The Roosevelt
“Revolution”
The Hundred Days, 1933:
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Banking and finance
Economic Recovery
Creating credit
Unemployment Relief
Banking & Finance
• Federal Reconstruction Finance
Corporation shored up banks
• Separation of commercial and
investment banking
• Securities and Exchange Commission
established
• US$ off Gold standard (in 1934 $
pegged at level 60% below 1932 rate)
Economic Recovery
• Agricultural Adjustment Act created AAA
– Raise prices by limiting production
• National Industrial Recovery Act created
NRA
– Voluntary Codes to guarantee prices, wages,
employment levels
– Exemption from Anti-Trust Legislation
– Section 7(a) guaranteeing right to collective
bargaining
Symbols of the New Deal
Creating Credit
• Commodity Credit Corporation (under
the RFC)
• Home Owners’ Loan Corporation
(under the RFC)
• In 1934: Federal Housing Administration
Unemployment Relief
• Federal Emergency Relief
Administration (FERA)
– And creation of state agencies: food
stamps, direct relief, work relief
• Civil Works Administration (CWA):
2 million federal employees
• Works Progress Administration (WPA)
• PWA (Harold Ickes)
• CCC: Civilian Conservation Corps
The CCC
Motto: “We Can Take It!”
Modernisation
• Tennessee Valley Authority (TVA)
Limits of AAA and NRA
• Production limits evaded (Dust Bowl
suppressed agricultural production)
• Fate of tenant farmers & sharecroppers
• Administrative overload: corruption,
disorganisation
• Evasion of Section 7(a)
• Rising prices a problem as well as a blessing
• Economic recovery slow
How New?
• Continuation of post-Civil War state
building?
• WW1 War Industries Board
• Pluralism, interest groups,
bureaucratisation of government
• Hoover’s “Associative State”,
increasing regulation of economy
since 1890s
FROM RELIEF TO REFORM… THE STRUCTURAL PROBLEM
OF UNEMPLOYMENT IN A CAPITALIST SYSTEM AND THE
APPROPRIATE STATE RESPONSE
“…equilibrium at less than full employment…”
John Maynard Keynes, The General Theory of
Unemployment (1936)
“We’re in this relief business for a long, long time…
Until the time comes, if it ever comes, when industry
and business can absorb all able-bodied workers...
We shall have with us large numbers of the
unemployed. Intelligent people have long since left
behind them the notion that…the unemployed will
disappear as dramatically as they made their
appearance after 1929… For them a security
program is the only answer.”
Harry Hopkins, Spending to Save (1936), Director of
the FERA and later WPA
FDR in January 1935
We have not weeded out the overprivileged
and we have not effectively lifted up the
underprivileged.... Americans must forswear
the conception of the acquisition of wealth
which, through excessive profits, creates
undue private power... In building toward this
end we do not destroy ambition, nor do we
seek to divide our wealth into equal shares on
stated occasions. We continue to recognize
the greater ability of some to earn more than
others. But we do assert that the ambition of
the individual to obtain for him and his a
proper security, a reasonable leisure, and a
decent living throughout life is an ambition to
be preferred to the appetite for great wealth
The “Second New Deal”
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Programmes for Economic Recovery
The Social Security Act
The Wealth Tax
Banking and Corporate legislation
The Wagner Act (Labor rights)
Programmes for Economic
Recovery
• Works Progress Administration: in total
was to employ 8M people, build
100,000 public buildings, 75,000 bridges
and 287 airports
• Resettlement Administration: address
rural poverty, those not helped by AAA
• Rural Electrification Administration:
expand work of TVA
The Social Security Act (1935)
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Adopted principle of private life-insurance
plan on federal scale
• Dealt with “unemployables”: the old,
the disabed, families with dependent
children; [health in original draft
defeated in Congress]
• Congress eliminated agricultural and
domestic workers; limited federal
oversight
• Federal-state co-responsibility
The “Wealth Tax”
• Not as redistributive as supporters
hoped
• Increased income taxes on richest
• Increased corporate taxes and estate
taxes
• Aimed primarily at increasing
government revenue
Banking and Corporate legislation
• Marked shift from “broker state” to
“regulatory state”?
• Promoted competition in public
utilities, especially power industry
The Wagner Act
• Committed government to
“encourage collective bargaining”
• Established National Labor Relations
Board
• Led to rapid unionisation and to
creation of CIO, led by John L. Lewis
Elements of the
“Second New Deal”
• Federal government less concerned
with direct relief (FERA abandoned;
only tools now WPA and SSA)
• Shift from centralised planning to
regulation?
• Shift from collectivism to class rhetoric?
The Supreme Court v
The New Deal
The Supreme Court: a narrow view of “interstate commerce”
Schechter v United States (1935) – NRA
unconstitutional
Jan 1936: AAA unconstitutional
June 1936: A NY state minimum wage law
unconstitutional
Court-packing plan (1937)
Limitations of New Deal
• Conservative Aims of New Dealers?
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Saving free market capitalism
Fiscal orthodoxy (even parsimony?)
American nationalism
American Ideology? Property rights,
federalism, localism, self-help, … and
capitalism.
– …Pragmatism not conservatism? (so
would not take on fights they couldn’t
win)
• Constraints:
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Weakness of “state capacity”
Southern Block in Congress… racism
Federalism… state governors
Residual strength of right – especially
wealthy individuals and corporate
interests