The New Deal, Part 1: Domestic Policy

by | Mar 26, 2017

The New Deal, Part 1: Domestic Policy

by | Mar 26, 2017

Today, few Americans are left from the Greatest Generation (a phrase which my father, born in 1912, would have seen as obvious propaganda). There are more, perhaps, who experienced the New Deal directly as very small children. Most of us know it only from history, family lore, popular culture, film, and (yes) partisan political sources. And yet the farther it recedes in time, the more the feeling takes hold that the New Deal was an important watershed in American life.

That is certainly true and here is a clue: early in my lifetime you could still tell an overwrought person, “Don’t make a federal case of it!” Today this joke has no reach. Whatever the grievance, there very likely is a federal case in it. This change is the work of the New Deal, multiplied by the New Deal-at-War, forty years of Cold War, and other parallel causes. The Great Depression brought America’s state builders back to Washington in 1933. They were keen to overthrow the laissez faire and “isolationism” of the Republican New Era (neither of which, strictly speaking, exactly existed in the 1920s) and to renew America‘s wartime experiments with big, unaccountable government, largely abandoned as of 1919.

War among the Progressives

The contests that brought the New Deal into being, like those inside it, look like a war between (or among) Progressives. Republican administrations from 1921 to 1933 promised unending progress based on close cooperation between big business and government — not so much laissez faire as mild corporatism. (On corporatism, see my essay in Future of Freedom, February 2014.) In foreign affairs, as historian Clyde Wilson writes, these interwar Republican administrations pursued “moderate and realistic versions of Wilson’s failed fantasies … not so much a repudiation as a dilution of Wilsonism” (From Union to Empire). This was cautious Open Door Empire on a budget.

Herbert Hoover, hailed as a great Progressive, chanced to be president when an inflationary boom went bust. His remedies for the Great Depression foreshadowed the New Deal in detail. (See Ellis W. Hawley, “Herbert Hoover … and the Vision of an ‘Associative State,’” Journal of American History.) In the 1932 election advocates of economic “stabilization” (i.e., state-enforced cartelization) abandoned Hoover, whose corporatism fell short of theirs, and the Navy lobby also moved against him (Murray Rothbard, “The Hoover Myth,” Studies on the Left; and Charles and Mary Beard, America in Midpassage). (The Navy expected more from Roosevelt, a former assistant secretary of the Navy.)

New Dealers take power

Into the economic maelstrom stepped Franklin Roosevelt with his stentorian voice and Groton accent. He was not a “traitor to his class” (as businessmen claimed): his class was the landed gentry of upstate New York. He was pragmatic and distractible, but had perhaps a personal creed of organic collectivism (Richard P. Adelstein, “The Nation as an Economic Unit,’” Journal of American History).

Called in to “fix” the Great Depression, New Dealers retained Hoover’s Reconstruction Finance Corporation (which bailed out endangered companies). Striking out in several new directions at once, the New Deal oversaw a massive expansion of federal power. German observer M.J. Bonn commented, “[No] civilized community ever experienced such a sudden widening of Government action” (quoted in William E. Leuchtenberg, “Reflections on the Significance of the State in America,” Journal of American History).

As told by favorable historian Arthur M. Schlesinger Jr., the mad activism of the New Deal’s famous first Hundred Days was very exciting, as new agencies (Works Progress Administration, Civilian Conservation Corps, Tennessee Value Authority) and new legislation such as the Agricultural Adjustment Act grew like mushrooms. Roosevelt devalued the dollar by 40 percent and banned private gold transactions. He also torpedoed the London economic conference (1933), pleasing (temporarily) economic nationalists in his administration.

Contradictory New Deal practice arose from two somewhat contrasting forms of Progressivism (both found among Roosevelt’s advisors): Teddy Roosevelt’s New Nationalism and Woodrow Wilson’s New Freedom. New Nationalists accepted large corporations, if regulated and coordinated, and favored tariffs, economic nationalism (autarchy), and a degree of state planning. The Wilsonians, such as Louis Brandeis, wanted to use antitrust laws to level large corporations and restore competition and favored free trade. The nationalists were strongly corporatist, the free-traders less so, at least on paper. Both groups wanted increased foreign trade but disagreed on means. Historian Ellis W. Hawley writes, “The New Dealers failed to arrive at any real consensus about the origins and nature of economic concentration” (quoted in John A. Garraty, “New Deal, National Socialism, and the Great Depression,” American Historical Review; and see Otis Graham, The Old Progressives and the New Deal).

Read the rest at the Future of Freedom here.

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