“The most terrifying words in the English language are ‘I’m from the Government and I’m here to help.’” Ronald Reagan
When the stock market crashed in October of 1929 the American unemployment rate shot up to 9%. American businesses and workers quickly made adjustments, as they had during previous depressions, and by June of the next year unemployment was down to 6.3%.
Then the government started “helping.”
Congress and the Hoover administration implemented a high tariff, or punitive tax, on imported goods that June. The government then started spending money at rates never before seen in peacetime, in an attempt to “stimulate” the economy. Unemployment started climbing again; it reached 25% by the time President Hoover left office in 1933.
Franklin Roosevelt, Hoover’s successor in office, would prolong the depression another eight years through high taxes, arbitrary regulations on trade and industry, and government manipulation of wages and prices; but don’t expect to hear that in a typical college history class. The professors and textbook writers we trust to educate the next generation of American leaders are teaching their students that government activism is the only thing that could, and eventually did, end the Great Depression.
The View from the Ivory Tower
Professor Howard Zinn, in his A People’s History of the United States, tells students that after the 1929 stock market crash “the economy was stunned, barely moving.” In the widely used freshman textbook Give Me Liberty Professor Eric Foner says “The federal government had never faced an economic crisis as severe as the Great Depression.” These statements are far from true in regard to the relatively small dip the economy took in 1929 and early 1930. The true crisis was the depths the economy reached after the Smoot-Hawley tariff and other big government “solutions” had had a few years to work their magic.
The problems certainly had not reached historic levels by June of 1930, the month Smoot-Hawley went into effect. Unemployment had already gone down to 6.3%, as Vedder and Galloway point out in their book Out of Work. That is a lower unemployment rate than France, Germany, or Italy has had in the last eighteen years!
If college history books were written by conservatives, they would tell us that President Hoover and the 72nd Congress deepened and lengthened the Depression by meddling with the economy, and the Roosevelt government did greater harm with more meddling.
But college history books are written by college professors, which is to say they are mostly written by liberals. The people who teach history at most universities approve of President Roosevelt’s policies because they were left wing policies. The actual results of Roosevelt’s polices are framed in a positive light, because the people doing the framing share Roosevelt’s world view.
From a certain perspective, the New Deal did address what was “wrong” with the American economy. The nation’s ever-increasing prosperity and productivity had by 1929 allowed a minority of Americans to earn large fortunes, creating a wide “disparity of wealth” between the nation’s richest and poorest people. This, to leftists, is a crisis that cries out for government intervention.
The textbook America’s Promise states that “possible culprits” responsible for the Great Depression “include the uneven distribution of wealth.” Howard Zinn’s A People’s History of the United States cites “the bad distribution of income” as a major cause of the Depression. In Give Me Liberty Dr. Foner laments that by 1929 “The fruits of increased production were very unequally distributed. Real wages for industrial workers (wages adjusted to take account of inflation) rose by one quarter between 1922 and 1929, but corporate profits rose at more than twice that rate.”
Solving the “Problem”
Once President Roosevelt took office he made no bones about his left wing agenda. In his first inaugural address he blamed bankers and businessmen for all the nation’s problems. In his second he promised to “find through government the instrument of our united purpose to solve for the individual the ever-rising problems of a complex civilization.” (Italics added)
Roosevelt’s government made it illegal for individuals to own gold, and forced people to sell their gold to the government at a price the government dictated.1 He raised the top income tax rate to a staggering 79%.2 He used taxpayers’ money to create and subsidize a government-run electric utility, to force a private sector electric company out of business. As I described in an earlier post his government tripled peace-time government spending, and then ramped up the spending still higher during WWII.
Roosevelt worked with Congress to create new federal agencies that controlled the lives and businesses of the American people in unprecedented ways. His Resettlement Administration (RA) relocated people from the cities to government-owned communal farms, organized along Marxist principles. His Agricultural Adjustment Administration (AAA) bought and killed six million pigs, and let them rot; in an effort to drive up food prices to help the nation’s farmers. The AAA also instituted a policy of using taxpayers’ money to pay farmers not to farm. (Key provisions of the AAA were eventually ruled unconstitutional, but the practice of paying farmers not to farm their land is still with us today.)
Under the National Recovery Act (NRA), the government dictated how much merchandise factories produced, and how they sold it. The NRA dictated business practices in absurd detail. It was eventually declared unconstitutional when a poultry broker sued the federal government over regulations that had driven his small company to the verge of bankruptcy. One of the rules that formed the basis of the suit was that the poultry seller could not allow his customers to choose the chickens they bought; the government mandated that a chicken was to be assigned to the customer at random. (When the Supreme Court ruled against the NRA Roosevelt called a press conference and denounced the Court for returning the nation to “the horse and buggy age.”3)
The Works Progress Administration (WPA) and Public Works Administration (PWA) were formed to create government jobs for the unemployed. Many of these jobs were highly political. Under its Federal Writers’ Project the WPA hired journalists to write propaganda supporting the New Deal. It also hired thousands of actors, directors, and musicians for a “Federal Theater Project,” which staged plays showing the New Deal as the solution to the nation’s problems.4 It hired photographers to work with the government’s journalists to document the suffering of the nation’s unemployed, and show the benefits of life in the Resettlement Administration farms and other federal projects. (The most well-known image of private sector suffering during the Oklahoma Dust Bowl was shot by a WPA-employed photographer named Dorothea Lange.)
How Historians Define New Deal Success
Roosevelt’s policies did a terrific job of narrowing that gap between rich and poor that liberal historians find so troubling. The Dow Jones Industrial Average never got back up to to its pre-depression level until many years after Roosevelt’s death. Virtually all stockholders were wealthy people in those days, and a stagnant or shrinking stock market meant losses for the rich. A study done in 1937 showed that, during the Depression years, fully two thirds of private sector businesses had been losing money. Many businesses failed during the Roosevelt years, and many people who had retained significant wealth after the crash lost everything during the Thirties.
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One thing the New Deal indisputably did not do was raise living standards for the American people as a whole. At the end of the 1930’s America’s working people were still worse off than they had been at the end of the 1920’s. In Give Me Liberty Professor Foner admits that unemployment was still at 15% in 1940, and claims that it took the still-higher wartime government spending of the WWII years to finally stimulate the economy enough to end the Depression. All that being said, the Professor declares the New Deal a success anyway:
Even as the New Deal receded, its substantial accomplishments remained. It greatly expanded the federal government’s role in the American economy and made it an independent force in relations between industry and labor. The government told farmers what they could and could not plant, required employers to deal with unions, insured bank deposits, regulated the stock market, loaned (sic) money to home owners, and provided payments to a majority of the elderly and unemployed…It restored faith in democracy and made the government an institution directly experienced in Americans’ daily lives and directly concerned with their welfare. It redrew the map of American politics. It helped to inspire, and was powerfully influenced by, a popular upsurge that recast the idea of freedom to include a public guarantee of economic security for ordinary citizens and that identified economic inequality as the greatest threat to American freedom. (Italics added)
Well, there you have it. The New Deal didn’t reduce unemployment or raise living standards, but it cut rich people down to size, it “expanded the federal government’s role in the American economy,” and it redefined the word “freedom” to mean, basically, government control. All good things, from the point of view of a typical history professor.
1 Amity Schlaes, The Forgotten Man, pp. 157 through 159
2 ibid., p. 256
3 ibid., p. 244
4 ibid., p. 259