The Great Depression: The New Deal--Business Policy

i>Figure 1.--

The New Deal's labor policy is fairly straight forward. The business policy is more complicated and difficult to understand. The New Deal's business policy was not as radical and unprecedented as is often suggested, but in one way more radical. The United Strates had the world's fastet growing economy propelling the country from a backwater agricultural frontier nation hugging the Atlantic seaboard to a continental power and the world's leading industrial power (19th century). This was accomplished becauase: 1) the United States more than antbother country embraced free marrket capitalism, 2) avoided spending vast sums on expensive armies, and 3) created an fine oublic education system. The Federal Government began to interfere with business during Progressive era. The major strep taken was attack the great trusts. Major trust busting actions were taken during both the Roosevelt (1901-09) and Taft Administration (1909-13). The Roosevelt Administrarion introduced the Prue Food and Drug Administration, a major step in regulating business for the public good. In this case the regulation was clearly in the oublic good. As the Fovernment regulatory authority increassed, the rgularory agencies gradually begam to use their authority fpr purposes beyond that intended and for ideological purposes. The trust busting actions might be seen as anti-business actions and were so depicted at the time. In actuality they were pro-business, helping to promote competition which is essentially to the proper functions of the free market system. The Wilson Administration (1913-19) introduced what it called the New Feeedoms, many Progressive actions, including much needed actions protecing child and women workers. It is imporant to note that such protections are not only moral matters. For millenia children and women have worked. This was an economic necesity, only with the advent of capitalism did the economy become sufficently productive that children no longer needed to work. Another major reform was the creation of the Fderal Reserve (1913), but at a time that ecconomic and finance theory were not well understood. The United States entered World War I (1917) abd as part of the war effort introduced wide spread administrative actions to the direct the economy. The War ended before these actions had a major impact, but set precedents. The post-War era was one if generally unregulated, rapid growth. But the idea of reducing comoetitipn was not just an idea pursued by colletivist progressives, but business people. The United States at the time of the Great Depression had some 7,000 trade associations, almost all enderoring to elimate competitiion to varying degrees. And Hoover as Secretary of Commerce cooperated in this effort thinking that it would be more efficent. [Martin] This of course was the business thinking at the heart of the New Deal and the Works Progress Administration (WPA). The major departure wascthe vhostility many New Dealers had toward buiness.

Overview

The New Deal's business policy was not as radical and unprecedented as is often suggested, but in one way more radical.

Background

The United Strates had the world's fastet growing economy propelling the country from a backwater agricultural frontier nation hugging the Atlantic seaboard to a continental power and the world's leading industrial power (19th century). This was accomplished becauase: 1) the United States more than antbother country embraced free marrket capitalism, 2) avoided spending vast sums on expensive armies, and 3) created an fine oublic education system. The Federal Government began to interfere with business during Progressive era. The major strep taken was attack the great trusts. Major trust busting actions were taken during both the Roosevelt (1901-09) and Taft Administration (1909-13). The Roosevelt Administrarion introduced the Prue Food and Drug Administration, a major step in regulating business for the public good. In this case the regulation was clearly in the oublic good. As the Fovernment regulatory authority increassed, the rgularory agencies gradually begam to use their authority fpr purposes beyond that intended and for ideological purposes. The trust busting actions might be seen as anti-business actions and were so depicted at the time. In actuality they were pro-business, helping to promote competition which is essentially to the proper functions of the free market system. The Wilson Administration (1913-19) introduced what it called the New Feeedoms, many Progressive actions, including much needed actions protecing child and women workers. It is imporant to note that such protections are not only moral matters. For millenia children and women have worked. This was an economic necesity, only with the advent of capitalism did the economy become sufficently productive that children no longer needed to work. Another major reform was the creation of the Fderal Reserve (1913), but at a time that ecconomic and finance theory were not well understood. The United States entered World War I (1917) and as part of the war effort introduced wide spread administrative actions to the direct the economy. The War Industry Board (WIB) was created to manage the economy (1917). The War ended before these actions had a major impact, but set precedents. While ir existed only briefly, te WIB was a huge step in centralized national economic planning and would affect both New Deal planning (National Recovery Administration) aswell as World War II economoic planning. The post-Woeld Wae I Roaring Twenties was an era of generally unregulated, rapid growth. But the idea of reducing comoetitipn was not just an idea pursued by colletivist progressives, but business people. The United States at the time of the Great Depression had some 7,000 trade associations, almost all enderoring to elimate competitiion to varying degrees. And Hoover as Secretary of Commerce cooperated in this effort thinking that it would be more efficent. [Martin] This of course was the business thinking at the heart of the New Deal and the Works Progress Administration (WPA). The major departure wascthe vhostility many New Dealers had toward buiness.

Initial Steps

National Industrial Recovery Act (NIRA, 1933)

The Roosevelt Administration's primary initial effort to deal with the depression was the National Industrial Recovery Act (NIRA). It established the National Recovery Administrarion in the first year of the Administration (1933). The New Dealers believed that eliminating 'cut throat competition' would be benbeficial. 'Cut throat' is of course anb adjetive designed to give competitoon a negative connotation. This of course reflected the consenus at the time that capitalism had failed. (We now know that it was governmrnt that turned a normal recession into the Great Depression--especially the Federal Reserve cutting th money supply.) Competitiin was at the heart of a finctioning capitalist economy which cononed with gthe profit mitive was what made it so effective. And why the without profuitss and cimpetitiin that Soviet Union and other Communist countries failed. The NRA was an experiment with central planning, essentially what the Soviet Union had introduced and NAZI Germany would introduce. THe Soviets had Five Year Plans. The NAZIS would introduce Four Year Plans.) The NRA was central planning-light. The NRA sought to bringing industry, labor, and government together to create codes of 'fair practices' and set prices. The NRA allowed companies to essentially collude and write 'codes of fair competition'. The NRA hoped the codes would reduce 'destructive competition' and with Union paericipation set minimum wages and maximum weekly hours. The codes would also set minimum prices for products. The NRA had a 2-year renewal provision/. It was set set to expire in 1935 if not renewed. There were great hopesfor the NRA. Particioating shops and businesses displayed posters with the symbol-the NRA Blue Eagle. The NRA seems to have been popular with workers primarily converned with unemployment. Nusinesses did not always abide by all the regulations. Unlike Soviet and NBAZi central planning, participation was voluntary. Businesses that did not participate and display the NRA Blue Eagle often were boycotted, making it mire cinpulsirt=y than was claimed. The NRA did not last long. The U.S. Supreme Court unanimously found that the NIRA was unconstitutional (1935). The Court ruled that the Law infringed on the separation of powers created by the Constitution. The Couer in Schechter Poultry Corp. v. United States ignored the central planning issue as well as competiion and profits. They ruledvthat the mandatory codes section of NIRA unconstitutional, because it regulated commerce that was not interstate in character. And that the codes represented an unconstitutional exeecise of power assigned to Congress. The NRA quickly ceased functioning. The labor provisions, however, reappeared in the National Labor Relations Act (Wagner Act) which Congress passed later the same year. The long-term result was an expamsion Nuniins and their increased bargaining power.

Works Progress Administration (WPA, 1935)

An important part of the First Hundred Days was expanding relief (money and food) programs to the unemployed and other afflicted groups. Relief was, however, a stop gap measure to allow Americans to survive the Depression until jobs once more became available. The Depression persisted. Here economists differ on why this was, but the private sector did not recreate the jobs that had been lost. As a result, another flurry of New Deal legislation followed in 1935. This was in part possible because of the Democratic Congressional victories in the 1934 by-election. The new programs included the Works Projects Administration (WPA) which provided jobs not only for laborers but also artists, writers, musicians, and authors. The WPA was in large measure the public face of the New Deal. The WPA along with Social Security became the center pieces of the New Deal. WPA also became perhaps the most controversial New Deal Agency. It was akso the New Deal agencybthat touched moe people rhan aby other.

Labor Policy

Taxation

Optics

Created: 12:58 PM 4/19/2020
Last updated: 12:58 PM 4/19/2020