The Great Depression saw the birth of the American welfare state, through which the federal government acted to insure at least a basic level of subsistence for the American populace. This naturally increased the degree of equality in the country as the less fortunate gained at least some protection against the economic exigencies of American life. This American welfare state, however, contained an extremely weak conception of the role of government in economic and social life. By European standards it was totally inadequate. And it was racism that limited how far the Americans went with their welfare state.



The major cause for the resurgence of the Democrats and the push to form a welfare state came from the great economic collapse during the Hoover administration. Within a few short weeks of the stock market crash, the economic losses were almost as great as the amount spent to fight World War I, and nearly twice as much as the entire national debt (Allen, 1940:20).


Like Grover Cleveland before him, President Hoover did virtually nothing to assuage the economic situation. And like his Democratic predecessor, he thought that any federal help would be governmental "hand-outs" that would corrupt America's work ethic. Instead of relying on the national government, he stressed the need for local government to act, and the spirit of individual charity and mutual self-help through voluntary giving.

Since the depression greatly affected the middle class as well as other classes, this class saw itself being hurt by the economic policies of the Republicans. Therefore, they started to shift to the Democrats. Franklin Roosevelt's conservatism on racial issues certainly made it possible for the South to move toward accepting the welfare state.


The idea of the welfare state never contradicted the basic American belief in the equality of opportunity. Rather, government was to intervene slightly to insure that the economic system continued to function effectively. Government would limit itself to simply insuring a certain minimum level of economic well-being for its citizens. This was such a limited conception of the welfare state that it would seem that everyone would agree, but in racist America many actually opposed it.


FDR and The Election of 1932

In the face of the great hardships created by the depression, non-intervention in the economy was obviously no solution at all. Accordingly, the public searched for alternatives. They turned to the new Democratic candidate for the presidency, the Governor of New York, Franklin Delano Roosevelt. When accepting the presidential nomination, the governor promised a "new deal" for America. The public wildly cheered the speech, even though it was vague and gave no hint of any intention to expand substantially the federal power.

In the 1932 election the public voted Roosevelt into office. In his inauguration speech he declared that "the only thing we have to fear is fear itself." He then went on to lambaste the financiers, comparing them to the money changers Christ drove from the temple. This was unusual talk for an American president, but the mood of the country shouted approval.

Roosevelt moved fast with near continuous legislation. He even called Congress to meet in special session. Back in Washington, the congressional mail came in with the very loud message "Support the President." Confidence that the depression could be beat spread throughout the land.

The day after his inauguration, Roosevelt ordered a four-day bank holiday to halt massive bank withdrawals. Just over one week after the inauguration, he held his first radio "fireside chat" with the nation. And by the end of his first month he passed the Reforestation Relief Act, which created the Civilian Conservation Corps (CCC) designed to relieve rampant unemployment. The corps employed thousands of young people in jobs that enhanced the nation's outdoors. The next month the Senate passed a bill to aid America's struggling farmers. FDR also took the nation off the gold standard, which put the country on an equal monetary footing with most countries. In May 1933 he created the Tennessee Valley Authority (TVA), a landmark federal program for rural development. And in the same month the Federal Securities Act required registration of securities with the Federal Trade Commission (FTC).

On the last day of May the National Industrial Recovery Bill (NRA) allocated more than $3 billion for public works programs. The act gave government additional controls over industry in an effort to bring the nation out of the current depression. The bill gave the government authority to fix minimum wages, shorten working hours, regulate production, and guarantee collective bargaining rights for labor. It held that the trade associations of each industry would write a "code" prescribing maximum hours and minimum wages and rules of fair competition. Furthermore, the government was to approve each plan.

The plan sounded radical, but the program was actually a modest one of business self-regulation. FDR was no radical. Like Woodrow Wilson, he was rather naive. He thought business would patriotically regulate itself in a spirit of cooperation with the new goals of the nation. And like Wilson, he became more liberal under the pressure of groups on his left and increasing disillusionment with business resistance. In fact, as the government stopped pushing anti-trust suits, business had a field day, engaging in price fixing and production quotas. The situation was so disastrous that the Supreme Court actually did Roosevelt a favor when in 1935 it declared the NRA unconstitutional.

In September the president ordered the outlay of $75 million to clothe and feed the jobless. Combined with state and local funds the relief package totaled an estimated $700 million. The following month FDR introduced the Civil Work Administration (CWA) to create jobs through federal spending.

FDR's policies worked to bring down national unemployment and the voters rewarded him by granting further election gains to the Democrats in the 1934 off-year elections. The Democrats captured additional seats in both houses of Congress, which gave them more than two-thirds control of the House and Senate. In August 1935 the Social Security Act passed into law.

In January 1936 the Supreme Court declared the Agricultural Adjustment Act unconstitutional. This could not, however, stop the tidal wave of support for the new programs. This support was so strong that even though the 1936 Republican candidate for the Presidency, Governor Alfred M. Landon of Kansas, declared that the Democratic administration had usurped the powers of Congress and flouted the Supreme Court, the G.O.P. platform actually embraced some of the New Deal social welfare programs. And the New Deal reforms continued. The Works Progress Administration (WPA), created by executive order, provided jobs for thousands of construction workers, teachers, musicians, artists, actors, and workers of all kinds.

Election of 1936 and Second Phase of the New Deal

The Roosevelt reelection in 1936 heartened the Democrats. Now they had four more years to help bring about changes in the government.  Schlesinger (1959) describes FDR's gradual shift to the left. The failure of NRA led in late 1934 and early 1935 to the rise of a new set of presidential advisers -- Ben Cohen, Tom Corcoran, Harry Hopkins, and Harold Ickes. These men were to the left of Roosevelt, who held substantially to a balanced budget approach to government. Their philosophy was Keynesian in nature. The economic thought of economist John Maynard Keynes, who believed that government should smooth out business cycles by deficit spending, had just been popularized in the United States by Marriner Eccles and Alvin Hansen.

The new advisers had a hard time convincing FDR, but current events gave them some needed ammunition. First, there arose a number of groups to the left of Roosevelt. The populist Huey Long established a virtual stranglehold over the imaginations of the people of Louisiana. Labor, under the leadership of John L. Lewis, also grew more militant. Second, the recession of the winter of 1937 (after the government had made drastic cuts in spending) aided the Keynesian argument. Moreover, increased war spending to aid the Allies seemed to boost the economy.

FDR was never a radical; certainly never as radical as Theodore Roosevelt with his New Nationalism. The president did move to the left politically, but he was still closer to the "anti-business" tradition of President Wilson. His overall conservatism is illustrated in his 1938 appointment of a Temporary National Economic Committee (TNEC). This new committee had the task of getting business, not government, to take the initiative and expand production, thus encouraging economic growth.


Congress had dominated the Republican presidents following the end of Wilson's second term, but the blast of popular support for FDR in the 1932 election changed this situation virtually overnight. Congress supported the president during the early days of the anti- Depression battles. During FDR's second term, a conservative coalition of Republicans and Southern Democrats blocked many of the president's domestic programs. And near the end of the president's fourth term, Congress was in open rebellion against his plans. In fact, Congress passed the Legislative Reorganization Act of 1946 to strengthen the legislature's position vis--vis the executive.

As in all previous reform cycles, the Supreme Court was out of step with the times. In 1935 and 1936 the Court struck down two New Deal measures, the National Industrial Recovery Act and the Agricultural Adjustment Act. Just after his second inauguration, FDR started to fight the Court with a plan to name up to six additional justices if those justices seventy years of age or older refused to retire. Former President Herbert Hoover declared that the president was trying to pack the court, and the Senate killed FDR's court reform bill by a vote of seventy to twenty. Nevertheless, the assault on the court did have an effect on the justices, and the court gave the New Deal the go-ahead with more favorable rulings. There is evidence, however, that beginning in 1937 the Court moved to the political left on its own initiative. That year the Court upheld every New Deal measure presented to it. Apparently, the severity of the depression itself and the widespread misery it left in its wake weakened the Spencerian laissez-faire doctrines, on which so many justices had been raised. In January 1939 the Court upheld the validity of the TVA and in February 1941 ruled the Fair Labor Standards Act (creating a forty-hour week) constitutional.

Eventually, the president was able to change the political composition of the Supreme Court. FDR's longevity in office made it possible to appoint liberal justices, such as Hugo Black, Felix Frankfurter, and William O. Douglas.

The American Welfare State

According to liberal theory, a new era had dawned in America. Not only would government intervene to keep the economy healthy, it would also provide some protection for individual citizens against economic adversity. The stock market crash of October 1929 and its aftermath seriously weakened the optimistic faith of the conservatives that the economic system, if just left alone, could automatically balance itself. In response to the ugly reality of one-third of the nation's work force being unemployed, legislators created ad- hoc measures that eventually laid the foundations for the modern welfare state, even if they never used this phrase. Such talk would have been too controversial and too much of a direct assault on the American belief in equality of opportunity and laissez-faire. The Great Depression momentarily challenged the fundamental belief in the American way. A few intellectuals and some workers lost faith in the system and came to sympathize with communism. Most of the nation, however, remained conservative, with a majority accepting the welfare state.

The problem with this liberal interpretation is that it does not see the inadequacy of the American welfare state. Although FDR did start the American welfare state, from the very beginning it was limited in its conception. The end result was a very restricted welfare society. Compared to programs developed in other welfare states, the American system had few programs and these were of poor quality. There were also problems the president did not even address. For instance, he did not push for a larger role for government in business affairs. (Roosevelt did obtain some support for labor in the Wagner Act and related policies.) FDR primarily left business alone and concentrated on social reforms. This is a tremendous failure for it has effectively delayed the nation coming to terms with changes in the economy even to the present day. The Japanese and German economic successes of the 1990s has now high- lighted this failure of the New Deal.


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