1. Roosevelt and the new deal
In 1933 the new president,
Franklin D.Roosevelt, brought an air of confidence and optimism that quickly
rallied the people to the banner of his program, known as the New Deal. “The
only thing we have to fear is fear itself,” the president declared in his
inaugural address to the nation.
A. Economic collapse (1929–1933) - From 1929 to 1933 manufacturing output decreased by one third. Prices fell by 20%, causing deflation that made repaying debts much harder. Unemployment in the U.S. increased from 4% to 25%. Additionally, one-third of all employed persons were downgraded to working part-time on much smaller paychecks. In the aggregate, almost 50% of the nation's human work-power was going unused.
A. Economic collapse (1929–1933) - From 1929 to 1933 manufacturing output decreased by one third. Prices fell by 20%, causing deflation that made repaying debts much harder. Unemployment in the U.S. increased from 4% to 25%. Additionally, one-third of all employed persons were downgraded to working part-time on much smaller paychecks. In the aggregate, almost 50% of the nation's human work-power was going unused.
USA annual real GDP from 1910 to 1960, with the years of the Great Depression (1929–1939) highlighted.
Unemployment rate in the US 1910–1960, with the years of the Great Depression (1929–1939) highlighted; accurate data begins in 1939.
Before the New Deal, there was no insurance on deposits at banks. When thousands of banks closed, depositors lost their savings. At that time there was no national safety net, no public unemployment insurance, and no Social Security. Relief for the poor was the responsibility of families, private charity, and local governments, but as conditions worsened year by year, demand skyrocketed and their combined resources increasingly fell far short of demand.
The depression had devastated the nation. As Roosevelt took the oath of office at noon on March 4, 1933, all state governors had authorized bank holidays or restricted withdrawals; many Americans had little or no access to their bank accounts. The unemployment rate was about 25% and higher in major industrial and mining centers. Farm income had fallen by over 50% since 1929. 844,000 nonfarm mortgages had been foreclosed, 1930–33, out of five million in all. Political and business leaders feared revolution and anarchy. Joseph P. Kennedy, Sr., who remained wealthy during the Depression, stated years later that "in those days I felt and said I would be willing to part with half of what I had if I could be sure of keeping, under law and order, the other half".
B. General characteristic of a New Deal (1933–1938) - the New Deal was a series of programs enacted in the United States between 1933 and 1938, and a few that came later. They included both laws passed by Congress as well as presidential executive orders during the first term (1933–1937) of President Franklin D. Roosevelt. The programs were in response to the Great Depression, and focused on what historians refer to as the "3 Rs," Relief, Recovery, and Reform: relief for the unemployed and poor, recovery of the economy to normal levels, and reform of the financial system to prevent a repeat depression.
Upon accepting the 1932 Democratic nomination for president, Franklin Roosevelt promised "a new deal for the American people".
B. General characteristic of a New Deal (1933–1938) - the New Deal was a series of programs enacted in the United States between 1933 and 1938, and a few that came later. They included both laws passed by Congress as well as presidential executive orders during the first term (1933–1937) of President Franklin D. Roosevelt. The programs were in response to the Great Depression, and focused on what historians refer to as the "3 Rs," Relief, Recovery, and Reform: relief for the unemployed and poor, recovery of the economy to normal levels, and reform of the financial system to prevent a repeat depression.
Upon accepting the 1932 Democratic nomination for president, Franklin Roosevelt promised "a new deal for the American people".
Roosevelt entered office without a specific set of plans for dealing with the Great Depression; so he improvised as Congress listened to a very wide variety of voices. Among Roosevelt's more famous advisers was an informal "Brain Trust": a group that tended to view pragmatic government intervention in the economy positively. His choice for Secretary of Labor, Frances Perkins, greatly influenced his initiatives. Her list of what her priorities would be if she took the job illustrates: "a forty-hour workweek, a minimum wage, worker's compensation, unemployment compensation, a federal law banning child labor, direct federal aid for unemployment relief, Social Security, a revitalized public employment service and health insurance."
The New Deal policies drew from many different ideas proposed earlier in the 20th century. Assistant Attorney General Thurman Arnold led efforts that hearkened back to an anti-monopoly tradition rooted in American politics by figures such as Andrew Jackson and Thomas Jefferson. Supreme Court Justice Louis Brandeis, an influential adviser to many New Dealers, argued that "bigness" (referring, presumably, to corporations) was a negative economic force, producing waste and inefficiency. However, the anti-monopoly group never had a major impact on New Deal policy. Other leaders such as Hugh S. Johnson of the NRA took ideas from the Woodrow Wilson Administration, advocating techniques used to mobilize the economy for World War I. They brought ideas and experience from the government controls and spending of 1917–18. Other New Deal planners revived experiments suggested in the 1920s, such as the TVA.
The "First New Deal" (1933–34) encompassed the proposals offered by a wide spectrum of groups. (Not included was the Socialist Party, whose influence was all but destroyed.) This first phase of the New Deal was also characterized by fiscal conservatism (see Economy Act, below) and experimentation with several different, sometimes contradictory, cures for economic ills. The consequences were uneven. Some programs, especially the National Recovery Administration (NRA) and the silver program, have been widely seen as failures. Other programs lasted about a decade; some became permanent. The economy shot upward, with FDR's first term marking one of the fastest periods of GDP growth in history. Though a downturn in 1937–38 raised questions about just how successful the policies were, the great majority of economists and historians agree that they were an overall benefit.
The New Deal faced some vocal conservative opposition. The first organized opposition in 1934 came from the American Liberty League led by conservative Democrats such as 1924 and 1928 presidential candidates John W. Davis and Al Smith. There was also a large but loosely affiliated group of New Deal opponents, who are commonly called the Old Right. This group included politicians, intellectuals, writers, and newspaper editors of various philosophical persuasions including classical liberals and conservatives, both Democrats and Republicans. A number of leading Democrats, who were progressives of the Woodrow Wilson era, were also critical of Roosevelt's New Deal policies. According to James T. Patterson, these leaders "were essentially progressives of the New Freedom vintage. They continued to believe that their party stood for Wilsonian ideals: regulated competition, states' rights, and individual freedom where it did not impinge upon the liberty of others," and saw themselves as "the true progressives and as the bulwarks of a party which they felt would have collapsed without them in the 1920's."
The New Deal represented a significant shift in politics and domestic policy. It especially led to greatly increased federal regulation of the economy. It also marked the beginning of complex social programs and growing power of labor unions. The effects of the New Deal remain a source of controversy and debate among economists and historians.
In one sense, the New Deal merely introduced social and economic reforms familiar to many Europeans for more than a generation.Moreover, the New Deal represented the culmination of a long-range trend toward abandonment of “laissez-faire” capitalism, going back to the regulation of the railroads in the 1880s, and the flood of state and national reform legislation introduced in the Progressive era of Theodore Roosevelt and Woodrow Wilson.
What was truly novel about the New Deal, however, was the speed with which it accomplished what previously had taken generations. Many of its reforms were hastily drawn and weakly administered; some actually contradicted others. Moreover, it never succeeded in restoring prosperity. Yet its actions provided tangible help for millions of Americans, laid the basis for a powerful new political coalition, and brought to the individual citizen a sharp revival of interest in government.
The First Hundred Days (1933) - the American people were generally extremely dissatisfied with the crumbling economy, mass unemployment, declining wages and profits and especially Hoover's policies such as the Smoot–Hawley Tariff Act and the Revenue Act of 1932. Roosevelt entered office with enormous political capital. Americans of all political persuasions were demanding immediate action, and Roosevelt responded with a remarkable series of new programs in the "first hundred days" of the administration, in which he met with Congress for 100 days. During those 100 days of lawmaking, Congress granted every request Roosevelt asked, and passed a few programs (such as the FDIC to insure bank accounts) that he opposed. Ever since, presidents have been judged against FDR for what they accomplished in their first 100 days. Walter Lippmann famously noted:
The New Deal represented a significant shift in politics and domestic policy. It especially led to greatly increased federal regulation of the economy. It also marked the beginning of complex social programs and growing power of labor unions. The effects of the New Deal remain a source of controversy and debate among economists and historians.
In one sense, the New Deal merely introduced social and economic reforms familiar to many Europeans for more than a generation.Moreover, the New Deal represented the culmination of a long-range trend toward abandonment of “laissez-faire” capitalism, going back to the regulation of the railroads in the 1880s, and the flood of state and national reform legislation introduced in the Progressive era of Theodore Roosevelt and Woodrow Wilson.
What was truly novel about the New Deal, however, was the speed with which it accomplished what previously had taken generations. Many of its reforms were hastily drawn and weakly administered; some actually contradicted others. Moreover, it never succeeded in restoring prosperity. Yet its actions provided tangible help for millions of Americans, laid the basis for a powerful new political coalition, and brought to the individual citizen a sharp revival of interest in government.
2. The first new deal (1933-1934)
The First Hundred Days (1933) - the American people were generally extremely dissatisfied with the crumbling economy, mass unemployment, declining wages and profits and especially Hoover's policies such as the Smoot–Hawley Tariff Act and the Revenue Act of 1932. Roosevelt entered office with enormous political capital. Americans of all political persuasions were demanding immediate action, and Roosevelt responded with a remarkable series of new programs in the "first hundred days" of the administration, in which he met with Congress for 100 days. During those 100 days of lawmaking, Congress granted every request Roosevelt asked, and passed a few programs (such as the FDIC to insure bank accounts) that he opposed. Ever since, presidents have been judged against FDR for what they accomplished in their first 100 days. Walter Lippmann famously noted:
At the end of February we were a congeries of disorderly panic-stricken mobs and factions. In the hundred days from March to June we became again an organized nation confident of our power to provide for our own security and to control our own destiny.
The economy had hit bottom in March 1933 and then started to expand. Economic indicators show the economy reached nadir in the first days of March, then began a steady, sharp upward recovery. Thus the Federal Reserve Index of Industrial Production sank to its lowest point of 52.8 in July 1932 (with 1935–39 = 100) and was practically unchanged at 54.3 in March 1933; however by July 1933, it reached 85.5, a dramatic rebound of 57% in four months. Recovery was steady and strong until 1937. Except for employment, the economy by 1937 surpassed the levels of the late 1920s. The Recession of 1937 was a temporary downturn. Private sector employment, especially in manufacturing, recovered to the level of the 1920s but failed to advance further until the war. The U.S. population was 124,840,471 in 1932 and 128,824,829 in 1937, an increase of 3,984,468. The ratio of these numbers, times the number of jobs in 1932, means there was a need for 938,000 more 1937 jobs to maintain the same employment level.
A. Unemployment programs - Roosevelt faced unprecedented mass unemployment. By the time he took office, as many as 13 million Americans — more than a quarter of the labor force — were out of work. Bread lines were a common sight in most cities. Hundreds of thousands roamed the country in search of food, work, and shelter. “Brother, can you spare a dime?” was the refrain of a popular song.
Relief - relief was the immediate effort to help the one-third of the population that was hardest hit by the depression. Also, relief was aimed at providing temporary help to suffering and unemployed Americans.
An early step for the unemployed came in the form of the Civilian Conservation Corps (CCC), a program that brought relief to young men between 18 and 25 years of age. CCC enrollees worked in camps administered by the army. About two million took part during the decade. They participated in a variety of conservation projects: planting trees to combat soil erosion and maintain national forests; eliminating stream pollution; creating fish, game, and bird sanctuaries; and conserving coal, petroleum, shale, gas, sodium, and helium deposits.
A Public Works Administration (PWA) provided employment for skilled construction workers on a wide variety of mostly medium-to large-sized projects. Among the most memorable of its many accomplishments were the Bonneville and Grand Coulee Dams in the Pacific Northwest, a new Chicago sewer system, the Triborough Bridge in New York City, and two aircraft carriers (Yorktown and Enterprise) for the U.S.Navy.
The economy had hit bottom in March 1933 and then started to expand. Economic indicators show the economy reached nadir in the first days of March, then began a steady, sharp upward recovery. Thus the Federal Reserve Index of Industrial Production sank to its lowest point of 52.8 in July 1932 (with 1935–39 = 100) and was practically unchanged at 54.3 in March 1933; however by July 1933, it reached 85.5, a dramatic rebound of 57% in four months. Recovery was steady and strong until 1937. Except for employment, the economy by 1937 surpassed the levels of the late 1920s. The Recession of 1937 was a temporary downturn. Private sector employment, especially in manufacturing, recovered to the level of the 1920s but failed to advance further until the war. The U.S. population was 124,840,471 in 1932 and 128,824,829 in 1937, an increase of 3,984,468. The ratio of these numbers, times the number of jobs in 1932, means there was a need for 938,000 more 1937 jobs to maintain the same employment level.
A. Unemployment programs - Roosevelt faced unprecedented mass unemployment. By the time he took office, as many as 13 million Americans — more than a quarter of the labor force — were out of work. Bread lines were a common sight in most cities. Hundreds of thousands roamed the country in search of food, work, and shelter. “Brother, can you spare a dime?” was the refrain of a popular song.
Relief - relief was the immediate effort to help the one-third of the population that was hardest hit by the depression. Also, relief was aimed at providing temporary help to suffering and unemployed Americans.
An early step for the unemployed came in the form of the Civilian Conservation Corps (CCC), a program that brought relief to young men between 18 and 25 years of age. CCC enrollees worked in camps administered by the army. About two million took part during the decade. They participated in a variety of conservation projects: planting trees to combat soil erosion and maintain national forests; eliminating stream pollution; creating fish, game, and bird sanctuaries; and conserving coal, petroleum, shale, gas, sodium, and helium deposits.
A Public Works Administration (PWA) provided employment for skilled construction workers on a wide variety of mostly medium-to large-sized projects. Among the most memorable of its many accomplishments were the Bonneville and Grand Coulee Dams in the Pacific Northwest, a new Chicago sewer system, the Triborough Bridge in New York City, and two aircraft carriers (Yorktown and Enterprise) for the U.S.Navy.
 |
| Grand Coulee Dam |
The Tennessee Valley
Authority (TVA), both a work relief program and an exercise in public planning,
developed the impoverished Tennessee River valley area through a series of
dams built for flood control and hydroelectric power generation. Its provision
of cheap electricity for the area stimulated some economic progress, but won it
the enmity of private electric companies. New Dealers hailed it as an example of
“grassroots democracy.”
The Federal Emergency Relief Administration (FERA), in operation from 1933 to 1935, distributed direct relief to hundreds of thousands of people, usually in the form of direct payments. Sometimes, it assumed the salaries of school teachers and other local public service workers. It also developed numerous small-scale public works projects, as did the Civil Works Administration (CWA) from late 1933 into the spring of 1934. Criticized as “make work,” the jobs funded ranged from ditch digging to highway repairs to teaching. Roosevelt and his key officials worried about costs but continued to favor unemployment programs based on work relief rather than welfare. There were dozens of new agencies created by Roosevelt through Executive Orders. They are typically known by their alphabetical initials.
B. Fiscal economic policy - the Economy Act, drafted by Budget Director Lewis Williams Douglas, was passed on March 14, 1933. The act proposed to balance the "regular" (non-emergency) federal budget by cutting the salaries of government employees and cutting pensions to veterans by fifteen percent. It saved $500 million per year and reassured deficit hawks, such as Douglas, that the new President was fiscally conservative. Roosevelt argued there were two budgets: the "regular" federal budget, which he balanced, and the emergency budget, which was needed to defeat the depression. It was imbalanced on a temporary basis.
Roosevelt initially favored balancing the budget, but soon found himself running spending deficits to fund his numerous programs. Douglas, however—rejecting the distinction between a regular and emergency budget—resigned in 1934 and became an outspoken critic of the New Deal. Roosevelt strenuously opposed the Bonus Bill that would give World War I veterans a cash bonus. Congress finally passed it over his veto in 1936, and the Treasury distributed $1.5 billion in cash as bonus welfare benefits to 4 million veterans just before the 1936 election.
New Dealers never accepted the Keynesian argument for government spending as a vehicle for recovery. Most economists of the era, along with Henry Morgenthau of the Treasury Department, rejected Keynesian solutions and favored balanced budgets.
C. Banking and Finance - when Roosevelt took the presidential oath, the banking and credit system of the nation was in a state of paralysis. With astonishing rapidity the nation’s banks were first closed — and then reopened only if they were solvent. The administration adopted a policy of moderate currency inflation to start an upward movement in commodity prices and to afford some relief to debtors. New governmental agencies brought generous credit facilities to industry and agriculture.
The Federal Emergency Relief Administration (FERA), in operation from 1933 to 1935, distributed direct relief to hundreds of thousands of people, usually in the form of direct payments. Sometimes, it assumed the salaries of school teachers and other local public service workers. It also developed numerous small-scale public works projects, as did the Civil Works Administration (CWA) from late 1933 into the spring of 1934. Criticized as “make work,” the jobs funded ranged from ditch digging to highway repairs to teaching. Roosevelt and his key officials worried about costs but continued to favor unemployment programs based on work relief rather than welfare. There were dozens of new agencies created by Roosevelt through Executive Orders. They are typically known by their alphabetical initials.
B. Fiscal economic policy - the Economy Act, drafted by Budget Director Lewis Williams Douglas, was passed on March 14, 1933. The act proposed to balance the "regular" (non-emergency) federal budget by cutting the salaries of government employees and cutting pensions to veterans by fifteen percent. It saved $500 million per year and reassured deficit hawks, such as Douglas, that the new President was fiscally conservative. Roosevelt argued there were two budgets: the "regular" federal budget, which he balanced, and the emergency budget, which was needed to defeat the depression. It was imbalanced on a temporary basis.
Roosevelt initially favored balancing the budget, but soon found himself running spending deficits to fund his numerous programs. Douglas, however—rejecting the distinction between a regular and emergency budget—resigned in 1934 and became an outspoken critic of the New Deal. Roosevelt strenuously opposed the Bonus Bill that would give World War I veterans a cash bonus. Congress finally passed it over his veto in 1936, and the Treasury distributed $1.5 billion in cash as bonus welfare benefits to 4 million veterans just before the 1936 election.
New Dealers never accepted the Keynesian argument for government spending as a vehicle for recovery. Most economists of the era, along with Henry Morgenthau of the Treasury Department, rejected Keynesian solutions and favored balanced budgets.
C. Banking and Finance - when Roosevelt took the presidential oath, the banking and credit system of the nation was in a state of paralysis. With astonishing rapidity the nation’s banks were first closed — and then reopened only if they were solvent. The administration adopted a policy of moderate currency inflation to start an upward movement in commodity prices and to afford some relief to debtors. New governmental agencies brought generous credit facilities to industry and agriculture.
Banking reform
 |
| Crowd at New York's American Union Bank during a bank run early in the Great Depression |
At the beginning of the Great Depression the economy was destabilized by bank failures followed by credit crunches. The initial reasons were substantial losses in investment banking, followed by bank runs. (Bank runs occurred when a large number of customers withdrew their deposits because they believed the bank might become insolvent. As the bank run progressed, it generated a self-fulfilling prophecy: as more people withdrew their deposits, the likelihood of default increased, and this encouraged further withdrawals.) Milton Friedman and Anna Schwartz have argued that the drain of money out of the banking system caused the monetary supply to shrink, forcing the economy to likewise shrink. As credit and economic activity diminished, price deflation followed, causing further economic contraction with disastrous impact on banks. Between 1929 and 1933 40% of all banks (9,490 out of 23,697 banks) failed. Much of the Great Depression's economic damage was caused directly by bank runs.
Herbert Hoover had already considered a bank holiday to prevent further bank runs, but rejected the idea because he was afraid to trip a panic. Roosevelt, however, gave a radio address, held in the atmosphere of a Fireside Chat, and explained to the public in simple terms the causes of the banking crisis, what the government will do and how the population could help. He closed all the banks in the country and kept them all closed until he could pass new legislation.
On March 9, Roosevelt sent to Congress the Emergency Banking Act, drafted in large part by Hoover's top advisors. The act was passed and signed into law the same day. It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed. Three-quarters of the banks in the Federal Reserve System reopened within the next three days. Billions of dollars in hoarded currency and gold flowed back into them within a month, thus stabilizing the banking system. By the end of 1933, 4,004 small local banks were permanently closed and merged into larger banks. Their deposits totalled $3.6 billion; depositors lost a total of $540 million, and eventually received on average 85 cents on the dollar of their deposits; it is a common myth that they received nothing back. The Glass–Steagall Act limited commercial bank securities activities and affiliations between commercial banks and securities firms to regulate speculations. It also established the Federal Deposit Insurance Corporation (FDIC), which insured deposits for up to $2,500, ending the risk of runs on banks.
 |
| Charles L. Goeller "Third Avenue", 1934 |
On March 9, Roosevelt sent to Congress the Emergency Banking Act, drafted in large part by Hoover's top advisors. The act was passed and signed into law the same day. It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed. Three-quarters of the banks in the Federal Reserve System reopened within the next three days. Billions of dollars in hoarded currency and gold flowed back into them within a month, thus stabilizing the banking system. By the end of 1933, 4,004 small local banks were permanently closed and merged into larger banks. Their deposits totalled $3.6 billion; depositors lost a total of $540 million, and eventually received on average 85 cents on the dollar of their deposits; it is a common myth that they received nothing back. The Glass–Steagall Act limited commercial bank securities activities and affiliations between commercial banks and securities firms to regulate speculations. It also established the Federal Deposit Insurance Corporation (FDIC), which insured deposits for up to $2,500, ending the risk of runs on banks.
This banking reform offered unprecedented stability: While throughout the 1920s more than five hundred banks failed per year; it was less than ten banks per year after 1933.
Monetary reform - under the gold standard, the United States kept the Dollar convertible to gold. The Federal Reserve would have had to execute an expansionary monetary policy to fight the deflation and to inject liquidity into the banking system to prevent it from crumbling—but lower interest rates would have led to a gold outflow. Under the gold standards price–specie flow mechanism countries that lost gold but nevertheless wanted to maintain the gold standard had to permit their money supply to decrease and the domestic price level to decline (deflation). As long as the Federal Reserve had to defend the gold parity of the Dollar it had to sit idle while the banking system crumbled.
In March and April in a series of laws and executive orders, the government suspended the gold standard. Roosevelt stopped the outflow of gold by forbidding the export of gold except under license from the Treasury. Anyone holding significant amounts of gold coinage was mandated to exchange it for the existing fixed price of US dollars. The Treasury no longer paid out gold in exchange for dollars, and gold would no longer be considered valid legal tender for debts in private and public contracts.
The dollar was allowed to float freely on foreign exchange markets with no guaranteed price in gold. With the passage of the Gold Reserve Act in 1934 the nominal price of gold was changed from $20.67 per troy ounce to $35. These measures enabled the Federal Reserve to increase the amount of money in circulation to the level the economy needed. Markets immediately responded well to the suspension, in the hope that the decline in prices would finally end. In her essay "What ended the Great Depression?" (1992) Christina Romer argued that this policy raised industrial production by 25% until 1937 and by 50% until 1942.
Securities regulation - before the Wall Street Crash of 1929, there was no regulation of securities at the federal level. Even firms whose securities were publicly traded published no regular reports or even worse rather misleading reports based on arbitrarily selected data. To avoid another Wall Street Crash the Securities Act of 1933 was enacted. It required the disclosure of the balance sheet, profit and loss statement, the names and compensations of corporate officers, about firms whose securities were traded. Additionally those reports had to be verified by independent auditors. In 1934 the U.S. Securities and Exchange Commission was established to regulate the stock market and prevent corporate abuses relating to the sale of securities and corporate reporting.
D. Public works - to prime the pump and cut unemployment, the NIRA created the Public Works Administration (PWA), a major program of public works, which organized and provided funds for the building of useful works such as government buildings, airports, hospitals, schools, roads, bridges, and dams. From 1933 to 1935 PWA spent $3.3 billion with private companies to build 34,599 projects, many of them quite large.
Monetary reform - under the gold standard, the United States kept the Dollar convertible to gold. The Federal Reserve would have had to execute an expansionary monetary policy to fight the deflation and to inject liquidity into the banking system to prevent it from crumbling—but lower interest rates would have led to a gold outflow. Under the gold standards price–specie flow mechanism countries that lost gold but nevertheless wanted to maintain the gold standard had to permit their money supply to decrease and the domestic price level to decline (deflation). As long as the Federal Reserve had to defend the gold parity of the Dollar it had to sit idle while the banking system crumbled.
In March and April in a series of laws and executive orders, the government suspended the gold standard. Roosevelt stopped the outflow of gold by forbidding the export of gold except under license from the Treasury. Anyone holding significant amounts of gold coinage was mandated to exchange it for the existing fixed price of US dollars. The Treasury no longer paid out gold in exchange for dollars, and gold would no longer be considered valid legal tender for debts in private and public contracts.
The dollar was allowed to float freely on foreign exchange markets with no guaranteed price in gold. With the passage of the Gold Reserve Act in 1934 the nominal price of gold was changed from $20.67 per troy ounce to $35. These measures enabled the Federal Reserve to increase the amount of money in circulation to the level the economy needed. Markets immediately responded well to the suspension, in the hope that the decline in prices would finally end. In her essay "What ended the Great Depression?" (1992) Christina Romer argued that this policy raised industrial production by 25% until 1937 and by 50% until 1942.
Securities regulation - before the Wall Street Crash of 1929, there was no regulation of securities at the federal level. Even firms whose securities were publicly traded published no regular reports or even worse rather misleading reports based on arbitrarily selected data. To avoid another Wall Street Crash the Securities Act of 1933 was enacted. It required the disclosure of the balance sheet, profit and loss statement, the names and compensations of corporate officers, about firms whose securities were traded. Additionally those reports had to be verified by independent auditors. In 1934 the U.S. Securities and Exchange Commission was established to regulate the stock market and prevent corporate abuses relating to the sale of securities and corporate reporting.
D. Public works - to prime the pump and cut unemployment, the NIRA created the Public Works Administration (PWA), a major program of public works, which organized and provided funds for the building of useful works such as government buildings, airports, hospitals, schools, roads, bridges, and dams. From 1933 to 1935 PWA spent $3.3 billion with private companies to build 34,599 projects, many of them quite large.
Under Roosevelt, many unemployed persons were put to work on a wide range of government financed public works projects, building bridges, airports, dams, post offices, courthouses, and thousands of miles of road. Through reforestation and flood control, they reclaimed millions of hectares of soil from erosion and devastation. As noted by one authority, Roosevelt's New Deal "was literally stamped on the American landscape".
E. Farm and rural programs - rural America was a high priority for Roosevelt and his energetic Secretary of Agriculture, Henry A. Wallace. FDR believed that full economic recovery depended upon the recovery of agriculture, and raising farm prices was a major tool, even though it meant higher food prices for the poor living in cities.
In the spring of 1933, the agricultural sector of the economy was in a state of collapse.It thereby provided a laboratory for the New Dealers’ belief that greater regulation would solve many of the country’s problems. In 1933, Congress passed the Agricultural Adjustment Act (AAA) to provide economic relief to farmers. The AAA proposed to raise crop prices by paying farmers a subsidy to compensate for voluntary cutbacks in production. Funds for the payments would be generated by a tax levied on industries that processed crops.By the time the act had become law, however, the growing season was well under way, and the AAA paid farmers to plow under their abundant crops. Crop reduction and further subsidies through the Commodity Credit Corporation, which purchased commodities to be kept in storage, drove output down and farm prices up.
Many rural people lived in severe poverty, especially in the South. Major programs addressed to their needs included the Resettlement Administration (RA), the Rural Electrification Administration (REA), rural welfare projects sponsored by the WPA, National Youth Administration (NYA), Forest Service and Civilian Conservation Corps (CCC), including school lunches, building new schools, opening roads in remote areas, reforestation, and purchase of marginal lands to enlarge national forests. In 1933, the Administration launched the Tennessee Valley Authority, a project involving dam construction planning on an unprecedented scale to curb flooding, generate electricity, and modernize poor farms in the Tennessee Valley region of the Southern United States. Under the Farmers' Relief Act of 1933, the government paid compensation to farmers who reduced output, thereby rising prices. As a result of this legislation, the average income of farmers almost doubled by 1937.
E. Farm and rural programs - rural America was a high priority for Roosevelt and his energetic Secretary of Agriculture, Henry A. Wallace. FDR believed that full economic recovery depended upon the recovery of agriculture, and raising farm prices was a major tool, even though it meant higher food prices for the poor living in cities.
In the spring of 1933, the agricultural sector of the economy was in a state of collapse.It thereby provided a laboratory for the New Dealers’ belief that greater regulation would solve many of the country’s problems. In 1933, Congress passed the Agricultural Adjustment Act (AAA) to provide economic relief to farmers. The AAA proposed to raise crop prices by paying farmers a subsidy to compensate for voluntary cutbacks in production. Funds for the payments would be generated by a tax levied on industries that processed crops.By the time the act had become law, however, the growing season was well under way, and the AAA paid farmers to plow under their abundant crops. Crop reduction and further subsidies through the Commodity Credit Corporation, which purchased commodities to be kept in storage, drove output down and farm prices up.
Many rural people lived in severe poverty, especially in the South. Major programs addressed to their needs included the Resettlement Administration (RA), the Rural Electrification Administration (REA), rural welfare projects sponsored by the WPA, National Youth Administration (NYA), Forest Service and Civilian Conservation Corps (CCC), including school lunches, building new schools, opening roads in remote areas, reforestation, and purchase of marginal lands to enlarge national forests. In 1933, the Administration launched the Tennessee Valley Authority, a project involving dam construction planning on an unprecedented scale to curb flooding, generate electricity, and modernize poor farms in the Tennessee Valley region of the Southern United States. Under the Farmers' Relief Act of 1933, the government paid compensation to farmers who reduced output, thereby rising prices. As a result of this legislation, the average income of farmers almost doubled by 1937.
In the 1920s farm production had increased dramatically thanks to mechanization, more potent insecticides and increased use of fertilizer. Due to an overproduction of agricultural products farmers faced a severe and chronic agricultural depression throughout the 1920s. The Great Depression even worsened the agricultural crises. At the beginning of 1933 agricultural markets nearly faced collapse. Farm prices were so low that, as an example, in Montana wheat was rotting in the fields because it could not be profitably harvested. In Oregon sheep were slaughtered and left to the buzzards because meat prices were not sufficient to warrant transportation to markets.
Roosevelt was keenly interested in farm issues and believed that true prosperity would not return until farming was prosperous. Many different programs were directed at farmers. The first 100 days produced the Farm Security Act to raise farm incomes by raising the prices farmers received, which was achieved by reducing total farm output. The Agricultural Adjustment Act created the Agricultural Adjustment Administration (AAA) in May 1933. The act reflected the demands of leaders of major farm organizations, especially the Farm Bureau, and reflected debates among Roosevelt's farm advisers such as Secretary of Agriculture Henry A. Wallace, M.L. Wilson, Rexford Tugwell, and George Peek.
Roosevelt was keenly interested in farm issues and believed that true prosperity would not return until farming was prosperous. Many different programs were directed at farmers. The first 100 days produced the Farm Security Act to raise farm incomes by raising the prices farmers received, which was achieved by reducing total farm output. The Agricultural Adjustment Act created the Agricultural Adjustment Administration (AAA) in May 1933. The act reflected the demands of leaders of major farm organizations, especially the Farm Bureau, and reflected debates among Roosevelt's farm advisers such as Secretary of Agriculture Henry A. Wallace, M.L. Wilson, Rexford Tugwell, and George Peek.
The AAA aimed to raise prices for commodities through artificial scarcity. The AAA used a system of domestic allotments, setting total output of corn, cotton, dairy products, hogs, rice, tobacco, and wheat. The farmers themselves had a voice in the process of using government to benefit their incomes. The AAA paid land owners subsidies for leaving some of their land idle with funds provided by a new tax on food processing.
To force up farm prices to the point of "parity," 10 million acres (40,000 km2) of growing cotton was plowed up, bountiful crops were left to rot, and six million piglets were killed and discarded.
The idea was to give farmers a "fair exchange value" for their products in relation to the general economy ("parity level"). Farm incomes and the income for the general population recovered fast since the Beginning of 1933. Still, food prices remained well below the 1929 peak.
The idea was to give farmers a "fair exchange value" for their products in relation to the general economy ("parity level"). Farm incomes and the income for the general population recovered fast since the Beginning of 1933. Still, food prices remained well below the 1929 peak.
The AAA established an important and long-lasting federal role in the planning on the entire agricultural sector of the economy and was the first program on such a scale on behalf of the troubled agricultural economy. The original AAA did not provide for any sharecroppers or tenants or farm laborers who might become unemployed, but there were other New Deal programs especially for them.
Between 1932 and 1935, farm income increased by more than 50 percent, but only partly because of federal programs. During the same years that farmers were being encouraged to take land out of production — displacing tenants and sharecroppers — a severe drought hit the Plains states. Violent wind and dust storms during the 1930s created what became known as the “Dust Bowl.” Crops were destroyed and farms ruined.
By 1940, 2.5 million people had moved out of the Plains states, the largest migration in American history. Of those, 200,000 moved to California. The migrants were not only farmers, but also professionals, retailers, and others whose livelihoods were connected to the health of the farm communities. Many ended up competing for seasonal jobs picking crops at extremely low wages.
The government provided aid in the form of the Soil Conservation Service, established in 1935. Farm practices that damaged the soil had intensified the impact of the drought. The service taught farmers measures to reduce erosion. In addition, almost 30,000 kilometers of trees were planted to break the force of winds.
Although the AAA had been mostly successful, it was abandoned in 1936, when its tax on food processors was ruled unconstitutional by the Supreme Court. Congress quickly passed a farm-relief act, which authorized the government to make payments to farmers who took land out of production for the purpose of soil conservation. In 1938, with a pro-New Deal majority on the Supreme Court, Congress reinstated the AAA.
By 1940 nearly six million farmers were receiving federal subsidies. New Deal programs also provided loans on surplus crops, insurance for wheat, and a system of planned storage to ensure a stable food supply. Economic stability for the farmer was substantially achieved, albeit at great expense and with extraordinary government oversight.
A Gallup Poll printed in the Washington Post revealed that a majority of the American public opposed the AAA. In 1936, the Supreme Court declared the AAA to be unconstitutional, stating that "a statutory plan to regulate and control agricultural production, [is] a matter beyond the powers delegated to the federal government". The AAA was replaced by a similar program that did win Court approval. Instead of paying farmers for letting fields lie barren, this program instead subsidized them for planting soil enriching crops such as alfalfa that would not be sold on the market. Federal regulation of agricultural production has been modified many times since then, but together with large subsidies is still in effect in 2016.
The Farm Tenancy Act in 1937 was the last major New Deal legislation that concerned farming. It, in turn, created the Farm Security Administration (FSA), which replaced the Resettlement Administration.
The Food Stamp Plan—a major new welfare program for urban poor—was established in 1939 to provide stamps to poor people who could use them to purchase food at retail outlets. The program ended during wartime prosperity in 1943, but was restored in 1961. It survived into the 21st century with little controversy because it was seen to benefit the urban poor, food producers, grocers and wholesalers, as well as farmers. Thus it gained support from both liberal and conservative Congressmen. In 2013, however, Tea Party activists in the House tried to end the program, now known as the Supplemental Nutrition Assistance Program, while the Senate fought to preserve it.
F. Industrial Recovery - industrial recovery was the effort in numerous programs to restore the economy to normal health. By most economic indicators this was achieved by 1937—except for unemployment, which remained stubbornly high until World War II began. Recovery was designed to help the economy bounce back from depression.
NRA "Blue Eagle" campaign - Roosevelt's advisers believed that excessive competition and technical progress had led to overproduction and lowered wages and prices, which they believed lowered demand and employment (Deflation). He argued that government economic planning was necessary to remedy this:
Between 1932 and 1935, farm income increased by more than 50 percent, but only partly because of federal programs. During the same years that farmers were being encouraged to take land out of production — displacing tenants and sharecroppers — a severe drought hit the Plains states. Violent wind and dust storms during the 1930s created what became known as the “Dust Bowl.” Crops were destroyed and farms ruined.
By 1940, 2.5 million people had moved out of the Plains states, the largest migration in American history. Of those, 200,000 moved to California. The migrants were not only farmers, but also professionals, retailers, and others whose livelihoods were connected to the health of the farm communities. Many ended up competing for seasonal jobs picking crops at extremely low wages.
The government provided aid in the form of the Soil Conservation Service, established in 1935. Farm practices that damaged the soil had intensified the impact of the drought. The service taught farmers measures to reduce erosion. In addition, almost 30,000 kilometers of trees were planted to break the force of winds.
Although the AAA had been mostly successful, it was abandoned in 1936, when its tax on food processors was ruled unconstitutional by the Supreme Court. Congress quickly passed a farm-relief act, which authorized the government to make payments to farmers who took land out of production for the purpose of soil conservation. In 1938, with a pro-New Deal majority on the Supreme Court, Congress reinstated the AAA.
By 1940 nearly six million farmers were receiving federal subsidies. New Deal programs also provided loans on surplus crops, insurance for wheat, and a system of planned storage to ensure a stable food supply. Economic stability for the farmer was substantially achieved, albeit at great expense and with extraordinary government oversight.
A Gallup Poll printed in the Washington Post revealed that a majority of the American public opposed the AAA. In 1936, the Supreme Court declared the AAA to be unconstitutional, stating that "a statutory plan to regulate and control agricultural production, [is] a matter beyond the powers delegated to the federal government". The AAA was replaced by a similar program that did win Court approval. Instead of paying farmers for letting fields lie barren, this program instead subsidized them for planting soil enriching crops such as alfalfa that would not be sold on the market. Federal regulation of agricultural production has been modified many times since then, but together with large subsidies is still in effect in 2016.
The Farm Tenancy Act in 1937 was the last major New Deal legislation that concerned farming. It, in turn, created the Farm Security Administration (FSA), which replaced the Resettlement Administration.
The Food Stamp Plan—a major new welfare program for urban poor—was established in 1939 to provide stamps to poor people who could use them to purchase food at retail outlets. The program ended during wartime prosperity in 1943, but was restored in 1961. It survived into the 21st century with little controversy because it was seen to benefit the urban poor, food producers, grocers and wholesalers, as well as farmers. Thus it gained support from both liberal and conservative Congressmen. In 2013, however, Tea Party activists in the House tried to end the program, now known as the Supplemental Nutrition Assistance Program, while the Senate fought to preserve it.
F. Industrial Recovery - industrial recovery was the effort in numerous programs to restore the economy to normal health. By most economic indicators this was achieved by 1937—except for unemployment, which remained stubbornly high until World War II began. Recovery was designed to help the economy bounce back from depression.
NRA "Blue Eagle" campaign - Roosevelt's advisers believed that excessive competition and technical progress had led to overproduction and lowered wages and prices, which they believed lowered demand and employment (Deflation). He argued that government economic planning was necessary to remedy this:
...A mere builder of more industrial plants, a creator of more railroad systems, an organizer of more corporations, is as likely to be a danger as a help. Our task is not ... necessarily producing more goods. It is the soberer, less dramatic business of administering resources and plants already in hand.
From 1929 to 1933, the industrial economy had been suffering from a vicious cycle of deflation. Since 1931, the U.S. Chamber of Commerce, the voice of the nation's organized business, promoted an anti-deflationary scheme that would permit trade associations to cooperate in government-instigated cartels to stabilize prices within their industries. While existing antitrust laws clearly forbade such practices, organized business found a receptive ear in the Roosevelt Administration.
New Deal economists argued that cut-throat competition had hurt many businesses and that with prices having fallen 20% and more, "deflation" exacerbated the burden of debt and would delay recovery. They rejected a strong move in Congress to limit the workweek to 30 hours. Instead their remedy, designed in cooperation with big business, was the NIRA. It included stimulus funds for the WPA to spend, and sought to raise prices, give more bargaining power for unions (so the workers could purchase more) and reduce harmful competition. At the center of the NIRA was the National Recovery Administration (NRA), headed by former General Hugh S. Johnson, who had been a senior economic official in World War I. Johnson called on every business establishment in the nation to accept a stopgap "blanket code": a minimum wage of between 20 and 45 cents per hour, a maximum workweek of 35–45 hours, and the abolition of child labor. Johnson and Roosevelt contended that the "blanket code" would raise consumer purchasing power and increase employment.
To mobilize political support for the NRA, Johnson launched the "NRA Blue Eagle" publicity campaign to boost what he called "industrial self-government". The NRA brought together leaders in each industry to design specific sets of codes for that industry; the most important provisions were anti-deflationary floors below which no company would lower prices or wages, and agreements on maintaining employment and production. In a remarkably short time, the NRA announced agreements from almost every major industry in the nation. By March 1934, industrial production was 45% higher than in March 1933. Donald Richberg, who soon replaced Johnson as the head of the NRA, said:
From 1929 to 1933, the industrial economy had been suffering from a vicious cycle of deflation. Since 1931, the U.S. Chamber of Commerce, the voice of the nation's organized business, promoted an anti-deflationary scheme that would permit trade associations to cooperate in government-instigated cartels to stabilize prices within their industries. While existing antitrust laws clearly forbade such practices, organized business found a receptive ear in the Roosevelt Administration.
New Deal economists argued that cut-throat competition had hurt many businesses and that with prices having fallen 20% and more, "deflation" exacerbated the burden of debt and would delay recovery. They rejected a strong move in Congress to limit the workweek to 30 hours. Instead their remedy, designed in cooperation with big business, was the NIRA. It included stimulus funds for the WPA to spend, and sought to raise prices, give more bargaining power for unions (so the workers could purchase more) and reduce harmful competition. At the center of the NIRA was the National Recovery Administration (NRA), headed by former General Hugh S. Johnson, who had been a senior economic official in World War I. Johnson called on every business establishment in the nation to accept a stopgap "blanket code": a minimum wage of between 20 and 45 cents per hour, a maximum workweek of 35–45 hours, and the abolition of child labor. Johnson and Roosevelt contended that the "blanket code" would raise consumer purchasing power and increase employment.
To mobilize political support for the NRA, Johnson launched the "NRA Blue Eagle" publicity campaign to boost what he called "industrial self-government". The NRA brought together leaders in each industry to design specific sets of codes for that industry; the most important provisions were anti-deflationary floors below which no company would lower prices or wages, and agreements on maintaining employment and production. In a remarkably short time, the NRA announced agreements from almost every major industry in the nation. By March 1934, industrial production was 45% higher than in March 1933. Donald Richberg, who soon replaced Johnson as the head of the NRA, said:
There is no choice presented to American business between intelligently planned and uncontrolled industrial operations and a return to the gold-plated anarchy that masqueraded as "rugged individualism" ... Unless industry is sufficiently socialized by its private owners and managers so that great essential industries are operated under public obligation appropriate to the public interest in them, the advance of political control over private industry is inevitable.
employment in the United States from 1920 to 1940
By the time NRA ended in May 1935, industrial production was 55% higher than in May 1933. In addition, well over 2 million employers accepted the new standards laid down by the NRA, which had introduced a minimum wage and an eight-hour workday, together with abolishing child labor. On May 27, 1935, the NRA was found to be unconstitutional by a unanimous decision of the U.S. Supreme Court in the case of Schechter v. United States. On that same day, the Court unanimously struck down the Frazier-Lemke Act portion of the New Deal as unconstitutional. After the end of the NRA quotas in the oil industry were fixed by the Railroad Commission of Texas with Tom Connally's federal Hot Oil Act of 1935, which guaranteed that illegal "hot oil" would not be sold.
Employment in private sector factories recovered to the level of the late 1920s by 1937 but did not grow much bigger until the war came and manufacturing employment leaped from 11 million in 1940 to 18 million in 1943.
Industry and Labor - The National Recovery Administration (NRA), established in 1933 with the National Industrial Recovery Act (NIRA), attempted to end cutthroat competition by setting codes of fair competitive practice to generate more jobs and thus more buying. Although welcomed initially, the NRA was soon criticized for over-regulation and was unable to achieve industrial recovery. It was declared unconstitutional in 1935.
The NIRA had guaranteed to labor the right of collective bargaining through labor unions representing individual workers, but the NRA had failed to overcome strong business opposition to independent unionism. After its demise in 1935, Congress passed the National Labor Relations Act, which restated that guarantee and prohibited employers from unfairly interfering with union activities. It also created the National Labor Relations Board (NLRB) to supervise collective bargaining, administer elections, and ensure workers the right to choose the organization that should represent them in dealing with employers.
The great progress made in labor organization brought working people a growing sense of common interests, and labor’s power increased not only in industry but also in politics. Roosevelt’s Democratic Party benefited enormously from these developments.
G. Housing Sector - The New Deal had an important impact in the housing field. The New Deal followed and increased President Hoover's lead and seek measures. The New Deal sought to stimulate the private home building industry and increase the number of individuals who owned homes. The New Deal implemented two new housing agencies; Home Owners' Loan Corporation (HOLC) and the Federal Housing Administration (FHA). HOLC set uniform national appraisal methods and simplified the mortgage process. The Federal Housing Administration (FHA) created national standards for home construction.
The New Deal helped increase the number of Americans who owned homes. Before the New Deal only four out of 10 Americans owned homes; this was because the standard mortgage lasted only five to 10 years and had interest as high as 8%. These conditions severely limited the accessibility to housing for most Americans. Under the New Deal, Americans had access to 30-year mortgages, and the standardized appraisal and construction processes helped open up the housing market to many more Americans of that time.
I. Trade liberalization - there is consensus amongst economic historians that protectionist policies, culminating in the Smoot-Hawley Act of 1930, worsened the Depression. Franklin D. Roosevelt already spoke against the act while campaigning for president during 1932. In 1934 the Reciprocal Tariff Act was drafted by Cordell Hull. It gave the president power to negotiate bilateral, reciprocal trade agreements with other countries. The act enabled Roosevelt to liberalize American trade policy around the globe. It is widely credited with ushering in the era of liberal trade policy that persists to this day.
Puerto Rico - a separate set of programs operated in Puerto Rico, headed by the Puerto Rico Reconstruction Administration. It promoted land reform and helped small farms; it set up farm cooperatives, promoted crop diversification, and helped local industry. The Puerto Rico Reconstruction Administration was directed by Juan Pablo Montoya Sr. from 1935 to 1937.
Employment in private sector factories recovered to the level of the late 1920s by 1937 but did not grow much bigger until the war came and manufacturing employment leaped from 11 million in 1940 to 18 million in 1943.
Industry and Labor - The National Recovery Administration (NRA), established in 1933 with the National Industrial Recovery Act (NIRA), attempted to end cutthroat competition by setting codes of fair competitive practice to generate more jobs and thus more buying. Although welcomed initially, the NRA was soon criticized for over-regulation and was unable to achieve industrial recovery. It was declared unconstitutional in 1935.
The NIRA had guaranteed to labor the right of collective bargaining through labor unions representing individual workers, but the NRA had failed to overcome strong business opposition to independent unionism. After its demise in 1935, Congress passed the National Labor Relations Act, which restated that guarantee and prohibited employers from unfairly interfering with union activities. It also created the National Labor Relations Board (NLRB) to supervise collective bargaining, administer elections, and ensure workers the right to choose the organization that should represent them in dealing with employers.
The great progress made in labor organization brought working people a growing sense of common interests, and labor’s power increased not only in industry but also in politics. Roosevelt’s Democratic Party benefited enormously from these developments.
G. Housing Sector - The New Deal had an important impact in the housing field. The New Deal followed and increased President Hoover's lead and seek measures. The New Deal sought to stimulate the private home building industry and increase the number of individuals who owned homes. The New Deal implemented two new housing agencies; Home Owners' Loan Corporation (HOLC) and the Federal Housing Administration (FHA). HOLC set uniform national appraisal methods and simplified the mortgage process. The Federal Housing Administration (FHA) created national standards for home construction.
The New Deal helped increase the number of Americans who owned homes. Before the New Deal only four out of 10 Americans owned homes; this was because the standard mortgage lasted only five to 10 years and had interest as high as 8%. These conditions severely limited the accessibility to housing for most Americans. Under the New Deal, Americans had access to 30-year mortgages, and the standardized appraisal and construction processes helped open up the housing market to many more Americans of that time.
I. Trade liberalization - there is consensus amongst economic historians that protectionist policies, culminating in the Smoot-Hawley Act of 1930, worsened the Depression. Franklin D. Roosevelt already spoke against the act while campaigning for president during 1932. In 1934 the Reciprocal Tariff Act was drafted by Cordell Hull. It gave the president power to negotiate bilateral, reciprocal trade agreements with other countries. The act enabled Roosevelt to liberalize American trade policy around the globe. It is widely credited with ushering in the era of liberal trade policy that persists to this day.
Puerto Rico - a separate set of programs operated in Puerto Rico, headed by the Puerto Rico Reconstruction Administration. It promoted land reform and helped small farms; it set up farm cooperatives, promoted crop diversification, and helped local industry. The Puerto Rico Reconstruction Administration was directed by Juan Pablo Montoya Sr. from 1935 to 1937.
3. The second new deal (1935-1938)
Many historians distinguish between a "First New Deal" (1933–34) and a "Second New Deal" (1935–38), with the second one more liberal and more controversial. The "First New Deal" (1933–34) dealt with the pressing banking crises through the Emergency Banking Act and the 1933 Banking Act. The Federal Emergency Relief Administration provided $500 million for relief operations by states and cities, while the short-lived CWA (Civil Works Administration) gave localities money to operate make-work projects in 1933–34. The Securities Act of 1933 was enacted to prevent a repeated stock market crash. The controversial work of the National Recovery Administration was also part of the First New Deal.
In its early years, the New Deal sponsored a remarkable series of legislative initiatives and achieved significant increases in production and prices — but it did not bring an end to the Depression. As the sense of immediate crisis eased, new demands emerged. Businessmen mourned the end of “laissez-faire” and chafed under the regulations of the NIRA. Vocal attacks also mounted from the political left and right as dreamers, schemers, and politicians alike emerged with economic panaceas that drew wide audiences. Dr.Francis E.Townsend advocated generous old-age pensions. Father Charles Coughlin, the “radio priest,” called for inflationary policies and blamed international bankers in speeches increasingly peppered with anti-Semitic imagery. Most formidably, Senator Huey P.Long of Louisiana, an eloquent and ruthless spokesman for the displaced, advocated a radical redistribution of wealth. (If he had not been assassinated in September 1935, Long very likely would have launched a presidential challenge to Franklin Roosevelt in 1936.)
In the face of these pressures, President Roosevelt backed a new set of economic and social measures. Prominent among them were measures to fight poverty, create more work for the unemployed, and provide a social safety net.
A. Mesures in second new deal - the "Second New Deal" in 1935–38 included the Wagner Act to promote labor unions, the Works Progress Administration (WPA) relief program (which made the federal government by far the largest single employer in the nation), the Social Security Act, and new programs to aid tenant farmers and migrant workers. The final major items of New Deal legislation were the creation of the United States Housing Authority and Farm Security Administration, both in 1937, and the Fair Labor Standards Act of 1938, which set maximum hours and minimum wages for most categories of workers.
Social Security Act - the New Deal’s cornerstone, according to Roosevelt, was the Social Security Act of 1935. Social Security created a system of state-administered welfare payments for the poor, unemployed, and disabled based on matching state and federal contributions. It also established a national system of retirement benefits drawing on a “trust fund” created by employer and employee contributions.
The Social Security Act, drafted by Frances Perkins established a permanent system of universal retirement pensions (Social Security), unemployment insurance, and welfare benefits for the handicapped and needy children in families without a father present. It established the framework for the U.S. welfare system. Roosevelt insisted that it should be funded by payroll taxes rather than from the general fund; he said, "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."
In its early years, the New Deal sponsored a remarkable series of legislative initiatives and achieved significant increases in production and prices — but it did not bring an end to the Depression. As the sense of immediate crisis eased, new demands emerged. Businessmen mourned the end of “laissez-faire” and chafed under the regulations of the NIRA. Vocal attacks also mounted from the political left and right as dreamers, schemers, and politicians alike emerged with economic panaceas that drew wide audiences. Dr.Francis E.Townsend advocated generous old-age pensions. Father Charles Coughlin, the “radio priest,” called for inflationary policies and blamed international bankers in speeches increasingly peppered with anti-Semitic imagery. Most formidably, Senator Huey P.Long of Louisiana, an eloquent and ruthless spokesman for the displaced, advocated a radical redistribution of wealth. (If he had not been assassinated in September 1935, Long very likely would have launched a presidential challenge to Franklin Roosevelt in 1936.)
In the face of these pressures, President Roosevelt backed a new set of economic and social measures. Prominent among them were measures to fight poverty, create more work for the unemployed, and provide a social safety net.
A. Mesures in second new deal - the "Second New Deal" in 1935–38 included the Wagner Act to promote labor unions, the Works Progress Administration (WPA) relief program (which made the federal government by far the largest single employer in the nation), the Social Security Act, and new programs to aid tenant farmers and migrant workers. The final major items of New Deal legislation were the creation of the United States Housing Authority and Farm Security Administration, both in 1937, and the Fair Labor Standards Act of 1938, which set maximum hours and minimum wages for most categories of workers.
Social Security Act - the New Deal’s cornerstone, according to Roosevelt, was the Social Security Act of 1935. Social Security created a system of state-administered welfare payments for the poor, unemployed, and disabled based on matching state and federal contributions. It also established a national system of retirement benefits drawing on a “trust fund” created by employer and employee contributions.
The Social Security Act, drafted by Frances Perkins established a permanent system of universal retirement pensions (Social Security), unemployment insurance, and welfare benefits for the handicapped and needy children in families without a father present. It established the framework for the U.S. welfare system. Roosevelt insisted that it should be funded by payroll taxes rather than from the general fund; he said, "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."
Compared with the social security systems in western European countries, the Social Security Act of 1935 was rather conservative. But for the first time the federal government took responsibility for the economic security of the aged, the temporarily unemployed, dependent children and the handicapped. Many
other industrialized nations had already enacted such programs, but calls for
such an initiative in the United States had gone unheeded. Social Security today
is the largest domestic program administered by the U.S.government.
To these, Roosevelt added the National Labor Relations Act, the “Wealth Tax Act” that increased taxes on the wealthy, the Public Utility Holding Company Act to break up large electrical utility conglomerates, and a Banking Act that greatly expanded the power of the Federal Reserve Board over the large private banks. Also notable was the establishment of the Rural Electrification Administration, which extended electricity into farming areas throughout the country.
Until 1935 there were just a dozen states that had old age insurance laws but these programs were woefully underfunded and therefore almost worthless. Just one state (Wisconsin) had an insurance program. The United States was the only modern industrial country where people faced the Depression without any national system of social security. Even the work programs of the "First New Deal" were just meant as immediate relief, destined to run less than a decade.
Labor relations and the National Labor Relations Act of 1935, also known as the Wagner Act, finally guaranteed workers the rights to collective bargaining through unions of their own choice. The Act also established the National Labor Relations Board (NLRB) to facilitate wage agreements and to suppress the repeated labor disturbances. The Wagner Act did not compel employers to reach agreement with their employees, but it opened possibilities for American labor. The result was a tremendous growth of membership in the labor unions, especially in the mass-production sector, composing the American Federation of Labor. Labor thus became a major component of the New Deal political coalition.
To these, Roosevelt added the National Labor Relations Act, the “Wealth Tax Act” that increased taxes on the wealthy, the Public Utility Holding Company Act to break up large electrical utility conglomerates, and a Banking Act that greatly expanded the power of the Federal Reserve Board over the large private banks. Also notable was the establishment of the Rural Electrification Administration, which extended electricity into farming areas throughout the country.
Until 1935 there were just a dozen states that had old age insurance laws but these programs were woefully underfunded and therefore almost worthless. Just one state (Wisconsin) had an insurance program. The United States was the only modern industrial country where people faced the Depression without any national system of social security. Even the work programs of the "First New Deal" were just meant as immediate relief, destined to run less than a decade.
Labor relations and the National Labor Relations Act of 1935, also known as the Wagner Act, finally guaranteed workers the rights to collective bargaining through unions of their own choice. The Act also established the National Labor Relations Board (NLRB) to facilitate wage agreements and to suppress the repeated labor disturbances. The Wagner Act did not compel employers to reach agreement with their employees, but it opened possibilities for American labor. The result was a tremendous growth of membership in the labor unions, especially in the mass-production sector, composing the American Federation of Labor. Labor thus became a major component of the New Deal political coalition.
The Fair Labor Standards Act of 1938 set maximum hours (44 per week) and minimum wages (25 cents per hour) for most categories of workers. Child labour of children under the age of 16 was forbidden, children under 18 years were forbidden to work in hazardous employment. As a result, the wages of 300,000 people were increased and the hours of 1.3 million were reduced. It was the last major New Deal legislation that Roosevelt succeeded in enacting into law before the Conservative Coalition of Republicans and conservative Democrats won control of Congress that year. While he could usually use the veto to restrain Congress, it could block any Roosevelt legislation it disliked.
Works Progress Administration - Roosevelt nationalized unemployment relief through the Works Progress Administration (WPA), headed by close friend Harry Hopkins. Roosevelt had insisted that the projects had to be costly in terms of labor, long-term beneficial, and the WPA was forbidden to compete with private enterprises (therefore the workers had to be paid smaller wages). The Works Progress Administration (WPA) was created to return the unemployed to the work force. The WPA financed a variety of projects such as hospitals, schools, and roads, and employed more than 8.5 million workers who built 650,000 miles of highways and roads, 125,000 public buildings, as well as bridges, reservoirs, irrigation systems, parks, playgrounds and so on.
Prominent projects were the Lincoln Tunnel, the Triborough Bridge, the LaGuardia Airport, the Overseas Highway and the San
Francisco–Oakland Bay Bridge.
The Rural Electrification Administration used co-ops to bring electricity to rural areas, many of which still operate. The National Youth Administration was another the semi-autonomous WPA program for youth. Its Texas director, Lyndon Baines Johnson, later used the NYA as a model for some of his Great Society programs in the 1960s. The WPA was organized by states, but New York City had its own branch Federal One, which created jobs for writers, musicians, artists, and theater personnel. It became a hunting ground for conservatives searching for Communist employees.
The Federal Writers' Project operated in every state, where it created a famous guide book; it also catalogued local archives and hired many writers, including Margaret Walker, Zora Neale Hurston, and Anzia Yezierska, to document folklore. Other writers interviewed elderly ex-slaves and recorded their stories. Under the Federal Theater Project, headed by charismatic Hallie Flanagan, actresses and actors, technicians, writers, and directors put on stage productions. The tickets were inexpensive or sometimes free, making theater available to audiences unaccustomed to attending plays. One Federal Art Project paid 162 trained woman artists on relief to paint murals or create statues for newly built post offices and courthouses. Many of these works of art can still be seen in public buildings around the country, along with murals sponsored by the Treasury Relief Art Project of the Treasury Department. During its existence, the Federal Theatre Project provided jobs for circus people, musicians, actors, artists, and playwrights, together with increasing public appreciation of the arts.
Tax policy - in 1935, Roosevelt called for a tax program called the Wealth Tax Act (Revenue Act of 1935) to redistribute wealth. The bill imposed an income tax of 79% on incomes over $5 million. Since that was an extraordinary high income in the 1930s, the highest tax rate actually covered just one individual – John D. Rockefeller. The bill was expected to raise only about $250 million in additional funds, so revenue was not the primary goal. Morgenthau called it "more or less a campaign document". In a private conversation with Raymond Moley, Roosevelt admitted that the purpose of the bill was "stealing Huey Long's thunder" by making Long's supporters his own. At the same time, it raised the bitterness of the rich who called Roosevelt "a traitor to his class" and the wealth tax act a "soak the rich tax".
A tax called the undistributed profits tax was enacted in 1936. This time the primary purpose was revenue, since Congress had enacted the Adjusted Compensation Payment Act, calling for payments of $2 billion to World War I veterans. The bill established the persisting principle that retained corporate earnings could be taxed. Paid dividends were tax deductible by corporations. Its proponents intended the bill to replace all other corporation taxes—believing this would stimulate corporations to distribute earnings and thus put more cash and spending power in the hands of individuals. In the end, Congress watered down the bill, setting the tax rates at 7 to 27% and largely exempting small enterprises. Facing widespread and fierce criticism, the tax deduction of paid dividends was repealed in 1938.
Housing Act of 1937 - the United States Housing Act of 1937 created the United States Housing Authority within the U.S. Department of the Interior. It was one of the last New Deal agencies created. The bill passed in 1937 with some Republican support to abolish slums.
B. Recession of 1937 and recovery - the Roosevelt Administration was under assault during FDR's second term, which presided over a new dip in the Great Depression in the fall of 1937 that continued until most of 1938. Production and profits declined sharply. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. The downturn was perhaps due to nothing more than the familiar rhythms of the business cycle. But until 1937 Roosevelt had claimed responsibility for the excellent economic performance. That backfired in the recession and the heated political atmosphere of 1937.
Business-oriented conservatives explained the recession by arguing that the New Deal had been very hostile to business expansion in 1935–37, had threatened massive anti-trust legal attacks on big corporations and by the huge strikes caused by the organizing activities of the Congress of Industrial Organizations (CIO) and the American Federation of Labor (AFL). The recovery was explained by the conservatives in terms of the diminishing of those threats sharply after 1938. For example, the antitrust efforts fizzled out without major cases. The CIO and AFL unions started battling each other more than corporations, and tax policy became more favorable to long-term growth.
"When The Gallup Organization's poll in 1939 asked, 'Do you think the attitude of the Roosevelt administration toward business is delaying business recovery?' the American people responded 'yes' by a margin of more than two-to-one. The business community felt even more strongly so." Fortune's Roper poll found in May 1939 that 39% of Americans thought the administration had been delaying recovery by undermining business confidence, while 37% thought it had not. But it also found that opinions on the issue were highly polarized by economic status and occupation. In addition, AIPO found in the same time that 57% believed that business attitudes toward the administration were delaying recovery, while 26% thought they were not, emphasizing that fairly subtle differences in wording can evoke substantially different polling responses.
Keynesian economists stated that the recession of 1937 was a result of a premature effort to curb government spending and balance the budget.
The Rural Electrification Administration used co-ops to bring electricity to rural areas, many of which still operate. The National Youth Administration was another the semi-autonomous WPA program for youth. Its Texas director, Lyndon Baines Johnson, later used the NYA as a model for some of his Great Society programs in the 1960s. The WPA was organized by states, but New York City had its own branch Federal One, which created jobs for writers, musicians, artists, and theater personnel. It became a hunting ground for conservatives searching for Communist employees.
The Federal Writers' Project operated in every state, where it created a famous guide book; it also catalogued local archives and hired many writers, including Margaret Walker, Zora Neale Hurston, and Anzia Yezierska, to document folklore. Other writers interviewed elderly ex-slaves and recorded their stories. Under the Federal Theater Project, headed by charismatic Hallie Flanagan, actresses and actors, technicians, writers, and directors put on stage productions. The tickets were inexpensive or sometimes free, making theater available to audiences unaccustomed to attending plays. One Federal Art Project paid 162 trained woman artists on relief to paint murals or create statues for newly built post offices and courthouses. Many of these works of art can still be seen in public buildings around the country, along with murals sponsored by the Treasury Relief Art Project of the Treasury Department. During its existence, the Federal Theatre Project provided jobs for circus people, musicians, actors, artists, and playwrights, together with increasing public appreciation of the arts.
Tax policy - in 1935, Roosevelt called for a tax program called the Wealth Tax Act (Revenue Act of 1935) to redistribute wealth. The bill imposed an income tax of 79% on incomes over $5 million. Since that was an extraordinary high income in the 1930s, the highest tax rate actually covered just one individual – John D. Rockefeller. The bill was expected to raise only about $250 million in additional funds, so revenue was not the primary goal. Morgenthau called it "more or less a campaign document". In a private conversation with Raymond Moley, Roosevelt admitted that the purpose of the bill was "stealing Huey Long's thunder" by making Long's supporters his own. At the same time, it raised the bitterness of the rich who called Roosevelt "a traitor to his class" and the wealth tax act a "soak the rich tax".
A tax called the undistributed profits tax was enacted in 1936. This time the primary purpose was revenue, since Congress had enacted the Adjusted Compensation Payment Act, calling for payments of $2 billion to World War I veterans. The bill established the persisting principle that retained corporate earnings could be taxed. Paid dividends were tax deductible by corporations. Its proponents intended the bill to replace all other corporation taxes—believing this would stimulate corporations to distribute earnings and thus put more cash and spending power in the hands of individuals. In the end, Congress watered down the bill, setting the tax rates at 7 to 27% and largely exempting small enterprises. Facing widespread and fierce criticism, the tax deduction of paid dividends was repealed in 1938.
Housing Act of 1937 - the United States Housing Act of 1937 created the United States Housing Authority within the U.S. Department of the Interior. It was one of the last New Deal agencies created. The bill passed in 1937 with some Republican support to abolish slums.
B. Recession of 1937 and recovery - the Roosevelt Administration was under assault during FDR's second term, which presided over a new dip in the Great Depression in the fall of 1937 that continued until most of 1938. Production and profits declined sharply. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. The downturn was perhaps due to nothing more than the familiar rhythms of the business cycle. But until 1937 Roosevelt had claimed responsibility for the excellent economic performance. That backfired in the recession and the heated political atmosphere of 1937.
Business-oriented conservatives explained the recession by arguing that the New Deal had been very hostile to business expansion in 1935–37, had threatened massive anti-trust legal attacks on big corporations and by the huge strikes caused by the organizing activities of the Congress of Industrial Organizations (CIO) and the American Federation of Labor (AFL). The recovery was explained by the conservatives in terms of the diminishing of those threats sharply after 1938. For example, the antitrust efforts fizzled out without major cases. The CIO and AFL unions started battling each other more than corporations, and tax policy became more favorable to long-term growth.
"When The Gallup Organization's poll in 1939 asked, 'Do you think the attitude of the Roosevelt administration toward business is delaying business recovery?' the American people responded 'yes' by a margin of more than two-to-one. The business community felt even more strongly so." Fortune's Roper poll found in May 1939 that 39% of Americans thought the administration had been delaying recovery by undermining business confidence, while 37% thought it had not. But it also found that opinions on the issue were highly polarized by economic status and occupation. In addition, AIPO found in the same time that 57% believed that business attitudes toward the administration were delaying recovery, while 26% thought they were not, emphasizing that fairly subtle differences in wording can evoke substantially different polling responses.
Keynesian economists stated that the recession of 1937 was a result of a premature effort to curb government spending and balance the budget.
Roosevelt had been cautious not to run large deficits.
In 1937 he actually achieved a balanced budget. Therefore, he did not fully
utilize deficit spending. Between
1933 and 1941 the average federal budget deficit was 3% per year.
In November 1937 Roosevelt decided that big business were trying to ruin the New Deal by causing another depression that voters would react against by voting Republican. It was a "capital strike" said Roosevelt, and he ordered the Federal Bureau of Investigation to look for a criminal conspiracy (they found none). Roosevelt moved left and unleashed a rhetorical campaign against monopoly power, which was cast as the cause of the new crisis. Ickes attacked automaker Henry Ford, steelmaker Tom Girdler, and the super rich "Sixty Families" who supposedly comprised "the living center of the modern industrial oligarchy which dominates the United States".
Left unchecked, Ickes warned, they would create "big-business Fascist America—an enslaved America". The President appointed Robert Jackson as the aggressive new director of the antitrust division of the Justice Department, but this effort lost its effectiveness once World War II began and big business was urgently needed to produce war supplies. But the Administration's other response to the 1937 dip that stalled recovery from the Great Depression had more tangible results.
Ignoring the requests of the Treasury Department and responding to the urgings of the converts to Keynesian economics and others in his Administration, Roosevelt embarked on an antidote to the depression, reluctantly abandoning his efforts to balance the budget and launching a $5 billion spending program in the spring of 1938, an effort to increase mass purchasing power. Roosevelt explained his program in a fireside chat in which he told the American people that it was up to the government to "create an economic upturn" by making "additions to the purchasing power of the nation".
The economic downturn of 1937–38, and the bitter split between the AFL and CIO labor unions led to major Republican gains in Congress in 1938. Conservative Republicans and Democrats in Congress joined in the informal Conservative Coalition. By 1942–43 they shut down relief programs such as the WPA and CCC and blocked major liberal proposals. Roosevelt himself turned his attention to the war effort, and won reelection in 1940 and 1944. The Supreme Court declared the National Recovery Administration (NRA) and the first version of the Agricultural Adjustment Act (AAA) unconstitutional, however the AAA was rewritten and then upheld. As the first Republican president elected after FDR, Dwight D. Eisenhower (1953–61) left the New Deal largely intact, even expanding it in some areas. In the 1960s, Lyndon B. Johnson's Great Society used the New Deal as inspiration for a dramatic expansion of liberal programs, which Republican Richard M. Nixon generally retained. After 1974, however, the call for deregulation of the economy gained bipartisan support. The New Deal regulation of banking (Glass–Steagall Act) was suspended in the 1990s.
Many New Deal programs remain active, with some still operating under the original names, including the Federal Deposit Insurance Corporation (FDIC), the Federal Crop Insurance Corporation (FCIC), the Federal Housing Administration (FHA), and the Tennessee Valley Authority (TVA). The largest programs still in existence today are the Social Security System and the Securities and Exchange Commission (SEC).
C. World War II and full employment - the U.S. reached full employment after entering World War II in December 1941. Under the special circumstances of war mobilization, massive war spending doubled the GNP (Gross National Product). Military Keynesianism brought full employment. Federal contracts were cost-plus. Instead of competitive bidding to get lower prices, the government gave out contracts that promised to pay all the expenses plus a modest profit. Factories hired everyone they could find regardless of their lack of skills; they simplified work tasks and trained the workers, with the federal government paying all the costs. Millions of farmers left marginal operations, students quit school, and housewives joined the labor force.
In November 1937 Roosevelt decided that big business were trying to ruin the New Deal by causing another depression that voters would react against by voting Republican. It was a "capital strike" said Roosevelt, and he ordered the Federal Bureau of Investigation to look for a criminal conspiracy (they found none). Roosevelt moved left and unleashed a rhetorical campaign against monopoly power, which was cast as the cause of the new crisis. Ickes attacked automaker Henry Ford, steelmaker Tom Girdler, and the super rich "Sixty Families" who supposedly comprised "the living center of the modern industrial oligarchy which dominates the United States".
Left unchecked, Ickes warned, they would create "big-business Fascist America—an enslaved America". The President appointed Robert Jackson as the aggressive new director of the antitrust division of the Justice Department, but this effort lost its effectiveness once World War II began and big business was urgently needed to produce war supplies. But the Administration's other response to the 1937 dip that stalled recovery from the Great Depression had more tangible results.
Ignoring the requests of the Treasury Department and responding to the urgings of the converts to Keynesian economics and others in his Administration, Roosevelt embarked on an antidote to the depression, reluctantly abandoning his efforts to balance the budget and launching a $5 billion spending program in the spring of 1938, an effort to increase mass purchasing power. Roosevelt explained his program in a fireside chat in which he told the American people that it was up to the government to "create an economic upturn" by making "additions to the purchasing power of the nation".
The economic downturn of 1937–38, and the bitter split between the AFL and CIO labor unions led to major Republican gains in Congress in 1938. Conservative Republicans and Democrats in Congress joined in the informal Conservative Coalition. By 1942–43 they shut down relief programs such as the WPA and CCC and blocked major liberal proposals. Roosevelt himself turned his attention to the war effort, and won reelection in 1940 and 1944. The Supreme Court declared the National Recovery Administration (NRA) and the first version of the Agricultural Adjustment Act (AAA) unconstitutional, however the AAA was rewritten and then upheld. As the first Republican president elected after FDR, Dwight D. Eisenhower (1953–61) left the New Deal largely intact, even expanding it in some areas. In the 1960s, Lyndon B. Johnson's Great Society used the New Deal as inspiration for a dramatic expansion of liberal programs, which Republican Richard M. Nixon generally retained. After 1974, however, the call for deregulation of the economy gained bipartisan support. The New Deal regulation of banking (Glass–Steagall Act) was suspended in the 1990s.
Many New Deal programs remain active, with some still operating under the original names, including the Federal Deposit Insurance Corporation (FDIC), the Federal Crop Insurance Corporation (FCIC), the Federal Housing Administration (FHA), and the Tennessee Valley Authority (TVA). The largest programs still in existence today are the Social Security System and the Securities and Exchange Commission (SEC).
C. World War II and full employment - the U.S. reached full employment after entering World War II in December 1941. Under the special circumstances of war mobilization, massive war spending doubled the GNP (Gross National Product). Military Keynesianism brought full employment. Federal contracts were cost-plus. Instead of competitive bidding to get lower prices, the government gave out contracts that promised to pay all the expenses plus a modest profit. Factories hired everyone they could find regardless of their lack of skills; they simplified work tasks and trained the workers, with the federal government paying all the costs. Millions of farmers left marginal operations, students quit school, and housewives joined the labor force.
 |
| factory workers in 1942, Long Beach, California. |
Federal budget soars - in 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditures tripled, but the national debt as a percent of GNP showed little change. Spending on the war effort quickly eclipsed spending on New Deal programs. In 1944 government spending on the war effort exceeded 40% of GNP. The US economy experienced dramatic growth during the Second World War mostly due to the deemphasis of free enterprise in favor of the imposition of strict controls on prices and wages. These controls shared broad support among Labor and Business, resulting in cooperation between the two groups and the Federal Government. This cooperation resulted in the government subsidizing business and labor through both direct and indirect methods.
Wartime welfare projects - conservative domination of Congress during the war meant that all welfare projects and reforms had to have their approval, which was given when business supported the project. For example, the Coal Mines Inspection and Investigation Act of 1941 significantly reduced fatality rates in the coal-mining industry, saving workers' lives and company money. In terms of welfare the New Dealers wanted benefits for everyone according to need. Conservatives, however, proposed benefits based on national service—especially tied to military service or working in war industries—and their approach won out.
The Community Facilities Act of 1940 (the Lanham Act) provided federal funds to defense-impacted communities where the population had soared and local facilities were overwhelmed. It provided money for the building of housing for war workers as well as recreational facilities, water and sanitation plants, hospitals, day care centers, and schools.
The Servicemen's Dependents Allowance Act of 1942 provided family allowances for dependents of enlisted men. Emergency grants to States were authorized in 1942 for programs for day care for children of working mothers. In 1944, pensions were authorized for all physically or mentally helpless children of deceased veterans regardless of the age of the child at the date the claim was filed or at the time of the veteran's death, provided the child was disabled at the age of sixteen and that the disability continued to the date of the claim. The Public Health Service Act, which was passed that same year, expanded Federal-State public health programs, and increased the annual amount for grants for public health services.
The Emergency Maternity and Infant Care Program (EMIC), introduced in March 1943 by the Children's Bureau, provided free maternity care and medical treatment during an infant's first year for the wives and children of military personnel in the four lowest enlisted pay grades. One out of seven births was covered during its operation. EMIC paid $127 million to state health departments to cover the care of 1.2 million new mothers and their babies. The average cost of EMIC maternity cases completed was $92.49 for medical and hospital care. A striking effect was the sudden rapid decline in home births, as most mothers now had paid hospital maternity care.
Under the 1943 Disabled Veterans Rehabilitation Act,
vocational rehabilitation services were offered to wounded WWII veterans, and
some 621,000 veterans would go on to receive assistance under this program.
The G.I. Bill (Servicemen's Readjustment Act of 1944) was a landmark piece of legislation, providing 16 million returning veterans with benefits such as housing, educational, and unemployment assistance, and played a major role in the postwar expansion of the American middle class.
The G.I. Bill (Servicemen's Readjustment Act of 1944) was a landmark piece of legislation, providing 16 million returning veterans with benefits such as housing, educational, and unemployment assistance, and played a major role in the postwar expansion of the American middle class.
4. A new coalition
In the 1936 election,
Roosevelt won a decisive victory over his Republican opponent, Alf Landon of
Kansas.He was personally popular, and the economy seemed near recovery.He took
60 percent of the vote and carried all but two states.A broad new coalition
aligned with the Democratic Party emerged, consisting of labor, most farmers,
most urban ethnic groups, African Americans, and the traditionally Democratic
South.The Republican Party received the support of business as well as
middle-class members of small towns and suburbs.This political alliance, with
some variation and shifting, remained intact for several decades.
Roosevelt’s second term
was a time of consolidation.The president made two serious political missteps:
an ill-advised, unsuccessful attempt to enlarge the Supreme Court and a failed
effort to “purge” increasingly recalcitrant Southern conservatives from the
Democratic Party. When he cut high government spending, moreover, the economy
collapsed.These events led to the rise of a conservative coalition in Congress
that was unreceptive to new initiatives.
From 1932 to 1938 there was widespread public debate on the meaning of New Deal policies to the nation’s political and economic life.Americans clearly wanted the government to take greater responsibility for the welfare of ordinary people, however uneasy they might be about big government in general.The New Deal established the foundations of the modern welfare state in the United States.Roosevelt, perhaps the most imposing of the 20th-century presidents, had established a new standard of mass leadership.
The New Deal produced a political realignment, making the Democratic Party the majority (as well as the party that held the White House for seven out of nine Presidential terms from 1933 to 1969), with its base in liberal ideas, the South, traditional Democrats, big city machines, and the newly empowered labor unions and ethnic minorities. The Republicans were split, with conservatives opposing the entire New Deal as an enemy of business and growth, and liberals accepting some of it and promising to make it more efficient. The realignment crystallized into the New Deal Coalition that dominated most presidential elections into the 1960s, while the opposition Conservative Coalition largely controlled Congress from 1939 to 1964. By 1936 the term "liberal" typically was used for supporters of the New Deal, and "conservative" for its opponents. From 1934 to 1938, Roosevelt was assisted in his endeavours by a "pro-spender" majority in Congress (drawn from two-party, competitive, non-machine, Progressive, and Left party districts). As noted by Alexander Hicks, "Roosevelt, backed by rare, non-Southern Democrat majorities—270 non-Southern Democrat representatives and 71 non-Southern Democrat senators—spelled Second New Deal reform." In the 1938 midterm elections, however, Roosevelt and his liberal supporters lost control of Congress to the bipartisan Conservative Coalition.
No American leader, then or since, used the radio so effectively.In a radio address in 1938, Roose-velt declared: “Democracy has disappeared in several other great nations, not because the people of those nations disliked democracy, but because they had grown tired of unemployment and insecurity, of seeing their children hungry while they sat helpless in the face of government confusion and government weakness through lack of leadership.” Americans, he concluded, wanted to defend their liberties at any cost and understood that “the first line of the defense lies in the protection of economic security.”
Court-packing plan and jurisprudential shift - when Roosevelt took office a majority of the nine judges of the Supreme Court were appointed by Republican Party Presidents. Four especially conservative judges (nicknamed the Four Horsemen) often managed to convince the fifth judge Owen Roberts to strike down progressive legislation. Roosevelt increasingly saw the issue of the Supreme Court as one of unelected officials stifling the work of a democratically elected government. Early in the year 1937, he asked Congress to pass the Judiciary Reorganization Bill of 1937. That proposal would have given the president the power to appoint a new justice whenever an existing judge reached the age of 70 and failed to retire within six months. In that way Roosevelt hoped to preserve the New Deal legislation. But he had stirred up a hornet's nest since many congressmen feared he might start to retire them at 70 next. Many congressmen considered the proposal unconstitutional. In the end the proposal failed.
In one sense, however, it succeeded: Justice Owen Roberts switched positions and began voting to uphold New Deal measures, effectively creating a liberal majority in West Coast Hotel Co. v. Parrish and National Labor Relations Board v. Jones & Laughlin Steel Corporation, thus departing from the Lochner v. New York era and giving the government more power in questions of economic policies. Journalists called this change "the switch in time that saved nine". Recent scholars have noted that since the vote in Parrish took place several months before the court-packing plan was announced, other factors, like evolving jurisprudence, must have contributed to the Court's swing. The opinions handed down in the spring of 1937, favorable to the government, also contributed to the downfall of the plan. In any case, the "court packing plan", as it was known, did lasting political damage to Roosevelt.
With the retirement of Justice Willis Van Devanter, the Court's composition began to move solidly in support of Roosevelt's legislative agenda. In the end Roosevelt had lost the battle for the Judiciary Reorganization Bill but won the war for control of the Supreme Court in a constitutional way. Since he managed to serve in office for more than twelve years he got the chance to appoint eight of the nine Justices of the Court. Former Supreme Court Chief Justice William Rehnquist noted that in this way the Constitution provides for ultimate responsibility of the Court to the political branches of government.
From 1932 to 1938 there was widespread public debate on the meaning of New Deal policies to the nation’s political and economic life.Americans clearly wanted the government to take greater responsibility for the welfare of ordinary people, however uneasy they might be about big government in general.The New Deal established the foundations of the modern welfare state in the United States.Roosevelt, perhaps the most imposing of the 20th-century presidents, had established a new standard of mass leadership.
The New Deal produced a political realignment, making the Democratic Party the majority (as well as the party that held the White House for seven out of nine Presidential terms from 1933 to 1969), with its base in liberal ideas, the South, traditional Democrats, big city machines, and the newly empowered labor unions and ethnic minorities. The Republicans were split, with conservatives opposing the entire New Deal as an enemy of business and growth, and liberals accepting some of it and promising to make it more efficient. The realignment crystallized into the New Deal Coalition that dominated most presidential elections into the 1960s, while the opposition Conservative Coalition largely controlled Congress from 1939 to 1964. By 1936 the term "liberal" typically was used for supporters of the New Deal, and "conservative" for its opponents. From 1934 to 1938, Roosevelt was assisted in his endeavours by a "pro-spender" majority in Congress (drawn from two-party, competitive, non-machine, Progressive, and Left party districts). As noted by Alexander Hicks, "Roosevelt, backed by rare, non-Southern Democrat majorities—270 non-Southern Democrat representatives and 71 non-Southern Democrat senators—spelled Second New Deal reform." In the 1938 midterm elections, however, Roosevelt and his liberal supporters lost control of Congress to the bipartisan Conservative Coalition.
No American leader, then or since, used the radio so effectively.In a radio address in 1938, Roose-velt declared: “Democracy has disappeared in several other great nations, not because the people of those nations disliked democracy, but because they had grown tired of unemployment and insecurity, of seeing their children hungry while they sat helpless in the face of government confusion and government weakness through lack of leadership.” Americans, he concluded, wanted to defend their liberties at any cost and understood that “the first line of the defense lies in the protection of economic security.”
Court-packing plan and jurisprudential shift - when Roosevelt took office a majority of the nine judges of the Supreme Court were appointed by Republican Party Presidents. Four especially conservative judges (nicknamed the Four Horsemen) often managed to convince the fifth judge Owen Roberts to strike down progressive legislation. Roosevelt increasingly saw the issue of the Supreme Court as one of unelected officials stifling the work of a democratically elected government. Early in the year 1937, he asked Congress to pass the Judiciary Reorganization Bill of 1937. That proposal would have given the president the power to appoint a new justice whenever an existing judge reached the age of 70 and failed to retire within six months. In that way Roosevelt hoped to preserve the New Deal legislation. But he had stirred up a hornet's nest since many congressmen feared he might start to retire them at 70 next. Many congressmen considered the proposal unconstitutional. In the end the proposal failed.
In one sense, however, it succeeded: Justice Owen Roberts switched positions and began voting to uphold New Deal measures, effectively creating a liberal majority in West Coast Hotel Co. v. Parrish and National Labor Relations Board v. Jones & Laughlin Steel Corporation, thus departing from the Lochner v. New York era and giving the government more power in questions of economic policies. Journalists called this change "the switch in time that saved nine". Recent scholars have noted that since the vote in Parrish took place several months before the court-packing plan was announced, other factors, like evolving jurisprudence, must have contributed to the Court's swing. The opinions handed down in the spring of 1937, favorable to the government, also contributed to the downfall of the plan. In any case, the "court packing plan", as it was known, did lasting political damage to Roosevelt.
With the retirement of Justice Willis Van Devanter, the Court's composition began to move solidly in support of Roosevelt's legislative agenda. In the end Roosevelt had lost the battle for the Judiciary Reorganization Bill but won the war for control of the Supreme Court in a constitutional way. Since he managed to serve in office for more than twelve years he got the chance to appoint eight of the nine Justices of the Court. Former Supreme Court Chief Justice William Rehnquist noted that in this way the Constitution provides for ultimate responsibility of the Court to the political branches of government.
5. World War II
In the Depression
years, the United States remained focused on domestic concerns while democracy
declined across the world and many countries fell under the control of
dictators. Imperial Japan asserted dominance in East Asia and in the
Pacific. Nazi Germany and Fascist Italy militarized too and threatened conquests,
while Britain and France attempted appeasement to
avert another war in Europe. US legislation in the Neutrality Acts sought to avoid foreign conflicts;
however, policy clashed with increasing anti-Nazi feelings following the
German invasion of Poland in
September 1939 that started World War II. Roosevelt positioned the US as the
"Arsenal of Democracy",
pledging full-scale financial and munitions support for the Allies – but
no military personnel. WAR AND UNEASY NEUTRALITY - before Roosevelt’s second term was well under way, his domestic program was overshadowed by the expansionist designs of totalitarian regimes in Japan, Italy, and Germany. In 1931 Japan had invaded Manchuria, crushed Chinese resistance, and set up the puppet state of Manchukuo. Italy, under Benito Mussolini, enlarged its boundaries in Libya and in 1935 conquered Ethiopia. Germany, under Nazi leader Adolf Hitler, militarized its economy and reoccupied the Rhineland (demilitarized by the Treaty of Versailles) in 1936. In 1938, Hitler incorporated Austria into the German Reich and demanded cession of the German-speaking Sudetenland from Czechoslovakia. By then, war seemed imminent.
The United States, disillusioned by the failure of the crusade for democracy in World War I, announced that in no circumstances could any country involved in the conflict look to it for aid. Neutrality legislation, enacted piecemeal from 1935 to 1937, prohibited trade in arms with any warring nations, required cash for all other commodities, and forbade American flag merchant ships from carrying those goods. The objective was to prevent, at almost any cost, the involvement of the United States in a foreign war.
With the Nazi conquest of Poland in 1939 and the outbreak of World War II, isolationist sentiment increased, even though Americans clearly favored the victims of Hitler’s aggression and supported the Allied democracies, Britain and France. Roosevelt could only wait until public opinion regarding U.S. involvement was altered by events.
After the fall of France and the beginning of the German air war against Britain in mid-1940, the debate intensified between those in the United States who favored aiding the democracies and the antiwar faction known as the isolationists. Roosevelt did what he could to nudge public opinion toward intervention. The United States joined Canada in a Mutual Board of Defense, and aligned with the Latin American republics in extending collective protection to the nations in the Western Hemisphere.
Congress, confronted with the mounting crisis, voted immense sums for rearmament, and in September 1940 passed the first peacetime conscription bill ever enacted in the United States. In that month also, Roosevelt concluded a daring executive agreement with British Prime Minister Winston Churchill. The United States gave the British Navy 50 “overage” destroyers in return for British air and naval bases in Newfoundland and the North Atlantic.
The 1940 presidential election campaign demonstrated that the isolationists, while vocal, were a minority. Roosevelt’s Republican opponent, Wendell Wilkie, leaned toward intervention. Thus the November election yielded another majority for the president, making Roosevelt the first, and last, U.S.chief executive to be elected to a third term.
In early 1941, Roosevelt got Congress to approve the Lend-Lease Program, which enabled him to transfer arms and equipment to any nation (notably Great Britain, later the Soviet Union and China) deemed vital to the defense of the United States. Total Lend-Lease aid by war’s end would amount to more than $50,000 million.
Atlantic Charter - most remarkably, in August, he met with Prime Minister Churchill off the coast of Newfoundland. The two leaders issued a “joint statement of war aims,” which they called the Atlantic Charter. Bearing a remarkable resemblance to Woodrow Wilson’s Fourteen Points, it called for these objectives:
In early 1941, Roosevelt got Congress to approve the Lend-Lease Program, which enabled him to transfer arms and equipment to any nation (notably Great Britain, later the Soviet Union and China) deemed vital to the defense of the United States. Total Lend-Lease aid by war’s end would amount to more than $50,000 million.
Atlantic Charter - most remarkably, in August, he met with Prime Minister Churchill off the coast of Newfoundland. The two leaders issued a “joint statement of war aims,” which they called the Atlantic Charter. Bearing a remarkable resemblance to Woodrow Wilson’s Fourteen Points, it called for these objectives:
- no territorial aggrandizement;
- no territorial changes without the consent of the people concerned;
- the right of all people to choose their own form of government;
- the restoration of self-government to those deprived of it;
- economic collaboration between all nations;
- freedom from war, from fear, and from want for all peoples;
- freedom of the seas;
- the abandonment of the use of force as an instrument of international policy.
America was now neutral in name only. The main contributions of the US to the Allied war effort comprised money, industrial output, food, petroleum, technological innovation, and (especially 1944–45), military personnel. Much of the focus in Washington was maximizing the economic output of the nation. The overall result was a dramatic increase in GDP, the export of vast quantities of supplies to the Allies and to American forces overseas, the end of unemployment, and a rise in civilian consumption even as 40% of the GDP went to the war effort. This was achieved by tens of millions of workers moving from low-productivity occupations to high efficiency jobs, improvements in productivity through better technology and management, and the move into the active labor force of students, retired people, housewives, and the unemployed, and an increase in hours worked.
- no territorial changes without the consent of the people concerned;
- the right of all people to choose their own form of government;
- the restoration of self-government to those deprived of it;
- economic collaboration between all nations;
- freedom from war, from fear, and from want for all peoples;
- freedom of the seas;
- the abandonment of the use of force as an instrument of international policy.
America was now neutral in name only. The main contributions of the US to the Allied war effort comprised money, industrial output, food, petroleum, technological innovation, and (especially 1944–45), military personnel. Much of the focus in Washington was maximizing the economic output of the nation. The overall result was a dramatic increase in GDP, the export of vast quantities of supplies to the Allies and to American forces overseas, the end of unemployment, and a rise in civilian consumption even as 40% of the GDP went to the war effort. This was achieved by tens of millions of workers moving from low-productivity occupations to high efficiency jobs, improvements in productivity through better technology and management, and the move into the active labor force of students, retired people, housewives, and the unemployed, and an increase in hours worked.
It was
exhausting; leisure activities declined sharply. People tolerated the extra
work because of patriotism, the pay, and the confidence that it was only
"for the duration", and life would return to normal as soon as the
war was won. Most durable goods became unavailable, and meat, clothing, and
gasoline were tightly rationed. In industrial areas housing was in short supply
as people doubled up and lived in cramped quarters. Prices and wages were
controlled, and Americans saved a high portion of their incomes, which led to
renewed growth after the war instead of a return to depression.
On the home front, mobilization of the US economy was managed by Roosevelt's War Production Board. The wartime production boom led to full employment, wiping out this vestige of the Great Depression. Indeed, labor shortages encouraged industry to look for new sources of workers, finding new roles for women and blacks.
On the home front, mobilization of the US economy was managed by Roosevelt's War Production Board. The wartime production boom led to full employment, wiping out this vestige of the Great Depression. Indeed, labor shortages encouraged industry to look for new sources of workers, finding new roles for women and blacks.
However, the
fervor also inspired anti-Japanese sentiment,
which was handled by removing everyone of Japanese descent from the West Coast war zone. Research and development took
flight as well, best seen in the Manhattan Project,
a secret effort to harness nuclear fission to
produce highly destructive atomic bombs.
 |
| An aerial view of the Hanford B-Reactor site from June 1944. At center |
JAPAN,
PEARL HARBOR, AND WAR - while most Americans
anxiously watched the course of the European war, tension mounted in Asia. Taking
advantage of an opportunity to improve its strategic position, Japan boldly
announced a “new order” in which it would exercise hegemony over all of the
Pacific. Battling for survival against Nazi Germany, Britain was unable to
resist, abandoning its concession in Shanghai and temporarily closing the
Chinese supply route from Burma.In the summer of 1940, Japan won permission
from the weak Vichy government in France to use airfields in northern
Indochina (North Vietnam). That September the Japanese formally joined the
Rome-Berlin Axis. The United States countered with an embargo on the export of
scrap iron to Japan.
In July 1941 the Japanese occupied southern Indochina (South Vietnam), signaling a probable move southward toward the oil, tin, and rubber of British Malaya and the Dutch East Indies. The United States, in response, froze Japanese assets and initiated an embargo on the one commodity Japan needed above all others — oil.
General Hideki Tojo became prime minister of Japan that October. In mid-November, he sent a special envoy to the United States to meet with Secretary of State Cordell Hull. Among other things, Japan demanded that the United States release Japanese assets and stop U.S. naval expansion in the Pacific. Hull countered with a proposal for Japanese withdrawal from all its conquests. The swift Japanese rejection on December 1 left the talks stalemated.
On the morning of December 7, Japanese carrier-based planes executed a devastating surprise attack against the U.S. Pacific Fleet at Pearl Harbor, Hawaii.
In July 1941 the Japanese occupied southern Indochina (South Vietnam), signaling a probable move southward toward the oil, tin, and rubber of British Malaya and the Dutch East Indies. The United States, in response, froze Japanese assets and initiated an embargo on the one commodity Japan needed above all others — oil.
General Hideki Tojo became prime minister of Japan that October. In mid-November, he sent a special envoy to the United States to meet with Secretary of State Cordell Hull. Among other things, Japan demanded that the United States release Japanese assets and stop U.S. naval expansion in the Pacific. Hull countered with a proposal for Japanese withdrawal from all its conquests. The swift Japanese rejection on December 1 left the talks stalemated.
On the morning of December 7, Japanese carrier-based planes executed a devastating surprise attack against the U.S. Pacific Fleet at Pearl Harbor, Hawaii.
Twenty-one ships were
destroyed or temporarily disabled; 323 aircraft were destroyed or damaged;
2,388 soldiers, sailors, and civilians were killed. However, the U.S.aircraft
carriers that would play such a critical role in the ensuing naval war in the
Pacific were at sea and not anchored at Pearl Harbor.
American opinion, still divided about the war in Europe, was unified overnight by what President Roosevelt called “a day that will live in infamy.” On December 8, Congress declared a state of war with Japan; three days later Germany and Italy declared war on the United States.
MOBILIZATION
FOR TOTAL WAR - the nation rapidly geared
itself for mobilization of its people and its entire industrial capacity. Over
the next three-and-a-half years, war industry achieved staggering production
goals — 300,000 aircraft, 5,000 cargo ships, 60,000 landing craft, 86,000
tanks. Women workers, exemplified by “Rosie the Riveter,” played a bigger part in
industrial production than ever before.
American opinion, still divided about the war in Europe, was unified overnight by what President Roosevelt called “a day that will live in infamy.” On December 8, Congress declared a state of war with Japan; three days later Germany and Italy declared war on the United States.
MOBILIZATION
FOR TOTAL WAR - the nation rapidly geared
itself for mobilization of its people and its entire industrial capacity. Over
the next three-and-a-half years, war industry achieved staggering production
goals — 300,000 aircraft, 5,000 cargo ships, 60,000 landing craft, 86,000
tanks. Women workers, exemplified by “Rosie the Riveter,” played a bigger part in
industrial production than ever before.Total strength of the U.S.armed forces at the end of the war was more than 12 million. All the nation’s activities — farming, manufacturing, mining, trade, labor, investment, communications, even education and cultural undertakings — were in some fashion brought under new and enlarged controls.
As a result of Pearl
Harbor and the fear of Asian espionage, Americans also committed what was
later recognized as an act of intolerance: the internment of Japanese Americans. In
February 1942, nearly 120,000 Japanese Americans residing in California were
removed from their homes and interned behind barbed wire in 10 wretched temporary
camps, later to be moved to “relocation centers” outside isolated Southwestern
towns.
Nearly 63 percent of these
Japanese Americans were American-born U.S.citizens. A few were Japanese
sympathizers, but no evidence of espionage ever surfaced. Others volunteered
for the U.S.Army and fought with distinction and valor in two infantry units
on the Italian front. Some served as interpreters and translators in the
Pacific.
In 1983 the U.S.government
acknowledged the injustice of internment with limited payments to those
Japanese-Americans of that era who were still living.
THE WAR IN NORTH AFRICA AND EUROPE - soon after the United States entered the war, the United States, Britain, and the Soviet Union (at war with Germany since June 22, 1941) decided that their primary military effort was to be concentrated in Europe.
Throughout 1942, British and German forces fought inconclusive back-and-forth battles across Libya and Egypt for control of the Suez Canal. But on October 23, British forces commanded by General Sir Bernard Montgomery struck at the Germans from El Alamein. Equipped with a thousand tanks, many made in America, they defeated General Erwin Rommel’s army in a grinding two-week campaign. On November 7, American and British armed forces landed in French North Africa. Squeezed between forces advancing from east and west, the Germans were pushed back and, after fierce resistance, surrendered in May 1943.
THE WAR IN NORTH AFRICA AND EUROPE - soon after the United States entered the war, the United States, Britain, and the Soviet Union (at war with Germany since June 22, 1941) decided that their primary military effort was to be concentrated in Europe.
Throughout 1942, British and German forces fought inconclusive back-and-forth battles across Libya and Egypt for control of the Suez Canal. But on October 23, British forces commanded by General Sir Bernard Montgomery struck at the Germans from El Alamein. Equipped with a thousand tanks, many made in America, they defeated General Erwin Rommel’s army in a grinding two-week campaign. On November 7, American and British armed forces landed in French North Africa. Squeezed between forces advancing from east and west, the Germans were pushed back and, after fierce resistance, surrendered in May 1943.
The year 1942 was also the
turning point on the Eastern Front. The Soviet Union, suffering immense losses,
stopped the Nazi invasion at the gates of Leningrad and Moscow. In the winter of
1942-43, the Red Army defeated the Germans at Stalingrad (Volgograd) and began
the long offensive that would take them to Berlin in 1945.
In July 1943 British and American forces invaded Sicily and won control of the island in a month. During that time, Benito Mussolini fell from power in Italy. His successors began negotiations with the Allies and surrendered immediately after the invasion of the Italian mainland in September. However, the German Army had by then taken control of the peninsula. The fight against Nazi forces in Italy was bitter and protracted. Rome was not liberated until June 4, 1944. As the Allies slowly moved north, they built airfields from which they made devastating air raids against railroads, factories, and weapon emplacements in southern Germany and central Europe, including the oil installations at Ploesti, Romania.
In July 1943 British and American forces invaded Sicily and won control of the island in a month. During that time, Benito Mussolini fell from power in Italy. His successors began negotiations with the Allies and surrendered immediately after the invasion of the Italian mainland in September. However, the German Army had by then taken control of the peninsula. The fight against Nazi forces in Italy was bitter and protracted. Rome was not liberated until June 4, 1944. As the Allies slowly moved north, they built airfields from which they made devastating air raids against railroads, factories, and weapon emplacements in southern Germany and central Europe, including the oil installations at Ploesti, Romania.
Late in 1943 the Allies,
after much debate over strategy, decided to open a front in France to compel
the Germans to divert far larger forces from the Soviet Union.
U.S.General Dwight D. Eisenhower was appointed Supreme Commander of the Allied Forces in Europe. After immense preparations, on June 6, 1944, a U.S., British, and Canadian invasion army, protected by a greatly superior air force, landed on five beaches in Normandy. With the beachheads established after heavy fighting, more troops poured in, and pushed the Germans back in one bloody engagement after another. On August 25 Paris was liberated.
U.S.General Dwight D. Eisenhower was appointed Supreme Commander of the Allied Forces in Europe. After immense preparations, on June 6, 1944, a U.S., British, and Canadian invasion army, protected by a greatly superior air force, landed on five beaches in Normandy. With the beachheads established after heavy fighting, more troops poured in, and pushed the Germans back in one bloody engagement after another. On August 25 Paris was liberated.
The Allied offensive
stalled that fall, then suffered a setback in eastern Belgium during the
winter, but in March, the Americans and British were across the Rhine and the
Russians advancing irresistibly from the East. On May 7, Germany surrendered
unconditionally.
THE WAR IN THE PACIFIC - U.S. troops were forced to surrender in the Philippines in early 1942, but the Americans rallied in the following months. General James “Jimmy” Doolittle led U.S. Army bombers on a raid over Tokyo in April; it had little actual military significance, but gave Americans an immense psychological boost.
THE WAR IN THE PACIFIC - U.S. troops were forced to surrender in the Philippines in early 1942, but the Americans rallied in the following months. General James “Jimmy” Doolittle led U.S. Army bombers on a raid over Tokyo in April; it had little actual military significance, but gave Americans an immense psychological boost.
In May, at the Battle of
the Coral Sea — the first naval engagement in history in which all the fighting
was done by carrier-based planes — a Japanese naval invasion fleet sent to
strike at southern New Guinea and Australia was turned back by a U.S. task force
in a close battle. A few weeks later, the naval Battle of Midway in the central
Pacific resulted in the first major defeat of the Japanese Navy, which lost
four aircraft carriers. Ending the Japanese advance across the central Pacific, Midway was
the turning point.
Other battles also
contributed to Allied success. The six-month land and sea battle for the island
of Guadalcanal (August 1942-February 1943) was the first major U.S. ground victory in the
Pacific. For most of the next two years, American and Australian troops fought
their way northward from the South Pacific and westward from the Central
Pacific, capturing the Solomons, the Gilberts, the Marshalls, and the Marianas
in a series of amphibious assaults.
THE POLITICS OF WAR - allied military efforts were accompanied by a series of important international meetings on the political objectives of the war. In January 1943 at Casablanca, Morocco, an Anglo-American conference decided that no peace would be concluded with the Axis and its Balkan satellites except on the basis of “unconditional surrender.” This term, insisted upon by Roosevelt, sought to assure the people of all the fighting nations that no separate peace negotiations would be carried on with representatives of Fascism and Nazism and there would be no compromise of the war’s idealistic objectives. Axis propagandists, of course, used it to assert that the Allies were engaged in a war of extermination.
At Cairo, in November 1943, Roosevelt and Churchill met with Nationalist Chinese leader Chiang Kai-shek to agree on terms for Japan, including the relinquishment of gains from past aggression. At Tehran, shortly afterward, Roosevelt, Churchill, and Soviet leader Joseph Stalin made basic agreements on the postwar occupation of Germany and the establishment of a new international organization, the United Nations.
In February 1945, the three Allied leaders met again at Yalta (now in Ukraine), with victory seemingly secure. There, the Soviet Union secretly agreed to enter the war against Japan three months after the surrender of Germany. In return, the USSR would gain effective control of Manchuria and receive the Japanese Kurile Islands as well as the southern half of Sakhalin Island. The eastern boundary of Poland was set roughly at the Curzon line of 1919, thus giving the USSR half its prewar territory. Discussion of reparations to be collected from Germany — payment demanded by Stalin and opposed by Roosevelt and Churchill — was inconclusive. Specific arrangements were made concerning Allied occupation in Germany and the trial and punishment of war criminals. Also at Yalta it was agreed that the great powers in the Security Council of the proposed United Nations should have the right of veto in matters affecting their security.
Two months after his return from Yalta, Franklin Roosevelt died of a cerebral hemorrhage while vacationing in Georgia. Few figures in U.S.history have been so deeply mourned, and for a time the American people suffered from a numbing sense of irreparable loss. Vice President Harry Truman, former senator from Missouri, succeeded him.
WAR, VICTORY, AND THE BOMB - the final battles in the Pacific were among the war’s bloodiest. In June 1944, the Battle of the Philippine Sea effectively destroyed Japanese naval air power, forcing the resignation of Japanese Prime Minister Tojo. General Douglas MacArthur — who had reluctantly left the Philippines two years before to escape Japanese capture — returned to the islands in October. The accompanying Battle of Leyte Gulf, the largest naval engagement ever fought, was the final decisive defeat of the Japanese Navy. By February 1945, U.S.forces had taken Manila.
Next, the United States set its sight on the strategic island of Iwo Jima in the Bonin Islands, about halfway between the Marianas and Japan. The Japanese, trained to die fighting for the Emperor, made suicidal use of natural caves and rocky terrain. U.S.forces took the island by mid-March, but not before losing the lives of some 6,000 U.S. Marines. Nearly all the Japanese defenders perished. By now the United States was undertaking extensive air attacks on Japanese shipping and airfields and wave after wave of incendiary bombing attacks against Japanese cities.
At Okinawa (April 1-June 21, 1945), the Americans met even fiercer resistance. With few of the defenders surrendering, the U.S. Army and Marines were forced to wage a war of annihilation. Waves of Kamikaze suicide planes pounded the offshore Allied fleet, inflicting more damage than at Leyte Gulf. Japan lost 90-100,000 troops and probably as many Okinawan civilians. U.S.losses were more than 11,000 killed and nearly 34,000 wounded. Most Americans saw the fighting as a preview of what they would face in a planned invasion of Japan.
The heads of the U.S., British, and Soviet governments met at Potsdam, a suburb outside Berlin, from July 17 to August 2, 1945, to discuss operations against Japan, the peace settlement in Europe, and a policy for the future of Germany. Perhaps presaging the coming end of the alliance, they had no trouble on vague matters of principle or the practical issues of military occupation, but reached no agreement on many tangible issues, including reparations.
The day before the Potsdam Conference began, U.S. nuclear scientists engaged in the secret Manhattan Project exploded an atomic bomb near Alamogordo, New Mexico. The test was the culmination of three years of intensive research in laboratories across the United States. It lay behind the Potsdam Declaration, issued on July 26 by the United States and Britain, promising that Japan would neither be destroyed nor enslaved if it surrendered. If Japan continued the war, however, it would meet “prompt and utter destruction.” President Truman, calculating that an atomic bomb might be used to gain Japan’s surrender more quickly and with fewer casualties than an invasion of the mainland, ordered that the bomb be used if the Japanese did not surrender by August 3.
A committee of U.S.military and political officials and scientists had considered the question of targets for the new weapon. Secretary of War Henry L.Stimson argued successfully that Kyoto, Japan’s ancient capital and a repository of many national and religious treasures, be taken out of consideration. Hiroshima, a center of war industries and military operations, became the first objective.
THE POLITICS OF WAR - allied military efforts were accompanied by a series of important international meetings on the political objectives of the war. In January 1943 at Casablanca, Morocco, an Anglo-American conference decided that no peace would be concluded with the Axis and its Balkan satellites except on the basis of “unconditional surrender.” This term, insisted upon by Roosevelt, sought to assure the people of all the fighting nations that no separate peace negotiations would be carried on with representatives of Fascism and Nazism and there would be no compromise of the war’s idealistic objectives. Axis propagandists, of course, used it to assert that the Allies were engaged in a war of extermination.
At Cairo, in November 1943, Roosevelt and Churchill met with Nationalist Chinese leader Chiang Kai-shek to agree on terms for Japan, including the relinquishment of gains from past aggression. At Tehran, shortly afterward, Roosevelt, Churchill, and Soviet leader Joseph Stalin made basic agreements on the postwar occupation of Germany and the establishment of a new international organization, the United Nations.
In February 1945, the three Allied leaders met again at Yalta (now in Ukraine), with victory seemingly secure. There, the Soviet Union secretly agreed to enter the war against Japan three months after the surrender of Germany. In return, the USSR would gain effective control of Manchuria and receive the Japanese Kurile Islands as well as the southern half of Sakhalin Island. The eastern boundary of Poland was set roughly at the Curzon line of 1919, thus giving the USSR half its prewar territory. Discussion of reparations to be collected from Germany — payment demanded by Stalin and opposed by Roosevelt and Churchill — was inconclusive. Specific arrangements were made concerning Allied occupation in Germany and the trial and punishment of war criminals. Also at Yalta it was agreed that the great powers in the Security Council of the proposed United Nations should have the right of veto in matters affecting their security.
Two months after his return from Yalta, Franklin Roosevelt died of a cerebral hemorrhage while vacationing in Georgia. Few figures in U.S.history have been so deeply mourned, and for a time the American people suffered from a numbing sense of irreparable loss. Vice President Harry Truman, former senator from Missouri, succeeded him.
WAR, VICTORY, AND THE BOMB - the final battles in the Pacific were among the war’s bloodiest. In June 1944, the Battle of the Philippine Sea effectively destroyed Japanese naval air power, forcing the resignation of Japanese Prime Minister Tojo. General Douglas MacArthur — who had reluctantly left the Philippines two years before to escape Japanese capture — returned to the islands in October. The accompanying Battle of Leyte Gulf, the largest naval engagement ever fought, was the final decisive defeat of the Japanese Navy. By February 1945, U.S.forces had taken Manila.
Next, the United States set its sight on the strategic island of Iwo Jima in the Bonin Islands, about halfway between the Marianas and Japan. The Japanese, trained to die fighting for the Emperor, made suicidal use of natural caves and rocky terrain. U.S.forces took the island by mid-March, but not before losing the lives of some 6,000 U.S. Marines. Nearly all the Japanese defenders perished. By now the United States was undertaking extensive air attacks on Japanese shipping and airfields and wave after wave of incendiary bombing attacks against Japanese cities.
At Okinawa (April 1-June 21, 1945), the Americans met even fiercer resistance. With few of the defenders surrendering, the U.S. Army and Marines were forced to wage a war of annihilation. Waves of Kamikaze suicide planes pounded the offshore Allied fleet, inflicting more damage than at Leyte Gulf. Japan lost 90-100,000 troops and probably as many Okinawan civilians. U.S.losses were more than 11,000 killed and nearly 34,000 wounded. Most Americans saw the fighting as a preview of what they would face in a planned invasion of Japan.
The heads of the U.S., British, and Soviet governments met at Potsdam, a suburb outside Berlin, from July 17 to August 2, 1945, to discuss operations against Japan, the peace settlement in Europe, and a policy for the future of Germany. Perhaps presaging the coming end of the alliance, they had no trouble on vague matters of principle or the practical issues of military occupation, but reached no agreement on many tangible issues, including reparations.
The day before the Potsdam Conference began, U.S. nuclear scientists engaged in the secret Manhattan Project exploded an atomic bomb near Alamogordo, New Mexico. The test was the culmination of three years of intensive research in laboratories across the United States. It lay behind the Potsdam Declaration, issued on July 26 by the United States and Britain, promising that Japan would neither be destroyed nor enslaved if it surrendered. If Japan continued the war, however, it would meet “prompt and utter destruction.” President Truman, calculating that an atomic bomb might be used to gain Japan’s surrender more quickly and with fewer casualties than an invasion of the mainland, ordered that the bomb be used if the Japanese did not surrender by August 3.
A committee of U.S.military and political officials and scientists had considered the question of targets for the new weapon. Secretary of War Henry L.Stimson argued successfully that Kyoto, Japan’s ancient capital and a repository of many national and religious treasures, be taken out of consideration. Hiroshima, a center of war industries and military operations, became the first objective.
On August 6, a U.S.plane, the Enola
Gay, dropped an atomic bomb on the city of Hiroshima. On August 9, a second
atomic bomb was dropped, this time on Nagasaki. The bombs destroyed large
sections of both cities, with massive loss of life. On August 8, the USSR
declared war on Japan and attacked Japanese forces in Manchuria. On August 14,
Japan agreed to the terms set at Potsdam. On September 2, 1945, Japan formally
surrendered. Americans were relieved that the bomb hastened the end of the
war. The realization of the full implications of nuclear weapons’ awesome
destructiveness would come later. Within a month, on October 24, the
United Nations came into existence following the meeting of representatives
of 50 nations in San Francisco, California. The constitution they drafted outlined a world
organization in which international differences could be discussed peacefully
and common cause made against hunger and disease. In contrast to its rejection
of U.S. membership in the League of Nations after World War I, the U.S. Senate
promptly ratified the U.N. Charter by an 89 to 2 vote. This action confirmed the
end of the spirit of isolationism as a dominating element in American foreign
policy.
In November 1945 at Nuremberg, Germany, the criminal trials of 22 Nazi leaders, provided for at Potsdam, took place. Before a group of distinguished jurists from Britain, France, the Soviet Union, and the United States, the Nazis were accused not only of plotting and waging aggressive war but also of violating the laws of war and of humanity in the systematic genocide, known as the Holocaust, of European Jews and other peoples. The trials lasted more than 10 months. Twenty-two defendants were convicted, 12 of them sentenced to death. Similar proceedings would be held against Japanese war leaders.
In November 1945 at Nuremberg, Germany, the criminal trials of 22 Nazi leaders, provided for at Potsdam, took place. Before a group of distinguished jurists from Britain, France, the Soviet Union, and the United States, the Nazis were accused not only of plotting and waging aggressive war but also of violating the laws of war and of humanity in the systematic genocide, known as the Holocaust, of European Jews and other peoples. The trials lasted more than 10 months. Twenty-two defendants were convicted, 12 of them sentenced to death. Similar proceedings would be held against Japanese war leaders.
No comments:
New comments are not allowed.