The 1930s: From the New Deal to the War Deal

Submitted by cathy n on 3 February, 2014 - 9:35

It may be difficult to remember that the American economy ever fell to the bottom of the most severe and protracted depression in the history of capitalism, during the 1930s. The depression decade has almost been pushed into the backyard of history away from the loud and sustained paeans of adulations about the fabulous production of the 1950s. No wonder: it can hardly be pointed to as a strong argument in praise of American capitalism, especially since this was the last decade of a peacetime economy. The performance was scarcely impressive.

"The Promise of American Life" has not been fulfilled. Herbert Croly had warned the American people before World War I about the fatalistic expectation that "the familiar benefits will continue to accumulate automatically." But the 1920s seemed to damp the criticism, of all but the radicals, that prosperity under capitalism could not go on forever. The "irresponsible optimism" of that day reached its height just before the stock-market crash of 1929; every man was to become a capitalist through widespread ownership of stocks and shares in the prosperity, now that depressions were eliminated. But the height to which that prosperity soared only mirrored the depth and despair of the next decade.

Present-day Fair-Dealism rests upon the emergence and the program, the aspirations if not the accomplishments, of the Roosevelt New Deal. The New Deal was thrust upon the American people at a time when the wheels of the American economy seemed to be grinding to a complete halt. It offered a program and plan of action inconceivable (perhaps evon to this day) to the Hoover mentality. Liberalism, seemingly on the brlnh of bankruptcy, found a new vehicle for its social reform in the New Deal. It was an era in which even defenders of capitalism and its theories came to question its practices and attempted to reform its injustices.

If Sought a New Balance

The New Deal has often been called a revolution. Certainly, if one were to read some of Roosevelt's attacks upon the ''money changers" and the monopolists, the idea might occur that fundamental changes were being proposed, if not being secretly carried out. Important evils of the American economy were singled out and attacked, but not dealt with in a fundamental way. The far from revolutionary rationale of the New Deal has been stated as follows:

The New Deal recognized that the American economy had slowed down and that the forces within it were no longer in equilibrium. Opportunities for capitalist enterprise had contracted; the population had ceased expanding; there were few new great industrial fields to be opened up; overseas markets had been shut off by high tariff walls or were already being closely worked by rival imperialist nations. Business control had shifted from industrial capitalism to finance capitalism. The spread between the capacity to produce and the ability to consume was constantly widening. The world market for American agricultural goods had largely disappeared. Not only had new jobs for white-collar and professional workers practically become non-existent, but there was a surplus rather than a dearth of industrial labor as well. Class lines were being drawn more clearly; the danger of class hostilities was no longer remote but already in evidence...

The New Deal program proceeded on the assumption that it was necessary to restrain class antagonisms, if not permanently at least until a recovery could be worked out. It was fhe often-stated idea of seeking a balance in the economy: private property was to continue but it was to stop exploiting labor and the producers of raw materials; agriculture, despite a declining market, was to increase its income and labor was to be assured employment and at least a means of subsistence.

The Political Deal

Such a reform program could be given a serious trial only In a country which had a large accumulation of wealth to draw upon and a vast reserve of natural resources.

The success or failure of the New Deal depended on the achievement of the program to hold down class antagonisms. If the New Deal was unable to salve the economic crisis end bring an end to widespread unemployment, then the class conflict would break out later on. Rut the Roosevelt administration never had to face this eventuality; the outbreak of war in 1939 did more to solve the crisis in American copitalism than six years of New Deal planning. The war rewound the mainspring of U. S. economy, and to this day the war economy has been the basis for continued "prosperity."

It has been sometimes stated that the New Deal was never meant to be anything more than a pro ton solution to the problems of the depression and the inequalities of American life. The New Deal provided several reforms, corrected a number of abuses, attacked monopoly, and above all gave labor the right to organize. These are admitted to be only first steps to a wider social program leading to what most liberals would call the "mixed economy."

| But, as will be pointed out later on, the New Deal had no program to move beyond its "pro tem solutions, and the reforms it made and inequities it corrected often raised so many problems and inequities as they endeavored to solve. And although labor was given the right to organize in Section 7a of the National Industrial Recovery Act of 1933 and later in the Wagner Act of 1935, the actual organization drives succeeded because of labor's own power in the strikes and sit-downs. This was the period when the great upsurge of the CIO took place!

The New Deal may be characterized as more of a political deal than an economic one in the sense that it was more concerned with creating a political balance than solving fundamental economic and social problems. The New Dealers did not survey the economic and social scene, correcting abuses and injustices wherever they occurred; but rather moved into those areas where there were large pressure groups effectively organized and articulate. It courted the political allegiance of strategically located economic interests, in order to maintain its political power at all. It came to represent a great many things to rather diverse interests. This conciliatory policy accounts for many of the zigzags in New Deal policy, for example on the question of monopoly. And in those areas where it did claim fe> take great steps forward, as in agriculture, from the standpoint of social justice it was a failure.

"Social-Democratic Phase"

The earliest proclaimed objective of the New Deal was to find a solution to unemployment; and on this much of its success or failure has to be judged. It is one thing to attack the "money changers" as the cause of the depression, but quite another to provide employment and security after claiming to have routed them.

The list of New Deal measures for immediate relief and for eventual reform is long and not unimpressive, especially on paper. The highlights fall on.the social-security program, tfee wage-and-hour law, the Tennessee Valley Authority, the insurance and loan, provisions for small home owners and saving accounts, and the elimination of some of the more corrupt practices of investment bankers and utilities corportaions. These are some of the laws and programs that give the New Deal its liberal and reform character.

In these respects, American capitalism-, under the impulsion of a crisis in which the ruling class lost its self-confidence and working-class radical discontent mounted, hurriedly caught up with types of social-reform measures which were already much better known in the older capitalisms of Europe. In this sense, the New Deal period has been called the "social-democratic phase" of U. S. capitalism; the suggested analogy (only a partial analogy, of course) is illuminating.

But the search is long, hard and fruitless if one tries to find those elements in this program of American liberalism which were capable of dealing with the depression. Some of the more glaring abuses were mitigated, but still others were created.

Pressing the Buttons

The major attack against the depression during the eight years before the War Deal came on five fronts: (1). the National Industrial Recovery Act; (2) the Agricultural Adjustment Act and Soil Conservation program; (3) the National Labor Relations (Wagner) Act; (4) the attack on monopolies through the Temporary National Economic Commission; and (5) the various relief and work projects like the Works Progress Administration and the Public Works Administration.

While perhaps nobody starved during this period, the important fact is that at the end of the 1930s there were still almost 10 million unemployed and many more underemployed. The New Deal shifted from program to program in the hope it could push the right button to end the depression. Industrial production even passed the level of 1929, and the United States entered into the War Deal with many economists predicting that the figure of 10 million unemployed would become the minimum for the economy.

In the case of agriculture, the New Deal worked in the interests of the agricultural landlords and the commercial farmers almost entirely. And not all agrtcultural interests were equally benefited; favored were the producers of corn, tobacco, wheat and cotton, while meat and dairy producers and the unorganized growers of vegetables received relatively little support. Landlords having mortgage debts were assisted but not the tenant farmers with chattel debts. It did next to nothing, and what it did never really extended beyond the experimental stage, for the sharecroppers of the South and the subsistence farmers all over the country. And for the two million agricultural laborers nothing was done; they were left to the vigilante committees. The main idea behind the Agricultural Adjustment Act of 1933 and the later Soli Conservation Act was to raise the prices of certain agricultural commodities through the curtailment of production.

AAA: Plowing Under

Although farm income was increased in the aggregate, it worked to the predominant benefit of the landlords and the commercial farmers. The benefits of the government payments for crop reduction created greater inequalities in the distribution of farm income. The picture of the typical American farm family, living in self-sustained plenty, was fast becoming a myth along with the typical rags-to-riehes story. Thousands of small farms were saved through the extension of mortgage credit preventing a debacle resulting from the depression and the main AAA policies.

Under the AAA, the worst abuses occurred in the cotton districts. In order to reduce costs, farm machinery was more widely employed, and where there was a reduction in crops it came off the land used by the tenant farmer and sharecropper. The result was to turn thousands of the poorest farm families onto the road as jalopy Joads or into the cities to go on relief.

Later New Deal attempts, through Rural Rehabilitation and the Farm Security Act, to mitigate these tragedies were limited and only partially successful. While the New Deal proclaimed the reduction of unemployment as one of its major goals, its agricultural program was one that turned the poorest farmers and farm laborers off the land, adding to the millions of unemployed. According to the President's Committee on Farm Tenancy, farm tenancy increased from 25 per cent of all farmers in 1880 to 42 per cent in 1935. The attempt through the Farm Security Administration to organize small family-sized subsistence farms was an anachronism out of another age, which was attacked by the Southern Tenant Farmers Union. The alternative of Organizing farm cooperatives was attacked by the big farm interests and the idea was quietly dropped in New Deal councils.

But the great anachronism of the AAA and the social failure of the New Deal's reform of capitalism was the reduction of crops and the slaughtering of livestock In the midst of poverty. While millions all over the world were actually starving and millions in the U. S. living on subsistence levels or below, the New Deal was busily engaged in various schemes to further reduce production because it could not be sold at a profit. But as the years of the New Deal progressed, the surpluses further accumulated even under scarcity production, and crops were still further restricted. For example, in 1939 wheat production was to be cut 50 per cent under 1938 production, and in cotton the total acreage planted was only about half of the normal amount. Henry Wallace, the secretary of agriculture, proclaimed the building of the ever-normal granary. This was characteristic of the New Deal: a full granary but a poverty-stricken people.

Business Allies

With respect to business, the New Deal worked closely with those interests that were connected with foreign trade and investment. It wrote reciprocal trade agreements; financed the rebuilding of the merchant marine; endeavored to protect the financial interests of the American investor in those places where default of interest and attempted repudiation of loans were taking place, as in Mexico. Specifically the State Department adopted an aggressive policy in the Far East for protecting thefuture right of American capital to exploit this under-developed area.

The New Deal forces had a special relationship with the consumer-goods industry. The program of the New Deal to raise prices and to increase labor's purchasing power through minimum-wage laws was precisely the thing to give immediate benefits to industries such as food-processing, clothing and tobacco. Due to the growth of monopoly capitalism, important sections of the American economy were highly controlled in prices, production and investment policy. During the depression these capital-goods industries, such as steel, cement and motor vehicles, experienced a relatively slight decrease in prices and a large drop in production, while in the more competitive consumer-goods industries the reverse occurred. The New Deal business policies of raising prices and restricting production, it can be seen, were more liable to aid the consumer-goods sector.

The NRA of 1933 was not intended to be a temporary stop-gap device but a bold administrative improvement to bring the country back to prosperity. Many of the features of the NRA codes and the entire conception of the act smacked thoroughly of fascist corporate-state ideas. The NIRA, when enacted, followed the proposals of the U. S. Chamber of Commerce in setting up industry-wide boards to prevent "cut-throat" competition, regulate production and establish minimum hours and wages. To accomplish this the government suspended the anti-trust laws so that business was able to do in public what it had always done or tried to do in secret.

Faced with the growing demand for and the possibility of enactment of a 30-hour law, business agreed to Section 7 giving labor "the right to organize and bargain collectively." This stimulated unions where they were already strong. But the "right to organize" became more illusory than real under the NRA since it lacked any power of enforcement by law or through the action of either the industry-wide code, the NRA administrator General Hugh Johnson or President Roosevelt.

NRA: Codes and Cartels

In part, the NRA became in practice a means for open Jptelization of American industry with government support through the "codes of fair competition. In actual operation the codes became the means for the domination of the biggest units within the industry. Prices were being raised at a much faster rate than wages and the country was on the inflationary spurt deemed so desirable by the president. Organized, not to mention unorganized, labor had next to no voice in the formulation or administration of the codes. Many forget that the biggest advance in labor organization in this period was in company unions, and bona-fide unionization was largely won despite the opposition of companies, company police, vigilante committees and. the hamstringing activities of the National Labor Board.

As advantageous as the NRA may appear to be to business, late in 1933 business groups and the Republican Party began a running fight with the NRA, demanding that the government retire from the field of "regulation" and leave the operation of industrial affairs to private business. The program the leading capitalists wanted included all the provisions of the NRA but excluded any reference to labor's right to organize for collective bargaining or the control of monopoly prices.

The controversy over the NRA reached a head with the initial reports of the National Recovery Review Board headed by the famous lawyer, Clarence Darrow.
It accused the NRA of fostering monopoly and oppressing small industrialists; it charged the administration of certain codes by monopoly interests, and stated that consumer prices were at the mercy of monopoly control. In a supplementary report, the Review Board came to this conclusion:

"The choice is between monopoly sustained by government, which is clearly the trend in the NRA, and a planned economy, which demands socialized ownership and control, since only by collective ownership can the inevitable conflict of separately owned units for the market be eliminated in favor of planned production. There is no hope for the small businessman or for complete recovery in America in enforced restriction upon production for the purpose of maintaining higher prices.

The hope for the American people, including the small businessman, not to be overwhelmed by their own abundance lies in the planned use of America's resources following socialization. To give the sanction of government to sustain profits is not a planned economy, but a regimented organization for exploitation."

Needless to say, the National Recovery Review Board never met again. Its findings were in sharp conflict not only with the specific emphasis of the New Deal at that time (1934) when it was furthering monopoly, but also in the later ''trust-busting" period. It formulated the beginning of a program capable of bringing complete recovery to America. At the time the NRA was ruled unconstitutional by the Supreme Court in 1935, it was already falling apart due to internal conflict, and there was no serious attempt to have it re-enacted in another form, as was done with the AAA and other legislation invalidated by the court.

What Section 7a Meant

Under Section 7a of the NRA, workers in many of the mass-production industries, such as auto and rubber, decided to test their newly won right to organize for collective bargaining, and they were even responsive to the inept organizational drives of the AFL. The AFL, organized in craft unions, was incapable of organizing the mass-production industries where the workers were predominantly semi-skilled. Strikes broke out all over the country: the San Francisco general strike, the Toledo Electric Auto-Lite strike, Minneapolis teamsters, Weir ton Steel, and many others.

The right to organize under Section 7a was a right that had only to be fought out on the picket line in order to be won. The AFL expressed disillusionment because it expected the government to do the organizing for it, and it feared that mass strikes would lead to the growth of radical influence in the newly formed unions. The strikes during the NRA period of the New Deal demonstrated that the organization drive still had to contend with company police, local police, Notional Guard troops, labor spies.

In the San Francisco general strike in 1934, General Hugh Johnson of the NRA flew out to Frisco where he opposed the strike, called the strikers "rats" and invited vigilantes to raid the headquarters of radical political groups. The NRA's National Labor Board more often than not served to delay organization through lengthy mediation hearings, and many strikes were Called in defiance of the NLB.

When the NIRA was declared unconstitutional in 1935, Senator Wagner salvaged Section 7a, and the National Labor Relations Act was passed in July 1935. It established the right to organize for collective bargaining and in addition listed a series of unfair labor practices for which employers could be enjoined: restraining or coercing workers in their plans to organize, discriminating against workers for trade-union activity or in favor of company unions.

It was in this period that the great organizing drives took place in auto, steel, rubber, glass and textiles. The UAW began the struggle against General Motors using the tactics of the "quickie" and sit-down strike; in February 1937, GM capitulated. A few weeks later, after another sit-down strike, Chrysler followed suit. The unionization of the two giants of the auto industry (Ford did not sign up until 1940) followed the impressive demonstration of labor's power as opposed to the run-around they received in 1934 at the hands of the Auto Labor Board, from which they received nothing.

The organization of the mass-production industries could only have been possible once the militant CIO was outside of AFL ranks following the split at the 1935 convention. To have depended upon the government's initiative would have been fatal, and in reality government help was virtually non-existent. Although the NLRB was established in 1935, it was not until April 1937 that the Supreme Court validated important sections of the law, and decisions on other important sections came from the court in 1938. Therefore the most important part of the drive that spearheaded the formation of the CIO took place when the machinery of the NLRB was tied down by impending Supreme Court decisions. The NLRB served as a psychological impetus, but it was labor's own power that did the job.

Upshot of a Decade

The New Deal in various ways offered advantages to many groups. The farmers and banks came into the New Deal with preferred claim. Through their powerful organizations they were able to utilize the legislation benefiting them. Industry also was able to seize upon the NRA for purposes of monopolization and price-fixing through the Chambers of Commerce, NAM and the thousands of trade councils. But labor had first to organize and fight before it was able to get something out of the NLRB and the Wage and Hour Law.

But whatever labor was able to extract from the New Deal, by its own militancy or by the pressure of the times, the New Deal policy has to be judged primarily on the basis of how it achieved its main objective - putting the economy back on its feet. The "recession" of 1937 already showed the New Dealers that they had failed. By 1938 Roosevelt turned in another direction with a call for trust-busting. The Temporary National Economic Committee, which was to investigate monopoly, was the result; it set itself to prove that the depression could really be blamed on the concentration of industry with its rigid fixed prices and its violation of the free market.

Broadus Michell, in his Depression Decade, points to the contradiction which this involved for the New Deal approach. The New Deal could not evolve a program capable of going to the roots of the depression, for such a solution would have meant attacking the fundamental institution of capitalism - private property. Writing of the TNEC, this last gasp of the New Deal before "Dr. Win-the-War" took over, he says:

"A guess would be that the 'recession', beginning in the autumn of 1937 had disillusioned the president and his advisers with former New Deal [economic] interventionist policies, and persuaded them that another crusade, however contradictory to the old one, was indicated. The president himself, and several leading participants, such as Henderson, who had been intimately involved in government encouragement of business combination, confessed no embarrassment in now damning what they had helped produce. . . .
". . . the CTNEC1'committee might hove concluded that the choice for the future was between concentration of economic power in private hands or in public hands. . . .
But the committee was unprepared for this recommendation. Loyal to the president's purpose 'to preserve the system of private enterprise for profit,' the committee proposed that where, private initiative was degenerative, government should reinvigorate it. The committee seemed unconscious of the touching quality of a faith in private enterprise that required government inducement. . . ."
". . . To the whole equivocal episode of the Temporary National Economic Committee may be appended President Roosevelt's doubtful but dogged commendation : 'It is a program whose basic thesis is not that the system of free private enterprise has failed in this generation, but that it has not yet been tried.'"

While - in 1941! - Roosevelt could defend capitalism only with the claim that it had "not yet been tried," his descendants in the Fair Deal today boast of its achievements. What they are boasting of are the "miracles" of capitalist production when it is mobilized for war, for this is capitalism at its "best." It was the war which solved the problems of the New Deal, as it is the war economy which shores up capitalism under the Fair Deal.