Creating Social Europe VI 1930s Slump in USA: the New Deal

USA: Introduction 48 states + 2 territories: federal structure Public relief: idiosyncratic and local Pop.: 123 m.: 49 m. workers: 6.5m. OAPs –107,000 protected against unemployment –750,000 sickness insurance cover –65+: 10% have pensions: 86,000 in almshouses Depression unprecedented: claiming relief = social disgrace

USA: The Slump : GNP falls by 33% : Farm index falls 50% Unemployment peak: 29% (14.5 m.) 1933 [1932-4: 10 m. unemployed] Results: –State resources, philanthropic resources and personal savings exhausted –Bank failures (mortgage debt) –Family breakdown, mob looting, rent riots

USA: the Slump: political consequences Local states overwhelmed by demand for help Election of mayors (e.g. Detroit) favouring relief – but local tax base dwindles States turn to federal government for help Growing popularity of public social security National Unemployment Councils emerge Hoover (incumbent non-interventionist Republican president) defeated by F. D. Roosevelt in election of 1932

Roosevelt and the New Deal I Immediate action (1933): Emergency Banking Act (shuts banks) AAA – raises farm prices by restricting output (Supreme Court opposition) NIRA – creation of business cartels (Federal support – Supreme Court opposition) Federal Emergency Relief Administration –$500m to states (1933) –1933-6: $3 billion spent by Fed govt on relief. –Relief rate = $30 per month (very low) –[winter 1934: 20 million dependent on dole]

Roosevelt and the New Deal II Civilian Conservation Corps ( ) –For year old single men –Operate in work camps: subsistence wage (tree planting, parks, recreation grounds etc.) –Take on 2.5 million over 9 years Civil Works Administration (1933-4) –$1 billion on schools, airports, roads etc. –Employs 4 million over period ($1 per day) [1934: unemployment dips: CWA wound up]

Roosevelt and the New Deal III Works Progress Administration ( ) –Employs 8.5 m. at cost of $11 billion –[peak at 2.5 m. of 9 m. unemployed – 1936] –Similar to CWA – plus cultural projects –Pay = $50 per month Grants / loans to rural sector and small business n.b. All the above measures designed to be temporary: to meet the emergency

Social Security Act 1935: pensions Non-workers returned to state relief Elderly (1932 – 2m. depend on families) 1931: 100 bills debated in states (5 states introduce tax-based pensions) 1935 Act: a contributory scheme –Joint contributions (below salary ceiling) –Retirement at 65: –Benefit calculated on taxable earnings –No cover for domestic / agricultural work

Social Security Act II Unemployment (support by AFL) – state debate UI bills (Wisconsin law ) –Interstate rivalry (and costs) 1935 Act – unemployment –Federal tax offset system (legal opposition to contributions) –States develop own scheme: covered by 1937 –Result = diversity and partial cover (agricultural / domestic workers not included) 1935 Act – Aid to Dependent Disabled, Mothers and Children (welfare)

New Deal in Perspective Is this Keynesian: does the New Deal work? –Temporary extensions in Federal role –Majority of unemployed remain on (low) relief –Unemployment does not decline until WW2 –Relief workers do not integrate back into labour market (shift: public works to relief) –New Deal does not promote economic recovery

New Deal: theoretical perspectives Liberal pluralist: response to public demand (democracy) Marxist (Piven and Cloward): New Deal is social control by ruling class –CP and socialists active in major cities –Diverted into administrative process –Fall in grass root activism – cuts in Fed help

The Marxist model criticised Skocpol (et al.) –No unity among unemployed. –No evidence of revolutionary intent. –Minor proportion of unemployed organised –CP influence strong among leaders of Workers’ Alliance of America, but not members –Labour (AFL, CIO) supports New Deal: employers oppose it But come to your own conclusions