Economy Act of March 20, 1933

Transcription

Episode 34 – The New Deal Hi, I’m John Green, this is CrashCourse U.S. history, and today we’re going to get a little bit controversial, as we discuss the FDR administration’s response to the Great Depression: the New Deal. That’s the National Recovery Administration, by the way, not the National Rifle Association or the No Rodents Allowed Club, which I’m a card-carrying member of. Did the New Deal end the Depression (spoiler alert: mehhh)? More controversially, did it destroy American freedom or expand the definition of liberty? In the end, was it a good thing? Mr. Green, Mr. Green. Yes. Ohh, Me from the Past, you are not qualified to make that statement. What? I was just trying to be, like, provocative and controversial. Isn’t that what gets views? You have the worst ideas about how to make people like you. But anyway, not EVERYTHING about the New Deal was controversial. This is CrashCourse, not TMZ. intro The New Deal redefined the role of the federal government for most Americans and it led to a re-alignment of the constituents in the Democratic Party, the so-called New Deal coalition. (Good job with the naming there, historians.) And regardless of whether you think the New Deal meant more freedom for more people or was a plot by red shirt wearing Communists, the New Deal is extremely important in American history. Wait a second. I’m wearing a red shirt. What are you trying to say about me, Stan? As the owner of the means of production, I demand that you dock the wages of the writer who made that joke. So after his mediocre response to the Great Depression, Herbert Hoover did not have any chance of winning the presidential election of 1932, but he also ran like he didn’t actually want the job. Plus, his opponent was Franklin Delano Roosevelt, who was as close to a born politician as the United States has ever seen, except for Kid President. The phrase New Deal came from FDR’s campaign, and when he was running FDR suggested that it was the government’s responsibility to guarantee every man a right to make a comfortable living, but he didn’t say HOW he meant to accomplish this. Like, it wasn’t gonna come from government spending, since FDR was calling for a balanced budget and criticizing Hoover for spending so much. Maybe it would somehow magically happen if we made alcohol legal again and one thing FDR did call for was an end to Prohibition, which was a campaign promise he kept. After three years of Great Depression, many Americans seriously needed a drink, and the government sought tax revenue, so no more Prohibition. FDR won 57% of the vote and the Democrats took control of Congress for the first time in a decade. While FDR gets most of the credit, he didn’t actually create the New Deal or put it into effect. It was passed by Congress. So WTFDR was the New Deal? Basically, it was a set of government programs intended to fix the depression and prevent future depressions. There are a couple of ways historians conceptualize it. One is to categorize the programs by their function. This is where we see the New Deal described as three R’s. The relief programs gave help, usually money, to poor people in need. Recovery programs were intended to fix the economy in the short run and put people back to work. And lastly, the Run DMC program was designed to increase the sales of Adidas shoes. No, alas, it was reform programs that were designed to regulate the economy in the future to prevent future depression. But some of the programs, like Social Security, don’t fit easily into one category, and there are some blurred lines between recovery and reform. Like, how do you categorize the bank holiday and the Emergency Banking Act of March 1933, for example? FDR’s order to close the banks temporarily also created the FDIC, which insures individual deposits against future banking disasters. By the way, we still have all that stuff, but was it recovery, because it helped the short-term economy by making more stable banks, or was it reform because federal deposit insurance prevents bank runs? A second way to think about the New Deal is to divide it into phases, which historians with their A number one naming creativity call the First and Second New Deal. This more chronological approach indicates that there has to be some kind of cause and effect thing going on because otherwise why would there be a second New Deal if the first one worked so perfectly? The First New Deal comprises Roosevelt’s programs before 1935, many of which were passed in the first hundred days of his presidency. It turns out that when it comes to getting our notoriously gridlocked Congress to pass legislation, nothing motivates like crisis and fear. Stan can I get the foreshadowing filter? We may see this again. So, in a brief break from its trademark obstructionism, Congress passed laws establishing the Civilian Conservation Corps, which paid young people to build national parks, the Agricultural Adjustment Act, the Glass Stegall act, which barred commercial banks from buying and selling stocks, and the National Industrial Recovery Act. Which established the National Recovery Administration, which has lightening bolts in its claws. The NRA was designed to be government planners and business leaders working together to coordinate industry standards for production, prices, and working conditions. But that whole public-private cooperation idea wasn’t much immediate help to many of the starving unemployed, so the Hundred Days reluctantly included the Federal Emergency Relief Administration, to give welfare payments to people who were desperate. Alright. Let’s go to the ThoughtBubble. Roosevelt worried about people becoming dependent on relief handouts, and preferred programs that created temporary jobs. One section of the NIRA created the Public Works Administration, which appropriated $33 billion to build stuff like the Triborough Bridge. So much for a balanced budget. The Civil Works Administration, launched in November 1933 and eventually employed 4 million people building bridges, schools, and airports. Government intervention reached its highest point however in the Tennessee Valley Authority. This program built a series of dams in the Tennessee River Valley to control floods, prevent deforestation, and provide cheap electric power to people in rural counties in seven southern states. But, despite all that sweet sweet electricity, the TVA was really controversial because it put the government in direct competition with private companies. Other than the NIRA, few acts were as contentious as the Agricultural Adjustment Act. The AAA basically gave the government the power to try to raise farm prices by setting production quotas and paying farmers to plant less food. This seemed ridiculous to the hungry Americans who watched as 6 million pigs were slaughtered and not made into bacon. Wait, Stan, 6 million pigs? But…bacon is good for me... Only property owning farmers actually saw the benefits of the AAA, so most African American farmers who were tenants or sharecroppers continued to suffer. And the suffering was especially acute in Oklahoma, Texas, Kansas, and Colorado, where drought created the Dust Bowl. All this direct government intervention in the economy was too much for the Supreme Court. In 1936 the court struck down the AAA in U.S. v. Butler. Earlier in the Schechter Poultry case (AKA the sick chicken case - finally a Supreme Court case with an interesting name) the court invalidated the NIRA because its regulations “delegated legislative powers to the president and attempted to regulate local businesses that did not engage in interstate commerce.”[1] Thanks, ThoughtBubble. So with the Supreme Court invalidating acts left and right, it looked like the New Deal was about to unravel. FDR responded by proposing a law that would allow him to appoint new Supreme Court justices if sitting justices reached the age of 70 and failed to retire. Now, this was totally constitutional – you can go ahead at the Constitution, if Nicolas Cage hasn’t already swiped it – but it seemed like such a blatant power grab that Roosevelt’s plan to “pack the court” brought on a huge backlash. Stop everything. I’ve just been informed that Nicolas Cage stole the Declaration of Independence not the Constitution. I want to apologize to Nic Cage himself and also everyone involved in the National Treasure franchise, which is truly a national treasure. Anyway, in the end, the Supreme Court began upholding the New Deal laws, starting a new era of Supreme Court jurisprudence in which the government regulation of the economy was allowed under a very broad reading of the commerce clause. Because really isn’t all commerce interstate commerce? I mean if I go to Jimmy John’s, don’t I exit the state of hungry and enter the state of satisfied? Thus began the Second New Deal shifting focus away from recovery and towards economic security. Two laws stand out for their far-reaching effects here, the National Labor Relations Act, also called the Wagner Act, and the Social Security Act. The Wagner Act guaranteed workers the right to unionize and it created a National Labor Relations Board to hear disputes over unfair labor practices. In 1934 alone there were more than 2,000 strikes, including one that involved 400,000 textile workers. Oh, it’s time for the Mystery Document? Man, I wish there were a union to prevent me from getting electrocuted. The rules here are simple. I guess the author of the Mystery Document. And I’m usually wrong and get shocked. “Refusing to allow people to be paid less than a living wage preserves to us our own market. There is absolutely no use in producing anything if you gradually reduce the number of people able to buy even the cheapest products. The only way to preserve our markets is an adequate wage.” Uh I mean you usually don’t make it this easy, but I’m going to guess that it’s Franklin Delano Roosevelt. Dang it! Eleanor Roosevelt? Eleanor. Of course it was Eleanor. Gah! The most important union during the 1930s was the Congress of Industrial Organizations, which set out to unionize entire industries like steel manufacturing and automobile workers. In 1936 the United Auto Workers launched a new tactic called the sit-down strike. Workers at the Fisher Body Plant in Flint, Michigan simply stopped working, sat down, and occupied the plant. Eventually GM agreed to negotiate, and the UAW won. Union membership rose to 9 million people as “CIO unions helped to stabilize a chaotic employment situation and offered members a sense of dignity and freedom.”[2] That quote, by the way, is from our old buddy Eric Foner. God, I love you, Foner. And unions played an important role in shaping the ideology of the second New Deal because they insisted that the economic downturn had been caused by underconsumption, and that the best way to combat the depression was to raise workers’ wages so that they could buy lots of stuff. The thinking went that if people experienced less economic insecurity, they would spend more of their money so there were widespread calls for public housing and universal health insurance. And that brings us to the crowning achievement of the Second New Deal, and/or the crowning achievement of its Communist plot, the Social Security Act of 1935. Social Security included unemployment insurance, aid to the disabled, aid to poor families with children, and, of course, retirement benefits. It was, and is, funded through payroll taxes rather than general tax revenue, and while state and local governments retained a lot of discretion over how benefits would be distributed, Social Security still represented a transformation in the relationship between the federal government and American citizens. Like, before the New Deal, most Americans didn’t expect the government to help them in times of economic distress. After the New Deal the question was no longer if the government should intervene, but how it should. For a while, the U.S. government under FDR embraced Keynesian economics, the idea that the government should spend money even if it means going into deficits in order to prop up demand. And this meant that the state was much more present in people’s lives. I mean for some people that meant relief or social security checks. For others, it meant a job with the most successful government employment program, the Works Progress Administration. The WPA didn’t just build post offices, it paid painters to make them beautiful with murals, it paid actors and writers to put together plays, and ultimately employed more than 3 million Americans each year until it ended in 1943. It also, by the way, payed for lots of photographers to take amazing photographs, which we can show you for free because they are owned by the government so I’m just going to keep talking about how great they are. Oh, look at that one, that’s a winner. Okay. Equally transformative, if less visually stimulating, was the change that the New Deal brought to American politics. The popularity of FDR and his programs brought together urban progressives who would have been Republicans two decades earlier, with unionized workers - often immigrants, left wing intellectuals, urban Catholics and Jews. FDR also gained the support of middle class homeowners, and he brought African Americans into the Democratic Party. Who was left to be a Republican, Stan? I guess there weren’t many, which is why FDR kept getting re-elected until, you know, he died. But, fascinatingly, one of the biggest and politically most important blocs in the New Deal Coalition was white southerners, many of whom were extremely racist. Democrats had dominated in the South since the end of reconstruction, you know since the other party was the party of Lincoln. And all those Southern democrats who had been in Congress for so long became important legislative leaders. In fact, without them, FDR never could have passed the New Deal laws, but Southerners expected whites to dominate the government and the economy and they insisted on local administration of many New Deal programs. And that ensured that the AAA and the NLRA would exclude sharecroppers, and tenant farmers, and domestic servants, all of whom were disproportionately African American. So, did the New Deal end the depression? No. I mean, by 1940 over 15% of the American workforce remained unemployed. But, then again, when FDR took office in 1933, the unemployment rate was at 25%. Maybe the best evidence that government spending was working is that when FDR reduced government subsidies to farms and the WPA in 1937, unemployment immediately jumped back up to almost 20%. And many economic historians believe that it’s inaccurate to say that government spending failed to end the Depression because in the end, at least according to a lot of economists, what brought the Depression to an end was a massive government spending program called World War II. So, given that, is the New Deal really that important? Yes. Because first, it changed the shape of the American Democratic Party. African Americans and union workers became reliable Democratic votes. And secondly, it changed our way of thinking. Like, liberalism in the 19th century meant limited government and free-market economics. Roosevelt used the term to refer to a large, active state that saw liberty as “greater security for the average man.” And that idea that liberty is more closely linked to security than it is to, like, freedom from government intervention is still really important in the way we think about liberty today. No matter where they fall on the contemporary political spectrum, politicians are constantly talking about keeping Americans safe. Also our tendency to associate the New Deal with FDR himself points to what Arthur Schlessinger called the “imperial presidency.” That is, we tend to associate all government policy with the president. Like, after Jackson and Lincoln’s presidencies Congress reasserted itself as the most important branch of the government. But that didn’t happen after FDR. But above all that, the New Deal changed the expectations that Americans had of their government. Now, when things go sour, we expect the government to do something. We’ll give our last words today to Eric Foner, who never Foner-s it in, the New Deal “made the government an institution directly experienced in Americans’ daily lives and directly concerned with their welfare.”[3] Thanks for watching. I’ll see you next week. Crash Course is made with the help of all of these nice people. And it is possible because of your support at subbable.com. Here at Crash Course we want to make educational video for free, for everyone, forever. And that’s possible thanks to your subscription at subbable.com. You can make a monthly subscription and the price is up to you. It can even be zero dollars although more is better. Thanks so much for watching Crash Course and as we say in my hometown, don’t forget to be awesome. ________________ [1] Foner. Give me Liberty ebook version p. 870 [2] Foner. Give me Liberty ebook version p. 873 [3] Give me Liberty ebook version p. 898