In 1932 the United States

economy stood at its lowest

ebb in
modern history. An army of out-
of-work military veterans
camped and marched in
Washington, DC.
Unemployment stood at around
25 percent. Indeed the entire
world seemed to have ground
to a
halt. Facing this crisis, Franklin
D. Roosevelt accepted the
Democratic nomination for
president, pledging himself to
‘‘a new
deal for the American people.’’1
In that speech alone, elements
of
the ‘‘new deal’’ included
increasing public works,
supporting
agricultural prices, creating
new mortgage markets,
shortening the
working day and week,
regulating securities, restoring
international trade, reforesting
the countryside, and repealing
Prohibition. After taking office
in 1933, Roosevelt worked with
Congress to get laws passed for
all these measures and more:
by the
end of the decade, the New
Deal had grown to include
social
insurance against old age,
unemployment, and disability;
watershed management;
support for unionization;
deposit
insurance; and a strengthened
Federal Reserve System,
among
other innovations.
The New Deal included a
variety of sometimes
contradictory
components that scholars still
struggle to summarize. Often
historians agree with Isaiah
Berlin, who said in 1955 that
the New
Deal was an impressive
balancing act, able ‘‘to
reconcile individual
liberty . . . with the
indispensable minimum of
organising and
authority.’’2 But as David M.
Kennedy notes, we can see the
New
Deal thus only when it is
‘‘illumined by the stern-lantern
of
history.’’3 Listening to
Roosevelt’s pledges in 1932,
watching
Congress pour reforms forth in
the first one hundred days of
his
administration in 1933, seeing
the White House reply to
challenges
from the Supreme Court and
political opponents in 1935,
hearing
Roosevelt campaign as ‘‘the
master’’ of corporate interests
in 1936,
it would have been hard to
discern in advance what
seemed clear in
the wake of the decade’s
passing. And indeed, there is
little proof
that Roosevelt or anyone else
set out to create the carefully
balanced system that the New
Deal became: it evolved as the
president and Congress
responded to the judiciary, the
electorate,
and the changing world of the
Depression.
In this very short introduction
to the Great Depression and
the
New Deal, I offer some basic
ideas for a first understanding
of this
profound crisis and America’s
still-influential legislative
response.
The world that broke down in
1929 broke down for reasons
that
astute observers had predicted
in advance. The subsequent
and
nearly total failure to repair the
damage owed to clear errors of
judgment and action, and the
prolonged misery that millions
of
people suffered could therefore
have been lessened. Roosevelt
and the Democratic Congresses
of the New Deal era achieved a
marked historical success by
correcting those errors. They
also
committed errors of their own,
and I do not slight them here.
But in the 1936 election, the
American voters
overwhelmingly
asked their leaders to forge
forward with their experiments,
mistakes aside, rather than
return to the old and, to their
minds,
wholly discredited ways. This
spirit of pragmatic
experimentation
became the basis for a
generation’s faith in the new
American
way, not just in the United
States but around the world.
Now, if you doubt the story is
quite so simple, and if you
insist
that these simple statements
require qualifications and
nuance,
I shall have to concede the
point—beyond the confines of
this
brief book, I greatly respect the
complexity of this era and the
2scholarship covering it. On the
principle that you will go on
from
here if you wish fully to
appreciate the period, the book
concludes
with recommendations for
further reading. But the body of
the
book sticks to these simpler
lines of argument on the
grounds that
they serve as a useful
introduction to the subject.
The Great Depression began in
the late 1920s, not necessarily
with
the Great Crash of 1929 but
around that time, and afflicted
a world
tied together by specific kinds
of debts, both within and
between
countries. Chapter 1 outlines
that world and America’s
peculiar
place in it, explaining how it
differed from the world before
World
War I, and emphasizing the
vulnerabilities of the system as
outlined by contemporary
critics: the web of debt binding
that
world together looked fragile to
its keenest observers.
Chapter 2 discusses the
reactions to the crisis, first of
the Federal
Reserve System, which serves
the United States as a central
bank,
and second of President
Herbert Hoover and the
Republican
majority in Congress. Contrary
to Democratic accusations, the
Republicans did not do nothing
—but Hoover’s own principles
prevented him from doing
nearly enough, and the crisis
worsened
appallingly under his
leadership.
Chapter 3 shows that the
greatness of the Great
Depression owes
to its widespread impact. It
afflicted all sections of the
American
economy and much of the
world. Perhaps most
importantly, it
encouraged middle-class
American taxpayers and voters
to
identify themselves with the
unfortunate many, rather the
fortunate few.
The discussion here of the New
Deal, like all such discussions,
requires a selective principle to
explain what belongs under
that
rubric and what does not. You
will find two in this book. The
first is
chronological. While writers
sometimes use the term ‘‘New
Deal’’
to refer to the modern
Democratic Party’s agenda, or
indeed the
expansion of the American
state under any administration
for any
purpose after the Roosevelt era
(a concept that sometimes
goes
under the name, ‘‘the New Deal
order’’), I concern myself in this
book chiefly with the 1930s—
after which Roosevelt and his
contemporaries thought the
New Deal ended—and look only
briefly to its legacy in the war
years.4 The second is
functional. I
divide the New Deal here into
three parts: (1) those measures
that
appear to have worked to
reverse the Depression; (2)
those that did
not; and (3) those that had little
to do with fighting the current
disaster but served to prevent
or soften future ones.
Beyond Roosevelt’s core
conviction that ‘‘[n]ecessitous
men are
not free men,’’ little held the
New Deal together.5 New Deal
programs embodied no single
approach to political
management of
the economy. They originated
in no single book, speech, or
person’s
thoughts. In some instances,
Roosevelt himself had little to
do
with, or even opposed,
ultimately important and
successful
legislation. The New Deal
emerged over time from the
fights
between the president, the
Congress, the Supreme Court,
all of
them influenced by the
electoral returns that time after
time
supported this continuing
conflict, in the interests of
creating a
stronger country.
Chapter 4, ‘‘Reflation and
Relief,’’ covers the New Deal
stabilization and shoring-up of
America’s banks, currency, and
credit, and the simultaneous
effort to supply immediate
relief to
the Depression’s suffering
millions while still keeping
American
traditions and institutions
intact. These efforts alone,
pursued
vigorously, might eventually
have ended the Depression, but
New
Dealers had greater ambitions.
Chapter 5, ‘‘Managing Farm
and Factory,’’ explains New
Deal
attempts to re-create the
managed economy of World
War I for the
peacetime crisis of the 1930s.
These efforts generated
controversy
at the time and in retrospect
appear considerably ill-advised.
But
they had roots deep in
American politics, and their
failures helped
turn the New Deal into the
balanced mechanism it
became.
4Chapter 6, ‘‘Countervailing
Power,’’ considers the ways
New
Dealers tried to redistribute
influence in the American
economy.
They did not use state
redistribution of wealth through
tax policy
and welfare payments; rather,
they used law to encourage
interest
groups and individual actors to
act independently of their
employers.
By 1936, the use of
countervailing power had
become a distinctive
hallmark of the New Deal.
Never so efficient as direct
state action,
the strategy of countervailing
power allowed Roosevelt to, in
Berlin’s words, ‘‘establish new
rules of social justice . . .
without
forcing his country into some
doctrinaire strait-jacket,
whether of
socialism or State capitalism, or
the kind of new social
organisation
which the Fascist regimes
flaunted as the New Order.’’6
By such
methods the New Deal gave
weaker groups in society the
ability to
negotiate better deals in a
marketplace it left substantially
intact.
The book’s final chapter shows
that the American electorate
ratified Roosevelt in the
landslide victory of 1936 and
explains why
the New Deal nevertheless
ground to a halt within a few
years after
that. The Supreme Court played
its part, and so did Franklin
Roosevelt’s overreaching
ambition. But so too did the
results of
their first experiments change
some New Dealers’ minds. And
finally, the impending war in
Europe and America’s response
to it
set aside the New Deal’s fiscal
caution and experimental care.
The New Deal did not end the
Great Depression. As one
American
who lived through the 1930s
told Studs Terkel, ‘‘industries
needed
to make guns for World War II
made that happen.’’7
Unemployment did not return
to its 1929 level until 1943.8
But
while we can therefore say that
the New Deal did not finish the
job,
we cannot say that it was not
working. Throughout the 1930s,
with
the exception of the recession
in 1937–38, the economy was
improving—growing on average
8 percent a year from 1933–37
and 10 percent a year from
1938–41, while unemployment
fell
steadily as well.9 This
impressive rate of recovery
reminds us how
far the United States had to go
to recover from the Hoover era.
It
also helps explain why the New
Deal achieved such political
success.
As a program to reform the
American and global political
economy, the New Deal met
with more ambiguous fortune
because
it blurred into the war. The New
Deal started and mainly stayed
a
purely American set of
solutions to a problem of global
importance, although the
Anglo-American trade
agreement of
1938 pointed toward an
international method of
reviving the world
economy. And while the
postwar order that Roosevelt in
his last
years helped secure for the
world owed much to New Deal
methods
of pragmatic experimentation
and shifting power away from
states,
because the war began before
the lessons of the New Deal
had
made themselves quite clear,
observers could not readily
disentangle the two great
events. The moral clarity of the
1940s
obscured the hard choices,
partial successes, and political
bargains
of the 1930s.
In the conclusion I discuss the
New Deal’s influence on the
postwar
world through the Bretton
Woods system of international
agreements for economic
stability, which endured until
the 1970s.
Not until then did the United
States begin to retreat from its
New
Deal at home and abroad. And
even after several subsequent
decades during which
politicians have led a revival in
America’s
pre-1929 beliefs, claiming
repeatedly that government is
a
problem, not a solution, for
modern economies, the New
Deal’s
basic commitment to shared
responsibility for economic
security
and its skepticism toward the
complete reliability of bankers,
brokers, and corporate
executives has not quite died.
Throughout this book, the
reader will find these
interpretations
guided not only by the easier
wisdom of scholarly hindsight,
but
also by the perceptive
assessments of contemporary
observers. Just
as Americans enjoyed the great
good fortune of Franklin
Roosevelt’s unique presidential
competence in both peace and
war, they had also among them
a remarkable generation of
social
scientists and other political
analysts. The book relies on
them as
much as on those who have
followed them and profited
from their
vision. And on the advice of one
of the most acute among them,
we
begin with a description of the
world that came limping to a
halt in
the Great War of 1914–18.