New Deal

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See also: Fascism and the New Deal.
The New Deal Blue Eagle.[1]

The New Deal was a group of otherwise disjointed programs conducted by President Franklin D. Roosevelt, a Democrat, throughout the Great Depression, especially from 1933 to 1936. His program had three aspects: Relief, Recovery and Reform. It sought to provide immediate Relief for the millions of unemployed in the Great Depression. It was intended to promote Recovery of the economy to normal standards—a goal he did not fully achieve. It involved a series of Reforms, especially in the financial system and labor relations. The basic issue was how to deal with the severely damaged economy—and great social misery—caused by three years of the Great Depression. Conservatives endorsed parts of the First New Deal (the 1933 programs) and rejected the more radical Second New Deal (the 1934–35 programs).

The New Deal was popular among voters leading to the formation of the New Deal Coalition, which made the Democrats the majority party during the Fifth Party System into the 1960s. However, a Conservative Coalition took control of Congress in 1937 and blocked nearly all additional programs; during the war years (1941–45) the conservatives successfully rolled back many of the relief efforts on the grounds they were no longer needed since full employment was achieved. The "reforms" that regulated the economy were mostly dropped in the deregulation era (1974–87), except for oversight of Wall Street by the SEC, which conservatives approved because it increased investor confidence.

The New Deal Coalition dominated national politics until it split apart in the 1960s. Ever since it has been the holy grail of liberals seeking to restore their former glory.

Although the New Deal did not fully solve the economic catastrophe that was on the verge of destroying the US economy in early 1933, it achieved many of its objectives and the period of 1933–37 saw some sectors return to economic growth.


Broker State

The New Deal created the "Broker State", where different interest groups compete in the national market. The government became a mediator between those interest groups, giving power to those who has enough political and economic power to demand it. One of the limitations of this Broker States was that minority groups were often ignored since they did not have political power.

Economic planning

Main article: Economic planning

As the Depression set in, terms like “planned economy” and “national planning” became the watchwords of the day.[2] They had been used by theoreticians for years and popularized by best-selling writers like George Soule and Stuart Chase, who lauded the Soviet Gosplan (central planning), asking plaintively, “Why should the Russians have all the fun of remaking a world?” One prominent member of the Brain trust was Rexford Guy Tugwell. Tugwell was a follower of the school of thought known as "Institutional Economics". His official position was assistant secretary of agriculture, that is, second in command to Henry A. Wallace, but his influence extended far beyond that. Tugwell had traveled to the Soviet Union in 1927 and observed through scientific economic planning the Soviets were able to “carry out their industrial operations with a completely thought-out program.” “The future,” he announced, “is becoming visible in Russia.” Tugwell scorned the free market as anarchical, an uncoordinated muddle of hopelessly conflicting aims and purposes. It would have to be replaced by national planning, or technocracy, another shibboleth of the day, implying rule by the technical experts and managers,[3] like himself.

First and Second New Deals

Historians distinguish between the "First New Deal" of 1933, which had something for almost every group, and the "Second New Deal" (1935–36), which introduced class conflict, especially between business and labor unions. The First New Deal (1933–34) included many "alphabet agencies", notably (AAA, CCC, FERA, CWA, FHA,[4] FDIC,[5] NRA, PWA, TVA, SEC).[6]

The Second New Deal, started in 1934-35 included the WPA, a giant relief agency, and Social Security,[7] as well as the NLRA or "Wagner Act" that promoted rapid growth of labor unions. The opponents of the New Deal, complaining of the cost and the shift of power to Washington, stopped its expansion by 1937, and abolished many of its programs by 1943. The Supreme Court ruled several programs unconstitutional (some parts of them were soon replaced, except for the NRA). The main New Deal programs still in existence today are Social Security the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC) which regulates Wall Street.[8]

Foreign policy

see World Economic Conference of 1933

In foreign policy the New Deal pursued isolationism, set in motion by Roosevelt's "bombshell message" to the World Economic Conference of 1933 which ended efforts to stabilize international exchange rates. Roosevelt—acting against the advice of his top aides—feared that cooperation with major nations would limit his abilities to manipulate the money supply and end the deflation that was a crippling element of the depression. The major nations were appalled. Nazi Germany, which promoted autarchy, rejoiced for it gained a free hand to expand its economic power across the globe. A series of Neutrality Laws (see Neutrality Act) were passed that prohibited American business from selling munitions to nations at war.

There was a peculiar affinity between the New Deal and the European dictatorships that on occasion extended even to fascism and national socialism. Early on, FDR referred to Benito Mussolini as “the admirable Italian gentlemen,” stating to his ambassador in Rome, “I am much interested and deeply impressed by what he has accomplished." Mussolini, in turn, was flattered by what he saw as the New Deal's copying of his own corporate state, in the National Recovery Act (NRA) and other early measures. Even Hitler had kind words at first for Roosevelt's “dynamic” leadership, stating that “I have sympathy with President Roosevelt because he marches straight to his objective over Congress, over lobbies, over stubborn bureaucracies.”

What linked the New Deal to the regimes in Italy and Germany, as well as in Soviet Russia, was their fellowship in the wave of collectivism that was sweeping the world. In an essay published in 1933, John Maynard Keynes observed this trend, and expressed his sympathy with the “variety of politico-economic experiments” under way in the continental dictatorships as well as in the United States. All of them, he gloated, were turning their backs on the old, discredited laissez-faire and embracing national planning in one form or another.

The New Deal was a kinder, gentler form of the collectivism. In all of the national planning schemes, government gained power at the expense of the people, with the leaders seeking to impose a philosophy of life that subordinated the individual to the needs of the community—as defined by the state.

Roosevelt and the State Department promoted a "Good Neighbor" policy toward Latin America, which meant that the U.S. would no longer try to prevent or overthrow dictatorships or governments ruinous to the people. An immediate result was the takeover of Cuba by a military dictatorship.

Finally realizing the dangers posed by the Nazis, Roosevelt reversed course in 1938 and sought to repeal the neutrality laws. However, not all the New Dealers went along with FDR; many remained isolationist.

Relief, Recovery, and Reform

The New Deal had three components: direct relief, economic recovery, and financial reform; these were also called the 'Three Rs'.

Relief was the immediate effort to help the one-third of the population that was hardest hit by the depression. Roosevelt expanded Hoover's Federal Emergency Relief Administration (FERA) work relief program, and added the Civilian Conservation Corps (CCC), Public Works Administration (PWA), and (starting in 1935) the Works Progress Administration (WPA). In 1935 the social security and unemployment insurance programs were added. Separate programs were set up for relief in rural America, such as the Resettlement Administration (RA) and Farm Security Administration (FSA). These work relief programs have been praised by most economists in retrospect.[9]Milton Friedman who after taking a graduate degree in economics was employed by the WPA to analyze family budgets and studied the hardships of families said that, at the time, he and his wife "regarded [these job-creation programs] appropriate responses to the critical situation" but not "the price- and wage-fixing measures of the National Recovery Administration and the Agricultural Adjustment Administration."[10]

Recovery was the effort in numerous programs to restore the economy to normal health. By most economic indicators this was achieved by 1937—except for unemployment, which remained stubbornly high until World War II began.

Reform was based on the assumption that the depression was caused by the inherent instability of the market and that government intervention was necessary to rationalize and stabilize the economy, and to balance the interests of farmers, business and labor. It included the National Recovery Administration (NRA, 1933) (which ended in 1935), regulation of Wall Street (SEC, 1934), the Agricultural Adjustment Act (AAA) farm programs (1933 and 1938), insurance of bank deposits (Federal Deposit Insurance Corporation 1933) and the Wagner Act (1935)encouraging workers to organize into labor unions. Despite urgings by some New Dealers, there was no major anti-trust program. Roosevelt rejected the opportunity to take over banks and railroads. He did not support state ownership of factories, and only one major program, the Tennessee Valley Authority (1933), involved government ownership of the means of production.

The National Recovery Act (NRA) and the Agricultural Adjustment Administration (AAA) were plans to take the whole industrial and agricultural life of the country under the wing of the government, organize it into vast farm and industrial cartels, as they were called in Germany, corporatives as they were called in Italy, and operate business and the farms under plans made and carried out under the supervision of government. This is the complete negation of classical liberalism. It is, in fact, the essence of fascism. Fascism goes one step further and insists this cannot be done by a democratic government; that it can be done successfully only under a totalitarian regime. At the time fascism was not defined as anti-Semitism. It was a word used to describe the political system of Italian Premier Benito Mussolini. Roosevelt adopted the Italian model merely because at the moment it seemed politically expedient.

By 1934, the Supreme Court began declaring significant parts of the New Deal unconstitutional. The programs were quickly fixed to pass muster, but in 1937 Roosevelt stunned the nation by a surprise proposal to pack the Supreme Court by adding five new justices. The proposal failed and Roosevelt permanently alienated many conservative Democrats; however the Supreme Court started upholding New Deal laws. Justices then started retiring, allowing Roosevelt to select a majority of the Court. By 1942, the Supreme Court had almost completely abandoned its "judicial activism" of striking down congressional laws. The Supreme Court ruled in Wickard v. Filburn that the Commerce Clause covered almost all such regulation allowing the necessary expansion of federal power to make the New Deal "constitutional".

Two old words now took on new meaning. "Liberal" no longer referred to classical liberalism but now meant a supporter of the New Deal; conservative meant upholding the Constitution. Whether the New Deal was successful is usually approached not as a historical problem, but as a current debate whether the New Deal should be a model for government today, complicated by its conflicting goals of promising something for nothing for everyone. Liberals continue to battle conservatives. The term "New Deal" is also used to describe the New Deal Coalition that Roosevelt created to support his programs, including the Democrat Party, big city machines, labor unions, Catholic and Jewish minorities, African Americans, farmers, and most Southern whites.

The Origins of the New Deal

On the 29th of October, 1929, the flight of capital from the over valued U.S. stock market set off a downward spiral in employment and growth in every part of the globe known as the Great Depression. Although statistics were not kept it was later estimated unemployment in the U.S. increased from 4% to 25% between 1929 and 1933 while manufacturing output plunged by approximately a third. Gross private domestic investment, which includes construction and inventories, shrank from $16.2 billion to $1.4 billion.[11] Prices everywhere fell, making the burden of the repayments of debts much harder. Heavy industry, mining, lumbering and agriculture were hard hit. The impact was much less severe in white collar and service sectors, but every city and state was hit hard.

Upon accepting the 1932 Democrat nomination for president, Roosevelt promised "a new deal for the American people."[12] Roosevelt entered office with no single ideology or plan for dealing with the depression. He was willing to try anything, and, indeed, in the "First New Deal" (1933–34) virtually every organized group (except the Socialists and Communists) gained much of what they demanded. This "First New Deal" thus was self-contradictory, pragmatic, and experimental. Government spending propelled the economy to recover from the deep pit of 1932, and started heading upward again until 1937, when the over emphasis on consumption of capital resources plunged the economy into the Recession of 1937 and sent unemployment back to 1934 levels. Whether the New Deal was responsible for the recovery, or whether it even slowed the recovery, is a subject of debate.

The New Deal drew from many different sources over the previous half-century. Some New Dealers, led by Thurman Arnold, went back to the anti-monopoly tradition in the Democrat Party that stretched back a century. Monopoly was bad for America, Louis Brandeis kept insisting, because it produced waste and inefficiency. However, the anti-monopoly group never had a major impact on New Deal policy.

From the Wilson administration, other New Dealers, such as Hugh Johnson of the NRA, were shaped by efforts to mobilize the economy for World War I, They brought ideas and experience from the government controls and spending of 1917–18. And from the policy experiments of the 1920s, New Dealers picked up ideas from efforts to harmonize the economy by creating cooperative relationships among its constituent elements. Roosevelt brought together a so-called "Brain Trust" of academic advisers to assist in his recovery efforts. They sought to introduce extensive government intervention in the form of spending and regulation instead of allowing self-correcting mechanisms to run its course. New Dealers such as Donald Richberg, as the replacement head of the NRA, said "A nationally planned economy is the only salvation of our present situation and the only hope for the future."[13] Historian Clarence B. Carson says:

At this remove in time from the early days of the New Deal, it is difficult to recapture, even in imagination, the heady enthusiasm among a goodly number of intellectuals for a government planned economy. So far as can now be told, they believed that a bright new day was dawning, that national planning would result in an organically integrated economy in which everyone would joyfully work for the common good, and that American society would be freed at last from those antagonisms arising, as General Hugh Johnson put it, from “the murderous doctrine of savage and wolfish individualism, looking to dog-eat-dog and devil take the hindmost.[14]

1998 US stamp celebrates alphabet agencies of New Deal

The New Deal faced some very vocal conservative opposition. The first organized opposition in 1934 came from the American Liberty League led by Democrats such as 1924 and 1928 presidential candidates John W. Davis and Al Smith. There was also a large loose grouping of opponents of the New Deal who have come to be known as the Old Right which included politicians, intellectuals, writers, and newspaper editors of various philosophical persuasions including classical liberals, conservatives, Democrats and Republicans.

World Comparisons

Britain was unable to adopt major programs to stop its depression. That led to collapse of the Labour government and replacement in 1931 by a National coalition (predominantly Conservative). There was no equivalent "New Deal" government intervention in Britain, which allowing self-correcting market mechanism to operate, brought about a higher level of sustained employment and recovered more quickly from the Depression. In Canada, Conservative Prime Minister R. B. Bennett pushed for a program similar to the New Deal but failed to get it enacted and was defeated for reelection by the Liberals under William Mackenzie King. In New Zealand a series of economic and social policies similar to the New Deal were adopted after the election of the first Labour Government in 1935 [3].

In Nazi Germany, economic recovery was pursued through wage controls, suppression of unions, and big government spending programs on infrastructure and public works; as in the United States, large-scale armament spending came later in the 1930s. In Mussolini's Italy, the economic controls of his corporate state were tightened.

The First Hundred Days

Having won a decisive victory in 1932, and with his party having decisively swept Congressional elections across the nation, Roosevelt entered office with unprecedented political capital. Many Congressmen had their favorite projects, like the TVA plan of Senator George Norris, which the administration adopted and treated as its own. Finally there were numerous Hoover plans that he could not get passed but were ready to go, such as the emergency banking laws. Americans of all political persuasions were demanding immediate action, and Roosevelt responded with a series of new programs in the “first hundred days” of the administration.

The "Bank Holiday" and the Emergency Banking Act

Roosevelt hurled the blame at businessmen and bankers with religious rhetoric: "Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men....The money changers have fled from their high seats in the temple of our civilization."

The failure of Credit Anstalt, a large commercial bank in Austria in 1931, brought a new wave of financial panic to Wall Street. By March 4, all banks in the country were virtually closed by their governors, and Roosevelt kept them all closed until he could pass new legislation.[15] On March 9, Roosevelt sent to Congress the Emergency Banking Act, drafted in large part by Hoover's administration; the act was passed and signed into law the same day. It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed. Three-quarters of the banks in the Federal Reserve System reopened within the next three days. Billions of dollars in "hoarded" currency and gold flowed back into them within a month, thus stabilizing the banking system. All was normal by April. During all of 1933, 4,004 small local banks were permanently closed and were merged into larger banks. (Their depositors eventually received 85 cents on the dollar of their deposits.) Congress created the Federal Deposit Insurance Corporation in June, which insured deposits for up to $5,000, although Roosevelt opposed it support was overwhelming. The establishment of the FDIC virtually ended the era of "runs" on banks.

The Banking Act of 1935 removed the Secretary of the Treasury from the Federal Reserve Board of Governors and established the Federal Open Market Committee to control market operations of the Federal Reserve, the buying and selling of Government securities the Federal Reserve System.

Economic growth

The economy hit rock bottom in March 1933 and now it started to expand. As historian Broadus Mitchell notes, "Most indexes worsened until the summer of 1932, which may be called the low point of the depression economically and psychologically."[16] Economic indicators show the economy reached nadir in the first days of March, then began a steady, sharp upward recovery. Thus the Federal Reserve Index of Industrial Production hit its lowest point of 52.8 in July 1932 (with 1935-39 = 100) and was practically unchanged at 54.3 in March 1933; however by July 1933, it reached 85.5, a dramatic rebound of 57% in four months. Growth was steady and strong until 1937 but job creation continued to lag. By 1941, personal consumption expenditures - despite population increase - were virtually unchanged since 1929, reflecting a general impoverishment of the nation.[17]

The Economy Act

The Economy Act, drafted by Budget Director Lewis Douglas was passed on March 20, 1933. The act proposed to balance the "regular" (non-emergency) federal budget by cutting the salaries of government employees and cutting pensions to veterans by 40 percent. It saved $500 million a year and reassured deficit hawks such as Douglas that the new president was fiscally conservative. Roosevelt argued there were two budgets: the "regular" federal budget, which he balanced, and the "emergency budget," which was needed to defeat the depression. It was imbalanced on a temporary basis.

Roosevelt was ran on a platform of balancing the budget, but in office found himself running spending deficits to fund the numerous programs he created. Douglas, however, rejecting the distinction between a regular and emergency budget, resigned in 1934, and became an outspoken critic of the New Deal. Roosevelt strenuously opposed the Bonus Bill that would give World War I veterans a cash bonus. Finally, Congress passed it over his veto in 1936, and the Treasury distributed $1.5 billion in cash to 4 million of bonus welfare benefits to veterans just before the 1936 election.

These blank check appropriations led to the subservience of Congress and the rise of bureaucracy. Under the Constitution, Congress alone can write laws. The executive branch only enforces the law. But Congress now began to pass laws that created large bureaus empowered to make regulations or directives with a wide range of authority. Under these laws the executive bureau became a quasi-legislative body authorized by Congress to make regulations which had the effect of law. This practice grew until Washington was filled with a vast array of bureaus that were making laws, enforcing them and actually interpreting them through administrative law courts set up within the bureaus, abolishing on a large scale the separation of powers between executive, legislative and judicial processes.

At least until John F. Kennedy in 1960, New Dealers never fully recognized the Keynesian argument for government spending as a vehicle for recovery. Most economists of the era, along with Henry Morgenthau of the Treasury Department, rejected Keynesian solutions and favored balanced budgets.

Minimum wage

Shortly after his election FDR forced the Congress to scrap minimum wage and maximum hour legislation which the Senate had already passed.[18]

The Farm Programs

Roosevelt was keenly interested in farm issues, and emphasized that true prosperity would not return until farming was prosperous. Many different programs were directed at farmers. The first hundred days produced a federal program to protect commercial farmers from the uncertainties of the depression through subsidies and production controls. This program began with the Agricultural Adjustment Act, creating the Agricultural Adjustment Administration (AAA), which Congress passed in May 1933.

Would FDR's farm plan steamroller over traditional American values?

The AAA reflected the demands of leaders of major farm organizations, especially the Farm Bureau, and reflected debates among Roosevelt's farm advisers such as Henry A. Wallace, Rexford Tugwell, and George Peek. The AAA implemented a provision for crop reductions known as the "domestic allotment" system of the act. Under this system producers of corn, cotton, dairy products, hogs, rice, tobacco, and wheat would decide on production limits for their crops. The AAA would then pay land owners subsidies for leaving some of their land idle with funds provided by a new tax on food processing. Farm prices were to be subsidized up to the point of parity. Some crops were ordered to be destroyed and some livestock slaughtered to raise the prices farmers received. The idea was that the less produced, the higher the price, and the farmer would benefit. Farm incomes increased significantly in the first three years of the New Deal. A Gallup Poll revealed that a majority of the American public opposed the AAA; conservatives complained that price fixing was dangerously distorting the economy.

The milk program was especially problematic—and indeed still is in the 21st century, with state governments having a major role.

The main farm program was the Agricultural Adjustment Administration or AAA, enacted in 1933. The government rented land from farmers to take it out of production, thereby hoping the reduce the surpluses that caused such low prices. By 1936 conditions had dramatically improved in agriculture. Although the holy grail of 100% parity was not reached until 1943, incomes were much higher rising from $4.7 billion in 1932 to $8.7 billion in 1936. The heavy burden of debt that had soured the 1920s was mostly paid off or refinanced. The chimerical vision of escaping to the rich cities no longer enthralled the farm youth.

The main causes of the return to prosperity include the overall improved national economy, the severe draught of 1934 that reduced output and caused prices to rise. The AAA payments to farmers were a help. The acreage reduction program had little effect except in cotton and tobacco. In other crops the farmers improved their efficiency on the remaining acreage and output stayed level. In cotton and tobacco, however, prices were much higher and since the great majority of Southerners lived in rural areas and depended on these crops, the New Deal was very well regarded.[19]

The AAA established an important and long-lasting federal role in the planning on the entire agricultural sector of the economy, with support from liberals and conservatives alike.

In 1936, the Supreme Court declared the AAA to be unconstitutional, stating that "a statutory plan to regulate and control agricultural production, is a matter beyond the powers delegated to the federal government..." The AAA was replaced by a similar program that did win Court approval, and was endorsed by the both parties in the 1936 election.

Federal regulation of agricultural production has been modified many times since then, but together with large subsidies it is still in effect in 2009.

Tenant farmers and sharecroppers

Roosevelt, Henry Wallace and many New Dealers were highly sympathetic to the marginal farmers who lived on the land in severe poverty, especially in the South. Major programs addressed to their needs included the Resettlement Administration (RA), the Farm Security Administration (FSA), the Rural Electrification Administration (REA), the Tennessee Valley Authority (TVA) and rural welfare projects sponsored by the WPA, NYA, Forest Service and CCC, including school lunches, building new schools, opening roads in remote areas, reforestation, and purchase of marginal lands to enlarge national forests.

Tuskegee syphilis experiment

The Tuskegee syphilis experiment, officially the Tuskegee Study of Untreated Syphilis in the Negro Male, was a government funded racist study on the disease of syphilis begun during the New Deal.[20] The United States Public Health Service and the Center for Disease Control infected black people,[21] who could not read or were poor in Tuskegee, Alabama from 1932 to 1972.[22]

Tuskegee experiment during the New Deal.
The study was initially funded by the private Rosenwald Fund. However, The Fund ended its involvement due to lack of matching state funds, and the federal government under the heavily Democrat 73rd Congress took over the funding.[23] According to the 1995 Abstract to The Tuskegee Syphilis Experiment: biotechnology and the administrative state:
"The central issue of the Tuskegee Syphilis Experiment was property: property in the body and intellectual property. Once removed from the body, tissue and body fluids were not legally the property of the Tuskegee subjects. Consequently, there was not a direct relationship between a patient and research that used his sera. The Public Health Service (PHS) was free to exercise its property right in Tuskegee sera to develop serologic tests for syphilis with commercial potential. To camouflage the true meaning, the PHS made a distinction between direct clinical studies and indirect studies of tissue and body fluids. This deception caused all reviews to date to limit their examination to documents labeled by the PHS as directly related to the Tuskegee Syphilis Experiment. This excluded other information in the public domain. Despite the absence of a clinical protocol, this subterfuge led each to falsely conclude that the Tuskagee Syphilis Experiment was a clinical study. Based on publications of indirect research using sera and cerebrospinal fluid, this article conceives a very history of the Tuskagee Syphilis Experiment. Syphilis could only cultivate in living beings. As in slavery, the generative ability of the body made the Tuskegee subjects real property and gave untreated syphilis and the sera of the Tuskegee subjects immense commercial value. Published protocols exploited the Tuskegee Syphilis Experiment to invent and commercialize biotechnology for the applied science of syphilis serology.[24]

Jinbin Park of Kyung Hee University reports,[25]

"the growing influence of eugenics and racial pathology at the time reinforced discriminative views on minorities. Progressivism was realized in the form of domestic reform and imperial pursuit at the same time. Major medical journals argued that blacks were inclined to have certain defects, especially sexually transmitted diseases like syphilis, because of their prodigal behavior and lack of hygiene. This kind of racial ideas were shared by the PHS [Public Health Service] officials who were in charge of the Tuskegee Study. Lastly, the PHS officials believed in continuing the experiment regardless of various social changes. They considered that black participants were not only poor but also ignorant of and even unwilling to undergo the treatment. When the exposure of the experiment led to the Senate investigation in 1973, the participating doctors of the PHS maintained that their study offered valuable contribution to the medical research. This paper argues that the combination of the efficiency of military medicine, progressive and imperial racial ideology, and discrimination on African-Americans resulted in the Tuskegee Syphilis Experiment.


The administration launched a series of relief measures and welfare agencies to give meaningful jobs to the unemployed, especially unskilled laborers. The largest programs were the Civilian Conservation Corps (CCC), the Civil Works Administration (CWA), the Federal Emergency Relief Administration (FERA), the National Youth Administration (NYA), and above all, the Works Progress Administration (WPA). The WPA employed a maximum of 3.3 million in November 1938.[26] However, even at this level of WPA employment, unemployment (counting WPA as employment) was still 12.5% in 1938 according to figures from Micheal Darby.[27] All these emergency programs were terminated in 1942–43, when unemployment had vanished due to World War II related employment offers.

In 1933 the administration launched the Tennessee Valley Authority, a project involving dam construction planning on an unprecedented scale in order to curb flooding, generate electricity, and modernize the very poor farms in the Tennessee Valley region of the Southern United States.

Repeal of prohibition

In a measure that garnered substantial popular support, Roosevelt, in his first days of office, moved to put to rest one of the most divisive cultural issues of the 1920s. He supported and signed a bill to legalize the manufacture and sale of beer, an interim measure pending the repeal of Prohibition, for which a constitutional amendment (the Twenty-first) was already in process. The amendment was ratified later in 1933. Prohibition had been a rather unpopular amendment and led to bootlegging, the illegal manufacture (or importation) and sale of liquor within the United States.

Communists in the New Deal

CPUSA defector Louis Budenz testified he could name 400 individuals involved in the Communist conspiracy;[28] others testified there may have been over 1000.[29] The Silvermaster group infiltrated 27 high level Stalinist KGB operatives into government jobs in the Roosevelt and Truman administrations, including the first General Secretary of the United Nations, the first head of the International Monetary Fund, the head of the Manhattan Project as well as speech writers and staff assistants for both the President and Vice President.[30]

The New Deal was infiltrated with Communists.[31] Harold Ware was a Communist Party USA (CPUSA) official in the AAA and founded the Ware group. The group consisted of young lawyers and economists, had about 75 members in 1934 and was divided into about eight cells. The AAA was later found unconstitutional, but by that time the Communist operatives had established jobs in government employment. Alger Hiss, Lee Pressman, John Abt, Charles Kramer, Nathan Witt, Henry Collins, George Silverman, Marion Bachrach, John Herrmann, Nathaniel Weyl, Donald Hiss and Victor Perlo were all members. Harry Dexter White, who was involved in the most auspicious policy subversion as Director of the Division of Monetary Research in the Treasury Department, was also affiliated with the group. The Ware group was the CPUSA's covert arm at this time. Each of these agents not only provided classified documents to Soviet intelligence, but was involved in political influence operations as well.

In 1934, a Congressional Investigation was held to examine statements by Dr. william A. Wirt, who headed the U.S. Office of Education. Dr. Wirt had attended a dinner party with several Brain Trusters at the home of his secretary, Alice Barrows.[32] Barrows began working for the Office of Education in 1919 and was secretly a member of the Communist Party of the United States (CPUSA) which advocated the violent overthrow of the United States Constitution. Several of the Brain Trusters present at the dinner revealed to Wirt they were CPUSA members. Wirt testified,

I was told they believe that by thwarting our then evident economic recovery, they would be able to prolong the country’s destitution until they had demonstrated to the American people that the Government must operate business and commerce. By propaganda, they would destroy institutions making long term capital loans—and then push Uncle Sam into making these loans. Once Uncle Sam becomes our financier, he must also follow his money with control and management.[33][34][35]

Outside government, the far-left was exerting considerable influence in the labor movement (it dominated the new CIO), and was building a network of membership organizations. Thus the American League Against War and Fascism was formed in 1933 and, in 1937, became the American League for Peace and Democracy. There followed the American Youth Congress, 1934; League of American Writers, 1935; National Negro Congress, 1936; and the American Congress for Democracy and Intellectual Freedom, 1939. All had significant Stalinist connections, and fought furious battles with the anti-Communist left.[36]

Puerto Rico

A separate set of programs operated in Puerto Rico, headed by the Puerto Rico Reconstruction Administration. It promoted land reform and helped small farms; it set up farm cooperatives, promoted crop diversification, and helped local industry. The Puerto Rico Reconstruction Administration was directed by Ernest Gruening from 1935 to 1937.

Reform: (NIRA)

Business, labor, and government cooperation

Besides programs for immediate 'relief' the New Deal embarked quickly on an agenda of long-term 'reform' aimed at avoiding another depression. The New Dealers responded to demands to inflate the currency by a variety of means. Another group of reformers sought to build consumer and farmer co-ops as a counterweight to big business. The consumer co-ops did not take off, but the Rural Electrification Administration used co-ops to bring electricity to rural areas. (As of 2007, many still operate.)

Roosevelt realized that these initial actions were nothing but short-term solutions, and that more comprehensive government programs would be necessary. In the roughly three years between the Great Crash and Roosevelt's First Hundred Days, the industrial economy had been suffering from a vicious cycle of deflation. Since 1931, the U.S. Chamber of Commerce, then and now the voice of the nation's organized business, had been urging the Hoover administration to adopt an anti-deflationary scheme that would permit trade associations to cooperate in stabilizing prices within their industries. While existing antitrust laws clearly forbade such practices, organized business found a receptive ear in the Roosevelt administration.

The Roosevelt administration, packed with reformers aspiring to forge all elements of society into a cooperative unit (a reaction to the worldwide specter of business-labor "class struggle"), was fairly amenable to the idea of cooperation among producers.

The Roosevelt administration insisted that business would have to ensure that the incomes of workers would rise along with their prices. The product of all these impulses and pressures was the National Industrial Recovery Act (NIRA) which was passed by Congress in June 1933. The NIRA established the National Planning Board, also called the National Resources Planning Board (NRPB), to assist in planning the economy by providing recommendations and information. Fredric A. Delano was appointed head of the NRPB.

The NIRA guaranteed to workers the right of collective bargaining and helped spur some union organizing activity, but much faster growth of union membership came after the 1935 Wagner Act. The NIRA established the National Recovery Administration (NRA), which attempted to stabilize prices and wages through cooperative "code authorities" involving government, business, and labor. The NRA included a multitude of regulations imposing the pricing and production standards for all sorts of goods and services. Some ridiculed it as the "National Run Around." Most economists were dubious because it was based on fixing prices to reduce competition.[37] Historian Jim Power, in FDR's Folly says that the above-market wage rates dictated by the NRA made it more expensive for employers to hire people, and therefore unnecessarily maintained high unemployment and prolonged the Depression.

To prime the pump and cut unemployment, the NIRA created the Public Works Administration (PWA), a major program of public works. From 1933 to 1939 PWA spent $6 billion with private companies to build 34,500 projects, many of them quite large.

The NRA "Blue Eagle" campaign

New Deal economists argued that cut-throat competition had hurt many businesses and that with prices having fallen 20% and more, "deflation" exacerbated the burden of debt and would delay recovery. They rejected a strong move in Congress to limit the workweek to 30 hours. Instead their remedy, designed in cooperation with the Chamber of Commerce (representing big business), was the NIRA. It included billions in stimulus funds for the PWA to spend, and sought to raise prices, give more bargaining power for unions (so the workers could purchase more) and reduce harmful competition.[38] At the center of the NIRA was the National Recovery Administration (NRA), headed by former General Hugh Samuel Johnson, who had been a senior economic official in World War I. Johnson called on every business establishment in the nation to accept a stopgap "blanket code": a minimum wage of between 20 and 45 cents per hour, a maximum workweek of 35 to 45 hours, and the abolition of child labor. Johnson and Roosevelt contended that the "blanket code" would raise consumer purchasing power and increase employment.[39]

To mobilize political support for the NRA, Johnson launched the "NRA Blue Eagle" publicity campaign to boost what he called "industrial self-government." The NRA brought together leaders in each industry to design specific sets of codes for that industry; the most important provisions were anti-deflationary floors below which no company would lower prices or wages, and agreements on maintaining employment and production. In a remarkably short time, the NRA announced agreements from almost every major industry in the nation. By March 1934, industrial production was 45% higher than in March 1933.[40] According to some economists, the NRA increased the cost of doing business by forty percent.[41] Donald Richberg, who soon replaced Johnson as the head of the NRA said:

There is no choice presented to American business between intelligently planned and uncontrolled industrial operations and a return to the gold-plated anarchy that masqueraded as "rugged individualism."...Unless industry is sufficiently socialized by its private owners and managers so that great essential industries are operated under public obligation appropriate to the public interest in them, the advance of political control over private industry is inevitable.[42]

By the time NRA ended in May 1935, industrial production was 55% higher than in May 1933. On May 27, 1935, the NRA was found to be unconstitutional by a unanimous decision of the U.S. Supreme Court in the case of Schechter v. United States. On that same day, the Court unanimously struck down the Frazier-Lemke Act portion of the New Deal as unconstitutional. Some libertarians such as Richard Ebeling see these and other rulings striking down portions of the New Deal as preventing the U.S. economic system from becoming a planned economy corporate state.[43]

Employment in private sector factories recovered to the level of the late 1920s by 1937 (see chart 2), but did not grow much bigger until the war came; during the war manufacturing employment leaped from 11 million in 1940 to 18 million in 1943.

Second New Deal

Second New Deal Enacted 1935

In the spring of 1935, responding to the setbacks in the Court, a new skepticism in Congress, and the growing popular clamor for more dramatic action, the administration proposed or endorsed several important new initiatives. Historians refer to them as the "Second New Deal" and note that it was more radical, more pro-labor and anti-business than the "First New Deal" of 1933–34. The National Labor Relations Act, also known as the Wagner Act, revived and strengthened the protections of collective bargaining contained in the original (and now unconstitutional) NIRA. The result was a tremendous growth of membership in the labor unions comprising the American Federation of Labor. Labor thus became a major component of the New Deal political coalition.

Roosevelt nationalized unemployment relief through the Works Progress Administration (WPA), headed by close friend Harry Hopkins. It created hundreds of thousands of low-skilled blue collar jobs for unemployed men (and some for unemployed women and white collar workers). Applicants for WPA jobs did not have to be Democrats, but their foremen quickly explained that Roosevelt created their paychecks and that conservative Republicans wanted to abolish the program.

The National Youth Administration was the semi-autonomous WPA program for youth. Its Texas director, Lyndon Baines Johnson, later used the NYA as a model for some of his Great Society programs in the 1960s.

In the very long run, the most important program of 1935, and perhaps the New Deal as a whole, was the Social Security Act, which established a system of retirement pensions for people in the industrial sector (not including farmers or household workers) and unemployment insurance, as well as welfare benefits for poor families and the handicapped. It established the framework for the U.S. welfare system. Roosevelt insisted that it should be funded by payroll taxes rather than from the general fund; he said, "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program." With the Unified budget Act the Social Security Trust Fund was used to finance the Vietnam War and Great Society programs. The original payroll withholding was 1% of the workers gross income, with Roosevelt pledging it would never exceed 3%. Today it 6.2% and 12.4% for self-employed workers - one sixth of a workers lifetime earnings when Medicare is factored in. The withholding is on the first dollar of income with no deductions or exemptions allowed to offset contributions, and a worker was no claim or control over the assets in his account. If a worker dies before retirement, his estate has no claim on his lifetime contributions.

The Social Security Act of 1935, which provided a safety net for millions of workers by guaranteeing them an income after retirement, excluded from coverage about half the workers in the American economy. Among the excluded groups were agricultural and domestic workers — job categories traditionally filled by Black workers.

Social Security remains by far the single largest program driving the growth of National Debt; since it is value of labor that is withheld, the more people employed, the higher wages are paid. the more hours worked including overtime, all is added to the national debt as a promise by the federal government repay at some future date. And given that it is labor driving the creation of federal debt, the national debt cannot be paid down by labor. This is referred to as the "structural flaw" in the original Social Security Act. Further, FDR's assertion that "no damn politician can ever scrap my social security program" would not withstand a Constitutional challenge. In American people are born free, and no politician can the pledge that some future Congress elected by free citizens can refuse to honor the promises to pay seniors given that benefits are paid out from current workers earnings on a "pay as you go" basis, and are not held in a trust fund.

One of the last New Deal agencies was the United States Housing Authority, created in 1937 with some Republican support to abolish slums.

Defeat: Court Packing and Executive Reorganization

Roosevelt, however, emboldened by the triumphs of his first term, set out in 1937 to consolidate authority within the government in ways that provoked powerful opposition. Early in the year, he asked Congress to expand the number of justices on the Supreme Court so as to allow him to appoint members sympathetic to his ideas and hence tip the ideological balance of the Court. This proposal provoked a storm of protest.

In the long run the Court shifted to the Left. Justice Owen Roberts, switched positions and began voting to uphold New Deal measures, effectively creating a liberal majority in West Coast Hotel Co. v. Parrish and National Labor Relations Board v. Jones & Laughlin Steel Corporation thus departing from the Lochner v. New York era and giving the government more power in questions of economic policies. Journalists called this change "the switch in time that saved nine." Recent scholars have noted that since the vote in Parrish took place several months before the court-packing plan was announced, other factors, like evolving jurisprudence, must have contributed to the Court's swing. The opinions handed down in Spring 1937, favorable to the government, also contributed to the downfall of the plan. In any case, the "court packing plan," as it was known, did lasting political damage to Roosevelt and was finally rejected by Congress in July.

FDR already has too much power & demands more

At about the same time, the administration proposed a plan to reorganize the executive branch in ways that would significantly increase the president's control over the bureaucracy. Like the Court-packing plan, executive reorganization garnered opposition from those who feared a "Roosevelt dictatorship" and it failed in Congress; a watered-down version of the bill finally won passage in 1939.

Attacks Right and Left

Historians on the Left, like Conkin (1967), bemoan that FDR rescued capitalism just when the opportunity was at hand to nationalize banking, railroads and other industries. Liberal historians like Sitkoff argue that Roosevelt restored hope and self-respect to tens of millions of desperate people, built labor unions, upgraded the national infrastructure and saved capitalism in his first term when he could have destroyed it and easily nationalized the banks and the railroads.

Historians on the right like Folsom complain that FDR enlarged the powers of the federal government, built up labor unions, slowed long-term economic growth, and weakened the business community.[44]

A 1936 cartoon shows the GOP building its platform from the conservative planks abandoned by the Democrats.

Historians on the Left have denounced the New Deal as a conservative phenomenon that let slip the opportunity to radically reform capitalism. Since the 1960s, "New Left" historians have been among the New Deal's harsh critics. (For a list of relevant works, see the list of suggested readings appearing toward the bottom of the article.) New Left historian Barton J. Bernstein, in a 1968 essay, compiled a chronicle of missed opportunities and inadequate responses to problems. The New Deal may have saved capitalism from itself, Bernstein charged, but it had failed to help—and in many cases actually harmed—those groups most in need of assistance. Conkin (1967) similarly chastised the government of the 1930s for its policies toward marginal farmers, for its failure to institute sufficiently progressive tax reform, and its excessive generosity toward select business interests. From the far-Left Howard Zinn, in 1966, criticized the New Deal for working actively to actually preserve the worst evils of capitalism.

Since the 1970s research on the New Deal has been less interested in the question of whether the New Deal was a "conservative," "liberal" or "revolutionary" phenomenon than in the question of constraints within which it was operating. Political sociologist Theda Skocpol, in an influential series of articles, has emphasized the issue of "state capacity" as an often-crippling constraint. Ambitious reform ideas often failed, she argued because of the absence of a government bureaucracy with significant strength and expertise to administer them. Other more recent works have stressed the political constraints that the New Deal encountered. Both in Congress and among certain segments of the population conservative inhibitions about government remained strong; thus some scholars have stressed that the New Deal was not just a product of its liberal backers, but also a product of the pressures of its conservative opponents.

Government Role: balance labor, business and farming

New Deal saw the government as an umpire or balancing force among business, labor and farming, with consumers perhaps having a role too. This approach became known as "interest group pluralism", and emphasized the role of leaders bargaining with each other and with government agencies. Congress played less of a role in New Deal thought (to the annoyance of many Congressmen.)

By the end of the 1930s, business found itself competing for influence with an increasingly powerful labor movement, one that was engaged in mass mobilization and sometimes militant action; with an organized agricultural economy, and occasionally with aroused consumers. The New Deal accomplished this by creating a series of state institutions that greatly, and permanently, expanded the role of the federal government in American life. The government was now committed to providing at least minimal assistance to the poor and unemployed; to protecting the rights of labor unions; to stabilizing the banking system; to building low-income housing; to regulating financial markets; to subsidizing agricultural production; and to doing many other things that had not previously been federal responsibilities.

Thus, perhaps the strongest legacy of the New Deal, in other words, was to make the federal government a protector of interest groups and a supervisor of competition among them. As a result of the New Deal, political and economic life became politically more competitive than before, with workers, farmers, consumers, and others now able to press their demands upon the government in ways that in the past had been available only to the corporate world. Hence the frequent description of the government the New Deal created as the "broker state," a state brokering the competing claims of numerous groups. If there was more political competition, there was less market competition. Farmers were not allowed to sell for less than the official price. The transportation industry (especially airlines, trucking and railroads) was tightly regulated so that every firm had a guaranteed market and management and labor had high profits and high wages, all at the cost of high prices and much inefficiency. Quotas in the oil industry were fixed by the Railroad Commission of Texas with the federal Connally Hot Oil Act of 1935[45] guaranteeing that illegal "hot oil" would not be sold. To the New Dealers, the free market meant "cut-throat competition" and they considered that evil. Not until the 1970s and 1980s would most of the New Deal regulations be relaxed.

Thus, it did not transform American capitalism in any genuinely radical way. Except in the field of labor relations, corporate power remained nearly as free from government regulation in 1939 as it had been in 1933, but that changed dramatically during the war, as Washington took control over wage rates, prices, and allocation of raw materials, and sent military officers into munitions plants. All the relief programs were closed down during the war, but one major program survived—Social Security—to become the liberal hallmark of the New Deal into the 21st century.

Stagnation of the economy: Negative supply side

Hugo black kkk.jpeg

Supply side economics[46] can have a goal of expanding the supply of labor and capital, as typified the Ronald Reagan administration in the 1980s. But it can also be the reverse or "negative supply side," trying to reduce the unemployed, for example, by moving millions of people out of the labor force, as by relief agencies (CCC, WPA etc.), retirement (Social Security, Old Age pensions) or (staring in 1940) the military draft.\


Senator Hugo Black's 30-hour bill, a favorite panacea of the American Federation of Labor (AFL), did not pass, but its substitute, the National Industrial Recovery Act (NIRA), sought recovery through minimum wages and the reduction of hours. The NRA did reduce the total number of hours worked in the nation, and thus reduced the total GNP and average real income. The Civilian Conservation Corps (CCC) kept several hundred thousand young men at a time off the labor market. Child labor codes in the NRA effectively removed youths under sixteen from the labor market, and home work was drastically curtailed. Public opinion strongly supported federal and state efforts, echoed by many local governments, school boards, utilities, and other large employers, to prevent wives from working if the husband (the "breadwinner") had a job. Alien Mexican families were given one-way rail tickets back home. The Social Security program did not have much effect on older people until the 1950s, but meanwhile railroad retirement and old age assistance for the poor who stopped looking for jobs reduced the supply of labor. As late as 1937, Roosevelt's aides were drafting laws to shorten the work week to thirty-five hours, require premium pay for overtime, and fix the minimum hourly wage at 80 cents (far above the prevailing 63-cent rate). They failed, and the much watered down Fair Labor Standards Act of 1938 established a 25-cent-per-hour minimum wage which covered 43 percent of the nation's wage earners. The final, and successful supply-side remedy was the draft, and after 1940 the increase in military personnel paralleled the reduction of unemployment.

The problem with the supply-side remedies was that they cut output as much as input, made the nation poorer, slowed long-term growth, distorted personal choices, and increased unemployment.


The New Dealers promoted negative supply side because they believed in the theory of economic maturity developed by Alvin Hansen to the effect that the American economy by the late 1920s was fully grown and would not be growing any more. Recovery meant return to the levels of the 1920s, but it seemed unlikely there would be much future growth. There seemed to be no new industries—the most important new industry in the 1930s was radio, but it employed few people. Therefore, pro-growth solutions, New Dealers argued, were a mistake, especially because they gave a lot of leeway to big business.[47]

The most prominent spokesman for "economic maturity" was Harvard economist Alvin Hansen (1887-1975)[48] who called it "secular stagnation." In the late 1930s Hansen argued that "secular stagnation" had set in, so that the American economy would never grow rapidly again, because all the growth ingredients had played out, including technological innovation and population growth. The only solution, he argued, was constant deficit spending by the federal government. Critics, such as George Terborgh, attacked Hansen as a pessimist and defeatist for advancing his secular stagnation thesis. Hansen replied that secular stagnation was just another name for Keynes's underemployment equilibrium. However, the sustained economic growth beginning in 1940 undercut Hansen's predictions and his stagnation model was forgotten.[49]

Conservative opposition

Conservative economists at the time opposed this idea, most notably Raymond Moley (a widely read columnist), consultants George Terborgh[50] and Wilfrid I. King,[51] and professors Gottfried Haberler, Frank Knight, Oskar Morgenstern, Henry Simons, Joseph Schumpeter, and William Fellner.[52]

African Americans

The New Deal set up numerous agencies to help impoverished farmers, but in the long run they had to move to the cities to become better off. Many leading New Dealers, including Eleanor Roosevelt, Harold L. Ickes, Aubrey Williams and Harry Hopkins worked hard to ensure Blacks received at least 10% of welfare assistance payments. Economic uplift was one thing but political revolution was another: the New Deal did not try to undercut segregation or change the second class political status of Blacks in the South. Roosevelt did appoint an unprecedented number of African Americans to second-level positions in his administration that collectively were called the Black Cabinet, perhaps due to the influence of Eleanor Roosevelt, a vocal advocate of easing discrimination. Roosevelt and Hopkins worked with big city mayors to welcome Black political organizations that made the transition from the GOP to the Democratic party in 1934–36.

The WPA, NYA, and CCC relief programs allocated 10% of their budgets to blacks (who comprised about 10% of the total population, and 20% of the poor). They operated separate all-black units with the same pay and conditions as white units. The African American community responded favorably, so that by 1936 the majority who voted (usually in the North) were voting Democrat. This was a sharp realignment from 1932, when most African Americans preferred the Republican ticket. The New Deal thus established a political alliance between African Americans and the Democrat Party that survives into the 21st century.

Some liberal historians argue the New Deal laid the ground work for black breakthroughs during World War II, the civil rights movement and the Great Society of the 1960s. Militant African Americans insist that the Civil Rights movement owed everything to black activists, and very little to the New Deal. Note that the New Deal was especially beneficial to white ethnic minorities, who responded with 80-90% of their votes for Roosevelt's reelection.

Double dip recession

Double dip recession: an economic downturn within an economic downturn before the economy reaches full recovery.

The Roosevelt administration was under assault during FDR's second term, which presided over a new dip in the Great Depression in the fall of 1937 that continued through most of 1938. Production declined sharply, as did profits and employment. The Government's own statistics were showing that 23.8% of the Workforce was either unemployed, or underemployed. The term for the human suffering at the hands of government planners was "wastage." According to the Brain Trusters own statistics, of "100 Per Cent Manpower," 23.8 were "Per Cent Wastage." [53] After four years of "government solutions," contemporaneous reports were stating "much of the unemployment in 1937 was due to a decrease in the number of jobs available." [54]

Keynesian economists speculated that this was a result of a premature effort to curb government spending and balance the budget, while conservatives said it was caused by attacks on business and by the huge strikes caused by the organizing activities of the CIO and the American Federation of Labor (AFL).

Roosevelt rejected the advice of Morgenthau to cut spending, and decided big business was trying to ruin the New Deal by causing another depression that voters would react against by voting Republican. It was a "capital strike" said Roosevelt, and he ordered the FBI to look for a criminal conspiracy (they found none). Roosevelt moved left and unleashed a rhetorical campaign against monopoly power, which was cast as the cause of the new crisis. Ickes attacked automaker Henry Ford, steelmaker Tom Girdler, and the super rich "Sixty Families" who supposedly comprised "the living center of the modern industrial oligarchy which dominates the United States." Left unchecked, Ickes warned, they would create "big-business Fascist America -- an enslaved America." The president appointed Robert Jackson as the aggressive new director of the antitrust division of the Justice Department, but this effort lost its effectiveness once World War II began and big business was urgently needed to produce war supplies. [Kennedy p 352]

But the administration's other response to the 1937 deepening of the Great Depression had more tangible results. Ignoring the vitriolic pleas of the Treasury Department and responding to the urgings of the converts to Keynesian economics and others in his administration, Roosevelt embarked on an antidote to the depression, reluctantly abandoning his efforts to balance the budget and launching a $5 billion spending program in the spring of 1938, an effort to increase mass purchasing power. The New Deal had in fact engaged in deficit spending since 1933, but it was apologetic about it. The debt did NOT rise as a proportion of GDP, but did rise in terms of dollars. Now they had a theory to justify what they were doing. Roosevelt explained his program in a fireside chat in which he explained it was up to the government to "create an economic upturn" by making "additions to the purchasing power of the nation." He was opposed by fiscal conservatives who thought all government spending was inefficient and generated corruption.

Business-oriented observers explained the recession and recovery in very different terms from the Keynesians. They argued that the New Deal had been very hostile to business expansion in 1935–37, had encouraged massive strikes which had a negative impact on major industries such as automobiles, and had threatened massive anti-trust legal attacks on big corporations. All those threats diminished sharply after 1938. For example, the antitrust efforts fizzled out without major cases. The CIO and AFL unions started battling each other more than corporations, and tax policy became more favorable to long-term growth.

The 1937 - 1943 Depression was longer in duration than the 1929 - 1932 crash, the result of massive government intrusion into the private economy which stunted growth. Manufacturing demand stimulated by WWII led to the 1943-1949 recovery, where finally, in 1949, the New York Stock Exchange recovered to the level it had been at 1929.

Many New Deal reforms were unpopular and criticized. In 1948 President Harry Truman ran on a reformed New Deal platform called the Fair Deal, which was regarded largely as an admission the New Deal had not been fair.

World War II and the end of the New Deal

Prosperity had returned by 1938 for most people—but not for the bottom third, who remained plagued by structural unemployment. The impact of war mobilization and massive war spending doubled the GNP. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output as an expression of patriotism. Patriotism drove most people to voluntarily work overtime and give up leisure activities to make money after so many hard years. Patriotism meant that people accepted rationing and price controls for the first time. "Cost-plus" pricing in munitions contracts guaranteed that businesses would make a profit no matter how many mediocre workers they employed, no matter how inefficient the techniques they used. The demand was for a vast quantity of war supplies as soon as possible, regardless of cost. Business hired every person in sight, even driving sound trucks up and down city streets begging people to apply for jobs. New workers were needed to replace the 12 million working-age men serving in the military. These events magnified the role of the federal government in the national economy. In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditure tripled, and Roosevelt's critics charged that he was turning America into a socialist state. However, spending on the New Deal was far smaller than on the war effort.

In the first peacetime year of 1946, federal spending still amounted to $62 billion, or 30% of GNP. Wartime spending and other measures were able to provide an enormous output. Between 1939 and 1944, the peak of wartime production, the nation's total output almost doubled. This, along with the conscription and removal of soldiers, meant that civilian unemployment plummeted—from 14% in 1940 to less than 2% in 1943 as the labor force grew by ten million. Millions of farmers left marginal operations, students quit school, and housewives returned to the labor force. The war economy was not run on the basis of free enterprise, but was the result of government/business cooperation, with government bankrolling business.

A major result of the full employment at high wages was a sharp, permanent decrease in the level of income inequality. The gap between rich and poor narrowed dramatically in the area of nutrition, because food rationing and price controls guaranteed a reasonably priced diet to everyone. Large families that had been poverty-stricken in the 1930s had four or five or more workers, and shot to the top one-third income bracket. Overtime made for huge paychecks in the munitions factories; white collar workers were fully employed too, but they did not receive overtime and their salary scale was no longer much higher than the blue collar wage scale.

Economist Robert Higgs (1987), argues that the War did not end the Great Depression. Rather, a return to normality after the war, as the government relaxed wage controls, price controls, capital controls, reduced tariffs and other trade barriers, and eliminated the rationing of goods and the relaxing of Federal control over American industries, ended it.

Conflicting interpretation of the New Deal economic policies

Depression Statistics

major economic indicators, 1929-52

Economic indicators show the American economy reached nadir in summer 1932 to February 1933, then began recovering until the Roosevelt recession of 1937–1938. Thus the Federal Reserve Industrial Production Index hit its low of 52.8 on 1932-07-01 and was practically unchanged at 54.3 on 1933-03-01; however by 1933-07-01, it reached 85.5 (with 1935-39 = 100, and for comparison 2005 = 1,342).[55]

In Roosevelt's twelve years in office the economy had an 8.5% compound annual growth of GDP,[56] the highest growth rate in the history of any industrial country,[57] however, recovery was slow—by 1939 GDP per adult was still 27% below trend.[58] And, throughout the New Deal the median joblessness rate was 17.2 percent and never went below 14 percent.

Table 1: Statistics[59] 1929 1931 1933 1937 1938 1940
Real Gross National Product (GNP) (1) 101.4 84.3 68.3 103.9 96.7 113.0
Consumer Price Index (2) 122.5 108.7 92.4 102.7 99.4 100.2
Index of Industrial Production (2) 109 75 69 112 89 126
Money Supply M2 ($ billions) 46.6 42.7 32.2 45.7 49.3 55.2
Exports ($ billions) 5.24 2.42 1.67 3.35 3.18 4.02
Unemployment (% of civilian work force) 3.1 16.1 25.2 13.8 16.5 13.9

(1) in 1929 dollars

(2) 1935-39 = 100

Relief Statistics

Table 3: Families on Relief 1936-41:

Prolonged/Worsened the Depression

A 1995 survey of economic historians and economists asked "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." Of the economists 27% agreed and 51% disagreed. Of the economic historians, only 6% agreed and 74% disagreed. (the rest were in the partly agree/disagree group).[60]

The minority view is represented by Harold L. Cole and Lee E. Ohanian who conclude that the "New Deal labor and industrial policies did not lift the economy out of the Depression as President Roosevelt and his economic planners had hoped," but that the "New Deal policies are an important contributing factor to the persistence of the Great Depression." They conclude that the New Deal "cartelization policies are a key factor behind the weak recovery." They say that the "abandonment of these policies coincided with the strong economic recovery of the 1940s."[58] Lowell E. Gallaway and Richard K. Vedder conclude that the "Great Depression was very significantly prolonged in both its duration and its magnitude by the impact of New Deal programs." They argue that without Social Security, work relief, unemployment insurance, and especially without the labor unions, business would have hired more workers and the unemployment rate would have been lower.[61] Few economists or economic historians have agreed with these speculations. The New Deal years 1933-36 (or indeed the FDR years 1933–45) showed the highest growth rates in the history of the American economy.

Unemployment continues

Darby counts WPA workers as employed; Lebergott as unemployed

source: Historical Statistics US (1976) series D-86; Smiley 1983[62]

The New Deal tried public works, farm subsidies and other devices to reduce unemployment, but FDR never completely gave up trying to balance the budget. Unemployment remained high throughout the New Deal years; business simply would not hire more people, especially the low skilled and supposedly "untrainable" men who had been unemployed for years and lost any job skill they once had. Keynesians later argued that by spending vastly more money—using fiscal policy—the government could provide the needed stimulus through the "multiplier" effect. Critics of Keynesianism said that would just take money out of the private sector, causing a negative multiplier effect there. However, no economist has written a full-scale Keynesian analysis of the depression, so it is difficult to evaluate how that model would work.

Unemployment peaked in 1933, at 24.9%, and by 1941 unemployment had subsided to 9.9%, which was near the 1930 level of 8.9%. [4] Unemployment increased 163% over the average of what it had been in 1930 by the third year of the New Deal. By contrast, recovery was well underway in Great Britain, with an increase of only 1.1%.

In recent years more influential among economists has been the monetarist interpretation of Milton Friedman, which did include a full-scale monetary history of what he calls the "Great Contraction." Friedman concentrated on the failures before 1933, and in his memoirs said the relief programs were an appropriate response. From 1935 to 1943, Friedman was himself a Keynesian who was (1941–43) an official spokesman for the New Deal before Congress; he did not at that time criticize any New Deal or Federal Reserve policies.

Apart from building up labor unions, the New Deal did not substantially alter the distribution of power within American capitalism.

Keynes visited to the White House in 1934 to urge President Roosevelt to do more deficit spending. Roosevelt complained to Labor Secretary Frances Perkins, "He left a whole rigmarole of figures--he must be a mathematician rather than a political economist." That is, Keynes had an abstract theory but no useful suggestions about what to do.

Although Hopkins denied saying "Spend-Spend-Spend; Tax-Tax-Tax; Elect-Elect-Elect," conservative critics thought it fit the New Deal very well
Table 2: Unemployment (% labor force)
Year Lebergott Darby
1933 24.9 20.6
1934 21.7 16.0
1935 20.1 14.2
1936 16.9 9.9
1937 14.3 9.1
1938 19.0 12.5
1939 17.2 11.3
1940 14.6 9.5
1941 9.9 8.0
1942 4.7 4.7
1943 1.9 1.9
1944 1.2 1.2
1945 1.9 1.9

Fiscal Conservatism

Fiscal conservatism was a key component of the New Deal, as Zelizer (2000) demonstrates. It was supported by Wall Street and local investors and most of the business community; mainstream academic economists believed in it, as apparently did the majority of the public. Conservative southern Democrats, who favored balanced budgets and opposed new taxes, controlled Congress and its major committees. Even liberal Democrats at the time regarded balanced budgets as essential to economic stability in the long run, although they were more willing to accept short-term deficits. Public opinion polls consistently showed public opposition to deficits and debt. Throughout his terms, Roosevelt recruited fiscal conservatives to serve in his administration, most notably Lewis Douglas the Director of Budget from 1933 to 1934, and Henry Morgenthau, Jr., Secretary of the Treasury from 1934 to 1945. They defined policy in terms of budgetary cost and tax burdens rather than needs, rights, obligations, or political benefits. Personally, the president embraced their fiscal conservatism. Politically, he realized that fiscal conservatism enjoyed a strong wide base of support among voters, leading Democrats, and businessmen. On the other hand, there was enormous pressure to act–and spending money on high visibility programs attracted Roosevelt, especially if it tied millions of voters to him, as did the WPA.

National Debt as a percentage of GNP climbs from 20% to 40% as Hoover begins relief efforts with the Reconstruction Finance Corporation and levels off during the New Deal; soars during WW2 from Historical Statistics US (1976)

Douglas proved too inflexible, and quit in 1934. Morgenthau made it his highest priority to stay close to Roosevelt, no matter what. Douglas' position, like many of the Old Right was grounded in a basic distrust of politicians and the deeply ingrained fear that government spending always involved a degree of patronage and corruption that offended his Progressive sense of efficiency. The Economy Act of 1933, passed early in the Hundred Days, was Douglas' great achievement. It reduced federal expenditures by $500 million, to be achieved by reducing veterans’ payments and federal salaries. Douglas cut government spending through executive orders that cut the military budget by $125 million, $75 million from the Post Office, $12 million from Commerce, $75 million from government salaries, and $100 million from staff layoffs. As Freidel concludes, "The economy program was not a minor aberration of the spring of 1933, or a hypocritical concession to delighted conservatives. Rather it was an integral part of Roosevelt's overall New Deal."[63] Revenues were so low that borrowing was necessary (only the richest 3% paid any income tax before 1942.) Douglas, therefore, hated the relief programs, which he said reduced business confidence, threatened the government's future credit, and had the "destructive psychological effects of making mendicants of self-respecting American citizens."[64] Roosevelt was pulled toward greater spending by Hopkins and Ickes, and as the 1936 election approached he decided to gain votes by attacking big business.

Morgenthau shifted with FDR, but at all times tried to inject fiscal responsibility; he deeply believed in balanced budgets, stable currency, reduction of the national debt, and the need for more private investment. The Wagner Act met Morgenthau's requirement because it strengthened the party's political base and involved no new spending. In contrast to Douglas, Morgenthau accepted Roosevelt's double budget as legitimate–that is a balanced regular budget, and an “emergency” budget for agencies, like the WPA, PWA and CCC, that would be temporary until full recovery was at hand. He fought against the veterans’ bonus until Congress finally overrode Roosevelt's veto and gave out $2.2 billion in 1936. His biggest success was the new Social Security program; he managed to reverse the proposals to fund it from general revenue and insisted it be funded by new taxes on employees. It was Morgenthau who insisted on excluding farm workers and domestic servants from Social Security because workers outside industry would not be paying their way.[65]

Deficits held relatively constant throughout the 1930s at about 40% of the GDP.[66]

Fascism and New Deal

See also: Fascism and the New Deal

The term "fascism" in the 21st century has very strong connotations of mass murder and death camps, however, in the 1930s it meant the planned economy and corporativism exemplified by the economic plans of Benito Mussolini in Italy. And, comparisons have been made between the economic systems of Fascist Italy and the New Deal programs. Communists, classical liberals, conservatives, and Herbert Hoover used the term fascism in that manner at that time. Likewise, modern-day paleoconservatives argue that the New Deal was a major milestone in the rise of America's managerial state.

Journalist John T. Flynn, in his 1944 book As We Go Marching, said that "the New Dealers...began to flirt with the alluring pastime of reconstructing the capitalist system...and in the process of this new career they began to fashion doctrines that turned out to be the principles of fascism." Former President Herbert Hoover argued that some New Deal programs were "fascist," and that there was a presidential dictatorship. [Memoirs 3:420]

"Among the early Roosevelt fascist measures was the National Industry Recovery Act (NRA) of June 16, 1933 .... These ideas were first suggested by Gerald Swope (of the General Electric Company)....[and] the United States Chamber of Commerce. During the campaign of 1932, Henry I. Harriman, president of that body, urged that I agree to support these proposals, informing me that Mr. Roosevelt had agreed to do so. I tried to show him that this stuff was pure fascism; that it was a remaking of Mussolini's "corporate state" and refused to agree to any of it. He informed me that in view of my attitude, the business world would support Roosevelt with money and influence. That for the most part proved true."

Whatever Hoover was told, Roosevelt had not agreed to any such plan. In 1934, Roosevelt himself warned his "fireside chat" radio audiences against linguistic confusion. Some people, he said:

will try to give you new and strange names for what we are doing. Sometimes they will call it 'Fascism,' sometimes 'Communism,' sometimes 'Regimentation,' sometimes 'Socialism.' But, in so doing, they are trying to make very complex and theoretical something that is really very simple and very practical. . . . Plausible self-seekers and theoretical die-hards will tell you of the loss of individual liberty. Answer this question out of the facts of your own life. Have you lost any of your rights or liberty or constitutional freedom of action and choice?[67]

In September 1934 Roosevelt defended a more powerful national government as he believed was necessary to control the economy, by quoting conservative Republican Elihu Root:

The tremendous power of organization [Root had said] has combined great aggregations of capital in enormous industrial establishments . . . so great in the mass that each individual concerned in them is quite helpless by himself. . . . The old reliance upon the free action of individual wills appears quite inadequate. . . . The intervention of that organized control we call government seems necessary. . . . Men may differ as to the particular form of governmental activity with respect to industry or business, but nearly all are agreed that private enterprise in times such as these cannot be left without assistance and without reasonable safeguards lest it destroy not only itself but also our process of civilization.[67]

One historian remarks, "What Fascist corporatism and the New Deal had in common was a certain amount of state intervention in the economy. Beyond that, the only figure who seemed to look on Fascist corporatism as a kind of model was Hugh Johnson, FDR's head of the National Recovery Administration."[68] Johnson was “an admirer of Mussolini’s National Corporatist system in Italy and he drew upon the Italian experience in formulating the New Deal.”[69] Walker F. Todd, research fellow at the American Institute for Economic Research, agrees that Johnson “did admire greatly what Mussolini appeared to have done,” identifying the NRA as a “thoroughly corporativist” idea.[70] According to Jonah Goldberg, Johnson displayed a portrait of Il Duce in his NRA office and actually distributed a memo at the 1932 Democratic Convention proposing that the entire Congress and Supreme Court be sent into temporary exile and that "FDR become a Mussolini-like dictator.”[71] In his retirement speech, Johnson invoked what he called the “shining name” of Mussolini.[72] Johnson was said to carry around with him a copy of Raffaello Viglione's pro-Mussolini book,[73] The Corporate State, and presented a copy to Perkins.[74]

Donald Richberg after a series of scandals replaced General Hugh Johnson as head of NRA and speaking before a Senate committee said "A nationally planned economy is the only salvation of our present situation and the only hope for the future."[13] Historians such as Hawley (1966) have examined the origins of the NRA in detail, claiming the main inspiration came from Ku Klux Klan member Hugo Black and Sen. Robert F. Wagner and from American business leaders such as the Chamber of Commerce. The main model was Woodrow Wilson's War Industries Board, in which Johnson had been involved.

The legacies of the New Deal

The New Deal was the inspiration for Lyndon B. Johnson's Great Society in 1960s. Johnson (on right) headed the Texas NYA and was elected to Congress in 1938.

Some economists argue that although the New Deal did not end the depression, all in all it helped to prevent the economy from decaying further by increasing the regulatory functions of the federal government in ways that helped stabilize previous trouble areas of the economy: the stock market, the banking system, and others. Others argue that it worsened the depression. All analysts agree the New Deal produced a new political coalition that sustained the Democrat Party as the majority party in national politics for more than a generation after its own end.

Roosevelt's 12 years in office saw a dramatic increase in the power of the federal government as a whole. Roosevelt also established the presidency as the preeminent center of authority within the federal government. By creating a large array of agencies protecting various groups of citizens—workers, farmers, and others—who suffered from the crisis, enabling them to challenge the powers of the corporations, the Roosevelt administration generated a set of political ideas—known to later generations as New Deal liberalism—that remained a source of inspiration and controversy for decades and that helped shape the next great experiment in liberal reform, the Great Society of the 1960s. The wartime FEPC executive orders that forbade job discrimination against African Americans, women and ethnic groups was a major breakthrough that brought better jobs and pay to millions of minority Americans. Historians usually treat FEPC as part of the war effort and not part of the New Deal itself.

"New Deal" as Political Metaphor

Since 1933 politicians and pundits have often called for a "new deal" regarding this or that political object. That is, they demand a completely new, large-scale approach to a project. As Arthur A. Ekirch Jr. (1971) has shown, the New Deal stimulated utopianism in American political and social thought on a wide range of issues.

In Canada, Conservative Prime Minister Richard B. Bennett in 1935 proposed a "new deal" of regulation, taxation, and social insurance that was a copy of the American program; Bennett's proposals were not enacted and he was defeated for reelection in October 1935.

In accordance with the rise of the use of U.S. political phraseology in Britain, the Labour Party Government has termed some of its employment programs 'New Deal'.

Brain trust

Roosevelt gathered around himself informal advisors, mostly university professors, dubbed by the media the Brain Trust. A key advisor was Raymond Moley, who by 1936 broke with Roosevelt and provided the most important conservative critique.

Main programs

Just as Roosevelt expressed to Ambassador Long his admiration of Mussolini, Long in turn reported to Tugwell regarding Fascist economics, “Your mind runs along these lines.... It may have some bearing on the code work under N.R.A.”[75] The NRA—“the New Deal’s attempt to bring to America the substance of Mussolini’s corporativism”[76]—was established by the National Industrial Recovery Act (NIRA) of 1933--centerpiece of the New Deal legislation—which was “similar to experiments being carried out by the fascist dictator Benito Mussolini in Italy and by the Nazis in Adolf Hitler's Germany,” according to John A. Garraty,[77] president of the Society of American Historians.[78] "There was hardly a commentator who failed to see elements of Italian corporatism in Roosevelt's managed economy under the National Recovery Administration, the institution formed in 1933 to maintain mandatory production and price 'codes' for American industry," wrote Schivelbusch.[79] According to Leon Keyserling, chairman of President Truman's Council of Economic Advisers, NIRA had grown out of the 1931 "Swope Plan,"[80] which, aping Mussolini, had proposed "a national organization of modified cartels in which competition would be limited, overproduction governed, workers and investors vigorously protected," all controlled by "some Federal supervisory body."[81] As one NRA study concluded, “The Fascist principles are very similar to those which have been evolving in America and so are of particular interest at this time.”[82]

The Italian Fascist Party journal of political theory Gerarchia (Leadership) characterized the NRA as "bearing a Fascist signature" and as "corporatism without the corporations." Progressive journalist Roger Shaw agreed, "The NRA... was plainly an American adaptation of the Italian corporate state."[83] When Roosevelt referred to the industrial cartels established by the NRA as "modern guilds," writes Schivelbusch, he was making "reference to the corporatist system associated with Fascism."[84] FDR's own economics instructor at Harvard[85] concurred, identifying the NRA as "essentially fascistic."[86]

Just as Mussolini “organized each trade or industrial group or professional group into a state supervised trade association” that “operated under state supervision and could plan production, quality, prices, distribution, labor standards, etc.,”[87] the NRA “forced virtually all American industry, manufacturing, and retail business into cartels possessing the power to set prices and wages, and to dictate the levels of production.”[88]

National Recovery Act

In 1933 Italian Premier Benito Mussolini was a towering figure. Dr. Nicholas Murray Butler,[89] President of Columbia University and Nobel Peace Prize, said of fascism, it is as a “form of government of the very first order of excellence”; and found it “safe to predict that just as Cromwell made modern England, so Mussolini would make modern Italy.” [90] Chairman Sol Bloom of the Foreign Affairs Committee of the U. S. House of Representatives, suggested Mussolini was a great man and had something the United States government might well look to for imitation.[91] What they liked particularly was his corporative system. Mussolini organized each trade or industrial group or professional group into a state-supervised trade association. Mussolini called it a corporative.[92] These corporatives operated under state supervision and provided economic planning of production, quality, prices, distribution, labor standards, etc. The National Recovery Act, or NRA as it came to be called, provided that a corporative system in America for each industry should be organized into a federally supervised trade association. It was not called a corporative. It was called a Code Authority. In Nazi Germany such government-run planning authorities built on the Italian model were called industrial cartels. This was the same as fascism.[93] These code authorities could regulate production, quantities, qualities, prices, distribution methods, etc., under the supervision of the NRA that had the effect of ending the downward spiral of deflation and falling prices, but which risked the long-term effect of stifling innovation and favoring big business over small. Anti­-trust laws forbade such organizations. Roosevelt had denounced Hoover for not enforcing these laws sufficiently. Now Roosevelt suspended the anti-trust laws and compelled men to combine.

The NRA Act provided an appropriation of $3,300,000,000 which the President was given to be spent at his own discretion. He had a sum of money equal to what the government spent in the previous ten years outside of discretionary spending. Roosevelt decided how it should be spent and where. If a congressman or senator needed an appropriation for his district, instead of introducing a bill in Congress, he went to Roosevelt to ask for it. All over the country, states, cities, counties, business organizations, institutions of all sorts wanted projects of all kinds. Instead of going to Congress they went to the President.

In 1935 the Supreme Court said the NRA's procedures were unconstitutional, and it was never revived. In the twenty-three months that NRA was on the Statute books, the average number of workers involved in strikes and lockouts and the number of days of idleness and lost productivity per month resulting were approximately four times as large as during the six months before NRA. After NRA was declared unconstitutional, both the number of workers involved in industrial disputes and the number of days lost declined.[94]

Roosevelt asked Clarence Darrow to head up a national recovery review board. The Darrow Committee's report stated, "We have here a body not only perfectly equipped to exercise monopolistic control, but endowed with extraordinary powers incompatible with the ideals heretofore entertained in a free country. . . In proportion as the authority of government sanctions regulation by industrial combinations, the inevitable tendency is toward monopoly with the elimination of the small business ." [95]

Donald Richberg, former Counsel and later Administrator of NRA admitted candidly, "Yet step by step through the diabolical logic of events the NRA became the apparent exponent and protector of 'price fixing' - that hateful objective of that most hated ogre, a big business monopoly."[96]

Civilian Conservation Corps

One of FDR's favorites was the Civilian Conservation Corps (CCC), a relatively small program designed to keep unemployed young men out of trouble while giving them food and clothing and discipline, and their families some cash. Roosevelt described work camps as a means for getting youth "off the city street corners."

Young men were enrolled as amateur forest rangers, marsh-drainers, and the like, on projects designed to improve the countryside. The recruits were given room and board, clothing, and a dollar a day (they kept $5 a month, and the parents received the other $25). More than two and half million of them passed through the camps of the Civilian Conservation Corps, until the program was abolished in 1942, when the men were needed for the draft.

The CCC was highly popular among Americans, both liberals and conservatives.

In 1973, John A. Garraty published an important article on the CCC in the American Historical Review [97] Garraty was Gouverneur Morris Professor of American history at Columbia and later general editor of the American National Biography. Yet, while an admirer of FDR, Garraty was compelled to note the striking similarities between the CCC and parallel programs set up by the Nazis for German youth. Both were essentially designed to keep young men out of the labor market. Roosevelt described work camps as a means for getting youth “off the city street corners,” Hitler as a way of keeping them from “rotting helplessly in the streets.” In both countries much was made of the beneficial social results of mixing thousands of young people from different walks of life in the camps. . . . Furthermore, both were organized on semi-military lines with the subsidiary purposes of improving the physical fitness of potential soldiers and stimulating public commitment to national service in an emergency.

Garraty listed many other similarities between the New Deal and National Socialism. Like Roosevelt, Hitler prided himself on being a “pragmatist” in economic affairs, trying out one panacea after another. Through a multitude of new agencies and mountains of new regulations, both in Germany and America, owners and managers of enterprises found their freedom to make decisions sharply curtailed.

The Nazis encouraged working-class mobility, through vocational training, the democratizing youth camps, and a myriad of youth organizations. They usually favored workers as against employers in industrial disputes and, in another parallel to the New Deal, supported higher agricultural prices. Both FDR and Hitler “tended to romanticize rural life and the virtues of an agricultural existence“ and harbored dreams of the rural resettlement of urban populations, which proved disappointing. Characteristically for the collectivist movements of the time, “enormous propaganda campaigns” were mounted in the United States, Germany, and Italy (as well as in Russia) to fire up enthusiasm for the government's programs.

It is no wonder, then, as Professor Garraty writes, that “during the first years of the New Deal the German press praised [Roosevelt] and the New Deal to the skies. . . . Early New Deal policies seemed to the Nazis essentially like their own and the role of Roosevelt not very different from the Führer’s.”

Mother of seven children without food, California, ca. February 1936. Farm Security Administration Collection, Library of Congress

Works Progress Administration

The Works Progress Administration (WPA) operated 1935-43 and was the largest and most controversial of the relief programs. Until now relief had been a local responsibility, although both Hoover and FDR had provided federal funding. Now the national government took full control; conservatives charged it was done to build a vast national political machine for Roosevelt. The WPA had a larger size and budget ($5 billion at first) than previous efforts such as FERA and CWA. Harry Hopkins, a liberal close to FDR, was the director. The WPA was responsible for the building and renovation of over 100,000 public buildings and the construction of 600 airports, more than 500,000 miles of roads, and over 100,000 bridges. The WPA was also well known for its flexibility. It employed not only construction workers but also artists and authors as well as operating separate sewing projects for women. The National Youth Administration (NYA) was a unit of the WPA for young men and women (in contrast to its rival the CCC, which only enrolled young men).

No training

A major failing of the New Deal, and especially the CCC and WPA, was the deliberate decision not to provide job training. The reason was that liberals (and especially labor unions) thought there were already too many unemployed skilled workers and there was no need for more. In retrospect, this was one of the major failings of the New Deal, and was reversed in World War II, when the government subsidized job training on a very large scale in industry and the military. Ever since 1996 the consensus has been that job training is an essential part of any program designed to help the poor.

United States Great Britain
Unemployment (1930 average) 4,770,000 1,993,951
Unemployment February 1936 12,550,000 2,016,578
Percent increase 163% [98] 1.1% [99]

Art and music

Graham Jackson shedding tears at news of FDR's death. The photo was widely circulated in Life magazine and interpreted to mean that even Republicans cried at the death of FDR. It was later re-circulated in the 1960s to create the myth that African Americans were beneficiaries and part of the New Deal coalition. New Deal programs often specifically excluded Blacks by legislation passed by the Democrat Congress.[100]

The Works Progress Administration subsidized artists, musicians, painters and writers on relief with a group of projects called Federal One. While the WPA program was by the most widespread, it was preceded by three programs administered by the US Treasury which hired commercial artists at usual commissions to add murals and sculptures to federal buildings. The first of these efforts was the Public Works of Art Project, organized by Edward Bruce, an American businessman and artist. The Resettlement Administration (RA) and Farm Security Administration (FSA) had major photography programs. The New Deal arts programs emphasized regionalism, socialist realism, class conflict, proletarian interpretations, and audience participation. The unstoppable collective powers of common man, contrasted to the failure of individualism, was a favorite theme.[101]

The FSA photography project is most responsible for creating the image of the Depression in the USA. Many of the images appeared in popular magazines. The photographers were under instruction from Washington as to what overall impression the New Deal wanted to give out. Director Roy Stryker's agenda focused on his faith in social engineering, the poor conditions among cotton tenant farmers, and the very poor conditions among migrant farm workers; above all he was committed to social reform through New Deal intervention in people's lives. Stryker demanded photographs that "related people to the land and vice versa" because these photographs reinforced the RA's position that poverty could be controlled by "changing land practices." Though Stryker did not dictate to his photographers how they should compose the shots, he did send them lists of desirable themes, e.g., "church", "court day", "barns".[102] New Deal era films such as Citizen Kane ridiculed so-called "great men", while class warfare appeared in numerous movies, such as Meet John Doe and The Grapes of Wrath.

By contrast, there was also a smaller but influential stream of anti-New Deal art. Thus Gutzon Borglum's sculptures on Mount Rushmore emphasized great men in history (his designs had the approval of Calvin Coolidge). Gertrude Stein and Ernest Hemingway disliked the New Deal and celebrated the organic autonomy of perfected written work in opposition to the New Deal trope of writing as performative labor. The Southern Agrarians celebrated a premodern regionalism and opposed the TVA as a modernizing, disruptive force. Under Chief Justice Charles Evans Hughes, the Supreme Court built one of the most architecturally striking buildings; its classical lines and small size contrasted sharply with the gargantuan modernistic federal buildings in Washington. Hollywood managed to synthesize both streams, as in Busby Berkeley's Gold Digger musicals, where the storylines exalt individual autonomy while the spectacular musical numbers show abstract populations of interchangeable dancers securely contained within patterns beyond their control.[103]

See also

Notable New Deal programs

The New Deal had countless programs, labeled an "alphabet soup" by its detractors. Among the New Deal acts were the following, most of them passed within the first 100 days of FDR's administration. Most were abolished around 1943, others remain in operation in 2009:

  • Federal Emergency Relief Administration (FERA). ERA, a Hoover loan program to states for relief; replaced by FERA in 1933 to give grants to states to operate relief projects for the unskilled; replaced by WPA in 1935.
  • Bank Holiday, 1933: closed all banks until they became certified by federal reviewers
  • Abandonment of gold standard, 1933: gold reserves no longer backed currency; still exists
  • Civilian Conservation Corps (CCC), 1933: employed young men to perform unskilled work in rural areas; under Army supervision; separate program for Native Americans
  • National Recovery Act (NRA), 1933: industries set up codes to reduce unfair competition, raise wages and prices;
  • Public Works Administration (PWA), 1933: built large public works projects; used private contractors (did not directly hire unemployed)
  • Securities Act of 1933, created the SEC, 1933: codified standards for sale and purchase of stock, required risk of investments to be accurately disclosed; still exists
  • Social Security Act (SSA), 1935: provided financial assistance to: elderly, handicapped, paid for by employee and employer payroll contributions; required years contributions, so first payouts were 1942; still exists
  • Works Progress Administration (WPA), 1935: a national labor program for 2+ million unemployed; created useful construction work for unskilled men; also sewing projects for women and arts projects for unemployed artists, musicians and writers.
  • Judicial Reorganization Bill, 1937: gave President power to appoint a new Supreme Court judge for every judge 70 years or older; failed to pass Congress

Further reading

See the detailed guide at New Deal Bibliography

  • Alter, Jonathan. The Defining Moment: FDR's Hundred Days and the Triumph of Hope (2006), popular account
  • Badger, Anthony J. The New Deal: The Depression Years, 1933-1940. (2002) good general survey from British perspective
  • Best, Gary Dean. The Critical Press and the New Deal: The Press Versus Presidential Power, 1933-1938 (1993) looks at conservative papers and magazines online edition
  • Chafe, William H. The Achievement of American Liberalism: The New Deal and Its Legacies. (2002) online edition, liberal peaise
  • Conkin, Paul K. The New Deal. (1967), a brief New Left critique.
  • Dubofsky, Melvyn, ed. The New Deal: Conflicting Interpretations and Shifting Perspectives. (1992), reader
  • Eden, Robert, ed. New Deal and Its Legacy: Critique and Reappraisal (1989), essays by conservative scholars
  • Folsom, Burton W. New Deal or Raw Deal?: How FDR's Economic Legacy Has Damaged America (2009) excerpt and text search
  • Graham, Otis L. and Meghan Robinson Wander, eds. Franklin D. Roosevelt: His Life and Times. (1985). A very useful encyclopedic reference.
  • Himmelberg, Robert F. The Great Depression and the New Deal (2001) 185 pp. online edition, reader
  • Kennedy, David M. Freedom From Fear: The American People in Depression and War, 1929-1945. (1999), the best scholarly overview; online edition
  • Kirkendall, Richard S. . "The New Deal As Watershed: The Recent Literature," The Journal of American History, Vol. 54, No. 4. (Mar., 1968), pp. 839–852. in JSTOR, historiography
  • Leuchtenberg, William E. Franklin D. Roosevelt and the New Deal, 1932-1940. (1963). The standard scholarly history.
  • McElvaine Robert S. The Great Depression 2nd ed (1993), social history, by a liberal
  • McJimsey, George. The Presidency of Franklin Delano Roosevelt, (2000)
  • Milkis, Sidney M. and Jerome M. Mileur, eds. The New Deal and the Triumph of Liberalism (2002)
  • Mitchell, Broadus. Depression Decade: From New Era through New Deal, 1929-1941 (1964), overview of economic history online edition
  • Moley, Raymond. After Seven Years (1939), conservative memoir by ex-Brain Truster online edition
  • Powell, Jim FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression (2003) sharp attack from the right
  • Shlaes, Amity. The Forgotten Man: A New History of the Great Depression (2007), 480pp, popular conservative attack
  • Sitkoff, Harvard. ed. Fifty Years Later: The New Deal Evaluated. (1984). A friendly liberal evaluation.

External links


  2. FDR: The Man, the Leader, the Legacy, Ralph Raico, Future of Freedom Foundation, April 1, 2001. Retrieved from The Independent 06/17/07.
  3. James Burnham, The Managerial Revolution, (1966).
  4. see Federal Housing Administration
  5. See FDIC - Federal Deposit Insurance Corporation
  6. See SEC - U.S. Securities and Exchange Commission
  7. See SSA - Social Security History
  8. Other major programs that still exist under their original names include the, the Federal Housing Administration (FHA)Federal Housing Administration and the Tennessee Valley Authority (TVA)TVA
  9. Parker 2002
  10. Friedman, Two Lucky People (1998) p. 59.
  11. In 1958 constant dollars. Source: Board of Governors of the Federal Reserve System, Federal Reserve Bulletin, June 1973, p. A68.
  12. The phrase came from the title of popular writer Stuart Chase's book A New Deal published earlier in 1932.
  13. 13.0 13.1 Leuchtenburg p. 58
  14. Carson, Clarence B. The Relics of Intervention part 4. New Deal Collective Planning
  15. for details see "Bottom" in Time Magazine (March 13, 1933) online at [1]
  16. Mitchell p 404.
  17. Personal consumption expenditures in the aggregate for 1929 were 77.2 billion, 45.8 billion in 1933, and 80.6 billion in 1941. Measured in constant 1958 dollars. Source: Board of Governors of the Federal Reserve System, Federal Reserve Bulletin, June 1973, p. A68.
  18. The Roosevelt Myth, John T. Flynn, Fox and Wilkes, 1948, Book 2, Ch. 3., The Forgotten Deprssion.
  19. Benedict, Farm Policies, p 353
  26. According to Nancy Rose' Put to Work.
  27. Darby, Michael R.Three and a half million U.S. Employees have been mislaid: or, an Explanation of Unemployment, 1934-1941. Journal of Political Economy 84, no. 1 (1976): 1-16.
  28. FBI Headquarters File 100-63, Louis Francis Budenz, Internal Security—C, Serial 122.
  29. Executive Sessions of the Senate Permanent Subcommittee on Investigations of the Committee on Government Operations (McCarthy Hearings 1953-54).
  30. FBI Silvermaster file Vol. 15, pg. 4 pdf.
  31. The Moynihan Commission on Government Secrecy wrote in its final report, "The first fact is that a significant Communist conspiracy was in place in Washington, New York, and Hollywood." Moynihan Commission on Government Secrecy, Appendix A 6. The Experience of The Bomb; the report also included, "At this distance it is difficult to conceive the intensity of Communist conviction in the 1930s....Looking back, however, we see more clearly the dilemma ... By 1950... the United States Government possessed information which the American public desperately needed to know: proof that there had been a serious attack on American security by the Soviet Union, with considerable assistance from what was, indeed, an “enemy within.” The fact that we knew this was now known to, or sufficiently surmised by, the Soviet authorities. Only the American public was denied this information. Moynihan Commission on Government Secrecy, Appendix A 7. The Cold War
  32. A June 1945 Venona project decryption of Soviet KGB wartime cables from the Washington D.C. KGB Office to Moscow's Eighth Department, the political intelligence wing, relayed information on matters regarding Attorney General Francis Biddle. KGB agent Charles Kramer, who served on the staff of several U.S. Senate Subcommittees, and Barrows are the sources of the information. Venona 3706 KGB Washington to Moscow, 29 June 1945. Mary Van Kleek who headed the Russell Sage Foundation and also served on the Board of the National Council, visited Washington weekly to meet with Barrows and Nathan Gregory Silvermaster. During World War II Barrows was the Executive Secretary of the the National Council of American-Soviet Friendship. This organization was declared in 1953 to be a Communist front organization by the Subversive Activities Control Board (SACB). In its Findings of Fact, the SACB said the National Council of American-Soviet Friendship, "advances positions...markedly pro-Soviet and...anti-United States a Communist-action organization which has as its primary purpose to advance the objectives of the world Communist movement under the hegemony of the Soviet Union; it has the policy to support and defend the Soviet Union under any and all circumstances...We conclude that the National Council of American-Soviet Friendship, Inc., is substantially directed, dominated, and controlled by the Communist Party of the United States...and is primarily operated for the purpose of giving aid and support to...the Soviet Union, a Communist foreign government." Reports of the Subversive Activities Control Board. Washington. United States Government Printing Office. 1966. Vol. 1, p. 501.
  33. Hearings, House Select Committee To Investigate Certain Statements of Dr. William Wirt, 73rd Congress, 2nd Session, April 10 and 17, 1934.
  34. Dr Wirt faces the cameras and tells all, Literary Digest v. 117 (April 21, 1934) p. 7.
  35. FBI Silvermaster file Volume 53 June 1946, p. 78 pdf.
  36. Leuchtenburg (1963) 281-3; Irving Howe, Lewis A. Coser, and Julius Jacobson, The American Communist Party: a critical history, 1919-1957 (1957); James R. Barrett, William Z. Foster and the Tragedy of American Radicalism (2002).
  37. Parker
  38. Unions in 1933-35 were small and weak; they took off after 1935.
  39. Arthur Schlesinger, Jr. The Coming of the New Deal (1959), 87-135
  40. Federal Reserve System, National Summary of Business Conditions (1936)
  41. Reed, Lawrence W. Great Myths of the Great Depression Mackinac Center for Public Policy.
  42. Schlesinger, The Coming of the New Deal p. 115
  43. "When the Supreme Court Stopped Economic Fascism in America". By Richard Ebeling, president of Foundation for Economic Education. Oct. 2005.
  44. Burton W. Folsom, New Deal or Raw Deal?: How FDR's Economic Legacy Has Damaged America (2009)
  45. The Handbook of Texas Online: Connally Hot Oil Act of 1935
  46. The term was invented in the 1970s.
  47. George Terborgh, The Bogey of Economic Maturity (1945) is a systematic refutation. online edition
  48. Alvin H. Hansen, "Economic Progress and Declining Population Growth," American Economic Review, Vol. 29, No. 1 (Mar., 1939), pp. 1-15 in JSTOR
  49. W. Robert Brazelton, "Alvin Harvey Hansen: Economic Growth and a More Perfect Society: The Economist's Role in Defining the Stagnation Thesis and in Popularizing Keynesianism," American Journal of Economics and Sociology, Vol. 48, No. 4 (Oct., 1989), pp. 427-440 in JSTOR
  50. Benjamin Higgins, "The Doctrine of Economic Maturity," American Economic Review, Vol. 36, No. 1 (Mar., 1946), pp. 133-141 in JSTOR
  51. Willford I. King, "Are We Suffering From Economic Maturity?," Journal of Political Economy, Vol. 47, No. 5 (Oct., 1939), pp. 609-622 in JSTOR
  52. William Fellner, " The Technological Argument of the Stagnation Thesis," Quarterly Journal of Economics, Vol. 55, No. 4 (Aug., 1941), pp. 638-651 in JSTOR
  53. Population and the Pattern of Unemployment, 1930-1937, Rupert B. Vance and Nadia Danilevski, The Milbank Memorial Fund Quarterly, Vol. 18, No. 1. (Jan., 1940), pp. 27-43.
  54. Population and the Pattern of Unemployment, 1930-1937, Vance and Danilevski.
  55. Industrial Production Index
  56. Historical Statistics of the United States (1976) series F31
  57. Angus Maddison, The World Economy: Historical Statistics (OECD 2003); Japan is close, see p 174
  58. 58.0 58.1 Cole, Harold L and Ohanian, Lee E. New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis, 2004.
  59. U.S. Dept of Commerce, National Income and Product Accounts Real GDP and GNP; Mitchell 446, 449, 451; Consumer Price Index AND M2 Money Supply: 1800-2003
  60. See
  61. Gallaway, Lowell E. and Vedder, Richard K. Out of Work: Unemployment and Government in Twentieth-Century America, New York University Press; Updated edition (July 1997).
  62. Smiley, Gene, "Recent Unemployment Rate Estimates for the 1920s and 1930s," Journal of Economic History, June 1983, 43, 487-93.
  63. Freidel 1990, p. 96
  64. Zelizer
  65. Zelizer 2000; Savage 1998
  66. Economists at the time used GNP (gross national product) and today they prefer GDP (gross domestic product). For the US, GNP and GDP are almost the same.
  67. 67.0 67.1 Kennedy 1999, p 246.
  68. Stanley Payne, History of Fascism (1995) p 230.
  69. Thayer Watkins, "The Economic System of Corporatism," Department of Economics, San José State University
  70. Walker F. Todd, "The Federal Reserve Board and the Rise of the Corporate State, 1931-1934," Economic Education Bulletin, Vol. XXXV No. 9 (September 1995) pp. 6, 34
  71. Jonah Goldberg, Hendrick Hertzberg & The F-Word, The Corner (National Review Online), March 5, 2009
  72. Hugh Samuel Johnson, The Blue Eagle, from Egg to Earth, Vol. 4 (Doubleday, Doran & company, inc., 1935), p. 405
  73. Sheldon Richman, "Fascism," The Concise Encyclopedia of Economics,
  74. Frances Perkins, The Roosevelt I Knew (The Viking press, 1946) p. 206. Socialist (Kent Worcester, C.L.R. James: A Political Biography [SUNY Press, 1995] ISBN 079142751X, p. 175) George Rawich wrote that Perkins told him Johnson gave each member of the Cabinet a book by Fascist theoretician Giovanni Gentile, “and we all read it with great care.” Schivelbusch suggests the book was actually Mussolini advisor Fausto Pitigliani’s The Italian Corporativist State. (Wolfgang Schivelbusch, Three New Deals: Reflections on Roosevelt's America, Mussolini's Italy, and Hitler's Germany, 1933-1939 [Macmillan, 2006] ISBN 080507452X, p. 203, n. 28)
  75. Long to Tugwell, May 16, 1934, Breckinridge Long Papers, Box 111, Manuscript Division, Library of Congress
  76. Leonard Peikoff, The Ominous Parallels (Stein and Day, 1982) ISBN 081282850X, p. 293
  77. John Arthur Garraty, The American Nation, 4th ed., vol. 2 (Harper & Row, 1979) ISBN 0060422696, p. 656. Cf. John A. Garraty, "The New Deal, National Socialism, and the Great Depression," The American Historical Review, Vol. 78, No. 4 (Oct., 1973), pp. 907-944
  78. History, The Society of American Historians
  79. Wolfgang Schivelbusch, Three New Deals: Reflections on Roosevelt's America, Mussolini's Italy, and Hitler's Germany, 1933-1939 (Macmillan, 2006) ISBN 080507452X, p. 23
  80. Jerry N. Hess, Oral History Interview with Leon H. Keyserling, Washington, D. C., May 3, 1971, p. 7 (Harry S. Truman Library, National Archives and Records Administration)
  81. INDUSTRY: Swope Plan, Time, Monday, September 28, 1931
  82. Janet C. Wright, "Capital and Labor Under Fascism," National Archives, Record Group 9, Records of the National Recovery Administration, Special Research and Planning Reports and Memoranda, 1933-35, Entry 31, Box 3
  83. Roger Shaw, "Fascism and the New Deal," The North American Review, Vol. 238, No. 6 (December 1934), pp. 559-564
  84. Wolfgang Schivelbusch, Three New Deals: Reflections on Roosevelt's America, Mussolini's Italy, and Hitler's Germany, 1933-1939 (Macmillan, 2006) ISBN 080507452X, pp. 24, 27, 30
  85. Gilbert Holland Montague, 1880-1961,
  86. Gilbert H. Montague, "Is NRA Fascistic?" The Annals of the American Academy of Political and Social Sciences, July, 1935, pp. 149-161
  87. John T. Flynn, The Roosevelt Myth (The Devin-Adair Company, 1948) pp. 42-43
  88. Richard M. Ebeling, "When the Supreme Court Stopped Economic Fascism in America," The Freeman, Vol. 55, No. 8 (October 2005), p. 3
  89. Axis (1936-1943), TIME magazine, Sep. 20, 1943,
  90. What To Do With Italy?, John G. Wright, From Fourth International, Vol.4 No.10, October 1943, pp.308-311.
  91. John T. Flynn, As We Go Marching, Doubleday, 1944, p. 70.
  92. The New Deal and Corporatism, Prof. Emeritus Gene Smiley, Marquette University, Presented at the Committee for Monetary Research and Education, October 19, 2006,
  93. The Roosevelt Myth, John T. Flynn, Fox and Wilkes, 1948, Book 1, Ch. 5.
  94. Bureau of Labor Statistics, United States Department of Labor.
  95. Special and Supplementary Reports of Darrow Committee, appointed by the President, released May 20, 1934. [2]
  96. Donald R. Richberg, The Rainbow, (1936), pg. 31.
  97. The New Deal, National Socialism, and the Great Depression, John A. Garraty, American Historical Review, Vol. 78, October 1973.
  98. American Federation of Labor.
  99. League of Natione, Bulletin of Statistics.
  101. Mathews 1975
  102. Cara A. Finnegan. Picturing Poverty: Print Culture and FSA Photographs (Smithsonian Books, 2003) pp 43-44
  103. Szalay 2000