Lecture

LEARNING OBJECTIVE I

Discuss the intellectual and philosophical foundation of the New Deal. 

"A New Deal for the American People." This was a phrase written and used for Franklin D. Roosevelt's acceptance speech at the Democratic National Convention in 1932.. It was an attempt to put a label on the changes he would make in a depression-stricken America; changes away from the "Old Deal" and "Old Capitalism."

The old capitalistic system with its emphasis upon social Darwinism, laissez faire, and rugged individualism had lost faith with the American people. The "Old Deal" was gone, where businessmen took from the environment what they could get while the government stood by and watched and expected the individual to

adjust to the results.

The depression of the 1930's raised some serious questions about the viability of the American economy. After nearly a century of rather spectacular, although. uneven, economic growth which had begun about 1840, economic development slowed down and came to a sudden halt after 1929.

The 1929 level of capital investment was not reached again until 1941.

The per capita income in dollars of purchasing power in 1929 dropped and did not pass the 1929 level until 1940. About 25% of the labor force was unemployed in 1932-33 and the nagging problem of unemployment continue until World War II.

Business leaders and the capitalistic system became discredited not merely because they were judged responsible for the depression, but because:

Both businessmen and the capitalistic system proved unable to restore prosperity.

Businessmen proved themselves derelict in duty and guilty of grave malpractices.

The public learned with astonishment the dignified House of Morgan kept a preferred list of influential public men to whom it sold securities below the market price.

It was also discovered the great National City Bank of New York made $2.5 million of stockholders' money available to bank officers for speculation, without interest or security.

This not only led to dissatisfaction with business leadership but led to a crisis in council the system of Western capitalism and thus democracy. Hence, one of the key underlying questions of the depression was could democracy in general and capitalism in particular survive not only the depression in this country, but in the World as well. One of the keys to understanding the

significance of Roosevelt and the New Deal is to understand this crisis in confidence not only in the systems of capitalism and democracy BUT in how the people felt about themselves.

Any judgment of the New Deal will depend upon the criteria used. Judged on the basis of its economic success, the New Deal, at best, was only partially successful. However, based upon its use of optimistic, psychology the New Deal was a great success.

The profound crisis of 1929 put the right man at the right place at the right time, in the form of Franklin D. Roosevelt.

In mid-March of 1933, Roosevelt held Congress in session and launched a program that would lead to 15 major new programs : laws in a hectic 100 days. FROM THE VERY FIRST, (1) Congress and (2) pressure groups were to shape the New Deal's political and economic contours (3) although Roosevelt and his advisers did contributed greatly.

Roosevelt explained the evolving New Deal as follows: "All of the proposals and all of the legislation since the fourth day of March have not been just a collection of haphazard schemes, but rather the orderly component of a connected and logical whole."

Roosevelt was not quite correct, but the UNIFYING ELEMENT was Roosevelt himself presiding over everything, even if he did not have total control. He acted as HEAD CHEERLEADER, radiating confidence and encouraging the masses. Hence the greatest benefit offered by Roosevelt and the New Deal was HOPE for the future and FAITH in Roosevelt, democracy, and capitalism. The New Deal combined structural economic innovation with optimistic psychology ·

Structurally, the New Deal pursued three strategic directions (Relief, Recover!}; d Reform). Roosevelt's intentions were apparently very broad and loose and at times he permitted and encouraged contradictory lines of policy. ROOSEVELT WAS CONFIDENT THE BROAD DIRECTION WAS CORRECT AND LIKE A QUARTERBACK, HE COULD TRY ANOTHER PLAY IF TACTICS NEEDED TO BE CHANGED. Roosevelt's handling of the New Deal is a perfect example of American pragmatism.

To understand Roosevelt's "Quarter backing," the words BALANCE AND INTEGRATION are necessary; a balance between capitalism and socialism. The strategic issue was how to formulate the New Deal and blend the two contradictory economic policies to satisfy the country's needs.

Roosevelt acted as a political power broker, balancing off the demands of different interest groups . Big business got the National Recovery Administration, organized labor, the Wagner Act; Farmers, the AAA; major Wall Street brokerage houses, the SEC; conservationists, titled TVA; and senior citizens and the working class enjoyed Social Security.