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the Great Depression -- the New Deal -- assessment
The Great Depression: The New Deal--Assessment
Figure 1.--It is true that the New Deal did not end the Depression which continued until the end of the decade when overseas war orders began to revice American industry. But it did ameliorate the impact of the Depression on many, but not all Americans. "This photograph was taken at Calipatria in California's Imperial Valley during February 1939. It was one of the Farm Security Administration (FSA) emergency migratory labor camps. The lady here was a daughter of ex-tenant farmers on thirds and fourths in cotton. She had fifty dollars when she set out. Went to Phoenix, picked cotton, pulled bolls made 80 cents a day with two people pulling bolls. Stayed until school closed. Went to Idaho, picked peas until August. Left McCall with forty dollars "in hand. Went to Cedar City and Parowan, Utah, a distance of 700 miles. Picked peas through September. Went to Hollister, California. Picked peas through October. Left Hollister for Calipatria for early peas which froze. Now receiving Farm Security Administration food grant and waiting for work to begin. "Back in Oklahoma, we are sinking. You work your head off for a crop and then see it burn up. You live in debts that you can never get out of. This isn't a good life, but I say that it's a better life than it was." Photographer: Dorothea lange.
President Roosevelt and the New Deal were extreemly controservial during the 1930s. The voters consistently retyrned him to office but by the 1938 elections were beginning to have doubts. In the aftermath of the War and the President's untimely death, historians tended to speak lauditorily of the New Deal afirming that President Roosevelt brought us out of the Depression. More recent historians have discussed the New Deal in less lauditory terms. With greater reflection it can I think, be fairly seen that it was World War II that finally ended the Depression. Some recent historians have even charged that the New Deal even prolonged the Depression. I am not entirely sure of that, but even if true it does not mean, howeve, tht the New Deal was a failure or thzt it did not have many beneficial impacts.
Assessments of the New Deal often are largely ideological in nature and thus are excahanges of opinion which commonly lead nowhere. Thus it is important to at least look at the available statistical data. The New Deal eventually took on a wide range of problems, but President Roosevelt was elected with one primary mandate--to end the Depression. So there are many statistical indicators that can be used to assess that basic question -- did the New Deal end the Depression? There are a range of economic indicators that are used to monitor business cycles, including business activity like steel or cement production, housing starts, tax receipts, unemployment claims, and much more. Some such as unemployment claims did not exist in he 1930s, but many data sets can be used. The single most important measure for most Americans was unemployment. And the available data clearly show that the New Deal did not significantly reduce unemployment: 1928 (4.2 percent), 1930 (8.7 percent), 1932 (23.6 percent), 1934 (21.7 percent), 1936 (16.9 percent),
1938 (19.0 percent), 1940 (14.6 percent), and 1942 (4.7 percent). [Bureau of Labor Statistics] This data shows that the New Deal did reduce unemployment to an extent, but not to normal levels, but unemployment began to increase again with the Roosevelt Recssion (1938). And the 19 percent reported in 1938 is misleading. It was sctually much higher as not counted are those who had given up looking for work and had dropped out of the job market. Only with World War II did unemploment return to normal levels. Now this is only one data set, but other economic indicators tell much the same story. The clear conclussion is what ever the New Deal did or did not do, and there were important achievements, it did not end the Depression. This is important, because Liberal Democrats today pursue the narative that the Federal Government solved an economic crisis created by capitalism. This simply not accurate. As Treasury Secretary Morgenthau admitted. "We�re spending more than ever and it doesn�t work. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this Administration we have just as much unemployment as when we started. � And an enormous debt to boot!" [Morgenthau. Testimony]
Critics
President Roosevelt and the New Deal had their critics in the 1930s. Early critics of the New Deal questioned its cost and inefficency. Some Republican leaders unable to compete at the polls began to charge that President Roosevelt was undermining the democratic system. Led by the Liberty League, the New Deal was asualted as an attack on individual libety. FDR's effort to pack the court in particular was heavily criticized. In more recent years the New Deal has been attacked on economic grounds. Some authors charge that the New Deal actually extended the Depression. There are a variety of criticisms of the New Deal. 1) The New Deal according to some economists trippled taxes. The bulk of the taxes were excise and sales takes paid by the poor and middle class. 2) Attacks on private property rights and attacks on "economic royalists" discourged investment. 3) The New Deal made it more expensive to hire people which discouraged hiring. Here programs like Social Security and efforts to promote union organizing (the Wagner Act) affected the cost of labor. 4) The New Deal made it more difficult to raise capital. Here the Security Exchanges Commission. 5) The New Deal destroyed food. Crops were turned over and farmers paid not to produce. 6) The New Deal increased the cost of goods. The New Deal had various programs to control prices. The National Recovery Act (NRA) was the major effort here. 7) The New Deal broke up several of the larger banks. These were not the banks that were failing. The banks that failed were the ones not allow to diversify with branches. 8) Public works progams proved to be a drag on the economy. TVA for example did not transform the lives of Tennessee farmers, but was instead an irrational mononpoly. 9) There were frivolous anti-trust lawsuits. There was no evidence that monoplies were limiting wages and jobs. 10) Makes work programs were directed at the political swing states and not the South. WPA and other programs did not create productive jobs and as they were financed by taxes that took money out of the hands of individuals whose spending would have created jobs in the private sector. [Powell] This author contends that after the Banks were reopened the economy began to recover, but the programs of the First Hundred Days discouraged that recovery. [Powell]
The New Deal critics commonly gloss over one very obvious factor. There are periods in history that capitalism has to be saved from capitalists. There are a seies of bubbles in economic history that caused systemic damage. The story is, however, more complicated. Often down played is the role of Government. Many economists believe that the Hoover Administration and the Congress (including Democrats) pursued policies that turned a serious economic down turn into the Great Depression. Despite the popular narative, the New Deal did not end the Depression. High levels of unemployment persisted in America throughout the 1930s until orders from Europe for military equipment and supplies began to flow into the United States as well as American rearmament. Here there is considerable difference among historians and economists about New Deal policies, but the basic fact is that the New Deal despite massive spending did not end the Depression. We believe that are, however, important defenses of the New Deal. First. the actions taken in the First Hundred Days prevented the Depression from getting worse. These actions included: 1) ending the gold standard and 2) saving the banking system. Second, many of the New Deal agencies accomplished very important goals. Here authors vary. We believe some of the most important New Deal accomplishments were: the Civilian Conservation Corps (CCC), Rural Electrification Administration (REA), Security Exchange Commission (SEC), and Social Security. Some authors would add the Wagner Act which strengthen the bargaing power of labor unions. Third, President Toosevelt and the New Deal prevented the rise of more radical forces. There was in 1933 the very real possibility that economic depression would have resulted in if not revolution, far more profound changes than the New Deal. Men like Huey Long or Fouglas MacArthur may have even fundamentally altered the democratic system. New Deal criticics may well dismiss this as unlikely, but America was in very deep trouble by 1933 and President Roosevelt's New Deal provided aevel of hope and economic relief that ensured the survival of American democracy. The New Deal was a era of tremendous political change in America. The many New Deal programs certainly had economic costs, but also great achievements. They have to be considered individually. Some may not have been helpful. Others decidely were, both in economic and social terms. The Rural Electrification Administration (REA) had a massive possitive impact on the produtivity of the American farmer. The Civilian Conservation Corps (CCC) not only helped large numbers of unemployed youth, but provided wonderful facilities in national parks and forrests that succeeding generations of Americans have enjoyed. What the critics of the New Deal ignore is the root causes of the Depression. Here a major cause was the unfair distribution of wealth which left large numbers of Americans without purchasing power and the ability to support a growing economy. This was in large measure because there was not a ballance between labor and capital. Once labor could demand fair wages the result after the War was a tremendous expandion of the middle class in the 1940s and 50s. Much of the criticism of the New Deal is based on a modern assessment that the programs as a whole were not best suited to promote rapid economy growth. This is probably true. The New Deal did, however, preserve liberal democracy, set a more ballance relationship between labor and capital, prevent the growth of radical (Fascist and Communist) revolution, address wide-spread suffering, provide a pension system for elderly Americans, and begin a wide range of social reforms.
The standard liberal narrative of the New Deal is that it solved the Depression. This is factually incorrect. Many issues are debateable and arguments can be mustered on both sides. The claim that the New Deal ended the Depression is not one of these issues. It is just a matter of looking the facts. There are several indicators of economic activity. By all of the major indicators, the Depression consisted throughout the 1930s until war orders from Europe began to flood into the United States. Unemployment is the single most followed indicator abnd not only did high levels of unemployment persist, but unemployment began to rise again (1937-38). This has been called the Roosevelt Recession. President Roosevelt's Secretary of the Treasurer wrote at the end of the decade, essentially admitting that the New Deal failed to end the Depression. "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong � somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. � I say after eight years of this Administration we have just as much unemployment as when we started. � And an enormous debt to boot." One has to ask why the popular narative has become that the New Deal ended the depression. One factor is that many of the New Deal agancies that were designed to end employmebt were popular with liberal Democrats despite the fact that they did not end unemoloyment, priograms like the Works Progress Administration (WPA). The idea here was for the Government to create jobs financed by higher taxes rather than to create a business climate that might incourage business to invest and create real jobs. And as a result, we are now having the very same debate in Washington.
Sources
Bureau of Labor Statistics. U.S. Department of Labor.
Morgenthau, Henry. Diary.
Morgenthau, Henry. Testimony before the House Ways and Means Committee (May 9, 1939).
Powell, Jim. FDR's Folly: How Franklin D. Roosevelt and he New Deal Prolonged the Great Depression. Powell's book is a popular summary of a number of economists who have challenged prevailing opinions on the New Deal.
