25: CHAPTER THE GREAT DEPRESSION AND THE NEW DEAL 19291939
I. HARD TIMES IN HOOOOVERVILLE A. Introduction 1. The prosperity of the 1920s ended in a stock-market crash that revealed the flaws honeycombing the economy. As the nation slid into a catastrophic depression, factories closed, employment and incomes tumbled, and millions lost their homes, hopes, and dignity. B. Crash! 1. During the preceding two years, the market had hit record highs, stimulated by optimism, easy credit, and speculators manipulations. 2. But after peaking in September, it suffered several sharp checks, and on October 29, Black Tuesday, panicked investors dumped their stocks, wiping out the previous years gains in one day. 3. The market hit bottom in July 1932. By then, the stock of U.S. Steel had plunged from $262 to $22, Montgomery Ward from $138 to $4. Much of the paper wealth of America had evaporated, and the nation sank into the Great Depression. 4. The Wall Street crash marked the beginning of the depression, but it did not cause it. The depression stemmed from weaknesses in the New Era economy. Most damaging was the unequal distribution of wealth and income. 5. With more than half the nations people living at or below the subsistence level, there was not enough purchasing power to maintain the economy. 6. A second factor was that oligopolies dominated American industries. Their power led to administered prices, prices kept artificially high and rigid rather than determined by supply and demand. 7. Banking presented other problems. Poorly managed and regulated, banks had contributed to the instability of prosperity; they now threatened to spread the panic and depression. 8. International economic difficulties spurred the depression as well. Shut out from U.S. markets by high tariffs, Europeans had depended on American investments to manage their debts and reparation payments from the Great War. 9. Government policies also bore some responsibility for the crash and depression. Failure to enforce antitrust laws had encouraged oligopolies and high prices; failure to regulate banking and the stock market had permitted financial recklessness and irresponsible speculation.
C.
D.
E.
F.
10.Reducing tax rates on the wealthy also encouraged speculation and contributed to the maldistribution on income. Opposition to labor unions and collective bargaining helped keep workers wages and purchasing power low. 11.The demand for cash caused banks to fail, dragging the economy down further. And the Federal Reserve Board prolonged the depression by restricting the money supply. The Depression Spreads 1. Unemployment skyrocketed, as an average of 100,000 workers a week were fired in the first three years after the crash. 2. Moreover, the depression began to feed on itself in a vicious circle: Shrinking wages and employment cut into purchasing power, causing business to slash production again and lay off workers, thereby further reducing purchasing power. 3. Urban families were also evicted when they could not pay their rent. Some move in with relatives; others lived in Hoovervillesthe name reflects the bitterness direct at the Presidentshacks where people shivered, suffered, and starved. Womens Jobs and Mens Jobs 1. The depression affected wage-earning women in complex wages. Although they suffered 20 percent unemployment by 1932, women were less likely than men to be fired. 2. Nearly every state considered restricting the employment of married women. 3. Firing women, however, rarely produced jobs for men, because few men sought positions in the fields associated with women. Families in the Depression 1. Divorce declined because it was expensive, but desertion increased, and people postponed marriage. Birthrates fell. Husbands and fathers, the traditional breadwinners, were often humiliated and despondent when laid off from work. 2. Womens responsibilities, by contrast, often grew. The number of female-headed households increased sharply. 3. The depression also affected children. Some parents sacrificed their own well-being to protect their children. But children felt the tension and fear, and many went without food. Last Hired, First Fired 1. Black unemployment rates were more than twice the white rate, reflecting increased job competition and persistent racism. 2. Racism also limited the assistance African Americans received. Religious and charitable organizations often refused to care for black people. Local and state governments set higher relief eligibility requirements for black people than for white people and provided them with less aid.
3. In 1931, African-American women in Harlem joined together as the Harlem Housewives League to challenge New York Citys race-based unequal distribution of relief. 4. By the mid-1930s, Hispanics made up only a tenth of the states migratory labor force, which increasingly consistent of white people who had fled the South and the Great Plains. 5. Local authorities in the Southwest, with the blessing of the Department of Labor, urged all Mexicans, regardless of citizenship status, to return to Mexico and free up jobs and relief assistance for white Americans. G. Protest 1. Bewildered and discouraged, most Americans reacted to the crisis without protest. 2. Communists, socialists, and other radicals organized more formal protests. Socialists built similar organizations, including the Peoples Unemployment League in Baltimore, which had 12,000 members. II. HERBERT HOOVER AND THE DEPRESSION A. The Failure of Voluntarism 1. Hoover fought economic depression more vigorously than any previous president, but he believed that voluntary private relief was preferable to federal intervention. The role of the national government, he thought, was to advise and encourage the voluntary efforts of private organizations, individual industries, or local communities. 2. Hoover also depended on voluntary efforts to relieve the misery caused by massive unemployment. He created the Presidents Organization for Unemployment Relief to help raise private funds for voluntary relief agencies. 3. Hoover blundered not in first relying on charities and local governments for relief but in refusing to admit that they were inadequate. Even his advisors warned that voluntarism and individual initiative had become obsolete. Both his vision and efforts fell short. 4. As the depression worsened, Hoover adopted more activist policies. He persuaded Congress to cut taxes to boost consumers buying power, and he increased the public works budget. 5. Hoovers ideological limitations infuriated Americans who saw him as indifferent to their suffering and a reactionary protector of privileged business interestsan image his political opponents encourages. B. Repudiating Hoover: The 1932 Election 1. Hoovers treatment of the Bonus Army symbolized his unpopularity and set the stage for the 1932 election. The incident confirmed Hoovers public image as harsh and insensitive. 2. In the summer of 1932, with no prospects for victory, Republicans renominated Hoover. Confident Democrats selected Governor Franklin D. Roosevelt of New York.
3. A distant cousin of Theodore Roosevelt, FDR had been prepared for the presidency. Born into a wealthy family in 1882, he had been educated at Harvard, trained in the law, and schooled in politics as a state legislator, assistant secretary of the navy under Wilson, and the Democratic vice president nominee in 1920. 4. FDR carried every state south and west of Pennsylvania. It was the worst rout of a Republican candidate ever. 5. The final blow came in February 1933, when panic struck the banking system. Desperate Americans rushed to withdraw their funds from the remaining banks, pushing them to the brink. III. LAUNCHING THE NEW DEAL A. Introduction 1. In the midst of this national anxiety, Franklin D. Roosevelt pushed forward an unprecedented program to resolve the crises of a collapsing financial system, crippling unemployment, and agriculture and industrial breakdown and to promote reform. B. Action Now! 1. In the first three months of his administration, the famous Hundred Days of the New Deal, the Democratic Congress passed many important laws. 2. Roosevelts program a mix of ideas, some from FDR himself, some from a diverse group of advisers. 3. FDR first addressed the banking crisis. On March 5, he proclaimed a nation bank holiday, closing all remaining banks. Congress then passed his Emergency Banking Act, a conservative measure that extended government assistance to sound banks and reorganize weak ones. 4. Prompt government action, coupled with a reassuring fireside chat over the radio by the president, restored popular confidence in banks. 5. In June, Congress created the Federal Deposit Insurance Corporation (FDIC) to guarantee bank deposits up to $2,500. 6. The Glass-Steagall Act separated investment and commercial banking to curtail risky speculation. 7. The Securities Act reformed the sale of stocks to prevent the insider abuses that had characterized Wall Street, and in 1934 the Securities and Exchange Commission (SEC) was created to regulate the stock market. 8. Two other financial measures in 1933 created the Home Owners Loan Corporation and the Farm Credit Administration, which enabled millions to refinance their mortgages. C. Creating Jobs 1. The Federal Emergency Relief Administration (FERA) furnished funds to state and local agencies. Harry Hopkins, who had headed Roosevelts relief program in New York, became its director and one of the New Deals most important members.
2. Work relief they believed, preserved both the skills and the morale of recipients. 3. The Civil Works Administration (CWA) hired laborers to build roads and airports, teachers to staff rural schools, and singers and artists to give public performances. 4. The Public Works Administration (PWA) provided work relief on useful projects to stimulate the economy through public expenditures. The PWA was directed by Harold Ickes. D. Helping Some Farmers 1. In May 1933, Congress established the Agricultural Adjustment Administration (AAA) to combat the depression in agriculture caused by crop surpluses and low prices. The AAA subsidized farmers who agreed to restrict production. 2. The objective was to boost farm prices to parity, a level that would restore farmers purchasing power to what it had been in 1914. 3. The AAA itself harmed poor farmers while aiding larger commercial growers. As southern planters restricted their acreage, they dismissed tenants and sharecroppers, and with AAA payments, they bought new farm machinery, reducing their need for farm labor. E. The Flight of the Blue Eagle 1. The New Deal attempted to revive American industry with the National Industrial Recovery Act (NIRA), which created the National Recovery Administration (NRA). The NRA sought to halt the slide in prices, wages, and employment by suspending antitrust laws and authorizing industrial and trade associations to draft codes setting production quotas, price policies, wages and working conditions, and other business practices. 2. Hugh Johnson became director of the NRA. He persuaded business leaders to cooperate in drafting codes and the public to patronize participating companies. F. Critics Right and Left 1. But the New Deal policies also provoked criticism, from both those convinced that too little had been achieved and those alarmed that too much had been attempted. 2. Industrialists and bankers organized the American Liberty League to direct attacks on the New Deal. 3. Even without the involvement of socialists of communists, labor militancy in 1934 pressed Roosevelt. Workers acted as much against the failure of the NRA to enforce Section 7a as against recalcitrant corporations. 4. The number of workers participating in strikes leaped from 325,000 in 1932 to 1.5 million in 1934. 5. Textile workers launched the single largest strike in the nations history, shutting down the industry in 20 states.
6. Four prominent individuals mobilized popular discontent to demand government action to assist groups neglected by the New Deal. a. Representative William Lemke of North Dakota, an agrarian radical leader of the Nonpartisan League, called attention to rural distress. Lemke objected to the New Deals limited response to farmers crushed by the depression. b. Francis Townsend, a California physician, proposed to aid the nations elderly, many whom were destitute. The Townsend Plan called for a government pension to every American over the age of 60, provided that the recipient retired from work and spent the entire pension. c. Father Charles Coughlin, a Catholic priest in the Detroit suburb of Royal Oak, threatened to mobilize another large constituency against the limitations of the early New Deal. Coughlin organized the National Union for Social Justice to lobby for his goals. d. Roosevelt found Senator Huey P. Long of Louisiana still more worrisome. Long proposed more comprehensive social-welfare policies than the New Deal had envisaged. In 1934, he organized the Share-Our-Wealth Society. His plan to end poverty and unemployment called for confiscatory taxes on the rich to provide every family with a descent income, health coverage, education, and old age pensions. IV. CONSOLIDATING THE NEW DEAL A. Introduction 1. Responding to the persistence of the depression and political pressures, Roosevelt in 1935 undertook economic and social reforms that some observers have called the Second New Deal. B. Weeding Out and Lifting Up 1. Introduction a. The Wagner National Labor Relations Act guaranteed workers the right to organize unions and prohibited employers from adopting unfair labor practices, such as firing union activists and forming company unions. b. The law also set up the Nation Labor Relations Board (NLRB) to enforce these provisions, protect worked from coercion, and supervise union elections. 2. Social Security a. It provided unemployment compensation, old-age pensions, and aid for dependent mothers and children and the blind. b. Moreover, unlike in other nations, the old-age pensions were financed through a regressive payroll tax on both employees and employers rather than through general tax revenues. Thus the new system was more like a compulsory insurance program. 3. Money, Tax, and Land Reform
a. Another reform measure, Banking the Act of 1935, increased the authority of the Federal Reserve Board over the nations currency and credit system and decreased the power of the private bankers whose irresponsible behavior had contributed to the depression and the appeal of Father Coughlin. b. The Revenue Act of 1935 provided for graduated income taxes and increased estate and corporate taxes. Opponents called it the Soak the Rich Tax, but with its many loopholes, it was scarcely that and was certainly not a redistributive measure such as Huey Long had proposed. c. The Second New Deal also responded belatedly to the environmental catastrophe that had turned much of the Great Plains from Texas to the Dakotas into a Dust Bowl. Dust storms blew away millions of tons of topsoil, despoiling the land and darkening the sky a thousand miles away. d. Many of these poor Okies headed for California, their plight captured in John Steinbecks novel, The Grapes of Wrath (1939). e. In 1935, Roosevelt established the Resettlement Administration to focus on land reform and help poor farmers. Under Rexford Tugwell, this agency initiated soil erosion projects and attempted to resettle impoverished farmers on better land, but the problem exceeded its resources. Congress moved to save the land, if not its people, by created the Soil Conservation Service in 1935. C. Expanding Relief 1. With millions still unemployed, Roosevelt pushed through Congress in 1935 the Emergency Relief Appropriation Act, authorizing $5 billionat the time the largest single appropriation in American historyfor emergency public employment. 2. Roosevelt created the Works Progress Administration (WPA) under Hopkins, who set up work relief programs to assist the unemployed and boost the economy. 3. The WPA also developed work projects from unemployed writers, artists, musicians, and actors. 4. The National Youth Administration (NYA), another WPA agency, gave part-time jobs to students, enabling 2 million high school and college students to stay in school, learn skills, and do productive work. D. The Roosevelt Coalition and the Election of 1936 1. The 1936 election gave Americans an opportunity to judge FDR and the New deal. Conservatives alarmed at the expansion of government, business people angered by regulation and labor legislation, and wealthy Americans furious with tax reform decried the New Deal. But they were the minority.
2. Even the presidential candidate they supported, Republican Governor Alf Landon of Kansas, endorsed much of the New Deal, criticizing merely the inefficiency and cost of some of its programs. 3. FDR named the first Italian American to the federal judiciary, for example, and appointed five times as many Catholics and Jews to government positions as the three Republican presidents had during the 1920s. 4. Roosevelt polled 61 percent of the popular vote and the largest electoral margin ever recorded, 523 to 8. V. THE NEW DEAL AND AMERICAN LIFE A. Labor on the March 1. Workers wanted to improve their wages and benefits as well as to gain union recognition and union contracts that would allow them to limit arbitrary managerial authority and achieve some control over the workplace. 2. The Second New Deal helped. By guaranteeing labors rights to organize and bargain collectively, the Wagner Act sparked a wave of labor activism. But if the government ultimately protected union rights, the unions themselves had to form locals, recruit members, and demonstrate influence in the workplace. 3. More progressive labor leaders saw that industry-wide unions were more appropriate for unskilled workers in mass-production industries. 4. Forming the Committee for Industrial Organization (CIO) within the AFL, they campaigned to unionize workers in the steel, auto, and rubber industries, all notoriously hostile to unions. The militants reorganized as the separate Congress of Industrial Organizations. (In 1955, the two groups merged as the ALF-CLO.) 5. The CLO also employed new and aggressive tactics, particularly the sitdown strike, in which workers, rather than picketing outside the factory, simply sat inside the plant, thereby blocking both production and the use of strikebreakers. 6. The CLO won major victories despite bitter opposition from industries and its allies. The issue was not wages but labors right to organize and bargain with management. 7. New Deal labor legislation, government investigations and court orders, and the federal refusal to use force against strikes helped the labor movement secure basic rights for American workers. B. Women and the New Deal 1. New Deal relief programs had a mixed impact on working women. 2. Women on relief were restricted to womens workmore than half worked on sewing projects, regardless of their skillsand were paid scarcely half what men received. 3. But by raising minimum wages, the NRA brought relatively greater improvement to women, who were concentrated in the lowest-paid
occupations, than to male workers. The Social Security Act did not cover domestic servants, waitresses, or women who worked in the home, but it did help mothers with dependent children. 4. Accordingly, if a woman worked outside the home and her husband was eligible for benefits, she would not receive her own retirement pension. And if a woman had no husband but had children, welfare authorities would remove her from work-relief jobs regardless of whether or not she wanted to continue to work, and would give her assistance from the Aid to Dependent Children (ADC) program, which was also created under the Social Security Act. 5. Secretary of Labor Frances Perkins was the first woman cabinet member and a key member of the network; other women were in the Treasury Department, the Childrens Bureau, and relief and cultural programs. 6. Eleanor Roosevelt had became not merely the most prominent first lady in history but a force in her own right and a symbol of the growing importance of women in public life. C. Minorities and the New Deal 1. Despite the move of African Americans into the Democratic Party, the New Deals record on racial issues was limited. 2. For similar reasons, many New Deal programs discriminated against African Americans. The CCC segregated black workers; NRA codes so often specified lower wages and benefits for black workers relative to white workers or even excluded black workers from jobs. 3. Eleanor Roosevelt prodded FDR to appoint black officials, wrote articles supporting racial equality, and flouted segregationist laws. Harry Hopkins and Harold Ickes also promoted equal rights. 4. African Americans themselves pressed for reforms. Civil rights groups protested discriminatory policies, included the unequal wage scales in the NRA codes and the CCCs limited enrollment of black youth. 5. FDR prohibited discrimination in the WPA in 1935, and the NYA adopted enlightened racial policies. Roosevelt also appointed black people to important positions, including the first black federal judge. 6. Native Americans also benefitted from the New Deal. New Deal officials also refocused government Indian policy, which had undermined tribal authority and promoted assimilation by reducing Indian landholding and attacking Indian culture. 7. Appointed commissioner of Indian affairs in 1933, John Collier prohibited interference with Native American religious or cultural life, directed the Bureau of Indian Affairs to employ more Native Americans, and prevented Indian schools from suppressing native languages and traditions. 8. Collier also persuaded Congress to pass the Indian Reorganization Act of 1934, often called the Indians New Deal. The act guaranteed
religious freedom, reestablished tribal self-government, and halted the sale of tribal lands. 9. Hispanic Americans received less assistance from the New Deal. Finally, by excluding agricultural workers, neither the Social Security Act nor the Wagner Act gave Mexican Americans much protection or hope. Farm workers remained largely unorganized, exploited, and at the mercy of agribusiness. D. The New Deal: North, South, East, and West 1. The New Deal in the South a. The New Deals agricultural program boosted farm prices and income more in the South than any other region. b. The New Deal also improved southern cities. FERA and WPA built urban sewer systems, airports, bridges, roads, and harbor facilities. c. The federal government had a particularly powerful impact on the South with the Tennessee Valley Authority (TVA), launched in 1933. Coordinating activities across seven states, the TVA built dams to control floods and generate hydroelectric power. d. The New Deal further expanded access to electricity by establishing the Rural Electrification Administration (REA) in 1935. 2. The New Deal in the West a. Westerners received the most federal money per capita in welfare, relief projects, and loans. Utah, which received the most federal relief funds per capita, was the nations prize gimme state. b. The Hoover Dam on the Colorado River completed in 1935; the Grand Coulee Dam on the Columbia River, finished in 1941; and other giant projects prevented flooding, produced cheap hydroelectric power, and created reservoirs and canal systems to bring water to farms and cities. E. The New Deal and Public Activism 1. Despite Hoovers fear that government responsibility would discourage local initiative, the 1930s witnessed an upsurge in activism. New Deal programs, in fact, often encouraged or empowered groups to shape public policy and social and economic behavior. 2. But federal programs often allowed previously unrepresented groups to contest traditionally dominant interest. VI. EBBING OF THE NEW DEAL A. Challenging the Court 1. Roosevelt regarded the Supreme Court as his most dangerous opponent. During his first term, the Court had declared several important measures unconstitutional. 2. In early 1937, Roosevelt proposed legislation authorizing the president to name a new justice for each one serving past the age of 70. Additional judges, he said, would increase judicial efficiency. But his
real goal was to appoint new justices more sympathetic to the New Deal. 3. The Court itself undercut support for FDRs proposal by upholding the Social Security and Wagner acts and minimum-wage legislation. Moreover, the retirement of a conservative justice allowed Roosevelt to name a sympathetic successor. Congress rejected Roosevelts plan. 4. Roosevelts challenge to the Court hurt the New Deal. It worried the public, split the Democratic Party, and revived the conservatives. B. More Hard Times 1. A sharp recession, beginning in August 1937, added to Roosevelts problems. 2. In 1938, Roosevelt reluctantly increased spending. His decision was based on the principles of the British economist John Maynard Keyes. C. Political Stalemate 1. The recession interrupted the momentum of the New Deal and strengthened its opponents. In 1938, Congress rejected tax reforms and reduced corporate taxes. 2. The few measures that passed were heavily amended. 3. To protect the New Deal, Roosevelt turned again to the public, with whom he remained immensely popular. 4. With Roosevelt in the White House and his opponents controlling Congress, the New Deal ended in political stalemate. VII.GOOD NEIGHBORS AND HOSTILE FORCES A. Introduction 1. Moreover, although FDR continued the policy of military nonintervention, his displeasure with the 1933 election of a radical as president of Cuba led him to support a coup there that resulted in the coming to power of the infamous dictator Fulgencio Batista. The Batista era lasted until he was overthrown by Fidel Castro in 1959. B. Neutrality and Fascism 1. Introduction a. Hitler came to power in 1933, shortly before FDR entered the White House, and he pledged to restore German pride and nationalism in the aftermath of the Versailles Treaty. b. As the leader of the National Socialist Workers Party, or Nazis, Hitler established a fascist governmenta one-party dictatorship closely aligned with corporate interests, committed to a biological world evolution, and determined to establish a new empire, the Third Reich. c. Italian leader Benito Mussolini, who had assumed power in 1922 and envisaged emulating the power and prestige of the Roman Empire, brutally attacked Ethiopia in 1935. d. The following year, a young fascist military officer, Francisco Franco, led an uprising in Spain and successfully ousted the Spanish
Republic and its loyalist supporters by 1939 to create an authoritarian government. e. Meanwhile, Hitler implemented his plan of conquest: he remilitarized the Rhineland in 1936, and in 1938 he annexed Austria. f. Congress passed four Neutrality Acts designed to continue Americas trade with its world partners but prohibit the president from taking sides in the mounting European crisis. g. The first act, passed in 1935, prohibited Americans from traveling to a war zone, banned loans to belligerent nations, and instituted an embargo on armaments to belligerents. 2. Appeasement and More Neutrality a. After annexing Austria, Hitler pushed again in 1938 when he demanded the Sudetenland from Czechoslovakia. The French and the British refused to stand up to Hitler, following instead a policy of appeasement. b. In America, too, the sentiment was for peace at all costs, and isolationism permeated the halls of Congress. c. Isolationism compounded by anti-Semitism and by the divisions between the leaders of the American Jewish community combined to ensure that the United States would not became a haven for Jews suffering under Nazi brutality. d. News of Nazi atrocities against Austrian Jews in 1938 shocked the American press, and Hitlers violent pogrom, known as Kristallnacht (Night of the Broken Glass), conducted against Jews throughout Germany in November 1938, added fresh proof of Nazi cruelty. e. As early as 1933, Hitler established the first concentration camp at Dachau, and by 1939, camps in Germany held over 25,000 people. f. Japan resented U.S. economic interests in East Asia and was offended by the policy of excluding Japanese immigrants. C. Edging Toward Involvement 1. After the Munich agreement, President Roosevelt moved away from domestic reform toward preparedness for war, fearful that conflict in Europe was unavoidable and determined to revise the neutrality laws.