Photograph of President Herbert
Hoover and President-elect Franklin Roosevelt enroute
to Roosevelt's inauguration, March 4, 1933. (Courtesy
of the Library of Congress)
The Hundred Days and Beyond: What did
the New Deal Accomplish? by
Anthony Badger
“There wasn’t anybody in that entire Brains
Trust apparently that had given any thought – they
had absolutely no plans – or any real study to the
problem created by this banking situation.”
-Walter Wyatt, the Federal Reserve official, who
was amazed at how unprepared the incoming Roosevelt administration
was for the situation they faced on inauguration day,
4 March, 1933.
The Hundred Days
The Hundred Days were an accident. Roosevelt took advantage
of the need to reopen the banks to ask Congress to stay
in session to pass recovery and reform legislation.
Much of that legislation was improvised. The haste dictated
by the economic crisis profoundly shaped the New Deal
response in the Hundred Days.
Despite the four months between election and inauguration,
Roosevelt had few worked-out legislative or recovery
plans. He certainly had no plans to deal with the rapidly
escalating banking crisis. When he took office and shut
the banks, he had to turn to held-over officials in
the Treasury and Federal Reserve to dust off legislative
proposals that they had devised in the Hoover years.
The key was not more credit (the banks had had plenty
of that) but recapitalization through the Reconstruction
Finance Corporation buying preferred stock in the banks.
It was still a tremendous gamble when the President
went on the air on Sunday March 12 to explain the crisis
and make a “man to man appeal” for confidence
when the banks reopened the next day. The gamble paid
off when people deposited more than they took out. There
was no Plan B if that appeal failed.
The response to FDR’s inaugural and from congressional
leaders to his banking proposals encouraged him to ask
Congress to stay in session. Eventually Congress passed
an unprecedented sixteen pieces of major legislation.
In the Hundred Days, the New Deal established a farm
program that told farmers what they could and could
not plant (the Agricultural Adjustment Administration),
created an industrial recovery programme that set minimum
prices and wages (the National Recovery Administration),
launched the biggest public works program in the nation’s
history (Public Works Administration), set up national
relief program (Federal Emergency Relief Administration),
refinanced farm and home mortgages, regulated the stock
market and banking, guaranteed bank deposits, and established
the Tennessee Valley Authority.
There was no great federal blueprint that FDR wanted
to impose on the country. He really only had definite
plans for farm policy, the Tennessee Valley and the
Civilian Conservation Corps. Only when existing appropriations
for relief were exhausted did he devise a temporary
relief administration. Forty days into the Hundred Days
there was no indication that there was to be an industrial
recovery program – congressional action forced
Roosevelt’s hand over that and over public works
spending.
There was much talk of the emergency as the equivalent
of war and a justification for emergency presidential
powers as in a time of war. Wartime agencies from 1917-18
served as model for agencies like the NRA. Many officials
who had served in government then returned to Washington
in 1933. But, in fact the emergency in 1933 led to constraints
rather than opportunities for federal power. The government
had to act quickly but there simply was not any established
“state capacity” for the government to do
so. The federal government, observed one historian,
“had almost no institutional structure to which
Europeans would accord the term ‘the State’.”
It had neither the information nor the personnel to
implement the policies launched in 1933.
As a result, bankers themselves had to decide which
banks were sound enough to reopen, farmers had to operate
the crop control programme, businessmen dominated the
formulation and the implementation of the NRA industrial
codes, existing state agencies had to administer the
relief programme, and the army had to organize the Civilian
Conservation Corps.
Similarly, Roosevelt and others had a fatal attraction
for one-off quick-fix solutions that would kick-start
the economy into recovery without the permanent expansion
of the bureaucracy and constant state intervention.
Congressional “share the work” schemes,
farm proposals for cost of production legislation, retrenchment,
public works spending, and above all demands for currency
inflation were all in this “start-up” mode.
Roosevelt never lost the hope that tinkering with the
currency –including the gold-buying experiment
– would raise price levels, particularly of farm
products and in itself bring recovery.
This concern for the domestic price-level fitted in
with his main advisers’ conviction that the depression
was national in origin and would be solved by nationalist
measures. These concerns finally knocked out of the
reckoning an internationalist option at the London conference
at the start of July. For men like FDR’s budget
director, Lewis Douglas, balancing the budget was one
part of an international rescue package that involved
exchange rate stabilization and the removal of trade
barriers. Roosevelt believed that currency stabilization
would tie his hands as he sought domestic recovery,
so he scuppered the London conference.
Why did FDR get support for the banking bail-out and
for the dramatic legislation of the Hundred Days? It
was not just his communication skills both personally
to congressional leaders and journalists and nationally
to the radio audience. He was popular, he had been elected
by a large majority, and he had survived an assassination
attempt. Above all, it was the scale of the depression
that made congressional leaders of both parties respond
to their constituents’ demands to support FDR.
Unemployment was at least twenty-five percent, agriculture
was devastated, and homeowners and farmers lost their
homes and land in the thousands every month. None of
the stabilizers that protect Americans nowadays were
in place – almost no unemployment relief since
private, local and state unemployment welfare funds
were exhausted; no guarantee of bank deposits; no unemployment
or old age insurance. FDR’s opportunity lay in
the magnitude of the economic downturn which led political
leaders to ignore (temporarily) cherished ideological
convictions against government intervention.
The Difficulties of Micro-Economic Intervention
The National Recovery Administration did not bring
recovery. In part, its failure reflected the contradictions
of the New Dealers’ analysis of economic failure.
In some industries they wanted to check excessive competition
which relentlessly fuelled the deflationary spiral:
cutting wages and prices in a vain effort to undercut
competitors. But their analysis of other industrial
sectors was that large firms practiced the economics
of scarcity, keeping prices artificially high. The codes
of fair practice, drafted largely by trade associations
which held a monopoly of information about their industries,
did little to protect consumers, increase wages, or
increase purchasing power. To small businessmen the
codes seemed to protect their larger rivals. For industries
in which a few firms already controlled most of the
market, there was little incentive to concede to labor,
consumers or potential new entrants. There were more
than 500 codes which merely increased resentment of
bureaucracy and efforts at code enforcement. Concentration,
as originally envisaged on codes in a few central industries
would have been better. But fundamentally, there was
little in the NRA that would create new jobs. It probably
checked the deflationary spiral but, if the hope was
that public works spending would engineer expansion,
then PWA spending could not work quickly enough. Probably
the biggest mistake was not to include government loans
to business in the NRA which might have financed expansion.
When the industrial recovery legislation was knocked
down in 1935 it had few friends: the only attempts to
sustain it were in coal mining.
The Agricultural Adjustment Administration was more
politically and institutionally successful. Production
control and price-support loans on stored commodities
remained part of US farm programmes until 1996. Agriculture
was the one area where there was ‘state capacity’
in 1933. The government had county by county production
records; agricultural economists had devised a production
control plan that was voluntary but provided incentives
to offset the ‘free rider’ principle; and
the Extension Service provided a network of agents in
each rural county could sign up millions of individual
farmers to participate. The farm program operated remarkably
smoothly and quickly. Critics have claimed that drought,
rather than government programmes, cut production, and
that the AAA exacerbated rural poverty. Whatever its
faults, the income it provided to farmers enabled them
to survive on the land in the 1930s until non-farm opportunities
arose after 1940. It eliminated many of the risks in
farming and provided new sources of credit.
However, organized farm groups achieved political power
in 1933 because their cooperation was essential to a
voluntary farm program. This strengthening of farm interest
groups meant that those groups would stand in the way
in the future of plans to reorder American agriculture
on a more efficient basis and in the way of solving
the problems of rural poverty. New Dealers came to recognize
that expanding urban consumer purchasing power, rather
than supporting farm prices, was the solution to the
farm problem. But by then farm pressure groups were
too entrenched. Government support for agriculture became
more and more generous (and less justifiable) as the
number of people in farming declined.
The Longer-Term New Deal
The longer-term New Deal reforms produced social cohesion
in the United States and a faith in the federal government
that would last until the 1960s.
Financial regulation of both banks and stock market
in 1933 and 1934 heralded a lengthy period of financial
stability, contained stock market speculation, and largely
ended the spectres of bank failure.
From 1933 to 1938 the New Deal instituted reforms that
would re-finance the mortgages of homeowners and farmers.
They enabled debt-ridden property owners to take out
longer-term mortgages and paved the way for a significant
expansion of homeownership in the US, although the construction
industry did not really start to revive until the late
1930s. The new mortgage arrangements helped the United
States eventually to have the highest percentage of
homeownership in the world. Farm foreclosures virtually
stopped after 1933.
The failure to secure dramatic economic recovery meant
that the government had to stay in the business of relief.
The Federal Emergency Relief Administration funded state
relief programs until 1935. In poor states the federal
government put up almost 90% of relief money. Harry
Hopkins always wanted to replace the dole with jobs.
The Civil Works Administration put people to work temporarily
in the winter of 1933-34. In 1935 the Works Progress
Administration provided jobs for the unemployed –
at its peak forty percent of the nation’s jobless.
Many WPA jobs were unskilled construction jobs, particularly
on roads. They struggled to attain the legitimacy and
wage rates of jobs in the private sector. But the WPA
provided jobs for artists, middle-class professionals,
teachers and students. The range of construction projects
from housing projects to high schools to a football
stadium at the University of Arkansas created a permanent
New Deal landscape at the local level. The WPA showed
that government job programmes can be creative and efficient.
For all the limitations and conservative stereotyping,
WPA jobs were the first indication for many Americans
that the federal government took its responsibility
for their welfare in an economic downturn seriously.
The Wagner Act of 1935 was perhaps the most remarkable
piece of legislation of the whole New Deal. It is difficult
to imagine another year in which such a pro-union piece
of legislation could have been passed. Anti-union tactics
had been largely unrestrained in the United States.
The courts, local, and state governments had usually
sided with employers. This alignment reflected the fact
that in most communities in the United States, the middle
class identified with the employer rather than with
local strikers. American workers had been encouraged
in union organization in the early New Deal, and had
launched in 1934 an unprecedented, albeit mostly unsuccessful,
wave of strikes. The Wagner Act, by outlawing a host
of employer anti-union activities and providing for
government-supervised worker elections for union recognition,
provided vital protection for union organizers as they
organized mass production workers for the first time
in 1936 and 1937. Unions provided the radical cutting
edge of New Deal politics in the late 1930s. The decade
was perhaps the only decade in the twentieth century
in which middle-class Americans identified with industrial
workers as fellow consumers. From the 1940s onwards
middle-class Americans tended to view organized labour
as hostile to their interests.
The final cement in a positive relationship between
ordinary Americans and their government was the 1935
Social Security Act. Like the Wagner Act, the Social
Security Act did not herald a ‘second New Deal’;
rather it was the culmination of expert reform development
and congressional study over a two-year period. The
United States had been an “outlier,” a “welfare
laggard” in the western industrialized world before
1935. For all the limitations of the Social Security
Act – regressive taxes, variations in state provision,
lack of coverage of some of the neediest Americans,
and the lack of health care – it nevertheless
represented a quantum leap in social provision. The
contributory taxes also ensured that its legacy was
permanent. As Roosevelt rightly observed, no future
Congress was going to take away benefits that their
constituents believed they had paid for.
It was these measures above all that created a half-way
political revolution in the United States and bound
lower-income voters to the Democratic Party until at
least the 1980s and made it the national majority party
until the 1990s. But it was only a half-way revolution.
FDR never created the unequivocally progressive party
that he hoped for. In particular, the southern Democrats,
who had so enthusiastically supported the emergency
New Deal, survived Roosevelt’s attempt to reconstruct
the party in the South. They were skeptical about the
non-emergency, urban, labor-oriented direction of the
New Deal which also threatened traditional patterns
of racial and economic dependency in the South. They
would combine after 1938 with conservative Republicans
in a bi-partisan coalition that would block efforts
to extend the New Deal for the next quarter of a century.
This constituted a powerful anti-statist coalition that
stymied FDR’s 1937-38 hopes of a Third New Deal
which would have guaranteed social minima to all Americans
through social housing, extended coverage of Social
Security, health insurance, a full-scale rural poverty
programme, and a commitment to full employment. That
agenda remains unfulfilled.
Infrastructure
The public works programmes (both the large-scale projects
of the PWA and the smaller labor-intensive programs
of the WPA) have tended to be treated as short-tem palliatives
aimed at temporary job creation. But the most recent
study of New Deal public works spending concluded that
it was “an extraordinarily successful method of
state-sponsored economic development.”
The New Deal rebuilt the infrastructure of the United
States when revenue-starved state governments could
not do so. It rebuilt the road system (though FDR’s
dream of an interstate highway system would not be realized
until 1956). It rescued American schools and universities.
Long before federal aid to education, the New Deal built
schools, paid teachers salaries, invested in capital
projects in the universities, and paid students to stay
on at school and college. Multi-purpose dams created
cheap electrical power and managed water resource development.
Nowhere was this impact greater than in the Sunbelt.
A new generation of younger southern politicians like
Albert Gore and Lyndon Johnson could see what the Tennessee
Valley Authority had done for a river valley –
it could be model for modernizing the poorest region
in the country. Like their western counterparts, they
could see that abundant electrical power and readily
available water could provide the key for industrial
development and the diversification of agriculture.
The federal government funded capital infrastructure
projects in Sunbelt cities that had been funded a generation
before in older northern cities by private capital.
What southern and western politicians also believed
was that their regional entrepreneurs need access to
capital, access that an eastern-dominated financial
system denied them. The Reconstruction Finance Corporation,
under Texas banker Jesse Jones, provided that capital.
It is difficult to conceive of the remarkable growth
of the South and the West in World War II and after
without that New Deal-funded infrastructure investment.
Conclusion
The New Deal was a “laboratory for economic learning”
in the 1930s. Given the state of government economic
knowledge in the 1930s it is not surprising that government
employees struggled to engineer recovery through micro-economic
intervention. Economic historians and right-wing commentators
blame the New Deal for prolonging the Depression by
deterring private investment through excessive regulation
and raising prices at the expense of jobs. While it
is true that Roosevelt had not secured recovery by the
time of the dramatic recession in 1937-38, it is also
true that the spending afterwards did create new jobs.
Government employment in the 1930s also compensated
significantly for the failure to create new jobs in
the private sector. Above all, it is difficult to see
that a free market solution could have been imposed
without massive social and anti-democratic unrest. For
all the bitterness of opposition to Roosevelt and heightened
class tensions in the US in the 1930s, the New Deal
developed, especially through its welfare and jobs programs,
enough social cohesion to allow its democratic institutions
to survive a catastrophic economic downturn intact and
to fight a world war successfully.
Anthony Badger is Paul Mellon Professor
of American History at Cambridge University and Master
of Clare College. He is the author of a number of books,
most recently FDR: The First Hundred Days
(Hill and Wang, 2008).
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