The New Deal was one of the most openly transformative policies presented during the 20th century, regardless of whether or not it “solved” the great depression. In Rauchway’s Reflation and Relief , he delves into not only explanations of certain New Deal Policies, but the philosophy behind its implementation. This commentary on the New Deal adds context to the policy and improves on my previous understanding of the bill.
To begin, Rauchway uses a quote to describe the philosophy of the New Deal as “isolationist” and “disregard for the outside world”(Rauchway 1). Unlike with the Marshall plan seen in the 1940s post Roosevelt, the new deal was purely aimed at reviving the American economy, and the many policies of the New Deal reflect this. One of the ways to ease the pain of the depression was to increase consumption, but to do this Americans needed money. When wartime preparations started to begin, even seen with the early Lend Lease act, Americans found themselves new employment opportunities and subsequently money to spend on goods. Roosevelt’s suspension of the gold standard and further transition to the inconvertible fiat helped banks recover from their run offs, and this along with the Federal Reserves increased monetary power was able to save capitalism in 8 days as stated by his advisor Raymond Moley. Rauchway does not go as far as Moley and says only part of capitalism was saved, but the positive impact is undeniable.
Accompanied with his policies that stretched constitutionality, Rauchway tells of Roosevelt’s approach to communicating his policy to the public. He would explain what the government was doing and why and gave a “teacherly explanation”(Rauchway 2). The New Deal is often referred to and talked about, but the former president’s descriptive approach when addressing the public is something new to me and further illustrated Roosevelt’s philosophy.
Further delving into the gold standard and banking crisis, Rauchway describes the issues caused by adhering to the gold standard and how responses attempted to address them. The Federal Reserve was worried about bank run offs after a large amount of gold was withdrawn worldwide following an Australian bank’s closure. To prevent this, the FED raised interest rates, providing a positive incentive to keep gold in the bank and as Rauchway describes “to reduce the amount in circulation, thus defending the dollar’s convertibility to gold”(Rauchway 3). However, this made money more expensive to borrow, slowing down economic growth and is why Roosevelt made the banking changes relating to the gold standard that he did.
Continuing on the theme of increasing consumption through employment, the CCC was created. This gave work to unemployed men aged 18 to 35 and separated out a portion of their wages for their family(Rauchway 5). Hundreds of thousands of men signed up for this and the idea was to help the young men become future heads of households and to prevent them from heading into delinquency. The FERA was created and a large amount of grants were distributed to states, assisting in relief efforts. These efforts or more specifically heavy government spending designed to shift demand, display the underlying Keynesian economic theory that was prevalent at the time.
The New Deal was an expansive program that attempted to help the American economy recover from the disastrous great depression. Although it is hard to determine the degree to which the programs assisted recovery, Rauchway would certainly say that the New Deal helped and I agree with that sentiment. Roosevelt’s philosophy both in addressing the nation and in regards to economic policy are important components of New Deal history, and context to the bill.
Excellent post.
4/4