History of American Business: A Baruch College Blog

David Yusupov

04/29/22

HIS 3410

Professor Griffin

Blog Assignment #4

Among the presidents in American history, none is more polarizing than Franklin D. Roosevelt. Supporters credit him with ending the Great Depression and ending World War II, while critics maintain that he had created a big government bureaucracy and was a quasi-dictator. Either way, nobody can deny that he was influential. One of the ways that supporters of FDR say he combatted the depression and brought an era of prosperity for the country was through the New Deal. This is precisely what the historian Eric Rauchway argues in the fourth chapter of his book  on the Great Depression and the New Deal. Essentially Rauchway’s main point was that Roosevelt was an innovator not afraid to use government power when necessary to go where no other President had gone before, to do what was necessary to alleviate the sufferings of the common man, and to save capitalism.

 Among the arguments that Rauchway uses to support his point that FDR was innovating is when he says “The Roosevelt agenda grew by experiment: the parts that worked, stuck, no matter their origin. Indeed, the program got its name by just that process: Roosevelt used the phrase “new deal” when accepting the Democratic nomination for president, and the press liked it. The “New Deal” said that Roosevelt offered a fresh start, but it promised nothing specific: it worked, so it stuck.” Essentially, Rauchway is portraying FDR as a man who was totally dedicated to fixing the crisis. He did not care about whether something was untried or untested, as long as it works. This is further confirmed when Rauchway writes: “As Isaiah Berlin afterward noted, Roosevelt’s “great social experiment was conducted with an isolationist disregard of the outside world.” So basically he is saying that Roosevelt was unbothered by what critics had to say. He stuck to his agenda.

To support his thesis about Roosevelt appealing to the common man, Rauchway says that :”Ever since the 1890s, when the Democratic Party first began to shift from its historic support for limited government, and when, under the leadership of William Jennings Bryan, it began to stand for the ordinary man against the great manufacturing corporations, the Democrats also had a soft spot for soft money. Bryan stood for the farmer and the worker against the gold standard, adherence to which was driving down the price of agricultural commodities. Instead, Bryan argued, the country should coin silver, inflating—or, properly, reflating—the currency and relieving the downward pressure on prices. Forty years on, the situation looked similar. Roosevelt not only depended on the farm vote, but like Bryan and many if not most Americans, he thought fondly of the nation’s long-vanishing family farms, and he hoped to provide them the same relief that Bryan had proposed: more money in circulation, higher dollar prices for their produce, and an easier time repaying their debts. As he said in January 1933, “If the fall in the price of commodities cannot be checked, we may be forced to an inflation of our currency. This may take the form of using silver as a base, or decreasing the amount of gold in the dollar. I have not decided how this inflation can be best and most safely accomplished.” Essentially Roosevelt was trying to emulate earlier progressive figures like WJB in support of helping the farmers.

In reading Judith Stein’s Pivotal Decade How the United States Traded Factories for Finance in the Seventies one of the very first aspects of her articulation that I noticed early on was her use of numbers. Stein bombards the reader with fascinating facts and statistics. While some historians occasionally utilize statistics to back up their argument to a fault, Stein does a great job in making sure that each fact she’s using correlates with what she is trying to argue. For example when Stein was prefacing her introduction of what the Great Compression was, in the very first paragraph of chapter 1 she says “By 1970, 63 percent of families owned their own homes, there was as many private cars as families, and only 10 percent were poor” (Stein, 1). Despite, in this case, Stein not arguing about a particular point, this quote is evidently exposing the tactic Stein will attempt to use to convince the reader from here on out.

Like mentioned before, Stein uses statistics that are very fascinating. The Great Compression was a period after World War II stretching all the way to the 1970s when the US economy was flourishing and when poor and middle class America were experiencing more economic growth than that of the rich. On page 1 Stein states “The income of the lower fifth increased 116 percent, while the top fifth grew 85 percent; the middle also gained more than the top” (Stein, 1). This is an amazing fact and one I believe will probably not be replicated any time soon. Usually when the economic state of a struggling nation begins to see exponential progress, the beneficiaries are always usually the upper class. This has been happening all around Latin America especially in recent history. In the late 20th century entering the 21st century, Latin American nations like Brazil, Mexico, and Caribbean Islands have been successful is becoming very rich nations after a period of owing massive foreign debt. While this is proven in the countries’ numbers as a whole, it does not tell the whole story. Despite these Latin American nations being well-off financially, the unemployment rates in those countries are rising, the poor people are becoming more poor and worse-off, and the upper-class are becoming filthy rich as they are the ones reaping all the rewards. I bring that up to say how amazing this time of the Great Compression must have been for the majority of the population of Americans. Its not common for such a “compression” of the wage gap between the rich and poor to occur and the statistic mentioned above perfectly embodies what this period in time was all about.

In additional thought that came to mind when reading Stein’s work was how the Great Compression laid the foundation to the benefits a lot of society today take advantage of. Those being, health insurance, paid vacations and holidays, and pensions. Like Stein says, these benefits became cemented as the “norms of working-class life,” (Stein, 2) and today are expected by most of us when joining the workforce. I believe it’s not an overstatement to say that the Great Compression was a critical reason for why workers today are enjoying these benefits. Why wouldn’t the government try to replicate what it did during the Great Compression if they saw how successful they were.

The Reflation and Relief Chapter four is an overview of the New Deal. President Roosevelt’s signature program was the New Deal. It saved the banking industry, put people back to work, and lifted the country’s morale during the worst economic times. What is overlooked is President Roosevelt’s constant connection to the American people. His fireside chats were reassuring to the American people. He explained why it was necessary to implement specific programs—to reduce the fear and anxiety of the American people, who were not used to having big government intruding into their lives.
He explained why it was necessary to take the dollar off the gold standard. He tackled the unemployment issue by giving relief to the states in the Emergency Relief and Construction Act. The federal government would fund the states. The states then gave the money to people out of work. Roosevelt was concerned about the youth and created the Civilian Conversation Corps. It gave work in planting trees, building bridges, and other public works projects. It gave discipline and dignity to a forgotten sector of the population. He attacked the quality of life issues by creating programs that put money in people while at the same time developing the infrastructure of the country. These programs were not popular with conservatives and did not immediately cure the ills of the Great Depression. He uplifted the American spirit and hoped for the ordinary person.
Roosevelt used the width of his dominion to deal with the devaluing of the currency. Oddly, benefited the farmers. Since the Great Depression, farmers were one of the hardest hit. The price of their crops dropped so low that it was difficult to pay their bills. Many lost their farms and were homeless. The dollar’s value fell, which made the price of cotton and grain rise. This bump in price allowed farmers to meet their financial responsibilities.
Roosevelt was the polar opposite of President Hoover. Hoover believed that the hands-off approach was better with minimal government interference. It allowed big business to correct itself. This view did not help the morale of the helpless people living in poverty. When Roosevelt got elected, he understood that the government could not sit on the sidelines while people suffered. He also understood that emotional health was crucial as any government program. He used the radio on a regular and frequent basis to communicate. The American people heard from the man at the government’s top that everything would be all right.

 

With his election, Roosevelt redefined the government’s role in the country with his New Deal policies. One such example is the government playing a more active role in jumpstarting the economy, assisting banks with policies such as the Emergency Banking Act and Public Works Administration. And for the people, welfare programs, organizations, and legislation that would ensure people didn’t deal with another depression as serious as the one America just went through. One such legislation, the Emergency Relief Appropriation Act of 1935, gave the president a large budget to use on large scale projects like infrastructure and recreation areas. This also led to the creation of one of Roosevelt’s more famous organizations, the Workers Progress Administration, which gave people, especially young workers, the chance to earn a wage that would assist them in getting them to become self-sufficient. As Eric Rauchway would describe in his book, “Great Depression and the New Deal”, the WPA defined a “security wage” as well as a “legitimacy to the once unorthodox idea that Americans deserved a certain degree of job security and a minimum standard of living as an essential part of their dignity. Americans, WPA’s “security wage” suggested, ought to earn a wage sufficient to provide them more than subsistence, enough to allow them pride and independence from their employers” (Rauchway, 8).

 

In previous history classes, my previous professors would present the idea that the New Deal “saved capitalism”; that the New Deal was something everyone was on board with. While Rauchway’s evaluation of the New Deal was generally positive, there were criticisms and points that he presents that I had not considered. As Rauchway showed with the 1939 Institute of Public Opinion poll, the worst thing the Roosevelt Administration did was the “relief and the WPA” while also being the best thing the Roosevelt Administration did (Rauchway, 8). For example, the agencies that Roosevelt created to help state economies were susceptible to mild political corruption. Big city mayors would be able to take advantage of their large voting populations to draw favor from the government and their funding (Rauchway, 8). Later in the New Deal did the government have to tighten their rules on who would have access to these relief programs in response to this potential corruption. For example, the government would narrow down the people who could get relief by such metrics such as their citizenship or their race/ethnicity (Rauchway, 8). 

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.

In Judith Stein’s “Pivotal Decade” preface starts with comparing the 1970s to the 1930s. It was the only decade where “Americans ended up poorer than they began.” (Stein, preface xi). This was known as the “deepest recession” since WW2, because of several factors, including, high oil prices, unemployment and inflation.

In addition, Stein gives an explanation on how Japan and Germany’s competition took place in the 1970s. New changes were needed. Not only this but also, Stein writes about how “the Age of Compression became the Age of Inequality” (Stein, preface, xii). Income and wealth played a big role and were also “redistributed”. She mentions how the Democratic Party and the GOP worked. Finally, the Age of Compression ended in 1973. After reading Stein’s preface, it felt interesting to learn more in depth about the economy and the events back then, since I only took an introductory history course.

Subsequently, in chapter one, Stein highlights how life was better in 1945. For example, Americans were in a much better economic position than other nations. For example, people owned houses and cars. “After WW2, the economy grew 4% a year” and poor people also had the opportunity to gain more. Some economists call this era the “Great Compression” (Stein, 1). Overall, Stein discusses the economic problems, the role of the government, and how problems were solved.

In the reading, “Pivotal Decade: How the United States Traded Factories for Finance Seventies” by Judith Stein argues about the economic issues in the 1970s and how it affected our economy. Stein explains on how America was in a better state in the 1945 compared to the 1970s. The income people received, other issues that were not being solved, and comparing this to other countries.

In 1945, Stein talks about the amount of family owned cars “54% percent of U.S. possessed cars” (Stein 1). Many people were more wealthy back in the past. But during the 1970s, “there were as many private cars as families” (Stein 1). The fall of families own cars was on the rise and the rise of private own ones. There was also a rise in people becoming poor.

In the 1930s, the unemployment was stable “unemployment never fell below 14 percent.” (Stein 2). Many people enjoyed holidays and other types of benefits.  During the 1950s, the amount of people living in cities decreased “Fourteen of fifteen cities with more than one million inhabitants decreased.” (Stein 2) Over the years as this continued, more people began to live in suburb areas. This was due to higher wages and other corporation outside the cities.

Other countries began to catch up to the United States GDP. For example, “In 1950, Japan’s GDP per person was the same as that of the United States in 1850.” (Stein 5) This points out that America was slowly falling behind as years pass by. The income level in Europe rose from “40 percent of American levels in 1950 to over 70 percent by 1973” (Stein 5). That compare to America it seems like Europe was growing at faster rate.

Stein argues that the United States foreign policy was ignoring how the economy progressed. Stein points out that “the U.S. economy grew at a rate of 2.3 percent per year between 1955 and 1961” (Stein 8) Which was a small amount compared to the other countries growth at that time. Stein also explains the lifestyle of 60 percent of all American workers in the 1970s “a toaster that will last for thirty-three years, a refrigerator and range that will each last for seventeen years.” (Stein 14) Many people keep home items for more than a couple of years and some even decades without changing. This point of the living condition of not being able to change anything.

In brief, Stein argues that economic had issues in the 1970s and how it affected our economy. Stein believes that the government was not imposing better policy to help America grow more instead of falling behind other countries. It gave me a better understanding of the issues of the economy and the issues that arise during the 1970s.

The United States of America was going through economic turmoil during the Great Depression. The stock market had crashed and unemployment was sky-high. One thing that helped the United States get out of this economic crisis was president Franklin D. Roosevelt and his New Deal. This is explained in chapter 4 “Reflation and Relief” written by by Eric Rauchways. Franklin D. Roosevelt’s New Deal was able to slowly rebuild the United States economy and create new jobs for citizens.

One way the New Deal was able to rebuild the economy was by creating new jobs. The United States during this time began to give out direct aid to help people that were poor and unemployed, however Roosevelt believed in the idea of work relief. Roosevelt and many other congressmen believed that if young men remained unemployed and unable to provide for their families, they would eventually abandoned them. In the chapter “Reflation and Relief” it says “The spring of 1935 brought a new Emergency Relief Appropriation Act, giving the president nearly $5 billion for relief projects including highways, conservation, irrigation, electrification, housing”(Rauchways). This quote shows how many projects were opened up by the Emergency Relief Appropriation Act. These projects opened up several job opportunities for unemployed workers. Other things such as the CCC also played a big impact in reducing unemployment rates. Young unemployed men would be able to provide for their families by going to camps run by the United States war department. Work relief also added a sense of pride in the workers that direct relief would not have done. In the chapter “Reflation and Relief” it says “Between the immediate effects of relief, which gave Americans not just something to spend, but the ability to regard themselves again as decent and productive citizens”(Rauchways). This quote shows the pride that Americans feel when they are given work and not just handed money.

Another way the Roosevelt was able to fix the economy was to help the banks. He did this by passing the emergency banking act. This act allowed the Federal Reserve System more control over the currency. the main goal of this act was to allow more money to be available. Another thing Roosevelt did to fix the economy was to decrease inflation. One way Roosevelt was able to do this was increase interest rates and moving away from the gold standard.

In conclusion Franklin D. Roosevelt and his policies helped the United States get out of the Great Depression. Roosevelt was able to fix the banks by giving more power to the Federal Reserve System. The Federal Reserve System was able to regulate the money that was coming into the economy. The New Deal was also able to drop unemployment by opening up several new jobs. In the chapter “Reflation and Relief” it says “But its policymakers wanted to accomplish something further and different than the mere conclusion of the crisis: they wanted to make sure the Depression could not happen again. To do so, they expected to change the American political economy forever”(Rauchways). This quote shows how big of a role the New Deal has played in the history of the United States.

In Judith Stein’s Preface and Chapter 1 of Pivotal decade, The United States diminishing decade and fighting to come back from the economical damage that had happened. Upon reading I learned the 1970s was the only decade other than the 1930s where Americans ended up poorer than what we had imagined. Stein provided so much data and facts that were not what we imagined the 70″s era to be where we thought about disco, the Watergate , hippie era just to name a few,she also dicussed that the economy is the foreground. But every economy is shaped by politics. By 1945, Americans had become much richer than people of other nations with the gowth in new technology and produtivity. 54% of families in the United States owned their own cars and began traveling more frequently as Boeing released their firt 707. 44% of the population were homeowners and had migrated to the suburbs after being able to finally afford homes . By 1970, 63% of families were homeowners, moving to the suburbs these migrations were made possible by higher wages, thirty-year GI bill home loans, the application of mass-production techniques to home-building, federal highway construction with over 60% of the population was driving, and corporate decisions to locate operations away from cities to attract a new crowd.

Between 1947 and 1973 disposable income increased 15 percent in real terms. For the first time in history, large numbers of workers had
discretionary income, money that they could decide how to spend. The Keynesian idea states that  promoted employment fostered polices that produced the Great Compression. “Keynesianism was in its heyday in the United States in the 1960s when Presidents John Kennedy and Lyndon Johnson cut taxes by $11.6 billion to increase aggregate demand and investment. (Spending on military items for the war in Vietnam helped, too.) The resulting investment rates of 16 and 17 percent, as a percentage of GDP, equaled those of the boom of the mid-1950s”.

With all these new policies and the goverment  finally taking action to better the economy, places such as Japan and Europe were also developing at a rapid pace. Like the United States, the  Europeans and Japanese agreed that the lesson of the 1930s was that government should shape and stabilize the market while allowing private investors to create jobs and implications on Tariffs also began with the introduction to GATT. The United States looked the other way as Europe and Japan protected markets began discriminating against American producers. The large American market quickly became economic competitors.President Kennedy’s undersecretary of state for economic affairs, welcomed European imports in the United States.They had been a lobbying for the European Economic Community (EEC) in Wash-
ington.American growth rates in the 1950s were lower than those in Europe and Japan. The U.S. economy grew at a rate of 2.3 percent a year between 1955 and 1961.

“The EEC, created in 1957, was really a customs union that violated the GATT. The community ‘‘averaged up’’ tarrifs, increased farm imposts, and kept American coal out with tight quotas”. U.S. exports to Europe fell while military expenditures in Europe continued. Thus, the U.S. balance of payments was in deficit.

Judith Stein speaks on what the Age of Compression was and how it became the Age of Inequality. The Age of Compression officially ended in 1973 after wages stopped growing because of the drop in productivity and equality with more private corporations, with the rate of productivty declining and wage growth falling suit.

In the opening of Judith Stein’s “How the United States Traded Factories for Finance in the seventies” we get a glimpse of what life was like at the time. A period in American history that was already filled with political cynicism was only fueled by the Watergate scandal. The cultural and political events of the day set the scene for what would become the only decade other than the 1930s where Americans ended up poorer than they began.

In 1945 Americans were prosperous when compared to people of other nations, as time went on and we moved further and further from the great depression life improved for the majority of Americans. In 1970 only about 10% of the population was below the poverty line, while back in 1945 more than 40% of Americans lived below the poverty line. The lower and middle class was able to take great financial strides during this time whereas the income of the lowest 5^th increased by 116% and the income of the 5^th gained about 85%. This is what became known as the ‘Great Compression’. The middle class became real.

In Europe and Japan, they had learned similar lessons during the economic hardship of the 1930s. However, they viewed that the state should have more of a hand in the economic process while the US took a more hands-off approach. The economic boom that can be seen in both Europe and Japan during this time is in part due to the Bretton Woods conference and what came out of it. America had realized that it needed other counties economies to be strong or else it would not be able to thrive on its own. This led to an increase promotion of global trade and expansion which then turned out to be an inevitable reality and a pivotal decision that allowed the United States to prosper.