Politics in the 1920’s Conservatism, Dominance of the Republican Party Conservatism

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  High unemployment, millions of American families without income, needed assistance
  
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  Depression caused total collapse of private charity due to bankruptancies and declining incomes, Government needed to step in an provide for the needy
  
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  Many elderly people lost their retirement investments and savings in the Depression, could not go back to work and thus needed an income
  
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  Also believed that it would encourage old workers to retire, freeing up employment for the young
  
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  Also stimulates Aggregate Demand and the economy
  

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  Payroll tax is a tax on employers on the number of employees they have, directly disincentives employment and hiring, which was desperately needed during the Depression
  
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  Removed $2 billion from the economy when it began in 1937, first Social Security Pension checks were not mailed until 1940, therefore it leaked income from the economy, possibly contributing to a delayed recovery
  

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  Also known as the National Labor Relations Act of 1935, known as a part of the ‘Second New Deal’, aimed to strengthen the power of Unions
  
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  The Wagner Act forced businesses to recognised Unions and negotiate with them as a part of the collective bargaining process
  
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  Union membership increased from 3.6 million in 1930 to 7.2 million in 1937, then 8.9 million in 1939
  
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  Pros-
  
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    Sought to increase wages, which was hoped to increase consumption and stimulate and economic growth
    
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    Provided protections for workers
    
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    Far reaching institutional change in the economy that secured the rights of American workers long after the end of the Great Depression
    
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  Cons-
  
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    Directly caused major industrial unrest in 1937
    
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      Committee on Industrial Organisations (CIO), formed to unionise industrial sector workers, more aggressive than American Federation of Labor and other Unions
      
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      Some Communists/Socialists were elected to high positions in the new industrial unions
      
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      Caused strikes in the:
      
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        Automobile- The Flint ‘sit down strike’ of 1936/7 by the United Auto Workers (UAW), UAW memberships grows from 30k to 50k
        
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        Steel
        
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        Glass
        
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        Rubber
        
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    Deterred business investment in rapidly unionising industrial sectors, possibly delaying economic recovery
    

The New Deal was effective at solving the economic problem of the Financial Crisis, and mostly successful at solving the social problem of poverty. Yet the New Deal was unable to solve the economic problem of unemployment and unable to bring the United States out of the Great Depression, which was achieved by World War Two.

The New Deal was only partially effective at solving the social problem of poverty.

Prior to the New Deal, the task of Welfare for the poor and unemployed was left to the individual States in the USA, as well as private charities. Yet as a result of the Great Depression, the need for welfare charity rose, and the taxes and private donations that paid for this assistance decreased significantly, private charities could only replace 1% of the total wages lost to unemployment from 1929-1933, whilst State and municipal governments could not provide adequate assistance for the unemployed, and could barely pay their own employees, for example Chicago’s school teachers were not paid from November 1932 to March 1933.

The New Deal initially provided income support for the unemployed relief through Federal agencies, yet the ‘New Dealers wanted to use federal power to more equitably distribute income, wealth and economic power and provide a minimum of economic security for all Americans’ (Edsforth, 2000). Thus, the Social Security Act 1935, created old age pensions, disability and unemployment insurance, funded through a payroll tax implemented in 1937. This was intended to provide a permanent safety net for Americans from poverty, and was partially successful in alleviating the poverty caused by the Great Depression. However it can only be deemed to be partially successful, because the number of Americans in poverty did not fall because of Federal aid, but rather the end of the depression and growth in employment. Thus the New Deal partially solved the social problem of poverty, but only the end of the depression truly ended the poverty crisis.

Economic

Unemployment

The New Deal was unable to solve the problem of high unemployment, which was 24.9% in 1933, despite the fact that providing relief and a permanent recovery from high unemployment was a top priority for the New Deal.

The New Deal created the Public Works Administration, the Civilian Conservation Corps and the Tennessee Valley Authority, some of many authorities. These Administrations were designed to construct public works projects such as roads, dams, railways, levees, canals, all with the intention to create employment for the millions unemployed in the process of constructing infrastructure. This is the principle of Keynesian Economics; Government deficit spending on infrastructure to create employment stimulated the economy, because the wages paid to men being employed by the government has a ‘multiplier effect’, creating new jobs as the money flows around the economy. The Public Works Administration had a 2 year budget of $3.3 billion (5.85% of 1933 US GDP), employed 4 million people, whilst the Civilian Conservation Corps employed 3 million unemployed young men in unskilled labor planting trees, constructing roads, parks and buildings.

The unemployment rate did begin to decrease, falling 10%, to 14.3% in 1937. However in 1937, New Deal public works spending cut, because it was belied the US economy was able to fully recover without massive government spending. The US economy entered the ‘recession within a depression’, unemployment jumped to 19%. This showed that the New Deal was able to reduce unemployment and create what appeared to be an economy recovery, but the reduction in New Deal spending revealed that the New Deal was ineffective in creating a genuine, private-sector driven, economic recovery.

In 1939 Unemployment was 17.2%, lower than what it was when Roosevelt came into office in 1933, but far higher than the 1929, or any level that would show that the US economy has recovered from the Great Depression. Thus ‘The New Deal failed to generate enough employment and income to stimulate a real recovery’ (Edsforth 2000). In fact it was WWII that ended the unemployment crisis and ‘at last put an end to the Depression-something the New Deal had been unable to do’ (Demarco 1998). This was due to young men entering the armed forces, which grew to 11.4 million in 1945, up from 370,000 in 1939, which had the effect of mobilising young men who would have otherwise been unemployed. Also, US industrial production soared 226%, as American factories and workers were employed producing War munitions and vehicles, which combined to reduce unemployment to 1.9% in 1943. Thus the New Deal did not effectively solve the problem of high unemployment, it was WWII that ended the unemployment problem.

Financial Crisis in US Banks

Following the Wall Street Crash in 1929, there were a number of bank failures in the United States that had continued until Roosevelt took office. The first failed due to loan exposure to the collapsing stock prices following the Wall Street crash. From 1930-33 agricultural prices and farm income fell which ‘forced more farm foreclosures and more bank failures’ (Edsforth, 2000). This financial contagion spread both in the United States and overseas, the largest bank in Austria Kreditanstalt collapsed in 1931, and the New York Bank of the United States collapsed, taking with it 400,000 deposits. By early 1933, a major financial crisis threatened the entire US economy.

Roosevelt’s first legislation of the New Deal, aimed at solving this financial crisis was the Emergency Banking Act, passed 9^th March 1933, which gave the US Treasury the power to take over failing banks, the president the power to declare a National Emergency to prevent banks from operating without the President’s Approval. This was designed to restore confidence and stability in the US banking system, since the US Treasury could step in an ensure that banks would not fail. The Emergency Banking Relief Act ‘successfully tackled the financial crisis, the most urgent of the problems FDR faced ... (it) immediately restored the public’s confidence in the banking system, money began to flow in them’. FDR later signed the Glass-Steagall Banking Act 1933, which aimed to reduce the level of risky speculative investment, increase the capital reserves available to banks and set up the Federal Bank Deposit Insurance Corporate to secure individual deposits. These pieces of New Deal legislation successfully secured the US Financial system, preventing a major banking collapse which would have sent the US economy further into depression.

Agriculture

The Agricultural sector was severely depressed throughout the 1920’s, as a result of overproduction causing low prices, which fell even further as domestic and global demand fell after the Wall Street Crash and Great Depression began. The New Deal attempted to solve the problem of Depression in the rural economy, which was believed to be caused by overproduction causing low prices and farm income. This was done through the Agricultural Adjustments Agency (AAA), which aimed to increase prices by destroying surplus crops and livestock as well as paying farmers to leave farmland uncultivated, which was hoped would decrease supply relative to demand and increase agricultural prices and farm incomes. Agricultural prices increased steadily from 1934-37, which may be partially attributed to the AAA. However as the ‘Dust Bowl’ wiped out millions of acres of farmland in Oklahoma, Texas, Kansas and other rural states, the Dust Bowl decreased agricultural production in those states, causing prices to rise across the nation as less farm produce was produced, as well as the US economy and demand recovering steadily from 1934-37, these factors can also be attributed to the recovery in agricultural prices. However the AAA is seen as a very controversial government program, since it destroyed otherwise useful produce that would have been sold to poverty stricken urban workers at low prices, and (not as a result of this though) the Supreme Court ruled the AAA to be unconstitutional in 1936, and the program was suspended. The New Deal also subsidised farmers following the 1936 AAA court ruling, and provided assistance to farmers by delaying the foreclosure of farm mortgages by law. Thus, the New Deal may have improved the situation in the agricultural sector of the economy by raising farm prices, yet this is disputed due to other correlating factors.

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  Confused – driven by public opinion
  
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  Monroe Doctrine
  
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  Economic and diplomatic dissonance
  
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  Xenophobia
  

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  Neutrality and isolationism
  
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  Preserve the Open Door in China
  
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  Reconciliation with South America
  

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  Clark Memorandum
  
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  Non-recognition of territorial gains – Stimson Doctrine
  
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  Independence to the Philippines
  
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  Washington Naval Conference and disarmament
  
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  Neutrality Acts
  
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  Ludlow Amendment
  
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  Kellog Briand Pact
  

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  Rejection of Versailles. ‘The Irreconcilables’
  
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  No league BUT observer status by 1923
  

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  Influence of the peace movement
  

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  World Court
  
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    American judges serve but voted down
    
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  Washington Naval Conference 1921/22
  
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    3/5/9 Power agreements
    
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    Role of Charles Evans Hughes/Mellon
    
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    Isolationist/Internationalist or economically motivated
    
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  Kellog-Briand Pact 1928
  
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    Role of France
    
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    63 Nations sign up
    
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    Escape hatches
    
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    More for US domestic consumption. Does not achieve much.
    
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  Latin America
  
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    Intervention in Nicaragua
    
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    Payment to Colombia of $25mill for canal
    
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    Evacuation of Dominican Republic, Haiti, Nic
    
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    Nationalisation of US assets in Mexico
    
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    Clark Memorandum
    
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      Informal renunciation of Roosevelt Corollary
      
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  Immigration restrictions
  

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  Dawes Plan 1924, Young Plan 1929
  
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    US underwrites German/European recovery
    
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  BUT Fordney McCumber 1922, Smooth Hawley 1930
  
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  Abrogation of free trade with the Philippines, Cuba
  

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  Breakup of League of Nations, militarism in Italy, Japan, Germany
  
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  Nye Committee
  
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    ‘Merchants of death’ explanation for US entry to WWI
    
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  Neutrality Acts
  
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    ‘High water mark’ of US isolationism
    
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    moral embargoes – Spanish Civil 37, Ethopia 35
    
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    not applied to Sino-Japanese War
    
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    BUT by 4^th Neutrality Act, the intent is ‘watered down’ for ‘cash and carry’
    
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    ‘the new law… indicated the end of American isolation from world conflicts’ – Akira Iriye
    
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  Panay incident 1937
  
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    Tests ‘isolationism’
    
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    Apology and indemnity
    
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  Quarantine’ speech 1938 – Chicago
  
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    Shows FDR gravitating towards war
    
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    BUT ‘Two Oceans Navy Bill’ – (defensive)
    
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    BUT ‘cash and carry’, ‘lend lease’, ‘great arsenal of democracy’
    
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    The New Deal’s triple A foreign policy; it will plow under every fourth American boy – Senator Wheeler
    
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  Ludlow Amendment 1937 – defeated by 209 to 188
  

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  1932/33 London Economic Conference
  
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    FDR pulls out; wants to devalue
    
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    Does not stabilise world currency
    
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    Unusual because FDR is internationalist
    
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  Johnson Debt Default Act 1934
  

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  Reintroduction of ‘peacetime’ conscription in US 1940
  
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  ‘undeclared war in the Atlantic’ 1941
  
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    Kerney, Greer sunk
    
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    American aircraft in Greenland
    
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    American destroyers escort convoys as far as Greenland/Iceland
    
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  Placentia Bay conference – The Atlantic Charter
  
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  Exchange of overaged destroyers
  
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  Embargo of oil/metals to Japan
  
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  Pearl Harbour 1941/ entry into Second World War
  
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    Manufacturing aircraft, ammunition for British
    
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    Virtually all Red Army trucks were manufactured in the US
    

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  Charles Lindbergh – America First
  

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  Most opposed to 1890s imperialism
  
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  Mark Twain
  

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  Private boycott of Japan/Germany
  

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  Sinclair Lewis – It could happen here (Fascism)
  
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  Immigration restrictions/xenophobia
  

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  Contradictory tariff and internationalist loans scheme
  
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  Exacerbated by the Depression – FDR’s stance on revaluation of the dollar