When people use the term "New Deal" now, they have in mind a particular set of changes brought about under the presidency of Franklin D. Roosevelt between 1933 and 1938. But when Roosevelt was inaugurated it was far from clear exactly what he planned to do, and the things that he did end up doing were as often the product of politics and circumstance as a pre-ordained plan. The first principle of the New Deal was experimentation - political, social and economic experimentation which was unashamedly pragmatic and, in the early years especially, liable to be discarded if it didn't produce the desired results or the circumstances changed (which, as logical as it may sound, is not always the case with a lot of government policy). And the need for experimentation stemmed, of course, from the Great Depression.
However, the New Deal was not just, or even primarily, a programme for economic recovery. And if it had been, it would have been a huge failure - the U.S. economy lurched painfully through the entire 1930s, with unemployment never below 13%, and things actually reached one of their worst points in 1937, by which point everything we would later recognize as part of the New Deal had been accomplished and unemployment again touched 19%. It took World War II to finally deal the death blow to unemployment and lift the economy, although it is also the case that post-war prosperity stretched on with the New Deal largely still in place.
Just this sort of long-term realignment of economy, society and polity was exactly what FDR had been aiming for, rather than immediate recovery in the 1930s. In fact, one does not have to look very hard in their memoirs or the archives to find examples of those involved in the New Deal worrying that immediate recovery in the '30s might have closed the window for longer-term reform. A good crisis, as another similarly-minded individual told us recently, must not go to waste.
The New Deal was based on a particular understanding of what had caused the Depression. FDR and his men believed that economic expansion had ground to a halt because the economy had reached a ripe old age in which the frontier had been tamed and industrialists and farmers had saturated their markets by producing too much. Discounting the possibility of further growth through innovation or technological advancement, Roosevelt declared that someone building a new factory was as likely to be a nuisance as an asset because over-production was forcing down prices, and hence wages. By this line of thinking, the era of growth in the U.S. economy was over, and the new era should focus on sharing the wealth of the economy around more equitably rather than trying to increase the total overall quantity of wealth.1
Apart from over-production, the other main problem that the New Dealers discerned in the economy was the lack of security it provided for individuals and its volatility. Blue-collar workers had an extremely insecure existence at the start of the 1930s due to the fact they could be hired and fired on a whim and were very rarely guaranteed work all year round. Meanwhile, agricultural workers were the prisoners of capricious commodity markets. Basic farm products traded at very low prices by the early 1930s, and agricultural wages were similarly depressed. This was a perennial problem and was the origin of the movement called "Greenbackism", which called for the federal government to print large quantities of money to cause rampant inflation and push up agricultural prices. FDR briefly flirted with this movement, causing one wag to remark that the president was in favour of "sound money - and lots of it".
Indeed, FDR flirted with a lot of movements, and some of his ideas have been more enduring than others. Many of his programmes were designed to make capitalism more efficient. So, for instance, he created the Securities and Exchange Commission and required all companies with publicly-traded shares to publish detailed accounts, hence creating a modern stock market in the U.S. Prior to the SEC, stock trading was concentrated in a few large banks like J P Morgan because these were the only institutions with enough information to make reliable investment decisions. His administration also oversaw the creation of Fannie Mae, which greatly increased the availability of mortgages by creating a centralized system for trading in home loans.
There were attempts at reforming capitalism that were not quite so successful. Chief amongst these was the National Recovery Administration, which was the closest FDR ever came to a frontal assault on the principle of markets. The NRA effectively tried to create a government-sponsored process of cartelization in every industry, meaning that every, say, car company would sit around a table and agree on production quotas, standards and wages that would allow them all to make a profit while paying acceptable wages and avoiding the supposed problem of over-production which was pushing down prices, profits and wages for everyone. Being as it was a voluntary programme (albeit backed by considerable government propaganda), the NRA never really got off the ground in most industries. It was declared unconstitutional by the Supreme Court in 1935; and a good job, too.
There were other socio-economic programmes which had a longer legacy. There was the Social Security Act, designed to provide for the unemployed and the old; laws against child labour, designed with a humanitarian motive and as a means of pushing up wages by shrinking the labour pool; the Wagner Act, which forced employers in some sectors to engage in collective bargaining with unions (although not to reach agreement); laws mandating maximum hours and minimum wages; the creation of the Tenessee Valley Authority; and a system of price support for agricultural products which amounts to a naked redistribution of wealth to farmers who grow unmarketable crops. All of these acts aimed much more at long-term economic justice than temporary economic relief, and were logical given the New Dealers' view of the causes of the Great Depression and the problems of the U.S. economy
There was one final element of the New Deal that FDR considered very important and which is worth discussing. The president and those around him worried that his liberal artifice might be torn down when the economic crisis had passed and conservatives were back in government. The New Deal had involved a vast strengthening of the federal government and of its powers to intervene in the nation's economy, and this development had prompted a backlash in all parts of the political spectrum - but especially the South, the Democratic Party's electoral rock in normal times - and in the Supreme Court, which kept declaring parts of the New Deal unconstitutional.
This is what prompted FDR's notorious attempt to pack the Supreme Court in 1937. The president asked Congress to give him the power to appoint a new justice to the Supreme Court for every one over the age of seventy and a half, which would neatly have allowed him to dilute the voting power of the judges known to be hostile to the New Deal. The request shocked the nation and solidified the perception that Roosevelt was seeking to concentrate far too much power in the executive branch of government. But it was precisely this strengthening of the executive branch and of the possibilities for economic governance that lay right at the heart of the New Deal and its legacy; so far as FDR was concerned, management of a modern economy was not possible if the Supreme Court persisted in declaring efforts by the federal government to intervene in the economy as unconstitutional.
In the end, the Supreme Court had a change of heart and suddenly reversed itself on the substantive issue, deciding that the federal government did have the power to intervene in the economy as the New Deal did ("the switch in time that saved nine"). So Roosevelt got his result without having to pack the court, and a new chapter was opened in the history of American constitutional law and governance. The victory for Roosevelt was pyrrhic. The reaction against his court-packing proposal was so severe that it spelled the end of his momentum and of a store of political capital that any future president could only dream of. The New Deal was over.
In retrospect, the New Deal has often appeared - especially to critics on the left - as partial, unfinished, and not radical enough. These critics wish that FDR had institutionalized far greater change, perhaps nationalizing key industries and securing more rights for workers and unions. The fact that these critics continue their harping is the measure of Roosevelt's success, because they misunderstand the New Deal's key achievement: it kept in place America's traditional system and institutions and made them smoother around the edges, keeping at bay the forces of radicalism and revolution which swept away the established order in nearly every other country in the developed world in the 1930s, culminating in mankind's bloodiest war. The republic endured. Democracy lived on. It would be churlish for any critic to refuse to toast Roosevelt for that, warts and all.
1. This idea of an economy that had reached maturity and had no more possibilities for growth within its own boundaries ran like a bright red thread through left-wing thought in the United States in this decade. In time, the same thinkers would declare that the Cold War was a ruse on the part of the U.S. to obtain export markets abroad and hence allow growth to continue despite the "fact" its limits had been reached in the continental United States.