Creating Social Europe VI

1930s Slump in USA: the New Deal

USA: Introduction

• 48 states + 2 territories: federal structure• Public relief: idiosyncratic and local• Pop.: 123 m.: 49 m. workers: 6.5m. OAPs

– 107,000 protected against unemployment– 750,000 sickness insurance cover– 65+: 10% have pensions: 86,000 in

almshouses

• Depression unprecedented: claiming relief = social disgrace

USA: The Slump

• 1929-33: GNP falls by 33%• 1929-32: Farm index falls 50% • Unemployment peak: 29% (14.5 m.) 1933• [1932-4: 10 m. unemployed]• Results:

– State resources, philanthropic resources and personal savings exhausted

– Bank failures (mortgage debt)– Family breakdown, mob looting, rent riots

USA: the Slump: political consequences

• Local states overwhelmed by demand for help• Election of mayors (e.g. Detroit) favouring relief

– but local tax base dwindles• States turn to federal government for help• Growing popularity of public social security• National Unemployment Councils emerge• Hoover (incumbent non-interventionist

Republican president) defeated by F. D. Roosevelt in election of 1932

Roosevelt and the New Deal I

Immediate action (1933):• Emergency Banking Act (shuts banks)• AAA – raises farm prices by restricting output

(Supreme Court opposition)• NIRA – creation of business cartels (Federal

support – Supreme Court opposition)• Federal Emergency Relief Administration

– $500m to states (1933)– 1933-6: $3 billion spent by Fed govt on relief. – Relief rate = $30 per month (very low)– [winter 1934: 20 million dependent on dole]

Roosevelt and the New Deal II

• Civilian Conservation Corps (1933-42)– For 18-25 year old single men– Operate in work camps: subsistence wage

(tree planting, parks, recreation grounds etc.)– Take on 2.5 million over 9 years

• Civil Works Administration (1933-4)– $1 billion on schools, airports, roads etc.– Employs 4 million over period ($1 per day)

[1934: unemployment dips: CWA wound up]

Roosevelt and the New Deal III

• Works Progress Administration (1935-43)– Employs 8.5 m. at cost of $11 billion– [peak at 2.5 m. of 9 m. unemployed – 1936]– Similar to CWA – plus cultural projects– Pay = $50 per month

• Grants / loans to rural sector and small business

n.b. All the above measures designed to be temporary: to meet the emergency

Social Security Act 1935: pensions

• Non-workers returned to state relief• Elderly (1932 – 2m. depend on families)• 1931: 100 bills debated in states (5 states

introduce tax-based pensions)• 1935 Act: a contributory scheme

– Joint contributions (below salary ceiling)– Retirement at 65: – Benefit calculated on taxable earnings– No cover for domestic / agricultural work

Social Security Act II

• Unemployment (support by AFL)– 1931 17 state debate UI bills (Wisconsin law )– Interstate rivalry (and costs)

• 1935 Act – unemployment– Federal tax offset system (legal opposition to

contributions) – States develop own scheme: covered by 1937– Result = diversity and partial cover (agricultural /

domestic workers not included)

• 1935 Act – Aid to Dependent Disabled, Mothers and Children (welfare)

New Deal in Perspective

Is this Keynesian: does the New Deal work?– Temporary extensions in Federal role– Majority of unemployed remain on (low) relief– Unemployment does not decline until WW2– Relief workers do not integrate back into

labour market (shift: public works to relief)– New Deal does not promote economic

recovery

New Deal: theoretical perspectives

• Liberal pluralist: response to public demand (democracy)

• Marxist (Piven and Cloward): New Deal is social control by ruling class– CP and socialists active in major cities– Diverted into administrative process– Fall in grass root activism – cuts in Fed help

The Marxist model criticised

• Skocpol (et al.) – No unity among unemployed.– No evidence of revolutionary intent.– Minor proportion of unemployed organised– CP influence strong among leaders of Workers’

Alliance of America, but not members– Labour (AFL, CIO) supports New Deal: employers

oppose it

But come to your own conclusions