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Research of How Successful the New Deal Was for Society and Economy

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As soon as Roosevelt’s presidential term began on the 4th March 1933, his New Deal promised relief, recovery and reform. FDR did more in his first 100 days than any of his predecessors and most of those who came after, but this is not quite as promising as it first appears. The Great Depression hit America like a tsunami just months into Hoover’s presidency and left the US in an economic crisis. Following this sudden, devastating decline of the stock market, the entire nation faced unprecedented financial, agricultural and industrial problems. Unemployment in 1933 had risen to a catastrophic 25% and average family income had fallen by 40% since 1929. By 1933, the GNP had halved compared to that in 1929. All of these problems posed huge threats to American stability and needed to be solved, and fast. FDR, a strong personality with a promising view of America’s future, was the man to step forward. It is hardly surprising that he won a huge electoral victory with 57.4% of the vote and 42 states carried in his favour, winning 472 of 531 electoral votes. However, there is much debate over how effective the New Deal really was at combatting the depression. Amity Shlaes, William E Leuchtenburg and Burton Folsom Jr. have different interpretations on Roosevelt and the New Deal. Leuchtenburg, argues that FDR was a good president who took great strides towards curing the nationwide depression. On the other side of the political spectrum, Shlaes and Folsom are much more critical of FDR’s attempts. In most cases, the negatives of the various New Deal policies tend to outweigh the positives. Measuring the successes and failures on such a scale as this is complex. In order to assess the extent to which conditions improved agricultural policy, the perspective of both landowners, tenant farmers and sharecroppers will be considered. Similarly the impact of industrial policy on groups will be analysed. Roosevelt personally, the way he came to power and the way he used it will also be assessed.

Amity Shlaes is an American author and magazine and newspaper columnist. Shlaes writes from a US libertarian point of view. She has written four books and had much success from each. As a libertarian, she is very much opposed to the amount of federal involvement during the depression. Shlaes writes in one article that Roosevelt’s actions to resolve the crisis, “may actually have perpetuated it.” She also uses Roosevelt’s mistakes in his intervention to reinforce her belief in libertarianism when she writes “even the best-intentioned government intervention can make things worse.”

Burton W. Folsom Jr is a professor of history at Hillsdale College in Michigan and a senior historian at the libertarian organisation Foundation for Economic Education in New York. His involvement with this group shows the views he may have as libertarians tend to be more in favour of political freedom and autonomy. Folsom is very negative of Roosevelt and the New Deal arguing that it largely worsened the Great Depression. It is easy to see his opinions, before even reading the book, purely from the title of his book “New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America.” He is not scared to make his opinions clear through his use of bold statements such as “how it hurt farming” and in his choice of quotations to support his own works like “for every problem that was solved, two or three new problems were created,” from H.V. Kaltenborn a national radio commentator. William E. Leuchtenburg has an extremely contrasting view from the two previously mentioned. He is “a leading Scholar on the life and career of Franklin Delano Roosevelt,” which shows he is experienced and respected in the field. His most notable work is “Franklin D. Roosevelt and the New Deal, 1932-1940” written in 1963. It could be argued that being born in 1922 gives him somewhat of an advantage, having lived through the events he chooses to write about. He talks a lot about Roosevelt’s personality and the moves he made to make him such a “people’s president,” he is particularly fond of FDR’s “Fireside Chats.” One of Leuchtenburg’s most famous quotes shows just how positive he is about FDR as he calls him “the saviour of capitalism.”

It’s not hard to see why Roosevelt quickly became so widely loved by the American people. With the state of the nation following the depression left by Hoover’s presidency, people began to look for any other alternative and Roosevelt seemed to be the knight in shining armour that the people were searching for. He had bright ideas to drag America out of the fast worsening depression and a level of charisma that very few could resist. Even Shlaes who is largely critical of FDR admits his personality was one of the better features of his presidential campaign as she writes “in the darkness, Roosevelt’s voice seemed to shine.”[5] In 1921, FDR contracted Polio, a paralytic illness which left him completely unable to use his legs. When this happened, he believed his political career to be over. His wife, Eleanor, convinced him otherwise. His disability and friendly, supportive wife certainly helped the people love him even more. The fact that he battled his disability and continued his fight to become the president of the United States showed a “great perseverance,”America was in a drastic situation and the American people were looking for, quite frankly, anything that wasn’t Herbert Hoover. Would the election result have been different if the situation was better? Probably not. But the margin of Roosevelt’s victory certainly would not have been so large. The desperation seen in the Americans is not dissimilar to that in the Germans at a similar time. Both nations had hit a huge depression and the desperation of them both lead to a mass voting for a big change. In 1932, before he had even been elected FDR “asked for only one clear mandate – bold action” which as Conkin points out, “seemed a terribly dangerous and callous demagoguery.” FDR also worked to form a level of communication between the president and the people. He replied to those who wrote him but his most famous method of communication with the people was his so called “Fireside Chats.” These were a series of 28 radio shows put on by FDR himself in which he explained his policies to the American people. Powell, another figure who is largely negative of Roosevelt’s administration finds positives in FDR’s fireside chats. He writes about his first ever fireside chat saying; “The “chat” went on for thirteen minutes and established FDR as a masterful communicator.” This shows that no matter how poor the new deal was, it is impossible to deny that Roosevelt was indeed a masterful communicator.

Agriculture was a massive aspect of the American lifestyle. Sadly, by 1933, farm prices were at rock bottom. Overproduction of cotton meant that money was lost on every single acre they planted. Tenant farmers had to pay quarter of their crops as rent and sharecroppers paid half of all the cotton they picked, a large number of whom were black. The Southern Tenant Farmers Union (STFU) was a union set up and formed of both blacks and whites. At the end of its first year, the union boasted to have over 1,000 members. The STFU arranged to meet with the AAA to get them to ensure that any money given to the planters was distributed fairly. Before long, the STFU went on strike in order to campaign for higher wages and sure enough, after 10 days of striking, land lords were forced to raise their wages. This success led to the STFU gaining many more members. The situation for southern farmers seemed to be getting brighter but their victory was short lived. Regrettably, agricultural unions were not included in The Wagner Act meaning that unions like the STFU had no federal protection which meant they were still intimidated by the planters. In this case, Roosevelt’s administration brutally prevented the progression of agriculture. The AAA was an act designed to use many different methods to bring farm prices back up. Powell argues that, because the AAA provided subsidies based on acreage and output, the policy largely favoured the bigger farmers. Unfortunately, “by basing payments on production instead of need, it inevitably aided most generously already large and prospering farmers.”[10] Kennedy highlights an issue with the provided subsidies and benefit payments, specifically the way in which they were distributed. He writes “In theory, Landlords were supposed to share their benefit payments with their tenants. In practice, very few of them did.” Powell also points out that the New Deal “displaced poor sharecroppers and tenant farmers, a large number of whom were black,” which reflects badly on FDR’s willingness to pursue racial equality. Bernstein, writing from a very different perspective, represents a similar line of argument. He claims that the New Deal’s agricultural policies “sacrificed the interests of the marginal and the unrecognised to the welfare of those with greater political and economic power.” However, Leuchtenburg disagrees with the view presented by both Powell and Bernstein. He argues that the moves made to improve farming and agriculture were a crucial part of the New Deal. Leuchtenburg indicates that “They gave highest priority to raising farm prices in order to restore the balance between industry and agriculture and to provide business with a vast home market.” The AAA has always been subject to extensive debate over many of its actions and who they really helped. It is hard to try and justify, for example, Roosevelt’s idea that overproduction was the issue when so many people were starving. It’s made even harder to argue by the AAA’s order to kill six million pigs and not turn them into food and their paying farmers in subsidies to not plant on certain plots of land. This did bring down production and subsequently brought crop prices back up. However, the plan to stop producing so much food when so many Americans were left so badly affected by the depression that they were starving, is completely inexcusable. This decision also seems to present a point of view from FDR in which financial stability outweighs the importance of quality of life for the American People.

The Farm Credit Act of 1933 is frankly absurd. The aim was to cure farmers of their indebtedness by providing loans. Which makes sense in the short term because farmers can pay off their debts. However, once the loans are paid off, the farmers are simply left in debt again from the loans they used, hence why Conkin makes the point, “recovery remained only a dream.” Over 100 million dollars was made available for loans and mortgage refinancing – “nearly four times as much as the total of mortgage loans to farmers from the entire land-bank system the year before.” The Farm Credit Act did, as Schlesinger argues, give “every evidence of getting at least the emergency debt problem under control,” but while, fixing the emergency is important, it is arguably more important to repair the long term worries of the situation. This also links with the Farm Mortgage Refinancing Act. It helped farmers with their loans by rescheduling them and avoid farms being repossessed. Unfortunately, for many farms it was already too late. People were in conditions too bad to continue and were repossessed anyway. In both the farm credit act and the Farm Mortgage Refinancing Act, the short term problems were solved by simply making them long term so they did not really solve anything at all. The Soil Erosion and Conservation Acts aimed to negate the effects left by the dustbowl and they did in fact succeed in doing so. Unfortunately, the money made from the land continued to go to the land lords as opposed to the smaller tenant farmers who continued to go unfairly underpaid for the work they were doing. The Tennessee Valley occupied an area around the size of England and Wales combined (roughly 40,000 square miles). It was in contact with 7 states and 2.5 million people lived within its boundaries, half of whom were on the dole. The Tennessee Valley and the river Tennessee provided biannual problems for hundreds of thousands of farmers in the area. Every spring, the river Tennessee flooded, washing away millions of tons of topsoil and destroying farms in its path. Every summer, there was very little water to be found in the river at all and the surrounding land was parched. These issues, combined with animal grazing and poor farming lead to a large increase in levels of soil erosion. On top of this, only 2% of farms within the Tennessee Valley had access to electricity, which provided unbeatable hinderance to the mechanisation and modernisation of the area. The Tennessee Valley Authority (TVA) built a series of dams along the valley to control the flooding which caused such devastation to the surrounding farmers, their land and their livelihoods and to use the dams to provide affordable electricity for the area. Kennedy believed that the TVA had serious potential as he writes “Roosevelt’s vision of what the TVA might do was breathtaking.” On the other hand, Shlaes blasts the TVA for “crowding out private utilities that hoped to light up the South.” The TVA was supposed to be the first of many acts of its kind all aimed at regenerating areas of land facing extreme social and economical distress. All the other projects flopped in congress and never came to be. However poor the rest of agricultural actions taken may be, the TVA was largely positive, especially with providing affordable electricity to the area and providing jobs in the huge area. However, while it was successful in providing electricity to the area, it caused conflict with private businesses trying to do the same. The success of the TVA, leaves us pondering the counterfactual question of “what more could have been done if the other projects had made it through congress?” Finally, the Rural Electrification Act ran alongside the TVA. It aimed to provide electric power throughout the country. It provided low interest loans to rural cooperatives that helped to fund the electrification of the most rural areas where the big businesses had no interest. The act saw a lot of success but that success took a long time to happen. By 1939, 25% of farming families had electricity, a small but welcome increase from the 20% in 1933. By 1949 it was over 90%.

After the depression, the industry was in a truly dire state. The economy descended from essentially full employment in 1929 when the unemployment rate was just 3.2 percent into massive unemployment in 1933 when the unemployment rate reached 25% and throughout the 30s, this figure never once dropped below 14%. Even during the build up to the second world war, which a lot of people mark as the end of the depression, unemployment was still at 9.9%. Unfortunately, the measurements taken to improve the situation across unemployment and industry were not carried out well enough to be called a success. The Roosevelt administration appropriated a monumental, 3.3 billion dollars to the Public Works Administration (PWA) to create jobs for skilled workers in building great projects in the first year alone. In its eleven years of life between 1933 and 1944, the PWA spent over 6 billion dollars, which did not exactly help the deficit. Some of the PWA’s most notable projects are, The Triborough Bridge, The Los Angeles Airport and The Lincoln Tunnel. By providing national and local pride with these great projects along with plenty of jobs for skilled workers, it’s easy to stop there and judge the PWA as a success but it’s not quite that simple. The PWA only hired skilled workers, which works well for private firms having more money pumped into them but it does not have quite such a happy effect on those unskilled workers looking for work. For a total of 6 billion dollars, the PWA could’ve done a lot more than build some good looking bridges and a couple of airports. The PWA’s younger, and rather confusingly named, brother, the Works Progress Administration (WPA) was much more promising. The WPA was one of the largest agencies to ever come out of the New Deal with an enormous, 4.9 billion dollars being appropriated for the carrying out of many public works projects including the construction of many public buildings and roads. The idea was to make sure people kept their self-reliance and self-preservation to stop people becoming dependant on the dole, which wasn’t being given out lightly. Most of the jobs however, were “make work projects that accomplished very little.” Critics often even called the WPA “We Piddle Around” to highlight the meaninglessness in their works. In 7 years, the WPA was responsible for 2,500 hospitals, 6,000 schools and 570,000 miles of roads, which sounds amazing, and some of it was. However, some projects were so “poorly constructed they had to be rebuilt almost immediately.” Within six months, over 2,000,000 people were employed by WPA schemes. The Civilian Conservation Corps (CCC) was a public work relief program that operated from 1933 to 1942 as part of the New Deal. Leuchtenburg writes that “the president offered the “army” jobs in the CCC, only to have the leaders refuse” a motion that was quickly turned against, as the mass of the army “enrolled by the hundreds” and eventually “a quarter of a million veterans signed up for the forest corps.” At first, southern politicians were Roosevelt’s most loyal supporters. It’s not surprising then, that the CCC was run by a Southern racist who did very little to encourage blacks to join. Those who did join faced horrendously strict segregation. In its years of operation, 250,000 black people enrolled in the CCC. There is a strong argument that the enrolment figures could have been much higher had the segregation been lessened if not removed to stop blacks from being intimidated by the discriminatory nature of the organisation.

The National Recovery Administration (NRA) was a policy often viewed as one of the more positive recovery programmes but it is in fact at the heart of all that was wrong with the recovery efforts. Codes and Rules were created to set minimum wages and maximum working hours for workers to remove the destructive competition of the industry and labour. However, the NRA’s codes allowed for black people to be paid less for doing the same work as a white person. When the NRA dissolved two years later, it was quickly replaced by the National Labour Relations Act. The NLRA was formed to establish relationships and communications between unions and employers in the private sector. The act also gave unions lots of power. The American Liberty League described the act as a threat to freedom. The TVA was another huge New Deal policy. It was designed to transform the Tennessee Valley with a series of dams all along it. It aimed to provide control for the flooding of the area and to provide affordable electricity to the surrounding area. By providing electricity to farms in the area, the TVA allowed the farms to modernise with newer technologies to make their farming easier. However, the construction jobs created by the TVA could’ve been given to the people of the area as opposed to sourcing them out to private firms. Powell is sceptical about the true positives of the TVA, asking “Why did the Tennessee Valley Authority become a drag on the Tennessee Valley?”

Kennedy Claims that “Roosevelt’s magic”[26] was what fixed the banking issue. Roosevelt used his fireside chats to announce his Emergency Banking Act, that was passed on 9th March 1933. It would be used to create a bank holiday to prevent further bank runs. Fearing further bank closures, people had rushed to withdraw their funds. Banks would not open until they were stable enough to do so. Folsom claims that FDR’s temporary bank closures “did calm the monetary fears of many Americans.” Within three days, more than 5,000 banks had been given permission to reopen. Later that year, the 1933 Banking Act was passed and granted more control to the Federal Reserve Board over the investment abilities of the banks. Additionally, The Glass-Steagall Act of 1933, separated investment and commercial banking activities. Folsom believes that this actually damaged the American banking system as “branch banking was forbidden” and these were often the “more stable banks.” Overzealous commercial bank involvement in stock market investment was being viewed as the main reason for the financial crash. Powell believes that the Glass-Steagall Act “had no impact on the small unit banks that failed by the thousands.” Critics argued that the Emergency Banking Act and the Glass-Steagall Act were “written by bankers for bankers.” They argue that this is clear because the acts seemed to benefit them, giving them “lavish government financial subsidies” and “liquidation of their weaker brethren,” which, seems undeniable. Reynolds also comments on the limitations of banking reform as he argues, “Congress failed to take the opportunity to create a system of branch banking of the sort that protected neighbouring Canada and Britain from an American style banking crisis.” Bernstein, of the New Left, criticises Roosevelt’s response from a different angle. Saying it emphasised the “conservatism of his administration” and their “self-conscious avoidance of more radical means”. “These complaints, however, ignored a number of restraints on FDR’s freedom of action,” says Parrish. Parrish is extremely complimentary of FDR. He even names the entire section of his book in which he discusses these financial policies “Saving Capitalism”, but it’s very hard to agree that when the act benefitted the bigger banks, more than those who were in fact struggling the most.

Overall, was the New Deal a success? No. Folsom writes “Roosevelt’s contagious smile, his hearty laugh and his smooth tenor voice all helped reassure Americans that their country would somehow return to prosperous days.” And it did, but unfortunately just much later than he had promised. Despite the efforts poured into repairing America, the sad truth is that it took a World War, in which over 400,000 Americans lost their lives, to put people into work. Leuchtenburg writes “FDR is at least the first President of modern America who asked the right questions”, although he may not have always got the answers or results he was looking for. Throughout Roosevelt’s presidency, unemployment remained alarmingly high, financial stability was at new lows with the federal deficit growing immensely and hundreds of thousands of people were left starving while livestock and crops were burned and thrown for waste. Discrimination and segregation are themes that run deep throughout industrial policies such as the CCC and NRA and agricultural policies like the AAA, making it impossible to argue that any form of progress towards racial equality was made during FDR’s presidency, especially seeing as though these were some of the largest policies to come out of the New Deal. The idea that the New Deal was successful in taking the US out of the depression cannot be defended when all of the evidence seems to point to FDR’s fumbles far outweighing his strides to stability. More often than not for FDR and his government, it seemed to be a one step forward two steps back situation. Shlaes writes “The real question about the Great Depression is not how or whether World War II ended it, but rather why the Depression lasted until the war.” Even before America entered the war in 1941, the US population was in nearly full employment, providing help for many European allies without being actively involved in the war. At the end of the war, there was a sharp decline in spending, taxes and regulation, which was essentially the final step to restore prosperity.

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