The New Deal
Victoria and Francis Stepper
(Note: This is the draft of a paper submitted for a college assignment about 20 years ago; the final document is lost.
The references are missing but the books and page numbers from which the quotes are derived are mentioned in the paper.)
The radical changes brought about by the New Deal were the result of the change in philosophy that began at the end of the nineteenth century. Politics is merely a branch of philosophy; it was with the change from a philosophy of individualism to collectivism that brought about socialism in politics.
The first major event signaling this change in the role of government was the presidency of Theodore Roosevelt from 1901 to 1909. Richard Hofstadter, in his book The American Political Tradition, refers to Theodore Roosevelt as "the Conservative as Progressive."
Roosevelt "despised the rich, but he feared the mob. Any sign of organized power among the people frightened him." [3-269] He had grandiose plans for the United States, including imperialism. "When great nations fear to expand, shrink from expansion, it is because their greatness is coming to an end," he said in 1899. [3-274] A militarist by nature, he saw war as noble and his duty to strengthen the government so that it could commandeer the nation's resources.
Roosevelt was impressed by his father, whose "heart filled with gentleness for those who needed help or protection." [3-279] Seeking to be noble and a champion of the people, he fought business by supporting legislation to help the laboring classes. In spite of his conservative upbringing, he was willing to propose bills which were "in a certain sense... socialistic" (as he said about one such bill ). [3-281] Eventually, Roosevelt received the support of the Progressives. [3-302]
The next political leader to push America toward the socialist path was Woodrow Wilson. Similar to Theodore Roosevelt, he is quoted as saying "Politics is a war of causes," [3-309] and "The truth is, we are all caught in a great economic system which is heartless"[3-308] Wilson was attracted to politics because he sought adoration by the public and power (he said "I have a sense of power in dealing with men collectively."[3-310]) Hofstadter describes him as a British liberal in progressive America. [3-311]
He considered both socialism and big business as dangerous, and believed that government must choose the middle course between plutocracy and the masses. [3-323] The middle course, however, was more socialist than America had been previously. In his 1912 presidential campaign, Wilson stated that "The business of government is to organize the common interest against the special interests." [3-330] The special interests meant big business and he sought laws to prevent the strong from crushing the weak, i.e., by controlling business. In a speech to Congress in 1914, Wilson declared "Our program of legislation with regard to the regulation of business is now complete." [3-337]
Still, America was not quite ready for a greater degree of socialism. Following Wilson and the Great War (which he had promised to keep America out of during the 1916 election campaign), America chose the conservatives Harding and Coolidge. Their main distinction was to let America run itself, which it did fairly well during the 1920s.
Continuing this course, Hoover was elected in 1928. His main problem was one of timing; in his first year as President, the stock market crashed and the worst depression in America's history began.
There have been conflicting reasons given as the cause of the depression. Naturally, the collectivists blamed capitalism, specifically laissez-faire capitalism, in which the government does not interfere in the economic life of the country. Capitalism's defenders at the time suggested that the government continue to do nothing; the country had gone through other depressions and recovered without interference. This was Hoover's perceived policy. [Note: after this paper was written, it was learned that he tried to aid the economy with financial stimuli, prolonging the depression.]
But this depression was much more severe than previous ones. The economy continued to worsen throughout Hoover's years as President and reached a low point in 1932. After three years of a "do-nothing" president, the people elected Franklin Delano Roosevelt.
If anything, Franklin D. Roosevelt was a pragmatist, i.e., someone uncommitted to any particular philosophy. He is quoted as saying:
The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all try something. [I-410]
The 1930s turned out to be radically different from the 1920s and before. The federal government assumed a socialist character, becoming the people's protector and provider. (Franklin Delano Roosevelt was called a patrician. [1-410]) Although Roosevelt was not a socialist, many of his advisors were and through him they saw the chance to institute socialism. We shall hear from some of them shortly.
While the events of the thirties involved a major change in government policy, did that change mean that people suddenly abandoned the principles of individual rights and limited government in favor of control by and obedience to an authoritarian government?
"What appears to be new is often really a matter of emphasis rather than of creation de novo... The question of... the steady collectivization of American economy has long been before the country." [2-vii, introduction] The authors of the above quote (Beard and Smith in their 1933 book The Future Comes) state that the goals of Franklin D. Roosevelt's recovery program are somewhat obscure. "What attitudes and principles lie behind the Recovery Program? Neither the President, his advisors, nor Congress has written a bill of particulars on this point. It is necessary, therefore, to go to the speeches of the President, of those associated with him and under his direction." [2-143] (Beard and Smith's book was the source for many of the quotes that follow.)
The task of restoration "can be helped by national planning" and "supervision of all forms of transportation and of communications and other utilities which have a definitely public character," said Roosevelt. "It seems to me... that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country... And by living wages I mean more than a bare subsistence level -- I mean the wages of decent living." [2-144] (Who defines what a decent wage is? If a business' reason for existence is just to provide employment, Karl Marx would agree.) Roosevelt rationalized this by declaring that only by raising the standard of living can the excess industrial capacity be absorbed, referring to the many idle factories that could no longer operate for lack of funds. [2-145]
All employers must be united to act as one. In what could later be referred to as doublespeak by Orwell in his novel 1984 (remember the "Slavery is Freedom" slogan?) , FDR said "We are putting in place of old principles of unchecked competition some new government controls... Their purpose is to free business." [2-145]
FDR sought a balance in the economic life of the nation. Prosperity cannot be obtained "in a nation half boom and half broke;... the best way is for every one to be reasonably prosperous." Obviously socialist is this idea of income redistribution and the obliteration of the difference between the earned and unearned.
How was this to be achieved? "The secret of the NRA (National Recovery Act) is cooperation," said Roosevelt. The cooperation was to be among business, labor and government, with the government using force against those who won't cooperate. Roosevelt warned that he would "curb those who might thwart this great common purpose by seeking selfish advantage." [2-145]
If there is still doubt to the socialist theme of the above, consider these quotes from Donald R. Richberg, General Counsel to the NRA. Dismissing critics as ignorant, he declared that "No man with sufficient intelligence to be worthy of any attention can deny that a planned control of the great essential industries is absolutely essential." (The method of impugning the character of one's opponents is a sign that one has insufficient intellectual arguments for one's position. For example, opponents of the transfer of wealth from one group to another are frequently labeled racists.)
Claiming to reject both socialism (where the government owns and controls all property, including the means of production) and capitalism (where individuals own and control all property), Richberg projects the "reconstructed individualist," a man who knows that "our industries must be operated for the primary purpose of employing as many workers as possible at the highest possible wages, while paying the lowest possible compensation for the use of money and property that will induce all necessary investment." [2-147] By the way, the social system in which the individual owns property but the government controls it is called fascism.
In agriculture, FDR stated that the problem for farmers is that they produce too much. Therefore, the government should take steps to reduce production and thereby increase the farmers' earnings. [2-151-2 ] Of course, one must remember that this was said when millions were unemployed and unable to feed their families.
In finance, the government sought to "apply social values more noble than mere monetary profit." (FDR)[2-152) The gold standard was abandoned and gold was made illegal for Americans to own. Paper money was devalued to 40% of its previous value, proving that the federal government had printed and infused too much currency into circulation. The taxpayers were to be responsible for the money of all depositors (the results of this gem took over fifty years in the form of the S&L crisis of the 1990s), the government would regulate all security transactions, and banks would only be allowed reasonable profits. [2-152-31]
Roosevelt sidestepped the conflicts between his programs and the Constitution by declaring that "Our constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form," [2-155] as if the Constitution were a lump of clay to be remolded at will, taking any shape but always remaining "essentially" clay. Having sworn to uphold the Constitution, he apparently felt free to reinterpret it at will, blatantly ignoring the fact that the Constitution is the people's protection from the government, that it is a restraint on government action, not a license for government to violate individual rights.
Anti-individualism is a common element of Roosevelt's and his administrators' speeches. The demands for "cooperation," the perceptual focus on groups (industry, labor, farmers, etc.), and when an individual is recognized, he must be of the "reconstructed" type who considers the nation's and community's interests above his own.
Frances Perkins, Secretary of Labor, used terms such as "economic cooperative effort, mass effort, fair competition, tremendous collective organizations, movement for the benefit of the whole people, national movement toward a common end for the whole American people." [2-158]
Using Orwellian doublespeak again, Richberg justifies the violation of a man's freedom by stating that "The only way that men can be set free is by imposing restraints' on the abuse of freedom." [2?153] And what is an example of an abuse? Apparently profit is one. "There is nothing destructive or antagonistic to the institution of private property in the demand that human beings must be kept alive, protected from want, and maintained in good health before properties can be made income producing." [2-157]
To those who might object to the New Deal, Prof. A. A. Berle, Jr. wrote an article in the New York Times Sunday Magazine (October 29, 1933) titled "The Social Economics of the New Deal." While the "old economic forces still work,... they take so long to do it." What was needed was an economic machine that worked now. "Whether it was rugged individualism, Fascism, Communism, Socialism, or what-not made not the slightest difference." (!!!) He then proposed that we should forget about the Constitution, the government should "commandeer everything and everyone," expropriate all property, determine what should be produced and how much, and provide each citizen with a ration card so each can get an equal share of the goods and services. (He prescribes full and undiluted socialism after telling us that no particular economic system matters! Perhaps he thought that the common man was afraid of the term socialism and too stupid to realize that that was what he proposed.)
Berle believes that the New Deal will succeed but concludes his article with "In a world in which revolutions just now are coming easily, the New Deal chose the more difficult course of moderation and rebuilding." [2-159]
The case for determining the socialist nature of the New Deal has been sufficiently made. The significance of the New Deal on American culture was the changes in the way people thought of government and the services it would provide. The Recovery Program attempted to bring about the following. The government would participate in the operation of businesses, labor would have the right to organize and have a say in industry, farmers would cooperate in adjusting production and setting prices. Price and wage fixing would be used to redistribute wealth and resolve conflicts between private property and social needs. The government would help farmers because they are at an unfair advantage with highly organized capitalist industries.
On a broader level, the Recovery Program sought to provide security for all rather than allow individuals to strike it rich on their own. This would require a change in attitude for Americans. Related to this is the idea that the unemployed and poor are not to blame for their situation; therefore, the government should help them. Large enterprises, such as banking and railroads, should be nationalized. [2-161-4]
Although some of the New Deal's programs were repealed or found unconstitutional by the Supreme Court, many of its policies and programs still exist. We have Social Security, welfare, control of the stock market and regulation of banking, fiat money (currency without backing), deficit spending, farm support programs, subsidies for certain industries (such as textiles), strong government control of interstate commerce, and so on.
The question still remains, though, as to why people accepted these radical changes. To answer this, we must first look at the beliefs that people found in their environment; what philosophy was being presented to them? People usually do not drastically change their political system unless a crisis impels them; in this case, the crisis was the Great Depression. So, secondly, we will examine how this crisis developed.
As stated previously, politics is a branch of philosophy. In order for people to feel that socialism, or socialistic ideas, were an appropriate solution to their economic problems, they must have already accepted the premises of socialism. Art is a barometer of a culture, an expression of the predominant philosophy of that culture. The popular movies and books of the thirties express many of the ideas Roosevelt talked about.
Steinbeck's Grapes of Wrath, for example, shows the plight of farmers suffering from circumstances beyond their control, something many unemployed workers and businessmen could identify with. An important symbol in the book is the "NO RIDERS" sign on a truck, which suggests that the rich are out to destroy the poor.
Steinbeck implies that the universe is hostile and man is helpless. The Joad family is analogous to the turtle that doggedly moves ahead but faces many obstacles. The character Wiley shares his food with Tom, saying that when a man has food and another doesn't, he must share it. People are just part of a greater whole. Throughout the novel, people survive by helping one another; the traditional way of life is over. The symbols for this are Grampa dying and the departure from their land.
The Plow That Broke the Plains was a movie with the message that only the government could solve our economic problems. Lewis' It Can't Happen Here warns that unless the government provides leadership (whatever that means), someone else will. He warns against the alternatives of communism and fascism and a planned economy (socialism?) What's the difference? The alternatives are false; there is only a shade of difference among fascism, communism, and socialism -- they are all planned economies.
It is easy to see that the ideas propagated by Roosevelt are the same ideas present in Grapes of Wrath et. al., that his concrete proposals are the implementations of the abstract philosophical premises of the art of the 1930s and earlier. "Philosophy studies the fundamental nature of existence, of man, and of man's relationship to existence," says Ayn Rand in her book Philosophy: Who Needs It.[4-2] "The men who are not interested in philosophy absorb its principles from the cultural atmosphere around them -- from schools, colleges, books, magazines, newspapers, movies, television, etc."[4-8] She gives some examples of common utterances and the philosophers who first uttered them. "It may be true for you but it's not true for me. (William James) I couldn't help it! Nobody can help anything he does. (Hegel) I can't prove it, but I feel it's true. (Kant) Act first, think afterward. (John Dewey)"[4?5]
Ayn Rand published another book, titled Capitalism: The Unknown Ideal, which is a collection of essays, lectures and articles (by her and others, including Alan Greenspan, the current Chairman of the Federal Reserve) that explain what capitalism really is and how its history has been misrepresented and ignored. What is novel is that she defends capitalism on moral grounds. This paper is not about capitalism or even socialism, but the New Deal and its significance. However, in this book is a plausible explanation of what caused the depression.
"A nation-wide depression, such as occurred in the United States in the thirties, would not have been possible in a fully free society. It was made possible by... government manipulation of the money supply."[5-79] The mechanism for doing so was the Federal Reserve System, established in 1913.
The Federal Reserve undertook to free individual banks from the limitations imposed on them by the amount of their own individual reserves, to free them from the laws of the market and to arrogate to government officials the right to decide how much credit they wished to make available at what times.
A "cheap money" policy was the guiding idea and goal of these officials. Many bureaucrats believed that the government could keep the economy in a state of unending boom. As a consequence of the low interest rates, money was poured into every sort of speculative venture. In 1929, the country's economic and financial structure had become impossibly precarious. By the time the government finally and frantically raised the interest rates, it was too late. [5-79-81]
The same article makes the point that "controls and regulations began long before the New Deal; in the 1920s, the mixed economy was already an established fact of American life." [5-82]
It is instructive to look at the problems of the farmers, since they were often viewed as representative of the stereotypical American -- self-reliant and ruggedly individualistic. Agriculture never shared in the boom of the 1920s. "The depression of 1930 and after merely served to sharpen the outlines of a situation that had been steadily getting bleaker as the decade of the twenties progressed. Put simply, farm prices had been deflated, while farm costs were still highly inflated." [1-153]
Farm property values went down from $78 billion in 1919 to $57.6 billion in 1929 and to $44 billion by 1932. At the same time, farm income went from $15 billion in 1919 to $12 billion by 1929 and to $5.2 billion in 1932. Taxes and interest on mortgages doubled from 1910 to 1930, both going from three to six percent making the farmers' debt 12 percent. Total mortgage debt reached 39.6 percent in 1930. [1-154]
Contributing to the farmers' plight were increased farm products from foreign countries following the Great War, decreased population growth, changes in American diets to less land intensive products, lower food intake because of better heated homes, and jobs requiring less physical toil. In addition, improvements in farming increased per acre yield and created a surplus of food. All of these factors created a surplus of farmers' produce relative to the needs of America and the world. [l-155-6]
Workers in unions did much better than farmers but labor (represented by unions) couldn't expand its activities due to court actions in the 1920s, the class collaboration of traditional trade unions which compelled unskilled laborers to fend for themselves, labor's policy of voluntarism, the unwillingness to organize for political action or use the government for its purposes, and the prevalent spirit of cooperation with management. Times were generally good in the 1920s and workers were generally content.
We've talked a little about the economics of the depression but what must be realized is the devastating impact it had on nearly everyone. When the government raised interests rates by withdrawing money from banks, many businesses could no longer operate. Like dominoes, one business failure affected another. And the banks that made risky loans were unable to collect payments from the borrowers who had gone bankrupt, and they became insolvent. There was a general paralysis of economic activity, and a paralysis in the people as well. Few were able to take successful action; most were helpless and therefore unable to act. Hoover did nothing, telling people to wait, that things would get better on their own. After three years, businessmen, laborers and farmers were still waiting, and barely surviving. When Roosevelt came along with the promise to do something, they were desperate enough to try anything.
Roosevelt reiterated the values that people had been hearing for over a generation. Those without were willing to support a man who promised that those who had wealth would have to share it. Businessmen who were on the verge of bankruptcy were willing to surrender the freedom to run their businesses as they saw fit in return for the help to survive. And farmers welcomed the government's assistance (many to this day) in raising the prices of their crops and getting paid not to grow food.
If the situation wasn't as desperate as it was, there may have been more opposition. When times are good, people aren't so ready to sell their souls to the devil, so to speak. Although the socialists (as progressives and liberals) had been dominating the intellectual scene for decades, and art had helped prepare the populace for the New Deal, I doubt that such policies would have become part of our culture had it not been for the depression.
We can look back with the 20/20 vision of hindsight and see that socialism was not the answer, that it has failed in Eastern Europe and the Soviet Union, and that a variant of socialism created the horror of Nazi Germany. But the legacy of the New Deal remains; America is still a mixed economy, more socialist now, perhaps, than ever before. The President and the Congress argue over how much the capital gains tax should be, both seeking to provide investors with a minimum incentive, just as Richberg proposed. We have a minimum wage law, with different parties arguing over how much is a "decent" wage. Governor Florio and his successors in New Jersey propose to redistribute the wealth more seriously than the federal government. There's Medicare, Medicaid, Social Security, and welfare.
Once a principle has been accepted, it is just a matter of time before people will put it into practice. If we are our brother's keepers, if, as St. Ambrose said, that anything beyond what a person needs to exist belongs to those who do not have, if man is helpless in a hostile universe, that he is not to blame for his condition, that everyone deserves a "fair" share of a country's wealth regardless of one's contribution to that wealth, then all of the government's policies starting with the New Deal make sense.
It should be evident that economic considerations are not primary. If they were, then people would embrace capitalism and reject socialism. Because people desire security, a guarantee of their basic needs, they are willing to accept a lower standard of living, they are willing to live under the control of paternalistic government, and to chain those abler than themselves.