Jennifer Taub and John Weeks discuss President Roosevelt’s policy of saving the economy from the ground up
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore.
MarchÂ 4 will be the 80th anniversary of the inaugural speech of Franklin Roosevelt becoming president of the United States. Here’s a little clip of what he said.
FRANKLIN D. ROOSEVELT, U.S. PRESIDENT: I am prepared under my constitutional duty to recommend the measures that a stricken nation in the midst of a stricken world may require. These measures or such other measures as the Congress may build out of its experience and wisdom I shall seek within my constitutional authority to bring to speedy adoption.
JAY: Now joining us to talk about the significance of Roosevelt’s New Deal and what it means for today is, first of all, Jennifer Taub. She’s an associate law professor at Vermont Law School. Before joining the VLS, she taught at the Isenberg School of Management and at the University of Massachusetts, Amherst.
And also joining us, from London, is John Weeks. He’s a professor emeritus at the University of London School of Oriental and African Studies and author of the recently released book The Economics of the 1 Percent: 1 Percent Economics, 99 Percent Ideology. And he writes at JWeeks.org.
Thank you both for joining us.
So, John, before we kind of get into sort of comparison of today to then, give us some broad strokes of what was the significant decisions of Roosevelt and the New Deal.
JOHN WEEKS, PROF. EMERITUS, SCHOOL OF ORIENTAL AND AFRICAN STUDIES: Let me begin by telling a story. When my mother died, I went to pick up the woman whoâ€”to take her to the funeralâ€”who had done our cleaning for us. And I remember I went into her house. I’d never been in her house. She was African-American. Those were still the dark days of the end of segregation. [crosstalk]
JAY: And this is in Texas, right? This is taking place in Texas?
WEEKS: Yeah, this was in Texas. Right. There were two photographs on the wall. One of them was Martin LutherÂ King, and the other was Franklin D.Â Roosevelt. And so I understood why Martin LutherÂ King was there, but I said to her, why is Franklin D.Â Roosevelt there? I didn’t know he did much forâ€”we called them black people in those days. And she said, “Saved our farm.”
And I think that there are a lot ofâ€”for all of Roosevelt’s drawbacks, there were manyâ€”I mean, there wereâ€”millions and millions of Americans loved him because they thought he had saved their farms, their houses, their lives, their health, and so on. And it’s difficult, I think, for people now to realize how strongly the vast majority of Americans felt, you know, felt very deeply about Roosevelt.
JAY: Jennifer, for our younger viewers, contextualize this a little bit. He’s elected in ’32, inaugurated in ’33. What did that period look like?
JENNIFER TAUB, ASSOC. PROF., VERMONT LAW SCHOOL: It was a really difficult period. The Depression had been under way for a while. If you remember, the great crash of the stock market was in OctoberÂ 1929. So by the time Roosevelt took office, there was massive unemployment. People were scavenging in dumpsters looking for food to eat. There were tremendous foreclosures and great amounts of unemployment. And so whatâ€”the country was quite desperate and very frustrated with Herbert Hoover, who was the outgoing president. So Roosevelt presented a tremendous hope, and he really did live up to people’s hopes.
JAY: John, when Roosevelt actually ran for office, my understanding is he actually ran on a platform of budget cuts. And Hoover was actuallyâ€”.
WEEKS: He ran on a balanced budget. One of his criticisms of Hoover was that Hoover had overseen a deficit.
I think there’s no doubt that Roosevelt was an opportunist. Give me more opportunists like that. I mean, he came into power. He realized that something very drastic had to be done and had to be done quickly. He tried different things. He had some of the things [incompr.] struck down by a reactionary Supreme Court, which Jennifer can probably comment on more than I can. Then he tried different things.
And I think that he was a person that for some reason or other rose above his classâ€”or dropped below his class (he was one of the wealthiest men in the United States) to recognize the plight of Americans. I mean, there wereâ€”like, there are so many quotes, but let me just give one. Roosevelt said the test of our civilization is not if we build a larger economy; it’s whether or not we build for the poorest in society.
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JAY: But how much of that was rhetoric? I mean, wasn’t Roosevelt essentially doing whatever possibly could be done to maintain capitalism in the United States and very afraid of any move towards socialism? There was a realâ€”there certainly was a workers movement. The union movement was gaining some strength. The Soviet Union, whether it was true or not, certainly held out the promise of an entirely different system. I mean, wasn’t Roosevelt doing what had to be done to save capitalism?
WEEKS: What I think is thatâ€”did Roosevelt save capitalism? Maybe he did. But is that a criticism? I would say that there were many people at that time who did not want Roosevelt elected and wanted to continue with the policies which Jennifer has described, which Hoover had pursued. And indeed, in 1933, soon after Roosevelt was inaugurated, there was a cabal, a plot to try to remove him by the most reactionary elements of financiers in the United States, and it was exposed by the Marine Corps general who they approached to be the head of this coup. So, yes, Roosevelt saved capitalism. But I think that’s a criticism only if you think that the only way thatâ€”where he should have gone is socialism. I don’t think that was really in the cards.
JAY: Well, Jennifer, I guess part of that question is is: did Roosevelt’s policies even actually really save capitalism? There’s an argument that it mitigated the crisis some, but it wasn’t till the massive government expenditure in World WarÂ II that you really had the end of the Depression.
TAUB: I mean, that’s true. But I want to return to what you mentioned earlier about what was happening in Europe with the authoritarian regimes in Russia and in Germany. And I think that if you look back at the news and the historical record, that was very much on people’s minds. So I believe that Roosevelt didn’t just, as you say, save capitalism, but also saved democracy, at least for a while.
What he put in place was quite different to what BushÂ II did in the fall of 2008. When BushÂ II began the rescue, it was a rescue of the financial system and it was a recoveryâ€”it was, again, a recovery of the financial system with very much of a top-down let’s keep things in place and let’s try to restore confidence in the existing banking structure and the financial market players.
In contrast, Roosevelt understood that that wasn’t going to work, and so he did a bottom-up type of rescue. And this included things like establishing the Works Administration, where over 3Â million people were given jobs, you know, fixing infrastructure and the like. And so he literally had the federal government, through an executive order, getting people back to work.
He also established the HOLC, the Home Owners’ Loan Corporation, which was in response to what Hoover tried to do, which was more of a top-down, setting up regional banks to help out the savings banks. Instead, Roosevelt realized none of those were rescuing people from the bottom up, and ended up preventing many foreclosures.
And so I think that what Roosevelt was trying to do was a move of saying the federal government was going to try to help shore up the economy, begin to regulate securities, take a closer look at banking by separating investment banking from commercial banking. He was going to step in and take a lot of authority, but it wasn’t just top-down authority; it was also bottom-up support, rescue, and recovery for the people. And that gave the federal government more legitimacy in what it was doing than I think where we are today.
And why there might be resistance to federal spending when we desperately need it is because the memory of the Bush 2008 and then early Obama 2009 bailouts of the banks without reciprocity for homeowners is still fresh in people’s minds.
JAY: Right. John, what are some other examples of Roosevelt legislation or acts that you think one could learn from?
WEEKS: I would mention a couple of things. One thing: before I mention anything else, I think that you have to stress Roosevelt’s advisers. Jennifer referred to this. But some of them were very progressive indeed, much more progressive than Roosevelt. And the one that I mentioned, the first woman cabinet member, Frances Perkins, who was the secretary of labor, who was a very, very progressive person and should be celebrated by Americans as I’m doing nowâ€”but I would mention two very important things that Roosevelt did in addition to all of those work creation schemes, which Frances Perkins was deeply involved in. One was we can thank the Glassâ€“Steagall Actâ€”actually, it’sâ€”formally is the Banking Act of 1933. For 40Â years when we did not have a financial crisis, that is, from 1933 until nineteenâ€”well, 50Â years, I should sayâ€”1983, there was no financial crisis. We gotâ€”the first big financial crisis we got was the savings and loan, and that was a direct result of a law being passed amending the Banking Act of 1933 thatâ€”allowing savings and loans to do things they should not have done, which you know because a quarter of them went bust. That’s one thing. The other thing is establishing the principle that when the private sector demand is inadequate, the federal government should step in and make up for that demand. So those two principlesâ€”one, that finance must be regulated, and two, that the federal government must provide a economic boost when the economy is lagging.
JAY: And there was also legislation passed that on the face of it, at least, was supposed to make it easier for unions to operate. Jennifer, talk a bit about that.
TAUB: Yes. I mean, Rooseveltâ€”and some of this was protected and some of it was struck down, but the ability for the American labor movement to grow depended upon the ability to organize with protection and without fear of retaliation. And that wasâ€”we can thank Roosevelt for that.
I want to also mention, sinceâ€”touch on some things John said, and add a few others. One new thing is Rooseveltâ€”we can look back and thank Roosevelt for the existence of unemployment insurance, and also establishing the precursors for our Medicare system, which Americans cherish today, even those who say they don’t want big government, right? The funny thing they say is, you know, get your government hands off my Medicare. And we can really thank Roosevelt for that.
One thing John mentioned was the Glassâ€“Steagall act or the Banking Act of 1933. And, again, because of what was put in place in the New Deal, there was an understanding that if banks wanted to have access to the safety netsâ€”and those safety nets were the Federal Reserve lending support (and remember, the Fed was established in 1913, so that’s our 100-year anniversary), but also the establishment of deposit insurance, which only came in with the Glassâ€“Steagall Act. Both of these two things didn’t just help people in terms of avoiding runs on the banks and what that does to the economy, but it helped banks because they knew that the deposits they brought in were backstopped by the federal government. And by having that backstop or having that safety net, what that meant is it was absolutely essential to make sure that if the government was going to be standing behind these deposits, that someone had to limit what the banks actually did with the deposits. And that was [incompr.] important piece of the fabric.
And as John mentioned, this started getting pulled away right around the timeâ€”right prior to the savings and loan crisis. And part of what gets undone isn’t just the regulations saying, if you’re getting the safety net, you have to avoid certain high-risk practices, but other things got pulled away related to bank size. Right? So there’s a whole series of things that start happening in the ’70s and ’80s and ’90s that put in place the growth of finance as an important part of the economy.
JAY: Alright. Well, in the next segment of our interview, we’ll pick up the discussion. And just to tease it a little bit, it seems to me after World WarÂ II, to a large extent led by the Democratic Party, what begins is a process of undoing the New Deal, and right up until today. But the twist to that is Roosevelt helps hand power to Truman, whoâ€”under his administration I think the New Deal starts to get unraveled. And Roosevelt didn’t have to do that. So let’s talk about that in the next segment of this discussion on The Real News Network.
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