This
blog is an over simplification but I have a simple mind and need to keep things
simple, so please humor me. Some will also call this “my opinion”, which is
true, and I’m just “another guy” a very amateur historian, admittedly an
opinionated amateur historian not an economist.
When
I started my regular blog the first event I found was “FDR is inaugurated”. I
was reminded that I see significant similarities in the times we live in and
those of the beginning of the 20th century. I decided to do two
blogs this cycle. This one is dedicated to FDR and before or later, depending
on timing, I will do my regular “this day in history” format. The constant is
that both might take some effort to get through. (Side Note; I also was tempted
to do the same when Donald Trump was elected president. I thought that this
administration is very similar to Andrew Jackson’s administration and still do.
But I did restrain myself from doing so.)
3/4/1933
- FDR is inaugurated. FDR inherited the “Great Depression” from Herbert Hoover
and immediately took steps in the form of the “New Deal”.
WAIT!,
lets backup a little. Before FDR there was Herbert Hoover. Hoover began his
presidency, in 1929 and at the peak of the “Roaring Twenties”. Things were
glorious, life was good, but there were whispers, an underlying caution.
Business was booming “progress” was the key word and the headstrong dash. The world
was still reeling from the Second Industrial Revolution and WWI and was trying
to deal with the aftermath. The “people” were not as well off as the “beautiful
people” thought. The economy showed subtle signs of faltering. Hoover needed to
reach those not so beautiful people (generally the workers, today sometimes
referred to as the 98%) without alienating the rich and powerful (generally the
employers, today sometimes referred to as the 2%). The economy looked wonderful
for the few but money was actually very tight for the majority. He did some
interesting things. He increased protections for the Federal Government and its
employees, canceled private oil leases, shut down Al Capone, increased federal
parks/forests, started Tennessee Valley dam development and so on. Unfortunately,
the “Roaring Twenties” economy continued to falter and further actions were
taken. In August the “Fed” increased the discount rate to protect the “gold
standard” and the “game of DOW” reached a record high, for a short time. The
DOW began to fall and trading volume was 2 to 3 times its normal, by the end of
August/early September Wall Street bankers were quickly panicking. With cash
being very tight the “game of DOW” was played with credit, or “on the margins”.
The “game of DOW” did not improve and banks failed, 650 of them, making cash even
tighter. Personal and business bankruptcies soared; the “Great Depression” was
here. Hoover followed the tried and true, strategy of protectionism, he raised import
tariffs. This triggered the unintended consequence of trade wars that further
crippled business, both in the US and in Europe. As the year wore on financial
centers became even weaker and failed, the Bank of the United States fail in
December. The economy shrank, the unemployment rate increased, wages shrank and
deflation set in. Nothing the government did seemed to slow the downward economic
cycle.
It
seems to me they did not adequately account for critical factors not in control
of the Federal Government that were gripping Europe and North America. The
actions taken did not factor in the noneconomic factors. For one the weather in
these years was devastating for agriculture, too much rain when it wasn’t
needed and too little rain when it was. The temperatures were too cool when
warmer temperatures were needed and to hot when it should have been cooler.
This triggered drought on these areas. You’ll remember the famous “Dust Bowl”;
actually there were more than one. Another factor that I believe was not taken
into account was that the health of the “economy” was greatly exaggerated by
prevailing opinion. Wealth disparity was very wide but unrecognized by the
“privileged” class. This wealth disparity was also an underlying problem in
Europe, perhaps to a greater degree. This disparity was not addressed or even
acknowledged by any of the governments. The disparity problem was, however, addressed
by other interests; social movements and, arguably, the second of the “great wars”.
FINALLY!
This brings us to the actual subject; “FDR
is inaugurated in 1933”. The tradition of the “First 100 Days” of the
presidency is coined. The center piece of FDR’s “first 100 days was the “New
Deal”.
Some
of the contents of the “New Deal”;
Civilian Conservation Corps (CCC),
this program put 2.5 million unemployed men to work. While the work was
temporary, this program provided much needed work and income to people who had
been marginalized for decades. This program still provides benefits to us,
although largely unheralded today and we scarcely are aware of it. (As a “side
note”; I think that WWII similarly provided “temporary work” for largely
unemployed men and is actually why WWII ended the “Great Depression”.)
Federal Emergency Relief Administration
(FERA), this brought much needed and immediate support to
the “poor” (who by the way, became the “middle class”). This program was so
large that it quickly was divided in two and became; the Works Progress
Administration, carrying out major public works, largely public buildings and
roads. And the Social Security Administration, an independent agency of the
Federal Government that administers a social insurance program, the Social
Security program, of today.
Agriculture Adjustment
Administration (AAA), this program was an attempt to control
crop prices in response to the rural economic crisis. This program was
sometimes used for mortgage relief in return for acreage use agreements. (Side
Note; My very conservative Great Grand Aunt, living in the Chippewa Falls area,
did not like this “government intrusion” and hated FDR until the day she died.)
National Industry Recovery Act
(NIRA), this program was intended to rebuild the general
economy. This was another prodigious program that became two programs. .
The
first portion, the National Recovery
Administration (NRA), was intended to promote the industrial recovery
focusing on fair wages and prices designed to stimulate economic recovery.
(Side Note; I seems to me that FDR was pro- business but suspicious of
“unfettered capitalism”). “Business” quickly pushed back and the NRA chiefly
was relegated to developing industrial codes for industry to adopt.
The
second “section” was the Public Works
Administration (PWA), please note this is not the (WPA). The PWA program
was intended to focus on large public works activities. The WPA was also a “New
Deal” program but focused on public works by employing people “on relief” who
were paid directly by the Federal Government. My understanding is that the
scope of projects and methods of funding were different.
The
original NIRA was short lived and was declared unconstitutional in 1925 by the
US Supreme Court. But that’s another story.
Tennessee Valley Authority (TVA),
this program was intended to stimulate agriculture in the depressed Tennessee
Valley area. Significantly, this is the first time that the Federal Government
supplanted private companies by offering electricity to the public. The
development of the Tennessee River had been a political “hot potato” since the
early 1920’s. The valley spans seven states and has been economically depressed
since the end of the Civil War. The “New Deal” gave FDR the opening to move
forward.
Additionally,
seemingly for emphasis, the opening song for the 1933 stage show ‘The Gold
Diggers’ was ‘We’re in the Money’, sung by Ginger Rogers. “Sign of the Times.”
