The Real Deal on the ‘New Deal’

by Andrew Pollack / December 2005 issue of Socialist Action newspaper

In the aftermath of Hurricane Katrina, some Democratic Party politicians and even conservative newspapers like the New York Daily News were calling for a “new New Deal” to deal with the destruction wrought, and with the broader social problems exposed in its wake.
Some pundits even claimed the reaction against Bush’s apathy toward Gulf residents’ needs would help shift the country’s politics back to the left.

For instance, The Nation’s William Greider predicted that “[t]he catastrophe … is one of those big moments that jolt public consciousness and alter the course of national history.” He predicted “dramatic breakdown for the reigning right-wing orthodoxy, the beginning of its retreat and eventual demise.”

Greider took as good coin the rhetoric of Democrats who “are doing what they haven’t dared to do for many years, even decades: They are invoking their New Deal legacy and applying its liberal operating assumptions to the present crisis. … Only the federal government has the resources and authority to lead such a complex undertaking.”

For most working people, the phrase “New Deal,” based on the commonly accepted mythology of what happened in the early years of Franklin Delano Roosevelt’s administration, conjures up pictures of public-works jobs for all who needed them, of gigantic public-works
projects rebuilding old institutions and building brand new ones, and of government concern for the down and out.

Those Democratic Party politicians who were throwing around Rooseveltian rhetoric may even believe this mythology. But the rebuilding packages they put forward fall far short of what FDR was alleged to have achieved, and are instead more in synch with today’s bipartisan consensus that the market is a cure-all for whatever ails you.

The more astute Democratic politicians, however, know precisely the limits of the New Deal and in some ways their miserly proposals more accurately match the overall picture of Roosevelt administration policy.

Barely a month after Katrina, the few Democrats who had earlier engaged in New Deal-style rhetoric had largely fallen mute, and by mid-October The New York Times could report that Republicans were once again pressing their plans to save the Gulf and the economy as a whole with even more tax cuts for the corporations and the rich.

“We’ve had a stunning reversal in just a few weeks,” said Robert Greenstein of the liberal Center on Budget and Policy Priorities. “We’ve gone from a situation in which we might have a long-overdue debate on deep poverty to the possibility, perhaps even the likelihood, that low-income people will be asked to bear the costs. I would find it unimaginable if it wasn’t actually happening.”

But the inability—in fact, the unwillingness—of the Democratic Party to take its own rhetoric seriously made this turn of events predictable.

Saving the banks

Let’s take a look at the reality behind the New Deal mythology. FDR used the phrase “New Deal” in his 1932 campaign but the main theme of his thoroughly mainstream platform was cutting the deficit. His Secretary of Labor, Frances Perkins, later said it was only a “happy phrase” to make people feel better.

The very first task undertaken by Roosevelt upon taking office was saving the country’s banks, which had shut down the day of his inauguration. The motivations and machinations of FDR’s banking experts are well-described by one of his most ardent supporters, historian Arthur M. Schlesinger Jr., in the second volume of his three-volume tribute, “The Age of Roosevelt.”

Schlesinger quotes FDR aide Raymond Moley to the effect that those working on the emergency banking legislation had “forgotten to be Republicans or Democrats. We were just a bunch of men trying to save the banking system.” And by saving the system they meant consolidating the hold of the biggest banks … at a time when even some liberal members of Congress pleaded with Roosevelt to establish a national banking system.

Roosevelt’s reply: “That isn’t necessary at all. I’ve just had every assurance of cooperation from the bankers.”

Concludes Schlesinger, “the very moneychangers, whose flight from their high seats in the temple the President had so grandiloquently proclaimed in his inaugural address, were now swarming through the corridors of the Treasury.” And they were there in order to help Roosevelt’s advisers craft the new bills, which would tighten their grip on the nation’s banks (much as the big energy companies worked in the White House to help Dick Cheney craft Bush’s energy bill.) The result, says Moley, of FDR’s conservative policies, was that “capitalism was saved in eight days.”

Yet Schlesinger also cites Senator Bronson Cutting of New Mexico, who wrote years later: “The nationalization of banks by President Roosevelt could have been accomplished without a word of protest. It [not doing so] was President Roosevelt’s great mistake.”

FDR himself testified to his motivations in this and subsequent policy decisions: “No one in the United States believes more firmly than I in the system of private business, private property and private profit. No Administration in the history of our country has done more for it. It was this Administration which dragged it back out of the pit into which it had fallen in 1933.”

Restoring prosperity?

Once the system was saved from total meltdown, Roosevelt and his “Brain Trust” initiated a variety of programs to convince the country that they could end the Depression. One was the public-works program, originally known as the Public Works Administration, which was originally proposed by some FDR advisers to work in tandem with the National Recovery
Administration.

Together the two would hasten recovery: the former would put money in the pockets of workers so that they could spend them on businesses overseen by the latter. But almost immediately the two programs were decoupled (Schlesinger calls it an “amputation”), and PWA spending flowed to a trickle. As a result the “NRA had lost its engine of expansion,” and it was decided that economic stimulus was to come not from public spending but indirectly through a revived market based on renewed business confidence, thus yielding greater purchasing power.

This was entirely in keeping with Roosevelt’s faith in the ability of market forces to eventually right the ship of the economy, and his reluctance to spend any more government funds than absolutely necessary.

The NRA was supposedly a trade-off: corporations would enjoy the suspension of antitrust laws in return for voluntary agreements for minimum wage levels and maximum hours. But the wages in the codes—which were written by the corporations themselves—were so low, and the hours so long, that they provoked countless strikes and organizing efforts around the country.

Says Schlesinger: “though the code authority exercised public powers, it was not a public body. It was, as [NRA administrator Hugh] Johnson put it, ‘an agency of the employers in an industry.’” The result was just enough renewed economic activity to keep the biggest corporations from going under.

Thus socialist Maurice Spector could write in the New International in 1938 that there had been no recovery in the sense of an expansion of capital, of increasing opportunities for accumulation, which is the norm for a recovering capitalist economy. Instead “capital
secured its profits by restriction” of production, reviving existing production facilities to levels still below the 1920s peaks.

In fact, it’s universally acknowledged, even by the most ardent mainstream academic defenders of Roosevelt, that the system did not fully recover until the war and the associated meteoric expansion of war-materiel production.

The public works record

Throughout Roosevelt’s term, spending on public works and jobs rose and fell in reaction to protest. FDR aide Harry L. Hopkins estimated that the average annual expenditure on unemployed relief from 1933 to 1936 at about $1.7 billion. In contrast, Roosevelt spent $79 billion on the war in 1943, $95 billion in 1944, and over $100 billion in 1945.

The record in housing construction is a good example of the disparity: whereas from 1933 to 1937 the Public Works Administration built only 25,000 units of public housing (not much more than union-owned banks had financed in the 1920s), roughly 20 times as many units
were built in Roosevelt’s third and fourth terms so workers could settle near new war plants.

Nancy Rose, author of “Put to Work: Relief Programs in the Great Depression,” says that unemployment, which was at 25 percent in 1933, was still nearly 15 percent in 1940—despite the various public works programs that came and went.

Even at the high point of public hiring under the Works Progress Administration (WPA), jobs were provided for only one-third of the unemployed. Only about a quarter of the jobless went through any of the federal programs—and all at wages so low that they provoked countless strikes and organizing efforts. Says Art Preis in “Labor’s Giant Step”: “The highest relief, the most relief jobs and the biggest wages were in direct proportion to the number of unemployed
struggles.”

The woes of urban workers were matched by those of poor farmers and farmworkers. The Agricultural Adjustment Act subsidies and crop-restrictions helped the wealthiest farmers disproportionately while pushing poor farmers and sharecroppers and tenants off the land. What’s more, payments for restricting production were made to farm owners who were trusted to pass along to tenants their share—which, of course, almost never happened.

Roosevelt made clear his desire to cut public jobs as soon as possible: “The Federal Government with the return of prosperity must more and more narrow the circle of its relief activities and reduce the amount of Federal revenue to be expended in the amelioration
of human want and distress.”

Despite the failure of this prosperity to appear—even in the first few years after conversion to war production—Roosevelt continued slashing public works, throwing a million and a half off the WPA rolls in the spring of 1939, again provoking WPA strikes and unemployment demonstrations.

Those getting public-works jobs were disproportionately white males, who were typically
paid more than women and minorities (when the latter were admitted at all). The number of jobs was increased before elections and cut soon afterward. For instance, 400,000 WPA workers were laid off as soon as Roosevelt won election to a second term.

Despite all these limitations the amount of infrastructure built and services provided was
impressive. Says Rose: “Workers built and repaired one million miles of roads and 200,000 public facilities, including schools, playgrounds, courthouses, parks and athletic fields, swimming pools, bridges, and airports, drained malarial swamps, and exterminated rats in slums. They created works of art, gave concerts, set up theaters throughout the country, even in small towns, set up nursery schools, served over 1.2 billion school lunches to needy children, gave immunizations, taught illiterate adults to read and write, and wrote state guidebooks—classics that are still in use.”

Schlesinger’s list adds some crucial infrastructure projects, including sewage and water systems, gas and electric power plants, courthouses, hospitals and jails; dams and canals, reclamation and irrigation projects, levees and flood control projects, bridges and viaducts, docks and tunnels.

Working people can certainly appreciate the need for all of the above. But the labor and radical movements had long been demanding such spending and had no reason to feel “grateful” to capitalist politicians finally granting it only under the twin compulsion of
devastating economic crisis and the threat of revolution.

Beside fear of revolt Roosevelt had another motivation for such public works as were undertaken, especially the ones listed by Schlesinger: it was in the direct interest of his own class to rebuild and extend the country’s infrastructure. The U.S. had after World War I become the foremost economic power in the globe. Yet, due to its relative political backwardness, in many respects it still lagged behind those capitalist powers it had just leapfrogged over in raw production capacity.

The lack of infrastructure was holding back not only the ability of corporations to make a profit at home, but also the state’s ability to gear up for the coming war abroad—a war which Roosevelt was desperate to be part of in order to secure the global markets he believed the country’s new economic ascendancy entitled it to.

Thus in the late 1930s public works programs began more and more to churn out military goods. These programs helped rebuild the Navy (aircraft carriers, destroyers, submarines, planes, etc.), helped the Army mechanize, built over 50 military airports, etc.

Soon Roosevelt switched from direct government hiring for war production and began instead shoveling money to private companies to churn out rifles, tanks, airplanes, and bombs, and even to finance privately owned factories to make such goods.

The public-works programs also suffered from being administered by and for a capitalist class wedded to an anarchic market, rather than by a working class with a material interest in rational, coordinated production.

Thus farmers were paid for not producing, and crops were destroyed, milk spilled and livestock slaughtered while millions went hungry.

Roosevelt’s antilabor record

One of the most persistent yet inaccurate New Deal myths is Roosevelt’s supposed fondness for organized labor, in particular the false notion that he “gave” workers the right to organize through Section 7(a) of the NRA. Section 7(a) was in fact granted to try to dampen a huge strike wave.

In 1933 and 1934, way before the famous 1937 Flint sit-down, workers were sitting down and engaging in other militant forms of strikes for union recognition. If anything Section 7(a) led to more strikes because employers still did not recognize this right “given” to workers.

Roosevelt didn’t lift a finger against the recalcitrant bosses, and even spoke openly of their
right to continue forming company unions (whose membership actually swelled dramatically after passage of the NRA and only died out after the birth of the Congress of Industrial Organizations).

Frances Perkins admitted that 7(a) was only put in the NRA reluctantly after protests from AFL officials. United Mine Workers head John L. Lewis told his biographer Saul Alinsky, “Roosevelt was not too friendly to Section 7(a); and if there were any time when I began to question and wonder and have reservations about the President, it was at that time.”

Nor did Roosevelt stop the bosses from using armed thugs and city cops to battle strikers. The federally funded National Guard was used repeatedly to violently break strikes. After police called out by Chicago’s Democratic mayor murdered 10 strikers at Republic Steel and wounded dozens more, Roosevelt rejected an appeal from CIO leaders to intervene, and instead declared “a plague on both your houses” (i.e. both workers and bosses).

Roosevelt was soon to send in Army troops to break strikes at war production plants, and during the war sought to ban strikes altogether.

Farm workers’ leaders could sense Roosevelt’s disdain as well. Said STFU leader H.L. Mitchell, Roosevelt “talked like a cropper and acted like a planter.” And the reason for that, says Schlesinger, was that “to back the SFTU would have been too unmistakable an affront to the conservative southern leadership in Congress on which he relied for so much of his
legislative program.”

Racism in the New Deal

In addition to explicit or de facto discrimination in the programs and laws described above, Roosevelt—whose administration rested on an alliance of Dixiecrats and racist Northern urban party machines—also refused to pass anti-lynching legislation, to abolish the poll
tax, to desegregate the Armed Forces, or to take any other substantive measures against the country’s rampant racism.

This aspect of the New Deal has been brought back to light recently in a book by Ira Katznelson.

Summarizing his argument in the Washington Post (“New Deal, Raw Deal: How Aid Became Affirmative Action for Whites,” Sept. 27, 2005), Katznelson reminds those who would hark back to the New Deal as a positive example that such “nostalgia requires a heavy dose of
historical amnesia. It also misses the chance to come to terms with how the federal government in the 1930s and 1940s contributed to the persistence of two Americas.”

He shows how Blacks were excluded from New Deal legislation such as Social Security, labor laws, and other programs for education, home-ownership and small-businesses. The most well-known case is the exclusion of farm and domestic workers from all labor protections, unemployment insurance, and Social Security programs—an exclusion also affecting many Latino workers.

Even where not explicitly excluded, local administration of these programs allowed racists to
deny benefits to Blacks. By disproportionately granting some benefits to white workers, the economic gap between the races was actually widened.

Roosevelt’s racism also showed in his crafting of the notorious “bracero” program in the 1940s. Under this program big farmers in the Southwest imported “guest workers” from Mexico to till the fields with virtually no rights and at pitifully low wages—wages often
stolen from them by the bosses and/or the Mexican and U.S. governments, and which some of the surviving workers are still trying to retrieve today through the courts!

Women Get a Raw Deal

Another pro-Roosevelt liberal historian, Blanche Wiesen Cook, has detailed the discrimination facing women workers under the New Deal: “FDR’s First 100 Days did nothing for an estimated 140,000 homeless women and girls who wandered U.S. streets and railroad sidings. New programs ignored the needs of almost four million unemployed women. The plight of single, divorced, and widowed women was also ignored.”

The programs set up to accommodate a fraction of the female unemployed suffered from the same spending restrictions as those employing men, compounded by gender discrimination. Relief projects were forbidden from competing with private businesses, and women were barred from work outdoors.

The 300,000 women employed in the first program were slotted into special “women’s work”: canning and gardening, public libraries, schools, and social services. The vast majority of women in the new programs were employed in domestic services or sewing and craft projects—and at lower wages than men on public works.

Says Cook: “Women’s reemployment was slow, sporadic, inadequate. By 1938, 372,000 women had WPA jobs, but over three million women remained unemployed; almost two million women suffered the insufficiency of part-time work.”

The New Deal prioritized re-employment of male “breadwinners.” And whereas under the new Social Security Act, mostly male job titles were deemed worthy of old-age pension and unemployment insurance coverage, needy women and children were largely relegated to “relief.” Even after being amended in 1939, the Social Security Act set up a maddening maze
of restrictions for wives, spouses, and widows—limiting the conditions under which women could qualify.

From New Deal to War Deal

Roosevelt was in fundamental agreement with his ruling-class colleagues that the country’s economic and social crises couldn’t be solved within the confines of its borders but required international economic expansion. And such expansion, given the worldwide extent of the Depression and the resulting manic search by all imperial powers for new markets both at home and abroad, could only be achieved by war.

The turn to war production coincided with a turn away from the New Deal. The New York Times observed in 1937 that Roosevelt had “accepted the idea of aiding industry on its own terms,” and CIO head Philip Murray said there had been no new social welfare legislation
since 1938. Agencies such as the Reconstruction Finance Corporation and the Export-Import Bank were retooled to aid in gearing up war production (including making huge grants and loans to military goods manufacturers) and expanding overseas commerce.

The turn can be clearly seen in the evolution of what was the New Deal’s most extensive and famous project, the Tennessee Valley Authority, originally set up in 1933 as a way to provide jobs and electricity to the impoverished Appalachian region. Once war preparation began, the electricity from its dams, as well from the Boulder and Grand Coulee Dams in the West, were
harnessed to the wheels of their regions’ new war factories.

TVA-generated power was also critical for building the first atomic bomb. To manufacture its nuclear materials the government built the city of Oak Ridge from scratch in the Tennessee Hills, its location chosen because of proximity to TVA dams.

Preis summarizes the switch thus: “The ‘New Deal’ proved to be a brief, ephemeral period of mild reforms granted under pressure of militant mass action by the organized workers, both employed and unemployed. By late 1937, Roosevelt had adopted the policy of propping up basic industry with government war orders, while cutting relief expenditures even though
unemployment rose. The ‘New Deal’ became the ‘War Deal.'”

Social Security

One of the most treasured gains of this period—and one now under heavy attack—are the old-age pensions provided by Social Security.

Here too Roosevelt’s legislation can be attributed directly to mass pressure and fear of deeper revolt. For decades radicals had been exposing the abandonment of the elderly by employer and government to miserable, poverty-stricken existences and early death. In 1933 the Townsend movement, centered on a program of a $200 a month pension for every senior,
achieved a mass following almost overnight.

In 1935 Roosevelt signed the Social Security Act. It included provisions for old-age pensions and unemployment insurance. Agricultural and domestic workers were excluded, as were workers in nonprofit organizations, self-employment, small businesses, and other sectors such as laundry workers, seamen, and educational and government workers.

As a result, only half the workforce was included, and over 80 percent of Black women workers were not covered. Workers excluded from the main Social Security program became eligible for Old Age Assistance and Aid to Dependent Children. Both required a means test—i.e., proof of your destitution.

The foremost proponent of liberal reform in this area, Abraham Epstein, analyzed the Act in the pages of The Nation. Epstein had in fact coined the term social security to highlight the need not just for old-age pensions and unemployment insurance but also health insurance, care for the dependent and disabled, etc. Epstein wrote that “the present law seems doomed from the start by its complex, slovenly, and mangled character” and its dependence on a mish-mash of federal, state and local programs, laws, and administrative agencies.

“Everywhere abroad,” Epstein noted, “social-insurance measures have been championed chiefly by organized labor. Our labor movement has either opposed them or given half-hearted and uninformed support.” By labor movement he obviously meant the leadership, such as
AFL head William Green—who opposed unemployment insurance!

Epstein also decried the financing of Social Security by payroll taxes. In other countries, he said, the “well-to-do … have shared in the maintenance of the aged poor since the establishment of the Elizabethan poor-law system three centuries ago.” But the new bill
“transfers the entire burden … to the backs of the young workers and their employers. … Since industry will make every effort to pass on its levy to the consumers, it means that the young employees—in their dual role of workers and consumers—will bear the major cost.

Bush’s plans to dismantle Social Security met fierce opposition, primarily because working people treasure the gains made under the program, just as we treasure the housing, schools, hospitals, roads, and other public works built in the 1930s.

But we must remember, as Art Preis said, that these precious gains were granted “under pressure of militant mass action by the organized workers,” and not as gifts from benevolent rulers. That’s the only way we can see through the false claims of today’s politicians claiming to be “New Dealers” and can fight independently for all that we need and deserve.