New Deal, The
New Deal, The
1929–1933: THE STOCK MARKET CRASH, THE DEPRESSION, AND THE HUMAN TOLL
1935–1936: THE SECOND NEW DEAL
DEBATES SURROUNDING THE NEW DEAL
THE NEW DEAL’S LEGACY AND IMPACTS
The term New Deal refers collectively to the sweeping economic reforms and government programs pushed by President Franklin D. Roosevelt and enacted by Congress to combat the Great Depression and relieve its impacts on wide swaths of American society. The New Deal comprised two major waves of reforms: the First New Deal (1933–1934) and the Second New Deal (1935–1936). The First New Deal was more experimental and focused on relief efforts; the Second New Deal was more focused on class conflict. Together, they permanently changed the relationship between government and business and promoted government as an agent of the common good, a role not widely accepted before 1933. The New Deal also fundamentally reorganized the contours of American politics, erasing Republican dominance and creating a majority coalition for the Democratic Party that would last a generation.
1929–1933: THE STOCK MARKET CRASH, THE DEPRESSION, AND THE HUMAN TOLL
The 1928 election produced victory for Herbert Hoover and his Republican Party—the party’s third presidential election win in a row. Hoover’s first year in office, 1929, saw continued economic prosperity for the business and manufacturing sectors of the economy—but distress for the agricultural economy. The October 1929 stock market collapse brought the prosperous era of the 1920s to a crashing end and raised doubts about Republican claims of being “the party of prosperity.” As eminent New Deal historian William E. Leuchtenburg notes:
In the three years of Herbert Hoover’s presidency, the bottom had dropped out of the stock market and industrial production had been cut more than half.… [S]teel plants were operating at a sickening 12 percent of capacity, with “an almost complete lack” of signs of a turn for the better. In three years, industrial construction had slumped from $949 million to an unbelievable $74 million.… By 1932, the unemployed numbered upward of 13 million. Many lived in the primitive conditions of a preindustrial society stricken by famine. In the coal fields of West Virginia and Kentucky, evicted families shivered in tents in midwinter; children went barefoot. In Los Angeles, people whose gas and electricity had been turned off were reduced to cooking over wood fires in back lots. (Leuchtenburg 1963, p. 1)
Leuchtenburg’s account further documents the massive human toll of the Depression: famished children; at least one million men wandering the country in an often fruitless search for work; “Hoovervilles,” or large settlements of makeshift shacks of boxes and scrap metal, housing hundreds or more in many American cities; children kept out of school because they had nothing to wear. Conditions in rural America were also desperate owing to falling crop prices and a breakdown of transportation networks for farm products. Farm foreclosures and evictions of farm families were widespread. As Leuchtenburg notes (1963, pp. 23–24):
As farm income dipped sharply while taxes and mortgage obligations remained constant, thousands of farmers lost their land for failure to pay taxes or meet payments.… [O]n a single day in April 1932, one-fourth of the entire area of the state of Mississippi went under the hammer of auctioneers.
By early 1933, unemployment reached 25 percent, with fifteen million out of work. Five thousand banks had folded, wiping out nine million savings accounts. The venerable U.S. Steel Corporation saw its full-time workforce collapse from 229,000 in 1929 to 0 in 1933.
Presidential elections are often, in part, a referendum on the national economy. The 1932 election was very much so, creating conditions ripe for a Democratic victory—a rarity during the Republican-dominated era since 1896. In November 1932, Herbert Hoover was defeated decisively, and Democrats gained a Senate majority as well, after already having won a House majority in the 1930 congressional elections. Franklin D. Roosevelt would begin his first term working with sizable Democratic majorities in both houses of Congress.
1933–1934: THE FIRST NEW DEAL
Roosevelt entered office March 4, 1933, at a time of almost wartime crisis. The collapse of banks and the rush of depositors had prompted bank holidays nationwide. The first priority was a banking bill to reopen the banks. During Roosevelt’s first 100 days in office, Congress passed fifteen major pieces of legislation, including what some critics derided as an “alphabet soup” of new government agencies and programs. The First New Deal was pragmatic: It met demands from and benefited many sectors of society, such as bank depositors, bankers, farmers, opponents of Prohibition, the unemployed, organized labor, and business interests. The most important legislation was the business-supported National Industrial Recovery Act (NIRA, 1933), which authorized companies to form cartels and created provisions for the president to regulate businesses to promote fair competition, raise prices and wages, and create jobs for the unemployed. NIRA also included the first federal minimum wage and maximum workweek, which remain today. Though struck down by the Supreme Court in 1935, NIRA’s provisions for collective bargaining were reinstated in the Wagner Act (1935).
The First New Deal also offered something for farmers: the Agricultural Adjustment Act (AAA, 1933). This program provided federal subsidies to farmers to leave some of their land idle. The effect was to reduce crop surpluses and raise crop prices, ultimately providing greater economic stability for farmers. Since the agricultural season was already under way in May 1933, the program began with the controversial large-scale destruction of crops and slaughter of livestock, overseen by the Agricultural Adjustment Administration. Some southern farmers were asked to plow under one-fourth of their cotton crop, again to raise prices. Federal farm programs in the mid-2000s still embodied the AAA’s underlying principle of preventing crop overproduction that can cause severe price drops.
Given the rash of bank failures in early 1933, protecting bank deposits from being wiped out was a major priority. The First New Deal, then, included creation of the Federal Deposit Insurance Corporation (FDIC), a federal agency that guarantees checking and savings deposits in the event a bank folds. The FDIC remained in place into the twenty-first century, insuring deposits up to $100,000.
To provide large-scale relief to the unemployed, the First New Deal also included the Public Works Administration (PWA), an agency that contracted with private firms for, and funded, construction of large public projects such as airports, bridges, hospitals, schools, streets, and highways. The PWA encouraged contractors to hire the unemployed. Another work relief program was the Civilian Conservation Corps (CCC), which put young men to work planting trees, building trails and logging roads, erecting fences, raising telephone and power lines, and completing projects to prevent soil erosion. Similarly, a government corporation, the Tennessee Valley Authority (TVA), was established to provide flood control, economic development, and hydroelectric power to many of the southern states—a largely agricultural and impoverished region at the time. Congress also repealed Prohibition in 1933.
1935–1936: THE SECOND NEW DEAL
The 1934 congressional elections strengthened Democratic control of Congress, providing Roosevelt with additional political capital to pursue further reforms. The Second New Deal, more openly prolabor and antibusiness than the First New Deal had been, fostered more class conflict. The Second New Deal included three major legislative acts: the Social Security Act, the National Labor Relations Act (Wagner Act), and the Works Progress Administration. The first two of these remain today.
The Social Security Act (1935) created a social insurance program, funded through a payroll tax paid by workers and employers alike. The program provides benefit payments for retirement, disability, death (i.e., for widows and survivors), and unemployment. Social Security established the framework for the social welfare state in the United States and provided philosophical support for the Great Society programs in the 1960s.
The National Labor Relations Act (Wagner Act, 1935) was passed following a wave of tumultuous strikes in major cities, as well as years of labor unrest in southern textile mills, including a massive general strike in 1934. The act established workers’ right to collectively bargain with employers—that is, to establish and join labor unions. The Wagner Act granted workers the right to strike, declared certain employer actions as prohibited “unfair labor practices,” and established procedures for lodging complaints and determining whether or not workers wish to join a union. Later, Congress amended the Wagner Act to extend the prohibition against unfair labor practices to unions.
The Works Progress Administration (WPA, 1935) was a federal program to provide jobs and income for the unemployed. Although most jobs provided construction work, the WPA included programs for writers, artists, and musicians and provided some work for women as well. A component program, the National Youth Administration, provided job training and employment for teenagers. The WPA was disbanded in 1943 during World War II, an era of nearly full employment. The Rural Electrification Administration (REA) provided electricity to remote and rural areas, especially in the more agriculture-dominated South and Plains states.
Overall, the New Deal overturned, for most Americans, prevailing notions of limited government and laissez-faire economic policies by creating government programs and agencies on an unprecedented scale. New Deal defenders argued that new rules, and a vast expansion in the size and scope of the federal government, were necessary to address an economic crisis and attendant human misery that were equally unprecedented.
DEBATES SURROUNDING THE NEW DEAL
The New Deal did have its critics, particularly because it represented a massive change in prevailing ideas of limited government, minimal regulation of business, and emphasis on state, local, and private charity for the needy. Before and during the 1920s, the “old economic order” of most wealthy Americans, financiers, industrialists, and railroad and banking interests, among others, allied with the probusiness Republican Party and argued against major government relief efforts to combat poverty and unemployment. Government relief was thought to reward laziness and discourage individual initiative. Before 1933, the prevailing philosophy of Social Darwinism held that wealth indicated virtue (hard work, initiative, and energy), and poverty indicated moral failings (lack of thrift, laziness, or both)—both individual characteristics, not remediable by government action. The “old order” also resisted government regulation, including the Wagner Act, fearing that government was openly siding against businesses and with workers in labor disputes. Before 1933, federal government policy also often reflected Social Darwinist thinking: Business regulation was limited, government was small in size, agencies were few in number, and preferred policies emphasized free markets and a hands-off, laissez-faire government that should not hinder market competition. (However, earlier Progressive-era reforms included a ban on child labor, food and drug safety laws, and prohibited direct corporate contributions to federal election campaigns.)
Ideological opposition to the New Deal, then, derived from prevailing notions of the proper relationship between government and business. New Deal advocates responded by noting the massive human costs of the depression, coupled with a conviction that the old rules could no longer work. One analysis, by A. A. Berle Jr., notes the rise of large economic organizations (corporations) that could, absent government restraint, use their economies of scale to squeeze out competition. According to Berle:
The old economic forces do still work and they do produce a[n economic] balance after a while. But they take so long to do it and they crush so many men in the process that the strain on the social system becomes intolerable. Leaving economic forces to work themselves out as they stand will produce an economic balance, but in the course of it you may have half the entire country begging in the streets or starving to death.
The New Deal [is] a recognition of the fact that human beings cannot indefinitely be sacrificed by millions to the operation of economic forces … [producing a] shocking toll on life and health and happiness. (Berle 1933, pp. 4–9, 19)
Berle summarizes the New Deal as an effort to “counterbalance the effects of organization gone wrong, to make sure the burdens of readjustment are equitably distributed, and that no group of individuals will be ground to powder in order to satisfy the needs of an economic balance.” Historical accounts, too, often characterize the New Deal as an effort to restore balance to the economic system. Leuchtenburg (1963) characterizes New Deal theorists as seekers of balance: “the best society was one in which no important element held preponderant power” (p. 35) But New Dealers were especially worried about the “disproportionate power wielded by business in comparison to that possessed by agriculture” (p. 35). In addition, as the labor unrest of the 1920s and 1930s showed, the imbalance between the political and economic power of business versus that of organized labor was also a concern. This informed the Wagner Act (1935) and its provisions guaranteeing rights for workers seeking to organize or join a union.
While not the focus of much philosophical debate, one additional innovation of the New Deal era is noteworthy: the major infusion of scientific and academic experts into government. Roosevelt relied heavily on a “brain trust” of professors, including Raymond Moley, Rexford Tugwell, Harold Ickes, and other experts in formulating and justifying New Deal policies and in serving in senior cabinet positions. The emphasis on scientists and experts in government was a novelty at the time but rested on then-emerging doctrines of “neutral competence” in public administration.
THE NEW DEAL’S LEGACY AND IMPACTS
It is not clear whether New Deal policies “lifted” the nation out of the Great Depression, but the political impacts are clearer. It both reorganized the relationship between federal and state governments and triggered a political realignment that made the Democratic Party the majority party in American politics for a generation.
Economic Impacts of the New Deal Economically, the country hit “rock bottom” in March 1933, when the banking crisis had brought the financial system to the brink of collapse, even shutting down Wall Street and the Chicago Board of Trade by Roosevelt’s Inauguration Day. Economic indicators tended to recover from mid-1933 to 1937, but then a second recession hit, worsening conditions again. Full economic recovery would wait until the United States entered World War II in 1941. In other respects, the New Deal did fundamentally transform the economic system. The New Deal swept away the “old economic order” of business domination over government policy and minimal government intervention in economics and business. The New Deal’s critics feared the United States was moving toward a socially engineered economy, with some comparisons to communist planned economies appearing. New Deal supporters, however, argued that the new rules meant that government would not dominate the economic system but only become a partner with business, agriculture, and labor in fostering economic growth and prosperity. What is certain is that the New Deal era institutionalized expectations of more active government intervention in the economy than was previously considered tolerable. Although some individual New Deal programs (NIRA, CCC, WPA) no longer exist, some others do (Social Security, FDIC, the National Labor Relations Act, the minimum wage). The notion that government properly is a partner in promoting economic health and growth is now widely accepted, and a return to strictly laissez-faire economic policy is effectively outside the boundaries of political acceptability. Likewise, the notion that government should shrug off assistance or protection to most of society’s most vulnerable members was discredited during the New Deal era, resulting in Social Security.
Minimal Impacts: The New Deal and American Blacks However, New Deal advocates did not always extend the philosophy of aiding the disadvantaged to one especially vulnerable group: black Americans. The New Deal had very little to offer blacks, considering the widespread racism, forced segregation, and discrimination and denial of voting rights they faced around the country, but especially in the South, where most blacks lived. For example, the New Deal encouraged the formation of labor unions, but most unions refused to admit blacks. New Deal programs benefited farmers and the jobless, but their benefits focused on the white jobless; racial discrimination in employment sometimes meant blacks would benefit little from jobs programs. Furthermore, Roosevelt refused to support both federal antilynching legislation and racially egalitarian voting laws. Thus, the New Deal left the festering problems of civil rights and rampant racial discrimination, especially in the South, virtually untouched. As nearly all white southerners were a key, and thoroughly racist, component of the Democratic majority coalition, any effort to push the Democratic Party toward favoring civil rights for blacks would certainly prompt a furious backlash. Later events, such as the Dixiecrat walkout at the 1948 Democratic Party’s national convention and the white southern backlash to President Lyndon Johnson’s support for civil rights laws in 1964–1965, showed how readily fears of white southern backlash would become reality. Given the New Deal’s near total failure to address the desperate circumstances facing southern blacks (then comprising a large majority of blacks nationwide), the transformation of blacks into a solidly Democratic voting bloc during the 1930s seems puzzling.
Historian Nancy Weiss (1983) focuses on the economic benefits the New Deal provided to lower-income Americans, regardless of race. Her analysis indicates that despite Roosevelt’s poor record on racial issues and the glaring racial inequalities built into the administration of many New Deal programs, blacks still perceived the Roosevelt administration as more friendly to their interests than any since that of Ulysses S. Grant (1869–1877). Another historian, Patricia Sullivan (1996), studied the rise and fall of a liberal movement in the South, the nation’s most racially repressive region. She concluded that while a southern liberal movement, centered in the Popular Front, flowered in the 1930s and 1940s, it eventually collapsed by 1950 under the combination of racist and anti-Communist ideologies. The southern Popular Front movement, which attracted both black and white support, coincided with the growing visibility of a notably racially progressive wing of the Democratic Party, as historian David L. Chappell notes in reviewing Sullivan’s work (1999). In the Roosevelt administration, the liberals were represented by Interior Secretary Harold Ickes, National Youth Administration director Aubrey Williams, and First Lady Eleanor Roosevelt, among others. While the liberals’ impact on national racial policies was limited, they did provide hope and a sense of having “friends in high places” to millions of black Americans.
In short, explanations of why blacks moved into the Democratic Party vary. Weiss’s account focuses on the New Deal’s economic benefits for the poor, white and black, while Sullivan’s account focuses on a bond of emotional solidarity between many blacks and the Democratic Party. The 1936 election made clear that black partisan loyalties had shifted from majority Republican to majority Democratic. During the civil rights era (1960–1968), the national Democratic Party’s strong embrace of federal civil rights laws further cemented this alliance. Since 1964, blacks have been the most overwhelmingly Democratic voting bloc in American politics.
Political Impacts of the New Deal Politically, the New Deal had two major impacts: a reorientation of the proper relationship between the national and state governments and a political realignment that established the Democratic Party as the new majority party in national politics.
The New Deal changed the relationship between the national and state governments. Before 1933, the system of “dual federalism” prevailed; the national government was responsible for defense, currency, and post offices, for example. The state governments were responsible for education, social welfare, law enforcement, voting, and elections, among other things. Under dual federalism, the federal government provided little financial assistance to the states. And the policy spheres of the federal and state governments were generally separate and distinct.
The New Deal’s programs meant the federal government would assume a much greater role in social welfare and economic regulation than it had previously. The PWA and other works programs marked a dramatic increase in federal aid to the states. Future programs would be based on this new philosophy: that the federal government should financially assist states and communities. Thus, the size and scope of the federal government grew dramatically, and the federal government would provide assistance to the poor and unemployed.
In partisan politics, the effects of the New Deal were profound. In many Americans’ minds, the Great Depression had destroyed the Republican Party’s credibility as being the “party of prosperity.” While President Herbert Hoover had taken some steps to combat the economic crisis, other actions fostered impressions that Hoover little understood the human costs of the Depression or was actively callous to human suffering. In 1932, Hoover deployed soldiers to evict an encampment on the outskirts of Washington, D.C., of “bonus marchers”—World War I veterans seeking payment of long-delayed war pensions. The images and news reports of troops rousting nonviolent squatters from the Anacostia Flats, forcing them out of their shacks at gun-point, and burning the settlements to the ground incensed many Americans. This action was probably a major contributor to Hoover’s defeat that fall. Roosevelt had offered few specifics during the 1932 campaign but displayed pragmatism and a willingness to experiment once in office. The New Deal was not initially conceived as an ideological program; it was an effort to “try out” potential solutions to the crisis.
That said, Roosevelt also projected a very appealing public persona. Although he had been stricken with polio in 1921, his disability was usually not visible to the public because television did not yet exist. Roosevelt excelled in communicating with Americans by radio. In the first of his “fireside chats,” or radio addresses, Roosevelt set out to calm public fears: “The only thing we have to fear is fear itself.” During his first 100 days in office, Roosevelt persuaded Congress to approve fifteen major pieces of legislation—a feat unprecedented at the time and never duplicated since.
Therefore, Roosevelt hardly needed to convince Americans that he was taking concerted action in a time of economic crisis. Roosevelt excelled at soothing Americans’ fears and convincing them he understood their concerns and trials.
While Roosevelt’s persona endeared him to many, his New Deal programs fundamentally realigned American politics, largely along social-class lines and in the Democratic Party’s favor. In 1934, Democrats gained more congressional seats; it is unusual in a midterm election for the president’s party to gain strength in Congress. In 1936, Roosevelt won a landslide reelection over Republican Alf Landon, winning 61 percent of the popular vote and carrying every state except New Hampshire and Maine. Although Democratic strength in Congress would drop sharply after the 1938 midterm election, Roosevelt won four consecutive terms as president (in the elections of 1932, 1936, 1940, and 1944). In April 1945, Roosevelt died, and his vice president, Harry S. Truman, became president. The strength of Roosevelt’s political coalition was apparent even in 1948, when Truman, defying virtually all predictions, defeated Republican Thomas Dewey, extending Democratic control of the presidency to five consecutive terms (twenty years). Not until 1952 would a Republican again win the White House. Democrats also controlled Congress continuously from 1932 to 1946, with huge Democratic majorities after the 1934 and 1936 elections. Republicans, the dominant party from 1896 to 1932, were now the clear minority party in American politics and would remain so until 1968.
Roosevelt’s “New Deal coalition” consisted of three major groups of voters: white southerners, urban ethnics and immigrants, and working-class Americans. White southerners had long-standing loyalties to the Democratic Party and hostility toward the Republican Party, both dating from the Civil War and Reconstruction eras. Urban ethnics and immigrants, many of them Catholic, swung decisively toward the Democratic Party between 1928 and 1936, partly because of anti-Catholic sentiments apparent in some elements of the Republican Party, partly because “white ethnic” groups such as Polish, Irish, German, and Italian Americans tended to reside in cities where largely Democratic political machines held sway, exchanging favorable votes for city jobs or other favors, and partly because their communities gained valuable public works projects from the PWA and other programs. Also, many white ethnics were also members of labor unions or worked in blue-collar jobs, making Social Security, jobs programs, and federal labor protections attractive policies. Finally, working-class Americans were strongly attracted by Roosevelt’s public criticisms of financiers and corporate executives and by his policies that supported organized labor, minimum wages, maximum hours, and jobs programs for the unemployed. A major political effect of the New Deal, then, was to position Democrats as a party friendly to working-class Americans and committed to fairness for many (but rarely for blacks): jobs for the unemployed, decent wages and working conditions, the right to organize collectively, and benefits for vulnerable Americans such as the elderly and disabled. Blacks also supported Democratic candidates when and where they could vote—but most blacks lived in the South, where they faced brutal repression and near total voting discrimination in much of the region.
Meanwhile, Democrats portrayed Republicans as a party of and for the richest Americans, bent on canceling or cutting New Deal programs and reverting to laissez-faire economic policies. During the 1936 election, voting was very strongly structured along social class lines: Republicans won majorities of the vote among the wealthiest Americans, but Democrats won lopsidedly among those with lower incomes—and in 1936, there were many more lower-income than higher-income Americans. Political scientists James Sundquist (1983) and Walter Dean Burnham (1970) both identify the 1932–1936 period as a “critical” or realigning period in American politics, in which a previous Republican majority was replaced by a Democratic majority.
Overall, the New Deal fundamentally changed the relationship between government and business in the United States, from minimal regulation to selective regulation; expanded the federal role in assisting people buffeted by economic forces beyond their control, and wrought a new era of Democratic Party dominance in national politics. The New Deal era brought great challenges and great changes to the political and economic systems, along with many new government programs to face those challenges.
SEE ALSO Banking; Business Cycles, Real; Democratic Party, U.S.; Economic Crises; Economics, Keynesian; Federalism; Great Depression; Inequality, Racial; Politics; Politics, Black; Politics, Southern; Racism; Republican Party; Roosevelt, Franklin D.; Social Welfare Functions; Supreme Court, U.S.; Welfare State
BIBLIOGRAPHY
Berle, A. A., Jr. 1933. The Social Economics of the New Deal. New York Times Magazine, October 29, pp. 4–9, 19.
Burnham, Walter Dean. 1970. Critical Elections and the Mainsprings of American Politics. New York: Norton.
Chappell, David L. 1999. Review of Days of Hope: Race and Democracy in the New Deal Era, by Patricia Sullivan. African American Review 33 (1): 149–151.
Leuchtenburg, William E. 1963. Franklin D. Roosevelt and the New Deal, 1932–1940. New York: Harper and Row.
Sullivan, Patricia. 1996. Days of Hope: Race and Democracy in the New Deal Era. Chapel Hill: University of North Carolina Press.
Sundquist, James L. 1983. Dynamics of the Party System: Alignment and Realignment of Political Parties in the United States. Rev ed. Washington, DC: Brookings Institution.
Weir, Margaret. 2005. States, Race, and the Decline of New Deal Liberalism. Studies in American Political Development 19: 157–172.
Weiss, Nancy J. 1983. Farewell to the Party of Lincoln: Black Politics in the Age of FDR. Princeton, NJ: Princeton University Press.
Fred Slocum