Changes

==Government Role: balance labor, business and farming==

==Government Role: balance labor, business and farming==

Despite the dismal record in aiding marginal farmers and African Americans, among others--  contrasted with its often frequent generosity toward certain business interests--the New Deal was to elevate and strengthen new interest groups so as to allow them to compete more effectively for the interests by having the federal government evolve into an arbitrator in competition among all elements and classes of society, acting as a force that could mediate when necessary to help some groups and limit the power of others. 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.

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 [[Tom Connally|Connally]] Hot Oil Act of 1935<ref>The Handbook of Texas Online: [http://www.tsha.utexas.edu/handbook/online/articles/CC/mlc3.html Connally Hot Oil Act of 1935]</ref> 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, 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 [[Tom Connally|Connally]] Hot Oil Act of 1935<ref>The Handbook of Texas Online: [http://www.tsha.utexas.edu/handbook/online/articles/CC/mlc3.html Connally Hot Oil Act of 1935]</ref> 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==

Supply side economics<ref>The term was invented in the 1970s.</ref> 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.  

   

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.

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.

The most prominent spokesman for "economic maturity" was Harvard economist Alvin Hansen (1887-1975)<ref> Alvin H. Hansen, "Economic Progress and Declining Population Growth," ''American Economic Review,'' Vol. 29, No. 1 (Mar., 1939), pp. 1-15 [http://www.jstor.org/stable/1806983 in JSTOR]</ref> 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.<ref> 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 [http://www.jstor.org/stable/3487557 in JSTOR]</ref>

   

Conservative economists at the time opposed this idea, most notably Raymond Moley (a widely read columnist), consultants George Terborgh<ref> Benjamin Higgins, "The Doctrine of Economic Maturity," ''American Economic Review,'' Vol. 36, No. 1 (Mar., 1946), pp. 133-141 [http://www.jstor.org/stable/1802261 in JSTOR]</ref> and Wilfrid I. King<ref> Willford I. King, "Are We Suffering From Economic Maturity?," ''Journal of Political Economy,'' Vol. 47, No. 5 (Oct., 1939), pp. 609-622  [http://www.jstor.org/stable/1824177 in JSTOR]</ref>, and professors Gottfried Haberler, Frank Knight, Oskar Morgenstern, Henry Simons, Joseph Schumpeter, and William Fellner.<ref> George Terborgh, ''The Bogey of Economic Maturity'' (1945) is a systematic refutation.  [http://www.questia.com/googleScholar.qst;jsessionid=LZXTJhxhfZFGMG8K0TbQMs2GvQX0NBvy2Gk2Tp7PLb59fkLll6Qs!-508003271!-1404068679?docId=8860128 online edition]</ref>

==African Americans==

==African Americans==