Franklin D. Roosevelt - The new deal in action



The National Recovery Administration (NRA) formed the spearhead of the administration's attack on the economic crisis. Roosevelt had voiced its informing philosophy in a speech to San Francisco's Commonwealth Club in September 1932. His keynote was a call for stability, not stimulus. "Our task now," he had said, "is not . . . necessarily producing more goods. It is the soberer, less dramatic business of administering resources and plants already in hand." Headed by General Hugh Johnson, the NRA set out to secure the agreement of major industries to government-backed codes designed to stop the downward slide of payrolls, prices, and production. Johnson offered exemption from antitrust prosecution to industries that consented to put a floor under wages and to cease cutthroat price slashing. Section 7a of the National Industrial Recovery Act appealed for labor support of these arrangements, by offering guarantees of the right of unions to organize and bargain collectively.

Fearing a court test of the NRAs constitutionality, Johnson avoided legal coercion and relied instead on a massive publicity campaign to achieve his aims. He plastered the country with the NRA symbol, a stylized blue eagle, and organized monster parades to induce businessmen to do their part. Within months, some 2 million employers in most major industries had signed code agreements.

The codes brought stability to the failing economy, but they did not bring instant recovery. More than 20 percent of the work force remained idle in 1934. The codes also brought controversy. Small businessmen in particular chafed under the labor regulations of the codes; virtually all businessmen resented the weight of government bureaucracy with which they were suddenly saddled; other critics charged that the codes maintained prices at artificially high levels and promoted monopoly.

On 27 May 1935 the United States Supreme Court declared the NRA unconstitutional. The administration soon rebounded with a series of "Little NRA" bills targeted on specific industries, including coal mining and oil refining. These measures, together with the Robinson-Patman Act of 1936 and the Miller-Tydings Act of 1937, both of which prohibited "unfair" price competition in the retail trades, showed the persistence of the stagnationist economic philosophy that had originally generated the NRA.

In agriculture, which in the 1930s still employed more than one-fifth of all American workers, the administration pursued similar policies. It aimed at achieving equilibrium, not growth, by raising prices and lowering production. In 1933 those ends compelled the distasteful means of crop destruction. Farmers were required to plow under millions of acres of cotton and to slaughter millions of baby pigs. Thereafter, debate raged within the administration over the best method of increasing farm income. George Peek, head of the Agricultural Adjustment Administration (AAA) and a fierce economic nationalist, favored dumping American surpluses in foreign markets. Rexford Tugwell, then assistant secretary of agriculture and an economist devoted to government-directed economic planning, advocated stricter production controls. For the moment, at least, Tugwell won. In the years immediately following 1933, the AAA relied on loan subsidies and a variety of compulsory crop-reduction laws to reduce the agricultural glut.

Farm income rose nearly 50 percent by 1936, though some of this gain was achieved by exporting rural unemployment to the cities. A combination of spectacular dust storms in the Great Plains and AAA policies forced many small farmers off the land, especially black sharecroppers and tenant farmers in the cotton South. The Resettlement Administration was established in 1935, and its replacement, the Farm Security Administration, in 1937, to deal with the problems of displaced agricultural workers, but neither agency significantly deflected the shift of labor out of agriculture that the depression, the AAA, and the weather had catalyzed.

The Supreme Court declared certain key provisions of the AAA unconstitutional in early 1936, though Congress, as in the case of industrial policy, moved swiftly to replace it with only minor modifications. The Soil Conservation and Domestic Allotment Act of 1936 and the Agricultural Adjustment Act of 1938 perpetuated the early New Deal policies of subsidizing crop reductions. Yet none of these measures solved the problem of over-production, and the growing mountain of agricultural surpluses severely strained the government's ability to maintain prices. By the late 1930s, the United States was dumping millions of bushels of wheat overseas. It would take a world at war to absorb fully the paradoxically baleful bounty of America's farms.

Despite the drama of the Hundred Days and the efforts of the NRA and the AAA, the economy remained sickly. Desperate for some means to raise prices and lift the crushing burdens of debtors, especially farmers, Roosevelt set out in October 1933 on a deliberate program of monetary inflation. He had already cleared the way for such action by taking the United States off the international gold standard on 19 April 1933. A few weeks later, he had repudiated the efforts of the London Economic Conference to stabilize international exchange rates. Now he launched a bold but somewhat ill-advised scheme to devalue the dollar by ordering the Treasury Department to buy gold at ever-increasing prices. These purchases ended in January 1934, with the price of gold pegged at $35 an ounce, the level at which it remained for decades. The dollar had been reduced to about 59 percent of its pre-1933 value relative to gold, but prices had not risen correspondingly.

Roosevelt's disappointment at that result was aggravated by the sharp criticism his gold-buying program evoked in orthodox financial circles. Several high officials in the administration resigned or were fired because of this episode. But pressure to inflate the currency persisted. Congress in June 1934 directed the Treasury Department to monetize large amounts of silver. These inflationary measures, together with chronic though unintended federal budget deficits and the creation in June 1934 of the Securities and Exchange Commission (SEC) to regulate the securities market, helped to precipitate the first organized business opposition to the New Deal—the American Liberty League, chartered in August 1934. Executives of the Du Pont and General Motors corporations, including conservative Democrats like Raskob, dominated the new organization.

If the Liberty League represented the nucleus of an emerging anti-New Deal coalition, its influence was negligible in the congressional elections of 1934. Voters gave the Democratic party a whopping three-to-one majority in the House and an unprecedented sixty-nine seats in the Senate. Many newly elected Democrats came from urban, industrial areas whose unemployed voters hungered for drastic, even radical, solutions to the seemingly endless depression. If anything, the center of political gravity in the new Congress was well to the left of Roosevelt and the New Deal.





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