“Fear Itself”: Crash, Depression, and the New Deal, 1929-1939 Stock Market Crash, Bank Failures, and Depression



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“Fear Itself”: Crash, Depression, and the New Deal, 1929-1939

Stock Market Crash, Bank Failures, and Depression


The prosperity of the 1920s was more of a façade than a reality. The fragile state of the American economy was strikingly revealed in October 1929 with the stock market crash. Although the crash itself affected only a small percentage of wealthy Americans (about 2.5 percent of the population), it became increasingly difficult for the wider American public to remain confident in the economy in the weeks following the crash.


Inherent weaknesses in the American banking system represented the core problem. During the Progressive Era, President Woodrow Wilson’s administration sought to standardize the banking system with the Federal Reserve Act of 1913. By 1929, however, only one-third of the nation’s banks were members of the Federal Reserve System; the vast majority were independently owned and operated and lacked any sort of organizational structure. Consequently, as nervous depositors began closing their accounts, panics forced a growing number of banks to shut their doors. The collapse of the banking system ended all hope of restoring the public’s confidence in the national economy.
Additionally, consumer spending sharply declined. The overuse of credit, uneven distribution of wealth, and unregulated practices and speculative buying of stock in the 1920s also contributed to the weaken state of the economy. With about 3 out of every 5 American families below or at the poverty level, it should not have been surprising that consumer demand depended largely on the small amount of wealthy and the increasingly indebted middle class. A weak global economy compounded the problem. A frail European economy was one of the primary legacies of World War I. England and France were heavily indebted to American banks, which, in part, explained their insistence on German reparations after the war so that they could satisfy their American creditors. After 1924 and the implementation of the Dawes Plan, American loans poured into Germany. The stock market crash and the banking collapse in America choked off such activity and sent the European economy into a downward spiral. High unemployment in Europe reduced demand for American-made products, and corporate profits in American entered into a steep decline as well.
Hard Times

As the depression reached global proportions, American corporations cut production and slashed wages to compensate for the losses. These adaptations further weakened consumer purchasing power and drove unemployment up to unheard of levels—in 1933, national unemployment totals reached 25 percent and numbers were substantially higher in localized areas (50 percent in Cleveland, Ohio; 80 percent in Toledo, Ohio). As a result, many American families could no longer afford to pay mortgages and were turned out of their homes.


Change in economic indicators 1929–32[14]




United States

Great Britain

France

Germany

Industrial production

–46%

–23%

–24%

–41%

Wholesale prices

–32%

–33%

–34%

–29%

Foreign trade

–70%

–60%

–54%

–61%

Unemployment

+607%

+129%

+214%

+232%

Jerome Blum, Rondo Cameron, Thomas G. Barnes, The European world: a history (2nd ed 1970) page 885

Charitable organizations tried to ameliorate the problem by opening soup and bread kitchens, but such efforts did little to end the suffering of the vast majority of Americans who were devastated as a result of the depression. Families were forced to rifle through garbage dumps in search of food scraps. The depression also redefined gender roles within families as more women had to assume the role of provider. Although divorce rates declined, the rate of husbands deserting their families sharply increased, as did the number of neglected and abandoned children.

The depression pushed African-Americans deeper into poverty than ever before. Black men were regarded as the “last to be hired and the first to be fired.” As more southern blacks stopped cultivating cotton and moved to southern cities looking for new jobs, membership in the Ku Klux Klan increased as did the number of lynchings. In cities throughout the nation, unemployment among blacks hovered around 50 percent; additionally, employers and labor unions discriminated against African American men.
Farmers in the Great Plains suffered as a result of shortsighted farming techniques and land mismanagement. Natural disasters compounded these problems as drought conditions and high winds generated dust storms that literally blew away the dry topsoil in Kansas, eastern Colorado, western Oklahoma, the Texas Panhandle, and eastern New Mexico. This part of the nation became known as the “Dust Bowl.” Millions of people had to abandon their homes and farms; many of them moved to California hoping to find new opportunities as chronicled in John Steinbeck’s memorable novel, The Grapes of Wrath.
The Ordeal of Herbert Hoover

In the immediate aftermath of the stock market crash, the majority of American economists and politicians were inclined to do nothing and allow the depression to run its course. Many viewed the situation as a necessary correction and believed that the nation would soon be on the road to recovery.


Many Americans responded to the Depression with resignation or blamed themselves for their economic woes. Others responded with protests that were at first spontaneous and lacking in coordination, because the unions, socialist groups and others that might have led them had been devastated in the 1920s. In early 1932, 20,000 unemployed World War I veterans who marched on Washington to demand early payment of a bonus due in 1945 were dispersed by federal troops. After the Senate rejected the bill, about half of the so-called “Bonus Army” left, but approximately 8,000 stayed behind. After an exchange of gunfire between the veterans and local police, Hoover called in the army to maintain order. Instead, Army Chief of Staff Douglas MacArthur sent tanks and infantry (with bayonets fixed) into the veterans’ camps that housed men, women, and children. The fiasco marked the lowest ebb of the Hoover administration and largely defined the election of 1932.

Throughout America, demonstrations of the unemployed demanded work and relief. Farmers protested low prices by temporarily blocking roads to prevent goods from getting to market. The small Communist Party was the only group that seemed able to channel and direct the discontent. Communists formed unemployed councils that organized marches, demonstrated for public assistance, and opposed evictions of unemployed families. The newspapers worried that America was close to revolution.
To many Americans, President Hoover’s response to the Depression seemed inadequate and lacking in compassion. His advisors told him that depressions were a normal function of capitalism that removed uncompetitive firms and encouraged moral virtue among the unfortunate. Businessmen vehemently opposed federal assistance to the jobless and many suggested that individuals would survive the depression through thrift. Federal policymakers who had never faced an economic crisis of this magnitude did not realize how consumer spending supported much of the economy. Most did not believe that federal assistance to the unemployed would spur economic recovery. Hoover maintained his commitment to “associational action,” strongly opposed direct federal economic intervention, and believed that private charity and voluntary action by business to keep up investment and employment would suffice. Hoover, a firm believer in rugged individualism, believed that government intervention in the economy endangered liberty and government assistance to the unemployed created dependency, He called together business and labor leaders and established commissions to encourage firms to coordinate maintaining prices and wages without government regulation. Hoover’s public reassurances that the economy was recovering clashed with reality and made him seem ignorant of the problems facing many ordinary Americans. His rigid adherence to individualism and laissez-faire in a time of economic misery allowed millions unable to work, rather than unwilling to work, to suffer.



"Hooverville" became a common term for shacktowns and homeless encampments during the Great Depression.


Some of Hoover’s actions, such as the Hawley-Smoot Tariff, which raised already high taxes on imported goods, caused other nations to retaliate, and decreased international trade, exacerbated the crisis. A tax increase Hoover won from Congress in order to balance the budget further reduced consumers’ purchasing power. By 1932, even Hoover conceded that voluntary measures were insufficient. He signed laws creating the Reconstruction Finance Corporation, which loaned money to failing banks, railroads, and other businesses, and the Federal Home Loan Bank System, which gave aid to homeowners threatened with foreclosure. Although he had vetoed bills to create employment with public-works projects like road and bridge construction, he now approved $2 billion for such projects and local relief. But Hoover refused to do anything further, including direct aid to the unemployed which, he told Congress, would be a “disservice” to the jobless.
In the mid-1920s, some intellectuals had worried that the prevailing notion of freedom in America celebrated unbound economic enterprise yet accepted limits on free speech and expression and other civil liberties. Though the prosperity of the 1920s reinforced this laissez-faire conception of freedom, the Great Depression and Hoover’s failed response discredited it. By 1932, the basis for a new conception of freedom based on Progressive-style positive state action in the economy and a respect for civil liberties, and cultural pluralism was already present and would become the foundation of modern twentieth century liberalism.


Q1. Why did the nation’s worst depression in its history follow the stock market crash of 1929 when only 3% of Americans actually owned any stock? (Explain how the underlying weaknesses in the economy of the 1920s contributed to the economic collapse that followed. Did actions, or inaction by the Federal Government, both President Hoover and Congress, make conditions worse?) 1-2 pages

Franklin D. Roosevelt and the New Deal Experiment, 1933–1938




Roosevelt decided to enter politics in 1910 when he won election as a New York state senator. His political fortunes grew after President Wilson appointed him assistant secretary of the navy in 1913 and, later, when the Democratic Party named him as their vice presidential candidate in 1920. In the aftermath of Harding’s victory in the 1920 election, Roosevelt was stricken with polio and left paralyzed from the waist down. He spent much of the early 1920s recovering from this illness, but had to rely on a wheelchair, heavy steel braces, or crutches in order to move around. By 1928, Roosevelt had recovered sufficiently to win election as governor of New York where he soon embarked on an ambitious effort to resolve the growing economic crisis in his state following the stock market crash in October 1929. The energy Roosevelt displayed during these troubled times made him the likely Democratic nominee for the 1932 election. The depression had crippled the Hoover administration, and following the “Bonus Army” disaster, Roosevelt handily won the election and helped the Democratic Party carry decisive majorities in both houses of Congress.
The Depression provoked different responses across the globe. For most of the 1930s, conservative governments ruled in Britain and France, and they did little to resolve the crisis. In Germany, Adolf Hitler of the Nazi Party established one of the most brutal dictatorships in human history, banning all political opposition and terrorizing Jews. In the Soviet Union, the tyrannical Joseph Stalin launched five-year plans that industrialized that nation and allegedly eliminated unemployment, at great social cost. Japan’s militarist government invaded China in 1937 and aspired to dominate all Asia.


Roosevelt envisioned the New Deal as an alternative to socialism, fascism, and unregulated capitalism. He wanted to reconcile democracy, individual liberty, and economic planning. Despite what conservative critics thought, Roosevelt was not a radical; he was committed to preserving America’s capitalist (free enterprise system) economy. His motto was , “Reform, if you want to preserve.” He understood that unless reforms were made, capitalism could not work except for a small minority at the top. Ultimately, as was the case in Russia, the people could revolt and overthrow capitalism and democracy.


The Coming of the New Deal

President Roosevelt did not begin his first term as president with a full-fledged plan. He initially depended on a group of intellectuals and social workers who took key positions in his administration. They included secretary of labor Frances Perkins, a veteran of Hull House and the New York Consumers’ League; Harry Hopkins, who directed emergency relief during Roosevelt’s term as New York’s governor; secretary of the interior Harold Ickes, a veteran of Theodore Roosevelt’s Progressive campaign of 1912; and Louis Brandeis, who had advised Woodrow Wilson in 1912 and now advised FDR while serving on the Supreme Court.

The First Hundred Days (The First New Deal)

When Franklin Delano Roosevelt assumed the presidency, a desperate public looked to him for action. Roosevelt was starkly different than Hoover when it came to temperament, political philosophy, and political skills. Hoover often looked and sounded burdened by the office of president, while Roosevelt was always photographed with a smile and the speeches he gave on the radio soothed the American people. Unlike Hoover, who was an ideological conservative, Roosevelt was a pragmatic liberal. As a pragmatist, Roosevelt was willing to experiment; he was more concerned by results than by theory. He saw the benefit and necessity of activist government to regulate the economy and improve peoples’ lives. Like Lincoln, Roosevelt believed that “The legitimate object of Government is to do for a community of people whatever they need to have done but cannot do at all or cannot do so well by themselves in their separate and individual capacities.” Finally, Roosevelt was a master politician. Roosevelt enjoyed people, and enjoyed the give and take of politics. Only the harshest of his conservative critics failed to be charmed or swayed by him.
FDR realized that Americans needed leadership and action immediately, and when he took office on March 4, 1933, he acted quickly. He started a campaign of reassuring Americans and restoring their confidence. At his inauguration, he declared that “the only thing we have to fear is fear itself.”
The actions that Roosevelt took to end the Depression became known as the New Deal. At the core, the New Deal was a three-pronged approach to ending the Depression. There was relief for the needy, economic recovery, and reform of the banking and financial system.
Roosevelt’s first step was to confront a banking system about to collapse. Immediately following his inauguration, Roosevelt proclaimed a nationwide “bank holiday” in an attempt to shore up the public’s confidence in the national banking system. After closing the banks, he worked with Congress to pass the Emergency Banking Act that authorized the reopening of banks under strict guidelines and reassured the public with the first of many “fireside chats” encouraging them to put their money into a bank. Later, Congress passed legislation establishing the Federal Deposit Insurance Corporation (FDIC) that insured individual accounts up to $2,500 and prohibited banks from investing in risky ventures.
Afterwards, Roosevelt addressed the issue of unemployment and established a series of jobs programs including the Civilian Conservation Corps (CCC) and the Public Works Administration (PWA). At this time, the federal government also took its first steps toward the welfare state by setting aside $500 million for direct relief to needy families that was distributed through the Federal Emergency Relief Administration (FERA). As it turned out, few people were willing to accept government relief, and by October 1933 the head of the FERA, Henry Hopkins, coupled his agency with the Civil Works Administration (CWA). Work relief allowed for many unemployed Americans to get the financial assistance they needed while retaining their personal sense of pride and self-worth.
Roosevelt searched for ways to turn regional economies around as well. To aid ailing farmers, he pushed the Agricultural Adjustment Act (AAA) through Congress to provide farmers with subsidies for letting acreage lie fallow or growing nonsurplus crops. Through this program, Roosevelt sought ways to raise farm prices. The AAA proved to be controversial since it required farmers to plow under acres of corn and wheat and slaughter millions of hogs while many Americans were starving. Additionally, since individual farmers could determine which would land lie fallow, many forced tenant farmers and sharecroppers off their lands in exchange for government subsidies. In the South, poor white and African American farmers suffered disproportionately as a result of the AAA while wealthier farmers prospered. In 1935, however, the Supreme Court ruled that the AAA was unconstitutional and overturned the legislation.
In the northeast, Roosevelt supported a comprehensive effort to bring about industrial recovery through the National Industrial Recovery Act (NIRA) and its administrative agency the National Recovery Administration (NRA). Through these initiatives, industry leaders and union leaders met with consumer groups to establish fair competition codes that would limit production and stabilize prices. Section 7(a) of the NIRA also guaranteed labors right to organize and collectively bargain. Eventually, support for the NIRA and NRA tapered off as many became disenchanted with its bureaucratic procedures and others simply began to ignore the codes. The Supreme Court hastened its end in May 1935 when it declared that the NIRA was also unconstitutional.
Other New Deal initiatives included efforts to provide public electrical power that not only provided jobs, but also altered the environment and improved the quality of life for Americans living in rural areas. Boulder (later Hoover) Dam and the Grand Coulee Dam provided electricity and drinking water for Los Angeles and the Pacific Northwest, respectively. The 80-mile, All-American Canal connected the Colorado River to California’s Imperial Valley and opened up an additional 1 million acres of land for cultivation. In the South, Congress approved the formation of the Tennessee Valley Authority (TVA) to construct dams for flood control and hydroelectric power plants. The TVA combined with the Rural Electrification Administration (REA) to provide electricity to rural homes for electric lights and electrical appliances throughout the South.

In the years 1933 to 1941 the economy expanded at an average rate of 7.7% per year.[158] Despite high economic growth rates unemployment fell slowly.


Unemployment rate[159]

1933

1934

1935

1936

1937

1938

1939

1940

1941

Workers in job creation programs counted asUnemployed

24.9%

21.7%

20.1%

16.9%

14.3%

19.0%

17.2%

14.6%

9.9%

Workers in job creation programs counted as employed

20.6%

16.0%

14.2%

9.9%

9.1%

12.5%

11.3%

9.5%

8.0%


As you can see above, unemployment remained very high by the Fall of 1934, even when counting New Deal public works jobs, but most Americans were grateful for the change in direction under Roosevelt.
Although the initiatives in 1933 and early 1934 did not end the depression, most Americans were grateful for the effort; they demonstrated their gratitude in the 1934 mid-term elections by increasing the Democratic majority in both houses of Congress. Also, as a result of the New Deal, a new coalition emerged that reshaped the Democratic Party as its base shifted from the rural South to the industrial North and won a number of votes from Catholics, Jewish immigrants, and African Americans for the first time.
Q2. How did Roosevelt’s political philosophy and personality compare to Hoovers? (1 – 2 paragraphs)
Q3. Describe the main parts of the New Deal in 1933-34. How much of a dent in the Depression did these efforts make? How did voters evaluate the effectiveness of the New Deal? (1 page)
Attacks from the Left and Right

Not all Americans were supportive of the New Deal. Roosevelt’s efforts angered conservatives who were concerned about the enlargement of federal power and authority in economic matters. Conservatives accused the President of trying to assume dictatorial powers and destroy individual rights. They also called his public works programs of being “boondoggles”, programs that waste taxpayer’s money. Conservatives and some prominent businessmen formed the American Liberty League to oppose Roosevelt and the New Deal. But the real threat to Roosevelt was from the political left. Roosevelt annoyed those on the left who thought he was too timid and not willing to go far enough.


Anti-Roosevelt political cartoons.

The demagogues from the left caused Roosevelt the most concern.

The radio priest, Father Charles Coughlin, railed against the president calling him a liar and a pawn of the moneyed elite. Dr. Francis E. Townsend called for the government to give all people over the age of sixty, $200 a month on the condition that they spend the money during the same month. In this manner, Townsend sought aid for the elderly as well as a means to end the depression by pumping billions of dollars into the economy. Roosevelt’s most significant challenge, however, came from Huey Long of Louisiana. Long was elected governor of his state in 1928 and senator in 1930 (although he did not take his seat in the Senate until his term as governor expired in 1932). Initially, Long supported the New Deal but soon turned against Roosevelt to further his own ambitions. In 1935, Long proposed an ambitious program, called “Share Our Wealth,” that would basically soak the rich to redistribute wealth in America. By appropriating all incomes over $1 million and estates worth more than $5 million, Long believed the government should use that money to provide each American family with $5,000 to buy a home or farm, an annual income of $2,000, a free college education, and a radio. Long’s scheme appealed to poor people throughout the nation and threatened to divide the Democratic Party at a crucial time as the 1936 election approached. An assassin’s bullet, however, ended Long’s challenge in September 1935. Roosevelt still had other critics on the left to contend with, including Socialist politicians like Upton Sinclair and the American Communist Party whose membership increased from 8,000 to 75,000 between 1928 and 1938.



The Second New Deal: Roosevelt Moves to the Left

As Roosevelt attempted to deal with his critics from the right and the left, he determined to tilt leftward in order to salvage the New Deal. The gains the Democrats in Congress made in 1934 reassured Roosevelt that the people wanted more help from the government. After two years of the New Deal unemployment remained stubbornly high. The unemployment rate for 1934 was 21.7 %, down from 25%, but still unacceptable. If you count New Deal job’s programs, the rate was 16%, which was still very high. In order to improve conditions, FDR launched what is known as the Second New Deal in 1935 and sponsored legislative initiatives like the National Labor Relations (or Wagner) Act (NLRA), the Social Security Act, and the Emergency Relief Appropriation Act (ERA). All of these measures sought ways to shore up Roosevelt’s support among those that found Long’s and Townsend’s ideas most appealing.
The Wagner Act was another major Second New Deal measure. It democratized the American workplace by empowering a National Labor Relations Board to supervise elections in which employees voted on union representation. Sponsored by Robert Wagner of New York, the bill also made illegal “unfair labor practices” such as firing and blacklisting union organizers that had stymied organization in the past. Collective bargaining was redefined as a crucial element of American freedom and, now legally protected, would offer workers a mechanism by which they could win higher wages and thus contribute to the recovery.
The American Welfare State

The Social Security Act was the most important element of the Second New Deal. It represented Roosevelt’s belief that the government had to guarantee the material well-being of ordinary Americans. It established a system of unemployment insurance, old age pensions, and aid to the disabled, elderly poor, and families with dependent children. Though these programs built on old Progressive proposals, this was a permanent system of social insurance. The Social Security Act created the American version of the welfare state—a term with origins in World War II-era Britain that referred to income assistance, medical care, and social services for all citizens. Although unprecedented in American history, the American welfare state, compared to welfare states in Europe, was more decentralized, spent less, and covered fewer citizens. The original Social Security bill contained a system of national health insurance that was eliminated after vehement opposition by the American Medical Association, which feared government regulation of doctors’ incomes and practices.
While some New Dealers wanted a universal program funded by general tax revenues with a single set of eligibility standards administered by federal officials, Secretary of labor Frances Perkins and powerful Congressmen wanted to keep relief in state and local hands and make workers contribute to the costs of their own benefits. FDR wanted Social Security taxes to come from employers and workers, rather than general revenues, in order to give working citizens a “legal, moral, and political right” to collect their old age pensions and unemployment benefits, which Congress would not dare violate. Thus Social Security became a mixture of national and local funding, control, and eligibility standards. Old age pensions were administered nationally but paid for by taxes on workers and employers. These taxes also paid for unemployment insurance, but this was decentralized, allowing states to set unemployment benefit levels. The states paid most of the costs for direct poor relief in a program called Aid to Dependent Children, and eligibility and payment varied greatly.
Social Security was a significant departure in American government’s traditional function, and the Second New Deal dramatically changed the relationship between the federal government and American citizens. Before the 1930s, Americans asked whether the government should intervene in the economy. After the New Deal, Americans asked only how the government should intervene.
Q4. What were the biggest challenges to Roosevelt and the New Deal? How did Roosevelt respond to his critics and to continued high levels of unemployment? (1 – 1 ½ pages)
Q4. Would you say that the Second New Deal was a continuation of the 3 Rs’ – relief, recovery, and reform? Or, was it a much greater emphasis on one of the R’s at the expense of the others? Explain. ( ½ – 1 page)

FDR and the Idea of Freedom

The Depression ensured that Americans would face, in the words of one writer, a “reckoning with liberty.” FDR declared that for too many Americans, “life was no longer free; liberty no longer real; men no longer follow the pursuit of happiness.” Most Americans assumed that liberty required a new meaning. The New Deal transformed the idea of freedom by tying it to the growing power of the national government.
Roosevelt was not just a master politician but also a brilliant communicator, and with his opponent controlling most newspapers, he turned to the radio to reach Americans with weekly broadcasts called “fireside chats” in order to build support for his policies. FDR adopted old terms and ideas to defend his innovative policies, most notably “liberalism,” which he redefined as large, active, and socially conscious government. In his second fireside chat, Roosevelt contrasted the older notion of liberty as liberty of contract, which served the “privileged few,” to his definition of liberty as “greater security for the average man.” He continued to positively associate freedom with economic security and identify economic inequality as its greatest foe. Yet, “liberty” defined as freedom from powerful government animated his opponents. They argued that New Deal spending undermined fiscal responsibility and that new regulations suppressed American freedom. Conservative businessmen and politicians formed an organization to oppose his policies called the American Liberty League. As the 1930s went on, his opponents increasingly employed the language of liberty to paint FDR as a dictator who threatened traditional American freedoms.


By 1936, politics reflected class divisions more than at any other point in American history. Working-class voters provided large majorities for the Democratic Party, and large and small businessmen were alienated from the New Deal. Americans divided over their definitions of liberty. One magazine editor said that citizens had two opposing concepts of liberty, one based on free enterprise, the other a “socialized liberty” based on an equality of wealth and goods. A fight over the ideal of freedom defined the 1936 presidential campaign. The Democrats insisted that in a modern economy the government is obliged to guarantee a “democracy of opportunity” for all. Roosevelt, in his speech accepting the nomination, attacked “economic royalists” who intended to establish a tyranny over ordinary people. He insisted that economic rights were the precondition for liberty and that poor men “are not free men.” FDR argued that large corporations constituted a “new despotism” that threatened economic freedom.


The ERA appropriated $4 billion for work relief and public works construction. The Works Progress Administration (WPA) was the most important ERA program and soon became the nation’s biggest employer.

The WPA employed 8.5 million Americans to build roads, public buildings, parks, and bridges. It also employed artists, musicians, and writers by sponsoring symphony orchestra and jazz groups across the nation; the Federal Writers Project employed over 5,000 writers on a variety of projects including the 150-volume Life in America series that included oral histories of former slaves.


The 1936 Election
FDR faced Republican nominee and former Kansas governor Alfred Landon, who denounced Social Security and other New Deal programs as a threat to individual liberty. Roosevelt, however, won by a landslide, carrying every state except for Maine and Vermont. Strong support from organized labor, and his ability to unite southern white and northern black voters, Protestant farmers and urban Catholic and Jewish ethnics, and industrial workers and middle-class home owners won him the election. These groups formed the so-called New Deal coalition that dominated American politics for the next fifty years.
The Court fight and the Decline of the New Deal
At his second inauguration, FDR admitted the Depression was not over and promised to do more to help the significant minority of American still in need of assistance. Encouraged by his massive victory, Roosevelt committed what many believe was an enormous error. Arguing that several Supreme Court justices were too old to perform their functions, he proposed that the president be allowed to appoint a new justice for each who remained on the Court past age seventy (six at that time). FDR’s goal was to change the balance of power on a Court that might invalidate Social Security, the Wagner Act, and other parts of the Second New Deal. Immediately FDR was criticized as an aspiring dictator. Congress rejected the plan. But Roosevelt influenced the Supreme Court, as the “court-packing” threat seemed to persuade the Court to accept economic regulation by the state and federal governments. The Court soon upheld a minimum wage law, affirmed federal power to regulate wages, hours, child labor, and rejected challenges to Social Security and the Wagner Act. Chief Justice Charles Evans Hughes said that while “freedom of contract” did not appear in the Constitution, “liberty” did, and it required legal protections against social evils that menace the people’s welfare.
Critics pounced on the “Court-packing” plan—even Roosevelt’s staunchest liberal supporters in Congress rejected the scheme. In the end, the president expended a tremendous amount of political capital on the proposal and galvanized his conservative critics.

The Second New Deal slowed after the court-packing fight. Although the Housing Act, passed in 1937, signaled the first major effort to build homes for the poorest in America, the Fair Labor Standards bill languished in Congress for a year before it passed in 1938, banning goods produced by child labor, setting a minimum wage, and requiring overtime pay for more than forty hours of work per week. This established federal regulation of wages and working conditions, a radical departure from pre-Depression policies.
In 1937, the economy slumped sharply, after FDR, who saw economic improvements in 1936, had decreased federal farm and WPA work relief. In addition, Social Security withholdings also began. All of these actions took money out of an economy that still had not recovered enough to sustain prosperity. This caused business investment, production, and stocks to also fall and unemployment to rise.
Republicans and southern Democrats combined forces that could effectively block further New Deal legislation. This new congressional coalition revealed how alarmed Republicans were about the new Democratic coalition Roosevelt led; it also heightened concerns among southern Democrats that Roosevelt might support civil rights legislation for African Americans in exchange for their continued support.
A severe recession in 1937 eroded Roosevelt’s stature still further as battles erupted within his administration over how to respond to the economic downturn. As the 1938 mid-term elections approached, voters blamed Roosevelt for the recession, and the Republican Party made significant gains in both houses of Congress. The new Republican numbers and support from southern Democrats took control of Congress away from the president and his supporters. As a result, the New Deal effectively ended in 1938; Roosevelt became more cautious when it came to economic matters and found his attention increasingly focused on foreign policy matters, especially events in Europe.
Q5. How did Roosevelt stumble politically in 1937-38? How did FDR’s stumbles affect the New Deal and the nation’s recovery from depression? ( ½ -1 page)

Depression Culture


Economic hard times brought about a new appreciation for social realism in literature, art, and photography. Authors, such as John Dos Passos (Big Money, 1936), Richard Wright (Native Son, 1940), John Steinbeck (The Grapes of Wrath, 1939), and William Faulkner (As I Lay Dying, 1930), presented vivid portraits of the stark realities of the depression decade. A group of African American painters memorialized the black experience of the 1920s and 1930s with their rich depictions of the African American migration following World War I and of dispossessed blacks as a result of the depression. Jacob Lawrence, Reginald Marsh, and Edward Hopper ranked among the most prominent African American artists of the time period. Photojournalists similarly brought home the horrors of the depression to Americans across the nation.

New magazines such as Life and Look provided a venue for photojournalists to publish their pictures and preserve the drama and tragedy of life in America during the Great Depression. Other writers chose to recall a more nostalgic time rather than chronicle the pain and hardship of the 1930s. Margaret Mitchell’s famous novel Gone With the Wind and regional painters such as Grant Wood represent this popular trend in depression-era culture.



Escapism became a driving force behind numerous forms of entertainment during the depression. Superman appeared in Action Comics while enthusiastic sports fans followed baseball and professional boxing. Hollywood, however, played the most important role in helping a large number of Americans forget their hardships. Major studios provided a wide variety of films, some offering escape and others examining the harsh realities of life. Comedians such as W.C. Fields, Laurel and Hardy, Charlie Chaplain, and the Marx Brothers brought laughter to audiences across the nation. Walt Disney and Frank Capra also made significant contributions as film directors in the 1930s.

Radio still played a major role in the daily lives of Americans during the depression. In addition to tuning in to Roosevelt’s “fireside chats,” millions of Americans tuned in to musical performances, daily “soap operas,” and crime-fighting shows such as The Shadow and The Lone Ranger. Additionally, the radio replaced newspapers as the public’s primary source of information. The blending of news and entertainment on occasion led to confusion as seen in Orson Welles’ famous rendition of War of the Worlds in 1938 that caused thousands of New Jersey residents to flee from their homes because of the Martian invasion.

The New Deal Society, 1933–1938



Perhaps the most dramatic development of the mid-1930s was the organization of millions of workers into unions in the mass-production industries that had successfully resisted unionization. Called “labor’s great upheaval,” this unprecedented militancy was unexpected. This time the federal government seemed to side with workers, through the NIRA and the Wagner Act of 1935, which gave workers the legal right to form unions. With the drastic reduction in European immigration, cultural differences between workers were less important. American-born children of the new immigrants now dominated the workforce. Militant socialists and communists with years of experience in organizing provided leadership to this movement.
American factories were small tyrannies in which unions were rare, workers could be assaulted by supervisors and fired at will, and managers determined the length of the workday and the speed of assembly lines. Local governments supported employers. Workers demanded more than just higher wages in the 1930s. They wanted an end to employers’ arbitrary rule and basic civil liberties for workers, such as the right to picket, hand out literature, and meet to discuss grievances. All of these required union recognition. Roosevelt’s election inspired those who hoped to end “industrial despotism.” In 1934, labor revolted. 2,000 strikes broke out, including violent, massive strikes in Toledo, Minneapolis, and San Francisco. Only a huge nationwide strike of textile workers failed to achieve any of its goals.


This upheaval challenged the AFL’s old model of organizing workers by craft skill rather than organizing all workers in a particular industry, such as steel, into one union. When the AFL convention in 1935 refused an appeal by thirty AFL leaders for the creation of industrial unions, John L. Lewis, head of the United Mine Workers, forced a split which led to the creation of the Congress of Industrial Organizations (CIO). The CIO, Lewis said, would win “economic freedom and industrial democracy” for American workers. In December 1936, the United Auto Workers, a small CIO union, conducted a sit-down strike, occupying a General Motors plant in Cleveland. Soon such strikes spread to GM factories in Flint, Michigan. Strikers defended the plants from police attacks, and Michigan’s governor refused to send troops to break the strike. In February, 1937, GM capitulated and recognized the UAW. Ford did not recognize the UAW until 1941, but by then the UAW had hundreds of thousands of members. The triumph in auto spread to the steel industry, which recognized unions by 1938. By 1940, around 9 million workers were in unions, double the number from 1930. Unions won rights to influence management decisions and gained new grievance and seniority procedures.
Unlike the AFL, the CIO embraced positive government intervention in labor-management affairs. It presented a program for federal economic and social policy, including public housing, universal health care, and unemployment and old age insurance. The CIO built on the increasingly popular idea that prosperity would rise from an American standard of living for all Americans based on mass consumption, and argued that the Depression was caused by the highly unequal distribution of wealth and income. By mid-decade, many New Dealers accepted this “underconsumptionist” explanation of the Depression, which saw lack of effective consumer demand as its cause.
Q6. Discuss the effects of the New Deal on the labor movement? ( ½ - 1 page)
The New Deal and Minorities and Women
African Americans made few tangible gains as a result of the New Deal. Roosevelt’s unwillingness to antagonize southern whites and risk losing their support limited the benefits of the New Deal for African Americans. The National Recovery Agency failed to protect blacks from discriminatory practices; relief agencies paid black recipients less than whites; groups and organizations such as the CCC and the TVA remained racially segregated. The Second New Deal offered limited gains for blacks. Eighteen percent of WPA jobs, for example, went to African Americans even though they represented only 10 percent of the population. Roosevelt, largely at the behest of his wife Eleanor, did allow some significant symbolic gains for African Americans. He established a group of African American advisors, called the “black cabinet,” to keep him abreast of issues concerning African Americans; he appointed the first black judge to the federal bench; and he urged his attorney general to create a Civil Rights Division in the Department of Justice. When the Daughters of the American Revolution refused to allow a renowned African American opera singer, Marian Anderson, to perform at a planned Easter Day concert, Eleanor Roosevelt quit the organization and arranged for a separate Easter Concert featuring Anderson on the steps of the Lincoln Memorial. Despite these shortcomings, African-Americans supported the New Deal and, in spite of Roosevelt’s timidity, these symbolic gestures made it possible for more substantial changes in the decades that followed.
Native Americans were among the minority groups that benefited the most as a result of the New Deal. Roosevelt appointed John Collier as head of the Bureau of Indian Affairs. Collier initiated a series of reforms that restored tribal ownership of land and protected Native American religious practices and traditional culture. Collier also expanded medical and educational services on Indian reservations and promoted gender equality among Native American groups.
Although the depression changed gender roles within individual households, prevailing attitudes toward women in the workplace remained unchanged. Eighty-two percent of all Americans (including 75 percent of women) agreed that a woman’s place was in the home; but, in the end, family need triumphed over traditional values. In spite of the growing number of working women, discriminatory attitudes remained deeply entrenched. Women were forced to take low-paying, low-status jobs, and labor unions remained hostile toward women in the workplace. The New Deal, however, did bring about some changes. Henry Hopkins, as director of FERA, paid close attention to the needs of working women; the NRA instituted equal pay for equal work provisions for women; and Roosevelt appointed the first woman cabinet member in American history—Francis Perkins as secretary of labor. Other women, such as Grace Abbott, played prominent roles in New Deal initiatives. Abbott helped write the social welfare provisions of the Social Security Act. Eleanor Roosevelt also worked to enhance political rights for women by promoting a wide network of professional women and reformers and making women an integral part of the new Democratic Party coalition that emerged as a result of the New Deal.
Q7. Discuss the effects of the New Deal on women and minorities. ( ¾ - 1 ½ pages)


The Legacy of the New Deal
The New Deal initiated a series of fundamental transformations in the United States as President Roosevelt attempted to end the financial crisis of the 1930s. It increased the size and scope of the federal government and led more Americans than ever before to view Washington D.C. as the focal point of civic life rather than state and local leaders. The New Deal also empowered groups that had previously been ignored or dispossessed such as farmers and labor unions. There was also a modest redistribution of wealth in the United States as a result of the New Deal. Middle class Americans were among the greatest beneficiaries of this redistribution; wealthy Americans saw only a slight decrease while poor Americans saw only a slight increase in income. Although the New Deal did not end the Great Depression, it nonetheless had a profound impact on American society and rescued capitalism from collapse. The Great Depression provided the United States with its greatest challenge since the Civil War. As Roosevelt’s influence over domestic policy started to wane in 1938, the United States found that it would soon have to confront another powerful threat rising in Europe.

Q8. How would you evaluate the New Deal? Was it more a success, or more a failure? Explain. ( ½ - 1 page)






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