Undoing the New Deal: Roosevelt Created A Social Safety Net, Not Socialism (pt3)
Historian Peter Kuznick says the New Deal created necessary programs and regulations that mitigated the effects of the Great Depression, but he wouldn’t nationalize the banks or challenge private ownership
PAUL JAY: Welcome to the Real News Network. I’m Paul Jay in Baltimore. During the 1930s in the deep depression, unemployment went from, in 1929, before the crash of around 4% to as high as 25%, but if you take into account the number of people that started working part-time for lower wages and the unemployed, I’m told that the actual loss of labor power in the economy was as high as 50%, people not working full-time.
In order to save the day for the crisis of global capitalism, and of course this great depression and deep crisis affected virtually every country in the world, except perhaps the Soviet Union, which had its own issues but was not as affected as the Western capitalist countries were. That being said, there were two basic responses: in Europe, the response eventually was fascism. The rebellion and the working class and the rise of the socialist movement was crushed through brute force of Hitler and Mussolini and fascists leadership, both in France and other places.
In the United States, where there were forces advocating the same kind of fascism. In fact, Henry Ford was a big supporter of Adolf Hitler. In the end, the response was something different. The response was Roosevelt and the New Deal. The New Deal made a great compromise with labor. It created a social safety net that more or less didn’t exist prior to the New Deal. Unemployment insurance, Social Security, banking regulation, support for agricultural workers, for farmers, subsidies and such, it was a whole range of measures that both benefited the people and to some extent helped take away the most severe consequences of the depression, at least for some, certainly many people suffered terribly.
That being said, the New Deal also saved capitalism, which had given rise to the great crisis in the first place. The New Deal was a compromise, that’s the bottom line, and since the new deal was established in the 30s, it has been attempted to be undone by both some Democratic presidents and Republican. We’re telling this story in a series of interviews with historian, Peter Kuznick who now joins us from Washington. Thanks for joining us again, Peter.
PETER KUZNICK: That was a very good summary of the New Deal there.
PAUL JAY: Thank you. Peter is a professor of history and director of the nuclear studies at Institute at American University. He’s the co-writer with Oliver Stone of the Untold History of The United States.
So, please go back and watch the earlier parts of this series because we are working through things kind of chronologically. Although, we are going to step back just a little bit because we had made our way up to Truman and the purging of the Democratic Party, of the New Dealers at the leadership of the Democratic Party and the administration under Truman, President Truman. But we haven’t really talked about just what the new deal is that was being undone. So Peter, give us just the basic strokes, what the problem was and what the new deal was and tried to address.
PETER KUZNICK: The problem, as you stated very, very cogently, was that the capitalist economy collapsed by 1933 when Roosevelt took office. You have to remember that Roosevelt doesn’t take office until March and later have a constitutional amendment, and the then presidents take office on January 20th but at this point, Roosevelt takes office in March. So, between his election in November and is taking off as the economy continued to plummet, Hoover, Herbert Hoover, his predecessor accused Roosevelt of deliberately letting the economy collapse.
Some of the clear indications of that were the increased collapse of the banking system. By the time Roosevelt took office, the entire banking system had collapsed. We had bank… We had … bank in state after state, so first you’ve got a collapse of the banking system, on top of which we’ve got a collapse in agricultural production. Farm prices plummeted about 60%, or farm income had plummeted about 60%. Industrial production was down 50%. Unemployment, as you said, officially was 25%, but the actual unemployment and underemployment was much, much higher than that. So, you’ve got a collapse of industry, you’ve got a collapse of agriculture, you’ve got a collapse of banking and you have a collapse of morale.
Roosevelt’s election in 1932 represented a sense of hope again. Hoover was thoroughly discredited. Hoover was willing to invest directly to save people’s cattle but he wouldn’t invest directly to save the farmers themselves. That was typical of Hoover’s approach. So, even though Hoover is more accurately treated as the first of the new kind of presidents, the interventionist presidents because Hoover actually intervened far more than any of the previous presidents would have into the economy, Hoover was not willing to go beyond voluntarism for the kind of programs that Roosevelt did implement.
Roosevelt ran on a fairly conservative platform but once he got into office, he realized that more dramatic steps were needed. Even still, he was not a radical by any means, especially in the beginning. He was in an excellent position to nationalize the entire banking system. He could’ve done that with little protest. The bankers were considered to be the enemy of the people in 1933. They were thought to be-
PAUL JAY: Thousands of banks had closed their doors.
PETER KUZNICK: Thousands of banks collapsed across the country, rural banking system almost entirely. Entire states had shut down their banking, and so Roosevelt could’ve come in there and done something very, very dramatic as many people urged him to do but Roosevelt took a much more tempered kind of approach, a moderate approach. He made his famous fireside chat, called for a moratorium, closed the banks temporarily, reopened the banks and without any major fundamental structural changes in the banking system, restored confidence in the banking system and the banks were able to continue functioning with more regulation, but generally along the lines they had functioned before. He did not privatize the banking system. In other areas-
PAUL JAY: Didn’t socialize the banking system.
PETER KUZNICK: Right. He didn’t nationalize the banking system the way many people had urged him to do. He kept it in the hands of the same people he had before. There were congressional hearings about banking. Certain individuals were fired, lost their positions, but in terms of fundamental reform of the banking system, that didn’t happen.
PAUL JAY: A very critical point because the, as much as these measures, like these massive workfare programs and regulations, as much as they were called socialist by the right, and perhaps they have a certain kind of socialist character to them because it is a certain amount of government intervening in the economy, on this most critical point of how stuff is owned and the most critical would’ve been public owners of the banks, that would’ve been quite a socialistic kind of measure. He didn’t go there.
PETER KUZNICK: No. Nor did he in any of the other programs. What we see, for example, is agriculture. Henry Wallace is secretary of agriculture and the initial approach was to cut farm production. The idea was recovery through scarcity, so by plowing under their crops, cotton especially, by killing the piglets, it was going to reduce the supply and therefore raise the demand and raise the prices. It worked. Wallace commented and said, “This was a horrible example to set. This is the wrong way to go about doing this,” but it was necessary so they distributed the pigs that they had massacred to poor people.
They distributed the commodities to people in need, and it actually worked in terms of revitalizing the agricultural economy, which began to boom after that, propelling both Roosevelt’s and Wallace’s popularity. The same thing with the industrial economy, National Industrial Recovery Act. Now, that was the one policy, the one area that did have more fascist overtones, especially under Hugh Johnson, who was a supporter of Mussolini, who was put in charge of that, and distributed Mussolini’s programs and writings and other right-wing writings to people on his staff, but overall that was another place where they could’ve taken a very, very different approach but the approach was a moderate approach during the first New Deal.
What they wanted to do was get people back to work so they set up the Civilian Conservation Corps, the various work programs and they put millions of people back to work during the New Deal. Government funded programs to put people to work, which meant-
PAUL JAY: Directly federally funded. They didn’t go as much through cities and states. It was in direct federal program, is that right?
PETER KUZNICK: They were both, actually. Some of them did go through cities and states, some of them did go through private companies but there were massive federal programs as well to build dams, to build roads, build the national parks, to build airports, to build schools, housing, the kinds of things that we needed that would still make sense today, although it would’ve made sense for Obama to get out of the 2007/2008 recession, but there’s an aversion to doing that kind of direct government aid at this point. In the 1930s, the American public was open to that partly because they had been through three and half years of complete misery and partly because we hadn’t been divided along quite the same ideological lines at the time.
So, there was a massive federal spending program that lasted really until 1937 and part of what propels that is that in 1934, the midterm elections, the Democrats moved sharply to the left as the country is moving sharply to the left. In the 1934 election, Democrats controlled the Senate, 69 to 25. They controlled the House 32 to 103. So, we look at the narrow Republican majorities now, you compare with the Democratic majorities in 1934 or in the 1936 election was even more. Roosevelt won the election in 1936. The electoral college vote was 523 for the Democrats to eight for the Republicans.
The same before that was, the Republicans only won Vermont and Maine. The same before that was, as goes Maine, so goes the country. At that point, they joked, “As goes Maine, so goes Vermont,” and that was all the Republicans could control in 1936. In the House, the Democrats controlled the House 331 to 89. They controlled the Senate, 76 to 16. So, the comments at the time was that the right-wing Republicans had been vanquished. Roosevelt, by this point, Harold Ickes had told him after the ’34 election that the country is far to the left of the Democratic Party. Ickes urged him, with the support of Wallace and others, to move the policies to the left and Roosevelt responded appropriately.
As he says one the eve of the election, he makes a speech in Madison Square Garden and he says, “We have to struggle with the old enemies of peace, business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism and war profiteering.”
Roosevelt: We have to struggle with the old enemies of peace, business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the government of the United States as a mere appendage to their own affairs. We know now that government by organized money is just as dangerous as government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me and I welcome their hatred.
PETER KUZNICK: When is the last time you heard a Democrat talk like that, talk about the plutocrats and the banking interest as being the enemy of the people? Maybe Bernie Sanders sounded that note. You certainly didn’t hear Hillary Clinton sounding that way, nor do we hear Barack Obama, even though they should’ve been making that kind of populist appeal, which we could do in the United States again if we look at the attitudes of the Democratic party, Democratic voters.
According to the pew values survey in 1994, 30% of Democrats were liberal left-leaning but according to the pew values survey, by 2017, 73% of Democrats are liberal left-leaning. There should be a Democratic Party that reflects that the same way that the Democrats reflected that in the 1930s. This was a period, as we mentioned a little bit last time, that the second wave of the New Deal, the more radical wave, was propelled by the upsurge in labor and by the sharp shift to the left. We have in 1935, ’36 the popular front beginning where you’ve got a liberal left coalition.
The communists are actually part of that but this reflects the labor surge. Beginning in ’33, we see a sharp increase in strikes and in 1934, we’ve got general strikes led by the communists and socialists and musteites, or Trotskyism Musteites, that take over San Francisco, take over Minneapolis, take over Toledo, Ohio. We have national strikes with a very radical agenda, leading to ’37 when we have these sit-in strikes in the auto industry. So, you’ve got a surge of labor radicalization during that time, the building of the CIO.
We also, this is a time when the scientists moved sharply to the left, when the African-American communities is sharply on the left but even America’s intellectuals and writers. Pretty much every prominent American writer during this time is strongly on the left. We can maybe point to Fitzgerald and Faulkner as exceptions but every other prominent American writer is on the left. You see the same thing among all the creative areas.
PAUL JAY: Peter, there’s sections of the elites who support the New Deal. Apparently there’s a quote from Joseph Kennedy who says, “I don’t mind giving up even half of my fortune as long as I get to keep the other half,” but there were large sections in the elites, particularly in the banking, finance circles that fought Roosevelt tooth and nail. It wasn’t just rhetoric from Roosevelt. It was a real war. What did that look like?
PETER KUZNICK: On the one hand, we know that in 1934 some of these right-wing elements approached Marine General Smedley Butler and urged him to lead a right-wing uprising against the New Deal. There were remarkable congressional hearings about that in 1934, and McCormick, the chair of the House committee, said that they had verified every charge that Butler made, that this had actually gone on. Unfortunately, nothing came of that but it’s during the same time, ’35 I think it was, that the Liberty League had formed, it was a right-wing organization, funded largely by the DuPont’s and the Morgans, and with support by people like Al Smith who was a Democratic presidential candidate in 1928 and turns against the New Deal because of its more radical elements.
So you’ve got the Liberty League, and you also have a lot of these shirt movements, these right-wing movements cropping up around the country. So you do have a right-wing element but they’re dwarfed by the left in the 1930s. You look at the congressional hearings in 1935 and ’36, you’ve got the Nye Committee hearings in the Senate. Gerald Nye held hearings about the war profiteering and they attacked the munitions makers as being merchants of death and they introduced legislation. There are two possible ways to do it: one is that if the United States goes to war, one part of the legislation says that we should tax at 100% all incomes above $10,000. The other legislation says we should nationalize the munitions industries and the war industries.
The idea in the 1930s coming out of World War I was that it was so deplorable, so vile, the thought that people would make money off war, off this kind of people’s death and destruction and suffering, that they wanted to cut out war profits entirely. Wouldn’t that be a great idea, Paul, if we did that today? Yet these greedy bastards who were profiting off killing around the world. As we know, the rates of return on the so-called defense or military expenditures is skyrocketing. These people propel our military machine. They make profit off of death.
Remember Bob Dylan’s great song, Masters of War. The anger Dylan expressed there was the anger that people felt in the mid-1930s against these war profiteers, these merchants of death, who actually calculated that in World War I, as one book argued, they made about $25,000 off of every death in World War I.
PAUL JAY: One of the other big features of the New Deal was financial regulation. As we move forward and talk about the undoing of the new deal, one of the main focuses of attack, especially in more recent years is the undoing of financial regulation but there was quite a bit of regulation put in at that time. What did that look like?
PETER KUZNICK: Well, as you say, there was a federal deposit insurance corporation. There was a lot of regulation. Regulation was not seen as a bad thing. Regulation was seen as a good thing. This is a kind progressive reform that goes back to the turn-of-the-century. In response to Upton Sinclair’s The Jungle was to regulate the meat industry. We have seen regulation as a good thing in the interest of the people. The idea of rampant unbridled capitalists squeezing every last profit out of the system by any kind of deceitful means possible was again a… to the American people in the 1930s.
We see also the introduction of Social Security, works progress administration. We see government support for the arts, the New Deal arts programs, the New Deal theater programs. The idea that the government can play a positive role in bringing the arts and theater, and photography to the people was another part of this.
PAUL JAY: There are two important pieces too. There was in the regulation of commodities trading, there were regulations about how much any individual can control in commodities and commodity speculation, the position limits. Nobody could monopolize a certain commodity and then manipulate the prices. There was the Glass-Steagall Act separating banking from speculation, which later is undone by a Democrat, Mr. President Clinton. So, all of these things envision a capitalism, to quote Hillary Clinton in the election campaign, that “reigns in the excesses of capitalism.” By reigning in those excesses, they will save capitalism and mitigate the worst of the consequences of it, they say.
To a large extent, it’s successful, especially compared to the alternative, which would’ve been in Europe fascism but perhaps also to make sure there was no real development of a socialist movement in the United States. We’re going to pick up this conversation in another segment. We’re going to keep doing this series because I think it’s very interesting and pick up again in Truman, and continuing this story of the undoing of the new deal. So please, thanks for joining us again Peter.
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