History 320 The Great Depression and the New Deal

1. History 320 The Great Depression and the New Deal

2. What caused the Great Depression? • NOT the stock market crash, though contributed • The inequalities of wealth that had been building since the Gilded Age • Lacking legalized unions or other means to increase wages, enormous wealth produced by gains in productivity concentrates in hands of wealthy • Laissez-faire philosophy of President Calvin Coolidge (1923-29) • Major Cause?: The consequences of WWI • Collapse of a vast global triangle of capital and debt

3. The Broader “Meaning” of the Great Depression • Isolationism was an illusion • League of Nations or not, Global Capitalism had now clearly linked the U.S. to the fate of the world • Laissez-faire policies seemed to have disastrous consequences in a global system: • Ideologically opposed to government management of even the domestic economy, free market advocates of laissez-faire were unlikely to countenance governmental management of the international economy

4. The Broader “Meaning” of the Great Depression • Challenged the old Horatio Alger faith that success was largely the result of individual hard work, discipline, honesty, etc., and failure was the result of laziness, lack of discipline, moral failings • Depression throws millions of hard-working, responsible Americans out of work • People lose their homes and families through no fault of their own • How much can individual Americans truly control their own destinies? • Decisions made not just in New York board rooms, but offices in Berlin and London, dictate the fate of millions • The Independent Yeoman Farmer is truly dead

5. The Promise of a “New Deal” and the Rise of Modern Liberalism

6. The New Deal • Only possible because of the mass pain and suffering of free-market capitalism’s greatest historical failure (so far) • Narrow window of opportunity to experiment with new ideas about the proper role of government and the meaning of American liberty and freedom • In many ways, a break from the past • But also had roots with the more modest reforms of the Progressive Era

7. What did the New Deal do? • Historians think in terms of the First and Second New Deals: • The First New Deal: • Focused primarily on basic relief of economic suffering and attempts to stimulate economic recovery • The Second New Deal: • Much more ambitious, FDR’s attempt to permanently alter the American political economy • Government to manage the economy for stable growth and to guarantee all Americans some modicum of economic security

8. The First New Deal • Agricultural Adjustment Act • Federal payments to farmers to take acres out of production, raise fewer pigs, etc. • Goal: Limit over-production • Civilian Conservation Corps • Employ idle young men in public works projects • Goal: Give people jobs and pump money into economy • Federal Depository Insurance Corporation • Guarantee private savings in banks • Goal: Regain public faith in safety of banks • National Industrial Recovery Act • Federal regulation of minimum wages, maximum hours • Promises workers right to unionize • Public Works Administration give people federal jobs

9. Did the First New Deal work? • Yes and no • Did not do succeed in fully ending the Great Depression • By 1935, few signs of significant economic recovery • But did take the edge off the worst suffering • Gave Americans “hope in hard times” • Americans believed FDR was on their side, and he wins the lasting devotion of millions • FDR’s overwhelming popularity sweeps in a democratic majority in the Congress • Some of these are to the left of FDR, reflecting an American desire for even bigger changes

10. Radical Threats • After five years of depression, many Americans begin to listen to would-be leaders much more radical than FDR • Consider what happened in many other capitalist nations

11. Germany: Hitler’s hyper-patriotic, nationalistic, and militaristic Nazi fascism

12. Italy: Mussolini’s hyper-patriotic, nationalistic, and militaristic fascism

13. Japan: The military’s hyper-patriotic, nationalistic, and militaristic Japanese-style fascism

14. USSR: Stalin’s anti-fascist, anti-capitalist, state-planned economy which suffered few ill-effects from the Great Depression • Few realized at the time, though, that Stalin had created the most brutal of police states that would result in the death of an estimated 15-20 million of his own people, perhaps 6 million through execution or the gulags

15. The distinctly un-militaristic, un-nationalistic, and un-fascistic (though nonetheless deeply patriotic) FDR, with his Scotty Fala and an unknown young victim of polio

16. Radical threats at home • The U.S. evinced definite strains of fascistic ideas in the 1920s • 100% Americanism and radical nationalism • Intolerance for a diversity of ideas • Suppression of civil liberties • First Red Scare: Remember that Fascism was also rabidly anti-communist • Eugenics: Controlled human breeding for pure Anglo-Saxon blood • The KKK—White Sheets become Brown Shirts? • A notable exception: Lacked the typical fascist emphasis on militarism

17. Home-grown American radicals: • Francis Townsend • LA doctor who called for generous federal monthly payments to the elderly to take them out of the labor pool

18. Home-grown American radicals: • Father Charles Coughlin • Detroit radio priest who called for the nationalization of major American industries • Deeply anti-Semitic, blamed economic troubles on a conspiracy of Jewish bankers (Adolf Hitler anyone?)

19. Home Grown American Radicals Huey Long Demagogic Louisiana Senator who wanted to “soak the rich” Confiscate large private fortunes, levy a steep progressive income tax Promised government would provide every average American family with a minimum yearly household income of $2,500

20. FDR’s New Political Philosophy • In this climate of world fascism and home-grown radicalism, FDR’s “radical” Second New Deal was clearly very moderate—a middle way between total state control and laissez-fair; demonstrating the amazing flexibility and adaptability of American democracy • Avoids fascism and communism • Redefines the meaning of “liberalism”: • The simple old days when Americans could be truly independent and self-sufficient were gone • Most Americans could no longer guarantee themselves and their families a modicum of security • Left to its own devices, it appeared that free-market instabilities often led to fascistic or other dictatorial attempts to provide fearful people security in an insecure world

21. FDR’s New Political Philosophy • Therefore, FDR and many other liberal analysts came to believe that it must be the task of democratically elected governments to guarantee some very modest level of economic safety and security—if not, democracy itself would likely perish • Government must actively manage and regulate the economy to insure sustained economic growth

22. The Second New Deal • Not about relief or recovery, but rather about creating a secure new political economy • Architects believed cyclic unemployment was a permanent and inevitable feature of modern industrial capitalism • Therefore, must have federal mechanisms to help the unemployed • Government to be the employer of last resort

23. The Second New Deal • 1935 Emergency Relief Appropriation • (Robert) Wagner National Labor Relations Act • Social Security • Required all 48 states to establish some system of unemployment insurance • Provided old age pensions

24. What did FDR and the New Deal do? • Created modern liberalism: A central purpose of government is to provide its citizens with economic security • For the first time, focused on guaranteeing the security of the mass of average American people rather than its previous traditional stance of protecting property, business interests, etc., as path to that security • Did so without destroying the creativity and wealth-generating power of industrial capitalism (indeed, post-war period sees the biggest economic boom in American history) • Nevertheless, some of the wealthy elites resented the New Deal and thereafter constantly fought to roll it back and reestablish elite control • Created an economic regulatory system and social safety net that—so far—may have prevented another economic downturn as severe as the Great Depression

25. What did FDR and the New Deal do? • Created the New Deal Democratic political coalition that would dominate until the 1970s • Lower class, middle class, farmers, labor, African Americans, urban north and “Solid South” • Greatly increased the size and power of the federal government • Likewise, also increased taxation, potentially unfair or illogical regulations, etc., and involvement of the government in lives of everyday Americans • New Deal liberalism justified bigger government as a necessity to balance the power of big business, manage the economy, avoid fascism/communism, and guarantee every American a measure of economic security • Big Question: Would big government nonetheless limit the freedom of Americans more than protecting those freedoms? • Ronald Reagan: Government is not the solution—government is the problem.

26. What did FDR and the New Deal NOT do? • Did not result in significant long-term redistribution of wealth • Did not create a system of substantial state ownership of industry, railroads, etc. • Did not end the Great Depression • In some cases, did more harm than good • Although large federal spending (Keynesianism) did spur modest economic growth, the economy was still weak by 1940 • Needed MASSIVE federal spending, which came only with the start of WWII: Military Keynesianism

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