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Eric Rauchway

The Great Depression &

the New Deal A Very Short Introduction

1

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Library of Congress Cataloging-in-Publication Data Rauchway, Eric.

The Great Depression and the New Deal : a very short introduction / Eric Rauchway.

p. cm.— (Very short introductions ; 166) Includes bibliographical references and index.

ISBN 978–0–19–532634–5 (pbk.) 1. United States—History—1919–1933. 2. United States—History—1933–1945.

3. Depressions—1929—United States. 4. New Deal, 1933–1939. 5. United States—Economic conditions—1918–1945. 6. United States—Social conditions—1933–1945.

7. Roosevelt, Franklin D. (Franklin Delano), 1882–1945. 8. Depressions—1929—Europe.

9. Europe—Economic conditions—1918–1945. I. Title. E806.R38 2008 973.91—dc22 2007030523

1 3 5 7 9 8 6 4 2

Printed in the United States of America on acid-free paper

Contents

Acknowledgments viii

List of Illustrations ix

Introduction 1

1 The World in Debt 8

2 The Hoover Years 23

3 Americans in the Depression 38

4 Reflation and Relief 56

5 Managing Farm and Factory 72

6 Countervailing Power 87

7 The End of the Beginning 105

Conclusion 126

Further Reading 134

Table 1. Major federal acts of the Great Depression

and New Deal 137

Index 143

Acknowledgments

I owe most to scholars cited in the text and am additionally grateful

to Alan Brinkley, Greg Clark, Andrew Cohen, Meg Jacobs, Ari

Kelman, David Kennedy, Peter Lindert, Alan Olmstead, Kathy

Olmsted, Steve Sheffrin, Alan M. Taylor, Louis Warren,

undergraduates enrolled in History 174B at UC Davis in Spring

2007, and the conscientious referees and staff of the press for

valuable comments and conversations about the Great Depression

and New Deal.

List of Illustrations

1 Breadline in New

York City 41

Franklin D. Roosevelt

Library

2 Hooverville squatters’

shacks 45

Library of Congress,

LC-USF34-004976-E

3 GDP and Unemployment 55

Historical Statistics of the

United States, series Ba475

(unemployment) and Ca9

(GDP).

4 Franklin D. Roosevelt during

a ‘‘Fireside Chat’’ 58

Library of Congress,

LC-USZ62-118215

5 Civilian Conservation Corps

poultry farm 79

Franklin D. Roosevelt

Library

6 Civilian Conservation Corps

weeding a Tennessee Valley

Authority nursery 90

Library of Congress,

LC-USW3-004511-D

7 Social Security Act 98

Franklin D. Roosevelt

Library

8 ‘‘White Trade Only’’ 107

Library of Congress, LC-

USF33- 006392-M4

9 Sinclair Lewis’s It Can’t

Happen Here 121

Library of Congress,

LC-USZC2-881

10 WPA Federal Art Project

Mural 122

National Archives and

Records Administration

69-N-P-1304

This page intentionally left blank

Introduction

In 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

1

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.

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

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T h e G re a t D e p re ss io n a n d th e N e w

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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

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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 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.

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D e a l

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

5

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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 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,

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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.

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.

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Chapter 1

The World in Debt

However various the explanations for the Great Depression have

grown, they share an understanding that the world wracked by the

crisis of the late 1920s differed significantly from the world in

which most people had grown up. Inasmuch as the world had a

single, integrated economy, it had recently undergone profound

changes as a result of World War I. The war made it harder for

people, goods, and money to move around the globe, and it shifted

the direction in which they flowed, too. Putting the United States

at the center of this new system, the war also changed America,

rendering the once-peripheral New World nation’s peculiarities

central to the planet’s concerns. Nor do these events and their

potential for disaster appear only in retrospective clarity—some

observers saw them coming.

Looking forward from the Treaty of Versailles at 1919, the

economist John Maynard Keynes forecast what lay in wait for the

industrial world: ‘‘depression of the standard of life of the

European populations to a point which will mean actual starvation

for some (a point already reached in Russia and approximately

reached in Austria). Men . . . in their distress may overturn the

remnants of organisation, and submerge civilisation itself in their

attempts to satisfy desperately the overwhelming needs of the

individual.’’ 1 Depression, desperation, and the dismantling of

civilization would result, Keynes wrote, from ‘‘the economic

8

consequences of the peace,’’ and although Keynes, perhaps

mistakenly, attributed this impending disaster partly to the treaty’s

provisions, he also criticized its omissions. 2 World leaders at

Versailles might have restored and codified the global system

that prevailed from about 1870 to 1914, a system Keynes described

as an ‘‘economic Utopia.’’ But they missed this chance, producing

instead a world quite unlike Utopia. 3

Before 1914, people, goods, and capital crossed national borders

with relative impunity. In consequence, they had the greatest

possible scope to seek a place where their work would yield the

greatest possible profit. To a considerable extent, this movement

across borders meant the export of excess from industrial Europe.

Between the middle of the nineteenth century and World War I,

about fifty-five million people left Europe to find their fortune

in New World nations. Mostly industrial workers looking for

higher wages in a worldwide market for their labor, their departure

from Europe decreased the supply of workers there, raising wages

for the laborers they left behind. Their arrival in the land-rich

nations of the New World helped push development out into

the frontiers. This migration did not occur altogether without

hindrance. To describe the international markets of the nineteenth

century as truly global represents some exaggeration, in large

measure because New World nations preferred some parts of

the globe over others when forging a cross-border market in, for

example, labor. Notably, in the 1850s Australian states

began limiting Chinese immigration, and by the early twentieth

century the United States, Canada, and Australia all had

erected high hurdles to immigration from both China and Japan;

the United States in 1917 not only added a ‘‘barred zone’’ that

blocked almost all the rest of Asia but also adopted a literacy test

to reduce the number of incoming people. Nevertheless,

these restrictions let millions of immigrants, particularly from

southern and eastern Europe, move to better employment in the

New World.

9

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o rld

in D e b t

During the same period, the British empire generally backed the

free movement of goods across borders. The relatively untaxed

passage of things in trade—raw materials and finished products

alike—between the Old World and the New allowed each nation to

produce mainly what it was best suited to make. Although

countries of the era sometimes raised barriers to trade as they did

to migration—Latin American countries had especially high

tariffs—international trade moved with relative freedom,

especially compared to the 1920s, and Britain led in the promotion

of lower tariffs. 4

Observers noted that trade with Britain proved especially useful to

many developing countries. British banks backed the builders of

roads, canals, and railways as these countries stretched into their

hinterlands and prairies. Bringing the fields under tillage made the

New World more productive, and selling products back to their

lender, Britain, helped developing countries defray their debts.

Combined with the movement of goods and people, the movement

of capital created a virtuous circle, at least so far as Europe was

concerned. As a British economist wrote in 1909, ‘‘by the

investment of capital in other lands we have, first, provided the

borrowing countries with the credit which gave them the power to

purchase the goods needed for their development, and secondly,

enabled them to increase their own productions so largely that they

have been able to pay us the interest and profits upon our capital

and also to purchase greatly increased quantities of British goods.’’ 5

Keynes regarded this vanished system so highly because it had

allowed Europe for the first time to relieve the pressure that an

increase of population had appeared inexorably to put on the

supply of food. Keynes explained: ‘‘With the growth of the

European population there were more emigrants on the one hand

to till the soil of the new countries, and, on the other, more

workmen were available in Europe to prepare the industrial

products and capital goods which were to maintain the emigrant

populations in their new homes, and to build the railways and

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T h e G re a t D e p re ss io n a n d th e N e w

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ships which were to make accessible to Europe food and raw

products from distant sources.’’ 6 The war shut down this system.

People and goods could no longer move freely, and their formerly

productive power went instead toward destruction. Capital funded

the war’s western front instead of the New World frontier. But

worse, once the war ended, the peace did nothing to restore the lost

world. ‘‘The Treaty includes no provisions for the economic

rehabilitation of Europe . . . or to adjust the systems of the Old

World and the New,’’ Keynes complained. 7

Looking back from the 1930s, the British historian E. H. Carr

wrote, ‘‘In 1918 world leadership was offered, by almost unanimous

consent, to the United States . . . it was then declined.’’ 8 Most

notably, the United States declined to lead the world in

reconstructing the old, open economy. Indeed, it moved in the

opposite direction.

The United States had tried to limit immigration before the war,

but it turned to the task with greater energy and effectiveness in

the 1920s. Congress established quota limits on immigration with

the laws of 1921 and 1924. Other New World countries blocked

immigration in their own ways. Some joined the United States in

barring political radicals and classes of the criminal, poor, or

disabled. Brazilians tried to steer immigration to farms, rather

than cities. Canada’s 1919 immigration act allowed officials to bar

‘‘immigrants . . . deemed unsuitable owing to their peculiar

customs, habits, [and] modes of life.’’ 9 These restrictions made it

harder for Europeans to find opportunities overseas, as Keynes had

foreseen in 1919.

The movement in goods slowed owing to restrictive law as

well. The United States raised tariffs in 1921 and 1922, and

other countries began following suit. Alarmed diplomats

convened conferences whose delegates advocated lifting these

barriers, culminating with the League of Nations’ World Economic

Conference in 1927, which declared itself strongly against tariffs, to

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no effect. The Americans had a history of high tariffs stretching

through the nineteenth century, but as the New York Times noted

in 1926, circumstances had changed since then: ‘‘It needs no

political economist to see that our situation in the world of trade

has been radically altered by the events following 1914. A fiscal

policy which might have been defensible before that year has since

gone hopelessly awry. Our immense and increasing investments

abroad cannot indefinitely be paid for unless we are willing to take

what our foreign debtors can offer us.’’ 10

With the war the United States had switched positions, almost

overnight, from the world’s great debtor to the world’s great

creditor. New York replaced London as the central lender in the

world’s credit network. This move meant more than merely a shift

in position and priority. Postwar debts differed from prewar

borrowing. New World borrowers spent nineteenth-century

British loans on railroads and ranches, building the capacity to

repay their lenders. Belligerent borrowers spent wartime American

loans on shot and shell, destroying that capacity. Nations wounded

in war borrowed more money to repay their debts, sometimes

borrowing from America to pay other belligerents who in turn paid

America.

This new global system of the 1920s, less open and flexible than its

predecessor, relied on continued American lending to fund deficits

and debts around the war-impoverished world. And for a time,

American lending served this purpose. Then, in 1928, it all but

stopped, sending Germany, Poland, Brazil, Argentina, Australia,

and Canada into recession. 11 But Americans were not looking at

the limping world. They had their eyes on the racing economy at

home.

After the United States recovered from a postwar recession in 1921,

its economy grew at a healthy annual rate. American workers

produced more goods more efficiently, and their incomes

increased, if not quite so quickly as the profits born from their

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greater productivity. 12

Many Americans’ optimism grew, too: they

thought they had entered a new era of prosperity, when more

Americans could afford more luxury goods and live, at least

materially, better lives than ever before. So securely did they hold

this belief that they accepted newly available offers of credit in

order to buy what they could not afford from their own pockets. By

the end of the decade Americans were living lives well-furnished

with debt.

Before World War I, the average American household went a little

more into debt each year—maybe a $4 increase over the year

before, excluding mortgages. In the 1920s, the average increase

more than tripled to about $14 a year. 13 With that borrowed money

Americans bought the same goods they were increasingly making:

expensive, durable, luxury items that gave them more varied

amusements and higher expectations from life. The 1920s brought

regular radio programs, and Americans bought radio sets and

phonographs. They bought household appliances, like electric

refrigerators. Most visibly, they bought cars. 14

The production, purchase, and financing of automobiles drove the

perception and reality of American prosperity in the 1920s. The

output of America’s automobile factories more than doubled over

the decade, so that by 1929 the 4.4 million cars they produced were

the single most valuable chunk of U.S. manufacturing output. At

decade’s end about 447,000 people worked in the automotive

industry—only slightly fewer than worked in iron and steel, the

nation’s biggest manufacturing industry. The more cars Americans

made, the more they drove up demand for glass, rubber, steel, and

petroleum. Car-buyers drove the growth of roads, suburban

houses, shopping centers, and other roadside attractions. 15

In 1920 American motor vehicle bureaus recorded only one car

registered for every three households; by the end of the decade the

country had a car for almost every household. In 1929 there were

about 23 million cars for a nation of about 123 million people: at a

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cozy fit of six per car, the whole country could have gone on the

road at once. 16

Henry Ford’s motor company provided some of the technical and

business innovations that made these changes possible. By World

War I, Ford had settled on the Model T as its all-purpose consumer

model, developed the moving assembly line as a method of mass

production, and began touting the high wages its workers earned,

as a way of ensuring their loyalty and their ability to purchase the

company’s signature product, whose price fell and fell over the

years, from around $950 in 1909 to a low of $290 in 1926. 17

Were Ford’s the whole story of the automobile industry and, by

extension, American manufacturing in the 1920s, it would sound

something like this: higher wages, lower prices, and the mass

production of a standard item made what was once a luxury into a

commonly available commodity. But this is not the whole story.

Despite the Model T’s falling sticker price, major durable goods

generally cost more in relation to other products in the 1920s than

they had before the war. Americans did not buy these products in

such quantities because they were cheap: they bought despite the

expense. 18

Ford’s inexpensive, standard Model T made it possible for more,

different people to own cars. But at some point, everyone who

could afford a car would have one, and then who would buy?

General Motors (GM) decided to make sure that the same people

would keep buying different cars: it introduced planned

obsolescence by annually changing its models, and to allow for the

extravagance of regular new cars, GM began extending credit

through the General Motors Acceptance Corporation. 19

Often the ready credit of the 1920s came dear, at an annual interest

rate of around 30 percent on an installment plan for a new car. 20

Even though moralists—Henry Ford among them—fretted over

the ever-expanding definition of what Americans needed to buy,

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consumers themselves hearkened to the doctrine Advertising and

Selling promulgated in 1926: ‘‘every free-born American has a

right to name his own necessities.’’ 21 Through the decade the list of

these new necessities grew.

Yet credit could not stretch cash infinitely. Installment plans sent

bills with clockwork regularity. Americans’ income did not arrive

with equal reliability: cyclical unemployment always loomed,

and social insurance against it scarcely existed. So buyers had to

take considerable care before they plunged into long-running

debt. Any added uncertainty in consumers’ outlook might make

them wait, just a while, to see what might happen to affect

their paychecks. In a time of economic crisis, even a short

pause in purchasing could slow or even stop the nation’s assembly

lines.

As Americans eagerly heeded the advertisers’ blandishments, they

ran closer to the limits on their good fortune. The countries

borrowing from the United States found out beginning in 1928

what happened when American credit dried up, and soon after

Americans found out what happened when their own credit-fueled

spending slowed. Both looked for the source of their problems and

for possible solutions at the headwaters of debt in Wall Street.

If the world economy of the 1920s consisted of concentric circles,

the outside ring held peoples remote from the industrial center and

little touched by its booms and busts. The next ring inward

included the industrial nations tied by debts to the United States.

Next from them dwelt most of the Americans themselves, divided

further into finer rings: those still struggling to get by, then those

better off if perhaps in hock to fund their routine purchases, and

then the minority—maybe under 10 percent—of Americans who

owned stocks. 22

And inward at last from them lived the near-

aristocracy, the moneymen who made decisions that determined

how easily everyone else could get their credit and who increasingly

fidgeted as they watched the stock-tickers.

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The best-connected and most diligent public servants of their day

worked on Wall Street and around it in lower Manhattan. In the

1920s they included the once and future Supreme Court Justice

Charles Evans Hughes; the once and future Secretary of War

Henry Stimson; the future New York governor Herbert Lehman;

and the future president and sometime foe of all that Wall Street

stood for, Franklin Roosevelt. 23

They handled mergers, stock

offerings, and all the great business of the nation’s businesses.

They also, along with their less reputable neighbors, handled other

transactions. For example, with a sufficient sum of capital a group

of investors could establish a ‘‘pool’’ specifically for the purpose of

manipulating a stock. Members of the pool would buy and sell to

one another at times and in increments calculated to tell a

particular story to an outsider watching the ticker tape. The

numbers on the tape showing the bare facts of trading did not lie,

but the pattern of numbers might deceive an imaginative observer

eager to know what the insiders knew. The ebb and flow of sales

conducted among the members of a pool would intimate to an

obsessed investor that someone, somewhere, had inside

information that a company’s stock should rise. Investors would

flock to the pool stock, driving its price up. Then, when it seemed

they had driven it as far as it would go, the original members of

the pool would cash in, sending the price back down to its

former level. It happened all the time and was not illegal.

Nor was it even secret: the Wall Street Journal reported on the

doings of pool stocks, published information about who led which

pools, and trafficked regularly in the opinions of analysts as to

which stocks best attracted uninformed enthusiasm (‘‘anything

which has electricity or light or power in its title,’’ one analyst

reported). 24

Americans sometimes distinguished between this sort of

activity, which they called ‘‘speculation,’’ and ordinary purchase

of stock, which they called ‘‘investing.’’ Investors bought stock

based on the soundness of the underlying enterprise over the long

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term, choosing securities on the basis of whether they thought the

company would do its business competently in the months and

years to come. Speculators bought and sold stock based on their

intuitions as to everyone else’s impulses in the market that day.

And as speculative activity overshadowed investment, more

speculators came into the market, and more observers worried.

By 1928, Wall Street men knew, and the Wall Street Journal

affirmed, that they were working in ‘‘the kind of market that makes

for larger commissions than profits.’’ 25

Even so, increasing

numbers of Americans wanted to play this evidently rigged game.

People flocked to the big money, hoping to buy into the inner

circle. Even a loss could give them the thrill of having brushed up

against the big men.

Watching the increase in trading on the exchanges and in the

borrowing to trade on the exchanges, the Federal Reserve decided

to make it more expensive to borrow money. In June of 1928 the

Federal Reserve Bulletin noted ‘‘an unprecedented volume of

transactions on the exchange and a continued rise in security

prices’’ while ‘‘brokers’ loans reached a record figure . . . and

continued to increase.’’ So the Federal Reserve began ‘‘withdrawing

funds from the money market.’’ 26

Yet speculation flourished into the new year. Early in 1929, just

before Herbert Hoover’s inauguration as president, the Federal

Reserve warned publicly that it did not wish banks to use its credit

for ‘‘maintaining speculative security loans.’’ 27

Although

speculation continued at a high rate, U.S. overseas investment did

not: capital leaving America averaged around $800 million

annually from 1925 to 1928, rising to $1,250 million in 1928, but

fell to $628 million in 1929 and averaged about $360 million

annually from 1929 to 1932. 28

The Federal Reserve’s tighter

monetary policy helped slow American capital going to foreign

countries. Nations like Germany, which had depended on

American loans, began to struggle under this handicap.

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In later years, pronouncements reflecting incautious optimism, an

insistence that everyone should become rich, that everything was

for the best—comments so comforting to contemporaries and so

reckless in retrospect—became a staple of every story about the

Great Crash. And such remarks showed up all over in the weeks

before they altogether ceased. Newspapers regularly sought the

cheery views of professional soothers, who obligingly declared that

they saw smooth sailing ahead. But by the late 1920s, a growing

number of bankers and policymakers had the impression that the

world simply could not sustain the current state of its finances.

Both around the globe and within the United States too many

people had borrowed too much money for unproductive purposes.

The financier Bernard Baruch wrote, ‘‘Whereas it is wise to buy

things on the partial payment plan that will result in time in

increased economies and better living, at the same time it can be

overdone. I am afraid it has now been overdone.’’ 29

Too few reliable investments remained. And even though only a

few Americans actually bought and sold stocks, the market had

become a kind of entertainment, a set-piece of idle chat. In itself,

this prevalence of market talk warned those in the know that it was

time to get out before it was too late. The financier Joseph

P. Kennedy, who by summer of 1929 had sold out of his major

holdings and kept his money in cash, advised a friend that ‘‘Only a

fool holds out for the top dollar.’’ 30

Self-aware fools went into the

market assuming that still greater fools had yet to buy in. It took a

shrewd judge of national character to decide just when the United

States would run through its supply of fools.

Generally, those with means to leave Manhattan in summer

regarded as fools those who stayed. Yet in August of 1929,

traditionally a time to flee the city’s unreasonable heat, the

moneymen stayed in town to see if they could beat the big bull

market as it rose. Even through Labor Day, even through hot days

of high humidity, to the September 3 peak of market prices, they

stayed. Then a few days later the market dropped a bit. A couple of

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weeks later it dropped a bit more. 31

The heat broke too. Rumors

spread that the pool operators had decided to see if they could

work their wiles in reverse and drive prices down. In the next

weeks the market slid, rallied, and slid again.

Through the morning of October 24, in the streets of New York,

crowds walked quietly downtown to Wall Street where they gathered

silently and stood looking at the New York Stock Exchange, as if

suddenly its abstract activities could become manifest, giving

evidence of the disaster now plainly happening to them all. 32

That

was Black Thursday. The market rallied afterward but then fell

again. The oil tycoon John D. Rockefeller announced that ‘‘there is

nothing in the business situation towarrant thedestruction of values

that has taken place’’ and that he was busy buying. 33

Neither this

gesture nor others like it shored up stock prices. By mid-November,

more than a third of the stock market’s value had vanished. 34

This fall in value immediately afflicted only a few Americans. But

so closely had the others watched the market and regarded it as an

index of their fates that they suddenly stopped much of their

economic activity. As the economist Joseph Schumpeter later

wrote, ‘‘people felt that the ground under their feet was giving

way.’’ 35

Facing a dubious future, Americans made important

decisions not to buy. Particularly, they stopped buying the

expensive durable goods like cars that they had learned to buy on

credit. Each signature on an installment-plan contract represented

a consumer’s prediction about his or her ability to pay in the future.

Suddenly Americans no longer felt able to see far enough ahead to

make sound forecasts. Within a few months of the crash new car

registrations had fallen by almost a quarter of their September

number. 36

In 1930 spending on consumer durables fell by 20

percent. 37

Factories closed and banks failed. Unemployment more

than doubled its 1929 level.

In 1931 John Maynard Keynes visited the United States and in

a lecture attributed the increasingly severe Depression to

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‘‘extraordinary imbecility.’’ 38

On this point observers generally do

agree: someone had blundered and, given the structure of global

finance after World War I, that someone must have had an address

ending in ‘‘United States of America.’’ The principal candidate,

then and later, was Herbert Hoover, who in his memoirs defended

himself by agreeing with the earlier Keynes: ‘‘the primary cause

of the Great Depression’’ Hoover wrote, ‘‘was the war of 1914–

1918.’’ 39

But Hoover stood little chance of escaping blame. By 1930

Joseph Kennedy was already calling one of Hoover’s backers to say,

‘‘jot down the name of the next president. . . . It’s Franklin

D. Roosevelt.’’ 40

Notes

1. John Maynard Keynes, The Economic Consequences of the Peace

(London: 1919), 213.

2. On Keynes’s critique of reparations, see Niall Ferguson, The Pity of

War: Explaining World War I (New York: Basic Books, 1999),

395–432.

3. Keynes, Economic Consequences, 8.

4. Christopher Blattman, Michael A. Clemens, and Jeffrey G.

Williamson, ‘‘Who Protected and Why? Tariffs the World Around,

1870–1938,’’ in Conference on the Political Economy of

Globalization (2002), 30.

5. Eric Rauchway, Blessed among Nations: How the World Made

America (New York: Hill and Wang, 2006), 156.

6. Keynes, Economic Consequences, 7.

7. Ibid., 211.

8. Edward Hallett Carr, The Twenty Years’ Crisis, 1919–1939, 2nd ed.

(London: Macmillan, 1962), 234.

9. Immigration Act, chap. 25 of 9–10 George V, p. 7, sec. 13, consulted

online 2/27/2007, www.canadiana.org/ECO/ItemRecord/

9_08048.

10. Rauchway, Blessed among Nations, 157.

11. Barry Eichengreen, ‘‘The Origins and Nature of the Great Slump

Revisited,’’ Economic History Review 45, no. 2 (1992): 223.

12. George Soule, Prosperity Decade: From War to Depression,

1917–1929 (New York: Rinehart, 1947), 220.

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13. Martha L. Olney, Buy Now, Pay Later: Advertising, Credit, and

Consumer Durables in the 1920s (Chapel Hill: University of North

Carolina Press, 1991), 91.

14. Ibid., 40.

15. Peter Fearon, War, Prosperity, and Depression: The U.S. Economy,

1917–1945 (Oxford: Philip Allan, 1987), 55–56.

16. Soule, Prosperity Decade, 164.

17. John Bell Rae, American Automobile Manufacturers

(Philadelphia: Chilton Company, 1959), 107–9; John Bell Rae, The

American Automobile (Chicago: The University of Chicago Press,

1965), 61, 88.

18. Olney, Buy Now, 182.

19. Roland Marchand, Advertising the American Dream: Making Way

for Modernity, 1920–1940 (Berkeley: University of California

Press, 1985), 156; Olney, Buy Now, 127.

20. Olney, Buy Now, 115.

21. Marchand, Advertising the American Dream, 160.

22. Peter Fearon, Origins and Nature of the Great Slump, 1929–1932

(Atlantic Highlands, NJ: Humanities Press, 1979), 34.

23. John Brooks, Once in Golconda: A True Drama of Wall

Street, 1920–1938 (New York: Wiley Investment Classics, 1999),

58–59.

24. ‘‘Market Comment,’’ Wall Street Journal, 3/21/1928, 22.

25. ‘‘Broad Street Gossip,’’ Wall Street Journal, 1/13/1928, 2.

26. Federal Reserve Bulletin 14:6 (June 1928), 373.

27. John Kenneth Galbraith, The Great Crash, 1929 (Boston:

Houghton Mifflin, 1972), 38.

28. United Nations, International Capital Movements during the

Inter-War Period (New York: Arno, 1979), 10, table 1.

29. Bernard M. Baruch, Baruch, 2 vols. (New York: Holt, 1957–60),

2:218.

30. Richard J. Whalen, The Founding Father: The Story of Joseph

P. Kennedy (New York: New American Library, 1964), 104.

31. Brooks, Once in Golconda, 110.

32. Ibid., 117.

33. ‘‘Rockefeller Buys, Allaying Anxiety,’’ New York Times, 10/31/1929, 1.

34. Brooks, Once in Golconda, 119.

35. Joseph A. Schumpeter, Business Cycles: A Theoretical, Historical,

and Statistical Analysis of the Capitalist Process (New York:

McGraw-Hill, 1939), 2:911.

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36. Christina D. Romer, ‘‘The Great Crash and the Onset of the Great

Depression,’’ Quarterly Journal of Economics 105, no. 3 (1990):

606.

37. Fearon, Origins and Nature, 34.

38. Robert Skidelsky, John Maynard Keynes: The Economist as

Saviour, 1920–1937, vol. 2, John Maynard Keynes (London:

1992), 391.

39. Herbert Hoover, Memoirs, 3 vols. (New York: Macmillan, 1951),

3:2.

40. Whalen, Founding Father, 113.

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Chapter 2

The Hoover Years

In the spring of 1931 Senator Robert Wagner (D-NY) claimed that

President Herbert Hoover had, in the face of crisis, ‘‘but clung to

the time-worn Republican policy: to do nothing and when the

pressure becomes irresistible to do as little as possible.’’ 1 Hoover

did not ‘‘do nothing,’’ but he did not do enough either. Instead he

followed a general policy for crisis management he had already

clearly established.

Indeed, when Hoover ran for president in 1928, Americans

associated him with competence in a crisis. Some Republican

leaders showed skepticism; Calvin Coolidge, whom Hoover served

as secretary of commerce, complained, ‘‘That man has offered me

unsolicited advice for six years, all of it bad.’’ 2 But a new emergency

had reminded Americans of Hoover’s virtues.

Rains swelled the Mississippi River early in 1927, and in the

middle of April the levees near Cairo, Illinois, collapsed. Hundreds

of thousands of acres disappeared beneath the water, and more

levees burst. Coolidge, who had to this point preferred hopeful

inaction, now appointed Hoover to head an emergency committee.

A successful mining engineer, Hoover had gone into public service

after making his fortune. During World War I, Woodrow Wilson

made Hoover head of the effort to provide food and other relief to

the war’s dispossessed, and Hoover earned a reputation as a

23

logistical genius. ‘‘He is certainly a wonder and I wish we could

make him President of the United States,’’ Assistant Secretary of

the Navy Franklin Roosevelt wrote in 1920. 3 Hoover owed his

reputation partly to his talent of organizing and using bureaucracy,

and partly to his talent at organizing and using the press. ‘‘[T]he

world lives by phrases,’’ he once said. 4

As head of the 1927 flood-relief effort, Hoover showed both the

extent and limits of these talents. He organized and managed

evacuations, saving lives; he oversaw the establishment of camps to

house refugees; he backed federal control of river management

to forestall future disasters. Hoover also turned a blind eye as

southern whites prevented black evacuees from leaving guarded

camps lest the South lose its labor supply. And he used whites’ fear

to his advantage, threatening local businessmen by saying, ‘‘I’ll

send your niggers north starting tonight,’’ if they did not contribute

money to a reconstruction fund. 5

Like the engineer he was, Hoover could build a machine to solve a

problem, but he expected someone else to operate it. He

accumulated $13 million in funds for reconstruction loans and

made sure everyone knew it, but he did not ensure that the money

would get lent to the stricken area, and the vast majority of it was

not. Further, although he favored massive federal spending on

engineering improvements in river management, he opposed

increasing the government’s humanitarian role, declaring, ‘‘No

relief to flood sufferers by Congress is desirable.’’ 6

As a prospective presidential nominee, Hoover knew he had to

promise loyalty and attention to the habitually Republican

black voters, without alienating potential white voters. He let

African American leaders know he favored a reconstruction plan

to subdivide the large farms in the flooded region into small

plots for black farmers. But he thereafter declined to support the

plan—or the black evacuees—in any substantial way. 7 The flood

gave Hoover the ability to claim that he could show grace

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under pressure. Doubters were few, though sometimes

acute: the Baltimore journalist H. L. Mencken wrote that

Hoover’s ‘‘achievements all diminish rather than increase on

analysis.’’ 8

For the 1928 election Hoover’s record turned out not to matter

much. Hoover won not because of what he had done but because of

what his opponent, Al Smith, was: a Catholic. Smith was many

other things—most notably, governor of New York, in whose

assembly he had also served. New Yorkers knew him as a

progressive who had helped reform the state constitution and

investigate the infamous Triangle factory fire. Smith had backed

bills for workplace health and safety and against child labor. 9 But

his accomplishments and Hoover’s alike vanished amid a war of

symbols waged with Hoover’s preferred weapons: phrases. While

Hoover kept his distance from the worst slurs, his allies attacked

Smith for representing the ‘‘sneering, ridiculing . . . foreign-

populated city of New York,’’ for opening the way to ‘‘card playing,

cocktail drinking, poodle dogs, divorces, novels, stuffy rooms,

dancing, evolution, Clarence Darrow, overeating, nude art, prize

fighting, actors, greyhound racing, and modernism.’’ 10

What in hindsight looks like a critical election—the choice of a

leader for a period of profound crisis—turned on these

insubstantial issues of cultural conflict. The election mattered for

two major reasons: it left the Republicans in control of government

on the eve of the Depression, and it put Hoover, who opposed

public relief even in crisis and who believed in the power of phrases

to shape the world, in charge of the federal response to economic

calamity.

On October 25, 1929, the day after Black Thursday, Hoover told

reporters, ‘‘The fundamental business of the country, that is the

production and distribution of commodities, is on a sound and

prosperous basis.’’ 11 Hoover’s message was, in the Wall Street

Journal’s words, ‘‘in harmony’’ with the leading bankers and

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leading industrialists, who emphasized that ‘‘the break . . . was a

technical one within the market and not based on fundamentals.’’ 12

A few weeks later, Hoover repeated his belief in the soundness of

American enterprise, saying, ‘‘Any lack of confidence in the

economic future or the basic strength of business in the United

States is foolish. Our national capacity for hard work and

intelligent cooperation is ample guaranty of the future.’’ 13

Hoover relied heavily on the idea of ‘‘intelligent cooperation.’’ He

saw himself as cheerleader to American enterprise, not as a referee,

coach, or player in the economy: he would call for teamwork and

hope to see it produced. He invited important figures in American

industry to meet, asking them to reason together, planning how

to keep the crash from turning into a depression. He urged

employers not to cut wage rates, and they agreed to cooperate. 14

Hoover went further still in his requests, asking state and local

politicians to hasten and augment their spending on roads and

other public works, believing that in various government treasuries

there lay ‘‘a substantial reserve for prompt expanded action.’’ 15

None of these strategies required much action from anyone in the

federal government, beyond uttering the occasional encouraging

phrase. None providedany immediate relief toAmericans. None cost

the federal government money. All depended on people outside

Washington, DC, to stop the disaster. None worked. The

businessmen’s pledge to uphold wage rates said nothing about

whether they would reduce hours or lay workers off, and they did

both. As early as January 1930, Business Week reported that ‘‘Some

automotive companies. . . discharged employees with what seemed

precipitous haste.’’ 16 Smaller employers, too numerous and minor to

get an invitation to Washington, did not feel bound by the wage

pledge.Accordingly,unemploymentroseand overallwagesdropped,

even in cases where the nominal rate of pay stayed the same.

Nor were local and state governments able to respond effectively to

Hoover’s plea. They spent some money on construction projects,

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but as the crisis continued they had less to spend. Tax revenue

fell and the bill for local poor relief rose. These two draining effects

on local budgets forced local governments, by the hundreds, to

delay, if not repudiate, their debt payments. 17 These government

defaults put pressure on another weak pillar in the Hoover plan:

his dependence on what he called, in November of 1929, ‘‘[t]he

magnificent working of the Federal Reserve system and the

inherently sound condition of the banks.’’ 18

This assessment

proved faulty.

Since beginning operations in 1914, the Federal Reserve System

had functioned like a central bank for the United States, regulating

the supply of credit in response to economic production. Central

banks were supposed also, as the British journalist Walter Bagehot

wrote in 1873, to ‘‘lend freely’’ in times of economic crisis,

forestalling panic.

But the officers of the Federal Reserve System had not established

their own clear set of rules for intervening in crises. Some

believed the system must act swiftly to forestall disaster; others

thought that the system should keep its credit in reserve unless the

need grew truly dire. The balance of opinion within the Federal

Reserve rested with the anti-interventionists, as did the balance

of opinion within the economic profession during the 1920s.

Mostly, economists thought that an economy in crisis should be

left alone and that weaker banks and firms should go under.

They thought that during a boom period, some businessmen

made poor calculations under the influence of excess optimism:

they borrowed too much, produced, and stocked too much in

anticipation of demand that would never materialize. Economists

thought that these poor calculations helped bring on a crisis in the

first place, and that the proper role of a downturn was to correct

these errors of judgment. As the most popular basic economics

textbook of the era said, ‘‘The period of depression, then, is one

in which . . . production is kept at a low level until surplus stocks

are disposed of, and new commitments are not made until there is

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a reasonable assurance of profits. In other words, the period of

depression, gloomy and unpleasing as it is, serves as a breathing

spell for business[.]’’ 19

Moreover, even had economists generally agreed on the need for

intervention in time of crisis, the Federal Reserve’s officers would

have had difficulty knowing just when that crisis had deepened to

a point requiring their action. The U.S. government kept no regular

statistics on unemployment or on total economic output, nor did it

have a system of accounting for national income. 20

Debate among

Federal Reserve bankers often rested on anecdotal evidence or

assumptions about what was happening in the economy.

In consequence, while in the immediate wake of the Crash the

Federal Reserve System took some steps to make it easier for banks

to lend and borrow money, after a few months it did little. Some of

its members fretted over the relative inaction, noting that the

depression seemed to be spreading around the world, particularly

afflicting America’s debtors. In the spring of 1930, George L.

Harrison, governor of the Federal Reserve Bank of New York,

visited Europe and observed ‘‘a shortage of working capital, and

thus a restriction of purchasing power, in a number of

countries . . . affected by the stringent credit conditions prevailing

last year.’’ 21

Harrison believed the Federal Reserve would need to

lessen restraints on credit, but a majority of the System’s governors

disagreed.

The Federal Reserve’s caution worked together with the Congress

and the president to bring the international economy to a near

halt. On June 17, 1930, Hoover signed the Smoot-Hawley Tariff

into law, raising taxes on imports to America. The idea for a new

tariff bill had arisen in 1928 as a method of protecting American

farmers, who were suffering a long bad patch, from foreign

competition. By the time it passed, many farmers opposed its

provisions, as did newspaper editors, some manufacturing

executives, and a number of foreign governments that believed it

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would cut the American market off from the rest of the world, with

dire consequences. Members of the automobile industry, which

accounted for 10 percent of American exports, were especially

alarmed. 22

A GM executive warned that ‘‘a creditor nation . . . must,

if it hopes to preserve its prosperity . . . buy foreign goods of every

possible description.’’ 23

Thomas Lamont, a partner in the J. P.

Morgan and Company investment bank, claimed he ‘‘almost went

down on my knees to beg Herbert Hoover to veto the asinine

Hawley-Smoot tariff.’’ 24

But a higher tariff looked to other constituencies like a good idea.

Republicans favored tariffs in response to economic complaint.

They had used one in the postwar depression of 1921, and

it seemed to work then. So they did it again, by partisan

majorities—more than 90 percent of House Republicans voted

for the bill, more than 90 percent of House Democrats voted

against; in the Senate, 78 percent of Republicans were for, and

86 percent of Democrats were against. 25

The aftermath seemed to prove the critics correct. In the years that

followed, other countries retaliated by erecting their own tariff

barriers, and world trade fell by one quarter of its volume. Blocking

other countries from their American markets made it harder for

foreign powers to repay their debts outstanding from World War I.

As one writer explained in the New York Times, ‘‘there is not

enough gold in the world to pay America; therefore America must

be paid by loans from America and by goods sold in America.’’ 26

With the restriction of credit in 1928, loans from America had

begun to fall off, and with the restriction of trade in 1930, goods

sold in America began to fall off. Payments to America would have

also to fall off, as countries sought to protect their own citizens.

Cutting down trade meant cutting down the international flow of

borrowed money.

At the end of 1930, the difficulty of borrowing money finally took

its toll. In the last two months of the year, bank failures imperiled

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enormous sums on deposit, more money than suspensions had put

at risk in the preceding year. 27

Nor did the panicking end even

then; the spasmodic collapse of the American banking system

continued. During Hoover’s presidency, more than 20 percent of

American banks went under. 28

The American banking system had, contrary to Hoover’s

assurances, some inherent weaknesses. The laws of many states

prevented banks from establishing branch offices. Banks with

many interconnected branches, lending money in different places

and to different kinds of borrowers, depended less on the fortunes

of any single locality and could weather a crisis more easily, while

unbranched American banks, or unit banks, failed relatively easily.

States that allowed branch banking had stronger, more

competitive banks that drove out or absorbed weaker banks. These

states entered the Depression with a stronger, more stable financial

system. Likewise, the Canadian banking system, with extensive

branch banking, survived the Depression largely intact. 29

The Crash hit American banks hard. Some had made loans to fund

speculation; others held foreign assets that went bust, as American

loans overseas halted and other countries could no longer meet

their obligations. But most important, banks suffered because their

clients suffered and could no longer pay off loans or make new

deposits in their savings accounts. Payment on loans and new

deposits provided banks with their major source of income. As

banks’ income dried up, they could not pay their own creditors.

Increasingly they had to close their doors. 30

The Federal Reserve System, in keeping with the opinion of a

majority of its members that the dying banks were a natural, if

painful, part of the circle of life in modern business, did not

prevent these failures or forestall further ones. Their inaction

accorded with the prevailing orthodoxy of their day. But the

prevailing orthodoxy of the 1920s defied the older, and tested,

belief set forth by Bagehot in 1873 as well as the evidence before

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them. Banks continued to fail, in great sickening waves of

calamity, each closure sending new ripples of fear far and wide.

Americans began to mistrust their banks altogether, which in turn

made it still more difficult for banks to get credit.

Much the same could be said of Hoover: while he hewed to the

respectable opinion of his day, he defied both the evidence of his

senses and a longer-established tradition that cried out for action.

And in consequence he too found it harder and harder to get credit

as he might have in normal times. Early in October of 1930,

Hoover emphasized the psychological causes of Americans’

troubles: ‘‘The income of a large part of our people is not reduced

by the depression . . . but is affected by unnecessary fears and

pessimism.’’ As to whether the government should take any action,

he allowed it might cut the tax on capital gains, which would

permit investors to keep more of their profits from trading. 31 A few

weeks later, on the anniversary of Black Thursday, Hoover quashed

rumors that he would call Congress into special session to take

action against unemployment. ‘‘No special session is necessary to

deal with employment,’’ he declared. ‘‘The sense of voluntary

organization and community spirit in the American people have

not vanished.’’ 32

Hoover’s belief in the power of encouraging

phrases abided: Americans needed to believe, he thought, in the

adequacy of voluntary, civic, nongovernmental action.

A few weeks later, an elite class of Americans lost their jobs all at

once: congressional Republicans. In the House of Representatives,

the Republicans lost fifty-two seats and yielded control to the

Democrats. 33

In the Senate, the Republicans lost eight seats,

leaving neither party with a clear majority.

On February 3, 1931, Hoover reiterated his opposition to federal

unemployment relief, explaining that he would favor it only ‘‘if the

time should ever come that the voluntary agencies of the country,

together with the local and State Governments, are unable to find

resources with which to prevent hunger and suffering.’’ 34

Like the

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Federal Reserve, which kept its gold in vaults while banks failed,

Hoover would not open the federal treasury for relief until after

private and local public institutions collapsed. He opposed federal

relief on principle, believing that Americans risked being ‘‘plunged

into socialism and collectivism’’ if the federal government provided

aid directly to its citizens. 35

He did not keep faith with cooperative and local efforts entirely in

vain. Some businesses tried hard to keep employment stable.

General Electric cut back on the number of styles in which it

produced lightbulbs, and also committed to fifty weeks of work in

1931 for employees who had been with the firm for two years or

more. Some unions worked with their industries to establish

unemployment insurance funds. Some companies retrained their

workers, in order to ease their movement within the firm. Still

others established loans for the unemployed. 36

States did what

they could. Governor Franklin D. Roosevelt of New York requested

an emergency relief program of the state assembly in the summer

of 1931, and Albany responded by devoting $20 million, which

went to the relief of more than 300,000 families. Other states

followed suit, spending tens of millions of dollars to aid their

citizens. 37

Yet these efforts did not suffice. Consumers spent cautiously when

they had no confidence, and hardly at all when they had no jobs.

Businesses that depended on consumers’ continued confident

borrowing suffered. As James Farrell, the president of United

States Steel Company, told a congressional hearing late in 1931, ‘‘it

is difficult to create business beyond the demands of buyers.’’ 38

And as businesses laid off their workers, fewer and fewer

consumers had money to spend.

Hoover did not refrain entirely from federal action. In February

1931, he signed legislation creating a Federal Employment

Stabilization Board, tasked with timing and scaling federal

spending on construction to respond to unemployment. 39

But he

32

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supported such laws reluctantly, telling an ally that he preferred ‘‘to

cut expenses and to give to the country and the world an exhibit of

a balanced budget,’’ and he opposed other legislation to expand

federal public works. 40

Hoover also ordered stricter enforcement

of anti-immigration legislation, and in March of 1931, the New

York Times reported the White House’s claim that ‘‘President

Hoover, in his efforts to relieve the unemployment situation . . . has

kept out of the country nearly 100,000 aliens who would have ben

[sic] admissible under normal business conditions.’’ 41

In June 1931, Hoover moved to halt the international propagation

of credit collapses, declaring a one-year moratorium on

intergovernmental debts. He had his eye particularly on Germany,

whose fiscal affairs were sinking ominously. ‘‘It is not,’’ the Times

declared, ‘‘that war is threatened there,’’ but rather that ‘‘[i]t is today

as if there were but a single nervous system for the entire civilized

world,’’ and an injury to one extremity affected the whole body. 42

The moratorium might have delayed a further international

financial collapse, but it could provide no immediate relief for

Americans. The unemployment rate continued to soar.

Retrospective estimates suggest it rose from about 9 percent in

1930 to about 16 percent in 1931 and then to an appalling 23

percent in 1932. During the Depression, government statisticians

sensitive to the deepening crisis and wishing to measure its

proportions developed the concepts and methods of measuring

and defining unemployment that underlie these modern

calculations. But their early work produced gloomy numbers,

contrary to what the Hoover administration wished to hear and

say. The president subjected the chief of the Bureau of Labor

Statistics to forcible retirement, as the New York Times reported:

‘‘ ‘Retired!’ he shouted. ‘Please don’t put it that way. It is not a

proper word.’ ’’ 43

In desperation, and in the beginning of his campaign for

reelection, Hoover approved a last set of policies for lifting the

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Depression. Alarmed by the impending collapse of the California-

based Bank of America, Hoover called for emergency legislation

to relieve the nation’s banks. 44

In January of 1932, he signed into

law the Reconstruction Finance Corporation (RFC), capitalized at

$500 million and permitted to issue notes of up to $1.5 billion so

it could lend money, principally to financial institutions, and

thus act (as the Federal Reserve was not) as an energetic lender

of last resort and rescue the nation’s credit-providing institutions.

RFC operated on the theory that if it could ease pressure on banks,

eventually they would confer a similar comfort on their borrowers.

Within two weeks of its creation, it was making a hundred

loans a day. 45

Hoover also signed a bill allocating $125 million to the Federal

Land Bank system, a network of banks established in 1916 to

provide farm mortgages. The extra money would prop up the

banks in the face of defaulting borrowers and savers who

demanded their deposits. Likewise, in the summer of 1932, Hoover

signed into law a system of Home Loan Banks to shore up banks

that had lent money for homeowners’ mortgages. He signed a

further bill easing the restrictions on banks within the Federal

Reserve System and allowing the Federal Reserve Board greater

latitude in manipulating interest rates. 46

All these measures probably helped loosen restrictions on

credit and got bankers and businessmen to lend and borrow

more freely again, which might eventually have led to the

substantial reemployment of the American people. But they did

nothing immediate for non-banker Americans. Hoover’s

supporters unintentionally damned their own efforts, explaining

correctly that they did nothing directly for ordinary citizens. As

Secretary of the Treasury Ogden Mills explained, the president’s

policies ‘‘set free the recuperative and constructive forces within

business itself . . . so that the nation’s business might have an

opportunity to do for itself what the Government cannot hope to

do for it.’’ 47

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Hoover stood by the principles of relief he had established in

1927—encouraging phrases, widely publicized, and aid to lenders,

but no direct assistance to American workers. He disavowed any

direct connection to citizens, explaining that he thought the

presidency conferred ‘‘a power for leadership bringing

coordination of the forces of business and cultural life.’’ 48

He left

himself entirely open to criticism from Governor Roosevelt,

who declared in April of 1932 that ‘‘The present

administration . . . has either forgotten or it does not want to

remember the infantry of our economic army. These unhappy

times call for . . . plans . . . that build from the bottom up and not

from the top down, that put their faith once more in the forgotten

man at the bottom of the pyramid.’’ 49

Roosevelt’s speech brought

disapproval even from members of his own party, for stirring up

the masses against the rich. But by summer he would be the

Democratic nominee for president, and in November he would put

Herbert Hoover out of work, winning the presidency by a

landslide, on the hope that he, as Hoover on principle would not,

might bring relief to ordinary Americans.

Notes

1. ‘‘Wagner Puts Party in Progressive Role,’’ New York Times, 5/15/31, 2.

2. John M. Barry, Rising Tide: The Great Mississippi Flood of 1927

and How It Changed America (New York: Simon and Schuster,

1997), 270.

3. Timothy Walch and Dwight M. Miller, eds., Herbert Hoover and

Franklin D. Roosevelt: A Documentary History (Westport, CT:

Greenwood, 1998), 6.

4. Barry, Rising Tide, 266.

5. Ibid., 368.

6. Ibid., 401.

7. Ibid., 384–93.

8. H. L. Mencken, On Politics: A Carnival of Buncombe, ed. Malcolm

Moos (Baltimore: Johns Hopkins University Press, 1956), 148.

9. Robert A. Slayton, Empire Statesman: The Rise and Redemption of

Al Smith (New York: Free Press, 2001), 98.

10. Ibid., 314, 316.

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11. ‘‘Hoover Asserts Business Sound,’’ Wall Street Journal,

10/26/1929, 1.

12. ‘‘Leaders Call Break Technical,’’ Wall Street Journal,

10/26/1929, 13.

13. ‘‘Text of Hoover’s Announcement of Plan for National Conference

on Business Aid,’’ New York Times, 11/16/1929, 1.

14. Albert U. Romasco, The Poverty of Abundance (New York: Oxford

University Press, 1965), 29.

15. ‘‘Text of Hoover’s Announcement,’’ New York Times, 11/16/1929, 1.

16. Romasco, Poverty of Abundance, 59.

17. Lester V. Chandler, American Monetary Policy, 1928–41 (New

York: Harper and Row, 1971).

18. ‘‘Text of Hoover’s Announcement,’’ New York Times, 11/16/1929, 1.

(Capitalization of ‘‘system’’ as in original.)

19. Chandler, American Monetary Policy, 119.

20. Ibid., 116.

21. Ibid., 151.

22. Barry Eichengreen, ‘‘The Political Economy of the Smoot-Hawley

Tariff,’’ NBER Working Paper no. 2001 (1986), 17.

23. ‘‘Urge Tariff Cuts to Aid World Amity,’’ New York Times,

6/10/1930, 2.

24. David M. Kennedy, Freedom from Fear: The American People in

Depression and War, 1929–1945 (New York: Oxford University

Press, 1999), 50.

25. Douglas Irwin, ‘‘From Smoot-Hawley to Reciprocal Trade

Agreements: Changing the Course of U.S. Trade Policy in the

1930s,’’ in The Defining Moment: The Great Depression and the

American Economy in the Twentieth Century, ed. Claudia Goldin,

Eugene N. White, and Michael D. Bordo (Chicago: The University

of Chicago Press, 1998), 334.

26. Edwin L. James, ‘‘Peril to War Debts Seen in our Tariff,’’ New York

Times, 6/18/1930, 1.

27. Ben S. Bernanke, ‘‘Nonmonetary Effects of the Financial Crisis in

the Propagation of the Great Depression,’’ American Economic

Review 73, no. 3 (1983): 262.

28. Chandler, American Monetary Policy, 105.

29. Mark Carlson and Kris James Mitchener, ‘‘Branch Banking, Bank

Competition, and Financial Stability,’’ NBER Working Paper

no. 11291 (2005); Richard S. Grossman, ‘‘The Shoe That Didn’t

Drop: Explaining Banking Stability During the Great Depression,’’

Journal of Economic History 54, no. 3 (1994).

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30. Chandler, American Monetary Policy, 105–6.

31. ‘‘HooverAsks Bankersto Take Lead,’’NewYork Times,10/3/1930, 1.

32. ‘‘Work for Jobless Put at $450,000,000,’’ New York Times,

10/25/1930, p. 4.

33. Clerk of the House website, www.house.gov, consulted 2/27/2007.

The Seventy-first Congress had 270 Republicans and the Seventy-

second had 218.

34. ‘‘Text of President Hoover’s Statement,’’ New York Times,

2/4/1931, 2.

35. Joan Hoff Wilson, Herbert Hoover, Forgotten Progressive (Prospect

Heights, IL: Waveland, 1992), 151.

36. Romasco, Poverty of Abundance, 135–38.

37. Ibid., 169–70.

38. Ibid., 139.

39. ‘‘Wagner Act Signed bythe President,’’ New York Times, 2/11/1931, 2.

40. Wilson, Herbert Hoover, Forgotten Progressive, 150.

41. ‘‘Alien Order Bars 96, 885 in 5 Months,’’ New York Times,

3/27/1931, 22.

42. ‘‘No Splendid Isolation,’’ New York Times, 6/20/1931, 11.

43. ‘‘Labor Commissioner Stewart Quits Post,’’ New York Times,

7/3/1932, 3.

44. James S. Olson, Herbert Hoover and the Reconstruction Finance

Corporation, 1931–1933 (Ames: Iowa State University Press,

1977), 33–35.

45. Ibid., 42.

46. Romasco, Poverty of Abundance, 190–93.

47. Ibid., 197.

48. Ibid., 200.

49. James S. Olson, Saving Capitalism: The Reconstruction Finance

Corporation and the New Deal, 1933–1940 (Princeton: Princeton

University Press, 1988), 55.

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Chapter 3

Americans in the Depression

The United States endured depressions before the 1930s, but the

Great Depression, in its breadth and duration, and in the

immediacy of its chronicling, produced also a great compression.

The newly interconnected country (Americans in their twenties

could remember when there were still western territories, rather

than fully fledged states) now had radio and newsreels throughout

its towns to show itself how its people suffered. As the Depression

lasted, it put the middle class more and more into the

circumstances of the poor and encouraged empathy across class

lines.

Americans in their forties could remember the last great

depression, when the global upheaval of the middle 1890s led to

frightening strikes and sent armies of the unemployed tramping

the countryside, seeking work they could not find. In the midst of

that depression, most voters cast their ballots against William

Jennings Bryan, the Democrat who claimed to speak for the

downtrodden. But Americans of this generation could remember

also how the 1890s fell during an age of globalization, and

remembered how so many of the country’s workers then had been

immigrants, literally of another people. By the Great Depression,

this was no longer so true. World War I slowed immigration almost

to a halt, and restrictionist legislation of the 1920s pulled America’s

golden door nearly shut. No longer did the factories seem to teem

38

with newly arrived foreign workers. And so closed one of the gaps

that had, a generation before, separated the middling sort from the

working class.

The severity of the Depression’s misfortune also diminished the

distance between the comfortable and the hard-up. So many

moved so quickly from one category to another that the employed

increasingly identified with their fellow countrymen who were out

of work. The gap between income brackets shrank. And where

once, not long before, middle-class Americans might reflexively

have considered lazy anyone who was unemployed, where once

they might have considered radical anyone who claimed the

government owed them some assistance, in the 1930s they

increasingly saw the suffering millions among them as people

much like themselves, who had worked to build the country that

seemed now to be falling apart. This diminishing distance between

classes helps to explain why Americans embraced E. Y. Harburg’s

song ‘‘Brother, Can You Spare a Dime?’’, repeatedly played

throughout the Depression.

They used to tell me I was building a dream

And so I followed the mob.

When there was earth to plow or guns to bear

I was always there right on the job . . .

Once I built a railroad, I made it run,

Made it race against time.

Once I built a railroad, now it’s done

Brother, can you spare a dime?

As Harburg explained, ‘‘This is the man who says: I built the

railroads. I built that tower. I fought your wars. . . . I made an

investment in this country. Where the hell are my dividends?’’ 1

Americans who were not themselves out of work—and they were

the majority of the workforce—could have ignored this angry and

anguished question, as they had at other times in the country’s

history. But as times got harder, Americans who had something,

39

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n

however little, to spare accepted the justice of the claim,

‘‘showering dimes and quarters upon outstretched hands,’’ as the

New York Times wrote early in 1933. 2 The country that so easily

and so recently divided along racial and ethnic lines now drew,

even if slightly, closer together.

So quickly after the crash did the crisis grow to such an appalling

extent that its full dimensions resisted comprehension. When the

unemployment rate ran to around a quarter of the workforce in

1932, about 11.5 million Americans had no work. To put this

in some perspective, we might imagine that nearly the entire

population of New York, then the most populous state, had no

jobs: that from the easternmost tip of Long Island to the shores

of Lake Erie, from the Canadian border to Pennsylvania,

nobody had work.

But this perspective does not give quite the right picture. Some of

the people of New York—children, dependent wives—would

ordinarily have held no formal jobs. And the 11.5 million out of

work represented only the workers who had no paycheck. Many

of them had families who depended on them for a living. So the

11.5 million who had no jobs represented something like thirty

million Americans who had lost their source of income. 3 Perhaps

a quarter of the entire population, therefore, found itself without

adequate means to buy shelter or food. 4

Nor indeed do these numbers, as awful an impact as they make, tell

us quite all we should know about the Depression’s scope. In

unemployment’s shadow ran underemployment: those Americans

lucky enough to keep their jobs often saw their hours and pay

reduced. Employers wanted to keep their skilled workers if they

could, so rather than lay people off, they urged their staff to share

the burden. To many employees it seemed only fair. And so by the

summer of 1932, more than half of American workers did their

jobs part-time, keeping on average 59 percent of a full-time job and

of full-time pay. 5

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Americans in need asked for help reluctantly, and when

circumstances forced them to seek help, they went to those closest

to them. But in the Depression, each of their customary sources of

support failed them, one by one. As a New York City official

explained in 1932, ‘‘when the breadwinner is out of a job he usually

exhausts his savings if he has any. . . . He borrows from his friends

and from relatives until they can stand the burden no longer. He

gets credit from the corner grocery store and the butcher shop, and

the landlord foregoes collecting the rent until interest and taxes

have to be paid and something has to be done. All of these

resources are finally exhausted over a period of time, and it

becomes necessary for these people, who have never before been in

want, to ask for assistance.’’ 6

When family and neighbors failed, workers could sometimes get

help from locally organized mutual assistance funds such as rainy-

day plans, or widows-and-orphans money set aside by a union or

1. These men stand in a New York City breadline in 1932.

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civic group. Often, Americans set up such plans within their

religious or ethnic communities, on the principle of pride, to

guard against one of their own having to go to charities or, what

felt even more degrading, public relief. So Polish Americans,

German Americans, church parishes and congregations, and

various other communities kept up aid agencies that tried to

provide for the unlucky among them and tide them over until work

came. ‘‘Let’s have pride enough not to sponge upon public support

when Catholic charity is still able to care for its own interest,’’ one

priest declared. 7

But these networks of support, sufficient to the occasional idle day

in a single industry, collapsed under the weight of need that now

pressed down on them. So increasingly people turned in shame to

public sources of relief, even though it cost them dearly, and

sometimes they clung to their self-respect long after they should

have, to save their lives, sought help. A doctor working in a free

clinic remembered, ‘‘The poor got some care, could go to free

dispensaries. The rich got good care because they could afford it.

There was this big middle class that was not getting any care. The

middle class got very much in the position of the poor

people. . . . People of that status would find it very difficult to accept

charity. . . . Every day . . . someone would faint on a streetcar. They’d

bring him in, and they wouldn’t ask any questions . . . they knew

what it was. Hunger. When he regained consciousness, they’d give

him something to eat.’’ 8

Historically, American cities had through their own treasuries

provided relief to their poor, but soon even cities could not help

their citizens. In 1932, a Detroit official put it this way:

Many essential public services have been reduced beyond the

minimum point absolutely essential to the health and safety of the

city. . . . The salaries of city employees have been twice

reduced . . . and hundreds of faithful employees . . . have been

furloughed. Thus has the city borrowed from its own future welfare

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D e a l

to keep its unemployed on the barest subsistence levels. . . . A wage

work plan which had supported 11,000 families collapsed last

month because the city was unable to find funds to pay these

unemployed—men who wished to earn their own support. For

the coming year, Detroit can see no possibility of preventing

wide-spread hunger and slow starvation through its own

unaided resources.9

Sometimes municipal funds might find their way to the needy

through nontraditional routes: in New York, where the Health

Department found that one in five of the city’s schoolchildren

suffered from malnutrition, public school teachers, threatened

with pay cuts, paid into a fund from their own pockets for the relief

of their pupils. 10

As civic organizations and governments crumbled

under the weight, often so did families. ‘‘A man is not a man

without work,’’ one of the unemployed told an interviewer. 11 Those

men who felt differently—who made for themselves a place in the

world outside the workplace, who as husbands and fathers and

friends and hobbyists knew what was worthwhile to strive for—

shouldered the burden of crisis more easily. But they were in the

minority. As one sociologist wrote, ‘‘The average American has the

feeling that work . . . is the only dignified way of life. . . . While

theoretically, economic activities are supposed to be the means to

the good life, as a matter of fact it is not the end, but the means

themselves, that have the greater prestige.’’ 12

More often than not, men took this sense of duty to heart. They

knew how closely their children watched them, how much hung on

their ability to get even a little work, how much joy it could bring to

a house, or at least how much sorrow it could hold off. As one man

who had been a boy during the Depression remembered,

A lot of fathers—mine, among them—had a habit of taking off.

They’d go to . . . look for work. . . . This left the family at home,

waiting and hoping that the old man would find something. And

there was always the Saturday night ordeal as to whether or not the

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old man would get home with his paycheck. . . . Heaven would break

out once in a while, and the old man would get a week’s work . . . that

smell of fresh sawdust on the carpenter’s overalls, and the fact

that Dad was home, and there was a week’s wages. . . . That’s the

good you remember. And then there was always the bad part.

That’s when you’d see your father coming home with the toolbox

on his shoulder. Or carrying it. That meant the job was over.13

Sometimes men who left to look for work never came back, finding

homes in doorways or subways or the communities of shacks on

the edges of cities or landfills that, soon enough, Americans

learned to call ‘‘Hoovervilles.’’ Children who were old enough and

independent might themselves leave, foraging on the road instead

of relying on overburdened parents. Usually such tramps were

young men prepared to fend for themselves, racing to catch

boxcars and steal rides. Sometimes the railroad detectives turned a

blind eye to their unscheduled human cargo, sometimes not.

Sometimes other travelers helped, sometimes they did not. In all,

maybe two million Americans made their homes on the road in the

years after the Crash. 14

When employers advertised jobs, they had their pick of workers

and could indulge their preferences, or prejudices. Increasingly,

they hired or kept on white men with work experience, leaving the

young and old, the women, and the African Americans

disproportionately represented among the unemployed. Before the

Crash, as women first entered the workforce in significant

numbers, Americans already found it easy to believe that if a

woman worked, she was doing it for frivolous spending money—

that properly, women would rely on men who, as heads of

households, would supply their wives and children with a living. In

the labor glut of the Depression, employers—sometimes by policy,

sometimes simply by habit—hired fewer married women and more

readily dismissed those they already had on the rolls. 15 Yet women

increasingly sought work, mainly to keep families afloat, though

sometimes to maintain a middle-class life in the face of the

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Depression. 16

Women faced a harder market than their fathers,

husbands, brothers, or sons. And if they had to leave their families,

life on the road presented an even greater threat of physical

exploitation than it posed to their male relations. Accounts of

women out of work and without family tell of them establishing

communities to protect themselves, sharing meager resources and

small rooms, scheduling shifts for the use of beds and clothes. One

politician remarked that the woman worker in America was ‘‘the

first orphan in the storm.’’ 17

If so, the black worker followed close behind her into the rough

weather. In the cities of the United States, African Americans lost

2. Squatters’ shacks populate the banks of the Willamette River in this

‘‘Hooverville’’ settlement near Portland, Oregon.

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their jobs much more quickly than their white counterparts. In

part they suffered a misfortune of historical timing: black

Americans, long a rural population, had on average moved to cities

less recently and had less opportunity to develop careers as skilled

laborers than white Americans. But a comparative lack of skills

accounted only partially for the high levels of African American

unemployment. Black workers noticed that they were ‘‘last hired,

first fired,’’ and that employers deliberately laid off black workers

to replace them with white ones. ‘‘So general is this practice that

one is warranted in suspecting that it has been adopted as a

method of relieving unemployment of whites without regard to the

consequences upon Negroes,’’ a National Urban League study

concluded in 1931. 18

These inequities in the job market ensured the Depression-era

working class actually in work, or nearest to it, looked much more

white, much more male, and overall much more uniform than the

working classes of earlier eras. The laborers who held jobs had

much visibly in common with one another, and the issues of

cultural conflict that so consumed Americans of earlier eras

diminished. The object of Americans’ solicitude became the

imperiled white, male head-of-household, whose hardship they

could understand as the nation’s concern. 19

These nationwide hardships crossed the lines between urban

and rural populations to an unprecedented degree.

Unemployment, as a cyclical problem, had plagued cities as long

as there had been cities, and Americans had a folk tradition of

returning to the countryside when the cities went into a slump.

Farm jobs traditionally enjoyed a resistance to the problems

that plagued cities, and in the Depression many Americans did

seek out the security of a subsistence farm—in 1932 the farm

population rose to the highest point it would reach between

the two world wars. 20

But a series of unfortunate events made

sure that the countryside suffered the Great Depression as the

cities did.

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Farm incomes reached their peak around World War I, when the

dangers of shipping and general scarcity drove up the price of

agricultural produce. High prices inspired farmers to put more

land under the plow. Newly available tractors let them do it

quickly. Then in the postwar depression, farm prices fell sharply;

even after they rose again in the middle 1920s, the prices of the

goods farmers had to buy rose higher still. The fresh prevalence of

farm machines made it cheaper to produce more agricultural

goods on a large scale, and as tractors appeared, mules and men

went away. ‘‘Tractored out’’ hands left the countryside to seek

opportunity elsewhere. 21

Even the new city prosperity hurt

farmers: as urban Americans improved their circumstances, they

chose their diets based on taste, rather than need. Once, a wider

waistband had signaled health and success, but now thin was

fashionable, and food producers’ income declined. Further,

farmers, like other Americans, took on considerable debt in their

expansion and mechanization, rendering them vulnerable to

shock. 22

When the Crash shook this system, the fragile supports for farmers

collapsed. Farm income tumbled downward. Creditors forced

farmers to sell their property to cover delinquent debt payments. 23

Often, and increasingly, farmers and their neighbors tried to

thwart attempts to dispossess them. They might band together and

buy property at a delinquency auction, then return it for free to the

owner, or they might threaten lawmen who sought forcibly to sell

property.

The weather conspired with the man-made calamity. Beginning in

1931, rainfall on the Great Plains lessened until it dropped below

the level necessary to sustain crops. Soon the earth would dry and

crack so that it could no longer hold itself together, and great winds

would simply blow it away. 24

The South suffered from its continuing peculiarity. Since slavery,

its people depended on poorly paid farm jobs to get by. Containing

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only about a quarter of the nation’s population, the South

accounted for more than 40 percent of America’s farmworkers,

and they were the worst-paid hands in the country. 25

Often they

were tenant farmers who owed their landlords a share of the crop

they produced and had little control over their livelihoods. ‘‘In

1929, me and my husband were sharecroppers,’’ one woman

recalled. ‘‘We made a crop that year, the owner takin’ all the crop.

This horrible way of livin’ with almost nothin’.’’ 26

As both progress and disaster pushed people off the farms, they

left, as able people throughout history have done, seeking better

chances. As they did before the Depression, many migrants went

West, to California, where the job market might be, and the

weather generally was, better. Luckier ones came by car: in 1931,

more than 800,000 automobiles entered the Golden State. 27

Less

fortunate travelers came by train: in a single month of 1932, the

Southern Pacific Railroad company, whose lines ran into and along

the length of California, figured it had evicted 80,000 freight-

hoppers from the cars it carried. 28

Many of both kinds of migrants

wound up encamped throughout California’s long valleys, living in

tents or small cabins, picking crops for what passed for a

living, surviving—or failing to—on beans and rice. Observers

figured more than a quarter of the children in such camps

suffered from malnutrition, and some of them died of it. 29

The image of Americans living with almost nothing, driven by

drought and storm from their homes, bent under hardship and

persevering by will, soon seared itself into the minds of people all

over the country. In later years, in reporters’ stories and in tales

survivors told, in enduring photographs by Walker Evans and

Dorothea Lange, and accounts by James Agee and Lorena Hickok,

these pictures of poverty in the land of dreamed plenty came to

represent the Depression.

But it is worth remembering too that they did not alone represent

the Depression, and in the dispassionate view of history, the

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sudden affliction of the ordinarily affluent may have mattered

more. For example, not all the luckless migrants belonged to the

chronically poor or even the working class. Many simply found

themselves dispossessed as a region’s economy succumbed, entire,

to the collapse. ‘‘We were living in a very large house and making

good money,’’ the son of a successful tractor salesman recalled,

until ‘‘POW—Dad didn’t have a job anymore.’’ 30

As the whole country trembled, if it did not quite crumble, even

generally well-off Americans who rarely thought much or

concretely about the lot of the poor had suddenly an occasion to

think hard on the matter, even though they might not themselves

lack work, even though, perversely, the Depression allowed such

Americans to live better at lower cost, because sellers in

desperation had so lowered their prices. Yet nobody could live

quite without worry. They mended their shoe leather with

cardboard and stitched pieces of bedsheets together. 31 The recently

introduced brand of adhesive cellophane, Scotch Tape, sold well to

people trying to fix what they had, instead of buying new. 32

The crisis developed further, seeming ever more systemic, ever

more permanent, and Americans came increasingly to believe that

the unfortunate could not, by themselves, bear responsibility for

their plight, and that but for the grace of God almost any of the

nation’s citizens, however prudent and hard-working, might find

themselves out of luck one day. And as their own local

communities proved inadequate to the catastrophe, they listened

increasingly for national voices, which came to them over the

radio.

One such voice belonged to Father Charles Coughlin, whose weekly

radio broadcasts reached Americans nationwide. 33

Coughlin

began his radio career in a parish outside Detroit, taking to the

airwaves in the middle 1920s to defy the local Ku Klux Klan. His

talents and opinions on a widening variety of subjects won him an

ever larger audience. People said you could walk for blocks in

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America’s cities when Coughlin was on the radio and never miss a

word, as the priest’s message drifted out his loyal listeners’

windows into the street. Speaking over a nationwide network in

the Depression, he spoke increasingly about political matters. 34

Coughlin spoke to a mainly middle-class audience, to people who

liked things as they were before the Crash yet who did not own so

much that they could insulate themselves from the material or

psychological effects of the Depression. 35

Coughlin attacked

Communism but, as he told a congressional hearing, he thought

the greatest force for Communism in the world was an intransigent

capitalist like Henry Ford, who by denying his workers’ lesser,

reasonable claim for relief risked a revolutionary claim to

everything. 36

By 1932, Coughlin and his listeners had reason firmly

to put Herbert Hoover in the same intransigent category as Ford.

In his last summer as president, Hoover set himself against a new

claim for relief from a special category of Americans: war veterans.

In 1924 Congress had voted a special supplementary payment, or

bonus, to veterans of World War I based on the length and location

of service. The government issued certificates showing the amount

owing to each veteran, who could collect either in 1945 or upon his

death. As times grew leaner and veterans looked longingly at those

sums due in the distant future, they thought perhaps the

government might relent and pay them a little early. A bonus due

them on their deaths would not do much good, so perhaps they

could have it now. After all, Congress had just, at the president’s

urging, created the Reconstruction Finance Corporation, which

would channel as much as $2 billion to banks and railroads to keep

them afloat. ‘‘If the government can pay $2 billion to the bankers

and the railroads,’’ Coughlin wondered, ‘‘why cannot it pay the $2

billion to the soldiers?’’ 37

Some former soldiers who thought likewise decided to go to

Washington, DC, to stake their claim in person. The major, early

organization came from Portland, Oregon, but before long news of

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the movement inspired other marchers, both singly and in groups.

Washington police began to prepare for the arrival of twenty

thousand men, who became known as the Bonus Army. The Secret

Service infiltrated the march to look for threats and found

‘‘Generally speaking there were few Communists . . . and they

had little effect on the men’s thinking. The veterans were

Americans, down on their luck, but by no means ready to

overthrow their government.’’ 38

On June 7, thousands of soldiers

paraded through the city in front of a hundred thousand

cheering onlookers. 39

Others among the capital’s defenders assessed the marchers

differently. General Douglas MacArthur, then U.S. Army chief of

staff, began gathering forces, including tanks, to defend the city

against the vagabond threat that began to camp, with the help of

city police, across the Anacostia River from the Capitol. Warned

repeatedly that they might look like subversives, the marchers

policed themselves vigorously, organizing courts and less formal

groups to throw out Communists. But it did them no good.

Congress adjourned without voting them relief, and the White

House and the army grew increasingly concerned the longer they

stayed. At the end of July, MacArthur resolved to, in his words,

‘‘break the back’’ of the bonus march with full military force.

Soldiers marched out, fixed bayonets, and fired tear gas on the

marchers and bystanders alike. Cavalry rode into the crowd; as

Major George S. Patton recalled, ‘‘Bricks flew, sabers rose and fell

with a comforting smack, and the mob ran.’’ 40

Afterward

MacArthur claimed he heard, as he generally did, cries of gratitude

from the bystanders. 41

MacArthur’s fans, if extant, were surely a minority. Newsreel

footage of the clash between the armed and unarmed armies

showed tanks rolling through Washington’s streets, the veterans’

camp burning, and smoke drifting past the Capitol dome.

MacArthur and Hoover said they did not believe the men were, in

the main, really veterans at all. But the images of American soldiers

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chasing poverty-stricken Americans petitioning their congressmen

elicited the sympathy of viewers. ‘‘I felt myself one of them,’’ one

woman said. 42

In Albany, the governor of New York state and Democratic

presidential nominee Franklin D. Roosevelt read about the Bonus

March in the New York Times. Looking at the coverage, he told an

aide that they scarcely needed to take Hoover seriously as an

opponent after this disaster. Roosevelt said he might feel sorry for

Hoover if he did not already feel sorry for the marchers. Indeed,

Roosevelt himself did not think the government could afford to pay

the men a bonus—indeed, he would veto a bonus bill as president—

but, he thought, the men still deserved some sympathetic attention.

He thought for a while, smoking. Still, he said, the men making

their claim on the government, abused by the administration,

‘‘made a theme for the campaign.’’ 43

Notes

1. William L. Manchester, The Glory and the Dream: A Narrative

History of America, 1932–1972 (Boston: Little, Brown, 1974), 27;

Studs Terkel, Hard Times: An Oral History of the Great Depression

(New York: New Press, 2000), 20–21.

2. ‘‘The Lyrical Mr. Harburg,’’ New York Times, 1/8/1933, X2.

3. Lester V. Chandler, America’s Greatest Depression, 1929–1941

(New York: Harper and Row, 1970), 34.

4. David E. Kyvig, Daily Life in the United States, 1920–1940: How

Americans Lived through the ‘‘Roaring Twenties’’ and the Great

Depression (Chicago: Ivan R. Dee, 2002), 208.

5. Chandler, America’s Greatest Depression, 35.

6. Ibid., 41.

7. Lizabeth Cohen, Making a New Deal: Industrial Workers in

Chicago, 1919–1939 (Cambridge: Cambridge University Press,

1990), 218–21.

8. Terkel, Hard Times, 145.

9. Chandler, America’s Greatest Depression, 44.

10. ‘‘20.5% of City Pupils Are Found Underfed,’’ New York Times,

10/29/1932, 17.

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11. Mirra Komarovsky, The Unemployed Man and His Family (New

York: Arno Press, 1971), 133.

12. Ibid., 82.

13. Terkel, Hard Times, 107–8.

14. James R. McGovern, And a Time for Hope: Americans in the Great

Depression (Westport, CT: Praeger, 2000), 10.

15. Claudia Dale Goldin, Understanding the Gender Gap: An Economic

History of American Women (New York: Oxford University Press,

1990).

16. Winifred D. Wandersee Bolin, ‘‘The Economics of Middle-Income

Family Life: Working Women During the Great Depression,’’

Journal of American History 65, no. 1 (1978): 70–71.

17. William H. Chafe, The Paradox of Change: American Women in the

20th Century (New York: Oxford University Press, 1991), 71.

18. William A. Sundstrom, ‘‘Last Hired, First Fired? Unemployment

and Urban Black Workers During the Great Depression,’’ Journal

of Economic History 52, no. 2 (1992): 421.

19. See also Gary Gerstle, American Crucible: Race and Nation in the

TwentiethCentury (Princeton:PrincetonUniversity Press,2001),177.

20. 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 Da2; Peter

Fearon, War, Prosperity, and Depression: The U.S. Economy,

1917–1945 (Oxford: Philip Allan, 1987), 176.

21. Kevin Starr, Endangered Dreams: The Great Depression in

California (New York: Oxford University Press, 1996), 224.

22. Chandler, America’s Greatest Depression, 56.

23. Ibid., 63.

24. Donald Worster, Dust Bowl: The Southern Plains in the 1930s

(New York: Oxford University Press, 1979), 11.

25. Kyvig, Daily Life, 211; Bruce J. Schulman, From Cotton Belt to

Sunbelt: Federal Policy, Economic Development, and the

Transformation of the South, 1938–1980 (Durham, NC: Duke

University Press, 1994), 3.

26. Terkel, Hard Times, 232.

27. Starr, Endangered Dreams, 23.

28. Ibid., 226.

29. Ibid., 229.

30. James N. Gregory, American Exodus: The Dust Bowl Migration

and Okie Culture in California (New York: Oxford University

Press, 1989), 16.

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31. Manchester, Glory and the Dream, 35.

32. Kyvig, Daily Life, 227.

33. Alan Brinkley, Voices of Protest: Huey Long, Father Coughlin, and

the Great Depression (New York: Vintage, 1983), 92.

34. Ibid., 94.

35. Ibid., 197–98.

36. Ibid., 102.

37. Paul Dickson and Thomas B. Allen, The Bonus Army: An American

Epic (New York: Walker and Company, 2004), 51.

38. Ibid., 82.

39. ‘‘7,000 in Bonus Army Parade in Capital, Orderly but Grim,’’ New

York Times, June 8, 1932, 1.

40. Dickson and Allen, Bonus Army, 176.

41. Ibid., 174.

42. Ibid., 193.

43. Rexford Guy Tugwell, The Brains Trust (New York: Viking, 1968),

357–59.

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0

200,000

400,000

600,000

Unemployment Real GDP

800,000

1,000,000

1,200,000

0 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940

5

10

15

20

25

3. GDP and Unemployment. Unemployment as a percentage of the

civilian labor force, measured on the vertical axis, and real GDP in

millions of 1996 dollars, measured on the right vertical axis.

Chapter 4

Reflation and Relief

When Franklin Delano Roosevelt took the oath of office as

president for the first time on March 4, 1933, every moving part in

the machinery of the American economy had evidently broken.

Banks, farms, factories, and trade had all failed.

Roosevelt right away began working to repair finance, agriculture,

and manufacturing, though he would give less attention to

overseas economic affairs. As Isaiah Berlin afterward noted,

Roosevelt’s ‘‘great social experiment was conducted with an

isolationist disregard of the outside world.’’ The New Deal worked

to solve the current crisis and prevent future catastrophe in

America alone, by American methods, ‘‘with a minimum of

relationship with the outside world, which [Berlin continued] was

indeed to some degree part of American political tradition.’’ 1

The Roosevelt agenda grew by experiment: the parts that worked,

stuck, no matter their origin. Indeed, the program got its name by

just that process: Roosevelt used the phrase ‘‘new deal’’ when

accepting the Democratic nomination for president, and the press

liked it. 2 The ‘‘New Deal’’ said that Roosevelt offered a fresh start,

but it promised nothing specific: it worked, so it stuck.

The administration’s policies to revive the money and credit of the

country together with its policies to relieve the immediate misery of

56

the American people ranked among the earliest and most enduring

successes of the New Deal. From the time of their initial

implementation in 1933 to the mobilization for war production in

1940, with the sole exception of the recession of 1937–38, the

American economy grew at averaged rates of around 8 to 10

percent a year. Likewise, unemployment fell dramatically from its

unconscionable 1932 peak. If merely curing the immediate

Depression were the only New Deal goal, its policies of relief and

reflation might, pursued vigorously and consistently, have proved

sufficient to the task, and their evident success had much to do

with the electorate’s willingness to support Roosevelt.

Roosevelt began by rescuing the banks. Two days after taking

office, he declared the nation’s banks must stop transactions in

gold, thus shutting them down, and he asked Congress to ratify his

action. Congress complied with the Emergency Banking Act on

March 9, which affirmed Roosevelt’s action, and appointed a

receiver with the power to reorganize banks if necessary. In

addition, the law empowered RFC to buy bank stock and allowed

the Federal Reserve System greater latitude in issuing currency,

both measures meant to make money more readily available. 3

Three days later, Roosevelt spoke to the nation over the radio for

the first of a series of ‘‘fireside chats,’’ in which he explained how the

banks worked, what he had done, and that ‘‘I hope you can see

from this elemental recital of what your Government is doing that

there is nothing complex, or radical, in the process.’’ 4 The next day,

March 13, banks began to open. Ultimately, the bill allowed about

half the country’s banks to reopen without qualification, a quarter

to reopen with some limits on withdrawals, a fifth to undergo

reorganization, and required the remainder—about 1,000 banks—

to close up shop. 5

The bank holiday set a recurring pattern for New Deal legislation.

The president would take swift action of sometimes dubious

constitutionality—in this case, Roosevelt rested his authority for

bank closures on the not transparently applicable Trading with the

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Enemy Act, passed during World War I and giving the president

powers during war. 6 Congress would quickly comply, often adding

to the bill measures that went further even than Roosevelt

originally anticipated—in this case, not only did Congress amend

the Trading with the Enemy Act to include peacetime emergencies,

it added banking law that drew on preceding state action and on

measures legislators had contemplated during the Hoover

administration. The president would sell the action, with the

charming combination of his aristocratic accent and plain

language, to the American public—in this case, saying simply, ‘‘ We

had a bad banking situation.’’ Roosevelt would also go beyond

simple folksiness into a teacherly explanation of the circumstances

and his policy, trying truly to explain the technical details of the

emergency and his response. However precipitous Roosevelt’s

4. Franklin D. Roosevelt seated behind a microphone during a

Fireside Chat in 1937.

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action, he aimed at fundamentally conservative goals. As one of his

advisors, Raymond Moley, later wrote, as a result of the bank

holiday, ‘‘Capitalism was saved in eight days.’’ 7 Or at least a part of

capitalism, anyway. With achievements like this, the crisis in which

the country found itself would incrementally improve, earning the

administration a degree of credibility and perhaps the latitude for

further and lasting reform of the American economic system.

The reform came three months later in the Banking Act of 1933,

which owed almost nothing to Roosevelt. The law increased the

power of the Federal Reserve Board to regulate banking, divided

the banks that dealt with public depositors from those that

invested on Wall Street, and—against Roosevelt’s initial

judgment—established a temporary Federal Deposit Insurance

Corporation (FDIC) through which the federal government stood

behind the ordinary American’s savings. The president worried

that the government would one day find itself forced to pay out too

large a sum for failed banks, but he accepted the plan—wisely, as it

turned out: under FDIC bank failures dropped by an order of

magnitude. 8 In 1935 Congress gave FDIC a permanent charter.

In its conservative, capitalism-saving aspect, the story of banking

reform adumbrates the later, larger story of the New Deal;

throughout, Franklin Roosevelt emphasized his economic

orthodoxy. In his radio address he explained that although the

Federal Reserve Board could issue more currency now, this

currency would rest on a sound basis. ‘‘This currency is not

fiat currency,’’ he declared. Yet even as he assured the voters,

and perhaps himself, of his staid intentions with respect to the

currency, he was moving in the opposite direction.

Ever since the 1890s, when the Democratic Party first began to

shift from its historic support for limited government, and when,

under the leadership of William Jennings Bryan, it began to stand

for the ordinary man against the great manufacturing

corporations, the Democrats also had a soft spot for soft money.

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Bryan stood for the farmer and the worker against the gold

standard, adherence to which was driving down the price of

agricultural commodities. Instead, Bryan argued, the country

should coin silver, inflating—or, properly, reflating—the currency

and relieving the downward pressure on prices. Forty years on, the

situation looked similar. Roosevelt not only depended on the farm

vote, but like Bryan and many if not most Americans, he thought

fondly of the nation’s long-vanishing family farms, and he hoped to

provide them the same relief that Bryan had proposed: more

money in circulation, higher dollar prices for their produce, and an

easier time repaying their debts. As he said in January 1933, ‘‘If the

fall in the price of commodities cannot be checked, we may be

forced to an inflation of our currency. This may take the form of

using silver as a base, or decreasing the amount of gold in the

dollar. I have not decided how this inflation can be best and most

safely accomplished.’’ 9

To inflate the currency, Roosevelt would have to cut the dollar

loose from gold, to which it, like the other major currencies of the

world, had been anchored. Under the gold standard, countries, in

theory, agreed to keep their currencies convertible to gold by

maintaining only so much money in circulation as their gold

reserves warranted. If their gold reserves fell—because, perhaps,

their creditors demanded payment—they would have to use their

central banks to reduce the money supply within their economies,

lest their currencies drop in value. As early as 1929, after the drop-

off in U.S. overseas lending and the rise in protective tariffs, the

requirement of keeping their currencies in proportion to their gold

supplies became too burdensome to a number of Latin American

and European countries. The 1931 failure of Credit-Anstalt, a

major Austrian bank, led to worldwide gold withdrawals, including

from the financial capital of the world, London. By September,

Britain had to withdraw itself from the gold standard. To bankers,

politicians, and other people who regarded the British empire as

solid and the gold standard as the foundation of its solidity, this

abandonment looked dire indeed.

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In the face of this crisis, the Federal Reserve System raised interest

rates to discourage gold withdrawals from the United States.

Investors would see the higher rates and know, first, that they

could realize a higher return in America, and so keep their money

there, and second, that by making money more expensive to

borrow, the Federal Reserve meant to reduce the amount in

circulation, thus defending the dollar’s convertibility to gold. 10

Satisfactory though this strategy might prove to proponents of the

gold standard, it made money more expensive at a time when many

Americans desperately needed it cheaper. Easier money would

have meant more borrowing, more investment, and more jobs. But

the system’s bankers chose the gold standard over relief of

domestic troubles. Hoover made a joint announcement with the

French prime minister, Pierre Laval, in support of the gold

standard. American central bankers stood with their French

counterparts, who ‘‘consider[ed] the convertibility into gold not as

a servitude which has grown out of date, but as a necessary

disciplinary requirement. We see in it the only efficient guarantee

for security of contracts and for the morality of business

transactions.’’ 11

The 1933 Emergency Banking Act only temporarily cut the dollar’s

tether to gold. But in April, Roosevelt issued an executive order

preventing Americans from holding gold, except in small amounts,

and required them to turn their gold in to Federal Reserve

Banks in return for other currency. A few weeks later the

president let it be known, the New York Times reported, that

‘‘He foresaw . . . a situation arising where the radical element

in Congress . . . might . . . enact legislation of a revolutionary

character’’—perhaps to coin silver. To prevent this radical action,

Roosevelt allowed that ‘‘some sort of inflation might be helpful,’’

but perhaps better that he provide it himself rather than leave it to

Congress. 12

It became clear that the temporary escape from gold

might represent a new policy entirely. Under the Thomas

Amendment to the Agricultural Adjustment Act of May 12,

Congress allowed the president to fix the price of the dollar in gold.

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The dollar price of gold rose from its previous rate of $20.67 per

ounce to $30 per ounce. At the end of the summer, Roosevelt

began using RFC to buy gold at steadily higher prices. In a

fireside chat he announced, ‘‘My aim in taking this step is to

establish and maintain continuous control. This is a policy, not

an expedient! . . . We are thus continuing to move toward a

managed currency.’’ 13

In January 1934, Congress passed the

Gold Reserve Act, upon which Roosevelt fixed the price of gold

at $35 per ounce and took title of all the monetary gold in the

country. 14

The New Deal Congresses reacted to the widespread belief that the

bankers and brokers had caused the crash by giving Roosevelt

and his appointees extraordinary discretion to manipulate money

and banking, which if they had used recklessly might have

damaged the financial industry and the American economy. In

addition to the Emergency Banking Act and the Thomas

Amendment, the Securities Exchange Act of 1934 created the

Securities and Exchange Commission (SEC), broadly empowered

to regulate Wall Street by preventing traders’ misuse of insider

information. 15 The Banking Act of 1935 put control of the Federal

Reserve System in its board of presidentially appointed governors,

rather than in the system’s bankers. 16

Roosevelt managed to avoid

some of the potential opprobrium from business by judicious use of

power and by careful appointments, as when he reassured nervous

bankers by appointing veteran trader Joseph Kennedy the first

chairman of SEC. Within a few years businessmen gave only SEC

among New Deal regulatory agencies a greater than 50 percent

approval rating. 17

Aside from his political judgment, luck also blessed Roosevelt in

the use of his broad new powers. When the dollar fell in value, the

price of farm commodities, particularly cotton and grain, rose,

making it easier for indebted farmers to pay their creditors. 18

Perhaps more importantly, overseas investors began selling their

gold for dollars. Gold began flowing into the United States. The

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United States had always enjoyed a peculiar position among

nations, securely connected to Europe through economic and

cultural ties, yet geographically and politically distinct. And now

this position began to benefit Americans as political upheaval in

Europe, coupled with first the threat and then the actuality of war,

increased the golden inflow through the 1930s. This gold put

American banks in a much more stable position, increasing the

money supply to the American economy. Banks began offering

credit at lower interest rates, making it possible for businessmen to

consider borrowing and investing in those aspects of their

enterprises that would create more jobs, which helped account for

the drop in unemployment during Roosevelt’s term. 19

The Roosevelt administration did more than its predecessor to

revive American banking, and its efforts evidently succeeded. But

the New Deal’s financial policies—however plainly Roosevelt

explained them over the radio—dealt with matters far removed

from ordinary Americans’ experience. Later laws did more to put

the federal government into the business of backing citizens’

investments—the federal government insured mortgages and

through dedicated agricultural agencies worked to secure farmers’

credit. But in 1933, Roosevelt’s policymakers knew they must reach

ordinary Americans more directly and quickly than they could by

saving banks and stabilizing credit. During the Roosevelt

administration, the federal government of the United States began

for the first time to offer substantial direct aid to the nation’s

unemployed. These relief measures emerged piecemeal from

political compromises, rather than from blueprints, and changed

considerably over the years. The last year of Hoover’s

administration brought the beginnings of a federal relief program,

but it came grudgingly and too slow: the Emergency Relief and

Construction Act of 1932 allowed RFC to loan up to $300 million

to states for relief. But the program, offering as it did loans rather

than grants, and going through existing state bureaucracies,

accomplished little and certainly came too late to lift Hoover in

public opinion. 20

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Early in the New Deal, congressmen found it easy to identify young

unemployed men as especially worth their attention. Young

workers, with fewer skills and experience, found themselves out of

work more often than workers at the peak of their powers. Yet by

virtue of their youth they represented great promise. Young men, by

the standards of the era, stood to become future heads-of-household

and family providers. Contrariwise, if nobody did anything to help

them soon, young men were most likely to leave their communities,

becoming tramps or hoboes, posing a threat to social order.

Thus on March 31, 1933, within the first month of the Roosevelt

administration, Congress created the Civilian Conservation Corps

(CCC), which it chartered initially to provide work for men

between the ages of 18 and 35 (inclusive). If single, healthy,

unemployed, an American citizen, and a member of a family on

relief, a young man could join the CCC, sign over a significant

chunk of his wages to his family, and head out for a camp,

organized and run by the War Department, somewhere in the

American countryside. The Agriculture and Interior Departments

had a list of jobs to preserve the nation’s crops and forests. Floods

and forest fires needed preventing and fighting; pests required

eradication; roads and bridges, fences and firebreaks all wanted

building. A few hundred thousand of the country’s young men,

culled from the unemployment rolls and kept to around two and a

half thousand camps, supervised by soldiers, seemed just the

solution for these problems. 21

Americans might have worried about CCC’s quasi-military

qualities and the potential for indoctrination of the nation’s youth

in government-run camps. But the boys generally served short

stints—initial enrollment lasted six months, and legislation later

limited enrollment to two years. And as a small, closely focused

program justified by generally agreed-upon beliefs identifying

young men as especially worthy of the government’s resources,

CCC enjoyed a comparative freedom from criticism not extended

to other New Deal relief programs. 22

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In May, Congress passed the Federal Emergency Relief Act, which

created the Federal Emergency Relief Administration (FERA),

devoting another $500 million of RFC’s money to grants, rather

than loans, to the states to support relief. Half the money would go to

states based on how much money they themselves spent; the other

half relied on the discretion of FERA’s administrator. Roosevelt

appointed Harry Hopkins, a rail-thin, chain-smoking social worker

who ran New York State’s relief efforts when Roosevelt was

governor, to head the agency. Hopkins set up a desk in a corridor of

RFC’ s offices and began handing out money to the states. 23

In June, Congress appropriated $3.3 billion, which became the

purse of the Public Works Administration (PWA). As the nation’s

gross domestic product for 1933 amounted only to $56.4 billion,

this sum amounted to an extraordinary 5.9 percent of the

American economy’s overall size that year. 24

Roosevelt appointed

his secretary of the interior, Harold Ickes, to run PWA. Originally a

Republican from Chicago, Ickes used his vast resources carefully,

treating PWA often only as a financing agency for local

governments, which had to design, authorize, and appropriate

most of the funds to back a major project if they wished to qualify

for Ickes’s largesse.

In consequence of Ickes’s care and Hopkins’s comparatively small

budget, the early relief effort, even though it earned headlines,

made scarcely a dent in the problem of unemployment. Watching

as the nation headed into another Depression winter, Hopkins

urged on Roosevelt the creation of a new agency, one that would

allow him to bypass state officials and employ people directly.

Roosevelt obliged by creating the Civil Works Administration

(CWA) and charging Hopkins with hiring four million Americans,

which he did, by January 1934. Mindful of Americans’ attitudes

toward public assistance, Hopkins meant CWA to dignify relief by

providing work to employees, rather than handouts to clients.

Soon CWA workers were fixing up city halls, docks, and public

roads, all on the federal government’s payroll.

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If to Americans of later generations PWA, FERA, CCC, CWA,

and RFC, along with their many sibling New Deal agencies,

made up a bewildering alphabet soup of bureaucracies,

Americans in the 1930s had reason to know which was which.

They knew RFC was Hoover’s bank-saving agency (now become

the pot from which many New Deal agencies scooped a portion),

that CCC enrolled their sons and brothers to protect the

American land, that PWA would soon build a school, hospital,

bridge, port, causeway, or airport (although it had not begun yet),

and that CWA got them through the bitter, record-setting cold of

winter in 1933/34. 25

Likewise, the money Congress appropriated for various New Deal

programs often later seemed like so many variously sized drops in

an ocean of fiscal red ink. In 1932, the federal government spent

only about half what the state and local governments spent. By the

eve of World War II, the New Deal had more than doubled federal

spending. All the while lawmakers, and especially the president,

fretted over the millions and billions they added to the federal

budget. 26

Partly for this reason, CWA did not last. Its expense, and even the

gratitude with which Americans greeted it, made Roosevelt

nervous. He did not like spending more money than the

government took in, nor did he like letting Americans rely directly

on the federal government for relief programs. In his skittishness

Roosevelt conceded the necessity of a national work relief

program, but he did not want it to ‘‘ become a habit with the

country.’’ And before spring he had ordered Hopkins to fire his

four million workers, in the vain hope that the brief program had

provided enough of a push. 27

Despite the phased demobilization

of CWA, staggered to prevent too many people from going on the

market at once, it left people writing Hopkins plaintively for

‘‘some kind of aid a job any where any kind of work’’ and

administrators complaining that a public work half done was

worse than one never begun. 28

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Despite Roosevelt’s nerves, he liked the idea of work relief better

than handing out money. So when by the end of 1934 the

Depression still had not lifted, his administration began designing

a new program of work relief. Americans of the 1930s knew that

work relief cost more than direct relief. Simply paying money to the

poor was cheaper than setting up a bureaucracy to plan projects to

employ the poor. But pride and their morality led them to prefer

the costlier course, which allowed desperate Americans the dignity

of meaningful work.

The spring of 1935 brought a new Emergency Relief Appropriation

Act, giving the president nearly $5 billion for relief projects

including highways, conservation, irrigation, electrification,

housing, sanitation, reforestation, flood control, and indeed almost

any conceivable public good. 29

Roosevelt used the act to set up the

Works Progress Administration (WPA), which took over from

FERA and became Hopkins’s new brief. With WPA, the New Deal

government frankly and fully entered the business of hiring the

American people to end the Great Depression. Whereas PWA and

FERA mostly respected the existing federal structure of the United

States, by spending money from the national treasury through

state and local governments, WPA repeated and magnified the

brief CWA experience, making it an ongoing and central feature of

New Deal government.

With WPA, Hopkins once more hired millions, and put them to

work building hospitals, schools, playgrounds, and airports. This

agency employed artists and writers and actors to ply their trade. It

built roads and public housing. but it also drew immediate

criticism for spending public money to pay idle hands to do useless

work poorly. The purpose and structure of the agency not only

guaranteed it would get these complaints, it further guaranteed

that such critiques would have some truth in them. Roosevelt

meant WPA to hire as many people as quickly as possible to reduce

unemployment as much as possible. To really reduce

unemployment, its projects could not do what private enterprise

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was doing, or what local governments were doing; otherwise, the

federal government would simply be substituting WPA jobs for

already existing jobs and would thus not reduce unemployment. As

a result, WPA jobs might well look like the sort of project that

would not ordinarily get done—make-work, or boondoggles, or

(less ungenerously) the comforts of civilization.

Moreover, WPA offered a temptation for at least mild political

corruption. Hopkins had money to give out to local officials,

mayors who normally had to beg indifferent or hostile state

legislators for support. Now someone in Washington, someone

with funds, wanted their friendship. Big-city mayors who governed

large voting populations had an especially good claim on WPA’s

attention.

Congress responded to concerns about WPA’s possible political

uses by drawing ever-narrower boundaries around the agency,

boundaries that by themselves indicate what worried or offended

people about the agency. From 1936, illegal immigrants could not

work for WPA. From 1937, WPA workers had to accept private-

sector offers or be released from the agency. From 1938, WPA

employees had to supply a quarterly statement of outside

earnings, if any; veterans had first right to a WPA job, then

American citizens, then immigrants who had declared an intent to

become citizens. Other immigrants could not apply. From 1939,

workers could stay on the rolls for only eighteen months unless

recertified as needy, and WPA workers had to be American

citizens. 30

While Congress tried to prevent the political use of WPA, criticism

of its projects backfired. Public works that might look extravagant

at first glance (a $25,000 dog pound for Memphis, Tennessee, for

example) turned out to serve a useful purpose, reducing the

number of dog bites and treatments for rabies in the city. 31

Each

project proved popular in its own community. And WPA built a

great many projects.

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On the whole, WPA embodied new assumptions about earnings.

It defined a ‘‘security wage,’’ which though minimally adequate

was often higher than private bosses wanted to pay, and its

paychecks came with a regularity previously unknown to workers

accustomed to seasonal or cyclical unemployment. It contributed

legitimacy to the once unorthodox idea that Americans deserved a

certain degree of job security and a minimum standard of living as

an essential part of their dignity. Americans, WPA’s ‘‘security

wage’’ suggested, ought to earn a wage sufficient to provide them

more than subsistence, enough to allow them pride and

independence from their employers. 32

A 1939 Institute of Public Opinion poll found that, when asked to

name ‘‘the worst thing the Roosevelt Administration has done,’’

23 percent of Americans picked ‘‘Relief and the WPA,’’ making it

the most unpopular New Deal measure. Given the American

prejudice against federal relief and the potential for political abuse,

it was scarcely surprising. The same poll found that, when asked to

name ‘‘the greatest accomplishment of the Roosevelt

administration,’’ 28 percent of Americans picked ‘‘Relief and the

WPA,’’ making it the most popular New Deal measure. Given the

variety and local popularity of relief projects, this was unsurprising

too. That 5 percent margin on an issue central to the New Deal

made more than enough political difference to the Democrats. 33

Between the immediate effects of relief, which gave Americans

not just something to spend, but the ability to regard themselves

again as decent and productive citizens, and the longer-term

effects of reflation, which quietly began rebuilding the

private-sector economy, the Roosevelt administration might

have had an adequate strategy for fighting the Depression,

although for the government really to pull the country out of

its economic slough would require a more vigorous pursuit of

both policies. But its policymakers wanted to accomplish

something further and different than the mere conclusion of

a crisis: they wanted to make sure the Depression could

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not happen again. To do so, they expected to change the American

political economy forever.

Notes

1. 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), 629.

2. William E. Leuchtenburg, Franklin D. Roosevelt and the New Deal,

1932–1940 (New York: Harper Torchbooks, 1963), 8.

3. James Stuart Olson, Saving Capitalism: The Reconstruction

Finance Corporation and the New Deal, 1933–1940 (Princeton:

Princeton University Press, 1988), 30.

4. First Fireside Chat (Banking), May 12, 1933, consulted online

2/27/2007, www.presidency.ucsb.edu/ws/index.php?pid¼14540. 5. Peter Fearon, War, Prosperity, and Depression: The U.S. Economy,

1917–1945 (Lawrence: University Press of Kansas, 1987), 219.

6. Samuel Anatole Lourie, ‘‘The Trading with the Enemy Act,’’

Michigan Law Review 42, no. 2 (1943).

7. Raymond Moley, After Seven Years (New York: Harper and

Brothers, 1939), 155.

8. Milton Friedman and Anna Jacobson Schwartz, A Monetary

History of the United States, 1867–1900 (Princeton: Princeton

University Press, 1963), 437.

9. Barrie A. Wigmore, ‘‘Was the Bank Holiday of 1933 Caused by a Run

on the Dollar?,’’ Journal of Economic History 47, no. 3 (1987): 743.

10. Lester V. Chandler, American Monetary Policy, 1928–41 (New

York: Harper and Row, 1971), 177.

11. Ibid., 168.

12. ‘‘President’s Action Forced by Events,’’ New York Times,

4/20/1933, 1.

13. Chandler, American Monetary Policy, 276.

14. ‘‘President’s Statement of Action under the New Law,’’ New York

Times, 2/1/1934, 12; Gold Reserve Act is 48 Stat. 337; Friedman

and Schwartz, Monetary History, 465.

15. 48 Stat. 881.

16. Richard H. Timberlake, Monetary Policy in the United States: An

Intellectual and Institutional History (Chicago: University of

Chicago Press, 1993), 283.

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17. Ralph F. de Bedts, ‘‘The First Chairmen of the Securities and

Exchange Commission: Successful Ambassadors of the New Deal

to Wall Street,’’ American Journal of Economics and Sociology 23,

no. 2 (1964): 176.

18. Christina D. Romer, ‘‘Why Did Prices Rise in the 1930s?,’’ Journal

of Economic History 59, no. 1 (1999): 174.

19. Romer, ‘‘What Ended the Great Depression?,’’ Journal of Economic

History 52, no. 4 (1992): 757.

20. Lewis Meriam, Relief and Social Security (Washington, DC:

Brookings Institution, 1946), 346.

21. Ibid., 434–42. Also Neil M. Maher, Nature’s New Deal: The

Civilian Conservation Corps and the Roots of the American

Environmental Movement (New York: Oxford University Press,

2007).

22. Meriam, Relief and Social Security, 441–42.

23. Leuchtenburg, Franklin D. Roosevelt, 120–21.

24. Historical Statistics of the United States, Millennial Edition

Online, series Ca74.

25. Leuchtenburg, Franklin D. Roosevelt and the New Deal, 122.

26. Historical Statistics of the United States, Millennial Edition

Online, series Ea18.

27. Leuchtenburg, Franklin D. Roosevelt and the New Deal, 122.

28. Bonnie Fox Schwartz, The Civil Works Administration, 1933–

1934: The Business of Emergency Employment in the New Deal

(Princeton: Princeton University Press, 1984), 234.

29. Meriam, Relief and Social Security, 354–56.

30. Ibid., 380–82.

31. Jason Scott Smith, Building New Deal Liberalism: The Political

Economy of Public Works, 1933–1956 (Cambridge: Cambridge

University Press, 2006), 149.

32. Meriam, Relief and Social Security, 385.

33. ‘‘Relief Top Issue, Survey Indicates,’’ New York Times, 6/4/

1939, 27.

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Chapter 5

Managing Farm and Factory

The New Deal’s earliest efforts to rewrite the rules of the United

States’ political economy included two major agencies to centralize

the planning of American production. Both efforts had more to do

with ambitions dating back to World War I than with responses to

the current crisis. And major components of both efforts failed

politically, but in their failure they pointed the way to a different

policy for preserving American capitalism.

If American money and banking policy put the United States on

the road to recovery within the first year of the Roosevelt

administration, it did little to help stabilize the world economy.

Indeed, as American monetary policy brought gold into the United

States, other countries felt pressure as their money supplies

dwindled. Roosevelt made it amply clear in his first year that he

could spare no thought for other countries as long as the American

situation remained so dire. In the summer of 1933 he scuttled the

international London Economic Conference by sending the

message, ‘‘The sound internal economic system of a Nation is a

greater factor in its well being’’ than anything the conference could

decide. 1 The peoples of the rest of the world would have each to

find their own route out of the crisis.

Some countries left the gold standard and began groping their own

way back to prosperity, in some cases by establishing exclusive

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trade relations within their old colonial empires. Everywhere,

falling commodity prices hit farmers cruelly hard, and many

colonized countries had few major occupations besides farming.

Colonies, as ever, found themselves at the mercy of their imperial

masters. Latin American countries sought bilateral trade

arrangements to ensure purchases, Brazil offering coffee for

German machinery and Argentina selling beef to Britain.

As the crisis continued, political parties gained support by

proposing radically new systems of social organization. Fascist and

Communist movements gathered strength by promising various

forms of state socialism that would control national economies and

restore stability. Anti-imperialist movements arose to promise

independence to beleaguered farmers in the colonized world. 2

Everywhere, people hurt by the Depression sought some new form

of society immune to the ailments they faced. Or almost

everywhere: while the United States experienced some of the same

pressures, and sometimes its sufferers saw themselves in similar

terms to their peers in other countries, its radical movements

looked more traditional than novel. For example, one American

farm advocate declared that ‘‘American agriculture stands in just

the same subservient position to American industrialism that the

colonies occupied toward England a century and a quarter

earlier.’’ 3 But unlike their similarly economically subservient

colonial cousins, American farmers had representation in their

legislature—indeed, more representation than their numbers alone

would merit. In consequence, although the New Deal included

American experiments with economic planning, the tactics

adopted had less to do with radical responses to the immediate

crisis and more to do with the long history of farm grievances in

America.

By the time the United States sank into the Great Depression, the

country had already seen seventy years of nearly constant agitation

for federal action in favor of farmers. The legislation of the Civil

War era—principally the Homestead Act, the Pacific Railroad Act,

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the Morrill Land Grant Act—encouraged Americans to go West in

the belief they would there find land on which they could settle into

single-family farming. The Reconstruction of the South after the

war had, albeit briefly, encouraged similar hopes of establishing

more single-family farms there. But small-time farmers in America

came soon to grief, suffering various combinations of aridity, debt,

infestation, and the consolidation of farmland in fewer, larger

holdings.

As one economic history of the United States has it, ‘‘Farmers are

always unhappy.’’ 4 ‘‘Always’’ may slightly overstate the case, but

even so, a variety of factors conspired to keep farmers on edge for

almost the entirety of the early twentieth century. Expensive and

innovative technologies made farming less a family pursuit and

more an industrial concern, with sound credit and efficiency

surpassing diligence and hardihood as the cardinal agrarian

virtues. The extension of transportation networks throughout the

world put farmers ever more obviously into competition with an

international market. Even as farmers faced more overseas

competition, they saw American tariff policy protect their fellow

citizens in manufacturing from the same pressures: for much of

this period, Congress favored using import taxes to prevent foreign

factories from selling their goods in the American market. Behind

the shield of the tariff, farmers saw, American manufacturers could

reduce production and raise prices without fear of international

competitors undercutting them. Meanwhile, the American people

moved in droves to cities, putting urban life and concerns at the

center of national debate and relegating agriculture to the margins.

While farming dwindled in economic and cultural importance,

farmers retained an outsized influence on national politics.

Because the United States Senate allocates legislators to states, not

to people, it overrepresents the less populated, more heavily

agrarian states of the nation. In consequence, farmers retained

great, though waning, influence in national politics even as they

became fewer in number. Further, Congress’s failure to adopt a

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redistricting scheme after the 1920 Census—the first

count that showed more Americans living in cities than on

farms—guaranteed that rural Americans enjoyed better

representation in the House of Representatives than their

numbers warranted. 5

Into the 1920s, the effects of World War I rendered more acute the

chronic unhappiness of American farmers. During the war, the

United States shipped meat and grain to its allies, rationing them

at home on wheatless and meatless days. Thus deprived of their

traditional diet, Americans learned to eat more of the more

perishable fruits and vegetables, which also—Americans

found—kept them healthier. Also, the passage of laws prohibiting

manufacture and sale of alcoholic drinks reduced consumption

of grain. Thus demand for the staples of the American farm fell. 6

At the same time, farmers increased their harvests. While the

European powers waged war, American farmers rushed to feed

them, turning fields over to grain that might otherwise have lain

fallow or served as pasture. When the war ended, this extraordinary

demand ceased, but American farmers generally kept up their new

levels of productivity in the hope that prosperity might return. 7

With decreased demand and increased supply, farm prices fell.

They might have risen again if enough people left farming for other

pursuits and turned their land over to other uses. But many

American farmers wanted to remain farmers; they just wanted to

become better paid ones. So they banded together to lobby for

legislation restoring them to parity with their fellow countrymen in

the cities. They wanted to stay on the farm but live as comfortably as

people who worked in offices and factories. And increasingly, they

pointed to the era just before World War I as their golden mean,

when farm goods fetched what they saw as a fair price.

To return to that period of parity, farmers believed, they would

have to arrange their economic activity much as manufacturers

did, which meant controlling prices by curbing production. As

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Henry A. Wallace, who would serve as secretary of agriculture

under Franklin Roosevelt, said in 1922, ‘‘It is no more wrong for

farmers to reduce production when prices are below cost of

production than it is for the United States Steel Corporation.’’ 8 To

Wallace and his allies, U.S. Steel symbolized all industrial

corporations that enjoyed advantages farmers did not: the tariff

protected manufacturers from foreign competition, and the scale

and scope of their operations let a central office reach decisions

that swayed the entire domestic market. Providing similar benefits

to agriculture meant first of all, as one advocate put it, ‘‘getting the

tariff to the farmer.’’ 9 But just blocking imports with a tariff

would have done no good, as American farmers were already

producing far more than the domestic market could consume. So

farmers needed further methods of gaining benefits similar to

those enjoyed by industry. In addition, farmers could only pine

for the centralized efficiency of major corporate offices: farm

producers were too many and too scattered to decide on

concerted activity.

In the early 1920s, farm advocates sketched a plan to skirt these

obstacles. George Peek, president of the Moline Plow Company in

Illinois, along with his business partner, Hugh S. Johnson,

realizing ‘‘you can’t sell a plow to a busted farmer,’’ developed an

idea that the farm bloc in Congress supported. Peek and Johnson

had both worked with the War Industries Board (WIB), the agency

that regulated American production during World War I, and they

believed their experience of managing an economy almost totally

sealed off from the world market would suit the country now.

A tariff, they thought, should block imports of farm goods, and a

government corporation should buy up any crop surplus and seek

to export it overseas. Farmers’ marketing associations would

work to coordinate domestic production. Peek’s plan became the

basis for the McNary-Haugen bills passed by Congress in the late

1920s and vetoed by President Calvin Coolidge on the grounds that

they would interfere too much with the free market and raise prices

for urban consumers. During his presidency, Herbert Hoover

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sought a halfway position; even before the Crash he backed

Congress’s 1929 creation of a Federal Farm Board empowered to

loan money to farmers and to store excess crops, while encouraging

cooperative action in American agriculture. Like other Hoover

policies, it proved unequal to the Depression. 10

Other farm advocates pushed the McNary-Haugen idea further,

believing that tariff-like protections would not work well enough;

farmers had also to reduce their production. W. J. Spillman, an

economist working for the Department of Agriculture, developed a

plan of ‘‘domestic allotment.’’ Examining the domestic

consumption of (for example) wheat, the government would

determine the size of the domestic market for a commodity and

allot to each state and farm an appropriate share of this market.

Farmers producing their allotted share would receive market value

plus a bonus for their crop, and would have to take only market

value for any further production. 11 Milburn L. Wilson, a professor

of agricultural economics at Montana State College, promoted

domestic allotment aggressively, adding to the original idea and

urging it on farm association and broader business interests alike.

In its mature phases, the plan included self-financing provisions,

taxing the processors of a commodity (e.g., millers of grain into

flour) to pay for the allotments. Wilson promoted this plan to

Roosevelt’s campaign in 1932, and Roosevelt spoke favorably of an

interventionist farm policy in (as his advisor Raymond Moley said)

‘‘generalities too vague to require examination.’’ 12

The New Deal’s first major farm legislation, the Agricultural

Adjustment Act of 1933, reflected this long, if mixed, lineage.

Although it began by citing ‘‘the present acute emergency,’’ it

focused on farmers’ longer-standing complaints. It charged the

government with erasing the ‘‘severe and increasing disparity

between the prices of agricultural and other commodities, which

disparity has largely destroyed the purchasing power of farmers,’’

and it specifically pointed to the years just before the deranging

effects of World War I as the ideal of parity to which the country

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should return. And in keeping with the New Deal preference for

vague generalities, it left the exact mechanism of the plan up to the

president but provided him the powers to reduce acreage under

production, to pay benefits for desirable harvests, and to tax

processors, all of which the domestic allotment idea required. 13

In

addition, the law exempted farm associations from antitrust

prosecution (making it possible for farmers to centralize their

decision-making) and made participation in its programs

voluntary.

Roosevelt’s appointments also reflected the heritage of his farm

policy: he named Wallace as secretary of agriculture and Peek as

head of the new Agricultural Adjustment Administration (AAA),

which would administer the production-control policy. Wilson

became head of AAA’s wheat section. 14 Differences of opinion split

these three longtime lobbyists for federal farm policy; Peek

preferred the use of marketing associations to reducing

production, Wilson wanted the domestic allotment plan as a step

to permanent acreage reduction, and Wallace told Wilson the

programs might work ‘‘if we are really going the route of state

socialism. And I am very much inclined to think that we really are

going that route.’’ 15 Coupled with the vagueness of the law and of

Roosevelt’s wishes, these divisions made an already difficult job

harder.

By the time AAA got under way in the spring of 1933, cotton

growers had already planted their crop. Seeing an abundance of

cotton already on hand, AAA asked growers to plow up their plants

in exchange for a fee, lest already low cotton prices fall further.

AAA agents spread out over hundreds of counties to persuade

farmers to dig up what they had just sown. They met problems

typical to any bureaucracy—they never had enough blank contract

forms where they needed them, and farmers complained about the

fairness of yield estimates, and an estimator’s freedom to indulge

his friends: ‘‘Our estamater sure did not give us a fair deal. . . . He

has pets.’’ 16

Checks for the plow-up often came late.

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Beyond these ordinary administrative difficulties, AAA met

problems specific to its agrarian mission. Mules long-trained to

avoid plowing up cotton plants balked when set to the task. Poor

weather prevented plow-ups in some places, and fair weather

discouraged farmers from plowing up a good crop in others.

Sometimes a sheriff had to send a tractor to enforce a plow-up

contract and charge the cost to the reneging farmer. 17 When plow-

up checks did come, landlords sometimes kept the payments from

tenants.

If the spectacle of a government destroying cotton when millions of

its people went without adequate clothing rankled, the spectacle of

that government destroying food in the midst of hunger positively

hurt. But to keep hog farming incomes up to parity, AAA officials

decided they had to slaughter millions of piglets, lest they in future

years fuel a glut. ‘‘That we should have . . . idle and hungry and ill-clad

millions on the one hand, and so much food and wool and cotton

upon the other that we don’t know what to do with it, this is an utterly

idiotic situation, and one which makes a laughing stock of our genius

as a people,’’ a Missouri farm leader claimed. 18

5. These men, members of the Civilian Conservation Corps, worked on

a poultry-raising farm in Jonesville, Virginia.

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None of the farm policy’s architects really meant it to address the

nation’s ancient problems of rural poverty or the new problems of

the Great Depression. The law specifically aimed to erase the

inequality in purchasing power between countryside and city by

moving back to an imagined golden age, not forward to a brave

new world. Far from stimulating recovery by aiding the majority of

the nation’s buyers, its regressive processing taxes, passed on to

consumers, penalized urban buyers to benefit rural sellers.

Farmers mainly supported such policies: cotton growers lobbied to

have acreage reduction made compulsory once they realized that

nonparticipating farmers would derive the benefits of raised prices

without having to sacrifice a portion of their crop. In response

Congress passed the Bankhead Cotton Control Act of 1934, taxing

farmers on everything they sent for ginning over their quota. This

law required a referendum after its first year of operation, and in

the vote almost 90 percent of cotton-growers nationwide favored

its retention. 19

As John D. Black, an economist sympathetic to the domestic

allotment plan, noted in 1936, AAA took for its goal a relative rise

in farm incomes, not a rapid recovery from the Depression. For a

speedy recovery, a policy of raising farm incomes was generally

thought inferior to a policy of raising business profits, because

business profits meant more investment and higher wages for

more consumers. The best case one could make for AAA, Black

wrote, was ‘‘that it has given us a better recovery than would a

business-profits recovery, because . . . it has given us a better

distributed recovery’’—which was to say, a recovery better

distributed geographically, from city to farm, not a recovery better

distributed across classes. And even that case did not hold up

especially well, Black noted: while farm prices had risen, perhaps

two-thirds of their rise owed to drought and to the devaluation of

the dollar rather than to AAA action. 20

Moreover, as much as

farmers liked the rise in their prices, they lamented a simultaneous

rise in the prices of the goods they bought—a rise they attributed to

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the New Deal’s other major economic management law, passed a

month after the agriculture act.

Industrial policy, like farm policy, drew on an established tradition

of centralizing authority to control prices, harking back to a

perceived golden era—this time during World War I, when the

government worked with business leaders on WIB to encourage

cooperation and command of production. While WIB veteran

George Peek went to head AAA, his old colleague from WIB days,

Hugh Johnson, helped create and run its industrial counterpart,

the National Recovery Administration (NRA).

At least since the great merger movements of the late nineteenth

century, major American businessmen regarded with suspicion

the principle of unfettered competition, which lowered the

prices they could get for their goods and services, sometimes

below the cost of production. Increasingly, they professed to

believe in an ‘‘ ‘economic right price,’ the ‘universal use’ of which,

through federal regulation, ‘would wholly and permanently

eliminate unfair price-cutting.’ ’’ 21

Businessmen thus faced similar

problems to American farmers, while enjoying certain natural

advantages. Manufacturing lent itself to centralized control more

easily than farming. Innovation in technology and techniques

permitted ever greater substitutions of machine and management

efficiency for employment of skilled labor, and thus put control

of the factory floor more securely into the hands of businessmen.

Indeed, perhaps the only obstacle (however low) to the utter

concentration of manufacturing was the federal antimonopoly

code.

WIB taught businessmen that with government cooperation,

instead of antagonism, they could control production to fix prices,

prevent strikes, and make a decent profit—all while appearing

patriotic. The Depression afforded them an opportunity to lobby

once more for such an emergency arrangement so they could

determine the right, higher price for their products.

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The first business-government collaboration of the Depression had

been the Hoover-era ‘‘Buy Now’’ campaign. Journalists, politicians,

and other boosters implored the consumers who had driven the

boom of the 1920s to purchase their way back to prosperity. This

rhetorical campaign failed. In 1931 Business Week reported, ‘‘The

‘Buy Now’ idea seems to have faded out. . . . There appears to be

increasing doubt as to what buyers should use for money.’’ 22

By the

Roosevelt administration, it had become clear it would require

more than cheerleading to increase purchasing power. Roosevelt

asked his secretary of labor, Frances Perkins, if she could come up

with a way to provide labor unions a place in the industrial policy

for reducing competition. Perkins, America’s first female cabinet

member, had served in Roosevelt’s New York administration,

where she advocated minimum wage and maximum hours

legislation. Now she proposed the creation of industrial boards, on

which representatives of management, labor, and the government

might sit together. To participate in the policy, unions would also

need a right to organize, which Supreme Court cases had

questioned even after the 1914 Clayton Act exempted unions from

the antitrust laws. The American Federation of Labor (AFL)

defended the right to organize as a way to increase ‘‘buying

power.’’ 23

An economist with the brand-new AAA argued that the industrial

legislation had to perform a similar purpose to the farm law—to

promote not a speedier, but a better distributed, recovery: ‘‘I think

the act has got to do something about improving wages, about

improving labor conditions, about protecting collective bargaining

so that it will be in better balance, and so we will have a stimulation

of consumer interest and consumer buying.’’ 24

Like the Agricultural Adjustment Act, the industrial legislation

reflected its mixed origins. The National Industrial Recovery Act of

1933 included a variety of measures, including provision for public

works that allowed Roosevelt to create his work-relief agencies.

But its major provision allowed the creation of a more managed

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industrial policy through boards like the ones Perkins had

envisioned, with management, labor, government, and consumer

representatives negotiating regulatory codes. Congress suspended

the antitrust laws to permit price-fixing among businesses for a

two-year period. It authorized the president to set, or to delegate

authority to set, codes of operation for industry that would

determine the basis for fair competition. In section 7a of Title 1, the

law required such codes to guarantee that

employees shall have the right to organize and bargain collectively

through representatives of their own choosing, and shall be free

from the interference, restraint, or coercion of employers of labor,

or their agents, in the designation of such representatives or in

self-organization or in other concerted activities for the purpose of

collective bargaining or other mutual aid or protection.25

Unions, business groups, and consumer advocates waited to see

what the President would do with his new powers.

Roosevelt launched NRA with warlike rhetoric, invoking ‘‘the great

cooperation of 1917 and 1918’’ as precedent, and named Hugh

Johnson, the former general, to run it, thus satisfying the

businessmen who looked fondly to WIB for inspiration. Johnson

created a martial symbol for NRA, a blue eagle clutching a gear and

a clawful of thunderbolts. He tried to mobilize consumers by

extending the wartime metaphor. ‘‘It is women in homes and not

soldiers in uniform who will this time save our country. . . . It is zero

hour for housewives.’’ 26

The price-raisers had the upper hand because executives of large

corporations had more control over their enterprises, greater

familiarity with the scale and scope of their operations, and a

good friend in Hugh Johnson. By the end of summer 1933, most

major industries had developed codes, while less than 10 percent

of the industries with NRA code-making authorities had a labor

member and even fewer had a consumer representative. Thus,

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many of the codes resulted from negotiations between

businessmen and government officials, many of whom had

recently been businessmen themselves. As one observer

complained, NRA codes looked like ‘‘a bargain between business

leaders on the one hand and businessmen in the guise of

government officials on the other.’’ 27

Labor leaders discovered that

management could circumvent section 7a by creating company-

run unions. Workers began to complain that prices were going up,

but not wages. NRA, which looked every day more like what critics

called an ‘‘Old Deal’’ organization, repeated the Hoover-era ‘‘Buy

Now’’ campaign, to the same response: ‘‘What with?’’ as one farmer

asked. 28

NRA also deeply vexed some owners of smaller businesses. Many

found themselves ill-equipped to deal with the bureaucratic

requirements of code compliance and unlikely to make themselves

heard against larger competitors in the code-making authorities.

The principal price-fixing measures of the codes catered to larger

businesses trying to prevent niche competitors from undercutting

them. And especially in the Depression, standing up for the little

guy offered an irresistible political opportunity, as Frances Perkins

observed: ‘‘You can always get sympathy by using the word

small. . . . With little industries you feel as you do about a little

puppy.’’ 29

In response NRA established a board to investigate such

complaints. Headed by the celebrity lawyer Clarence Darrow, the

study discovered ‘‘monopolistic practices’’ in seven of the eight

NRA industries it studied, and found that small businesses were

‘‘cruelly oppressed.’’ 30

By 1934, NRA had stalled amid criticism. Johnson resigned,

replaced by a committee. Early in 1935, an examination of NRA

found only two instances in which codes had been enforced against

business. With the two-year exemption from antitrust prosecution

nearly expired, the Senate defied Roosevelt, voting only a limited

extension of NRA. 31

Before the House could decide whether it

agreed, the Supreme Court declared NRA unconstitutional—but it

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was already clear that in Roosevelt’s subsequent, privately

expressed opinion, NRA gave him ‘‘an awful headache’’ and some

of its policies had been ‘‘pretty wrong.’’ 32

Before long the Supreme Court would also strike down AAA. For

the Court, the two agencies similarly violated the Constitution:

they exerted an unprecedented and unauthorized coercive

executive power within states. As Henry Wallace had said, such

agencies edged toward ‘‘state socialism,’’ which it is fair to suppose

most Americans, even in that desperate crisis, regarded with

suspicion.

Shorn of their more statist, managerial elements, key parts of the

AAA and NRA survived as Congress reenacted them in law.

Inasmuch as neither program aimed at a swift recovery, but

tried instead to provide a different balance in the distribution of

American wealth and power—from city to countryside and from

management to labor and consumers—the policies enjoyed

considerable popularity among important Roosevelt

constituencies, representing aspects of the New Deal approach to

political economy that would last well beyond the Depression.

Notes

1. Lester V. Chandler, American Monetary Policy, 1928–41 (New York:

Harper and Row, 1971), 281.

2. Dietmar Rothermund, The Global Impact of the Great Depression

(London: Routledge, 1996), 107, 29.

3. Judith Goldstein, ‘‘The Impact of Ideas on Trade Policy: The Origins

of U.S. Agricultural and Manufacturing Policies,’’ International

Organization 43, no. 1 (1989): 35.

4. Susan Previant Lee and Peter Passell, A New Economic View of

American History (New York: W. W. Norton and Company, 1979),

301.

5. Zechariah Chafee Jr., ‘‘Congressional Reapportionment,’’ Harvard

Law Review 42, no. 8 (1929); Orville J. Sweeting, ‘‘John Q. Tilson

and the Reapportionment Act of 1929,’’ Western Political Quarterly

9, no. 2 (1956).

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6. Theodore Saloutos, The American Farmer and the New Deal

(Ames: Iowa State University Press, 1982), 9.

7. Ibid., 5.

8. Ibid., 32.

9. Goldstein, ‘‘Impact of Ideas,’’ 43.

10. Keith J. Volanto, Texas, Cotton, and the New Deal (College Station:

Texas A&M University Press, 2005), 15 ff.

11. Ibid., 20.

12. William D. Rowley, M. L. Wilson and the Campaign for the

Domestic Allotment (Lincoln: University of Nebraska Press, 1970),

15; Saloutos, The American Farmer and the New Deal, 41; Volanto,

Texas, Cotton, 22.

13. 48 Stat. 31, 34–5.

14. Rowley, M. L. Wilson, 195.

15. Ibid., 138.

16. Volanto, Texas, Cotton, 45.

17. Ibid., 49.

18. Anthony J. Badger, The New Deal: The Depression Years, 1933–40

(London: Macmillan, 1989), 163.

19. Volanto, Texas, Cotton, 83.

20. John D. Black, ‘‘The Agricultural Adjustment Act and National

Recovery: Discussion,’’ Journal of Farm Economics 18, no. 2

(1936): 243.

21. Ellis W. Hawley, The New Deal and the Problem of Monopoly:

A Study in Economic Ambivalence (Princeton: Princeton

University Press, 1966), 40.

22. Meg Jacobs, Pocketbook Politics: Economic Citizenship in

Twentieth Century America (Princeton: Princeton University

Press, 2005), 96.

23. Hawley, New Deal and the Problem of Monopoly, 28.

24. Jacobs, Pocketbook Politics, 208.

25. 48 Stat. 195, 198.

26. Jacobs, Pocketbook Politics, 109.

27. Hawley, New Deal and the Problem of Monopoly, 57–62.

28. Ibid., 58, 93.

29. Ibid., 82.

30. Ibid., 96.

31. ‘‘Extension of NRA for Only 10 Months Voted By Senate,’’ New York

Times 5/15/1935, 1.

32. Frances Perkins, The Roosevelt I Knew (New York: Viking Press,

1946), 251.

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Chapter 6

Countervailing Power

From the first, and increasingly through the 1930s, New Dealers

asked the federal government to exercise new powers not mainly

for centralized planning or social welfare, but rather, as the

economist John Kenneth Galbraith would later say, ‘‘to give a

group a market power it did not have before.’’ Looking back from

1952, Galbraith noted that ‘‘the most important legislative acts of

the New Deal,’’ as well as those that ‘‘fueled the sharpest domestic

controversies,’’ were laws that enlisted the federal government in

‘‘the support of countervailing power.’’ 1

The idea of using the state to support private interests in the name

of countervailing power attracted New Dealers for two reasons.

First, it kept them on the side of American capitalism by stopping

short of state ownership or even regulation of business. Second, in

their understanding of history they were not the first American

lawmakers to use the federal government to support private

interests, they were simply the first to propose using the

government mainly to benefit groups other than the owners of

major corporations. As Senator Lewis Schwellenbach (D-WA)

said of the nation’s mythically government-free pioneer past,

‘‘Don’t let anyone tell you that government bounties were not being

given in those days. . . . The railroads got their sections of land in

each township. . . . Vast tracts of timber lands were available

for . . . the timber operators. . . . A protective tariff system was

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maintained by which hidden taxes were removed from the pockets

of everyone who labored in industry and agriculture. . . . There were

[government] bounties galore. But the people who worked, and

who bought and consumed our products never got in on them.’’ 2

If those policies of the nineteenth-century Republican Party

succeeded in strengthening the original power within the

American industrial economy—the great banks and

manufacturing corporations of the Northeast—they left the rest

of the country relatively underdeveloped. Not coincidentally,

strong support for the New Deal came from the poorer South

and West, whose voters believed they benefited little from these

policies.

This historical legacy of lopsided regional riches made it happily

unnecessary for the Roosevelt administration to distinguish

between good politics and good policy: if they wanted to spend

money to even out economic development in the country and

create countervailing powers, they would spend it in the South and

the West, and on the industrial workers of the country.

Contrariwise, if they wanted to spend money to benefit the most

loyal and critical voters in the New Deal coalition, they would

spend federal money in the South and the West, and on the

industrial workers of the country. Politics and economics worked

together in the New Deal construction of countervailing power.

Franklin Roosevelt prided himself on inventing one way in which

the government could create countervailing power, which he called

the ‘‘yardstick’’ concept. During World War I, Roosevelt argued

while assistant secretary of the navy that the U.S. government

ought not to armor-plate all its own ships but rather should build a

small armor-plating plant and thus learn how much the process

should cost. The costs of the government-run plant would serve as

a measure of fair profit for private contractors, providing a

counterweight to the businessmen’s information on the cost of

production. The navy would then know what it ought to pay to give

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contractors a fair, but not excessive, profit. Roosevelt remembered

this idea later. 3

At around the time Roosevelt was urging the government to enter

the armor-plating business, Washington was entering the

electricity business at Muscle Shoals in Alabama. There the

Tennessee River drops by 134 feet through thirty-seven miles of

rapids. And there the U.S. government built Wilson Dam,

providing hydroelectric power to factories producing nitrates for

fertilizer or explosives. 4 Before construction on the dam had quite

finished, the Harding administration proposed turning it over to

private management, and the Coolidge administration in its turn

supported this idea. Senator George Norris, a progressive

Republican of Nebraska and chairman of the Agriculture

Committee (which had charge of bills relating to fertilizer), blocked

the privatization plan and instead proposed expanding public

ownership of electrical production.

In the 1932 campaign Roosevelt stepped into this impasse between

privatization and public ownership, saying that a few government

power plants were ‘‘forever a yardstick to prevent extortion’’ by

private monopolies. After his inauguration he worked with Norris

to create the Tennessee Valley Authority (TVA), which would take

over Muscle Shoals and build other dams along the river,

extending government-provided power through much of the

South. 5

The law creating TVA listed among its several goals ‘‘the

agricultural and industrial development of said valley.’’ 6 Whereas a

generation before, the federal government under Republican

control lent itself to the development of the West by interstate

private railroad corporations, under Democratic control it now

pushed for the development of the South by interstate public

power corporations. But interstate and public did not here mean

distant or unresponsive: headquartered in Knoxville, Tennessee,

TVA devoted itself to working through local institutions and

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drumming up support for what its director, David Lilienthal, called

‘‘grass roots administration of federal functions.’’ If Americans

were going to adopt public ownership of electricity, Lilienthal

figured, they would have to do it locally—they would never support

and indeed, in the interest of democracy should never support,

national socialism, contrary to the ambitions of some planners and

the fears of their opponents. 7

Democratic politicians had long yearned to raise up the South from

its legacy of poverty and join it to the West as a balance to the

financial and industrial (and generally Republican) centers of the

Northeast and Midwest. But they had to circumvent white

southerners’ animosity to the federal government, whose Justice

Department and civil rights policies the white South had long

loathed. TVA’s campaign for locally controlled federal power helped

Democrats design a federal development policy white southerners

could stand. Repeatedly, southern cities held referenda in which

6. Civilian Conservation Corps boys weeding a Tennessee Valley

Authority nursery near Wilson Dam in Alabama.

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citizens voted against the private monopolies and for public power,

with Lilienthal’s enthusiastic support. Energetic and well-funded

resistance to these votes came from private power corporations

owned by the holding company of Commonwealth and Southern,

which Wendell Willkie, a Democrat who supported Roosevelt in

1932, headed. TVA dampened Willkie’s affection for the

administration. While Willkie himself negotiated with TVA,

members of Commonwealth and Southern’s constituent companies

fought its expansion. Southern cities and TVA responded by

working to get PWA to build—or even merely to plan to build—

lines and plants to compete with, and render redundant, the

private power companies. Often PWA’s plans alone provided

enough federal leverage so the private power companies sold their

infrastructure and yielded to local, public control. 8

For much of the 1930s, Willkie’s companies kept TVA from

providing power to southern cities by suing and getting injunctions

from courts. Although higher courts eventually ruled in TVA’s

favor, the long judicial process forced Lilienthal to spend months

on the stump, contrasting TVA’s commitment to democracy and

local control to the private companies’ opposition to both. Under

such circumstances Lilienthal could credibly insist that though

TVA’s opponents might call it ‘‘soviet,’’ it was the power companies,

and not TVA, that favored the centralized, outside control of the

Tennessee River Valley.

TVA illustrated typical vices and virtues of the New Deal’s plans to

use federal leverage to empower existing groups. It brought

electrical power cheaply—at perhaps half the price Americans paid

to private companies—to people who never before had it, and its

success inspired private companies to try lower rates and larger

markets as well. TVA also inspired Roosevelt to try rural

electrification on a national scale, creating the Rural Electrification

Administration in 1935 with money from the relief act of that

year, to support the creation of rural power cooperatives. Like

TVA, REA not only opened service to new areas, it pressed private

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companies to see profit potential in markets they had hitherto

slighted. 9

In these respects the effort at generating electrical power for

countervailing constituencies worked, laying the foundations for

further economic development in regions sorely wanting it.

Inasmuch as it brought southern politicians and voters around to

the New Deal, it succeeded too. At the same time, TVA’s

commitment to respecting local institutions limited its support for

democracy: working through established southern structures

meant leaving the racial hierarchy of the South intact. TVA

fertilizer programs did not involve the historically black

agricultural colleges of the South, nor did its segregated workforce

look out of place in the land of Jim Crow. 10

The New Deal worked to develop the West, too. Critics of the

administration’s motives pointed out that the swing states of the

West, much more politically changeable than the Northeast or

South, received a disproportionate share of the New Deal’s dollars.

Although PWA officials responded that more than a fair share of

their budget went to the much longer settled and more developed

states east of the Mississippi, it remained the case that on a per

capita basis PWA money went much farther in the sparsely

populated West. Likewise, if the New Deal were in the business of

buying votes, western states had more electoral votes per capita to

offer.

Suspicions that the Roosevelt administration was buying the

West’s allegiance proved weakly founded. These states had a lot of

land and needed many miles of roads: if the federal government

were going to spend solely on the basis of need, it would spend

more money per capita on roads out West. Further, the West had

plenty of projects, particularly for hydroelectric power, already

planned and ready for funding. With so much land capable of

sustaining so many more people, paying for these projects in the

West looked like a good investment. Finally, the federal

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government owned disproportionate shares of land in western

states—more than 80 percent of Nevada, for example—which

made it cheaper and easier to build projects there. 11

Just as spending money to develop the South made economic sense

because it meant tapping the potential that slavery and its legacy

had corked, spending money on the West made economic sense

too: it meant making way for the denser settlement of a potentially

much richer region. If New Deal development led also to

environmental spoliation, if it extended the American industrial

system indiscriminately, if it failed to disturb racial impediments to

democracy (WPA helped intern Japanese-Americans in the West

during World War II), or if it appeared suspiciously political, it also

looked like a sound investment. The construction of public works

under a policy of development raised up these historically

underdeveloped regions as countervailing powers to the older,

richer, and historically Republican Northeast. These policies also

represented the most redistributive policies of the New Deal:

although the Roosevelt administration may have worked to

redistribute money and power geographically, it did not as directly

use the state to redistribute money and power across classes.

At least since Adam Smith made ability to pay his first maxim of

taxation, countries more comfortable with state action than the

United States of the 1930s provided market power to groups that

otherwise did not enjoy it by taxing people who had more wealth

and using the proceeds to provide goods to people who had less.

Despite the directness of this method, the New Deal did not use it.

Indeed, the Roosevelt administration retained the opposite tax

policy as established under Hoover in 1932, adding AAA

processing taxes to regressive federal excise taxes on liquor and

other goods deemed luxuries or vices. These taxes put a

disproportionate burden on those Americans least able to pay.

Even the Revenue Act of 1935, which resulted from Roosevelt’s

request for a ‘‘sound public policy of encouraging a wider

distribution of wealth,’’ touched so few people it looked like ‘‘a hell

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raiser, not a revenue raiser,’’ as a member of the House Ways

and Means committee claimed. 12

Believing that prospects for

recovery depended on businessmen’s investment, the Democrats

stuck with the less-visible excise taxes—polls showed that

Americans rarely considered these levies to qualify as taxes—

instead of raising income taxes on more Americans.

But the Roosevelt administration did work to redistribute wealth,

just not through tax policy. Instead it wanted the market to work

more equitably, to allot to workers and consumers higher wages

without government’s direct intervention. To achieve this end the

New Deal fostered the growth of worker and consumer

organizations empowered to bargain collectively, and therefore

more effectively, for a better deal in the marketplace. A simple

theory supported this policy: if business had grown ever more

organized and therefore efficient at cutting its cost, so should the

buyers of products and the sellers of labor also organize and learn

efficiency. In an instance of this theory’s implementation, NRA

promoted the organization of consumers and laborers.

Mild as toleration of a labor union’s right to exist may seem,

management fought it. In 1934, the country’s factories exploded in

strikes as corporations refused to recognize unions. Strikes shut

down entire cities. Roosevelt established the National Labor

Relations Board (NLRB) to settle disputes. Investigations showed

the managers of American industries had determined to abort

unions’ birth, using infiltration, threats, speedups, and, bluntest

instrument of all, the desperate job market: ‘‘Look out the

window,’’ employers said, in numerous variations in numerous

workplaces, ‘‘and see the men waiting in line for your job.’’ 13

John L. Lewis of the United Mine Workers famously told his men,

‘‘The President wants you to join a Union.’’ 14

Lewis exaggerated:

Roosevelt disliked promoting confrontation with businessmen

who would lead the country’s economic recovery and viewed

unions with mistrust. But as on other issues, congressmen of

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Roosevelt’s party pushed the president. Senator Robert Wagner

drafted a bill to create a permanent NLRB and specifically to

prevent the formation of company unions or the intimidation of

union organizers. The law not only required companies to bargain

with union representatives elected by workers but also instituted

a majority rule providing that if a majority of workers in a shop

voted for a union, that union would have the power to represent

the whole shop.

Wagner saw the law as a way to keep from investing the state

with too much power. ‘‘The National Labor Relations Board is the

only key to the problem of economic stability if we intend to rely

upon democratic self-help by industry and labor instead of

courting the pitfalls of an arbitrary or totalitarian state.’’ 15 Stronger

unions, though a bitter pill, might go down more easily with

middle-class voters than indefinitely increased federal authority

and spending. And as passed by Congress in July 1935, shortly after

the Supreme Court struck down the National Industrial Recovery

Act, the Wagner Act replaced NRA’s statist code-making

authorities with the philosophy of countervailing power,

attributing the economic crisis to the earlier absence of an effective

counterweight to business management:

The inequality of bargaining power between employees who do not

possess full freedom of association . . . and employers who are

organized in the corporate or other forms of ownership

association . . . tends to aggravate recurring business depressions by

depressing wage rates and reducing the purchasing power of wage

earners. . . . It is hereby declared to be the policy of the United States

to . . . eliminate these obstructions . . . by encouraging the practice

and procedure of collective bargaining.16

Now the president really did want American workers to join a

union—the law required it of him. And despite an unfriendly labor

market (the ready availability of unemployed workers impeded

unionization) Americans did join: In 1930, under a tenth of workers

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in manufacturing belonged to unions, while by 1940, more than a

third did; in mining, the rate of unionization over the same period

went from slightly over a fifth to just under three-quarters. Similar

increases characterized other sectors. 17 Given the rate of

unemployment, the rise in unionization as a countervailing force to

managerial power owes considerably to the shift toward legal

protection for unions, finally and extensively justified by the time of

the Wagner Act as a way to achieve a more equitable distribution

of wealth without increasing the power of the state.

Federal policy encouraged Americans to organize themselves not

only as producers but also as consumers. Upon signing the

National Industrial Recovery Act, Roosevelt declared, ‘‘A

Consumers Advisory Board will be responsible that the interests of

the consuming public will be represented’’ in NRA’s code-making

process. 18

The head of the Consumers’ Advisory Board , Mary

Harriman Rumsey, advertised her willingness to listen to the

ordinary American consumer. 19

Complaints poured in, along with

labels and other evidence of rising prices on milk, bread, and

similar staples.

Similarly, AAA invited the consumers into the producers’ sanctum.

Frederic Howe, a municipal reformer and New York

Commissioner of Immigration in the 1910s, became consumers’

counsel to AAA in the summer of 1933. Howe had the job of

preventing prices from rising much higher than the level necessary

for producers to recover the AAA processing tax. 20

His office began

producing Consumers’ Guide, which listed prices for staple

products in various American cities, showing how much over cost

the prices had risen. Like Rumsey, Howe invited consumers to

report price rises and especially sought discrepancies between

listed and actual prices. 21

Before long these in-house consumer voices began seeking outside

help. Rumsey appointed economists and activists for the project of

‘‘building a Consumers’ movement.’’ They hoped to establish

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consumer councils around the country. Although the president’s

purported wish that Americans join labor unions did much more

to organize the workforce than the consumer movement did, the

New Deal’s call for Americans to join consumer unions also

produced a counterweight to managerial decisions and indeed to

the administration’s own policies. Ultimately, the consumer

movement the New Deal helped build and tie to its policies lobbied

to change those policies. In response to such complaints, NRA

hosted a ‘‘Field Day of Criticism’’ that revealed widespread

consumer dissatisfaction with its work. One of NRA’s in-house

consumer advocates, Leon Henderson, worked with economist

Gardiner Means to report on the rigidity of high prices under

NRA’s policies, influencing Congress’s reluctance to renew NRA’s

charter. Rising meat prices led to consumers’ strikes against

butchers around the country. Consumers pledged not to buy until

the New Deal shifted its support from producers and processors

toward buyers. One of AAA’s consumer advocates, Donald

Montgomery, began campaigning against rising bread prices.

Having raised up the countervailing power of consumer

consciousness, the New Deal responded by shifting away from its

initial commitment to an alliance between government and

industry, and toward a more impartial role. 22

For these countervailing forces to have real effect they needed

independence. The South and West needed development so they

could generate their own wealth and capital, enabling them to

represent their own regional interests against the Northeast.

Workers and consumers needed organization and legitimacy so

they could represent their interests independently of business

management. In seeking to afford individual American workers

and consumers a greater degree of independence, the Roosevelt

administration determined to insure them against loss of income,

either temporarily, through cyclical unemployment, or

permanently, through disability or old age. To this end Roosevelt

appointed a Committee on Economic Security (CES) to draft plans

for social insurance.

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The report CES sent to Roosevelt called for universal coverage of the

American elderly by pensions paid for partly by their own

contributions and increasingly, over time, out of the general

revenues of the U.S. Treasury. Roosevelt rejected this plan, declaring

it was ‘‘the same old dole under another name’’—he wanted a self-

financing plan under which old-age pensions worked on the model

of insurance premiums. Workers and their employers would pay into

a fund a percentage of their paychecks. In the event of retirement in

old age, workers would draw a pension funded by their savings. The

7. Government posters such as this promoted Social Security. Other

posters promised support for widows and children of qualified

workers.

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program would thus constitute ‘‘a wholly contributory scheme with

the government not participating,’’ as Roosevelt asked. 23

Critics immediately pointed out the drawbacks of this plan. No

other country financed social insurance this way, and for good

reason. Contributions calculated as a percent of payroll put a

relatively heavier tax burden on poorer earners. Within the

administration, Harry Hopkins pointed out the regressivity of the

payroll taxes and recommended a tax on wealthier Americans’

incomes instead. In the press, opinion-makers fretted that ‘‘the law

is almost a model of what legislation ought not to be,’’ as the New

Republic wrote. 24

The administration’s concern with fiscal soundness also prevented

the Social Security system from reaching all Americans. Because

the United States came late to the business of old-age insurance, it

had the advantage of other countries’ experience to examine. As

Abraham Epstein, an advocate of old-age insurance, noted in 1922,

‘‘It is evident that it can only be made to apply to persons who are

in regular employment. It is next to impossible to collect

contributions from persons who are irregularly employed, from

agricultural laborers, from those who are not their own employers,

from women who work at home not for wages, from small

merchants, and so forth.’’ 25

The Roosevelt administration

therefore sought to follow other countries that had excluded farm

workers and domestic servants from their old-age pension policies

at the start, and Congress complied.

The limits on Social Security would not last, nor did

administration officials think they would. Privately, the experts

knew that the contributory scheme would soon need

supplementing from the general treasury. Publicly, they avowed

their intention to expand the program to cover more workers

when they could. As amended in 1939 and 1950, the system

fulfilled these expectations. But for the moment of its creation,

Social Security stuck to the limits Roosevelt set on it.

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If the decisions to limit Social Security derived from a concern for

fiscal soundness, they had further effects peculiar to the American

workforce. The exclusion of farm workers and domestic servants

disproportionately affected African Americans. At a stroke,

Congress cut half the black workers in the country, and around 60

percent of those in the South, out of the Social Security system. If

this racial discrimination followed from innocent concerns for

fiscal stability, a further provision in the law could not so easily

escape criticism.

Social Security also included a program of direct assistance to

the elderly already beyond working age, who could not now

contribute to funding their own pensions, setting aside federal

funds to match whatever states spent to provide cash relief. It

included similar plans for aid to the blind or to needy dependent

children (chiefly the children of widowed mothers), on the

principle that they, like the elderly, constituted a class of deserving

unemployed people. The question of how much they deserved

remained open. 26

When determining how to allocate federal matching funds to the

states for assistance to the elderly poor (a program distinct from

the contributory insurance scheme), the Social Security proposal

initially imposed on the states a uniform standard of ‘‘decency and

health.’’ Representatives of southern states protested that to meet

this standard as acknowledged elsewhere in the country would

require them to quadruple their aid to the poor as, indeed, the

average income in the South amounted to as little as one quarter

of what Americans in richer states earned. This discrepancy

derived largely, as one southern senator admitted, from the

different labor market imposed on the ‘‘great many colored people’’

in the South. Despite the obvious racist tinge to southern

protestation, their provision passed with the administration’s

approval (and that of the sole African American in Congress,

Arthur Mitchell, Democrat of Illinois, who argued it was

unrealistic to expect a fourfold increase in a state’s relief bill). 27

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Social Security’s unemployment provisions resembled other parts

of the plan: as with old-age insurance, the federal component of

unemployment insurance would come from payroll taxes; as with

aid to the deserving and unemployable, states would be able to

determine the generosity of unemployment benefits. But

unemployment compensation went further to prevent too much

power from lodging in Washington. Once states established their

own unemployment compensation schemes, employers could

deduct what they paid their state governments from what they

owed the federal government. The law thus encouraged states to

establish unemployment insurance programs, rather than creating

a national plan.

If, as many later commenters would claim, Social Security became

the basis for the American welfare state, it did so despite its framers’

apparent intentions. Its principal provisions do not qualify as

welfare at all, nor as relief, owing to Roosevelt’s insistence that they

draw on beneficiaries’ contributions rather than the general

revenue. Americans did not enjoy these benefits as a matter of right,

only by virtue of their having bought into the plans, as they might

have with a private insurance program. Roosevelt wanted to limit

federal contributions to the barest minimum in the interest of fiscal

soundness—hence the contributory plan, hence the state

unemployment plans, hence the matching basis for old-age

assistance. ‘‘Not one nickel more. . . . Not one solitary nickel. Once

you get off the . . . matching basis the sky’s the limit, and before you

know it, we’ll be paying the whole bill.’’ 28

Nor did Social Security push the United States onto a course like

that followed by other modern nations, as American lawmakers

chose instead a contributory system of regressive taxation.

Adopting a progressive income tax for national benefits would not

only have mimicked other countries’ social spending and arguably

have served social justice, but it might also have done a better

job of fighting the Depression. But the New Dealers did not shape

Social Security as a Depression-fighting policy. Rather, it

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constituted a guarantee of Americans’ future independence from

their employers and thus as an underpinning of the strategy for

fostering countervailing power around the country. Moreover, it

represented a modest step in that direction: reformers on the

Committee on Economic Security believed that to make employees

properly independent, the United States needed a system of

national health insurance—but so vigorously did opponents,

particularly the American Medical Association, resist even efforts

to research the subject that the committee dropped it. 29

Rather

than increase the power of the state, New Dealers preferred to

increase the power of individual citizens and groups of citizens,

and did so within what they regarded as realistic political limits.

As Franklin Roosevelt headed to reelection in 1936, he could claim

to have worked both for the recovery of the American economy

and for its reform, in both the interest of a fairer marketplace

and the interest of the Democratic Party, which happened, owing

to geographic and historical peculiarities of the American

experience, to overlap. The South and the West needed economic

development; the industrial Northeast needed relief from the

severity of unemployment. All the great dams and roads and

bridges the Roosevelt administration built, the infrastructure that

brought the promise of modernity to the South and West,

amounted to a minority of the New Deal’s total spending, 60

percent of which went instead to relief that funneled chiefly to the

more urban states of the Northeast. 30

In responding to these needs Roosevelt was responding also to the

constituents he most needed: the consumers and the workers of

the industrial state and the voting citizens of the South and West,

all of whom drew strength and independence from his policies. As

they grew in power, they pushed the president to do more for them.

In the New Deal’s success lay the possibility of its demise: the

louder these voices grew, the more clearly they clamored for

differing goals. Roosevelt could keep them together only by

extraordinary efforts and the accidents of history.

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Notes

1. John Kenneth Galbraith, American Capitalism: The Concept

of Countervailing Power (New York: Transaction Publishers,

2004), 137.

2. Jason Scott Smith, Building New Deal Liberalism: The Political

Economy of Public Works, 1933–1956 (Cambridge: Cambridge

University Press, 2006), 120–21.

3. Thomas K. McCraw, TVA and the Power Fight, 1933–1939

(Philadelphia: J. B. Lippincott Company, 1971), 30.

4. Ibid., 1.

5. Ibid., 33.

6. 48 Stat. 58.

7. David Lilienthal, The TVA: An Experiment in The ‘‘Grass Roots’’

Administration of Federal Functions (Knoxville, TN: 1939).

8. McCraw, TVA, 138.

9. Theodore Saloutos, The American Farmer and the New Deal

(Ames: Iowa State University Press, 1982), 219.

10. McCraw, TVA, 142.

11. John Joseph Wallis, ‘‘The Political Economy of New Deal Spending

Revisited, Again: With and Without Nevada,’’ Explorations in

Economic History 35, no. 2 (1998).

12. Mark H. Leff, The Limits of Symbolic Reform: The New Deal and

Taxation, 1933–1939 (Cambridge: Cambridge University Press,

1984), 137, 56.

13. Meg Jacobs, Pocketbook Politics: Economic Citizenship in

Twentieth Century America (Princeton: Princeton University

Press, 2005), 139.

14. Ibid., 137.

15. Ibid., 145.

16. 49 Stat. 449.

17. Irving L. Bernstein, Turbulent Years: A History of the American

Worker (Boston: Houghton Mifflin, 1971), 769–70.

18. ‘‘President’s Statement on Recovery Act Policies,’’ New York Times,

6/17/1933, 2.

19. ‘‘A Champion of the Consumer Speaks Out,’’ New York Times,

8/6/1933, SM5.

20. ‘‘Consumer Bureau to Check Prices,’’ New York Times, 6/24/1933,

22.

21. Jacobs, Pocketbook Politics, 119.

22. Ibid., 131–32.

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23. Mark H. Leff, ‘‘Taxing the ‘Forgotten Man’: The Politics of Social

Security and the New Deal,’’ Journal of American History 70, no. 2

(1983): 366–68.

24. Ibid.: 373.

25. Gareth Davies and Martha Derthick, ‘‘Race and Social Welfare

Policy: The Social Security Act of 1935,’’ Political Science Quarterly

112, no. 2 (1997): 222.

26. James T. Patterson, America’s Struggle against Poverty, 1900–

1985 (Cambridge, MA: Harvard University Press, 1986), 67–75.

27. Davies and Derthick, ‘‘Race and Social Welfare Policy,’’ 227.

28. James T. Patterson, The New Deal and the States: Federalism in

Transition (Princeton: Princeton University Press, 1969), 93.

29. Daniel S. Hirshfield, The Lost Reform: The Campaign for

Compulsory Health Insurance in the United States from 1932 to

1943 (Cambridge, MA: Harvard University Press, 1970), 42–70.

30. Wallis, ‘‘Political Economy,’’ 167.

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Chapter 7

The End of the Beginning

Franklin Delano Roosevelt spoke with an apparently easy

confidence and in the accent of an upper class indigenous to

the country but normally concealed from most Americans

behind the stone walls and tree-lined roads of the Hudson River

Valley and Long Island. His ancestors had come to New

Amsterdam in the seventeenth century, and his family never

strayed far, though governments fell and rose, some abetted by

Roosevelts. His mother’s family, the Delanos, were merchants.

He attended Groton and Harvard, schools chiefly for rich, white,

Protestant boys. When he married his distant cousin Eleanor

Roosevelt (making her Eleanor Roosevelt Roosevelt) he acquired

as uncle-by-marriage President Theodore Roosevelt, in whose

footsteps he followed as a state legislator, assistant secretary of

the navy, and governor of New York. Were it not for his bout

with adult polio, which left him unable to stand without much

pain, effort, and assistance, he would have endured no evident

hardship and, indeed, all the privilege a democratic country

could offer.

Nothing in his background made him look anything like a tribune

of the people; neither did he run as one in 1932, when he criticized

Hoover for running deficits, nor preside as one afterward. In

the United States as throughout the industrial world, the

circumstances favored the growth of social spending policies, yet

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Roosevelt himself, as leader of the party more favorable to such

programs, resisted them. Sometimes his fiscal conservatism availed

nothing, as when he opposed deposit insurance or exhibited

indifference to the National Labor Relations Act until it had all but

passed Congress anyway. Sometimes his conservatism

permanently shaped American social policy, as when he

determined the contributory and federal structure of the Social

Security system. And despite his willingness to experiment, these

fiscally conservative impulses never left him, which made the

Roosevelt who emerged in 1936 as the champion of labor and the

loudest philosopher of countervailing power all the more peculiar.

When nominated for president by his party that summer, he

declared war on ‘‘the privileged princes of these new economic

dynasties. . . . These economic royalists complain that we seek to

overthrow the institutions of America. What they really complain

of is that we seek to take away their power. Our allegiance to

American institutions requires the overthrow of this kind of

power.’’ 1 Roosevelt went on to ‘‘heartily subscribe’’ to ‘‘the brave

and clear platform of this Convention,’’ which listed ‘‘malefactors of

great wealth’’ near ‘‘kidnappers and bandits’’ in the lineup of the

nation’s enemies. 2

Roosevelt’s opponents would sometimes call him a traitor to his

class, but as the historian Richard Hofstadter observed in 1948, ‘‘if

by his class one means the whole policy-making, power-wielding

stratum, it would be just as true to say that his class betrayed him.’’ 3

Despite Roosevelt’s care in constructing the New Deal, despite the

restraint and caution and respect for American federalism of the

New Deal’s every measure, despite the overriding evidence in both

word and deed that the Roosevelt administration came time

after time to rescue American capitalism and had no intention of

replacing it, Roosevelt met at best foot-dragging, often

disingenuous cooperation; as the New Deal succeeded and the

Depression lessened, outright hostility from members of his class

who (it turned out ) regarded even slight shifts in the social order

as portents of anarchy.

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As much as the Democratic Party depended on the votes of

segregationist whites, and as much as the Roosevelt administration

built New Deal programs to respect the institutions of federalism

and states’ rights precisely to avoid disturbing the racial politics of

the South, the New Deal nevertheless did more to assist African

Americans than the Hoover administration had and more than the

old Democratic Party had. The ideal of assisting the ‘‘forgotten

man’’ compelled New Dealers with a sense of shame and history to

remember that black Americans more routinely fell into that

category than any other class. As First Lady, Eleanor Roosevelt

ranked high among such New Dealers. She had in youth worked in

a settlement house that helped the immigrant poor of New York

City; she showed such sensitivity to the issues of class and race that

she became the channel through which civil rights leaders like

Walter White of the National Association for the Advancement of

Colored People (NAACP) could make themselves heard in the

8. Ben Shahn photographed this ‘‘White Trade Only’’ sign—one of

many around the country—in Lancaster, Ohio, for the Farm Security

Administration in 1938.

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White House. In particular, she pushed Hopkins at WPA to ensure

that relief went to black, as well as white, workers. 4 Such efforts

produced only partial success—CCC, for example, noticeably

resisted racial integration—but the New Deal made inroads into

black joblessness as no program, federal or state, Democratic or

Republican, previously had. 5

These changes undermined southern whites’ sense of privilege, and

some took this threat so seriously they decided to seek redress.

One, a retired executive of the du Pont corporation, wrote another

du Pont executive early in 1934 to complain, ‘‘Five negroes on my

place in South Carolina refused work this spring . . . saying they had

easy jobs with the government,’’ and received the reply that

perhaps some organization should appear, ‘‘for educating the

people to the value of encouraging people to work; encouraging

people to get rich[.]’’ 6 From this spark emerged the American

Liberty League, which one Roosevelt aide derided as like

cellophane—‘‘first, it’s a du Pont product and second, you can see

right through it’’—which is to say its members, despite their

expressed nonpartisan concern for the U.S. Constitution, had

clearly no higher goal in mind than defeating Roosevelt in 1936. 7

A year later, the Liberty League got a valuable ally in its opposition

to the New Deal: the Supreme Court of the United States. On May

27, 1935, Chief Justice Charles Evans Hughes read the majority

opinion in the case of Schechter v. United States. The Schechter

slaughterhouse owners had been convicted in federal court for

selling an ‘‘unfit chicken’’ and other violations of the National

Recovery Administration (NRA) code for the poultry industry.

Hughes argued, contrary to the preamble of more than one New

Deal law, ‘‘Extraordinary conditions do not create or enlarge

constitutional power.’’ The Court believed that NRA represented

an unlawful delegation of power from Congress to the president

and thence to the code-making authorities, and particularly that it

too broadly interpreted Congress’s constitutional ability to regulate

interstate commerce. 8

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On May 31, Roosevelt held a press conference—‘‘the first of its kind

in White House history where a president, speaking

informally . . . outlined without reference to a manuscript an

issue which appeared to him as second in importance only to war,’’

as a New York Times reporter wrote. 9 The president read from

telegrams pleading with him to restore NRA regulations, one of

which suggested stripping the Supreme Court of its jurisdiction

over the industrial codes. But, Roosevelt said, ‘‘these telegrams are

futile.’’ The Court’s decision in Schechter was, he said, ‘‘more

important than any decision probably since the Dred Scott case’’

(the case insisting the federal government had no power to

prohibit slavery in the U.S. territories, which precipitated the Civil

War) because the Court relied on a strict definition of the

Constitution’s commerce clause. Roosevelt read the decision as

preventing the federal government from regulating

manufacturing, mining, agriculture, and construction, even if

the raw materials or finished products of those activities crossed

state lines. And in a country dependent on interstate commerce, a

country transformed by modern transportation and

communication into a single nation, this reading of the law

rendered the federal government impotent. ‘‘We have forty-eight

Nations from now on. . . . It is a perfectly ridiculous and impossible

situation,’’ Roosevelt declared. The strict interpretation of the

commerce clause might have worked when little trade crossed state

lines and the nation’s people moved by ‘‘horse-and-buggy.’’ But

now that ‘‘We are interdependent—we are tied together,’’ Roosevelt

said, the United States needed a national government. ‘‘Now, as

to the way out . . . ’’ Roosevelt began, then stopped himself.

‘‘I suppose you will want to know something about what I am going

to do. I am going to tell you very, very little on that,’’ he said. 10

Nor did he, for more than a year, say anything substantial in public

about the Supreme Court and the New Deal, not even when the

Court invalidated the Agricultural Adjustment Administration the

following January and a set of other New Deal measures afterward.

His opponents spoke volumes. Liberty Leaguers began lionizing

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the justices as defenders of the American Way. And Roosevelt’s

opponents began declaring that the issue of the upcoming election

would be the Court. Conservative Democrat Eugene Talmadge of

Georgia asked whether America’s voters wanted ‘‘a bunch of

Communists . . . to appoint the successors’’ to the aging justices.

Republicans said Roosevelt had gone beyond the conventions of

American civility with his ‘‘horse-and-buggy’’ comments, and

their nominee, Governor Alf Landon of Kansas, said that Roosevelt

had ‘‘cracked up.’’ 11 Senator Arthur Vandenberg (R-MI),

disingenuously ruminated, ‘‘I don’t think the President has any

thought of emulating Mussolini, Hitler or Stalin, but his utterance

as I have heard it is exactly what these men would say.’’ 12

Although Roosevelt said little, his administration and Congress

kept active, passing the Wagner Act to re-create and strengthen

labor’s right to organize as recognized in the National Industrial

Recovery Act, and passing the Guffey Coal Act to create a

miniature NRA specifically for the bituminous coal industry, on

the grounds that this industry operated on a truly interstate

scope. 13

The Court kept pace with the New Dealers, invalidating the Coal

Act in May 1936, as one of a string of decisions that over the course

of a year pitted its majorities against the New Deal in opinions that

struck Felix Frankfurter, then a law professor at Harvard, as

‘‘written for morons’’ and left him fuming, ‘‘Apparently history and

precedents mean nothing.’’ 14

Nor were Harvard faculty the only

Americans appalled. The president reliably received letters from

constituents complaining, as one Texas man did, that ‘‘I told you

the Rich Men always Run to the Supreme Court to Beat Our

Laws.’’ 15

Ultimately the Court outstripped the federal legislators and ran

ahead to put a roadblock in front of the states. In Morehead v.

New York ex. rel. Tipaldo, the Court ruled that states could not set

minimum wages for women workers. Roosevelt mildly

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commented, ‘‘It seems to be fairly clear . . . that the ‘no-man’s-land’

where no Government—State or Federal—can function is being

more clearly defined. A State cannot do it and the Federal

Government cannot do it.’’ 16

Some Republicans recognized that

with this decision, defending the Supreme Court no longer looked

like such a fine election strategy. Congressman Hamilton Fish

(R-NY) said, ‘‘I say to my Republican friends if you lend or express

any sympathy for this decision . . . it will mean a million votes for

the Democratic party.’’ Herbert Hoover remarked, ‘‘something

should be done to give back to the states the powers they thought

they already had.’’ 17

But by now the Republicans had so thoroughly committed

themselves to a policy of standing with the Court against Roosevelt

they could not easily reverse course. At the Republican National

Convention, Hoover insisted, ‘‘The American should thank Almighty

God for the Constitution and the Supreme Court,’’ and got two

minutes’ applause. 18 In the New York Times, Arthur Krock wrote,

‘‘the court knows itself to be on trial.’’ 19 If so, the Court had put itself

in the dock, and the Republicans had climbed in with it—Roosevelt,

in his near-total silence on judicial issues, had little to do with it.

The election amounted to a referendum on the Court only inasmuch

as it ranked much more importantly as a referendum on the New

Deal, and not the New Deal as a particular program or even a success

but as a willingness to use the power of the U.S. government on

behalf of working and suffering Americans. While his opponents

stood by the Supreme Court and against the New Deal, Roosevelt

stood by the New Deal and against the Depression. In Madison

Square Garden on October 31, he said, ‘‘Tonight I call the roll—the

roll of honor of those who stood with us in 1932 and still stand with

us today. Written on it are the names of millions who never had a

chance—men at starvation wages, women in sweatshops, children at

looms.’’ And arrayed against them

the old enemies of peace—business and financial monopoly,

speculation, reckless banking, class antagonism, sectionalism, war

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profiteering.Theyhad begun toconsidertheGovernmentoftheUnited

Statesasa mere appendage to their ownaffairs. . . . They are unanimous

in their hate for me—and I welcome their hatred. I should like to

have it said of my first Administration that in it the forces of selfishness

and of lust for power met their match. I should like to have it said

of my second Administration that in it these forces met their master.20

The electorate assented. All the states but Maine and Vermont

went for Roosevelt. No president had enjoyed such a majority in

the electoral college since James Monroe ran virtually unopposed

in 1820, and Roosevelt won a larger share of the popular vote

(more than 60 percent) than any other candidate since careful

record-keeping began in 1824. 21

Roosevelt won unprecedented

majorities of African American and Jewish voters. But most

importantly he drew working people to the polls in record numbers

to vote for the president they knew stood by them. Pollsters

found that middle-class people were more likely to vote for the

president than the rich, and the working class were more likely to

vote for the president than the middle class. Even within the

working class, this gradation showed itself: going down the scale of

skills, the less-skilled workers were more likely to support the

president than the more-skilled ones. The American people had a

good idea where their president stood. As one wrote him, ‘‘you are

the one & only President that ever helped a Working Class of

People.’’ 22

At the same time, the voices in the land that had sought

to challenge Roosevelt for leadership of the middle and working

classes had fallen silent. Huey Long had been murdered the year

before. Father Charles Coughlin, the radio priest, led an

unsuccessful third party effort, earned rebuke from the Catholic

Church for his politics, and lost listeners as he became increasingly

anti-Semitic. Even the Communist Party in the United States

avoided criticizing Roosevelt. 23

The astounding national majority that Roosevelt had built would

last for about thirty years, but even at the moment of its triumph

the fissures that would crack it apart had already opened. A

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coalition whose political program as a matter of principle used the

federal government to aid working-class, ethnic, and African

Americans was a coalition that appealed almost entirely to urban

Americans. This coalition might well succeed in electing a

president, as populous cities could carry populous states with many

electoral votes. But the structure of Congress and especially of the

Senate resisted this politics of class and city, largely because the

eighteenth-century framers meant the Congress to do just that.

Rural areas, areas with smaller towns, and the white South with its

persistent racist politics looked with increasing hostility on the

Roosevelt administration as the president—with increasing

frankness—declared himself the champion of the country’s

downtrodden. Roosevelt won reelection on a newly clear New

Deal, but he also laid bare the difference between the New Deal

and the Democratic Party. 24

Roosevelt spent the first year of his second term clarifying this

difference in a manner he would not have chosen, with his first major

political loss. Despite the president’s own silence about the Supreme

Court in 1936, advocates of judicial reform spoke often about

changing the Court’s composition, recalling the Reconstruction era

when a Republican Congress had stripped the Court of jurisdiction

in some cases and shifted its numbers. One of the president’s

advisors discovered that the New Deal’s great foe on the Court,

Justice James McReynolds, when serving as Woodrow Wilson’s

attorney general in 1913, had proposed to reform the federal

judiciary by requiring the appointment of a new judge for each

judge who did not retire on his seventieth birthday. The Supreme

Court’s four most anti-New Deal justices were all over seventy, and

none of the justices was under sixty. Roosevelt settled on

McReynolds’s plan for increasing the Court’s numbers—or as

supporters privately and opponents publicly said, ‘‘packing’’ the

Court. 25

Well before the president committed himself to the plan, the Court

apparently reacted. In December, after the election but before the

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inauguration, Justice Owen Roberts, who had previously voted

with four other anti-New Deal justices to make a majority on the

Court, switched his vote to a new, pro-New Deal majority in a case

that looked to almost all observers like a frank reversal. The Court

would not read its opinion in West Coast Hotel v. Parrish until

March, but in it the justices said the opposite of what they had said

in Tipaldo—that the states could indeed legislate minimum

wages. 26

And soon they would uphold the Wagner Act and the

Social Security Act, and afterward seemed much friendlier to the

New Deal in all its respects.

Yet Roosevelt went ahead with his plan to shift the Court.

Supporters could claim the idea had obvious merits: the

Republicans packed the Court during Reconstruction; Theodore

Roosevelt advocated similar measures during and after his

presidency; when Franklin Roosevelt entered office fewer than 30

percent of federal judges were Democrats and through his entire

first term he had not been able to appoint a Supreme Court

justice; Tipaldo in particular struck almost everyone as obviously

at odds with the times and tradition. 27

But the Court-packing plan

presented an excellent opportunity to level at Roosevelt the charge

of dictatorial ambition which, in an unsettled age of actual

dictators in developed countries, carried special weight. The

Senate Judiciary Committee issued a report repudiating the

president’s plan as a ‘‘needless, futile, and utterly dangerous

abandonment of constitutional principle’’ that reminded them of

the misfortunes other countries’ political systems had recently

suffered. Seven of the ten signers were Democrats. As one

journalist wrote, the report looked like conservative Democrats’

‘‘document of secession.’’ 28

As the summer went on, and the Court looked ever more

conciliatory, Roosevelt’s Court-packing plan looked increasingly

unnecessary. It finally went down to defeat amid death—Senator

Joseph T. Robinson (D-AR), Roosevelt’s floor leader, died while

pressing the bill—and death threats from vigilante opponents of

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the president, and the administration’s congressional support

faded away. 29

The protracted Court fight and the split within the Democratic

Party worked with a larger hardship to undermine the New Deal.

For the first time since Roosevelt’s election and with sickening

speed, the country plunged into economic recession, imperiling the

New Deal’s claims to success. It did not look like an ordinary

reversal of the business cycle, as the economy had clearly not

completely recovered from the fall of 1929. Administration critics

blamed the recession on Roosevelt. They said he had scared

businessmen into holding onto their capital, thus preventing them

from making productive investments, and they also blamed the

Social Security taxes, which had gone into effect in 1937, for

removing money from the economy. Within the administration,

New Dealers blamed businessmen for deliberately refusing to

invest—for starting what they called a ‘‘capital strike,’’ to discredit

the New Deal—and they too blamed Roosevelt: in a resurgence of

his fiscal conservatism, Roosevelt had ordered cuts in public works

spending with the goal of balancing the budget. 30

As New Deal

spending fell, unemployment rose. 31

In a private letter to the president dated February 1, 1938, John

Maynard Keynes argued that Roosevelt ought to act as if all critics

were right. Cutting relief spending was, Keynes said, ‘‘an error of

optimism,’’ and renewed spending on public works would help

reverse the downturn. At the same time, Keynes noted, the United

States needed private enterprise to help solve its problems: ‘‘You

could do anything you liked with them, if you would treat them

(even the big ones), not as wolves and tigers, but as domestic

animals by nature, even though they have been badly brought up

and not trained as you would wish. . . . If you work them into the

surly, obstinate, terrified mood, of which domestic animals,

wrongly handled, are so capable, the nation’s burdens will not get

carried to market.’’ So Roosevelt needed to reenlist businessmen in

the recovery effort. Keynes’s recommendations carried extra

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weight now, as he had in 1936 published The General Theory of

Employment, Money, and Interest, which together with the

recession encouraged American economists to believe that a

government’s deficit spending could bring about a recovery from

recession by getting consumers to buy more. 32

Roosevelt acted as if he believed at least half of Keynes’s argument.

In the spring of 1938, Roosevelt asked for a resumption of public

works spending, admitting that it ‘‘began to taper off too quickly’’

in 1937. 33

In June, Congress obliged, making about $3 billion

available for renewed relief spending and dramatically raising

federal contributions to the economy. 34

But by this time the Court

fight and the recession had weakened Roosevelt. Apart from the

increase of relief spending, he got from Congress the Fair Labor

Standards Act, which banned child labor and set a federal

minimum wage. 35

But Roosevelt won that law only with

considerable help from a long campaign waged by the National

Consumers’ League and some major labor unions. 36

Afterward the

New Dealers could no longer produce significant new law.

The president now attacked two major sources of opposition.

Against organized business, Roosevelt arrayed the Temporary

National Economic Committee (TNEC), which aimed to expose

the bad practices of monopolists. And against conservative

southern Democrats he launched a personal campaign. Both

efforts failed. TNEC conducted hearings into various industries

and considered a variety of methods to end, or at least to regulate,

monopolies. While it discovered and duly reported reams of data

on American industry, it came up with no clear proposal for action

against the trusts and holding companies that controlled American

businesses. But it did emphasize that government must play the

role Keynes prescribed, of promoting prosperity by spending

gauged to encourage consumer purchasing. 37

Roosevelt himself took a more traditionally partisan approach to

the economy, identifying the South as ‘‘the Nation’s No. 1 economic

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D e a l

problem,’’ and targeting it as the Democratic Party’s number one

political problem: ‘‘I think the South is going to remain

Democratic, but I think it is going to be a more intelligent form of

democracy than has kept the South for other reasons, in the

Democratic column for all these years. . . . it is going to be a liberal

democracy.’’ 38

Roosevelt campaigned without success against

sitting southern Democrats through the summer of 1938, and they

reacted by invoking the specter that had stirred white southern

hearts since the Civil War: outside interference by Yankee

agitators. In the November congressional elections, the American

electorate registered general disillusionment with the president,

returning a House of Representatives in which the Democratic

delegation lost seventy-two seats and a Senate in which the

Democratic delegation lost seven seats. 39

Roosevelt’s prediction

proved incorrect. The South would not turn liberal, nor even

remain Democratic if the Democrats insisted on trying to change

its race relations: in ten years’ time, his successor, Harry S Truman,

would narrowly avoid defeat when the South bolted the

Democratic Party because it adopted the cause of civil rights for

African Americans.

From the high of 1936 to the low of 1938, Roosevelt demonstrated

what the New Deal could and could not do to American politics.

On a national level at the polls in a presidential election, the

president could successfully present himself as the champion of the

people and their New Deal against an old guard of the rich and

hidebound. He could ride the rhetoric and the reality of class

politics to reelection. But American laws and customs do not

provide for the national organization of politics. And against a

Congress elected from localities, against a Senate elected from

states, Roosevelt’s cross-sectional politics foundered. In 1938 the

president’s mailbag clearly showed the divisions between sections

of the country. While some wrote with praise and to ask, as one

woman did, ‘‘How can anybody be against you?! You have kept so

many parents and children together through W.P.A.,’’ others

clearly were against him. One woman said, ‘‘It makes me sick at

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heart, to think you have nothing on your program only the same

old thing you have had for 5 yrs. just giving to those who will take

it,’’ and one man asked, ‘‘Did it ever enter your head that the

country ran before your time and will after your gone?’’ 40

It is also fair to say that apart from health insurance, Roosevelt and

Congress between them set in place American versions of the

major components of social security as it existed in other industrial

countries, including provision for the elderly, the unemployed,

the disabled, and the otherwise dependent. They shored up the

banks and the currency and, by their lights, saved American

capitalism. They launched the development of underdeveloped

regions in the South and the West. True, some goals failed, like the

extension of the TVA model to other regions. 41

And already the

Democrats had discovered the political peril that awaited them

when they edged even a little bit toward the specifically American

necessity of civil rights for black citizens.

Late in the 1930s, policymakers who had come to Washington to

change the way the nation worked found themselves increasingly

asked to find ways to make the existing structure of the American

economy work a bit better. Agencies like the National Resources

Planning Board discounted the idea of structural changes in favor

of using government to improve existing institutions. 42

Congress

patched up programs, re-creating AAA to keep parity policies in

place without offending the Supreme Court and amending Social

Security. New Dealers increasingly accepted the policy generally

described as Keynesianism—that through the federal budget they

could promote Americans’ spending and thus overall economic

growth without meddling in the basic workings or balance of the

economy.

But though at the legislative level the creative phase of the New

Deal was ending, as an idea distilled from those legislative conflicts

and compromises it had only just begun its life. The idea was a

simple one, as a WPA relief worker said in 1938:

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The way I look at it is this. This is a rich country. I figger it ain’t going

to hurt the government to feed and clothe them that needs it. Half of

’em can’t get work, or just ain’t fixed to handle work if they get

it. . . . We’ve got the money. Plenty of it. No sense in the big fellows

kicking about a little handout to the poor. Matter’s not if some ain’t

deserving. . . . Lot of ’em that comes here, why I’d sooner give them a

kick in the pants than shove ’em out supplies. But you got to take the

good with the bad. Or bad with the good, whichever way you’ve a

mind to put it. 43

The idea in this speech, the idea that it did a rich country no harm

to help even the unworthy poor came out of the New Deal; and so

indeed did the speech itself and so also did the idea that a rich

country ought to record and keep it, plain utterance of an ordinary

person though it was.

The speech remains because WPA preserved it, along with the

musings of many other Americans. The Federal Writers’ Project

of WPA, together with a number of other similar projects, sent

writers around the country to record Americans—not just their

opinions of the New Deal, or the Depression, or the president, but

anything and everything, their lives and hopes and ambitions and

idle irritations, not to ennoble the New Deal or the nation but

simply to give the culture a record of itself and its people. The

writers worked as carefully as they could, following instructions to

‘‘take down the exact words of the informant.’’ 44

They recorded

how Americans spoke, sang, worked, and played. Their colleagues

with cameras recorded how the people and the country looked.

They interviewed current sharecroppers and former slaves: ‘‘I lays

in the bunk two days, getting over that whipping, gitting over it in

the body but not the heart. No sir, I has that in the heart to this

day.’’ 45

They found onetime pioneer settlers, and Indians who

remembered when the pioneer settlers came. They wrote down

tall tales, ghost stories, and folk songs, the stuff of the country’s

rural past now vanishing in the newly national, urban nation. And

they published it, in The Jewish Landsmanschaften of New York

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(1938), U.S. One: Maine to Florida (1938), The Negro in Virginia

(1940), The Havasupai and the Hualapai (1940), among dozens of

other books on every state and people and feature of the landscape.

With the Federal Art Project and the Federal Theatre Project,

WPA also made new culture for the country. The art project made

murals and posters with a distinctive visual style. And the theater

project ensured that Americans could see plays like Macbeth or

Dr. Faustus, The Mikado or an adaptation of Sinclair Lewis’s novel

warning about the potential for fascism in America, It Can’t

Happen Here, not only in New York but in cities around the

country.

These cultural ambitions of the New Deal came to grief on the

same opposition as its political ambitions. Conservative,

particularly southern, Democrats like Congressman Martin Dies

of Texas, began fretting publicly about Communist influence on

the New Deal. Dies’s Un-American Activities Committee began

hearings in 1938 to investigate the influence of Communism

on unions and the New Deal broadly, including the Federal

Theatre Project. In December, Hallie Flanagan, the Project’s

director, went before the committee. When she mentioned

Christopher Marlowe, who wrote Dr. Faustus, Congressman

Joseph Starnes asked her, ‘‘You are quoting from this Marlowe.

Is he a Communist?’’ Flanagan replied, ‘‘Put in the

record . . . that he was the greatest dramatist in the period

of Shakespeare, immediately preceding Shakespeare.’’ 46

The

exchange illustrated the breadth of the gap between the culture

the New Dealers were promulgating and the culture in some

regions of the country asked to appreciate it. By 1939 the

Dies Committee had helped end funding for the Federal

Theatre Project, and the conservatives in Congress turned their

attention to other New Deal agencies. In the summer of 1939

they began looking into NLRB, and conservative Democrats

and Republicans voted together to defeat spending bills

Roosevelt had proposed. 47

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As conservative opposition stymied him, Roosevelt began thinking

past the New Deal. One of his advisors said that in 1940 the

president told him, ‘‘he has probably gone as far as he can on

domestic questions.’’ The war in Europe began to claim his

attention. And though he would tell the remaining New Dealers

‘‘we must start winning the war,’’ he did not quite abandon the New

Deal, even as the nation began to fight. 48

9. Poster for the Federal Theatre Project staging of Sinclair Lewis’s It

Can’t Happen Here.

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Notes

1. Franklin D. Roosevelt, ‘‘Acceptance Speech for the Renomination

for the Presidency,’’ June 27, 1936, Philadelphia, PA. Checked

online, 2/27/2007, at www.presidency.ucsb.edu/

shownomination.php?convid¼37. 2. James MacGregor Burns, Roosevelt: The Lion and the Fox (New

York: Harcourt, Brace and Company, 1956), 272.

3. Richard Hofstadter, The American Political Tradition and the Men

Who Made It (New York: Vintage, 1989), 435.

4. Harvard Sitkoff, A New Deal for Blacks (New York: Oxford

University Press, 1978), 60.

5. Bruce J. Schulman, From Cotton Belt to Sunbelt: Federal Policy,

Economic Development, and the Transformation of the South,

1938–1980 (Durham, NC: Duke University Press, 1994), 34.

6. Frederick Rudolph, ‘‘The American Liberty League, 1934–1940,’’

The American Historical Review 56, no. 1 (1950): 19.

7. William E. Leuchtenburg, The FDR Years: On Roosevelt and His

Legacy (New York: Columbia University Press, 1995), 124.

10. This WPA Federal Art Project mural in San Francisco’s George

Washington High School depicts a scene from the American

Revolution.

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8. 295 U.S. 495, 528.

9. Charles W. Hurd, ‘‘President Says End of NRA Puts Control Up to

People,’’ New York Times 6/1/1935, 1.

10. Franklin D. Roosevelt, press conference, May 31, 1935. Checked

online, 3/1/2007, www.presidency.ucsb.edu/ws/

print.php?pid¼15065. 11. William E. Leuchtenburg, ‘‘When the People Spoke, What Did They

Say?: The Election of 1936 and the Ackerman Thesis,’’ Yale Law

Journal 108, no. 8 (1999): 2088, 2080.

12. Leuchtenburg, ‘‘The Origins of Franklin D. Roosevelt’s ‘Court-

Packing’ Plan,’’ Supreme Court Review 1966 (1966): 358.

13. 49 Stat. 991; ‘‘The Bituminous Coal Conservation Act of 1935,’’ Yale

Law Journal 45, no. 2 (1935).

14. Leuchtenburg, ‘‘When the People Spoke,’’ 2106; Leuchtenburg,

‘‘Comment on Laura Kalman’s Article, ‘The Constitution, the

Supreme Court, and the New Deal’,’’ American Historical Review

110, no. 4 (2005).

15. Leuchtenburg, ‘‘The Origins of Franklin D. Roosevelt’s

‘Court-Packing’ Plan,’’ 355.

16. Leuchtenberg, ‘‘When the People Spoke,’’ 2084.

17. Ibid., 2090.

18. Ibid.

19. Arthur Krock, ‘‘In Washington,’’ New York Times 5/27/1936, 22.

20. Franklin D. Roosevelt, ‘‘Address at Madison Square Garden, New

York City,’’ 10/31/1936. Checked online 3/7/2007 at

www.presidency.ucsb.edu/ws/print.php?pid¼15219. 21. Leuchtenburg, FDR Years, 145–46.

22. Ibid., 153.

23. Alan Brinkley, The End of Reform: New Deal Liberalism in

Recession and War (New York: Vintage, 1995), 257–62,

Leuchtenburg, FDR Years, 137.

24. James T. Patterson, Congressional Conservatism and the New

Deal: The Growth of the Conservative Coalition in Congress, 1933–

1939 (Westport, CT: Greenwood Press, 1981).

25. Leuchtenburg, ‘‘The Origins of Franklin D. Roosevelt’s ‘Court-

Packing’ Plan,’’ 390–99.

26. Leuchtenburg , ‘‘Comment on Laura Kalman’s Article.’’

27. Leuchtenburg, ‘‘The Origins of Franklin D. Roosevelt’s ‘Court-

Packing’ Plan,’’ 349, n. 8.

28. Leuchtenburg, ‘‘FDR’s Court-Packing Plan: A Second Life, a

Second Death,’’ Duke Law Journal 1985, no. 3/4 (1985): 675–77.

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29. Ibid.: 685–87.

30. ‘‘PresidentPlans600,000WPACut,’’NewYorkTimes,1/26/1937,2.

31. Patrick Renshaw, ‘‘Was There a Keynesian Economy in the USA

between 1933 and 1945?,’’ Journal of Contemporary History 34,

no. 3 (1999): 343–44.

32. William J. Barber, Designs within Disorder: Franklin D. Roosevelt,

the Economists, and the Shaping of American Economic Policy,

1933–1945 (Cambridge: Cambridge University Press, 1996),

108–12; Brinkley, End of Reform, 82–85, 94–97.

33. Lester V. Chandler, American Monetary Policy, 1928–41 (New

York: Harper and Row, 1971), 325–26.

34. 52 Stat. 809 and E. Cary Brown, ‘‘Fiscal Policy in the ’Thirties:

A Reappraisal,’’ American Economic Review 46, no. 5 (1956);

Chandler, American Monetary Policy, 254.

35. 52 Stat. 1060.

36. Landon R. Y. Storrs, Civilizing Capitalism: The National

Consumers’ League, Women’s Activism, and Labor Standards in

the New Deal Era (Chapel Hill: University of North Carolina Press,

2000), 177–205.

37. Brinkley, End of Reform, 122–31.

38. Schulman, From Cotton Belt, 49–50.

39. Checked on the Clerk of the House website, 3/8/2007, http://

clerk.house.gov/art_history/house_history/partyDiv.html, and the

Senate Historian website, 3/8/2007, www.senate.gov/pagelayout/

history/one_item_and_teasers/partydiv.htm.

40. Lawrence W. Levine and Cornelia R. Levine, eds., The People and

the President: America’s Conversation with FDR (Boston: Beacon

Press, 2002), 234–35, 241.

41. Leuchtenburg, ‘‘Roosevelt, Norris and the ‘Seven Little TVAs,’ ’’

Journal of Politics 14, no. 3 (1952).

42. Patrick D. Reagan, Designing a New America: The Origins of New

Deal Planning, 1890–1943 (Amherst: University of Massachusetts

Press, 1999); Brinkley, End of Reform, 245–61.

43. [Federal Writers’ Project], These Are Our Lives (New York: W. W.

Norton, 1975), 366.

44. Joint Committee on Folk Arts, WPA folksong questionnaire,

1939. Library of Congress Digital ID AFCTS wpa001, viewed

online 3/8/07.

45. Jerre Mangione, The Dream and the Deal: The Federal Writers’

Project, 1935–1943 (New York: Avon, 1972), 264.

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46. Roy Rosenzweig and Barbara Melosh, ‘‘Government and the Arts:

Voices from the New Deal Era,’’ Journal of American History 77,

no. 2 (1990): 596.

47. Patterson, Congressional Conservatism, 321–22.

48. Brinkley, End of Reform, 144.

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Conclusion

The New American Way at

Home and Around the World

In November 1938, just months after the Fair Labor Standards Act

passed, Roosevelt privately told his secretary of the treasury, Henry

Morgenthau, that the world’s slide into war might well benefit

Americans generally and the Democrats politically. ‘‘These foreign

orders’’ for armaments, Roosevelt said, ‘‘mean prosperity in this

country and we can’t elect a Democratic Party unless we get

prosperity.’’ At the same time Roosevelt began thinking about

building up American military power as a deterrent, to avoid

having to negotiate with Hitler. 1 Despite losses in the 1938

congressional elections, the Democratic Party remained in power,

as did Roosevelt for an unprecedented third term in 1940. And in a

few years he told reporters he ‘‘no longer like[d] the term ‘New

Deal’,’’ that ‘‘Dr. New Deal’’ had come to save the country from

one set of ills, but now that it faced new perils, ‘‘his

partner . . . Dr. Win-the-War,’’ would take over. 2

Roosevelt’s substitution of ‘‘win-the-war’’ for ‘‘New Deal’’ mirrored

shifts in the federal budget. Congress ended the New Deal, even as

war allowed the government to spend the public’s money with a

zeal and abandon that mere global economic crisis could not

support. By the end of 1943, Congress had abolished CCC, WPA,

and other New Deal agencies. 3 At the same time, federal spending

grew from 8 percent of US GDP in 1938 to 40 percent in 1943. 4

The war let federal officials hire Americans directly without a

126

second thought as to whether they were instituting anything so un-

American as national work-relief. War spending and employment

dwarfed Depression spending and employment, and in 1943, at

long last, unemployment (measured as a percentage of the civilian

labor force) dropped below its 1929 level. 5 As the economist E. Cary

Brown noted in 1956, the New Deal never seriously tested Keynes’s

recommendations: ‘‘[f]iscal policy, then, seems to have been an

unsuccessful recovery device in the ’thirties—not because it did not

work, but because it was not tried.’’ 6 Only the war brought that

trial, and then not as an experiment in recovery, but as an incident

of military necessity.

Yet the war did not wholly displace the idea of the New Deal,

and when Roosevelt began to consider what lay beyond the

fighting, he resorted to the ideals of the 1930s. In January 1944,

Roosevelt delivered his State of the Union address, declaring, ‘‘It is

our duty now to begin to lay the plans and determine the strategy

for the winning of a lasting peace. . . . We have come to a clear

realization of the fact that true individual freedom cannot exist

without economic security and independence.’’ He then went on to

list, ‘‘a second Bill of Rights under which a new basis of security

and prosperity can be established for all regardless of station, race,

or creed.’’ The new rights included

The right to a useful and remunerative job in the industries or

shops or farms or mines of the Nation;

The right to earn enough to provide adequate food and clothing

and recreation;

The right of every farmer to raise and sell his products at a return

which will give him and his family a decent living;

The right of every businessman, large and small, to trade in an

atmosphere of freedom from unfair competition and domination

by monopolies at home or abroad;

The right of every family to a decent home;

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n

The right to adequate medical care and the opportunity to achieve

and enjoy good health;

The right to adequate protection from the economic fears of old

age, sickness, accident, and unemployment;

The right to a good education.

Roosevelt concluded, ‘‘All of these rights spell security. And after

this war is won we must be prepared to move forward, in the

implementation of these rights, to new goals of human happiness

and well-being.’’ 7

Time magazine remarked that ‘‘Dr. Win-the-War has apparently

called into consultation Dr. Win-New-Rights.’’ 8 But many of the

rights—to security from economic hardship, to employment, to

good farm prices, to vigorous business commerce, to a living wage

and a home—already had New Deal programs designed to ensure

their implementation. And others—to medical care and to

education—developed easily from New Deal principles. They

found fuller expression in Roosevelt’s plans for the peace, not only

for America, but for the world. 9

As the New Deal wound down its ambitious domestic program,

the Roosevelt administration began looking outward again.

Secretary of State Cordell Hull, like Keynes, had for decades

believed that an open world economy would tend toward peace

and prosperity. ‘‘[U]nhampered trade,’’ Hull said, ‘‘dovetailed with

peace.’’ 10

To this end he worked to secure trade agreements

including the Anglo-American Trade Agreement of 1938, which

contributed to the idea that international cooperation might

restore the global economy of the era before World War I.

Near the end of World War II, ideas like Hull’s approached fruition.

In June 1944, John Maynard Keynes went to the United States to

represent Britain at the Bretton Woods conference. On paper

Keynes rated as only one of 730 delegates from forty-four countries

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convening to establish rules for the postwar economy. But in person

Keynes played the role of protagonist at the conference. In 1941,

before the United States had entered the war, he had drafted a plan

to supply part of what the Versailles Treaty left out—a system to

ensure the smooth operation of the world’s finance and commerce,

to ‘‘prevent the piling up of credit and debit balances without

limit’’—after all, the cardinal rule for the postwar economy would be

to avoid reproducing the prewar economy. 11 Keynes’s plan for an

International Clearing Union would allot governments credit based

on their share of world trade and allow them to draw that credit,

denominated in a notional banking currency, the Bancor, as needed

to keep their economies stable.

Morally alongside Keynes stood his antagonist, the American

representative Harry Dexter White. White had his own plan to solve

the same problem by slightly different solutions: governments

would still borrow, but from a contributory fund rather than from a

pool of Bancors. 12 White’s plan stood in much the same relation to

Keynes’s idea as the New Deal stood in relation to European welfare

states. Under British programs to address poverty and disability, as

drawn up in the Beveridge plan of 1942, citizens received benefits

from the state as a matter of right. Nobody got pensions as a matter

of right under Social Security—retirees drew benefits because they

had contributed.

The American delegation rejected Keynes’s plan and insisted on

White’s for much the same reason the Roosevelt administration

had insisted on a contributory basis for Social Security: a

contributory scheme would limit claims and satisfy Congress. Thus

White’s plan became the major basis for the International

Monetary Fund (IMF) as agreed at Bretton Woods, and Congress

placed further restrictions on IMF to prevent unconditional

withdrawals from the fund. 13

IMF had a twin, the International Bank for Reconstruction and

Development, better known as the World Bank. Where IMF was

129

C o n c lu sio

n

supposed to allow countries to weather the vicissitudes of free

economies, the World Bank was supposed to lend money for the

repair of war damage and for long-poor countries to enter the club

of modern nations. It stood in relation to the world’s less-

developed regions rather as PWA, TVA, and WPA stood to the

American South and West. Also rather like those New Deal relief

agencies, the World Bank labored under the limits of prevailing

economic opinion, which limited also the bank’s capital: its

first loan to France committed a full third of its available

resources. 14

Even more like the New Deal’s domestic programs, the limited

resources of IMF and the World Bank provided the basis for

experimentation, for discarding failure and building upon success,

surviving even Roosevelt’s death in April 1945. Just as with the

early New Deal, constraints on the early Bretton Woods system

failed to produce global economic recovery: the World Bank could

not supply enough money for reconstruction, and IMF refused to

lend money unless assured it would be used only to correct short-

term imbalances, not for reconstruction at all. 15 And just as in the

New Deal, innovative U.S. policymakers established a new

program to meet the need: in 1947 a State Department official

wrote, ‘‘Communist movements are threatening established

governments in every part of the globe. These movements feed on

economic and political weakness. The countries under Communist

pressure require economic assistance on a large scale if they are to

maintain their territorial integrity and political independence. At

one time it had been expected that the International Bank [for

Reconstruction and Development, i.e., the World Bank] could

satisfy the needs for such assistance. But it is now clear that the

Bank cannot do this job. . . . The only way to meet this challenge is

by a vast new programme of assistance given directly by the United

States itself.’’ 16

This conviction became the basis for the European Recovery

Program, better known as the Marshall Plan, after Secretary of State

130

T h e G re a t D e p re ss io n a n d th e N e w

D e a l

George Marshall, who declared, ‘‘The United States should do

whatever it is able to do to assist in. . . the revival of a working

economy in the world so as to permit the emergence of political and

social conditions in which free institutions can exist.’’ Shortly

afterward, IMF liberalized its lending policy, and the U.S. dollar, still

tied to gold at $35 per ounce, became the base currency of a

revamped Bretton Woods system that lasted for about twenty-five

years. 17

By 1947, thirty years after it entered World War I, the U.S.

government had come around to something approaching Keynes’s

view after Versailles—that as the world’s richest country it had an

obligation to restore the world’s economy to health. The American

leadership reached this conclusion hesitantly and only when

prodded by crisis: they preferred much more modest

experimentation than the brilliant Keynes prescribed. The halting,

piecemeal efforts of the New Deal and then of the Bretton Woods

system solved problems slowly and partially, and thus let the United

States and the world drift rather closer to disaster than a simple

Keynesian move might have done. But the programs met with

ultimate success: Bretton Woods fostered greater economic stability

and more rapid economic growth than eras before or since. 18

The openly experimental, obviously fallible, always compromised

quality of the New Deal programs and their progeny reflected

the imperfect democracy that gave them birth. Considering the

costs of this painful process, we might prefer a program of

comprehensive change to Roosevelt’s caution. But weighing also

the performance of his administration’s jerry-built machinery both

at home and abroad against the record of more sweeping,

ideologically and theoretically coherent programs (including those

that attacked the New Deal), we might better appreciate the

merits of the Roosevelt era’s limits. The New Deal’s evident

imperfection invited criticism and further tinkering, making way

for improvements to the American democracy in the years

afterward and yet to come.

131

C o n c lu sio

n

Notes

1. Michael S. Sherry, The Rise of American Air Power: The Creation of

Armageddon (New Haven: Yale University Press, 1987), 81.

2. ‘‘ The Nine Hundred and Twenty-Ninth Press Conference,’’ The

Public Papers and Addresses of Franklin D. Roosevelt, ed. Samuel

I. Rosenman, 1943, vol., 571.

3. Alan Brinkley, The End of Reform: New Deal Liberalism in

Recession and War (New York: Vintage, 1995), 141.

4. 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 Ea636

and Ca10.

5. Ibid., series Ba475. Unemployment was 2.89 percent in 1929 and

1.77 percent in 1943.

6. E. Cary Brown, ‘‘Fiscal Policy in the ‘Thirties: A Reappraisal,’’ The

American Economic Review 46, no. 5 (1956): 863–66.

7. ‘‘President Roosevelt’s Message to Congress,’’ New York Times 1/

12/1944, 12.

8. Cited in Cass R. Sunstein, The Second Bill of Rights: FDR’s

Unfinished Revolution and Why We Need It More Than Ever (New

York: Basic Books, 2004), 15.

9. On the question of Roosevelt’s sincerity in this speech, see James

T. Kloppenberg, ‘‘Franklin Delano Roosevelt, Visionary,’’ Reviews

in American History 34, no. 4 (2006).

10. Quoted in Arthur W. Schatz, ‘‘ The Anglo-American Trade

Agreement and Cordell Hull’s Search for Peace 1936–1938,’’

Journal of American History 57, no. 1 (1970).

11. Cited in Elizabeth Borgwardt, A New Deal for the World: America’s

Vision for Human Rights (Cambridge, MA: Belknap Press of

Harvard University Press, 2005), 108.

12. See Ibid., 109.

13. Richard N. Gardner, Sterling-Dollar Diplomacy in Current

Perspective: The Origins and Prospects of Our International

Economic Order, New, exp. ed. (New York: Columbia University

Press, 1980), 134–36.

14. Edward S. Mason and Robert E. Asher, The World Bank since

Bretton Woods (Washington, DC: The Brookings Institution,

1973), 105.

15. Gardner, Sterling-Dollar, 297.

16. Ibid., 300.

132

T h e G re a t D e p re ss io n a n d th e N e w

D e a l

17. Gardner, Sterling-Dollar, 302.

18. Barry Eichengreen, ‘‘Epilogue: Three Perspectives on the Bretton

Woods System,’’ in A Retrospective on the Bretton Woods System:

Lessons for International Monetary Reform, ed. Michael D. Bordo

and Barry Eichengreen (Chicago: University of Chicago Press,

1993), 626.

133

C o n c lu sio

n

Further Reading

Badger, Anthony J. The New Deal: The Depression Years, 1933–40.

London: Macmillan, 1989.

Berlin, Isaiah. ‘‘President Franklin Delano Roosevelt.’’ In The Proper

Study of Mankind: An Anthology of Essays, edited by Henry Hardy

and Roger Hausheer, 628–37. London: Chatto and Windus, 1997.

Bordo, Michael D., Claudia Dale Goldin, and Eugene N. White, eds.

The Defining Moment: The Great Depression and the American

Economy in the Twentieth Century. Chicago: University of Chicago

Press, 1998.

Borgwardt, Elizabeth. A New Deal for the World: America’s Vision for

Human Rights. Cambridge, MA: Belknap Press of Harvard

University Press, 2005.

Brinkley, Alan. The End of Reform: New Deal Liberalism in Recession

and War. New York: Vintage, 1995.

——— . Voices of Protest: Huey Long, Father Coughlin, and the Great

Depression. New York: Vintage, 1983.

Carter, Susan B., Scott Sigmund Gartner, Michael R. Haines, Alan L.

Olmstead, Richard Sutch, and Gavin Wright, eds. Historical

Statistics of the United States, Earliest Times to the Present,

Millennial Edition. New York: Cambridge University Press, 2006.

Chandler, Lester V. America’s Greatest Depression, 1929–1941. New

York: Harper and Row, 1970.

Cohen, Andrew Wender. American Monetary Policy, 1928–41. New

York: Harper and Row, 1971.

———— . The Racketeer’s Progress: Chicago and the Struggle for the

Modern American Economy, 1900–1940. Cambridge: Cambridge

University Press, 2004.

134

Cohen, Lizabeth. Making a New Deal: Industrial Workers in Chicago,

1919–1939. Cambridge: Cambridge University Press, 1990.

Eichengreen, Barry. Golden Fetters: The Gold Standard and the Great

Depression, 1919–1939. New York: Oxford University Press, 1992.

——— . ‘‘The Origins and Nature of the Great Slump Revisited.’’

Economic History Review 45, no. 2 (1992): 213–39.

Fearon, Peter. Origins and Nature of the Great Slump, 1929–1932.

Atlantic Highlands, NJ: Humanities Press, 1979.

——— . War, Prosperity, and Depression: The U.S. Economy,

1917–1945. Oxford: Philip Allan, 1987.

Feinstein, Charles H., Peter Temin, and Gianni Toniolo. The European

Economy between the Wars. New York: Oxford University Press,

1997.

Fraser, Steve, and Gary Gerstle, eds. The Rise and Fall of the New Deal

Order, 1930–1980. Princeton: Princeton University Press, 1989.

Hawley, Ellis W. The New Deal and the Problem of Monopoly: A Study

in Economic Ambivalence. Princeton: Princeton University Press,

1966.

Jacobs, Meg. Pocketbook Politics: Economic Citizenship in Twentieth

Century America. Princeton: Princeton University Press, 2005.

Kennedy, David M. Freedom from Fear: The American People in

Depression and War, 1929–1945. New York: Oxford University

Press, 1999.

Kindleberger, Charles Poor. The World in Depression 1929–1939.

London: Allen Lane, 1973.

Leuchtenburg, William E. Franklin D. Roosevelt and the New Deal,

1932–1940. New York: Harper Torchbooks, 1963.

——— . The FDR Years: On Roosevelt and His Legacy. New York:

Columbia University Press, 1995.

——— . The Perils of Prosperity, 1914–1932. Chicago: University of

Chicago Press, 1993.

——— . The Supreme Court Reborn: The Constitutional Revolution in

the Age of Roosevelt. New York: Oxford University Press, 1995.

——— . ‘‘When the People Spoke, What Did They Say?: The Election of

1936 and the Ackerman Thesis.’’ Yale Law Journal 108, no. 8

(1999): 2077–114.

Maher, Neil M. Nature’s New Deal: The Civilian Conservation Corps

and the Roots of the American Environmental Movement. New

York: Oxford University Press, 2007.

135

F u rth

e r R e a d in g

Olson, James S. Saving Capitalism: The Reconstruction Finance

Corporation and the New Deal, 1933–1940. Princeton: Princeton

University Press, 1988.

Patterson, James T. America’s Struggle against Poverty, 1900–1985.

Cambridge, MA: Harvard University Press, 1986.

——— . Congressional Conservatism and the New Deal: The Growth of

the Conservative Coalition in Congress, 1933–1939. Westport,

CT: Greenwood Press, 1981.

——— . The New Deal and the States: Federalism in Transition.

Princeton: Princeton University Press, 1969.

Phillips, Sarah T. This Land, This Nation: Conservation, Rural

America, and the New Deal. New York: Cambridge University Press,

2007.

Romer, Christina D. ‘‘The Great Crash and the Onset of the Great

Depression.’’ Quarterly Journal of Economics 105, no. 3 (1990):

597–62.

——— . ‘‘What Ended the Great Depression?’’ Journal of Economic

History 52, no. 4 (1992): 757–84.

Rothermund, Dietmar. The Global Impact of the Great Depression.

London: Routledge, 1996.

Rowley, William D. M. L. Wilson and the Campaign for the Domestic

Allotment. Lincoln: University of Nebraska Press, 1970.

Saloutos, Theodore. ‘‘New Deal Agricultural Policy: An Evaluation.’’

Journal of American History 61, no. 2 (1974): 394–416.

Schulman, Bruce J. From Cotton Belt to Sunbelt: Federal Policy,

Economic Development, and the Transformation of the South,

1938–1980. Durham, NC: Duke University Press, 1994.

Skidelsky, Robert. John Maynard Keynes: A Biography. 3 vols.

London: Macmillan, 1983–2000.

Smith, Jason Scott. Building New Deal Liberalism: The Political

Economy of Public Works, 1933–1956. Cambridge: Cambridge

University Press, 2006.

Volanto, Keith J. Texas, Cotton, and the New Deal. College Station:

Texas A&M University Press, 2005.

Weir, David R. ‘‘A Century of U.S. Unemployment, 1890–1990:

Revised Estimates and Evidence for Stabilization.’’ Research in

Economic History 14 (1992): 301–46.

136

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D e a l

Table 1. Major federal acts of the Great Depression and New Deal

Name of action Citation Date Description

Reconstruction Finance Corporation Act

47 Stat. 5 1/23/32 Created Reconstruction Finance Corporation (RFC), capita- lized at $500m and permitted to issue obligations worth up to three times as much, to aid banks and other industries.

Glass-Steagall Act 47 Stat. 56 2/27/32 Permitted Federal Reserve System to issue notes backed by government securities.

Federal Home Loan Bank Act

47 Stat. 725 7/22/32 Created Home Loan Bank System, patterned on Federal Reserve System, to permit rediscounting of mortgage loans.

Emergency Banking Relief Act

48 Stat. 1 3/9/33 Title I recognized a banking emergency, empowered the president to halt bank transactions and the secretary of the treasury to impound gold. Title II empowered the comptroller of the currency to appoint conservators for banks, investigate their books, and determine their soundness. Title III authorized the RFC to buy and sell bank stock. Title IV liberalized the Federal Reserve System’s authority to issue advances to member banks.

Civilian Conservation Corp Reforestation Relief Act

48 Stat. 22 3/31/33 Authorized the president to create a "conservation corps among the unemployed," which became the Civilian Conservation Corps (CCC), chiefly for the maintenance of public lands.

Agricultural Adjustment Act

48 Stat. 31 5/12/33 Title I recognized a state of agricultural emergency and disparity between rural and urban incomes which it would be

(Continued)

1 3 7

Table 1 (Continued)

Name of action Citation Date Description

policy to redress; directed the secretary of agriculture to create Agricultural Adjustment Administration (AAA) to regulate production of commodities and administer processing tax. Title II, or the Emergency Farm Mortgage Act, expanded fed- eral power to back farm mortgages. Title III, or the Thomas Amendment, authorized the president to issue paper money and determine the gold or silver weight of the dollar.

Federal Emergency Relief Act

48 Stat. 55 5/12/33 Declared an economic emergency of unemployment and failure of local relief funds, allotted $500m of RFC money for a Federal Emer- gency Relief Administration (FERA) to grant as relief to the states.

Tennessee Valley Authority Act

48 Stat. 58 5/18/33 Created the Tennessee Valley Authority (TVA) to maintain and operate Wilson Dam and Muscle Shoals and to improve navi- gationandcontrolfloodsintheregion,extendingtotransmissionof electrical power and manufacture of fertilizer and explosives.

Securities Act of 1933 48 Stat. 74 5/27/33 Required corporations to register securities with the Federal Trade Commission to prevent fraudulent issues.

Home Owners’ Loan Act

48 Stat. 128 6/13/33 Created the Home Owners’ Loan Corporation (HOLC) to refinance mortgages on residences and prevent foreclosures.

Banking Act of 1933 (Glass-Steagall

48 Stat. 162 6/16/33 Increased power of the Federal Reserve Board to oversee transactions of Federal Reserve System, created the temporary

1 3 8

Banking Act) Federal Deposit Insurance Corporation (FDIC), limited com- mercial banks’ ability to trade in securities.

National Industrial Recovery Act

48 Stat. 195 6/16/33 Title I recognized a state of industrial emergency, suspended anti-trust law, and authorized the president to create an agency to address the emergency by the composition of industrial codes; Roosevelt created the National Recovery Administration (NRA). Title II authorized the president to create a Federal Emergency Administration of Public Works, which became the Public Works Administration (PWA), to lend and grant $3.3bn appropriated for this purpose.

Civil Works Administration

Executive Order no. 6420B

11/9/33 Roosevelt created the Civil Works Administration (CWA), funded with $400m from the National Industrial Recovery Act, "for the purpose of increasing employment quickly."

Gold Reserve Act 48 Stat. 337 1/30/34 Placed control of monetary gold in the federal government and authorized the president to establish the gold value of the dollar for a two-year period at not more than 60 percent of its current value; established a stabilization fund in the Treasury.

Securities Exchange Act

48 Stat. 881 6/6/34 Created Securities and Exchange Commission (SEC) and empowered it to regulate trading of securities on the stock ex- change.

National Housing Act 48 Stat. 1246 6/27/34 Created the Federal Housing Administration (FHA), funded out of the RFC, to insure mortgages.

(Continued)

1 3 9

Table 1 (Continued)

Name of action Citation Date Description

Joint Resolution for Enforcement of National Industrial Recovery Act

48 Stat. 1183 6/19/34 Authorized the president to create a board to enforce section 7a (collective bargaining) of the National Industrial Recovery Act. Roosevelt created the National Labor Relations Board (NLRB).

Emergency Relief Ap- propriation Act of 1935

49 Stat. 115 4/8/35 Appropriated $4.9bn for emergency relief use.

Resettlement Administration

Executive Order no. 7027

4/30/35 Under the Emergency Relief Appropriation Act of 1935, Roosevelt created the Resettlement Administration (RA) to aid the migra- tion of poor farm familes. In 1937 RA became the Farm Security Administration (FSA) within the Department of Agriculture.

Works Progress Administration

Executive Order no. 7034

5/6/35 Under the Emergency Relief Appropriation Act of 1935, Roosevelt created a system for evaluating proposed projects including the Works Progress Administration (WPA), "to move from the relief rolls to work . . . the maximum number of people in the shortest time possible."

Rural Electrification Administration

Executive Order no. 7037

5/11/35 Roosevelt created Rural Electrification Administration (REA) to support the extension of electrical power using funds from the Emergency Relief Appropriation Act of 1935.

1 4 0

National Labor Relations Act (Wagner Act)

49 Stat. 449 7/5/35 Created newNLRB to replace the board created by executive order in 1934, to assure specified rights of employees to organize and bargain collectively and prevent defined unfair labor practices.

Social Security Act 49 Stat. 620 8/14/35 Title I provided for grants to states for old-age assistance. Title II provided for federal old-age benefits. Title III provided for grants to states to administer unemployment compensation plans. Title IV provided grants to states for aid to dependent children. Title V provided grants to states for maternal and child welfare. Title VI allotted money to states for maintaining public health services. Title VII established a Social Security Board to study and recommend "the most effective methods of providing economic security through social insurance." Titles VIII and IX levied taxes on employers and employees to support the program. Title X provided grants to states for aid to the blind.

Banking Act of 1935 49 Stat. 684 8/23/35 Title I made the FDIC permanent. Title II amended the Fed- eral Reserve Act to establish the Board of Governors of the Federal Reserve System, appointed by the president, and lodged powers to regulate the supply of money, establish credit policy, and supervise banks with them.

Public Utilities Holding Company Act

49 Stat. 803 8/26/35 Defined a public interest in public utilites, enumerated abuses of that public interest, and made it policy to eliminate such abuses and also to eliminate holding companies.

(Continued)

1 4 1

Table 1 (Continued)

Name of action Citation Date Description

Soil Conservation and Domestic Allotment Act

49 Stat. 1148 2/20/36 Aimed at achieving agricultural parity through conservation measures.

National Housing Act Amendments of 1938

52 Stat. 8 2/3/38 Amended National Housing Act to make it easier to resell mortgages. RFC created National Mortgage Association of Washington, later renamed the Federal National Mortgage Association (Fannie Mae), to resell mortgages.

Agricultural Adjustment Act of 1938

52 Stat. 31 2/16/38 Established the yardstick of normal wheat yields and paid farmers to meet this target.

Fair Labor Standards Act

52 Stat. 1060 6/25/38 Established national minimum wage and maximum hours, banned child labor.

1 4 2

Index

A AAA (Agricultural Adjustment

Administration), 78–82, 93, 96,

97, 109, 118, 137

AFL (American Federation of

Labor), 82

African Americans, 24, 44, 45, 46,

100, 107, 112, 117

Agee, James, 48

Agricultural Adjustment Act, 77,

137

agriculture. See farms and farming

American Liberty League, 108, 109

Anglo-American Trade Agreement,

128

automotive industry, 13, 14, 19

B Bagehot, Walter, 27, 30

Bank for Reconstruction and

Development. See World Bank

Bankhead Cotton Control Act, 80

Banking Act of 1933, 59, 138

Banking Act of 1935, 62, 141

banking system, 30, 57, 59, 72

banks, 10, 17, 27, 29, 34, 63, 118;

failures of, 19, 29, 30, 31, 56

Baruch, Bernard, 18

Berlin, Isaiah, 1, 5, 56

Black Thursday, 19

Black, John D., 80

Bonus Army, 1, 50–52

Bretton Woods, 6, 128–31

Brown, E. Cary, 127

C Carr, E. H., 11

CCC (Civilian Conservation Corps),

64, 66, 90, 108, 126, 137

CES (Committee on Economic

Security), 97, 98, 102

charities, 41

Clayton Act, 82

communism,50,51,110,112,120,130

Consumers Advisory Board, 96

consumer spending, 13, 15, 19, 82

consumers’ unions, 96, 97

corruption, 68, 84

countervailing power, 5, 87, 88, 92,

95–97, 102, 118

court-packing, 113, 114

CWA (Civil Works Administration),

66–67, 139

Coolidge, Calvin, 23, 76, 89

Coughlin, Charles. See Father

Coughlin

credit, purchasing on, 13–15, 18, 19

143

D Darrow, Clarence, 25, 84

debt: personal, 13, 15, 28, 47, 60,

62, 74; intergovernmental, 10, 12,

15, 27–29, 33, 60. See also

monetary policy

depressions and recessions, 5, 12,

29, 38, 47, 57, 115. See also Great

Depression

Dies, Martin, 120

dust bowl, 47

E economic growth, 1, 5, 12–15, 57,

131

elections: of 1928, 23, 25; of 1930,

31; of 1932, 35, 52, 89, 105; of

1936, 102, 106, 108, 110–12; of

1938, 117, 126

Emergency Banking Act, 57,

61, 62

Emergency Relief and Construction

Act, 63

European Recovery Program. See

Marshall Plan

Evans, Walker, 48

F Fair Labor Standards Act, 116, 126,

142

Father Coughlin, 49, 50, 112

Farrell, James, 32

farm policy, 73–79

farms and farming, 28, 46, 47, 56,

62, 73–76, 78, 79

FDIC (Federal Deposit Insurance

Corporation), 59, 139, 141

Federal Art Project, 120

FederalEmergencyReliefAct,65,137

Federal Employment Stabilization

Board, 32

Federal Farm Board, 77

Federal Land Bank system, 34

Federal Relief Appropriation Act,

67, 140

Federal Reserve System, 1, 3, 17, 27,

28, 30, 34, 57, 59, 61, 62, 137, 138,

141

Federal Theatre Project, 120, 121

Federal Writers’ Project, 119

FERA (Federal Emergency Relief

Administration), 65–67, 137

fiscal policy, 5, 12, 26, 29, 33, 65, 66,

67, 93, 115, 116, 126, 127

G Galbraith, John Kenneth, 87

global finance, 18, 20, 130

Gold Reserve Act, 62

gold standard, 59–62

Great Crash, 3, 18, 19, 28, 30, 40,

44, 47, 50, 77

Great Depression, 2, 3, 8, 19, 25, 38,

46, 48–50, 65, 69, 73, 101, 111,

126

Guffey Coal Act, 110

H Harburg, E. Y., 39

Harrison, George L., 28

health insurance, 102

Hickok, Lorena, 48

hoboes, 44, 64

Hofstadter, Richard, 10

Home Loan Banks, 34, 137

Homestead Act, 73

Hoover, Herbert, 3, 6, 17, 20,

23–35, 50–52, 61, 63, 76, 82, 105,

107, 111; and 1927 flood relief, 23,

24; relief philosophy of, 24–26,

31, 32, 35; responses to Crash of,

26, 31–34, 63

Hoovervilles, 44, 45

Hopkins, Harry, 65–68, 99, 108

Howe, Frederic, 96

144

T h e G re a t D e p re ss io n a n d th e N e w

D e a l

Hughes, Charles Evans, 16, 108

Hull, Cordell, 128

I Ickes, Harold, 65

IMF (International Monetary

Fund), 129, 130

immigration and immigration

policy, 9, 11, 12, 33, 38, 68

industrial policy, 81–84

J Johnson, Hugh, 76, 81, 83

K Kennedy, David M., 2

Kennedy, Joseph P., 18, 20, 62

Keynesianism, 118

Keynes, John Maynard, 8–11, 19,

20, 115, 116, 126, 128, 129, 131

L Lamont, Thomas, 29

Lange, Dorothea, 48

Laval, Pierre, 61

League of Nations, 11

Lilienthal, David, 90, 91

London Economic Conference, 72

M MacArthur, Douglas, 51

Marshall, George, 131

Marshall Plan, 130, 131

McNary-Haugen bills, 76, 77

McReynolds, James, 113

Mencken, H. L., 25

Mills, Ogden, 34

Moley, Raymond, 59, 77

monetary policy, 17, 18, 27–30, 34,

56, 59, 61, 62, 72, 118, 129

Morehead v. New York ex. rel.

Tipaldo, 110

Morgenthau, Henry, 126

Morrill Land Grant Act, 74

municipal assistance, 42, 43, 49

N NAACP (National Association for

the Advancement of Colored

People), 107

National Consumers’ League, 116

National Labor Relations Act, 105

National Industrial Recovery Act,

82, 95, 96, 110, 140

National Resources Planning

Board, 118

New Deal, 1, 2, 3, 4, 5, 6, 56–69,

72,77,78,82,87,88,91,94,97,101,

102, 106, 109, 111, 114, 116, 121,

126, 127, 130; approval/

disapproval of, 62, 64, 67–9,

78, 111; criticism and

opponents of, 92, 106, 108–10,

113–18, 120; failures of, 66, 72,

84, 85, 93, 95, 116, 117, 131;

major acts of, 137–42;

methodology of, 1, 4, 6, 56–58,

67, 131; opposition to, 120;

successes of, 57, 68, 91, 92, 93, 102,

117–20, 131

NLRB (National Labor Relations

Board), 94, 95, 120, 140, 141

NRA (National Recovery

Administration), 81, 83, 84, 94,

96, 108–110

O optimism, 18, 19, 25, 26, 31, 115

P Peek, George, 76, 78, 81

Pacific Railroad Act, 73

145

In d e x

Patton, George S., 51

Perkins, Frances, 82, 84

political economy, 6, 70, 85, 88–90,

92, 93, 97, 102, 118

price-fixing, 81–84

PWA (Public Works

Administration), 65, 66, 91,

92, 130

R racism, 24, 38, 40, 44–46, 92, 93,

100, 107, 117

recovery, 57, 72, 80–82, 85, 102,

relief, 4, 57, 63–66, 67–9, 82, 116;

attitudes toward public, 39, 41,

42, 49, 65, 67, 69, 126; federal

efforts for aimed directly at

public, 4, 13, 35, 63–66, 116;

non–New Deal federal efforts for,

32–34, 63; private efforts for, 32;

state and local efforts for, 26, 27,

32, 42, 49, 65, 68; work relief,

64–67, 82, 115, 116, 126

reflation, 4, 56, 59, 61, 62, 69

REA (Rural Electrification

Administration), 91, 140

Revenue Act, 93

RFC (Reconstruction Finance

Corporation), 34, 50, 57, 62, 63,

66, 137

Roberts, Owen, 114

Rockefeller, John D., 19

Roosevelt, Franklin D., 1, 2, 4–6,

16, 20, 56–69, 77, 78, 82–89,

92, 94, 98, 101, 102, 105, 115,

116, 126, 131; as governor of

New York, 32, 35, 52; and

the Supreme Court, 109,

110–14; after the new deal,

126–31; campaigning and

elections, 2, 5, 35, 52, 77, 89,

102; conservatism of 59, 66,

106, 110, 111, 115; in the navy,

24, 88

Rumsey, Mary Harriman, 96

S Schecter v. United States, 108

Schumpeter, Joseph, 19

Schwellenbach, Lewis, 87

SEC (Securities and Exchange

Commission), 62, 139

sectionalism, 74–76, 90, 91, 100,

111, 113, 117

sexism, 44, 45

sharecropping, 48, 119

Smoot-Hawley Tariff, 28

Social Security, 98, 99–101, 106,

114, 118, 129

Social Security Act, 114

socialism, 32, 78, 85, 90

speculation, 16, 17

state power, 85, 95, 96, 101, 102,

107

strikes, 94

stock market, 15–17

stock pools, 16

Supreme Court, 82, 95, 108–11, 113,

114, 118

T tariffs, 10, 11, 12, 28, 29, 60, 74, 76,

77

tax policy, 31, 74, 80, 93, 94, 99

Terkel, Studs, 5

Thomas Amendment, 61, 62

TNEC (Temporary National

Economic Committee), 116

trade policy, 9, 10, 28, 29

Trading with the Enemy Act, 57, 58

tramps. See hoboes

Treaty of Versailles, 8, 9, 11,

129, 131

146

T h e G re a t D e p re ss io n a n d th e N e w

D e a l

Truman, Harry S, 117

TVA (Tennessee Valley Authority),

89–91, 118, 130, 138

U Un-American Activities

Committee, 120

underemployment. 40

unemployment, 1, 5, 15, 26, 31–33,

40, 46, 55, 57, 64, 67, 96, 97, 101,

102, 115 126

unions, 32, 41, 82–4, 94–97, 116,

120

V veterans. See Bonus Army

W

wages, 13, 14, 26, 69, 82, 95, 116

Wagner, Robert, 95

Wagner Act, 95, 96, 110,

114, 141

Wallace, Henry A., 76, 78, 85

West Coast Hotel v. Parrish, 114

White, Harry Dexter, 129

White, Walter, 107

WIB (War Industries Board), 76,

81, 83

Wilson, Milburn L., 77, 78

Willkie, Wendell, 91

World Bank, 129, 130

world economy, 6, 20, 29, 72,

128, 130; pre-WWI system, 8, 9,

10, 11, 128; international trade,

28, 29; overseas investment,

17, 62

World Economic Conference, 11, 12

World War I, 4, 7, 8, 9, 11, 12, 38,

72, 75–77, 88, 128

World War II, 5, 65, 126, 128

WPA (Works Progress

Administration), 67, 68, 93,

108, 117, 118, 120, 122, 126,

130, 140

147

In d e x

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176. Modern China

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181. The Old Testament

150

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