To fully comprehend the New Deal one must look further back in American history to find the cause-and-effect chain that lead to it’s “necessity”. The most obvious and easily identifiable cause would be the crash of the stock market in 1929. Banks across the nation were forced to close, and the citizens of America found themselves without savings and no back up plan. In turn, this caused a drastic spike in unemployment and left America desperate for relief. At this time, Franklin Delano Roosevelt (FDR) was making promises to turn the economy around with a governmental hand as he was campaigning for president. Once elected, he immediately put into action the New Deal in the hopes to better the economy with the creation of more jobs and offered help with a plethora of benefits. The New Deal has always been critiqued, even Ronald Reagan declared that “many New Dealers wanted fascism” , but recently many economists and historians have gone back and studied it with new eyes. When revisited, FDR’s New Deal was faulted by the myth of beneficially unemployment and higher wages, and a political leaning rather than primary focus on social reform in the decision making.
There are four secondary sources that will be used to provide evidence for this thesis. The first two are essays: “FDR: Advocate for the American People” by David M. Kennedy, and “FDR: Opportunistic Architect of Big Government” by Robert Higgs. Both essays describe the process of implementing Roosevelt’s New Deal agenda, but in opposite viewpoints. Where Kennedy thinks FDR is being a heroic leader with his means of soothing the nation, Higgs finds FDR manipulative and “wrongheaded”. Kennedy’s essay provides insight to the social aspect of the government reform and adds heavy emphasis on the benefits the New Deal gave immigrants, minorities, and the extreme poverty-stricken population of American citizens. “FDR: Opportunistic Architect of Big Government” however, calls out the economic fallacies put in place by the New Deal. The main thesis of Higgs’ essay is that the New Deal actually delayed the recovering of the Great Depression and that Roosevelt should not a revered as the savior of capitalism.The second pair of sources are articles from various scholarly journals that further shed light on the failed attempts of recovery: “The Causes and Cures of Unemployment in the Great Depression” by Richard T. Jenson, and “Employment, Politics, and Economic Recovery during the Great Depression” by John Joseph Wallis. Jenson’s article comprehensively explains how the mentality the New Deal that believed unemployment was no one’s fault but capitalism does not take into account the various forms of unemployment. He also continues to make the connection between these forms to the different strategies used to truncate them, including the method used in the New Deal. Wallis’ article investigates the federal spending under the New Deal and whether or not it had been done with political motives in mind rather than social reform based on multiple researches and the analyzation of different graphs.
It was commonly accepted during the 30’s that lower wages were a product of the Depression and therefore raising wages will reverse the negative effect. The total unemployment rate of all workers was at its highest with 25% in 1933, and did not get out of double digits until 1941 at 10% because of World War II. While this ideology brought down cyclical unemployment, the other two types of unemployment were neglected: frictional and structural/hard core unemployment. These three types were defined through the Keynesian economic theory. Cyclical unemployment is the kind of unemployment referred to when New Dealers spoke of unemployment being no fault of the unemployed. The problem is that this seen as through macroeconomics, and in turn does not accurately portray all of unemployment. Secondly is frictional unemployment, which Jensen describes as “normal” in “The Cause and Cures of Unemployment in the Great Depression”. It is defined as, “the time spent searching of a new or better job”. And lastly, and arguably the most severe form, is structural/hard core unemployment. These are workers with a considerable amount of time between jobs or since their last job. They were perhaps affected most by the Depression because the hiatus in jobs would be seen as unappealing to employers and would often deter them from being hired; a vicious chain. Discrimination is prevalent in this category.
The argument made by Jensen is that a staggering amount of cyclical unemployed from the Great Depression was forced into the structural type through the prolonging of the Depression in the New Deal. This was probably where the mistake was made. If FDR would have focused more on the structural unemployment rather than the cyclical, there may have been a quicker rise in employment. Whether or not they had picked up on the fact that most cyclical unemployed were now considered hard core unemployed, a different focus could have been made and a different outcome could be seen. But even if this was not so, raising wages in general could have only caused a delayed effected on the unemployment rate.
With raising wages, there is the risk of the act being received as off-putting to business and in turn, actually hiring less people. Besides the Depression, this new business policy also prolonged the recovery of America. To the New Dealers, raising wages would mean more spending money, more money back into the economy. Most economists do not believe in this Fordism theory, which should have been taken as a warning sign. It is risks like this that Roosevelt puts his faith into are clear example of the unreliability of the decisions being made under the New Deal. This is exactly what Higgs writes about when he refers to FDR’s actions as “ill-conceived, politically shaped experiments”. There is nothing heroic about winging it. Even Kennedy stated in his article that Roosevelt did not have the understanding of business as Hoover did. And with FDR president, there was not much that Hoover could have had a say in anyway.
A common praise of the New Deal was its progressiveness in matters of social justice. It is known that FDR tenaciously supported social security for all and attempted to divide the spoils of capitalism more evenly with the various kinds of benefits he proposed during this time. Kennedy talks admiringly about FDR’s empathy with the large population of poverty that had been barely surviving even before the Great Depression. With his Social Security Act, FDR had planned to take the country into a more welfare state that we had ever seen before in our history. Had he had truer intentions in mind, this may have been more successful than it was. But revisionists have found he may have been too preoccupied politically than with the actually concept of benefiting the nation.
This was found through the studying of federal spending records from under the office of Roosevelt and his New Deal. This federal spending was increased nearly 6 percent points from 1927 to 1940, but from finding out what it was used for the number seems even more ridiculous. A trend was spotted between states who complied with FDR’s plan and the amount in national grants received; the more a state seemed to support the New Deal, the bigger the grants were given. Where it is interesting, however, is in the correlation between states that complied and their incomes. Another problematic fact about the New Deal is that is had consistently given bigger grants to states that were known for being swinging to either party side. Areas of lower incomes and higher unemployment ironically did not receive the larger grants. Wallis’ uses this information to come to the conclusion that “it appears as though politics was not only an important factor in New Deal spending, it may have been the overriding factor, overshadowing the stated goals of promoting economic recovery and alleviating the suffering of unemployment.” The credibility of FDR’s pious declaration of social reform is mortally wounded with this discovery.
It is denial to claim that FDR’s New Deal did not have any benefits whatsoever, and no matter the speed, America eventually got itself out of the Great Depression. But with more and more studies coming out on such a historical, monumental, and crucial period of U.S. history, there is more light to be shed, and more sides to the story than previously told. These sides are from the unemployed who were trapped in maze, those who couldn’t benefit from raised wages, and those who needed relief but could not get it because of a “leader” too busy solidifying a political agenda. Yet still today, Roosevelt in widely considered one of the best United States Presidents. Have we given him too much credit?