The USA 1933–45: New Deals and economic recovery

This chapter investigates domestic issues during the period of Roosevelt’s presidency from 1933 to
1945. It looks at the First New Deal from 1933 to 1935, Roosevelt’s presidential style, the
effectiveness of the legislation introduced during the first 100 days, and alternatives from the political
left and right in the build-up to the 1936 presidential election. It analyses the nature and meaning of
the First New Deal before going on to look at how the New Deal programs developed in the years
1935–41, asking how successful they were in addressing the continuing problems caused by the
Depression. The impact of the period on arts and literature will be discussed. Finally, it examines the
impact of the Second World War on the US economy.

The first 100 days and the First New Deal

Two weeks before his inauguration on 4 March 1933, Franklin Delano Roosevelt addressed a meeting in
Miami, Florida. Joseph Zangara fired five bullets at him from close range. All missed their target.
Zangara opposed capitalism and sought to kill the man pledged to save it. Fittingly, Roosevelt
did go on to save the capitalist system in the USA through his New Deal program.

Historians speak of two and even three different New Deals in the 1930s. These will be
examined in this chapter.

Roosevelt’s inauguration

Roosevelt’s inauguration was in March 1933. This was four months after the election in November 1932.
Hoover was still in office and clearly Roosevelt must have been frustrated waiting to take over. During
this period, the Depression worsened considerably, with the outgoing president, Hoover, unable to
introduce effective measures to combat it. Hoover sought to involve Roosevelt in a smooth transition
and to agree on common policies. However, Roosevelt was non-committal to these offers. He wanted
neither to be associated with Hoover, whose credibility was shattered, nor to tie himself to shared
policies with political opponents.

Source A
Cartoon of Roosevelt throwing out Hoover’s rubbish on taking office in March 1933.
 The USA 1933–45: New Deals and economic recovery

Later, Hoover was to accuse Roosevelt of stealing his policies and taking credit for them. Indeed, it was
alleged by some critics that Roosevelt wanted the Depression to get worse so he could take credit for
launching a rescue operation after his inauguration. Hoover could then be accused of having done
nothing to halt the Depression.

In fact there was little difference at first between the policies of Roosevelt and Hoover. It was the two
men who were different. Roosevelt came across as dynamic, charismatic and someone in whom people
were ready to have faith. Hoover, as we have seen, was tired, jaded, and dull by comparison.

There was tremendous expectation and excitement about Roosevelt’s presidency; people were willing it
to be something special. Certainly no incoming president since the Civil War had faced so many
problems. Roosevelt’s inaugural speech seemed to offer everything that people wanted to hear. ‘The
only thing we have to fear’, Roosevelt said, ‘is fear itself’. He called for ‘action and action now’.

Source B

Extract from Roosevelt’s inaugural address, March 1933. Our greatest primary task is to put people back
to work. This is no unsolvable problem if we face it wisely and courageously.

It can be accomplished in part by direct recruiting by the government itself, treating the task as we
would treat the emergency of war, but at the same time, through this employment, accomplishing
greatly needed projects to stimulate our use of natural resources.

Roosevelt’s presidential style

Many historians, for example William E. Leuchtenburg, have claimed that the modern presidency begins
with Roosevelt. There is little doubt that the New Deal expanded the roles of the president and state in
the running of the USA. However, Roosevelt also brought a new style to the presidency. He appeared
full of infectious optimism and confidence. A few weeks after Roosevelt’s inauguration, one business
journal commented, ‘The people aren’t sure where they’re going but anywhere seems better than
where they’ve been.’ Roosevelt’s style differed from that of his predecessors in two ways:

 his use of the media

 his appointment of personnel.

Use of the media

Roosevelt was perhaps the first president to understand the power of the media. He developed the
twice-weekly press conferences into cozy conversations. He got to know members of the press corps by
name, he explained policies carefully and he invited questions. This contrasted with his predecessors,
who had only accepted questions written out and presented in advance. Hoover’s relationship with the
press had been so frosty that he had been accused of using the secret service to investigate any leakage
of information to the press.

The result of this new friendliness and ‘openness’ towards the press corps was that Roosevelt got them
on his side. He could release information as and when he thought it necessary, forestall criticism and
effectively control much of the newspaper reporting about him.

Fireside chats
Roosevelt was said to have ‘the first great American radio voice’. He spoke directly to the electorate on
issues in ‘fireside chats’. These became so popular that those without a radio would visit those who had
to ensure they did not miss the president. The mass media was still in its infancy. Until Calvin Coolidge
began to enjoy being photographed, few Americans had ever seen a picture of their president, let alone
heard his voice. Now the reassuring voice of Roosevelt in living rooms throughout the nation restored
confidence and helped people to believe that everything was going to be all right. After he told people
over the radio to tell him their troubles, it took a staff of 50 to handle his mail, which arrived by the
truckload. By contrast, one person had been employed to deal with Herbert Hoover’s correspondence.
 The USA 1933–45: New Deals and economic recovery

Appointment of personnel
Previously, presidents had tended to appoint political allies or at best other members of their party to
help them to govern. Roosevelt tended to look for the best people for the job irrespective of political
affiliations. Most of the ‘Brains’ Trusters’ (see page 58) followed him to the White House. In addition, he
appointed Henry A. Wallace, a farming expert, as Secretary for Agriculture.

Roosevelt encouraged rivalry and disputes among his appointees. He would listen to their disputes and
then make up his own mind between them. Sometimes he used personal appointees to investigate
issues, bypassing proper channels. Often when appointing people to office he made their job
specifications deliberately vague so their responsibilities would appear to overlap with others’. He knew
this would make people more dependent on him as they asked him to intervene in disputes or sought
his favor or support.

This strategy of personnel management worked. Roosevelt inspired intense loyalty. He could enthuse
with a smile or small favor. As Harold Ickes, his Secretary of the Interior said, no matter how jaded you
were, you came out of a meeting with Roosevelt like ‘a fighting cock’. His appointees would need their
energy. The first 100 days of Roosevelt’s administration set the scene for the transformation of the USA.

The first 100 days

Roosevelt asked Congress to grant him powers as great as those it would have given him had the USA
been invaded by a foreign enemy. He called Congress into a special session, which was to last for
100 days. These first 100 days of Roosevelt’s presidency were possibly the most frenzied and energetic
of any presidency, with a considerable amount of emergency legislation and the setting up of many
‘alphabet agencies’. Many historians have categorized the measures into those intended to bring about
‘relief, recovery or reform’, but as we shall see it is dangerous to assume Roosevelt had a blueprint to
transform American life greatly.

However, it is no exaggeration to say that, intentionally or not, at the end of the 100  days the USA had
been transformed.

Banking and finance

The most pressing concern was undoubtedly the collapse of the American banking system. By 1932
banks were closing at the rate of 40 per day. In October of that year, the Governor of Nevada, fearing
the imminent collapse of an important banking chain, declared a bank holiday and closed every bank in
the state. By the time of Roosevelt’s inauguration, banks were closed in many states.

One important effect of these bank closures was a flow of gold from the Federal Reserve and New York
banks to local banks that were still functioning. This was to support those banks, so they had enough
capital to continue to function. Between January and the inauguration in March, the nation’s gold
reserves fell from $1.3 billion to $400 million because of this shift. Nevertheless, American banks had
only $6 billion available to meet $41 billion worth of deposits. In the two days before the inauguration
$500 million was withdrawn. The situation was so fraught that Washington hotels would not accept out-
of-town cheques from inauguration guests.

Emergency Banking Relief Act

On 6 March Roosevelt closed all the banks in the country for four days to give Treasury officials time to
draft emergency legislation. The ensuing Emergency Banking Relief Act was passed by Congress after
only 40 minutes of debate. All the measures it contained had already been considered by Hoover.
However, they had been rejected because he feared the panic that may have resulted from the closing
of the banks. Roosevelt had no such fear. Although his action may have been unconstitutional, people
were expecting him to act decisively and, while the banks were closed, they improvised using barter,
foreign currencies and stamps as units of exchange.
 The USA 1933–45: New Deals and economic recovery

The aim of the Emergency Banking Relief Act was simply to restore confidence in the American banking
system. It gave the Treasury power to investigate all banks threatened with collapse. The Reconstruction
Finance Corporation was authorized to buy their stock to support them and to take on many of their
debts. In doing so the RFC became in effect the largest bank in the world.

In the meantime, Roosevelt appeared on radio with the first of his ‘fireside chats’. He explained to
listeners, in language all could understand, the nature of the crisis and how they could help. The
message on this occasion was simple: place your money in the bank rather than under your mattress. It
worked. Solvent banks were allowed to reopen, and others were reorganized by government officials to
put them on a sounder footing. By the beginning of April, $1 billion in currency had been returned to
bank deposits and the crisis was over. Raymond Moley, one of the ‘Brains’ Trusters’, and Roosevelt’s
speechwriter, felt that ‘American capitalism was saved in eight days’.

The Glass–Steagall Act

Roosevelt later drew up legislation to put the banking system on a sounder long-term footing. The
Glass–Steagall Act of 1933 had the following effects:

 Commercial banks that relied on small-scale depositors were banned from involvement in the
type of investment banking that had fueled some of the 1920s’ speculation.
 Bank officials were not to be allowed to take personal loans from their own banks.
 Authority over open-market operations such as buying and selling government securities was
centralized by being transferred from the Federal Reserve Banks to the Federal Reserve Board
in Washington.
 Individual bank deposits were to be insured against bank failure up to the figure of $2500 with
the insurance fund to be administered by a new agency, the Federal Deposit Insurance
Corporation (FDIC).

Reactions
The banking legislation, despite its success, was not without its critics. Some criticized Roosevelt for
adopting Hoover’s policies and for not being radical enough. Raymond Moley admitted that Hoover
might have passed similar legislation if he had had the power. Moreover, the measures were carried out
by officials appointed by Hoover such as Ogden Mills, whom Roosevelt had kept on.

While the Federal Reserve Board had been given more control, many critics nevertheless wanted to see
more government supervision of banking, possibly through nationalization. Some felt that Roosevelt had
even rewarded bankers for their past incompetence. Many banks had been given government subsidies
to help them to stay in business. By requiring that state banks join the Federal Reserve system to qualify
for insurance, large banks were given more control over smaller ones. Although this was to protect them
from failure, it all seemed to favor the rich and powerful. However, what these critics failed to
appreciate was that this was precisely Roosevelt’s intention. He saw his task as the saving of, rather than
the destruction of, American capitalism.

Finance
Roosevelt saw his role in finance as two-fold:

 to stop the flow of gold out of the country

 to increase the amount of money in circulation in the USA, thus raising prices.

In a series of measures taken in March and April 1933, he effectively took the USA off the Gold Standard
by forbidding the export of gold except under license from the Treasury and prohibiting the trading-in of
currency for gold. Those holding gold were required to turn it in to the Federal Bank for $20.67 an
ounce.
 The USA 1933–45: New Deals and economic recovery

The main objective of these measures was to bring down the value of the dollar abroad. Once the dollar
was no longer tied to the value of gold, it could find its own level in international markets. This meant in
theory that foreigners could afford to buy more American goods. The measure did seem to work,
because the international value of the dollar fell to $0.85 in gold, meaning that foreigners could buy
15 per cent more American goods than before for their money.

Effects of Roosevelt’s financial measures

This success did leave Roosevelt in a dilemma abroad. European countries in particular had great hopes
that the London Economic Conference, which met on 6 July 1933, would help to solve their financial
problems. Delegates from these countries wanted a general stabilization of currencies. Roosevelt
believed the falling value of the dollar was revitalizing the American economy and so refused to make
any agreement. This led directly to the collapse of the Conference. It showed how Roosevelt was
concentrating on American recovery and how the New Deal was essentially a domestic program. The
stabilization of foreign economies was simply not on his agenda.

Roosevelt wanted the dollar to fall even further by being left to find its own level. On 22 October 1933,
he announced that the RFC would buy gold above the market price, which was then $31.36 an ounce. As
the price of gold rose, the value of the dollar fell because it needed more dollars to buy it. On 30  January
1934, the Gold Reserve Act pegged the price of gold at $35 an ounce, and the dollar had effectively been
devalued by nearly 60 per cent since March 1933 when gold had been worth $20.67 an ounce.

At home, the effect of all this was to increase the amount of money in circulation. This, it was hoped,
would raise prices. The theory behind this was, as the volume of money rose, its relative value would fall
simply because there was more of it around. On the other hand, if the value of money fell it bought less,
thus causing prices to rise. It was hoped that the rise in prices would in turn help to revitalize American
industry and agriculture. However, while prices did rise somewhat, juggling the price of gold and
currency mechanisms did not affect any major economic recovery because the nature of the Depression
was too complex for any single measures to work.

The Silver Purchase Act, June 1934

Roosevelt also sought to raise prices by introducing more silver into the coinage. He was persuaded in
this by some of his supporters from silver mining states such as Colorado. They had seen the value of
silver fall to an all-time low and were looking for government help to improve this situation. Late in 1933
the federal government began to buy up all the silver produced domestically, at an artificially high price.
The Silver Purchase Act of June 1934 stated that the Treasury would buy silver until its monetary value
equaled 33 per cent that of gold; or alternatively the market price of silver reached what should be its
monetary value. However, in effect this measure had little impact beyond subsidizing the domestic silver
industry. It offered a further lesson that prices could not be raised without real economic recovery.

Regulation of the Stock Exchange

To ensure that the excesses of the 1920s, which had caused the Wall Street Crash, were not repeated
two measures were passed:

 The Truth-in-Securities Act, 1933, required brokers to offer clients realistic information about
the securities they were selling.
 The Securities Act, 1934, set up a new agency, the Securities Exchange Commission (SEC). Its
task was to oversee stock market activities and prevent fraudulent activities such as insider
dealing, where brokers agreed to artificially raise prices before selling, as in the Bull Pool.
Roosevelt appointed Joseph Kennedy to head the Commission. Cynics held that Kennedy, who
had been a major speculator in the 1920s, could exploit the situation. The Act was highly
successful despite the opposition of Wall Street insiders, some of whom had threatened to
move the exchange to Canada if it was passed. When the system caught and imprisoned
 The USA 1933–45: New Deals and economic recovery

Richard Whitney for embezzlement in 1938, the SEC demonstrated that it could now search out
its own rotten apples. Wall Street had gained a new credibility.

Economies in government
Roosevelt was a conservative in financial matters, and, like his predecessors, he believed strongly in a
balanced budget. Care was taken to distinguish between the budget for normal government business
and that for emergency relief to deal with the Depression. He expected the budget for normal business
to balance. He also sought to make all his recovery programs self-financing and often they began with
loans rather than grants. It was hoped that as money began to be made from the programs, these loans
would be repaid.

The Economy Act, 1933, meanwhile, slashed government salaries and cut ex-soldiers’ pensions.
Roosevelt, like Hoover, refused to give the veterans their bonus. However, when a second ‘Bonus Army’
arrived in Washington, Roosevelt greeted them with refreshments and entertainment. His wife was sent
to charm them without giving in to any of their demands. As a result of the charm offensive, this time,
they departed peacefully.

Agriculture
Agricultural recovery was given a higher priority than industrial recovery.

This was for a variety of reasons:

 Thirty per cent of the labor force worked in agriculture. If agricultural workers could afford to
buy more, industry would be stimulated.
 If agriculture became more profitable, there would be a reduction in farms being repossessed
by the banks.
 As we have seen, the farming lobby in Washington had always been influential in the past but
now felt under threat. Democratic politicians representing agricultural interests in the south
and west had been among Roosevelt’s earliest political supporters and he certainly felt he
owed them something.
 Roosevelt took a personal interest in agriculture. He regarded the farmer as the backbone of
the USA. This is an aspect of Roosevelt’s thinking that is often forgotten. He remained
passionately concerned with conservation and ecology, as illustrated by his personal interest in
the work of the Civilian Conservation Corps.

The increasingly militant Farmers’ Holiday Association in the Midwest threatened farm strikes if effective
legislation was not forthcoming. The same organization had disrupted the repossession of farms. It both
threatened and carried out acts of violence against officials trying to implement these.

In the long run, the aim of agricultural policies was to make farming more efficient by ending
overproduction. This would be done by taking the most uneconomic land out of production and
resettling displaced agricultural workers. However, in the short term, farming crises had to be
addressed.

This was done through a series of measures.

Extension of farm credit

The Farm Credit Act of March 1933 brought all the various agencies dealing with agricultural credit into
one body, the Farm Credit Administration. This helped the co-ordination of agricultural issues. In April,
the Emergency Farm Mortgage Act loaned funds to farmers in danger of losing their properties. The
Frazier–Lemke Farm Mortgage Act of June went a stage further. It lent money to farmers whose lands
had already been repossessed so they could recover them; interest was set at only one per cent.

Agricultural Adjustment Act, May 1933

 The USA 1933–45: New Deals and economic recovery

Overproduction had been the greatest problem of American agriculture. Government measures such as
Hoover’s Federal Farm Board had not addressed this problem. While industrial production had declined
by 42 per cent in the years 1929–33, agriculture had fallen by only six per cent. It was extremely difficult
to tell farmers to cut back their production. If the cutbacks were to be voluntary, an individual farmer
would be very unlikely to make the first move to do so in case none of his neighbors followed suit; if
compulsory, there would need to be new and far-reaching enforcement agencies set up. Nevertheless,
the main principle behind the Agricultural Adjustment Act was that the government would subsidize
farmers to reduce their acreage and production voluntarily.

The overall aim was of the Agricultural Adjustment Act was to increase farmers’ incomes. A new agency
was set up, the Agricultural Adjustment Administration (AAA), which agreed to pay farmers to reduce
their production of ‘staple’ items, initially corn, cotton, milk, pigs, rice, tobacco, and wheat. The program
was to be self-financing through a tax placed on companies that processed food. It was assumed that
these companies would in turn pass on the increased cost to the consumer.

Reduction of cotton production was perhaps the most pressing need. At the beginning of 1933, unsold
cotton in the USA already exceeded the total average annual world consumption of American cotton.
Moreover, farmers had planted 400,000 acres more than in 1932. They were, quite simply, paid to
destroy much of this. A total of 10.5 million acres were ploughed under, and the price of cotton
accordingly rose from 6.5 cents per pound in 1932 to 10 cents in 1933. However, it was one thing to
destroy cotton but it was far more contentious to destroy food when so many Americans were hungry.
Six million piglets were bought and slaughtered. Although many of the carcasses were subsequently
processed and fed to the unemployed, the public outcry was enormous.

Source C

An extract from C.B. Baldwin, assistant to the Secretary of agriculture Henry Wallace in Hard Times:
An Oral History of the Great Depression by Studs Terkel published in 1970.

They decided to slaughter piggy sows. You know what a piggy sow is? A pregnant pig. They decided to
pay the farmers to kill them and the little pigs. Lot of ’em went into fertilizer. This is one of the horrible
contradictions we’re still seeing.

They lowered the supply goin’ to market and the prices immediately went up. Then a great cry went up
from the press, particularly the Chicago Tribune about Henry Wallace slaughtering these little pigs. You’d
think they were precious babies. The situation was such, you had to take emergency measures. Wallace
never liked it.

In fact, the AAA destroyed only cotton and piglets. Drought helped to make the 1933 wheat crop the
poorest since 1896, and agreements were reached to limit acreage in other crops in subsequent years.

Total farm income rose from $4.5 billion in 1932 to $6.9 billion in 1935. The percentage of farmers
signing up for AAA agreements was high at first – 95 per cent of tobacco growers, for example – and the
Act was very popular with farmers.

Faced by drought, western ranchers sought to bring beef cattle under the protection of the AAA in 1934.
By January 1935 the government had purchased 8.3 million head of cattle, in return for which ranchers
agreed to reduce breeding cows by 20 per cent in 1937. Overall, it would appear that the AAA worked
effectively to deal with the crisis of overproduction, although there were problems, and these will be
considered later.

Tennessee Valley Authority, May 1933

The Tennessee Valley Authority (TVA) was one of the most grandiose schemes of the New Deal. It was
created to harness the power of the River Tennessee, which ran through seven of the poorest states in
the USA. It was hoped that by so doing the region of 80,000 square miles with a population of
two million would become more prosperous. The TVA had several major tasks:
 The USA 1933–45: New Deals and economic recovery

 to construct 20 huge dams to control the floods which periodically affected the region
 to develop ecological schemes such as tree planting to stop soil erosion
 to encourage farmers to use more efficient means of cultivation, such as contour ploughing
 to provide jobs by setting up fertilizer manufacture factories
 to develop welfare and educational programs
 most significantly perhaps, to produce hydroelectric power for an area whose existing supplies
of electricity were limited to two out of every 100 farms.

The designers of the TVA deliberately stated in the Act that the production of electricity was only a by-
product. This was because they knew private companies would oppose the right of a government
agency to manufacture and sell it. Moreover, the electricity generated was cheaper than elsewhere. The
TVA effectively became a central planning authority for the region. It was largely responsible for the
modernization and improved living standards that saw its residents increase their average income by
200 per cent in the period from 1929 to 1949.

Source D

The owner of the farm on the left agreed to become a test farmer using contour ploughing. Photo
courtesy of the Tennessee Valley authority.

Industrial recovery
Industrial recovery was a priority for the New Deal. However, it had only limited success due to the scale
of the industrial collapse. Although the economy grew 10 per cent per year during Roosevelt’s first term
from 1933 to 1936, output had fallen so low since 1929 that this still left unemployment at 14 per cent.

Roosevelt’s primary aims were to get people back to work and to increase consumer demand. To do
this, he needed both to act quickly before the situation got even worse and to gain the co-operation of
businessmen. He knew he could achieve little without the latter; there was simply no alternative
structure to change things without the active support of businessmen. They would hardly consent to
radical policies such as nationalization or anti-trust legislation.

The problem was that there was no consensus about how to go about ensuring industrial recovery.
 The USA 1933–45: New Deals and economic recovery

Some businessmen still supported policies of laissez-faire; others wanted massive government
intervention. Some felt competition should be ended; others believed it to be the keynote to recovery.
Again, it is important to note that Roosevelt was in the business of saving the American system of
capitalism, not replacing it. This came as a disappointment to many who had hoped for more radical
objectives.

Roosevelt was forced to act quickly and under pressure, as Congress was about to pass a measure to
restrict the working week to 30 hours with the hope of sharing out the existing jobs. He opposed this
scheme because he feared that rather than raise overall purchasing power it would simply share out
more thinly what already existed. Instead, he replaced it with the National Industry Recovery Act (NIRA)
of June 1933.

The Act came in two parts:

 National Recovery Administration (NRA)

 Public Works Administration (PWA).

National Recovery Administration

The NRA was set up to oversee industrial recovery. Headed by General Hugh Johnson, it seemed to offer
something to all groups involved in industry. Powerful businessmen, for example, benefited from the
suspension of anti-trust legislation for two years. The argument behind this was that if industrial
expansion was to be promoted, it was crazy to maintain laws that, in fact, restricted it. Firms were
encouraged to agree to codes of practice to regulate unfair competition such as price-cutting, and to
agree on such matters as working conditions and minimum wages in their industry.

Elsewhere in the NRA legislation, ‘yellow dog’ clauses were outlawed, and Section 7(a) declared
employees had a right to join trade unions and participate in collective bargaining. This meant that
employers would have to recognize trade unions to negotiate on behalf of their members. Roosevelt
had not welcomed this clause, which had been forced on him by Congress. He was more interested in
reducing unemployment than legalizing unions. His fears that this could lead to industrial unrest seemed
proven by the wave of violent strikes that were alleviated only with further legislation.

A hectic promotional campaign took place to promote the NRA and the codes. The national response to
the campaign was tremendous. Eventually, 557 codes were drawn up covering most industries, and
firms which agreed to them were entitled to display what would become one of the most enduring
symbols of the New Deal: a blue eagle, with the logo underneath, ‘We do our part’. It was hoped that
consumers would support those firms that bore the blue eagle and boycott those which did not. To
hasten proceedings, Hugh Johnson had drawn up a blanket code known as the President’s Re-
employment Agreement. This was particularly intended for small firms to subscribe to in order to take
advantage of the blue eagle and the increased custom it would presumably attract.

Problems with the codes

Problems with most of the operations of the NRA became quickly apparent. Many of the codes, for
example, turned out to be unworkable. This was in part because they were adopted so quickly, often
without proper thought or planning, but also because they were often contentious. Many large
manufacturers, notably Henry Ford, never subscribed to them and yet, as we shall see, small firms
complained that they favored big business. Many small firms found it difficult to comply with all the
regulations, particularly the minimum wage clauses. It was hoped, for example, that the firms signing
the codes would introduce a minimum wage of $11 for a 40-hour week. Few small firms could afford
this.

In March 1934 Congress set up the National Recovery Review Board to investigate whether small firms
were disadvantaged by the codes; it reported that indeed they were. The codes seemed to favor large
companies that could take advantage of them to restrict competition and increase their profits. They
 The USA 1933–45: New Deals and economic recovery

could, for example, work together to draw up codes in which they agreed to raise prices while keeping
wages low. Some agreed to limit output to raise prices and could therefore afford to cut back on their
workforce or pay lower wages.

Unions said that Section 7(a) was too weak for their needs and that many employers, including those
who did subscribe to the codes, were still riding roughshod over them. Ford, who did not subscribe to
any codes, kept a gang of union bashers on the payroll. Johnson created labor advisory boards to
mediate in disputes but because these were advisory, they had little influence.

The argument that the NRA favored big business was particularly persuasive. The codes were largely
drawn up by representatives from big business, often with the assistance of inexperienced White House
officials. One of the first tasks of a newly appointed young government official, for example, was to meet
sharp company lawyers to draw up the petroleum codes, even though he knew nothing about the
industry.

Ultimately, despite the fanfare, the codes did not help economic recovery. This led Johnson to attempt a
‘Buy Now’ campaign in October 1933 to encourage people to spend and therefore stimulate production.
He also advocated an overall 10 per cent wage increase and 10-hour cut in the working week. Neither
was successful.

In reality, the NRA codes looked impressive, but they could not bring about an economic recovery. Many
critics argued that, in practice, they did little except give large firms the opportunity to indulge in unfair
practices – the very opposite of what had been intended. Johnson, a successful businessman himself,
believed very firmly in self-regulation by business. There were to be no new government powers over
companies. Indeed, as mentioned earlier, the government had agreed to suspend anti-trust legislation
for two years.

Johnson had made many powerful enemies with his high-handed ways. The press had a field day not
only over his excessive drinking but also over the high salary he gave to his secretary, Frances Robinson,
whom he admitted was ‘more than a stenographer’. He began to be an embarrassment to the
administration and had to go. Roosevelt dismissed him in September 1934. After his departure some of
the codes were relaxed but the Supreme Court dealt the death blow in May 1935 when it declared the
NRA unconstitutional.

Public Works Administration

The second part of NIRA set up an emergency PWA to be headed by the Secretary of the Interior, Harold
Ickes. It was funded with $3.3 billion, and its purpose was ‘pump priming’. It was hoped that
expenditure on public works such as roads, dams, hospitals, and schools would stimulate the economy.
Road building would lead to increased demand for concrete, for example, which would lead the
concrete companies to employ more workers, who would therefore have more money to spend, and so
on.

A cautious administrator, Ickes made slow progress. In fact, he was criticized for spending only
$110 million of his funding in the first six months. His strength was that he demanded value for money
and would only fund worthwhile projects. He did not want to have the agency jeopardized by criticisms
that it was wasting taxpayers’ money, or ‘boondoggling’, in popular speech. This viewpoint was fully
supported by the president. Moreover, public works projects involve lengthy preparations with design,
planning and submission of contracts. Eventually the PWA put hundreds of thousands of people to work,
building, among other things, nearly 13,000 schools and 50,000 miles of roads.

It pumped billions of dollars into the economy and was responsible for massive public works schemes,
particularly in the west, where it enabled dams to be built to help irrigate former semi-desert land,
electricity to be produced and four vast National Parks to be created.

Relief
 The USA 1933–45: New Deals and economic recovery

There were millions of needy people in the USA. One major difference between Roosevelt and Hoover
was the willingness of the former to involve the government in direct relief measures.

Federal Emergency Relief Act, May 1933

This act established the Federal Emergency Relief Administration (FERA). It was given $500 million to be
divided equally among the states to help provide for the unemployed. Half the money was to be granted
to states for outright relief and, with the remainder, the government would pay each state $1 for every
$3 it spent on relief.

Roosevelt chose Harry Hopkins, whom he had first appointed to run social welfare schemes when he
was Governor of New York state, to run this program. He had administered the relief programs that the
president had introduced when Governor of New York. The Act said that each state should set up a FERA
office and organize relief programs. It should raise the money through borrowing, tax rises or any other
means. When some states such as Kentucky and Ohio refused to comply, Hopkins simply threatened to
deny them any federal monies.

Many states were wedded to the idea of a balanced budget and found expenditure on relief extremely
distasteful. It was still felt by many that to be poor was your own fault. Those requiring relief were often
treated abominably. One FERA worker reported that in Phoenix, Arizona, over 100 claimants were
jammed into a small room in temperatures of over 100 degrees (38°C), while an overflow queue was
waiting in a nearby garage. In many places there could be interminable waits and delays. Hostile
policemen often guarded the long queues of claimants, while uncaring officials completed endless
numbers of forms. Even after this there were usually long delays before any kind of relief was
forthcoming. The bottom line was that they knew Hopkins could not refuse them funds as the only
people who would suffer were those the funds were meant to help, the needy and unemployed
themselves. One governor even boasted that he had cut relief spending but still received FERA funds.

In the face of such opposition, FERA’s effectiveness was limited. Its workers were refused office space in
some states and often their caseloads were numbered in thousands. Its funds were limited too. In 1935
it was paying about $25 per month to an average family on relief, while the average monthly minimum
wage for subsistence was estimated at $100.

However, although its effects were disappointing, it did set the important precedent of federal
government giving direct funds for relief.

Civilian Conservation Corps 1933

Unemployed young men between the ages of 17 and 24 (later 28) were recruited by the Department of
Labor to work in the Civilian Conservation Corps (CCC) in national forests and parks and public lands. The
CCC was organized along military lines, but its tasks were set out by the Departments of the Interior and
Agriculture.

At an estimated cost of $5500 million in the first year, 250,000 recruits worked on reforestation, soil
conservation and forestry management projects. Initially they served for nine months to give as many as
possible the opportunity to join; they were paid $30 per month, of which $25 had to be sent home to
their families. Among the first recruits were 2500 of the second ‘Bonus Army’; Roosevelt waived the age
restrictions on their behalf.

The CCC was originally set up for two years, but Congress extended this for a further seven years in
1935, when its strength was increased to 500,000. In the period of its life, the CCC installed 65,100 miles
of telephone lines in inaccessible areas, spent 4.1 million man-hours fighting forest fires and planted
1.3 billion trees. The CCC gave countless young men a new self-respect and, particularly those from the
cities, valuable experience of both comradeship and life in the ‘great outdoors’. In addition, 100,000 of
its recruits were taught to improve their literacy skills. However, this experience was primarily available
 The USA 1933–45: New Deals and economic recovery

to young white men and, of course, their time in the CCC was no guarantee that they would not return
to the ranks of those on relief when it was over.

Civil Works Administration

The Civil Works Administration (CWA) was created in November 1933, with a $400  million grant from
the PWA, primarily to provide emergency relief to the unemployed during the hard winter of 1933-34.
Although it put four million people to work on public works projects, it was closed down in March when
the winter was over. However, FERA agreed to fund more public works projects itself.

Native Americans
The Indian Reorganization Act recognized and encouraged Native American culture in a shift from the
former policy of assimilation. Tribes were reorganized into self-governing bodies that could vote to
adopt constitutions and have their own police and legal systems. They could control land sales on the
reservations, while new tribal corporations were established to manage tribal resources.

These measures in no way relieved Native American poverty. Indeed, 75 out of 245 tribes vetoed them
when asked to vote on the measures. However, officials did their best to ensure Native Americans could
take advantage of New Deal agencies such as the CCC and PWA. Having said this, one must remember
that Native American poverty was so great that these measures for all their good intentions could at
best have only a very limited effect. As New Deal programs wound down in the 1940s, Native Americans
began to set up pressure groups but often remained among the poorest people in the USA.

Housing
Housing remained a problem because many homeowners were having problems repaying their
mortgages, while there was a shortage of public sector accommodation.

Homeowners Refinancing Corporation, June 1933

This agency helped homeowners in difficulties by offering new mortgages at low rates of interest over
longer periods.

Federal Housing Administration

The Federal Housing Administration (FHA) was established in June 1934 to offer federal insurance to
protect the ability to repay low-interest, long-term mortgages taken out by those buying new homes.
Clearly, this was an attempt to stimulate the building industry. However, the loans were solely for newly
purchased single-family homes; they could not be used to renovate existing properties or for buildings
set out as apartments where several people may live.

The FHA therefore did nothing to help the increasingly poverty-stricken inner cities. In fact, one of the
agency’s unanticipated effects was to encourage the movement to the suburbs. And with 65 per cent of
new houses costing over $4000 it was estimated that less than 25 per cent of urban families could afford
to take out any kind of mortgage on them. The agency mainly benefited white, middle-class families.
Increasingly, inner-city areas tended to be run down and left to poorer ethnic minorities who were
forced to rent squalid properties.
 The USA 1933–45: New Deals and economic recovery

Alternatives to the New Deal

The New Deal attracted much opposition, from the political right because it was too radical and from the
political left because it was not radical enough. In this section the alternatives put forward by some of
these opponents will be examined.

The right
Many of the wealthy, who had supported Roosevelt in the darkest days of the Depression as the savior
of capitalism, now turned against him when it seemed that capitalism had, in fact, been saved. This was
in part because of the increases in taxes, which they opposed, and also what they perceived as too much
continued government involvement in the economy. The Republican Party, still associated with its
failures during the early 1930s, was rebuilding and preparing for the 1936 election, but they were
finding it difficult to field a strong candidate.

Liberty Leaguers
The Liberty League was organized in April 1934 by many conservative Democrats as well as Republicans
to promote private property and private enterprise unregulated by law. Among its leaders were
Al Smith, who had been the Democratic candidate in the 1928 presidential election, and John Jacob
Raskob, a former Democratic Party chairman. Increasingly, its members saw Roosevelt as a traitor to his
class; some refused even to speak of him by name but used cruel jibes like, ‘that cripple in the White
House’. Some likened the New Deal to communism in the USSR. There is even a suggestion that the far
right planned a coup d’état against Roosevelt in 1934 and that this was foiled by the very general who
had been asked to lead it. The Liberty Leaguers attacked Roosevelt throughout the New Deal years and
formed the basis of right-wing opposition to him. By July 1936, it had 125,000 members; after
Roosevelt’s victory in the elections of that year, however, it became less significant.

The left
At the time, Roosevelt was more concerned about threats from the left. This was particularly because
left-wing groups might join together to form a third party to challenge him in the next presidential
election. The threats varied from those advocating radical schemes such as Revolving Old Age Pensions
to popular leaders such as Huey Long and Father Charles Coughlin.

End Poverty in California

 The USA 1933–45: New Deals and economic recovery

The novelist Upton Sinclair came up with a scheme whereby the unemployed would be put to work in
state-run co-operatives. They would be paid in currency, which they could spend only in other co-
operatives. For a time, Sinclair’s ideas gained credibility and he won the Democratic nomination as state
governor for California in the 1934 election. However, well-organized opposition, particularly from the
movie industry in Hollywood, ensured that he was soundly defeated by the Republican candidate.
Nevertheless, his many supporters remained and proved useful recruits for more serious alternative
movements as discussed below.

‘Share Our Wealth’

As an energetic Governor of Louisiana, Huey Long had ordered massive public works programs – over
3000 miles of paved highways were built between 1928 and 1933, besides new public buildings and an
airport at New Orleans – and ambitious adult literacy schemes. However, he did govern as a dictator and
opponents were treated quite brutally by his bullyboys.

In February 1934, Long moved on to the national scene with his ‘Share Our Wealth’ program. He
advocated that all private fortunes over $3 million should be confiscated and every family should be
given enough money to buy a house, a car and a radio. There should also be old-age pensions, minimum
wages so that every family would be guaranteed $2000–$3000 per year and free college education for
all suitable candidates. Long’s ideas proved very popular and ‘Share Our Wealth’ clubs grew to 27,431 in
number, with 4.6 million members spread across the states. Long began to talk of joining forces with
other radicals to form a third party to oppose Roosevelt in the 1936 presidential election.

In 1935, Postmaster General James A. Farley took a secret poll to assess Long’s popularity and was
shocked to discover that up to four million people might vote for him in 1936. This meant that Long
might hold the balance of power in the election. The Louisiana senator was, in fact, gunned down in
September 1935. Rumors circulated by his supporters that Roosevelt’s hand was somehow behind the
assassination. While these accusations were unfounded, the president must nevertheless have breathed
a sigh of relief at the news of Long’s death.

Old Age Revolving Pensions Inc.

Francis Townsend was a retired doctor who advocated old-age pensions with a difference. Everyone
over 60 years of age who was not in paid employment should be given $200 per month on the
understanding that every cent of it was spent and none saved. The idea was that this would boost
consumption and thereby production and so pull the USA out of the Depression. Moreover, encouraging
people to retire at 60 would provide more jobs for the young. Soon Townsend Clubs had 500,000
members and Congress was being lobbied to put the plan into operation. It was, of course, totally
impractical; payments to recipients would have amounted to 50 per cent of national income and an
army of bureaucrats would have been necessary to ensure pensioners were spending all their $200.
Nevertheless, the level of support showed that the movement had to be taken seriously.

Father Charles Coughlin

Charles Coughlin was a priest whose radio program, The Golden Hour of the Little Flower, was
enormously influential during the first half of the 1930s. It regularly commanded an audience of 30–
40 million, and listeners contributed more than $5 million per year to his parish in Detroit. At first,
Coughlin had supported Roosevelt, telling his audience, ‘The New Deal is Christ’s Deal’. However, he
later felt that Roosevelt had not done enough to change the banking system: Coughlin believed that
banks should be nationalized. He contradicted himself by arguing that the New Deal was both a
communist conspiracy and a means by which Wall Street financiers could keep ordinary people
enslaved.

In 1934, Coughlin founded the National Union for Social Justice with the aim of monetary reform and
redistribution of wealth. Roosevelt was afraid of Coughlin’s influence, particularly when a possible
alliance with Huey Long was mooted. However, Long was assassinated, and Coughlin became
 The USA 1933–45: New Deals and economic recovery

increasingly anti-Semitic; he blamed Jews for both the New Deal and control of Wall Street. Inevitably,
perhaps, he began to look with admiration to the European fascist dictators and this, together with
government-inspired attacks, led to Coughlin’s influence declining as the decade wore on. This was due
to many Americans’ dislike of Hitler and Mussolini and increasing fears of being involved in war against
them.

Thunder on the left

This is the name given to various political developments that are credited with moving Roosevelt and
the New Deal further to the left in 1935 and 1936. Governor Floyd B. Olson of Minnesota, for example,
led the Farmer–Labor Party which proposed far-reaching economic reforms. It advocated the state take
control of idle factories to put the unemployed to work, nationalization of public utilities and a
postponement of farm mortgage foreclosures. However, the movement died with Olson, who
developed terminal cancer in 1936. Robert Lafollette Jr and his brother Philip founded a new Progressive
Party, which had the support of eastern intellectuals and called for collective bargaining, unemployment
insurance and old-age pensions.

Impact of the opposition

Although, with hindsight, we can see that these movements did not constitute a serious threat to
Roosevelt, this was not how they were perceived at the time. At best, from Roosevelt’s point of view,
their popularity showed the level of support there might be for more radical presidential measures to
combat the Depression. At worst, there was the possibility that millions of Americans were so frustrated
with the established order that they were prepared to vote for radical or even revolutionary change.
Although few of Roosevelt’s advisers seriously believed this, the prospect of a third party at the 1936
presidential election was worrying. In a three-way presidential election it might hold the balance of
power. Roosevelt may need to put forward many of the measures it favored in order to get its support
to hold onto office.

Roosevelt, meanwhile, had learned of the mood of the country. In the 1934 mid-term congressional
elections, the Democrats had made gains in both houses, with 69 out of 96 seats in the Senate, the
biggest Democratic majority to date. Roosevelt was preparing a second New Deal that was influenced
not only by the demands of radical politicians but also by the increasing opposition of big business to his
measures.
 The USA 1933–45: New Deals and economic recovery

Activity

1. How different were the policies of Hoover and Roosevelt?

2. How fair is the cartoon in Source A to Hoover’s record as president? Explain your answer
carefully using evidence from the source.
3. How does Roosevelt emphasize the urgency of the task faced by his government in Source B?
4. What was different about Roosevelt’s presidential style?
5. How effective were the measures taken during the first 100 days?
6. Read Source C. Why do you think there was such an outcry about slaughtering the pigs?
7. Explain how the two sides of the hill are different in Source D. What do you think was the
purpose of this photograph?
8. Why did members of the wealthy classes oppose the New deal?
9. What were the left-wing alternatives to the New deal and how great a threat were they?
10. How much impact did the opposition have on Roosevelt?