Sometimes it's the little details that provide a little direction in the worst of misery. Just like the strings that came with the “Bull Durham” brand tobacco packets in the 1930s: when they hung out of the jacket pockets of men who had lost everything, the message was clear. It read: "I may be down, but don't mess with me, I'm too hard for you." This is how the writer Charles Bukowski recalled the time of the Great Depression in his autobiography "Fast Eine Jugend".
This author considered politicians to be corrupt at best. Nevertheless, even he recognized the oratorical talent of his President Franklin Delano Roosevelt (1882-1945). And rightly so, because unlike his predecessor Herbert Hoover, this man managed to strike a tone in his radio speeches that gave his compatriots hope again and again in the midst of the malaise: "We don't need to be afraid of anything but fear itself," is one of the phrases that have survived their creator. The US President also provided a concrete recipe for the crisis: “Never stop trying. If you see it doesn't work, try something else. And no matter how bad it gets, try something at all.”
These words in particular can be described as the unofficial motto of the program that was signed on March 4, 1933 under the name "New Deal". To this day, historians and economists argue about how to evaluate his results. But even the harshest critic has to admit one thing to Roosevelt and his administration: it was actually an attempt to at least partially negotiate a new social contract. In return, the government was willing to change things that were previously considered sacrosanct. As Roosevelt judged, "Whatever we do to breathe life into our ailing economic system, we cannot achieve it in the longer term until we achieve a more meaningful, less unequal distribution of national income."
The force with which the crisis hit the USA is particularly surprising. In 1928, no one would have thought the great stock market crash a year later was possible. Republican President Herbert Hoover promised his people just this year that soon there would be "a chicken in the pot" of all Americans. According to an anecdote, only the oil billionaire John D. Rockefeller had bad premonitions: when a shoeshine boy suddenly wanted to give him stock tips, the legend goes, he realized that far too many unsuspecting people had ventured onto the trading floor. That couldn't be healthy.
When the bubble burst, President Hoover, despite millions of people living in poverty, initially saw no reason to abandon America's belief in the market and in the individual mastering his destiny alone. He later hesitantly pushed ahead with measures such as dam construction, but adhered to a balanced budget policy, which stalled economic development. Above all, however, he failed to develop a charisma that would have inspired anyone to do anything. Hoover often seemed aloof; in a crisis of this magnitude, that was the worst imaginable prerequisite for generating a spirit of optimism.
Roosevelt was of a completely different breed. After winning the elections of November 1932, he declined the sentence "It's the economy, stupid!" Regulations hardly got along. The focus was always on the question: To what extent is the state allowed to intervene in the rules of the market in a country as liberally oriented as the USA if these rules could not prevent mass misery?
Researchers at least agree that Roosevelt didn't know the answer himself at the beginning. Especially in the first phase, he improvised with his advisors and otherwise relied on his rhetorical talent. But it was clear from the start that his program affected every area of the American economy - both the money and credit system as well as agriculture, industry and the labor market. This required a bureaucracy that would previously have been unthinkable in the US, since the reforms had to be managed centrally from Washington.
The banking crisis was of the utmost urgency because it had worsened since Roosevelt took office. In the wake of the stock market crash, nine million Americans, mostly middle class, lost $2.5 billion. As early as March 9, 1933, the government passed the "Emergency Banking Act", which gave the Treasury Department greater supervisory powers. Insurance for bank deposits and stock exchange supervision soon followed, intended to prevent excessive speculation and insider trading. The confidence of the savers returned surprisingly quickly - probably also because since 1934 it had been possible to refinance mortgages threatened with termination with state aid.
However, Roosevelt pursued a course in monetary policy that was at the expense of world trade. The government abandoned the gold standard to devalue the dollar and boost demand in the world market. Going it alone meant that other countries also devalued their currencies and imposed high tariffs on products from abroad. The largesse also soon created deficits in the budget, which the administration met again with cuts until it became clear in 1938 that this would seriously delay the recovery.
In agriculture, Roosevelt used a combination of restrictions on certain crops and subsidies on others, such as wheat, cotton, and tobacco. His aim was to align producer prices with industrial price levels. There were also subsidized low-interest loans to stave off foreclosures. Above all, however, the large white farmers in the South benefited from this – Roosevelt's Democrats traditionally had a large electoral base among them and were dependent on their political help.
But at the heart of the first phase of the New Deal was the National Industrial Recovery Act. The focus of US economic policy had always been to prevent cartels; now a government was in office that allowed production and price fixing to prevent "ruinous competition". Roosevelt tried to get the unions on his side by including minimum wages, maximum hours, prohibition of child labor and free collective bargaining in the Codes of Fair Business Practices. According to experts, however, the stronger formation of monopolies counteracted the economic improvement.
The job-creation measures, in turn, reveal the experimental nature of the New Deal. Corresponding programs from Washington and the individual states, for example to build dams, power lines or chemical plants, were launched and withdrawn or existed side by side. The bitter joke circulated in Washington that even leading politicians had lost track in the jumble of abbreviations for the measures.
Under these conditions, it is not surprising how strong the opposition to Roosevelt's plans was in the meantime. Level-headed scientists and journalists warned that the measures would fizzle out because the state would inevitably have to run out of money (John Maynard Keynes only developed his theory of borrowing during the crisis in 1938). Unions called for unemployment to be eliminated more quickly, conservative entrepreneurs for fewer restrictions, and the Supreme Court blocked more than one law.
All of this created an ideal climate for mostly left-wing populists. In the meantime, a man named Huey P. Long had a particularly large following. He served as governor of Louisiana from 1928 to 1932, after which he was a senator in Washington. Under the title "Share our wealth" he now demanded the highest taxes and duties for the rich so that every American family could live in their own house and have $3,000 at their disposal annually. Long might have become a real threat to Roosevelt, but he was assassinated in 1935 in Baton Rouge, the Louisiana capital.
The promises made by Detroit radio priest Charles E. Coughlin were similarly radical – he wanted to nationalize the entire banking system and was competing with the president with an alleged 40 million listeners. But he didn't prevail either. Because despite all the contradictions, Roosevelt's New Deal succeeded in conveying to the completely insecure Americans step by step that they were not inevitably exposed to a bad fate. This is an achievement that no president since him has been able to repeat.
In the present, things have become even more difficult: a figure like Donald Trump proves that US presidents are no longer necessarily elected for economic policies that benefit the middle class. During the election campaign, he presented himself as the greatest economist of all time, but he considered government aid programs to be socialism, the product of evil. In the Covid crisis, however, he was forced to resort to this remedy.
But the main reason he was chosen in 2016 was that he grabbed his predominantly white audience where emotion is at stake - his self-image. Some Trump voters were willing to give up more prosperity for promises like a border wall against illegal Mexican immigrants. So it will be interesting to see how incumbent Joe Biden will benefit from trying to at least partially follow the tradition of Franklin Delano Roosevelt with his policy of state intervention.
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