The Great Depression and the New Deal

1. The Great Depression and the New Deal Causes of the Great Depression The Hoover administration’s response Franklin Delano Roosevelt and the New Deal Labor and union recognition The New Deal coalition and its critics from the Right and the Left Surviving hard times: American society during the Great Depression

2. Causes of the Great Depression • Contrary to popular assumption, the Great Stock Market Crash in October of 1929, was not the cause of the Great Depression, but rather the catalyst for a host of causes that existed prior to and emerged following the crash. Warning signs had been seething beneath the surface in the 1920s, obscured by the robust industrial and consumer economies. • As discussed, agriculture faced depressed prices after WWI and never recovered to war-time levels, though production edged steadily upward, which further exacerbated the global glut of agricultural commodities. As the 1920s waned, manufacturers of durable goods faced a similar dilemma- downward pressure on prices due to bulging inventories. At some point in the late 1920s most of the people who could afford cars, washing machines and vacuum cleaners had already purchased them. As with agriculture, the solution for many manufacturers was to increase production. • Meanwhile, to spur demand, consumers had access to financing and easy credit. Installment plans were a novelty in the 1920s, and many middle and working class households across the nation became saddled with the debts of barely-paid-for goods.

3. Causes of the Great Depression • The same “buy now, pay later” approach began to infiltrate the trade in corporate stocks as well. Steady growth through the first half of the 1920s attracted substantial investment in the stock market, and by 1925, stock prices began a sharp rise culminating in a frenzy through 1929. The stock mania was purely speculative. Stories abounded of regular Joes who “got in early” and made a pile of dough. Word spread fast about the fortune to be made in stocks. • By 1929, far too many regular Joes were buying stocks “on margin” paying as little as 10% down on the speculation the price would continue to skyrocket. When prices began to falter, the bubble burst and panic selling ensued. In late October, the stock market took a nearly 40% haircut, followed by a moderate recovery sustained through 1931, followed by a much longer and deeper decline through the summer of 1932- when the market hit its all time low. At that point the market’s value was barely more than 10% of its 1929 peak. As the money vanished, so did the jobs. At the height of the depression, unemployment hovered above 25%, even higher in certain areas of the country.

4. The Hoover administration’s response • Hoover’s response to the crash and depression has been the subject of endless historical debate. Many in the 1930s and after blamed Hoover’s inaction for deepening the severity of the depression. In fact the Hoover administration did attempt to respond to the depression, but in retrospect his responses were far too mild to assuage the unprecedented severity of the downturn. • Even prior to the crash, Hoover had reluctantly attempted to address the already depressed agricultural sector with programs that would help farmers form cooperatives to store and sell surplus commodities. He also attempted to temper the rampant speculation in the stock market with Federal Reserve action to tighten the money supply. Both actions were too little too late. • As the true toll of the crash and rising unemployment set in through 1930, Hoover faced a philosophical dilemma. While he sympathized with the pleas of the jobless and hungry, as a self-made man who believed the ideals of hard work, thrift, and self-reliance were the cornerstone of American society, he simply could not fathom anything approaching direct assistance (dole) to the people, even to relieve the poor souls literally starving in the streets.

5. The Hoover administration’s response • Resentment for Hoover’s inaction grew as the depression worsened, and some of the actions he did take sped up the economic decline. Chief among these was the Smoot-Hawley Tariff, one of the largest tariff hikes in US history. Originally proposed to provide a modicum of price protection for farmers, by the time Congress passed the act, it was bloated with protectionist measures for nearly every special interest in the industrial sector. The result was catastrophic, as other nations passed retaliatory tariffs and faith in the US an as honest broker in free markets was shaken to the core. The vain hope that it would help American manufacturers stay afloat quickly dissipated. Instead, the tariff helped to plunge the world further into economic disaster. • Hoover’s reputation as cold-hearted was not helped by his handling of the “Bonus Army” in summer of 1932. This “army” of thousands of WWI veterans marched on Washington DC to demand the early payment of a legislated pension bonus. Encamped on the mall, Hoover authorized the actual army to evict the squatters, injuring many and killing two in the process. • In his final year in office, Hoover did finally deliver relief to the plummeting financial and industrial sectors. Congress organized the Reconstruction Finance Corporation (RFC) to act essentially as a government lending bank for financial, industrial, and agricultural concerns. The RFC was far too late to stem the tide of depression, but it probably did prevent an even more catastrophic collapse, and paved the way for the far bolder action of the succeeding administration.

6. Franklin Delano Roosevelt and the New Deal • When FDR was nominated as the Democratic candidate in 1932, he took the unprecedented action of accepting the nomination and addressing the party convention in person. In that speech, he vowed to deliver “a new deal to the American people,” and this idea, (and terminology) came to represent the entirety of Roosevelt’s programs to pull the nation from the brink of economic and socio-political collapse. • FDR’s message of prompt, bold, and experimental action was precisely what was being demanded by the American public, and predictably he and the Democrats trounced Hoover in the general election. While the electorate was elated for the clear change on the horizon, the four “lame duck” months before FDR was sworn in witnessed some of the very darkest days of the Depression. • After taking office in early March 1933, FDR set about a whirlwind of legislation in his first “Hundred Days” that sought to provide immediate relief to both the crumbling economy and the desperately impoverished . In his opening salvo, FDR declared an immediate banking holiday to forestall a complete collapse following months of epidemic bank runsand failures. Among other powers, the Emergency Banking Relief Act gave the president the authority to assess solvency for nationally chartered banks. With a grasp on the solvency of banks, FDR delivered a radio address assuring the public that it was safe to keep and return their money to banks. This was the first of many such “fireside chats” through the FDR years- his calm, plainspoken explanations of government’s efforts to affect the Depression offered hope and reassurance to the despairing masses. • Surrounded by his “Brains Trust,” FDR unleashed a flurry of new government agencies to deal with the “three r’s”: relief, recovery, and reform. Some of the long-term reforms that eventually got passed (Social Security) were premised on older Progressive ideas, but immediate economic recovery and unemployment relieve required a novel leap into uncharted waters. FDR got a blank check with the Federal Emergency Relief Act.

7. Franklin Delano Roosevelt and the New Deal • Under the administration created by FERA, among the first of the “alphabet agencies” designed for direct employment relief was the CCC (Civilian Conservation Corps). The CCC had a quasi-military structure and hired men ages 18-25 to complete conservation and public works projects across the nation. It remained one of the most popular of New Deal agencies throughout the 1930s. Far shorter-lived was the CWA (Civil Works Administration), which was open to unemployed men and women of any age and was conceived as temporary employment to help millions through the harsh winter of 1933-34. • An agency to deal with agriculture, the AAA, was also organized under the FERA. Agriculture was on the verge of total collapse and the AAA offered direct loans to farmers to prevent imminent foreclosure and embarked on what amounted to a complete market correction for agricultural commodities- paying farmers not to farm, to reduce surpluses and establish price parities. The AAA was later deemed unconstitutional, but a revamped “Second AAA” accomplished much the same goal in the “Second New Deal”

8. Franklin Delano Roosevelt and the New Deal • Three additional Hundred Days agencies bear mention: The NRA (National Recovery Administration) the TVA (Tennessee Valley Authority), and the PWA (Public Works Administration) • The NRA was one of the most ambitious and complex attempts to address recovery through regulation of labor and through the establishment of pricing and production codes for hundreds of individual industries. Although the NRA succeeded in temporarily stabilizing some key industries, it quickly became an unwieldy administrative monster, and like the AAA, was eventually ruled unconstitutional. • The TVA was unique among New Deal agencies in that it targeted a specific region, the Tennessee Valley, with a massive program to simultaneously tackle immediate employment relief and recovery, long term recovery, conservation, and quite controversially, electrification. The TVA eventually built over 20 hydroelectric dams on the Tennessee and its tributaries. The TVA’s electrification program was especially controversial because it put the agency in competition with private utilities providers, and for many, veered dangerously toward socialism. • Finally, the PWA, like the TVA, was designed for both short-term relief and long-term recovery, through the construction of roads, bridges dams, and public buildings.

9. Franklin Delano Roosevelt and the New Deal • As a whole, the New Deal legislation of the Hundred Days was a mixed bag. While some agencies were effective at providing immediate relief, and some did accomplish important, far-sighted goals of resource conservation and improvement of infrastructure, none was really able to create sustained, stable, long-term economic growth and recovery. • More important to the long scope of Roosevelt’s legacy were the reforms of the Second New Deal, a focused series of laws pushed through Congress leading to the election of 1936. Social Security ranks among the most sweeping and important reforms of the last 100 years. The Second New Deal also succeeded in passing reforms that labor had been pleading for decades.

10. Labor and union recognition • FDR’s initial efforts to affect labor reform through the National Recovery Administration were derailed when the Supreme Court found the agency unconstitutional, but Congress took up labor concerns again with the passage of the Wagner Act in 1935. For the first time in the long struggle of the labor movement, the Wagner Act guaranteed the rights of workers to organize into unions and collectively bargain with management for wages, hours, and working conditions. The act created the NLRB, (National Labor Relations Board) to administer the law. • Labor also benefitted from the Fair Labor Standards Act of 1938, which mandated minimum wages and maximum working hours for any industry engaged in interstate commerce. • These reforms greatly benefitted labor, but bitter infighting, especially between skilled and unskilled labor, hindered unity in the labor movement as a whole.

11. The New Deal coalition and its critics from the Right and the Left • The “coalition” of the New Deal refers to the political union forged by FDR and the Democratic Party during the 1930s. The coalition was formed from disparate elements: labor, urban ethnic minorities, the “Solid South” and eventually African Americans, who betrayed decades of loyalty to the party of Lincoln to answer the call of the Democrats as the champions of the downtrodden. • FDR’s political coalition faced substantial criticism from both the right and left of the political spectrum. Conservative Republicans criticized FDR’s progressive quasi-socialist New Deal programs as an affront to American values, while condemning him personally as a traitor to his class. (FDR came from an Old Money New York family). • FDR also faced a credible threat from the left, most notably from the populist Louisiana politician “Kingfish” Huey Long. Long was a masterful demagogue and his message of radical redistribution of national wealth (“Every Man a King”) resonated among many in the darkest days of the Depression. His bid for the presidency in 1936 was cut short by an assassin’s bullet. • Long’s bombastic anti-New Deal rhetoric, if not his political ambition, was matched by a radio personality and Catholic priest named Father Charles Coughlin. A fascistic and isolationist “microphone messiah,” he harshly criticized FDR and maintained a large and loyal audience estimated at more than 40 million. He is credited with nearly single-handedly derailing FDR’s plans for the US to join the World Court. • One issue that raised the ire of nearly all of FDR’s critics was his “Court Packing” scheme. As mentioned, the Supreme Court had struck down several of FDR’s first New Deal programs, and to overcome what he saw as an undue burden on his legislative and administrative experimentation, FDR began to call for an expansion of the Court so that he could appoint justices more sympathetic to his efforts. Even some of FDR’s closest allies balked at this power grab as a clear affront to checks and balances among the federal branches. Facing scathing criticism that he was attempting to take over the whole of government, FDR was ultimately forced to back off of his plan, and lost considerable political esteem in the process.

12. Surviving hard times: American society during the Great Depression • Clearly, the radical economic downturn experienced during the Great Depression had a major effect on American society as a whole. For many, faith in the entire socio-economic/ capitalist systems had been shaken to the core. Remarkably, however, considering the extreme times, the appeal of truly radical political and social reorganization remained limited. • Nonetheless the suffering was widespread and palpable to all but the most insulated. Millions lost their entire life savings as banks failed. Millions more lost their jobs and could not find work at any wage. Bread lines and soup kitchens struggled to feed the hungry. Hundreds of thousands of destitute young men eked out a hard living as vagabonds, travelling from town to town in search of whatever work they could find. • Adding insult to injury, an entire region of the nation suffered an unprecedented drought and resulting dust storms that considerable heightened the misery across the southern plains. The fierce and sometimes deadly clouds of the Dust Bowl led to a substantial migration of Okies and Arkies (especially to California and the far west) and inspired the sympathy of the nation. • Given the broad based misery and suffering, the popularity of radio and cinema was virtually ubiquitous. Escapist and fantasy themes predominated, allowing people to forget, if only for an hour, the everyday struggle for a normal life.