LEARNING OBJECTIVE III

Discuss the significance and the legacy of the New Deal.

Also after reading the following article (Did New Deal Prolong the Great Depression) discuss the arguments of critics and supporters of the New Deal. Your discussion should include how both sides (New Deal supporters and critics) would answer the following the question: "Did New Deal policies prolong the Great Depression?"

Be sure to cite two examples from the evidence of both critics and supports of New Deal policies.  

Lecture

The New Deal was the product of many minds and pressures apart from Roosevelt's. In fact, it was a loose bundle of laws and executive orders that were designed by many men and women. Most of the new policies were established as practical steps to solve immediate problems.

The first legacy, the greatest benefit offered by Roosevelt and the New Deal was hope. Programs like the Social Security Act and the, WPA gave back to many Americans a sense of personal dignity and a belief in their county.

There was only one major idea behind it all: that the federal government's powers should be used to meet any national crisis. Roosevelt and the New Deal became fused in the public mind. In Roosevelt the people felt that they had a president who cared and who understood.

During the New Deal the conservatives or critics of the Right claimed government intervention in the- economy and society ail gone too far, impairing the market mechanism, encouraging dependence upon government among a formerly self-reliant people and concentrating two power in Washington in general and in the White House in particular. These arguments were rejected by a majority of the American electorate during Roosevelt's lifetime and have not been reflected in the mainstream of historical scholarship.

There were also critics on the Left or the socialists who argued the New Deal saved a capitalism that had failed, and it achieved only minor reforms when more sweeping change was possible . These arguments , as well, were rejected by a majority of the electorate and by most historians.

The popularity of the New Deal was tested and affirmed at the polls at least twice when Roosevelt ran for re-election in 1936 and again in 1940.

Supporters and Critics of the New Deal

Supporters of the New Deal believe that it was successful. Many historians and journalists make this judg- ment by using the economic criterion of creating jobs. The New Republic, for example, argued that the shor t- comings of the WPA “are insignificant beside the gigantic fact that it has given jobs and sustenance to a mini- mum of 1,400,000 and a maximum of 3,300,000 per- sons for five years.”

Some historians stress that the New Deal was more than a temporary solution to a crisis. Professor A. A. Berle stated that, “human beings cannot indefinitely be sacri- ficed by millions to the operation of economic forces.”

According to the historian William E. Luechtenburg, “It is hard to think of another period in the whole history of the republic that was so fruitful or of a crisis that was met with as much imagination.” Pulitzer Prize-winning historian Allan Nevins, the New Deal was a turning point in which the U.S. government assumed a greater responsibility for the economic welfare of its citizens

Critics of the New Deal believe that it failed to reach its goals. The historian Barton J. Bernstein accepted the goals of the New Deal but declared that they were never met. To him, the New Deal “failed to raise the impoverished, it failed to redistribute income, [and] it failed to extend equality.”

In Senator Robert A. Taft’s opinion, “many more problems have been created than solved” by the New Deal. He maintained, “Whatever else has resulted from the great increase in government activity . . . it has certainly had the effect of checking private enterprise completely.

This country was built up by the constant establishment of new business and the expansion of old businesses.

. . . In the last six years this process has come to an end because of government regulation and the development of a tax system which penalizes hard work and success.” Senator Taft claimed that “The government should gradually withdraw from the business of lending money and leave that function to private capital under proper regulation.”

FDR was a President, not a king. His goals were ambitious and extensive, and while he had many supporters, his enemies were legion. Liberals and radicals attacked from the left for not providing enough relief and for maintaining the fundamental aspects of capitalism. Conservatives claimed his policies were socialism in disguise, and that an interfering activist government was destroying a proud history of self-reliance.

Despite big numbers at the ballot booth, Roosevelt needed to temper his objectives with the spirit of compromise and hope that his plans were popular enough to weather criticism. Friends and enemies alike had to admit that FDR was a political genius.

One major threat to FDR came from Father Charles E. Couglin, a radio priest from Detroit. Originally a supporter of the New Deal, Coughlin turned against Roosevelt when he refused to nationalize the banking system and provide for the free coinage of silver. As the decade progressed, Coughlin turned openly anti-Semitic, blaming the Great Depression on an international conspiracy of Jewish bankers. Coughlin formed the NATIONAL UNION FOR SOCIAL JUSTICE and reached a weekly audience of 40 million radio listeners.

Second, it led to the development of a new social philosophy that was accepted in some degree by both the Republican as well as the Democratic party after 1940. This coalition between Democrats and Republicans would last until the 1980s. It was the final acceptance of change in the American system which started with the Progressive Movement in 1901. The New Deal was a series of pragmatic reforms and compromises which saved capitalism after the "Old Deal" failed.

The new social philosophy was closely associated with the third legacy which produced a new economic system. The new economic system was the development of an effective partnership between private enterprise and government which is sometimes referred to as a "mixed economy."

During the New Deal the Federal Government had to come to the rescue of banks and other industries with financial aid which involved government supervision and the development of the partnership. Theoretically the American economy was a market economy, dependent on the decisions of private buyers and sellers. But as a result of the New Deal the state of the health of the economy evolved to where it became dependent, to a considerable degree, on the federal government through taxes, bank credits, direct spending, and subsidies.

As a result of the depression, the President and Congress had developed the tools to influence employment, inflation, prices, wages, and the rate of economic growth. More important , the American, people have come to expect the government or even demand that the government to control these economic factors. If the economy is failing the president and Congress are

often held politically accountable .

The government rarely adopted consistent or long-term programs of control which makes long-term planning by business difficult or sometimes very costly if its plans do not compliment future government strategies.

The Roosevelt administration expanded the power of the federal govern- ment, giving it—and particularly the president—a more active role in shaping the economy. It did this by infusing the nation’s economy with millions of dollars, by creating federal jobs, by attempting to regulate supply and demand, and by increasing the government’s active participation in settling labor and man- agement disputes. The federal government also established agencies, such as the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC), to regulate banking and investment activities. Although the New Deal did not end the Great Depression, it did help reduce the suffering of thousands of men, women, and children by providing them with jobs, food, and money. It also gave people hope and helped them to regain a sense of dignity.

The federal government had to go deeply into debt to provide jobs and aid to the American people. The federal deficit increased to $2.9 billion in fiscal year 1934. As a result of the cutbacks in federal spending made in 1937–1938, the deficit dropped to $100 million. But the next year it rose again, to $2.9 billion. What really ended the Depression, however, was the massive amount of spending by the federal government for guns, tanks, ships, airplanes, and all the other equipment and supplies the country needed for the World War II effort. During the war, the deficit reached a high of about $54.5 billion in 1943.

BANKING AND FINANCE

New Deal programs established new policies in the area of banking and finance. The Securities and Exchange Commission (SEC), created in 1934, continues to monitor the stock market and enforce laws regarding the sale of stocks and bonds. The Federal Deposit Insurance Corporation (FDIC), created by the Glass-Steagall Act of 1933, has shored up the banking system by reassuring individual depositors that their savings are protected against loss in the event of a bank failure. Today, individual accounts in United States federal banks are insured by the Federal Deposit Insurance Corporation for up to $100,000.

Watch the follow video explaining Glass-Steagall Act of 1933 . This act separated investment banks from basic savings and loans banks in an effort to keep our banking industry sound.  

Also watch this YouTube playlist to gain a better understanding of the various issues and perspective of the Glass-Stegal Act.

The interview posted below was originally aired in 2009. The man being interviewed, Senator Byron Dorgan, was one of the few senators who voted NO against the 1999 Gramm–Leach–Bliley Act (GLBA). GLBA, the bill that repealed the Glass–Steagall Act of 1933. 

Since the New Deal, government policies--consciously or otherwise--have been directed toward guaranteeing the income of various segments of society . Thus the economic partnership between business and government has led to an economic system sometimes know as "people's capitalism" or "welfare capitalism".

Fourth , was the physical rehabilitation of the country. For generations Americans had been laying waste their natural resources without restoring them. The New Deal's attack on this problem was thoroughgoing. It involved an ambitious program of soil conservation, building dams, and planting trees to prevent floods, reclaiming the grass lands or the Great Plains and millions of acres of sub-marginal lands, developing water-power resources, and inaugurating vast regional reconstruction enterprises like the TVA and the Columbia river projects . All this changed the face of the country and restored to productive use much of the national domain. No part of the New Deal was more imaginative than that of the conservation of natural resources as demonstrated by the TVA.

Of all the New Deal projects the most dramatic as the Tennessee Valley Authority. Not content with government operation of Tennessee river dams for nitrate production , Roosevelt insisted on expanding the program to a vast experiment in regional reconstruction. Congress in May 1933 created the Tennessee Valley Authority , with power to acquire, manufacture nitrate and fertilizer, generate and sell electric power, inaugurate flood control, withdraw marginal lands from cultivation, develop the river for navigation , and in general advance the economic and social well-being of the people living in the river basin's six state region.

Fifth, there was a major development in the realm of politics and government which saw the strengthening of the executive branch and the reassertion of presidential leadership characteristic of every period of progressivism in our history :Roosevelt made it clear as his predecessors had that the presidential power was pretty much what the president made it. As a result Roosevelt demonstrated leadership as seldom seen before or since and made the Democratic party stronger than it had ever been by grafting together a coalition of (1) urban workers, (2) farmers, (3) ethnic and racial minorities, and (4) intellectuals.

Last, but by no means least, was the New Deal's success in convincing so many Americans and Europeans that democratic reforms an capitalism represented viable alternatives to totalitarianism. For in the 1930s it became doubtful whether liberty, democracy, or capitalism could survive in the modem world, and at the end of the decade totalitarian states felt strong enough to challenge the democracies in a war for survival. Thus, the New Deal brought hope to a free world which had nearly lost faith in itself. Roosevelt felt failure.t meet-the people's needs was the greatest fundamental danger.to-the democratic and capitalistic systems.