Great Depression and the New Deal The Great Depression

The Great Depression was caused by the stock market crash of 1929. The 1920s had been a roaring good time for Americans: credit was easy and investments were going up. In the 1920s, it was known as the Installment Plan -- and "enjoy while you pay" was a popular expression used to lure buyers into the market who could not otherwise afford to be consumers. Credit was used for everything -- including stock. However, when credit expands in the form of shoddy loans, a credit bubble is created. The bubble, in this case, popped in 1929 when the market realized no more credit was going to be pumped in as a result of too many loans to undeserving customers were being made (i.e., customers who could not pay them back). With the market correction came the margin calls and accounts had to be liquidated in order to pay back the loans that had been issued to cover the stock purchases. Liquidation occurs by selling, which further pushed the market down; market psychology then kicked in, panic ensued, bank runs occurred, global trade fell off, and Black Tuesday became a day to remember in history. Credit restriction became a staple in local economies, further keeping the market in a depressed state throughout the 1930s.[footnoteRef:1] [1: Alan Brinkley, Voices of Protest (NY: Vintage, 1983), 159.]

The bursting of the bubble revealed the actual state of the American economy -- an economy propped up by credit, driven by unregulated banking, which in the wake of the Federal Reserve Act of 1913, was a sector that was essentially in control of the Republic via its control over the printing of money (the Fed would print the money then loan it to the government and charge the government interest for using it). This created a system of debt that could never be paid back. What was instituted was a kick-the-can-down-the-road economic philosophy (i.e., Keynesian economics) that would come to dominate the 20th century and continue on into present times. In reality, America never got out of the Great Depression -- it just learned to kick the can down the road harder and harder every passing year. Nonetheless, the debt levels of the U.S. are a clear indication of just how bad the problem has gotten.

The social impact of the Great Depression was a call for more centralization, oversight and economic relief. The Glass-Steagall Act of 1933 was passed in order to keep banks from acting as speculators in the market (this Act was repealed just prior to the creation of the housing bubble that led to the 2008 crash). Roosevelt took office in 1933 and pledged federal support in a series of Alphabet Programs designed to put Americans back to work. There was mass migrations, however, as the underlying social ills of the time went unaddressed (Roosevelt, for instance, did nothing to address the issues of Jim Crow and lynching in the South -- or the theft of land from African-Americans); thus, millions of workers poured into urban areas along with migrants from Europe. Crime rose and unemployment continued to be a problem in spite of the New Deal; escapist fantasy became a cultural staple with Hollywood epics like Gone With the Wind debuting to great fanfare. Hoover (in office before Roosevelt) had attempted to contend with the Bonus Expeditionary Force[footnoteRef:2] (aka the Bonus Army -- the disaffected assemblage of veterans gathering in Washington seeking aid in the worsening conditions of the Depression) by unleashing the military on them. This did not win Hoover any friends, and Roosevelt won the election that same year by coming across as a friend to the American worker. [2: Glen Jeansonne, Transformation and Reaction (IL: Waveland Press, 2004), 118.]

The American worker would not "get over" the depression until he got distracted -- by war. WW2 served to whip up in the military-industrial complex (the MIC as it has come to be known, and of which Eisenhower warned the general public in his own farewell address). The MIC would put Americans back to work by dealing instruments of death to nations around the world, profiting from conflict, and making sure that war remained "a racket" as Gen. Smedley Butler foretold in the 1930s after retiring from service as one of the most decorated servicemen in American history.[footnoteRef:3] However, "class war" also became an issue at this time, as Teamsters and unions polarized states like Minnesota, as Jeannsonne notes: "The Minneapolis truckers' strike appeared a prelude to class war because the local teamsters'...

Fr. Coughlin's radio program attracted millions of listeners, and he was at first supportive of Roosevelt, though he later turned critical. Race continued to be an issue as riots in Harlems in the 1930s failed to be adequately addressed. The Great Depression should have been a reset for America in more ways than one, but all that occurred was more of the same, with the country poised to enter into a larger socialist scheme -- the Social Security Act of 1935 being a perfect example of this point.
Part II: The New Deal

The New Deal consisted of a great number of initiatives that evolved throughout the 1930s as economic, political and ideological forces took shape under Roosevelt. There was the Agricultural Adjustment Act (AAA), which gave money to farmers to not grow produce; the National Industrial Recovery Act (NIRA) which set minimum wage and max working hours for the week; the Public Works Administration (PWA), which gave aid to the unemployed and served as a prop for the industrial sector; the Civil Works Administration (CWA), which set up seasonal jobs; the Civilian Conservation Corps, which set up jobs doing reforestation, etc.; the Works Progress Administration (WPA), which put billions of USD into roads, bridges and buildings; and the Federal Emergency Relief Administration. It was not so much an evolution as it was a philosophy of throw everything at the wall and see what sticks type of approach to fueling the economy. The problem of continuing to borrow from the Fed, however, was never really addressed -- and excessive borrowing was what had helped dig the hole in the first place. Spending its way out of the problem and digging deeper the hole (thereby exacerbating the problem) became a concern for Roosevelt as he grew "concerned about the deficit" and so "slashed spending in the summer of 1937, cutting WPA employment by 50% and ordering Ickes to phase out the PWA."[footnoteRef:5] But this was just an example of the kind of fits and starts that characterized the New Deal approach to America's social, political and economic ills. The world was careening towards war and the nation was merely attempting to soothe the effects of the Depression via legislation (Glass-Steagall), policy (Alphabet Soup programs), and social imperatives (ending Prohibition). [5: Glen Jeansonne, Transformation and Reaction (IL: Waveland Press, 2004), 161.]

The ideological aspect of the New Deal was simple: put Americans back to work. The economic consequences, however, were that the government was required to take on debt to employ workers. This was problematic as Roosevelt wanted to combat the deficit, not add to it. The political consequences, therefore, were that in Roosevelt's eyes, the entire world order needed to be reshaped -- and that would happen via WW2.

For many, therefore, the New Deal programs did not address the underlying issue of the Great Depression. Huey Long and Fr. Coughlin, for example, held that the major issue with the New Deal approach was that it did nothing to stem "the steady erosion of the individual's ability to control his own destingy."[footnoteRef:6] Townsend's idea on the other hand was that the government should give everyone over 60 "a pension of $150 a month" with the condition being that the elderly spend the money as soon it comes it (this would kickstart the economy theoretically).[footnoteRef:7] Each of these voices had popular appeal because they were charismatic and spoke to the anger and frustration that the general public held towards its elected officials. The public did not really understood the underlying issues any better than these leading voices did -- and the fact that none of them had any real, substantial plan other than the idealist aims which they put forward to generate support from their listeners and facilitate their own expanding power as demagogues showed that real, effective solutions were hard to come by. The fact was that America was on the hooks of the banks and had been since 1913. Yet the banks were not going to hand back power short of a political mandate that required them to do so -- and such…