Show Hide image

From the NS archive: What’s left of the New Deal?

11 January 1936: In the US to assess Franklin D Roosevelt’s New Deal, HN Brailsford finds a watered-down affair.

Sign Up

Get the New Statesman’s Morning Call email.

In 1933, the American president Franklin D Roosevelt announced the New Deal, a series of financial reforms, business regulations and public works programmes designed to lift the country out of the Great Depression. Three years into the Deal, HN Brailsford, a prominent writer on social affairs and a regular contributor to the New Statesman, travelled to the US to see for himself the results of FDR’s scheme. What he found was a watered-down affair: the courts were blocking reforms, unemployment remained high, regulation was foundering and optimism waning. There had been changes for the good, he reckoned, but they were neither inviolable nor had gone far enough.

***

To find the US, after a two months’ stay, only moderately interesting, was for this traveller a new experience. I had last seen New York in the grip of the banking crisis. Every second person to whom one then talked, from taximen to professors, looked to Mr Roosevelt as a Messiah. Thereafter, for a year or more, even one’s friends on the left spoke of the New Deal in a language of excited optimism that was not a little bewildering. Today one has a perception of shrinkage. Everything is considerably smaller – the stature of the President, the dimensions of the crisis, the creative ambitions of the New Dealers, the hopes of the average man. If anything has grown, it is the fury of the conservatives, who talk of this smiling President much as our own Tories used to talk of Mr Lloyd George in his Limehouse days. Save for their anger, this continent has turned moderate. Business shows a moderate recovery, and the enthusiasm of the liberals a moderate slump. The creative rage is over. The permanent outlines of the US one used to know emerge again, like skyscrapers rising at Battery Point above an autumnal mist the towering shape of Big Business, the massive bulk at which political regulation chisels in vain, the rigid Constitution, the conservative Supreme Court.

“But after all,” the reader may say, “is anything left of the New Deal? Has not the Supreme Court upset all its legal foundations?” That is so, and there is more to come. This week’s verdict against its entire agricultural policy is more sweeping than the administration had expected. It was prepared for the loss of the processing tax, and had a sales tax ready to take its place. The blow looks staggering, for it seems to impose on the federal government the most rigid limitations of laissez faire. The Court virtually forbids any regulative activity whether in the field of industry or agriculture, and we must expect that it will take the same view of labour legislation. But the chaos involved in the total loss of the Agricultural Adjustment Act (AAA) would be so intolerable and would so rapidly smash such recovery as there is, that I believe a way round this prohibition must be found. Clumsily and with some gaps I think that local equivalents of the AAA will be built up in each state before the spring crops are sown. The farmers’ vote is strong enough to compel even conservative governors to act. Certainly I found that from a distance we had all exaggerated the effect of the previous judgments of the Supreme Court.

The New Deal meant primarily three things, and until this week all of them remained nearly intact. First, it meant the rescue of the farmer from total bankruptcy. Parity between agricultural and industrial prices at the pre-slump level has been on the whole achieved, and as a consequence the farmer’s buying power has been in great measure restored. Secondly, though the National Recovery Act has been declared unconstitutional, it is still true, however surprising this may be, that its achievements survive, though there is no legal right to enforce them. Industry is still organised in voluntary rings, which maintain prices, though they have ceased to raise them, and do in the main preserve the gains in wages and conditions that fell to the lower strata of the workers. There has, indeed, been some whittling at the Codes, chiefly in the South and in the retail trades. Strikes to maintain these gains are fairly frequent, and even in New York one may see the union pickets pacing rapidly, with their spoken and printed appeals, before a not inconsiderable number of stores.

One feels that the outlook for labour is precarious, both as regards wages and collective bargaining, for save in a few exceptional trades it failed miserably to take its opportunity for organisation. It will go on failing, unless the left, now under the leadership of John F Lewis, the miners’ president, can drive the incredibly conservative American Federation of Labour towards industrial unionism. None the less, it is still broadly true that the gains of the New Deal in the matter of wages, hours and child labour have been held.

Thirdly, through public works and relief there is still injected into circulation an immense though diminishing flood of dollars, which goes to maintain the demand for consumers’ goods. In all these three ways, then – by increasing the buying power of the farmers, the poorer workers and the unemployed – the immediate object at which the New Deal aimed has been in a measure attained. The result is a moderate business recovery.

Statistics bear witness to this recovery. The “business index” of the New York Times stood for the last week of the Old Year at 96.5. This figure is a percentage of an “estimated normal”, which was last recorded as a fact in the second quarter of 1930, after the index had risen to 113 in the middle of the boom year, 1929: “normal”, that is to say, means much less than maximum potential activity. The encouraging aspect of this index is that its movement throughout 1935 was steady (from 80 to 96): for the first time it hardly sagged in its ascent. The discouraging aspect of it is that the circulation of physical goods, as measured by railway freight car loadings, is at 69.4 seriously behind production, though it too has risen steadily.

Another indication may be worth quoting – the total of national income compiled by the Department of Commerce. This stood in 1929 at the colossal figure of $81bn; dropped in 1932 to $39.5bn; had risen in 1934 to $48.5bn, and promised to stand for 1935 at an estimated $57bn. “Prosperity”, as Americans have known it, is still far ahead: but “normalcy” (to use President Harding’s ugly word) is apparently in sight – for business, but not yet for the masses.

Here we reach the paradox of the New Deal. Business is nearly “normal”, yet unemployment is only somewhat less terrible than it was. Here, as usual, the official statistics fail us. The reckonings of the American Federation of Labour are, however, received with respect. It estimated that 15 million Americans were unemployed at the worst moment of the slump; it reckons 11 million are unemployed today. It includes, however, in this total the 3 million men employed on emergency (Works Progress Administration) public works (mainly “made” work paid on a quasi-charitable basis, at rates somewhat below the prevailing levels) and also the half-million young men in the Civilian Conservation Corps. The administration figures for five wholly idle millions actually on relief, not including their dependents. There are, then, at this nearly “normal” moment, perhaps seven, certainly five, million totally unemployed, and there would be another 3.5 million if the “made” work – much of it of doubtful utility – were to cease.

These are ominous figures. They seem to mean that failing one of two things, either a big increase in world trade and the resumption of export at the old figure, or else a great expansion of the internal market, the American system must carry a permanent burden of unemployed workers of at least six million, and some say eight. The lower figure, in the ratio of population, would answer to two million in our island. I found the average middle-class man disposed to acquiesce in this figure, with no sense of defeat: it is one of the “over heads” that business must carry. The President gave on 30 October some figures that have a bearing on this phenomenon. Taking as his basis 1930 (as a whole a less than “normal” year) he said that in 1935 industrial production now stood at 90 per cent, while the number of the employed had dropped to 82 and their total earnings to 74 per cent. The last figure may be disregarded, since the cost of living has dropped substantially. But the second figure is alarming, since it shows that under the New Deal tighter organisation and harder driving enables fewer men to produce more goods, even when (as is generally the case today) no new machinery has been installed.

In criticising this result American progressives agree in their censures on the President’s attitude to public works. Bent on spending the maximum on wages, the administration has chosen only schemes that required little expenditure on material. There has been, therefore, little improvement in the permanent equipment of this nation, and the revival in the constructional trades has been slow – though steel ingot production (thanks in part to rearmament) now stands at 79 per cent of “normal”. The hope of an ambitious housing scheme faded, as the real estate interests, which often control municipal government, hardened into opposition. There has been a little slum clearage, some building of garden suburbs with the aid of federal credit, and a good deal of similarly assisted repair and reconstruction work. But the scale of it all has been small, whether one measures it against the need of the poorer part of the population, or the distress of the building industry. This was both bad economics and poor politics. Assuredly there has been some fine and imaginative work, notably the Tennessee Valley Scheme (now in mortal danger), certainly the campaign against soil erosion, and perhaps the Florida Ship Canal, but in general public works rank as a grave disappointment.

One man in this administration, to my thinking by far its ablest and most attractive figure, sees clearly enough where the achievement halts. Mr Wallace has to his credit that he has subjected agricultural production to quantitative planning. It distresses him that he has had to use the new technique only for contraction, but he insists that it could as well be used for a regulated expansion. How to attain it? He spends his considerable powers of persuasion (as yet with small visible effect) on the attempt to make a creditor nation understand that it ought to have a “passive” balance of foreign trade. From that he will turn to figures that measure the actual under-nourishment of the poorer stratum of the industrial working class. If the income of seven million underpaid families could be raised from $1,500 to $2,000 per annum, agricultural production could be expanded by 15 to 20 per cent. But how, given the Supreme Court, can it be raised?

On such lines moves the best as well as the shoddiest thinking of this Republic. The enthusiasm for a new type of regulated capitalism is fading. Few envisage any change in the organisation, motive or ownership of capitalist production. The US has not begun to conceive a shift in the distribution of economic power. What it is thinking about, sometimes sanely, often crazily, is as yet only the more equitable distribution of income. This is the theme of the quasi-fascist demagogues, the late Huey Long and Father Coughlin, and of the Townsend Planners, whose promise of an old-age pension of £40 a month is greedily swallowed by gullible millions. It inspires the veterans’ bonus claim. It emerged as a timid increase in taxation under a clap-trap slogan (“soak the rich”) in the last Budget. It probably will inspire, so I gathered, the chief future efforts of the New Deal. The idea is to move towards a differentiated income tax that will penalise antisocial – or, as the President would say, “unethical” – forms of wealth, notably the gains of speculation. As the creative and constructive impulse of the New Deal weakens, its emphasis falls on distribution. And this, given the Constitution, is inevitable. Until it is drastically amended, constructive control of industry, even on liberal lines, is barely possible. But within limits the weapon of taxation may be used.

When I sailed, just before Christmas, no sober observer expected that the President would dare to raise the issue of the Supreme Court and the Constitution at the coming election. The Court plays in the US the part of our House of Lords, but it has, even among the masses, a prestige that the Lords never enjoyed. Progressives of high courage assured me that to challenge it would be the most fatal course the President could adopt – though all of them in private regard it simply as the tool of Big Business. Will this last judgment compel him to fight? It may be so, but I incline to doubt it. The odds are, I think, that he will rely on the fears of farmers and workers that the Republicans will cut relief. The more conservatives growl over lavish expenditure, the more acute will be the anxiety of the masses. The decisive vote that will re-elect Mr Roosevelt will be cast by the millions who now have a vested interest in the least constructive aspect of the New Deal.  

Read more from the NS archive here. A selection of pieces spanning the New Statesman’s history has recently been published as Statesmanship (Weidenfeld & Nicolson)