from Argentina and Australia entered the world market. Strapped with long-term debts, high taxes and a sharp drop in crop prices, farmers lost ground throughout the 1920s. In 1910, a farmer's income was 40 percent of a city worker's. By 1930, it had sagged to just 30 percent. A bushel of wheat that sold for $2.94 in 1920 dropped to $1 in 1929 and 30 cents in 1932.
The Crash of the American Economy
The Stock market indexes
peaked in September 1929, and they fell precipitously on
A few
of the indictments of the Hoover administration: Hoovervilles—cities of tens of thousands living in cardboard
shacks; the Smoot-Hawley tariff didn’t protect American trade, it strangled
it, the Revenue Act of 1932 attempted to balance the budget on the backs of
the unemployed; Hoover adamantly resisted direct federal aid, insisting that
aid must depend on volunteerism and local services… Hoover’s reputation has
been tarred by his Secretary of the Treasury, Andrew Mellon who remarked,
“a panic was not altogether a bad thing…It will purge the rottenness out of
the system…People will work harder, live more moral lives.” But
The Dust Bowl, begun with the onset of a cycle of drought
back in 1930, (Dust Storm)
displaced tens of thousands who wandered the rails, and packed up their families
in old cars to head for the coast. But these Dustbowlers,
like most Americans, weren’t out to foment revolution, they were looking for
work, looking just to make a decent wage, not to turn the world upside down.
Storm slide2 slide3
“Some 150,000 to
200,000 acres of our cultivated land
and a large portion of our grass land is literally blowing away for the reason that for the past
two years no vegetation has grown. Fields are bare and pastures are without
grass to hold the soil. Our roads are blocked. Trucks from consolidated schools
have been unable to take the children to their schools.” —F.
E. Herring to Elmer Thomas, on conditions in
1932-40
They don’t call it “depression” for nothing—many oral testimonies,
social workers, and coroners records testify to the frequency of suicides. The
point here is that belief in the promise of opportunity in
By 1933, conditions had deteriorated dramatically: from 1929
to 1933, the GNP fell 29%, prices fell 23%, construction was down 78%, and
investment fell an astounding 98%. The
GNP did not recover to 1929 levels until 1937, and it turned down again in
1938-39. Fifteen million Americans lost jobs.
U.S. Steel’s employment roles went from 229,000 in 1929 to zero in the
spring of 1933. In
The Human Toll and
Frustration
Many took their layoff as a personal failure. Chicago’s Studs Terkel remembered that “millions experienced a private kind of shame when the pink slip came. No matter that others suffered the same fate, the inner voice whispered, ‘I’m a failure.’” Another man remembered, “There’s something about the anniversary of your layoff that makes you feel more hopeless.” People were on the street selling apples and eating in souplines.
A man named Ed Paulsen spoke of 1931 SF, when a thousand men would line up in the morning at the Sprekels Sugar Refinery for work, and they would call for four; he says, “A thousand men would fight like a pack of Alaskan dogs…but only four of us would get through…So you’d drift up to Skid Row. There’s be thousands of guys there…
More and more men were after fewer and fewer jobs. So San Francisco just ground to a halt. Nothing was moving.” But people were moving as tens of thousands
took to the rails in search of the vanishing promise of America. They were looking for work, not revolution…
The frustration of not finding work sometimes expressed itself in angry
action: March 7, 1932, some 3000 Detroit
jobless marched to the River Rouge Ford plant, but when the Dearborn police
attempted to stop their march, snowballs and rocks were answered with tear gas, fire hoses, and
machine guns—the toll was five dead, at least fifty injured.
The Bonus Army: Also in 1932, The Bonus Expeditionary Force
marched on
From all over the country veterans hopped the trains…many with their women and children…for many there was no longer any home at which to leave them.
At Anacostia Flats, they were 20,000 strong; they camped in military order during June and July with their families, there was even a baby born, while vets gathered and Congress debated and finally refused to pass the Bonus Bill. But still many stayed on despite pressure from the police, many really had nowhere to go…
On July 28, Secretary of War, Patrick Hurley ordered Army Chief of Staff Douglas MacArthur to clear out the veterans. Assisted by young Major Dwight D. Eisenhower and another young officer named George Patton, cavalry troops with drawn sabres, tanks, and infantry with fixed bayonets and tear gas dispersed the veterans and burned the ramshackle camp. Bernard Myers was the “bonus baby” born a month earlier: he died in a Washington hospital from tear gas inhalation. Douglas MacArthur was reputed to have said, “I have released in my day more than one community held in the grip of a foreign enemy.” So American veterans were for the moment considered a ‘foreign enemy.’
Federal troops who had once defended the railroads against
angry workers were in 1932 employed against
New Deal historian Robert McElvaine
characterizes the mood of 1932 as “rebellious” –across America tensions were
evident. In NY delivery trucks were
hijacked; in Detroit shop windows broken out; in Arkansas hungry residents
forced the Red Cross to distribute food at gun point.
Dependent on local relief efforts, in 1932 only ¼ of
Those hurt the most were more stunned than angry. Many sank into despair and shame after they could not find jobs. The suicide rates increased from 14 to 17 per 100,000.
Wisconsin
relief. Help came more often at people’s back doors.
Kitty McCulloch remembers beggars at her back door; she says “I wouldn’t
give them money because I didn’t have it.
But I did take them in and put them in my kitchen and give them something
to eat.” This happened all across
And so, in 1932, the question that troubled Americans was
simple: “Why is mankind asked to go hungry and cold and poverty stricken in the
midst of plenty?” And
During the Civil War how references to America United States United States America America
The NEW DEAL
Roosevelt won the 1932
election by a landslide,
and he immediately assembled a group of young advisers known as “the brain
trust.”(Ben Cohen and Tommy Corcoran), They
debated how to reverse the contraction.
The main economic theories that were discussed.
1. Supply-side: prop up business and jobs and
spending will recover---we know it as the trickle-down theory…
2. Demand-side: public spending to stimulate buying
power, which will increase demand, and people will be called back to work,
prices will rise…
3. Business-Government cooperation—voluntary
industry regulation much like Hoover’s model.
4. Conservatives—hold the line on deficits to
inspire recovery, i.e. the market will right itself—and be stronger in the long
run, But as Harry Hopkins sneered, “we don’t eat in the long run”
5. State planning—the apparent successes of the
Soviet model presented an enticing socialist alternative to the disarray of
American laissez faire capitalism.
FDR ascribed to no one ideology. he declared
himself "A Christian and a Democrat." When it came to government
initiative, he said, "Take a method and try it," he said, "if
it fails admit it frankly and try another. But above all try something."
ACTION!
In confronting the depression, the Roosevelt administration enacted a wide range of economic
remedies which fall into three basic categories: relief, recovery, and reform.
Examples of emergency relief measures include the Emergency Banking Act, Federal
Emergency Relief Administration (FERA), the Civilian Conservation Corps (CCC)
(put two million people to work), the Farm Credit Act, the Civil Works Administration
(CWA), and the Agricultural Adjustment Administration’s (AAA) emergency crop
reductions in 1933.
Key measures aimed at promoting economic recovery were the National Industrial Recovery Act and its agency, the National Recovery Administration (NRA) the blue eagle. The idea behind the NRA was simple: representatives of business, labor, and government would establish codes of fair practices which would set prices, production levels, minimum wages, and maximum hours within each industry. The NRA also supported workers' right to join labor unions. By ending ruinous competition, overproduction, labor conflicts, and deflating prices, the NRA sought to stabilize the economy. Squabbling between competing interests undermined the effectiveness; critics called the NRA the "national run-around."
Also to spur recovery, the Public Works Administration
(PWA), the Reconstruction Finance Corporation (RFC), the Home Owners Loan
Corporation (HOLC) saved tens of thousands of homes and a fair number of banks, long term programs of the AAA to raise
prices by paying farmers to reduce crop and livestock output, and the Works
Progress Administration (WPA), which employed
as many as one third of the unemployed. One of the first policy initiatives
was to devalue the dollar.
Thirdly, measures with a substantive reform component include the Social Security Act (SSA),
the Wagner Act and its National Labor Relations Board (NLRB), the Tennessee
Valley Authority (TVA) built dams and electric plants, the Securities and
Exchange Commission (SEC), the Rural Electrification Administration (REA),
and the Banking Act 1935.
Labor Responds
Despite the flurry of activity, the results of the First 100
Days were only partial, or stop gap, and people continued to struggle for
answers to their poverty and unemployment..
In 1933, union membership was at a low ebb, under 3 million, but by 1940 membership soared to over 10 million. How did it happen?
The key point is that WORKERS had no benefits when private corporate welfare collapsed, they BEGAN TO ORGANIZE THEMSELVES. Remember that the AFL and other craft based organizations had not offered membership or representation for masses of industrial workers. John L. Lewis and Sidney Hillman, with the help of C.P. organizers, the John Reed Clubs, began to talk of full inclusion of all skills, gender, race… Responding to workers in industries that had never had any representation, the CIO offered a vision of inclusive industrial unionism that harkened back to the visions of Big Bill Haywood and Terence Powderly—and it took off…
An African American worker at a packing house wrote about the impact of the CIO.
Alternate Visions
from below (and left)
Father Coughlin, attracted
millions of listeners to his radio show in which he blasted an international
conspiracy of bankers and soon became a venomously anti-semitic
right winger.
The Townsend Plan (Dr. Francis Townsend) proposed guaranteed
pensions.
End Poverty In California (EPIC)—Upton
Sinclair’s socialist platform just missed in 1934
gubernatorial campaign in CA
The Socialist led Southern Tenant Farmers Union spoke for
those left out of AAA programs, with 50% black membership.
In CA’s
African Americans conducted a National Negro Congress that
included an address from Eleanor Roosevelt; The NAACP came of age as a political
organizer; A.
Philip Randolph guided the Brotherhood of Sleeping Car Porters into national
prominence; African Americans made an impact beyond their numbers…
Milo Reno and the Farmers Holiday—dumping produce in protest
Strikes: SF’s 1934 General Strike to Milwaukee’s streetcar
workers, to Philadelphia cabbies, to Salinas farm workers to N.E.’s Textiles; A Big One right here in Minneapolis—in May
1934 a truck drivers strike that had paralyzed the city erupted in a pitched
battle in which 67 were shot by police—but the teamsters held on and won the
right to unionize….
Women
The women’s movement was not especially vocal during the
darkest years. Ironically because of
sexist stereotypes in hiring, women’s occupations were concentrated in clerical
and social work, which did not contract nearly as much as male-dominated industrial
jobs. However, many women fared badly,
as unemployed husbands prompted ever more women into the labor market.
Women found they got less than 10% of
CWA jobs, partly because they were mostly construction, even worse,
the CCC employed only 8,000 women out of 2.5 million jobs; even the oft-praised
WPA relegated women to
production in sewing rooms in lieu of any meaningful training.
Midstream
Conservative pressure: the
Supreme Court rules the NIRA unconstitutional
But even though 1/3 of the nation was mired in poverty, the
unemployed like “ghosts that walk the streets”, popular Support remained strong
for FDR: One North Carolina hill country
woman: “I know he means to do everything he can for us, but they make it hard
for him…”
The 2nd New Deal (1934-5): The
popularity of radical calls like Share the Wealth, EPIC, and the Townsend
plan prompted conservatives to give FDR more room to innovate, in order to
quell what many felt was a clear and present danger to American society. And just as clearly, FDR felt the ground rumbling
in
Wagner Act: NLRB—like a section 7a with teeth—it provided
oversight for union elections and no blackballing. This measure was intended to
boost workers leverage to acquire fair wages and that in turn would stimulate
purchasing power to boost the recovery.
Social Security is one of the most fundamental legacies. Note that this was not a pension,
it was intended to be a safety net to provide unemployment insurance and
retirement annuities, AFDC, Widow’s Benefits. --good concept, but limited—left
out some of the most vulnerable workers like domestics and farm
workers—predominantly women and minorities. The best of it was to provide something for
laborers. The worst of it was that in
economic terms it was a regressive tax (lowest income pay the same rate as the
highest paid, ergo a greater proportion)
The primary Keynesian program to stimulate the economy was
the Harry Hopkins’ administered WPA—a
small-town Iowan, once called “profoundly shrewd and faintly ominous”, Hopkins
took to dispensing funds like a tornado—in his first two hours on the job
he dispensed $5 million, and over the next months, according to Bill Leuchtenberg, “he spent money like a Medici prince.” Beneficiaries included everybody from artists
to actors, a big improvement for Blacks over the First New Deal programs—Sitkoff
calls it a “Godsend” It employed some 8
million in everything from construction to theaters, including many writers
like Richard Wright. You may know his
book Native Son—and artists like young William
De Kooning and muralist Diego Rivera.
REA—power to the people (plug it in…) rural electrification brought millions
of farm families into the consumer economy. Only one in eleven farms had electricity
by 1935. Between 1935 and 1942 the lights came on for 35 percent of America's
farm families.
But workers were organizing at full speed—on Christmas Eve
1936 workers began a sitdown
strike at
The Right: I don’t think its mere coincidence that
just as the CIO achieves significant successes that Martin Dies, D-Texas,
organized the House Un-American Activities Committee, who then targeted
investigations on unions, newspapers, and even Shirley Temple….
The Right tightened
the reins on economic experimentation. FDR conceded to Powerful political pressure to return to a
balanced budget, which immediately resulted in a startlingly precipitous downturn…
Nobody, not FDR, nor his Brain Trusters,
knew how much Government spending would be enough to turn the economy around,
and they worried how much spending was too much—the dilemma was simply that the
demand-side Keynsianism conception of priming the
pump with tax money contradicted traditional American beliefs that less
government was better government, that business and personal freedoms are
endangered by government interference…
Conclusions
SUCCESS or FAILURE?
The New Deal programs lessened the scope of the Depression
and alleviated a lot of suffering, but
Historical Perspectives:
FDR’s Historical Reputation
Schlesinger’s Liberal Hero,
New Left’s Villain—FDR didn’t do enough.
Anathema to the right: FDR
subverted American freedom.
Maybe it is more useful not to judge or label, but to try to
understand the constraints and limits of the Conservativism
and Individualism of the American Tradition—and remember the American people
determined much of what
Pragmatic or Opportunist:
Asked whether he was a communist, socialist or capitalist in his
philosophy, FDR :
“Philosophy? I am a Christian and
a Democrat—that’s all.” The point is
that he was not an economist or political philosopher, he was a practicing
politician….always trying to find the center ground, and find a consensus even
if it was constructed out of contradictory ideological components, thus neither
an advocate for major structural changes, nor willing to wait passively for the
system to unravel…Roosevelt was a genuine American patrician—neither a
businessman or a working man, but in many ways an embodiment of the social
gospel of public service.
Who comes up? There
were streams of complaints that local administrators of New Deal programs
“persisted in discriminating against” African Americans. However, historian Harvard Sitkoff argues that because Black Americans had been denied
any of the prosperity of the 20s (remember the resurgence of the KKK), relief of any sort
“meant more to Blacks than whites. While
inequities persisted—we’ll see A. Phillip Randolph (SLIDE, H132) threaten
Roosevelt with a march on Washington to get support for fair employment practices at the beginning of)
–nonetheless, New Deal economic programs
were “explicit as never before” about the federal government’s recognition
of and responsibility for Afro-Americans. But segregation
including public facilities remained
an issue for the future.
Women in a break-even. There was more visibility of women
with power with the First Lady, Fances Perkins, and public figures like Amelia Earhart. Women were disadvantaged by wage differentials in
NIRA, excluded coverage under SSA and Fair Labor Standards. However,
t he NLRB opened up unions for women and offered invaluable protections.
The Rich mostly stay rich, but for a change workers
strengthened their position—in WWII we find the most even income distribution
of the century and this was accomplished by the gains workers had fought for in
the 1930s
THE ENVIRONMENT even benefited a bit. The NEW Deal did engage in an amazing
program for soil conservation (SLIDE conservation workers, n109), planting 200
million trees to break the winds and hold the soil in a treebelt
from South Dakota all the way to the Panhandle.
How much change ?
First, the New Deal programs exhibit a surprising thread of
continuity with the progressive impulses for reform and the desires to bring
rational organization and scientific management to the nation’s economic
affairs.
Nonetheless, The New Deal fundamentally altered how we
understand the economy-—the old conception of an economy that was ruled by Adam
Smith’s Invisible Hand was shattered like Humpty Dumpty. As FDR said, “We must lay hold of the fact
that economic laws are not made by nature, they are made by human beings” and if they’re not
working well, they can be modified….The question then as now is how much, in
what ways….The New Deal began a new mode of thinking and questioning the
system, how it works, to whose advantage, at whose expense? Central to this new mode of thinking is the
shift in our understanding of our rights—what were once privileges became seen
as rights—the right to a fair wage, the right to work, the right to organize
for our own benefits, the right to be heard…
In that process the New Deal introduced mechanisms of
negotiation that some have labeled the “Broker State”—in which the government
mediated between many particular interest groups—this is the pluralism that
characterizes our modern liberalism—certainly the New Deal provided the
opportunity for many new voices to be heard in the halls of government:
including labor, African Americans, and women.
In conclusion, neither FDR nor the great mainstream of
And for that we can credit all Americans who lived through
the Depression years, those who pushed for change as well as those who kept
a balance with cautious restraint. They
all deserve our remembrance.