Presidency of Franklin D. Roosevelt

 

In the history of USA Franklin D. Roosevelt was one of the famous President of the United States, who had taken several steps to uplift the USA. The ‘New Deal’ is the name given to a series of actions taken by the Franklin D. Roosevelt administration to take American people out of the depression prevailing in the country at that time and to lead them to a new future. Though these actions did not form a part of a carefully planned scheme and were taken to deal with the immediate problems yet all these actions were mainly guided by three principles Relief, Recovery and Reform.

Relief implied that millions of the American citizens who were in desperate need of food and money had to be helped. Recovery meant that the country had to be taken out of the depression. Reform implied that the glaring defects in American society had to be set right to take the country forward.

It may be noted that the chief objective of the New Deal was not to destroy capitalism, but to preserve it by keeping a balance between different interests. Roosevelt explained the objective of the New Deal thus:

“What we seek is balance in our economic system balance between the wage earner, the employee and the consumer”

He further noted that the programme of the New Deal was not inspired by any foreign ideology as believed by certain people, but an extension of the programme of progressives Theodore Roosevelt and Woodrow Wilson. The laws caused by Franklin D. Roosevelt’s administration dealing with banking and child labour were merely advanced on the legislation under Woodrow Wilson.

It to be observed that though New Deal was concerned with relief, recovery and reform all these objectives were not simultaneously. For example, during the first two years, the principal emphasis was laid on relief and recovery. The problem of reforms was attended to in the years. Let us examine the measures about each of these objectives in some details.

Relief Measures of Franklin D. Roosevelt

Federal Emergency Relief Administration

When Roosevelt assumed office as President one of the pressing problems which attracted his attention was the question of giving aid to about fifteen million unemployed, who were on the verge of starvation. To provide relief to these people he moved further than what Hoover had already done. In 1933 the Congress set up the Federal Emergency Relief Administration (EFRA), which made loans and outright gifts to the states and local authorities to provide work relief or outright dole to the unemployed.

As it was not an easy job to provide work, most of these agencies provided ‘dole’ (an outright payment in money or grants of clothing and food) to the unemployed. But, in due course of time, the Federal Government started emphasizing that instead of ‘dole’ work relief should be provided because doe led to a loss of self-respect and technical skill.

Therefore, in October 1933 the Federal Government (C.W.A) as a branch of the Federal Emergency Relief Administration. The effort was made through C.W.A. to provide job to persons who would have continued to live on relief.

Work Progress Administration    

As the dine rolled, the administration realized that the problem of unemployment should be dealt with on a more or less permanent basis. Accordingly, in April 1935, Congress passed the Relief Act, which required the government to provide work relief and to increase employment by providing useful projects. In July 1935 a new Works Progress Administration was set up under Hopkins to provide work to all employable.

The Works Progress Administration’s projects were selected on the basis that the project should be of public use and major pact of the funds should be spent on labour rather than materials. These plans should not interfere with private employment these plaits should be capable of accomplishment within a year.

The wages to be paid on all such projects were known as ‘security wages’ and were lower than the wages paid by private employees but higher than the amount raid as direct relief. The projects of W.P.A. included construction of roads, das, airports, schools, hospitals, community centres, playgrounds etc. between 1935 and 1941 the W.P.A. spent over 11 billion dollars and provided work to over two million people.

The W.P.A. also provided work to unemployed actors, musicians, writers and artists. For example, it sent travelling companies who performed plays in the big cities. The artists were engaged in decorating post offices and other public buildings. Thus the S.P.A. saved millions of working hours and most of the work done through it was of a permanent value to the United States.

The Civilian Conservation

To solve the problem of growing unemployment among young people, President Roosevelt established the Civilian Conservation Corps by a law of March 1933. This relief agency offered work to unmarried young men between the age of eighteen and twenty-five years. These young men were expected to work under army officers and were entrusted with responsibilities like clearing of forests, planting of trees, improving roads, preventing floods and other useful duties.

The enlistment was done every year and the cadets out of their monthly salary of $30 to their relatives or dependents. In addition to their salary, these men got free maintenance and medical care. This project served a very useful purpose because thousands of young men who had been looking in vain for jobs got something worthwhile to do. The C.C.C. lasted until America joined World War II.

Recovery Measures of Franklin D. Roosevelt

The New Deal also made an effort to effect recovery in business to provide normal employment to all those who were capable of earning their livelihood. The following measures were taken in this regard.

Reconstruction Finance Commission

The R.F.C. which was established during the administration of Hoover was permitted to continue under Franklin D. Roosevelt and certain new functions were assigned to it. In addition to its former functions, it was authorized to grant loans to industries as well as to railroads and banks. However, these loans were to be advanced strictly on a business basis. By 1936 the R.F.C. had loaned $11,000,000,000 and most of this money was repaid shortly.

The National Recovery Act

The National Recovery Act passed by Congress in 1933 was probably the most important and far-reaching measure adopted to effect recovery. The Act made an effort to ensure co-operation between business, labour and government to overcome hard times and put people back to work. It also aimed at reforming the conditions of work for the labour by raising wages and lowering working hours; by restricting child labour and by according legal status to the trade unions.

The Act has three outstanding features. First, it set up a Public Works Administration (PWA) which was designed to stimulate industry by a programme of direct spending. The Public Works Administration was expected to spend huge amounts on the erection of public buildings and other construction projects, which aimed at providing, a new business to heavy industries.

It also gave assistance as well as loans to the states and local authorities to encourage construction of roads, bridges, hospitals, schools etc. as a result of this effort of PWA millions of persons got the job. Secondly, the National Recovery Administration was set up which tried to abolish child labour, working hours, fixed minimum wages and took other steps to eliminate unfair competition in the industry.

The National Recovery Administration also approved the codes prepared by the industry. Intending to avoid the delay in the enforcement of this provision in July 1933, Roosevelt drew up a ‘blanked code’ which could be applied to any industry. The blanket or standard code abolished child labour established an eight-hour day and gave a minimum of 12.50 dollars per week.

The employers accepting this code were permitted to use ‘blue eagle’ on their goods and the government encouraged the public to give preference to the goods of such concerns. Thirdly, the Act also conceded the right of the labour to organize and bargain collectively through representatives of their own choosing.

With this view in mind, the Congress established in 1934 the National Labour Relations Board (N.L.R.E.), which usually supported the most extreme contention of the labour. However, in September 1934 the Supreme Court of the United States found the law under which the N.R.A. had been operating as unconstitutional and soon the whole N.R.A. organization was rapidly dismantled. 

Encouragement to Trade Unions

Though the National Industry Recovery Act had accepted the right of the workers to bargain with their employees through trade unions, but this right was rendered ineffective due to the pronouncements of Supreme Court regarding the constitutionally of the N.R.A. in 1935 the Congress passed the Wagner Act which compelled employers to recognize the union to which the majority of their workers belonged and to bargain with it in any dispute over hours and wages.

Under the Act, the employers could not interfere with the workers right to join unions. To ensure the compliance of this provision, the Act set up the National Labour Relations Board (NLRB) which looked into the complaints regarding interference by the employers and could punish them.

All these measures gave encouragement to trade union activities in the United States. As a consequence, the percentage of American workers organized in the Union stood at 7.8 in 1933 rose to 21.9 per cent in 1938.

Agricultural Adjustment Administration  

Since the end of World War I, American agriculture had been plagued to such an extent that when Roosevelt assumed office the farmers were in a rebellious mood. The effort of the Hoover administration to buy the surplus of the market through the Federal Farm Board had miserably failed. Roosevelt made an effort to stimulate agriculture and restore the purchasing power of the farmers.

In 1933 the Farm Credit Administration (FCA) was created to refinance agricultural mortgages at a rate of 4 per cent and load money to the farmers who had already lost their lands by force-closure. It also helped those farmers whose forms were on poor land to start cultivation in more fertile areas.

To ensure that the farmer got a good price for this produce the Farmers Relief Act was passed in 1933 which created the Agricultural Adjustment Administration (AAA). Recognizing that the markets were closed to American agricultural products and the farmers produced much more then could be consumed by the American people.

Roosevelt arranged for ‘benefit payments’ to farmers who agreed to reduce the production of basic crops like cotton, wheat, tobacco, hogs and corn. The necessary money for payments was obtained by imposing a tax on ‘processors’ (flour millers and meat packers), who passed on the burden to the consumer in the form of increased cost.

As a result in 1931 and 1935, the farmers withdrew from over 30 million acres of cultivation, which led to the great reduction in farm surplus. This inevitably led to increasing in total farm income. In 1936, the Supreme Court declared the Agricultural Adjustment Act as unconstitutional on the ground that farming was not interstate commerce and therefore fell within the jurisdiction of the state government and not Federal Government.

 It was also held that the processing tax was not designed to promote the general welfare, but to make money from one group and give it to another.       

Soil Conservation Act

After the Agricultural Adjustment at was declared unconstitutional. The Congress passed in February 1936 the Soil Conservation and Domestic Allotment Act as a stopgap measure under this act all important payment to farmers was to be continued but henceforth they were to be paid in return for the cooperation with the government for improvement of soil fertility prevention of erosion and economic use of farmland.

The processing tax was also abolished. However, the treasury continued to extend the necessary financial assistance. As a result the production of certain crops again showed an increase.

New Agricultural Adjustment Act

In 1938, Congress enacted the New Agricultural Adjustment Act, which combined the feature of the Old Agricultural Adjustment Act and the Soil Conservation Act, but made no provision for the processing tax, though the feature of benefit payment still continued. The new Act made provision for limitation of acreage allotments; storage loans and marketing quotas in emergencies.

In five key crops wheat, cotton, corn, tobacco and rice. All this was done to raise the income of farmers to achieve parity in income with other groups. The administration tried to stabilize agricultural production by a system of crop loans, crop insurance and crop controls. This was accomplished by establishing the Federal Crop Insurance Corporation in the Department of Agriculture.

Resettlement Administration and Farm Security Administration

To improve the lost of the farmers Roosevelt administration established two agencies the Resettlement Administration (R.A.) and Farm Security Administration (F.S.A.), both these agencies were intended to help farmers not reached by the Agricultural Adjustment Administration.

These agencies took out the farmers from the worn-out land, furnished them with credit and better knowledge regarding farming methods and provided loans to them to become independent owners of the lands.

Control Over Drought and Dust

In the years 1933-35 the great plains of South were hit by a serious drought and there was a danger that the region might become a desert. This also led to a large number of farmers leaving the ‘dust bowl’ to tackle the problem Congress provided funds by which seeds and live stocks were to be provided to the farmers. The farmers were encouraged to plant 190 million trees in ‘shelter belts’ which not only cut the velocity of the wind but also helped in retaining the Moisture.

Banking and Finance

When Roosevelt assumed office as President, the whole the financial system was collapsing. To give the people confidence in their banks within a week of his assuming office he got Congress to pass the Emergency Banking Act which gave the President the power to re-open those banks which were considered solvent.

As a result, soon the people were convinced that all was well with the country’s finances. The banks reopened and the people started depositing money with them. This measure was followed by the Glass-Steagall Act of 1933 which created a Federal Deposit Insurance Corporation.

The corporation insured small depositors against losses from bank failure. To prevent speculation with funds entrusted to their charge, commercial links were required to stop underwriting and selling securities. The Federal Reserve system was extended to include industrial and saving banks.

In 1933, Congress passed the Securities Act which made an effort to stop the formation of fraudulent companies. Under this Act, the companies which marketed or issued securities were required to make available to investors complete and truthful information.

By another Act passed in 1934 the Securities Exchanged Commission was created which supervised and regulated the issuance of all new securities. The Commission also set up rules for the stock market operation to discourage wild speculation and other practices by which the ‘insiders’ manipulated-stock market prices.   

 

Abandonment of Gold Standard

To keep the prices stable, Roosevelt the administration abandoned the gold standard and secured from Congress a Gold Repeal Resolution, which invalidated the gold clauses employed in many public and private contracts. Gold exports forbade, gold coins, gold bullion and gold certificates were withdrawn from circulation.

The government also fixed the price for newly mined gold as well as gold offered by foreign countries for sale. In 1931, Congress passed the Gold Reserve Act, which reduced the gold content of the dollar to 59.06 per cent of its former content. The Congress also set up a stabilizing fund of $2,000,000,000 to regulate the devaluated dollar about other forms of currency.

A few months later the Silver Purchasing Act was passed and the Treasury started purchasing huge quantities of silver to increase the supply of silver in the national monetary stocks. As a result of all these measures though the United States was soon in possession of most of the world’s supply of gold and silver, the purchasing price of the dollar remained far less than the President and his advisers had anticipated.

Reform Measures of Franklin D. Roosevelt

Following are the reform measure of Roosevelt.

Social Security Act

Although the United States was one of the richest countries of the world, there was no national scheme of unemployment or health insurance or of old age pension before 1933. Only in the stage of Wisconsin, the unemployment insurance scheme existed before 1935. The Roosevelt administration took a significant step in this direction in 1935 when it passed the Social Security Act.

The Act established a scheme of old age pension run by the Federal Government and run out of the funds contributed both by employers and employed. It also envisaged a plan of unemployment insurance under which the different states were to make their own detailed schemes. Thus the scheme aimed to provide social security against old age and unemployment.

Tennessee Valley Authority

In May 1933, the Congress established the Tennessee Valley Authority to promote the economic and social well being of the people in the Tennessee Valley region through better use of natural resources. The Tennessee Valley Authority (TVA) took over the Muscle Shoals dam and built others. It set up hydro-electric stations and sold electricity direct to the industry and farmers at much lower rates than those charged by the private companies.

It also undertook schemes for flood control, stoppage of soil erosion by planting trees, build navigation channels in Tennessee river assisted farmers by developing new fertilizers and built new model-villages. The establishment of the TVA did not merely mean that the government had entered the business of electricity it was a plan to use the natural resources of the area for the benefit of inhabitants.

The TVA was instrumental in building or controlling sixteen great dams which prevented floods and produced power. Its cheap electricity enabled farmers to install electrical and automatic machines, which greatly improved agricultural production. It also succeeded in checking erosion by putting worn-out lands back to forests and encouraging private conservation measures.

Housing Problem

The Roosevelt Administration also made effort to solve the problem of slums, which bred disease and crime. The job of slum clearance was so expensive that it was beyond the financial resources of the local authorities and private enterprises. During Roosevelt’s administration, huge funds were provided by the Federal Government to clear the slums and construct better houses in their place. As a result, for the first time in the history of America the slums began to shrink.

To stimulate home building and repair and to enable house owners to avoid foreclosure of mortgages the Congress established the Home Owners Loan Corporation (HOLC). The corporate provided the home builders with credit at a low rate of interest. Thus, the Corporation helped to save homes of many Americans from being sold up because of non-payment of loans and mortgages.

Another effort to deal with the housing problem was the establishment of the United States Housing Authority (USHA) in 1937. USHA aimed at providing aid to local communities to provide decent safe and sanitary dwellings for families of low income. By the end of 1939, USHA had constructed nineteen different low rent apartment houses which had been constructed in thirteen different cities and loan exceeding half-billion dollars had been approved for the use of another 155 communities.

Coordination of Railroad

 Roosevelt the administration also made efforts to improve the transportation system. As a result of the great depression and competition of automobiles, trucks, pipeline etc. the railroads were virtually brought to the brink of ruin. To improve their position and Emergency Railroad Transportation act was passed by Congress in June 1933.

This Act provided for a federal coordinator of transportation whose main duty was to eliminate wasteful competition, coordinate train service and to effect necessary economies. Loans from Reconstruction Finance Corporation was freely used to buy new railroad types of equipment and effect improvements in their service.

Other Reforms

 In addition to the above measures, the New Deal Administration took numerous other measures. Through the Pure Food and Drugs Act effort was made to save the public from fraudulent advertisements for patent medicines and other articles of food. The National Resources Board (1934) made a survey of the natural wealth of the country to check the wastage of the American natural resources.

By the Taylor Grazing Act (1931) the sale of Federal lands was forbidden and these were to be used either for parks and playgrounds or as grazing lands. Efforts were also made to improve America’s trade with foreign countries. By mutual treaties, American tariffs were reduced in return for similar reduction by other countries.

The End of New Deal  

 It is very difficult to give a precise date when the New Deal ended because it was ended without any formal announcement. The first formal declaration by Roosevelt by which he acceded the end of New Deal was made in his message to the Congress on January 4, 1939. He said:

“We have now passed the period of internal conflict in the launching of our programme of social reform. Our full energies may now he released to invigorate the processes of recovery to preserve our reforms.”

This statement implies that the New Deal had ended by this time. A beginning in the direction of abandonment of few deals was made in 1937 when the country faced as a setback in the form of a sharp decline in business popularly known as Roosevelt depression.

Although the slump did not last long, it weakened the confidence of people in New Deal. In the mid-term elections of 1938, the Republicans captured both the houses of the Congress and henceforth blocked all the New Deal legislation.

America’s involvement in World War II and President’s preoccupation with foreign affairs virtually ended the domestic reforms. Earlier the New Deal had suffered a setback as a result of Supreme Court declaring several steps taken as unconstitutional. Thus, the New Deal did not die of a heart attack, it died of slow strangulation.

Critical Evolution of New Deal

Diametrically opposite views have been expressed about the significance and contributions of the New Deal. One the one hand some scholars hold that save for Washington’s first administration and the American Civil War years, no other comparable period had witnessed such changes in American life. On the other hand, its opponents contended that the New Deal failed to attain its main objective viz. overcoming the depression.

Despite some twenty billion dollars poured out in six years of spending and lending, the gap between production and consumption still continued and the farm surpluses mounted still higher. The problem of unemployment also continued to be as grave as before.

On top of it, they maintain, the ever-increasing government-controlled to the curtailment of the liberties of the American citizen. Let us examine these views in some details to form a correct assessment of the New Deal.

Bad Effects of New Deal

The main drawbacks of the New Deal were as follows:

1.       As the New Deal administration spend huge amounts on various projects, the national debt greatly increased. As against $22,539,000,000 in 1933 it rose to $41,438,000,000 in 1940. The ravish spending on the part of the Federal Government undermined the virtues of thrift and initiative. In the 19^th century, the hard-pressed Americans had gone west, now they went on relief.

2.       The expansion of government activities inevitably leads to the expansion of bureaucracy. As most of the new entrants to the civil service lacked the requisite merit, it led to inefficiency in administration.

3.       By pampering the labour and the farmer, the New Deal administration sharpened the class consciousness.

4.       The problem of unemployment which the New Deal wanted to solve, assumed serious dimensions as a result of New Deal policies. In 1940, the number of unemployed stood at 7,000,000.

5.       Too much interference by the government in the economic sphere destroyed the independence and enterprise of the American private enterprise.

6.       Despite twenty billion dollars being poured in six years by the administration the gap between production and consumption continued to grow further. The farm surpluses instead of dwindling mounted still higher under Roosevelt.

7.       The stimulus provided to the industry by the enormous government spending was only a farce because as soon as the government cut down it's spending (as it did in 1937) the country once again relapsed into recession.

8.       The New Deal Administration tampered with the Constitution and greatly extended the powers of the Federal Government by encroaching on the powers reserved for the state governments and property rights of the citizens.

9.       The laws enacted to help the farmers no doubt improved a lot of the farmers but the condition of the agriculture labourers and sharecroppers became all the worse.   

The Good Points of New Deal

Despite the above defects, it cannot be denied that the New Deal had remarkable achievements to its credit. Several measures adopted by the New Deal Administration have survived the test of the time and have come to stay in society. Some of the prominent accomplishments of the New Deal The administration was as follows:

1.       It helped a large number of people, caught in the worst depression in American history, by providing them jobs, financing farm and home mortgages. Through vigorous banking policy, the administration saved many people from grave difficulty. Its relief programmes enabled the unfortunate people to earn money without sacrificing their self-respect.

2.       The Works Progress Administration (WPA) and Public Works Administration (PWA) rendered valuable services to the country by constructing roads, bridges, schools, hospitals and works of art. Similarly, the Tennessee Valley Authority (TVA) helped in the transformation of the great region by bringing under cultivation millions of acres and helping in the establishment of prosperous industries.

3.       In the sphere of social security also the New Deal Administration helped in removing the American backwardness and provided for schemes like old-age pensions, unemployment insurance etc. in subsequent years the scope of social security measures further widened.

4.       The other measures of the New Deal Administration like regulation of stock exchange, issuance of securities; the restriction of working hours, and collective bargaining between employers and workers have come to be accepted as a part of the normal American life.

5.       In the financial sphere, Roosevelt liberated the minds of the American people froth the idea that governmental deficit was something to be avoided at all costs. Now it is accepted on all hands that there are considerations such as national security or deflation which justify government action of spending more than its receipts. This was an unconscious contribution of the New Deal Administration because Roosevelt never understood the theory working behind it.

6.       The New Deal period also produced better economic results in the long run. By advancing the interests of the farmer and the workers it developed a broader basis of consuming power and thus laid a firmer foundation for industrial prosperity.

7.       Another important result of the New Deal was that the citizens were made to recognize the new role of the government in American life and people could look to the Federal Government for lair and decent conditions of life. The people also realized that the vast resources of the country should be used by national planning for the benefit of all the people and not merely for the good of few capitalists.       

8.       The New Deal Administration demonstrated the value of powerful Presidential leadership and demonstrated that democratic the system was also capable of dealing with the crisis effectively.

Conclusion

In light of the above discussion, it can be said in the conclusion that though the New Deal Administration could not fully solve the problems of unemployment and depression, yet it cannot be denied that the New Deal Administration succeeded in preventing the destruction of American the economic and political system in fact as a result of New Deal policies during the years 1933. In 1938, the American economic system was further strengthened.