What caused the Great What caused the Great Depression?Depression?

NOT the stock market crash, though contributed

The inequalities of wealth that had been building since the Gilded Age

Lacking legalized unions or other means to increase wages, enormous wealth produced by gains in productivity concentrates in hands of wealthy

Laissez-faire philosophy of President Calvin Coolidge (1923-29)

Major Cause?: The consequences of WWI Collapse of a vast global triangle of capital and debt

The Broader “Meaning” of the The Broader “Meaning” of the Great DepressionGreat Depression

Isolationism was an illusion League of Nations or not, Global Capitalism

had now clearly linked the U.S. to the fate of the world

Laissez-faire policies seemed to have disastrous consequences in a global system: Ideologically opposed to government

management of even the domestic economy, free market advocates of laissez-faire were unlikely to countenance governmental management of the international economy

The Broader “Meaning” of the The Broader “Meaning” of the Great DepressionGreat Depression

Challenged the old Horatio Alger faith that success was largely the result of individual hard work, discipline, honesty, etc., and failure was the result of laziness, lack of discipline, moral failings

Depression throws millions of hard-working, responsible Americans out of work

People lose their homes and families through no fault of their own

How much can individual Americans truly control their own destinies?

Decisions made not just in New York board rooms, but offices in Berlin and London, dictate the fate of millionsThe Independent Yeoman Farmer is truly dead

The Promise of The Promise of a “New Deal” a “New Deal” and the Rise of and the Rise of Modern Modern LiberalismLiberalism

The New DealThe New Deal

Only possible because of the mass pain and suffering of free-market capitalism’s greatest historical failure (so far) Narrow window of opportunity to experiment

with new ideas about the proper role of government and the meaning of American liberty and freedom

In many ways, a break from the past But also had roots with the more modest

reforms of the Progressive Era

What did the New Deal do?What did the New Deal do?

Historians think in terms of the First and Second New Deals: The First New Deal:

Focused primarily on basic relief of economic suffering and attempts to stimulate economic recovery

The Second New Deal:Much more ambitious, FDR’s attempt to permanently alter the American political economyGovernment to manage the economy for stable growth and to guarantee all Americans some modicum of economic security

The First New DealThe First New DealAgricultural Adjustment Act

Federal payments to farmers to take acres out of production, raise fewer pigs, etc.

Goal: Limit over-production

Civilian Conservation Corps Employ idle young men in public works projects Goal: Give people jobs and pump money into economy

Federal Depository Insurance Corporation Guarantee private savings in banks Goal: Regain public faith in safety of banks

National Industrial Recovery Act Federal regulation of minimum wages, maximum hours Promises workers right to unionize Public Works Administration give people federal jobs

Did the First New Deal work?Did the First New Deal work?

Yes and no Did not do succeed in fully ending the Great

DepressionBy 1935, few signs of significant economic recovery

But did take the edge off the worst sufferingGave Americans “hope in hard times”Americans believed FDR was on their side, and he wins the lasting devotion of millions

FDR’s overwhelming popularity sweeps in a democratic majority in the Congress

Some of these are to the left of FDR, reflecting an American desire for even bigger changes

Radical ThreatsRadical Threats

After five years of depression, many Americans begin to listen to would-be leaders much more radical than FDR

Consider what happened in many other capitalist nations

Germany: Hitler’s hyper-Germany: Hitler’s hyper-patriotic, nationalistic, patriotic, nationalistic, and militaristic Nazi and militaristic Nazi fascismfascism

Italy: Mussolini’s hyper-patriotic, nationalistic, and militaristic fascism

Japan: The Japan: The military’s military’s hyper-hyper-patriotic, patriotic, nationalistic, nationalistic, and and militaristic militaristic Japanese-Japanese-style style fascismfascism

USSR: Stalin’s anti-fascist, USSR: Stalin’s anti-fascist, anti-capitalist, state-planned anti-capitalist, state-planned economy which suffered few economy which suffered few ill-effects from the Great ill-effects from the Great DepressionDepression

•Few realized at the time, Few realized at the time, though, that Stalin had though, that Stalin had created the most brutal of created the most brutal of police states that would result police states that would result in the death of an estimated in the death of an estimated 15-20 million of his own 15-20 million of his own people, perhaps 6 million people, perhaps 6 million through execution or the through execution or the gulagsgulags

The distinctly un-militaristic, un-nationalistic, and un-fascistic (though nonetheless deeply patriotic) FDR, with his Scotty Fala and an unknown young victim of polio

Radical threats at homeRadical threats at home

The U.S. evinced definite strains of fascistic The U.S. evinced definite strains of fascistic ideas in the 1920sideas in the 1920s 100% Americanism and radical nationalism100% Americanism and radical nationalism Intolerance for a diversity of ideasIntolerance for a diversity of ideas Suppression of civil libertiesSuppression of civil liberties First Red Scare: Remember that Fascism was also First Red Scare: Remember that Fascism was also

rabidly anti-communistrabidly anti-communist Eugenics: Controlled human breeding for pure Anglo-Eugenics: Controlled human breeding for pure Anglo-

Saxon bloodSaxon blood The KKK—White Sheets become Brown Shirts?The KKK—White Sheets become Brown Shirts? A notable exception: Lacked the typical fascist A notable exception: Lacked the typical fascist

emphasis on militarismemphasis on militarism

Home-grown Home-grown American American radicals:radicals: Francis Francis

TownsendTownsend LA doctor who LA doctor who

called for called for generous federal generous federal monthly monthly payments to the payments to the elderly to take elderly to take them out of the them out of the labor poollabor pool

Home-grown Home-grown American radicals:American radicals: Father Charles Father Charles

CoughlinCoughlin Detroit radio priest Detroit radio priest

who called for the who called for the nationalization of nationalization of major American major American industriesindustries

Deeply anti-Semitic, Deeply anti-Semitic, blamed economic blamed economic troubles on a troubles on a conspiracy of Jewish conspiracy of Jewish bankers (Adolf Hitler bankers (Adolf Hitler anyone?)anyone?)

Home Grown Home Grown American RadicalsAmerican Radicals Huey LongHuey Long Demagogic Louisiana Demagogic Louisiana

Senator who wanted Senator who wanted to “soak the rich”to “soak the rich”

Confiscate large Confiscate large private fortunes, levy a private fortunes, levy a steep progressive steep progressive income taxincome tax

Promised government Promised government would provide every would provide every average American average American family with a minimum family with a minimum yearly household yearly household income of $2,500income of $2,500

FDR’s New Political PhilosophyFDR’s New Political PhilosophyIn this climate of world fascism and home-grown radicalism, FDR’s “radical” Second New Deal was clearly very moderate—a middle way between total state control and laissez-fair; demonstrating the amazing flexibility and adaptability of American democracyAvoids fascism and communismRedefines the meaning of “liberalism”:

The simple old days when Americans could be truly independent and self-sufficient were gone

Most Americans could no longer guarantee themselves and their families a modicum of security

Left to its own devices, it appeared that free-market instabilities often led to fascistic or other dictatorial attempts to provide fearful people security in an insecure world

FDR’s New Political PhilosophyFDR’s New Political Philosophy

Therefore, FDR and many other liberal analysts came to believe that it must be the task of democratically elected governments to guarantee some very modest level of economic safety and security—if not, democracy itself would likely perish

Government must actively manage and regulate the economy to insure sustained economic growth

The Second New DealThe Second New Deal

Not about relief or recovery, but rather about creating a secure new political economyArchitects believed cyclic unemployment was a permanent and inevitable feature of modern industrial capitalism Therefore, must have federal mechanisms to

help the unemployed Government to be the employer of last resort

The Second New DealThe Second New Deal

1935 Emergency Relief Appropriation

(Robert) Wagner National Labor Relations Act

Social Security Required all 48 states to establish some

system of unemployment insurance Provided old age pensions

What did FDR and the New Deal What did FDR and the New Deal do?do?

Created modern liberalism: A central purpose of government is to provide its citizens with economic security

For the first time, focused on guaranteeing the security of the mass of average American people rather than its previous traditional stance of protecting property, business interests, etc., as path to that security

Did so without destroying the creativity and wealth-generating power of industrial capitalism (indeed, post-war period sees the biggest economic boom in American history)

Nevertheless, some of the wealthy elites resented the New Deal and thereafter constantly fought to roll it back and reestablish elite control

Created an economic regulatory system and social safety net that—so far—may have prevented another economic downturn as severe as the Great Depression

What did FDR and the New Deal What did FDR and the New Deal do?do?

Created the New Deal Democratic political coalition that would dominate until the 1970s

Lower class, middle class, farmers, labor, African Americans, urban north and “Solid South”

Greatly increased the size and power of the federal government

Likewise, also increased taxation, potentially unfair or illogical regulations, etc., and involvement of the government in lives of everyday Americans

New Deal liberalism justified bigger government as a necessity to balance the power of big business, manage the economy, avoid fascism/communism, and guarantee every American a measure of economic security

Big Question: Would big government nonetheless limit the freedom of Americans more than protecting those freedoms?

Ronald Reagan: Government is not the solution—government is the problem.

What did FDR and the New Deal What did FDR and the New Deal NOTNOT do? do?

Did not result in significant long-term redistribution of wealthDid not create a system of substantial state ownership of industry, railroads, etc.Did not end the Great Depression

In some cases, did more harm than good Although large federal spending (Keynesianism) did

spur modest economic growth, the economy was still weak by 1940

Needed MASSIVE federal spending, which came only with the start of WWII: Military Keynesianism

QuestionsQuestionsor Comments?or Comments?