Other measures of the New Deal
The New Deal introduced a number of measures which tried to help the American people in other ways.
The Home Owners Loan Corporation (HOLC) helped people who were having difficulty with their mortgage payments. The government, through the Corporation, lent money to people at low interest rates to prevent them from losing their homes.
The Social Security Act was introduced in 1935. It set up a national system of state pensions for people over 65, for widows and for the disabled. It also provided for an unemployment insurance scheme to be run by each state with financial support.
What did the New Deal do?
The First Hundred Days
In the first hundred days of his presidency, Roosevelt worked round the clock with his advisers to produce an enormous range of sweeping measures.
From his first day, Roosevelt went straight into action. One of the many problems affecting America was its loss of confidence in the banks. He immediately tackled this banking crisis.
The day after his inauguration Roosevelt ordered all America's banks to close and to remain closed until government officials had checked them over. A few days later 5000 trustworthy banks were allowed to re-open. They were even supported by government money if necessary. At the same time, Roosevelt's advisers had come up with a set of rules and regulations which would prevent the reckless speculation which contributed to the Wall Street Crash.
These two measures, the Emergency Banking Act and the Securities Exchange Commission, gave the American people a taste of what the New Deal was to look like, but there was a lot more to come! One of Roosevelt's advisers at this time said 'During the whole Hundred Days Congress, people didn't know what was going on, but they knew something was happening, something good for them.' in the Hundred Days Roosevelt sent fifteen proposals to Congress and all fifteen were adopted.
The Federal Emergency Relief Administration set about meeting the urgent needs of the poor. A sum of 500 million dollars was ~pent on soup kitchens, blankets, employment schemes and nursery schools.
The Civilian Conservation Corps was aimed at unemployed young men in particular. They could sign on for periods of six months which could be renewed if they could still not find work. Most of the work done by the CCC was on environmental projects in national parks. The money earned generally went back to the men's families. Around 2.5 million young men were helped by this scheme.
The Agricultural Adjustment Administration tried to take a long-terni view of the problems facing farmers. it set quotas to reduce farm production in order to force prices gradually upwards. At the same time the AAA helped farmers to modernise and to use farming methods which would conserve and protect the soil. In cases of extreme hardship farmers could also receive help with their mortgag6. The AAA certainly helped farmers although modernisation had the unfortunate effect of putting more farm labourers out of work.
The National Industrial Recovery Act set up two important organisations:
The Public Works Administration which used government money to build schools, roads,dams, bridges and airports. These would be vital once America had recovered but in the short term they created millions of jobs.
The National Recovery Administration which improved working conditions in industry and outlawed child labour. It was voluntary, but firms which joined use the blue eagle as a symbol of the President’s approval.
The Second New Deal
The measures introduced during the Hundred Days had an immediate effect. They restored confidence in government. Reporters who travelled the country brought back reports of the new spirit to be seen around the USA.
Historians too agree that Roosevelt's bold and decisive action did have a marked effect on the American people.
Because of the urgency of the situation Roosevelt got all his early measures through Congress very quickly. However, before long the New Deal was meeting opposition and criticism. On the one hand, conservative forces in the Supreme Court ruled that the NIRA was unconstitutional. On the other hand, radicals like Huey Lone, were complaining that despite these measures the poor were still suffering. Huey Long was a Democratic senator and Governor of Louisiana in the southern USA. He called for greater taxation of the rich, including the confiscation of all fortunes worth over $5 million. He proposed a'Share Our Wealth' scheme which would give every family in the USA $6000 to spend. He claimed this would pull the USA out of the Depression. A reported 7.5 million people joined Share Our Wealth clubs. However,
Like Long, Roosevelt had always wanted his New Deal to go further, particularly in improving living and working conditions for ordinary people whom he called 'the forgotten men'. He reacted to his critics by introducing more legislation which was sometimes called the 'Second New Deal'. There were many measures but the key ones were passed in 1935.
The Wagner Act was passed after the Supreme Court rejected the NIRA. The Act forced employers to recognise the existence of trade unions and their rights to negotiate with employers for better pay and conditions. Although the NIRA was outlawed, workers were able to keep the protection which NIRA had given them. The new Act also covered employers such as Henry Ford who had refused to join NIRA in the first place.
The Social Security Act provided state pensions for the elderly and for widows. It also allowed state governments to work with the Federal Government to provide help for the sick and the disabled. Most importantly, the Act set up a scheme for unemployment insurance. This meant that employers and workers made a small contribution to a special fund each week. If workers became unemployed they would receive a small amount of benefit to help them out until they could find work.
The Works Progress Administration was set up to bring together all of the other organisations whose aim was to create jobs. It also extended this work beyond building projects to create jobs for office workers and even unemployed actors, artists and photographers.
Opposition to the New Deal
A programme like Roosevelt’s New Deal was unheard of in American history. It was bound to attract opposition. His Republican opponents particularly objected to the immense cost of the New Deal, which had to be paid for by the American taxpayer. This was a concern even for some more cautious members of Roosevelt's own Democratic Party.
The governments of individual states also expressed anxiety about the way in which the Federal Government was interfering in their own affairs, and in the life and work of Americans. This was very much against the recent trends of government in America.
Many rich Americans were not happy about paying for the New Deal through increased taxes. Business leaders also disliked Roosevelt’s support for trade unions and resented the contributions they now had to make towards the social security of their workers.
Nor had traditional Republicans changed their tune about the way that the very business speaking in 1935. values of America were being undermined by helping the poor.
The most serious opponents of the New Deal, however, were the judges of the Supreme Court. You have already seen how in 1935 the court declared that the NIRA was illegal. Roosevelt knew that the court was going to do the same for more of the New Deal measures. He could not afford to let this happen. Roosevelt made the New Deal the central issue in his campaign for re-election in 1936. He was returned with a huge majority over the Republicans. This time they only won in two states. He made fun of opponents of the New Deal by joking that 'Everyone is against the New Deal except the voters'.
Perhaps it was this landslide victory that led him into his first big mistake. In 1936 he asked Congress to give him the power to appoint new Supreme Court judges so that he would be able to get his measures through. Roosevelt was surprised by the alarmed reaction of Americans. Even some of his supporters opposed the action. Americans had always been afraid of anything which would tamper with the democratic balances of the Constitution. They believed that reforming the Supreme Court would give the President too much power. Roosevelt had to back down, although it should be said that the Supreme Court became more flexible after this crisis.
The events of 1936 took their toll on Roosevelt and he became more cautious after 1936. He cut, the New Deal budget. He laid off many workers employed by the New Deal's own organisations and the cut in spending triggered other cuts throughout the economy Unemployment spiralled up once more.
The 1937 recession damaged Roosevelt badly. The middle-class voters who thought he had the magic touch lost some confidence in him. As a result in 1938 the Republicans once again did well in the Congressional elections. Now it was much harder for Roosevelt to push his reforms through Congress. Roosevelt was still enormously popular with ordinary Americans. He was elected again with a big majority in 1940. The problem was that the USA was not as united behind his New Deal as it had been in 1933. Indeed by 1940 both Roosevelt's and America's attention was more focused on the outbreak of war in Europe, and japan's exploits in the Far East.
Causes of the Wall Street Crash
The reasons that led to the Wall Street Crash can be put into two main categories:
· Those to do with the overproduction of goods.
· Those to do with money and the stock market.
Reasons linked to overproduction that led to the Wall Street Crash:
1. Companies were producing too many goods.
2. American goods could not be sold abroad because other countries had put tariffs (taxes) on them to make them more expensive.
3. When the demand for goods began to fall, workers' wages were cut and some workers became unemployed, which meant that they could no longer afford to buy the new consumer goods.
4. Farmers could not afford to buy the new consumer goods.
Reasons linked to money and the stock market that led to the Wall Street Crash:
· People were allowed to borrow too much money and they could not afford to pay it back.
· People had taken out loans or invested their savings in the stock market, but there were too few controls on the buying and selling of shares.
· The US President had not taken any notice of what was going on; he just left the businesses and banks to themselves.
· Advertising and hire purchase agreements were not controlled, and this encouraged people to spend more.
· Too many people thought that share prices could only go up, which encouraged them to invest more than they could afford in the stock market.
· Banks did not have enough money in reserve to help businesses that were in trouble. This was because they had lent too much money but now the banks were facing difficulties because people could not afford to repay their loans.
Problems caused by the Depression
The Wall Street Crash brought the Roaring Twenties to an end and led to a Depression in America. What effect did this have on American society?
Here are some examples of how times changed after the Wall Street Crash.
1. President Hoover and the belief in prosperity
2. The growth of shanty towns
3. Food shortages
4. Farming
5. Franklin Roosevelt - a new President
President Hoover and the belief in prosperity
Herbert Hoover became President in 1928. When the Wall Street Crash happened he tried to reassure Americans that it was just temporary and that 'prosperity is just around the corner'. Although things showed no signs of improving, he was reluctant to help those affected by the Depression.
Unemployment rose, homelessness increased, and soup kitchens and bread queues became a familiar sight in American cities, but still Hoover did very little to help. He believed in 'rugged individualism' (people should look after themselves and stand on their own two feet). He appealed to businesses and charities to do what they could to help. By the time his government began to take action in 1932 it was too late. Hoover had lost the trust of the people. 'In Hoover we trusted, now we are busted,' became a popular saying.
The growth of shanty towns
Hoovervilles were the names given to the areas where homeless people lived in shacks that they had built out of wood, boxes and any other materials that they had managed to find on dumps. Due to unemployment or the loss of life savings, these people could no longer afford to pay their mortgages or rent. They had lost their homes and now had nowhere to live. The fact that these areas were called Hoovervilles shows what the people thought of President Hoover. They even called the newspapers that they covered themselves to sleep with 'Hoover blankets'.
Food shortages
Many unemployed people could not afford the basics and spent hours queuing for free soup or bread, handed out by charities or businesses. Unemployed workers in America received no help from the government. They had to resort to charity, begging and even theft to feed themselves and their families. People were hungry and many felt worthless and ashamed.
Farming
Farmers, who had already missed out on the boom of the 1920s, were also affected by the Depression. Low agricultural prices meant that in some places farmers could not afford to harvest or market their crops, which were left in the fields to rot. With unemployment rising throughout America, people could no longer afford to buy the farmers' produce, even at low prices. In some areas, for example Oklahoma, terrible soil erosion meant that farmers could not even attempt to grow any crops. Many of these, having lost their homes and farms, left with their families to search for work elsewhere.
Franklin Roosevelt - a new President
On 9 November 1932, Americans voted in the presidential election. The Democrat Franklin Roosevelt stood against Hoover. The voters did not believe that Hoover had taken the Depression seriously enough or done enough to help them. Roosevelt was elected by one of the largest majorities in American history.
How successful was the New Deal?
The sweeping electoral victories of Roosevelt and the Democrats indicate the popularity of the New Deal among the majority of Americans in the 1930s. But critics (both at the time and later) have attacked the New Deal for failing to solve problems brought about by the Depression, especially the problem of unemployment. Some critics complain about too much government interference and waste. Others have suggested that Roosevelt's government did not do enough for those who suffered from the Depression. Defenders of Roosevelt, on the other
hand, have argued that the New Deal helped groups of Americans who, until then, had been neglected or ignored by government. Among these groups were farmers, labour organisations, black Americans, women and the poorest people in society. There were limits to this help, defenders of Roosevelt claim, because there were limits to what any government could achieve. Whether or not the New Deal should be judged a success depends on the answer given to questions such as the following. First, did the New Deal achieve its aims? Second, if the New Deal did not completely achieve its aims, did it do enough for it still to be judged a success? Third, did the majority of American people approve of New Deal policies and programmes? Fourth, what about those people who opposed or did not benefit from the New Deal - how much notice should be taken of their viewpoint? And fifth, looking back, did the New Deal improve life in the USA?
The New Deal and the economy
One of the main aims of the New Deal was to bring about economic recovery.Most historians would agree that the New Deal was not completely successful in achieving this. The number of unemployed people did not fall below 10% of the workforce before the USA joined the war, for example, and National Income only returned to its 1929 level in 1940.Most historians, however, agree that some progress was made.Although the New Deal failed to solve the problem of unemployment completely, the number of jobless fell steadily between 1933 and 1937. Millions found work in the public works programmes set up by the government and the despair of 1929-32 was lifted. It was noticeable that when ~Roosevelt cut public spending in 1937-38, unemployment shot up again. In the end, however, it was the approach of war and the need for the production of war materials that led to full employment.
Another important aim of the New Deal was to provide emergency relief for those suffering from the Depression. In addition to the unemployed, there was a hard core of around workers' rights. 40 million Americans who were very poor in
the early 1930s. They included groups such as the old, single parent families, black Americans and native Americans. Roosevelt spoke of relations between helping 'the forgotten man at the bottom of workers and some the economic pyramid'. For many people, the employers remained too powerful. Alphabet relief agencies provided at least a basic standard of living. Also, minimum wage laws helped the very low paid. But none of these programmes were given enough funds to cure poverty.
Some groups, such as farmers and the white unemployed, had obvious reasons for supporting the New Deal. But it is more difficult to say why black Americans began to vote Democrat in such large numbers for the first time since the American Civil War of 1861-65 (see Box 5.20). Many New Deal agencies, especially in the South, discriminated against blacks. Black sharecroppers (poor tenant farmers who paid part of their crops as rent) were driven off the land because of crop reductions ordered by the white-dominated AAA agencies. The NRA became known as the 'Negro Removal Agency because black industrial workers were pushed out when wage levels were controlled. Roosevelt refused to take steps to help blacks gain equal rights (though he did support an anti-lynching Bill). He feared losing the solid Democrat support of whites in the South. But there were people around the President who cared about the plight of black Americans (including his wife Eleanor) and some black people were appointed to posts in New Deal agencies - such as Mary McLeod Bethune who headed the National Youth Administration. Most important was the fact that lacks at least some help from the relief programmes.
The New Deal Balance Sheet
How successful was it?
SUCCESS
Unemployment The New Deal reduced unemployment from the very high level of 1933,12.8 million, to 7,7 million in 1937. Millions of jobs were created.
Welfare Millions of poor people received relief, often food, shelter and clothing. Emergency relief certainly stopped people from starving. Government social security and welfare schemes helped many ordinary people and continued in the future.
Industry Construction work on dams and roads helped the future development of industry.
Workers' rights. Workers' rights and conditions were improved. The National Recovery Administration Codes did much to regulate conditions in many industries. When the Supreme Court made this law illegal it was replaced by the Wagner Act. This Act established workers' rights to join unions and to bargain collectively for wages. During the 1930s, union membership increased steadily. During 1937 there were many strikes in the auto and steel industries. Workers used 'sit-down strikes' - occupying their factories to make sure the machinery could not be kept running. Without the backing of the New Deal laws, these workers would have almost certainly been defeated by the employers. In 1937 there were about 4700 strikes with about 80% settled in favour of the workers.
Farmers. The New Deal did much to improve the lives of American farmers, especially those with large farms. By the mid-1930s farmers' incomes were rising.
Other effects The New Deal did much to raise the morale and confidence of many Americans. Many began to believe in themselves again. Few turned to extreme Communist or Fascist groups. Roosevelt had increased the role of the Federal (central) government in America. It became much more involved in people's lives. Most Americans now accepted that the Federal government had a role to play in making sure the weaker sections of society - the unemployed, the homeless, the old and the poor - were looked after. Roosevelt’s own background of disability meant that he could sympathise with the disadvantaged in American Society. He was determined to help the unemployed, the disabled and the elderly in his policies.
FAILURES
Unemployment. This was reduced but not ended. The various schemes had limited impact. Some said they did not provide 'real' jobs and the moment the government ceased to pay, the jobs would disappear. 'Were they just making work for, the sake of it? -Unemployment was still 9 million, in 1936 and rose to over 10 million two years later.
Workers' rights. American employers, deeply resented aspect of the New Deal and many large companies hired. Thugs to beat up union leaders and intimidate workers' who were on strike. During a strike by steelworkers in Chicago in 1937, ten demonstrators were shot dead by the police and ninety were wounded.
Farmers. Small farmers, farm labourers and sharecroppers saw little benefit from the New Deal.There was still much poverty in rural America,especially in the south. In 1934-5 a long-term drought hit the prairie states, and in many areas the soil was turning to dust. With no rain, previously fertile areas became deserts. These were the 'dustbowl' areas of Kansas, Texas, Oklahoma and Colorado. Many farmers left to seek work in California.
The poor. The New Deal did not, go far enough in dealing with poverty, or in helping the poorest people in American society. The Social Security Act excluded 20% of the workforce, including five million desperate farmworkers and domestics. Also there was no provision for state-paid medical care. Little was done to share out the country's wealth. In 1941 the richest 20% were earning 49% of the national income. The poorest 20% were earning 4%.
The slump of 1937-8. The limitations of the New Deal were shown in 1937. The economy seemed to be improving and Roosevelt took the opportunity to cut the amount spent on New Deal programmes. The economy went back into depression. industrialproduction fell by one-third and unemployment rose by nearly 3 million.
Black Americans. The programme did little to improve the position of black Americans. Although around 30% of all black people were dependent on emergency relief for survival. New Deal laws .attempted to assist biacks and mprove their civil rights. Roosevelt felt dependent on the support of Democrats from the south, who were determined to deny full rights to blacks.
The Second World War. Many argue that it was the rearmament programme and American entry into the Second World War in 1941 that eventually revived the economy and reduced unemployment. Even before American entry, the USA sold goods and food produce to Britain and France which increased the demand for American manufactured goods and food produce. The level of unemployment fell.
Whether the New Deal was a success or not, depends on the definition of success. Did the New Deal eliminate unemployment and turn America around? No. Did the New Deal eliminate poverty? No. It would be easy to run off questions such as these with an economic bent and come up with the answer no. However, an analysis of whether the New Deal was a success or failure requires a larger scope of questioning than simply looking at economic statistics.
Rather than look at the New Deal from 1933 on, an analysis of what America was like in the aftermath of the Wall Street Crash is important. What exactly had Roosevelt inherited in March 1933?
From the collapse of Wall Street in October 1929 to the presidential election in November 1932, to many Americans it appeared as if Hoover, the Republican president, was either doing nothing or too little. "Too little, too late" was a frequent label pinned to the presidency of Hoover. That a president, Roosevelt, was actually doing something positive was a huge boost to the American public - they were not being left to fend for themselves. Some who had been badly affected by the Depression had labeled their cardboard box homes "Hoovervilles" in disgust of what Hoover was doing for them. The free food handouts they got were nick-named "Hoover Stew". Those at the bottom end of society had no faith in Hoover and the new president gave them exactly this - faith and hope. Here was a president doing something for them.
Economic statistics also provide a clue as to whether the New Deal was a success or not.
America's Gross National Product 1928 to 1939:
Amount of consumer goods brought 1928 to 1939:
Private investment in industry:
If the 1928 figure is used as a baseline figure for a study as to whether the New Deal was a success or not, then in all three important areas, Roosevelt did not get back to the 1928 figure. However, America was at its economic peak then and after such an economic catastrophe as the Wall Street Crash, it would have bordered on the impossibility for Roosevelt to have got back to the 1928 figure.
If the 1933 figure is taken as a baseline figure - the year Roosevelt took office as president - then a different pattern emerges. In all three areas, there were significant improvements. Economic strength and development thrives on confidence and these figures give the clear impression that America now had greater confidence in her economic ability after the Wall Street Crash. For GDP - this is usually taken as key pointer in a nation's economic health - 1933 to 1939 witnessed a 60% increase; the amount of consumer products bought increased by 40% while private investment in industry increased by 5 times in just six years.
However, one other statistic is also used by those who were opposed to the New Deal. Unemployment figures for the 1930's are frequently used to argue the case that the New Deal did not work.
Number unemployed in America:
Those who criticise the New Deal claim that it never actually got rid of unemployment in America and that Roosevelt's New Deal only had short term impact which lulled the unemployed into thinking that all their troubles were at an end. The historian William Leuchtenburg believed that only World War Two got America out of the Depression. Arthur Schlesinger claims that the New Deal only got the wheels of industry turning but no more. Economists who attacked the New Deal claimed that all the acts introduced by the New Deal were short-term policies and that there was no long term planning for America's future. In one sense, they felt, that those who had come to rely on the New Deal were being conned as all the evidence pointed to the fact that at some time in the near future, they were likely to be made unemployed once again - after all, there were only so many trees you could plant and lakes in which to stock fish.
However, for many Americans in the 1930's, Roosevelt was the president who included in his policies the people who had felt excluded by politics once the Depression had taken its hold. Now the excluded were the included.