History of American Business: A Baruch College Blog

Franklin Delano Roosevelt gained public and congressional approval of the New Deal on the strength of American ideologies of capitalism. The chapter Reflation and Relief, by Eric Rauchway, discusses the approach Roosevelt took in navigating policies of the New Deal, furthermore, it presents the way in which he immersed the federal government into the American economy and households of ordinary American. Rauchway argues that Roosevelt understood American capitalism as an all-encompassing component in the American way of life, intertwined in the economic and political systems, making him proficient in creating, altering, and nullifying New Deal policies.
In creating the New Deal, as Rauchway argues, Roosevelt did not offer specific plans for general policy making, rather, he sought to provide Americans with a way out of the economic plight, caused by the Great Depression, using tactics that aligned with the ideals of American capitalism. Owing to American reliance on free enterprise, Roosevelt sought to enact public work plans that would have a “positive implication on commerce.” (Friedman 118) Congruently, he placed individuals in charge that were “mindful of Americans’ attitudes toward public assistance,” (Rauchway 6) making possible programs such as the Civilian Conservation Corp, the Civil Works Administration, and Works Progress Administration. Public support for these programs emerges through the participation of hundreds of thousands of young men, while congressional support reveals itself in the congressmen’s willingness to ascertain qualifying individuals. Furthermore, Roosevelt recognized when to alter or banish these programs; for example, he terminated the CWA, in part due to the “gratitude with which American greeted it,” (Rauchway 5) and set up the WPA as an alternative work relief program. Although, as Rauchway argues, the Public Opinion polls only held a 5 percent margin as to whether the WPA was the worst or best thing the Roosevelt Administration had done, the idea that Americans were productively employed supported their ideals of economic freedom.
Despite these ideals of economic freedom, the New Deal provided for unprecedented involvement of the federal government in the economy, as well as the daily lives of Americans. The Roosevelt Administration commenced a policy of “stimulating, monitoring, guiding, and regulating business.” (Friedman 85) He began with the Emergency Banking Act, shutting down banks, and demonstrating to the public his commitment to take crucial decisions; additionally, he was affirmative when addressing the public stating “there is nothing complex, or radical, in the process.” Congress complied with his actions, and it was later written by Raymond Moley that “Capitalism was saved in eight days.” (Rauchway 2) Henceforth, the Roosevelt Administration became heavily engaged in overseeing the economy, measures were taken such as inflating the currency, offering direct aide to unemployed, and ordering Americans to return their gold to federal banks in exchange for currency. Through these policies, Rauchway argues the Roosevelt administration adequately fought the depression, but he also believes the administration “expected to change the American political economy forever.” (Rauchway 10)
Although the Roosevelt Administration fought the Great Depression and changed American politics, economics, and lives, the Administration achieved it in a way that did not threaten American capitalism. These deeply imbedded ideals represent a substantial part of the American way of life, and it was crucial that Roosevelt took them into consideration when navigating the New Deal. It is evident in the Rauchway reading that Roosevelt largely agreed with these ideals and worked to keep them intact while facilitating the growth of the federal government and the implementation of new policies.

In Judith Stein’s “How the United States Traded Factories For Finance in the Seventies”, Stein tells readers how she learned that the 1970s was the only decade other than the 1930s where the Americans ended up poorer than they began.

In 1945, Americans were a lot richer than people of other nations. 54% of families in the United States owned their own cars. 44% of the population were homeowners. But more than 40% of the population still lived below the poverty line. By 1970, 63% of families were homeowners. There were as many private cars as there were families. 10% of the population were poor. After WWII, the economy grew 4% per year. The income of the lowest fifth increased by 115% and the top fifth grew 85%. Between 1947 and 1973, disposable income had increased 15%.

John Maynard Keynes showed that the economies lacked mechanisms to attain full employment. Through Keynes’ research and studying, he had discovered that the governments could either spend money or reduce taxes to increase the demand that would create more private investment, which would lead to full employment. Keynes believed that mass unemployment was not right and that it threatened free society and civilization. It was Keynesian idea that the state could “promote employment fostered polices that produced the great compression”. President Kennedy and Johnson had followed such ideas as Keynesianism was as it highest peak of popularity in the 1960s. Taxes were cut by 11.6B to increase demand and investment. The resulting investment rates of 16%-17% was equal to those of the boom in the mid-1950s. In 1969, the unemployment rate fell to 3.9%. Keynes became “Man of the Year” and Economists became an honored profession.

The 1970s had the deepest recession since World War II. The United States had growing and permanent trade deficits, declining productivity, rising oil prices, high unemployment, and inflation. Stein states that the economy is shaped by politics. Postwar United States liberalism was created by the New Deal. It was thought that high wages and regulated capital would create and sustain U.S. prosperity.

During the Age of Compression (1947-1973), income and wealth were mildly redistributed. Economic growth had soared and U.S. economic superiority was vast. But the United States suffered its first trade deficit, since 1893, in 1971. Stein explains that the Age of Compression became the Age of Inequality. The Age of Compression officially ended in 1973. Wages stopped growing because of the drop in productivity. Productivity had continued to decline until 1995 and wage growth could continue to fall.

 

The author of “Reflation and Relief” elaborates on the key details of Frederick Roosevelt’s initiatives and reformation that led to the nation’s upbringing after the Great depression. The economic downfall became the worst time for many Americans due to the lack of jobs and money circulation. During a time of high unemployment rate and low GDP President Roosevelt started by adjusting the banking system days after taking office. The Banking act of 1933 increased federal reserve power and allowed banking regulation. The author says “ if the fall of the commodities cannot be checked, we may be forced to an inflation of our currency”. Roosevelt would have to cut dollars loose from gold by raising interest rates and making the act of borrowing money more expensive. By reducing the circulation of dollars’ convertibility to gold, the USA and other Latin American nations can maintain a gold reserve. If money would have been easy to borrow then there would have been more investment and more jobs around but The system’s bankers chose the gold standard over the relief of domestic troubles and Americans had to suffer for a short period.
The 1933 Emergency banking act required Americans to turn in their gold into the federal reserve and prevent them from having gold in large amounts. The 1933 Civilian conservation corps was also put in place for young men with no experience who are looking for jobs. A couple of months later FDR also passed the( FERA) Federal Emergency Relief Administration which directly worked on struggling Americans who necessitated cash relief and jobs. I believe that FDR’s initiatives and reformation did create an impact on the American people during a time when they required government assistance for survival and its long-term effect. The New deal, which was a series of laws passed by FDR either became “the worst thing the Roosevelt administration has done” or “ The greatest Accomplishment”. Although the increase of jobs rised even more at the start of the war, laws passed by FDR during the great depression did eventually change the way the banking system is managed today.

 

Preconception about the institutionalizing of The New deal, the objective of this initiative was to restabilize the United States economy to prevent circumstances such as the Great Depression during the 1930’s from occurring again. Noting this, one of the key points during this time was the documented unemployment rates that were at an all time low in comparison to the rates during the Great Depression which was used to demonstrate that the New Deal was a success to the nation. The programs that were introduced allowed for Americans, mainly those in the middle class, to have access to “discretionary income” which would further aid companies and is a cycle established from this (Stein 2). What swerves me during the middle part and heading towards the end of the chapter is how undervalued actual unemployment rates were and the methods that were used to achieve said low unemployment percentages. Stein elaborates on how instead of the unemployment rate being around 3-5 percent realistically they should have been around 20-23 percent as the use of daily surveys were what allowed these low unemployment rates to surface. The use of daily surveys does not take into account other variables such as continued labor for the same people and it can be said that this format of obtaining the unemployment rates was very flawed. 

During this read what also intrigued me was the institutionalization of Keynesian ideas into the United States. Keynes’ ideology as far as seeing unemployment as a threat to free society and civilization aided the idea of The Great Compression in the 1940’s. Prior to this read I had heard about this concept of Keynes economics from previous class discussions, although it was not something I was completely familiarized with. Viewing how Keynesian economics aided the United States during a time where they were starting to fall behind in comparison to countries such as Europe and in Japan where they were starting to see economic progress as well. A question that arises from this reading is what flaws if any come about from this new Keynesian economic model as with everything that becomes institutionalized in society has flaws or setbacks that take time to adjust to these new policies institutionalized. 

Stein’s use of international comparisons added extensively to my understanding of the time period in question. Prior to this course, the books I have read on the subject of American history, focused primarily on the inner workings of American society (specifically politically and culturally). Stein uses an interesting approach in this book, as she compares the political party in power in the US, to the political party in power in European countries. “In the 1950s, conservatives headed European governments, too— Konrad Adenauer in Germany, Harold Macmillan in England, and General Charles de Gaulle in France.” (Stein, Chapter One: Politics and Society) The author then explains how during the time of “postwar prosperity” both American and European governments did not long for progressive governments (Stein, Chapter One: Politics and Society). While I had learned from my previous studies that the U.S. experienced a great economic improvement after the conclusion of the Second World War, I have not learned about the effect of this time period on European politics. Furthermore, I have not learned how U.S. and European politics reflected and mirrored each other. Stein writes, “But in the 1960s the moderate left regained power in the United States and Europe.” This adds additional support to prove the notion that U.S. politics do not form in a bubble. I think this is a really interesting example of the effect of globalization, and the impact it can have on a political party’s success. Politics in the U.S. and European governments do influence one another, even if traditional history textbooks may gloss over this fact. 

 

In order to demonstrate that prevailing notions about the plentifulness of the time period may not indeed be accurate, Stein employs various figures of the average yearly incomes for families of various socioeconomic levels from the 1940s through the 1950s. Instead of basing her argument on numbers and statistical data alone, Stein offers a close examination of a family’s budget that was ranked “intermediate” by the Bureau of Labor Standards (Stein, Chapter One: Politics and Society). Stein writes, “The husband will take his wife to the movies once every three months and that one will go to the movies alone once a year” (Stein, Chapter One: Politics and Society). This is just one example of the incredibly specific examples given by Stein. I believe that writing out the budget in this way, allows readers to gain a better understanding of this time period and truly understand the living standards experienced by the masses. In addition, I think using these forms of evidence creates an incredibly strong argument about perception of a historical time period, in comparison to the reality of everyday life during this time period. 

 

The United States diminishing decade of its collapsed economy during the Great Depression led to years of nationalism and unification among the people who shared mixed sentiments of struggles and necessities of moving forward. War signified prosperity, a new hope of employment, and attempting to achieve success in leaving behind poverty. World War II employed many people who desperately needed a boom in the economy. More than 40 percent of civilians in the United States live in poverty (Stein, 1). It was essential for the economy of the United States to improve, and during the 50s and 60s, the dream of wealth and progression continued after regulations from the New Deal addressed by President Franklin D Roosevelt. The New Deal Program helped the economy grow, giving people opportunities in banking and housing and helping major airlines cooperate so investments could continue (Stein,4). Stein argues that the economy’s stability should have continued if the focus was brought upon problems on imports, international affairs, and increasing exports. The battle against communism and unwillingness to grow the economy allowed Japan and Germany to rise, taking advantage of the level of imports permitted in the States.  The fear of communism held back the United States and blew money on investments in militarization and discounting exports.  Even though the issues of recessions were brought upon the United States, the country only had limited options in protecting the free world. Communicating with other countries might have been the better option than taking alternative routes toward violence and mass spending on a war that wouldn’t end. Stein disagrees with the primary focus of the Democratic party on environmental and education, and medicare issues rather than the economy of the United States. Despite the Democratic poor execution of these policies, each of these programs was necessary for the people’s health, and shedding light on these issues could have been the one unifier of the country.  Stein criticizes the leadership of democratic presidents such as President D. Eisenhower for not repealing the New Deal and leaving exposed GDP growth only rising by 2.3 percent from 1955 to 1961 (Stein, 12). The effects of anti-war sentiments and protests from many organizations and university students had a significant impact on the separation of the country’s loyalty and trust in its government. Despite the constant protest, the United States obligation was to prevent the spread of communism, affecting people’s confidence and the economy.

In a time of serious economic downfall such as the great depression, one can imagine the number of problems that the country has to face for the economy to collapse. Yet one president managed to take the responsibility to bring America out of this recession. In the reading “Reflation and Relief” by Erik Rauchway, Franklin Delano Roosevelt became the president of the United States on March 4, 1933. At a time when every part of the American economy had collapsed. These included banks, farms, factories, and trade. FDR would move on to tackle the recession through the program he called the “new deal”. This idea of the “new deal” was to promise nothing and to experiment with different ideas and keep the ones that worked. Furthermore, FDR’s “new deal” not only tackled the current recession but also worked to prevent such instances from repeating themselves in the future. A major difference that sets FDR aside from other presidents is that he would explain the situation to the public and then give his response on how he was going to tackle the situation. FDR did this through a series of Fireside chats where he would give evening radio addresses to the American people. FDR managed to revive banks by pausing gold transactions and then using the emergency banking act to reorganize banks. Followed up by FDR’s executive order to prevent Americans from holding gold, unless it’s a small amount, and turning their gold in for other currency such as the dollar. This played an important role because by luck overseas investors started selling their gold for dollars. 

In addition, FDR’s administration didn’t give money in the form of loans to the public like Hoover’s administration, instead, they gave money in the form of relief grants. However, Roosevelt saw that giving money away like this wasn’t going to solve anything. Therefore, he started creating programs like CCC, PWA, and CWA to create jobs for those unemployed. So that this massive labor force can finally be put to work and solve the problem of unemployment. This wasn’t enough to help with the problem of high unemployment so he replaced CWA with WPA. Although WPA was criticized for leaving room for mild political corruption, however, it offered a security wage that paid them more than what private bosses wanted to pay.

The detail that interested me was the idea that 23% of Americans picked “Relief and the WPA” as the worst thing the Roosevelt Administration has done and 28% picked it as the greatest accomplishment of the Roosevelt Administration. This was interesting because from the looks of it both the relief and the WPA seemed to only help Americans, so it sticks out when almost a quarter of Americans don’t like it. The 5 percent difference was seen as a political difference to the democrats. Rauchway uses this part to show how the relief helped Americans to push through the recession, while the WPA helped Americans to regard themselves as decent and productive citizens. Americans were worried about the potential for political abuse and the American prejudice against federal relief mainly republicans believing that the government should not interfere with society and the economy.

The reading “Reflation and Relief”, by Eric Rauchway, provided very insightful information about Franklin D. Roosevelt’s ideals and his core beliefs in business and his New Deal program. In 1933, FDR began to work as the figurehead of the country, when the country’s economy was in shambles, FDR pursued redemption and to even better the economy so that such a decline would never again repeat. The impressive part was that FDR adopted this isolationist reconstruction plan, without the help of other nations, FDR was able to steer the economy back into place and restore all businesses that were failing and in decline. However, by far one of, if not the most, crucial change FDR implemented was towards the banks. As someone who is not too familiar with the feats of most presidents, FDR was indeed was one who stood out uniquely. Due to his efforts, FDR changed the standard gold exchange for money, thanks to the Emergency Bank Act of 1933, to halt the exchange of gold, and the 1934 Gold Reserve Act, that boosted the price of gold, and lessening its circulation in the economy. However, luck was strangely bestowed as other nations were willing to exchange gold for dollars, a surprising turnout for everyone.

FDR was hailed a good leader for his New Deal was noted to have done much more good to the nation than previous presidents. The nation was too loosely lax with individualism when it came to business, they let monopolies and depressions occur because of the laissez-faire system. FDR’s heavy enforcement on government intervention. Thanks to his efforts, the government played a bigger role stepping into the fray, and helped more individuals than hurt. The New Deal congress was able to grant more jobs to healthy men, give them a job for any and every field in the US, business, land, agriculture, and military occupations were in supply to a lot of people.

It was quite a read for someone not adept in presidential history, I had heard of FDR before, I just never knew how big a deal he was, I can understand that every president has their pros, flaws, and shortcomings, but I can understand that the role is more daunting than it appears. I for one have a new found respect for FDR, his time in the head seat was longer than most, and his efforts actually turned the economy around and helped quite a lot of people, even up till today.

It is widely known that the Great Depression of 1929 triggered World War II, but I wanted to know more about its causes.
To do so, we must first consider the causes of the Great Depression. As discussed in class, the United States, which had suffered little damage in World War I, had become the creditor nation for the war expenditures and reparations of European countries. This led to a booming U.S. economy and a disproportionate increase in capital investment to the actual situation. However, European countries, which were the main export markets, set up protective tariff regimes in order to restore their economies. Therefore, products made with that capital investment could only be sold to the domestic market. Thus, the Great Depression was triggered by the motivation of capitalists, who gradually realized that there was an oversupply, to sell their shares before the value of their capital fell.

As noted on page 87 of Friedman’s “A Very Short Introduction: American Business History,” Hoover, then president, tried to revive the economy through market forces alone, in accordance with laissez-faire, the Republican Party’s policy. However, the economy was not able to recover. In 1930, he passed the Smoot-Hawley Act, which raised tariffs on agricultural and industrial goods. This was effectively a protective tariff system.

Other European countries also introduced block economies, whereby trade was conducted only between colonies and their own countries to prevent the outflow of their own currencies. Thus, it can be said that the U.S., with its large home market, and European countries with colonies found a temporary way out of the Great Depression. However, European countries without colonies, Germany and Italy, were unable to introduce a block economy, and Germany in particular was in economic distress because the issue of reparations for World War I had not yet been resolved. In the Far East, Japan’s economy was growing at the same rate as the other major powers, but without colonies, Japan was helpless in the face of the Great Depression. Thus, the world was divided into the Axis and Allied Powers, which were established by Japan, Germany, and Italy. The Second World War began with Germany’s invasion of Poland in Europe and Japan’s attack on Pearl Harbor in the Pacific.

When Roosevelt took office his goal was to tackle the situation in the United States first before dealing with oversea economic affairs. He put the New Deal into effect to hopefully solve the current crisis the country is going through and to make sure that the crisis won’t happen again in America. 

I feel like that was the best choice to make because if you can’t solve the crisis your own country is going through, then how can you tackle the situation aboard. Roosevelt sees that his country need help in recovering from this financial debt. That’s why when he won the presidency his first duty was to come up with a plan to help the people in the Unties State. The New Deal was put in place to try and end the misery that the American people is going through. The New Deal also help decrease the unemployment number by putting people back to work and climbing out of the great depression. During that time company rebranded itself and was trying to create more jobs for the people to have and support their living situation. The New deal was also trying to get young unemployed and unskilled people into the workforce because when the New Deal was put in place they figure out that the younger people are most affected by this financial crisis. 

When Civil Work Administration (CWA) was created it was meant to provide work to employees, which as jobs like fixing up city halls, docks, and public roads to rebuild the economy and the lives of Americans. It was a policy to give jobs to Americans but at the same time rebuild the country as a hold from the great depression. During the great depression, people were out of work and they didn’t have enough money to support their families. Moreover, they didn’t have enough money to pay the worker. 

Jobs that help Americans come out of the great depression were mainly repetitive. It was like an assembling line job where you do the task over and over again to finish productions. These types of jobs did give millions of people jobs after the great depression, and it drive up productions which mean it help build more economic income for the company and the country.