Parallels between the Great Depression of the 1930s and the 2007–2008 global economic meltdown abound. The crisis that hit in 2008 began as severely as that of the Great Depression. In the twelve months following the economic peak in 2008, industrial production fell by as much as it did in the first year of the Depression, while equity prices and global trade fell even more.1 As in the earlier period, panic swept financial centers across the world, and there was fear that the capitalist system had come undone. Most accounts of the parallels between the two periods, however, deal only with the economic similarities—the asset bubbles that, in the 1930s, resulted in a near complete collapse of the economic system, and the speculative frenzy of the current period that resulted in a near collapse of the global economy. Few, however, have sought to mine that past experience for lessons that might help us resolve the dilemmas of the contemporary crisis.
While the New Deal as a response to the Great Depression has received renewed attention in the current period, that attention has been focused primarily in the realm of fiscal and monetary policy. Yet the New Deal’s larger legacy “has been mostly forgotten or expunged except for a few highlights recycled in national memory.”2 Seldom have book-length assessments of the New Deal’s response to the Great Depression covered its full range of policy arenas. This book aims to fill that gap. We not only assess the successes and failures of the New Deal’s response to economic crisis, but we enlarge the framework for understanding both the Great Depression and our contemporary crisis by including the environmental crises that afflicted both periods. Although these are of different magnitudes, we can nonetheless learn from the New Deal response. In addition, we assess the degree and efficacy of the popular responses to economic crisis in the 1930s with popular responses in the contemporary period.
People are hungry for solutions to the myriad problems we face today, whether these be the corruption and incompetence of government, the high costs of unemployment and mortgage foreclosures, the unfinished business of health care reform, declining wages and incomes, deepening inequality, welfare state cutbacks, costly and unjust wars, the poisoning of our food, air, and water, or the threat of climate catastrophe. Issues such as these are considered in this book with a view to determining the relevance to current crises of New Deal responses to a set of somewhat similar issues.
Politicians and pundits love to analogize from history—take George W. Bush’s comparison of Saddam Hussein to Hitler in the run-up to the Iraq war. Yet no period of history is ever an exact replica of the past. That the world is constantly changing is a given, but, for those concerned about making or influencing policy decisions today, it is important to understand the patterns that history imposes. Path dependency theorists have shown us that institutional patterns set in motion in the past often define the limits and possibilities within which choices in the future must be made. American politics and policymaking, for example, is constrained by the framework set by the American Constitution. Yet a crisis of great magnitude can sometimes open up the possibility for path-breaking structural reform. The Great Depression was just such a crisis, setting in motion a period of reform that shaped the limits and possibilities of policymaking for the next fifty years, but which was eroded by the decline of the New Deal order. In this book we ask and attempt to answer why, so far, the crash of 2008 has not opened up another period of progressive reform.
Another pattern imposed by history is the law of unintended consequences. The unintended consequences of a policy meant to correct a social or economic problem in the past may cause new problems at a future time when other circumstances have changed or new knowledge is gained. This is particularly true, as our book shows, in the areas of agricultural and environmental policy. Technological change presents new possibilities, but also new liabilities, raising new questions about both the past and the present in relationship to it. We tend to think that all technological advances are ipso facto better than what existed in the past. But a comparison of the two periods of economic crisis raises some questions about this. Despite the long-standing endurance of U.S. political institutions, political realignments do occur—as a result of demographic changes, changes in the configuration and power of dominant economic institutions, changes in international relations, changes in the rules Congress makes for itself, and changes in Supreme Court precedents—and, of course, such realignments have a major bearing on the possibilities for progressive change. Lastly, the changing place of the United States in the international community can also affect domestic policymaking. Domestic policymaking is more constrained when a nation’s attention is focused on threats from abroad or when the greater part of its treasury is going into national defense to shore up its position as a superpower. So it is with caution and a great deal of contextualizing that we must approach any attempt to derive lessons for today from the period of the 1930s.
While acknowledging that history never repeats itself in the same way, there are, nevertheless, ways in which the past can help shape our thinking about policy choices in the present and future. Understanding what went wrong in the past can help us avoid making similar mistakes when confronted with similar circumstances; and it can help alert us to the unintended consequences of our current actions so that, we hope, they can be avoided. But there are also more positive lessons that history can bequeath us. The past, for example, can present us with role models of leadership that can be adapted to different times. It can present us with visionary possibilities for reorganizing our approach to certain contemporary problems now constrained by politics and ideology.
While relying considerably on existing scholarship on the Great Depression and New Deal, this book offers new perspectives on that period and the choices that were taken in light of questions that confront contemporary publics. Through doing so, we hope to demonstrate some possible ways out of our malaise, approaches that were begun but never fulfilled in the 1930s, that were raised as possibilities by popular movements but never allowed onto the political agenda, or approaches that were simply unforeseen in an earlier era. Thus, the book presents a set of guideposts—some beneficial, some cautionary—for the present and future.
Chapters 1 and 2 set the two periods of crisis in context. Chapter 1 teases out the influences of contextual factors on the public’s attitude toward government intervention in the economy during the Great Depression and Great Recession, asking why the public became so much more accepting of government intervention in the economy than it is today. It answers this by examining (1) the timing of events and the existence and character of popular social movements in the two periods; (2) the cultural currents at work in society; (3) the changing nature of the communications environment and its effect on politics; (4) the strength and composition of the president’s party in Congress; (5) the political skills of the Presidents themselves; (6) the relative political power and cohesiveness of the business class; (7) the international political context; and (8) the environmental context.
Chapter 2 compares the national industrialized consumer economy of the 1920s with today’s globalized service and information economy and the economic collapses that occurred in both eras. Dominant economic thought in both eras idealized free markets and rejected government regulations. Changes in consumer culture mark both eras, albeit of different products and mores. Each witnessed increases in productivity and output, consumer credit, and surges in financial speculation. Whereas trickle-down economics in the 1920s spurred domestic industrial employment, it has recently stimulated offshore hiring. One lesson policymakers learned from the Great Depression was to prevent an implosion of the financial system. The quick restoration of market confidence, however, sapped the political will for reforms on behalf of credit consumers and homeowners, and made room for an unproductive preoccupation with the federal deficit.
Chapter 3 examines the fiscal and monetary policies of the New Deal, comparing them with those of the Obama administration. In contrast to the trickle-down approaches of Hoover and Obama, Roosevelt enacted a “public option” or “bottom up” approach to recovery that consisted of steering billions of dollars in Reconstruction Finance Corporation funds into public works, mortgage modifications for millions of homeowners and farmers, and loans to state and local public school districts for school construction and teachers’ salaries. This “bottom up” approach was marred by Roosevelt’s decision to balance the budget in 1937, but the experience of war time government spending was finally a vindication of this approach, resulting in full employment and economic recovery. In later years amnesia about this lesson set in. In neither the 1930s nor today, however, were structural changes imposed on the management of the banks. But at least during the New Deal, the propped-up institutions of capitalism were supplemented and at times supplanted by more effective and accountable government institutions. A new “New Deal” must go farther than Roosevelt was willing to go—to a truly public option in banking and finance.
Chapters 4 and 5 examine the role of politics from below. Chapter 4 examines the 1930s “decade of dissent” when vibrant social movements contributed to a profound critique of American society and exerted pressure for change in public and corporate spheres. This chapter describes movements of unemployed workers; jobless veterans; employed workers; black workers; the elderly; tenant farmers; and middle- and lower-income persons seeking a more equitable distribution of income and wealth. New Deal responses to popular movements varied from movement to movement and from time to time, depending on the congruity of its goals with movement demands, the strength of the movement and the political threat it posed. The movements, for all their vigor, seldom achieved their goals. In several instances, radical demands served the function of making more moderate New Deal policies acceptable. The New Deal thus pursued a classic strategy of moderate reformers—gaining conservative assent by pointing to the threat of radical alternatives.
Chapter 5 explains the deep decline in U.S. labor which had been a militant force in the 1930s, thanks in no small measure to Communists and their allies in the CIO. Economic gains were made after workers’ right to organize and bargain collectively were guaranteed by the National Labor Relations Act. However, labor rights were subsequently curtailed by government policy, particularly red-baiting, that eliminated the movement’s most dynamic leaders and organizers. The need for big business assistance during World War II helped to rehabilitate capital, so that industrial stability rather than economic democracy became the priority in labor relations. By positioning labor as an interest group rather than a class, and by eliminating labor’s left wing, the “third New Deal” (1937–1945) narrowed the path for radical change and made labor vulnerable to the politics of class fragmentation pursued by the New Right. The “New Deal system” that resulted was more a product of labor’s defeat than a truce in the class struggle. The lesson of the New Deal is that a radical labor movement can make real social change even when government is only mildly supportive.
Most progressive economists today seem only to be interested in the macroeconomic effect of the New Deal jobs programs—as if the only thing they have to teach us about combating unemployment is the negative lesson derived from the Roosevelt Administration’s failure to engage in enough deficit spending to end the Great Depression as quickly as it could have. Chapter 6 argues that this misses the most important lessons these programs have to teach us. It misperceives the multiple objectives these programs served in combating the labor-market effects of the Great Depression. It ignores the social-welfare benefits that employment in the programs provided to millions of unemployed workers and their families; it discounts the value of the goods and services they produced for the nation’s communities; it overlooks the ability of programs like the WPA to enhance the effectiveness of Keynesian anti-cyclical measures; and it disregards the potential of such programs to achieve the ultimate goal of Keynesian economic policy—sustained full employment. Moreover, direct job creation, as this chapter explains, is a more cost effective model for delivering a macroeconomic stimulus to the economy than the indirect policies and programs progressives have promoted since World War II. The experience of direct job creation during that war taught New Dealers that if it were to become permanent public policy it could be the key to economic prosperity in the future.
Compared to the utter paucity of relief following the 1929 stock market crash, social welfare programs enacted by the New Deal were available and could be readily expanded at the outset of the financial crisis of 2008, thus helping to prevent the ensuing recession from becoming a depression. After discussing the role played by these programs, including their limits, Chapter 7 describes the New Deal’s ground-breaking temporary relief measures and Roosevelt’s timing and preparation of the public for permanent welfare reform. New Deal social welfare reform, principally the Social Security Act of 1935, is critically analyzed: its relationship to temporary relief; the populations it covered and excluded; security risks included and omitted; the type and level of its benefits; and its potential for expansion. Although Roosevelt and other planners of permanent social welfare reform preferred job creation to direct relief, the Social Security Act included unemployment insurance but not employment assurance. Although health insurance was considered important by planners of permanent social welfare reform, it was omitted out of fear that the opposition of the medical establishment could topple the entire program. The chapter concludes with a comparison of the Obama and Roosevelt approaches to social welfare reform, especially their timing and skill in preparing and gaining the support of the public.
Chapter 8 examines the unique series of Federal Arts Programs established by the New Deal to provide employment to unemployed cultural workers. It argues that these programs democratized and de-commodified culture, making both the enjoyment of culture and participation in the arts the property of the people, not just the provenance of a few. The chapter examines the difficulties faced by government officials in managing such an enterprise, the extraordinary outpouring of art and culture that resulted, the ways in which it enriched our understanding of the diversity of the country and its history, the tangible and intangible benefits this had for the country, and the lessons we can learn from this experience today as public support for the arts dwindles in the face of budgetary austerity.
Both The Great Depression and Great Recession were characterized by intertwined economic and environmental crises. Those drawing parallels between the two periods of economic collapse ignore the significance of the environmental crisis of the 1930s and therefore miss the lessons the New Deal response to that crisis have to teach us. Roosevelt undertook three programs to deal simultaneously with the problems of unemployment and environmental catastrophe: the Civilian Conservation Corps, the Soil Conservation Service and the Tennessee Valley Authority. While acknowledging the shortcomings of these programs, Chapter 9 argues that the lessons we could learn from that experience include the need for presidential leadership with a deep understanding—as FDR had—of ecological science; the importance of going beyond the strictures of the private market; of linking unemployment with environmental conservation and restoration; of the need to invoke the precautionary principle; and most critical of all, national government intervention, long-term planning and financing—not to mention international coordination—to deal with the magnitude of the environmental crisis of the 21st century.
Chapter 10 argues that, although the focus on supply management of New Deal agricultural policy was aimed at alleviating the plight of hard-pressed farmers, the politics surrounding its implementation, particularly the prominent role of Southern Democrats and conflicts that erupted among agricultural stakeholders, resulted in several important unintended consequences with long-term implications. These included reinforcement of regional class structures that benefited the largest and richest farmers, thus strengthening existing patterns of racial and economic inequality; changes in the economic interests of different sectors of agriculture; and the fostering of industrial agriculture with increased reliance on chemical fertilizers, pesticides, and herbicides. Their use has contributed to environmental degradation of rivers and aquifers, harm to wildlife, and global climate change. Overproduction of certain commodities and increased exports, especially of wheat, another unintended consequence, have resulted in the destruction of subsistence farming in parts of the developing world and, as a result, catalyzed political instability. Agricultural policy, the author argues, even during the Depression, was always subject to global trade patterns that limited the effectiveness of national policy. Thus any attempt to deal with it today must take international trade into account.
The final chapter reviews New Deal successes and failures. Achievements in relief, recovery and reform, though considerable, were hampered by Southern control of Congress and antipathy to deficit spending. Today’s leaders learned from the past that swift government intervention is necessary to stem economic crisis but didn’t apply the New Deal approach to job creation or learn that fiscal austerity stalls recovery or reverses course. It took the exigency of world war for the Roosevelt government to spend sufficient money to create full employment. Convinced that unemployment could be overcome by public policy, Roosevelt, toward the end of the war, proposed a “Second” or “Economic Bill of Rights” in which the “paramount” right was the guarantee of a job at a living wage.
Whereas popular movements contributed to progressive New Deal policies, strong regressive forces and near absence of progressive challenges are today’s realities. Unlike FDR, Obama did not use the opportunity to identify culprits and causes of the crisis and to alter perceptions of the political economy. Government intervention stopped the free fall, but the lesson that government can help was not drawn, thereby leaving the nation ill-equipped to cope with persisting, high unemployment and an environmental crisis utterly dependent on government for its solution.
1. “Lessons of the 1930s: There Could Be Trouble Ahead,” The Economist, December 10, 2011, 1.
2. Richard Walker and Gray Brechin, “The Living New Deal: The Unsung Benefits of the New Deal for the United States and California,” Working Paper Series, Institute for Research on Labor and Employment, University of California–Berkeley, accessed July 15, 2013, available at http://escholarship.org/uc/item/6c1115sm.