Wall Street Crash


When the Wall Street stock market crashed in October 1929, the world economy was plunged into the Great Depression. By the winter of 1932, America was in the depths of the greatest economic depression in its history.
The number of unemployed people reached upwards of 13 million. Many people lived in primitive conditions close to famine. One New York family moved into a cave in Central Park. In St Louis, more than 1,000 people lived in shacks made from scrap metal and boxes. There were many similar Hoovervilles all over America. Between 1 and 2 million people travelled the country desperately looking for work. Signs saying 'No Men Wanted' were displayed all over the country.
Poor children, during the depression
Poor children, during the depression
Many children were deserted and left homeless during the Depression
By the time of the election in November 1932, Hoover's popularity had reached rock bottom. It was not even safe for him to go onto the streets to campaign. After his heavy defeat, Hoover told his friends, "we are at the end of our string... there is nothing more we can do". The American economy did not fully recover until the USA entered the Second World War in December 1941.

Causes of the Depression

  1. As early as 1926, there were signs that the boom was under threat - this was seen in the collapse of land prices in Florida.
  2. Eventually, there were too many goods being made and not enough people to buy them.
  3. Farmers had produced too much food in the 1920s, so prices for their produce became steadily lower.
  4. There were too many small banks - these banks did not have enough funds to cope with the sudden rush to take out savings, which happened in the autumn of 1929.
  5. Too much speculation on the stock market - the middle class had a lot to lose and they had spent a lot on what amounted to pieces of paper.
  6. The Wall Street Crash of October 1929 was a massive psychological blow.
  7. America had lent huge sums of money to European countries. When the stock market collapsed, they suddenly recalled those loans. This had a devastating impact on the European economy.
  8. The collapse of European banks caused a general world financial crisis.

Effects of the Depression

  1. Unemployment - 13 million people were out of work.
  2. Industrial production dropped by 45 per cent between 1929 and 1932.
  3. House-building fell by 80 per cent between 1929 and 1932.
  4. The entire American banking system reached the brink of collapse.
  5. From 1929 to 1932, 5,000 banks went out of business.
  6. Although many people went hungry, the number of recorded deaths from starvation during the Depression was 110, although many other illnesses and deaths were probably related to a lack of nutrition.
Ups and downs
Contrary to popular impression, the crash itself was not the disaster of a single day but a series of events that began in the final week of October and reached its nadir in mid-November.

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external image start_quote_rb.gif The crash and its ensuing scandals transformed businessmen from saints to sinners external image end_quote_rb.gif
Between December 1929 and March 1930 the Dow Jones Industrial Average actually regained three-quarters of what it had lost since the beginning of the crash.
The unmistakable signs of depression did not fasten themselves upon the United States until the autumn of 1930, nearly a year after the crash.
But the economy and the market fed on each other's woes: by June 1930, the sluggish economy sent the stock market into another nosedive that did not hit bottom until July 1932.
One consequence of the crash, then, was to turn the nation's first feverish love affair with the stock market into a lasting aversion. Trading volume fell sharply as the broader public left the arena, and the market did not again reach its price levels of September 1929 until the end of 1954.
Paradise lost
The most telling consequence of the crash was that it undermined the nation's confidence in its boom economy.

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From the boom of the 1920s to the Depression of the 1930s; the 1929 crash was an era-changing event
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external image opennews.gifIn pictures
The market was considered a harbinger of the economy in the sense that its price movements anticipated and discounted broader trends and their effect on individual companies.
By the summer of 1929, both the economy and the market had become overheated, and the latter had lost its connection with economic realities and flown upward on the wings of an illusion that a new era had arrived in America.
The crash demolished that illusion: after October 1929, businessmen, investors and politicians alike watched every economic signal anxiously, seeking reassurance that the financial flameout had not soured the economy as well. The nation's mood shifted gradually from optimism to doubt to despair.
Crisis? What crisis?
President Herbert Hoover - who had come to office only in March 1929 - made every effort to counteract this mood swing within the limits of his philosophy of government that stressed voluntary action over government coercion.
No previous president had ever even tried to intervene in a failing economy.
By nature an energetic, upbeat person, Mr Hoover tried in vain to infect the nation with his optimism. But when recovery failed to come, his principles became a prison within which he could find no effective policies to cope with the deepening depression.
Thus the crash set the stage for the destruction of the Hoover presidency and the fall from power of the Republican party, which became the minority party for the first time since the 1850s and did not regain the White House until 1952.

Birth of big government
The severity of the depression brought to Washington a president in Franklin D Roosevelt whose imposing legacy included the rise of big government and far-ranging federal intervention in the economy.
That intervention included the creation of the nation's first federal social welfare programs (the last major industrial state to do so), the first federal regulation of Wall Street institutions, and the most important banking reform legislation in the nation's history.
The crash did not directly "cause" these changes, but it set in motion the events that transformed both the mood and the character of the nation and its institutions.
In this sense the market played its role of harbinger, anticipating and discounting what was to come. Afterward it retreated to the sidelines in the public eye and did not take center stage again until well into the postwar boom.


Roosevelt and the Elections


100 Days

Roosevelt entered office with enormous political capital. Americans of all political persuasions were demanding immediate action, and Roosevelt responded with a remarkable series of new programs in the “first hundred days” of the administration, in which he met with Congress for 100 days. During those 100 days of lawmaking, Congress granted every request Roosevelt asked, and passed a few programs (such as the FDIC to insure bank accounts) that he opposed. Ever since, presidents have been judged against FDR for what they accomplished in their first 100 days.

[edit] Bank and monetary reforms

With strident language Roosevelt took credit for dethroning the bankers he alleged had caused the debacle. On March 4, 1933, in his first inaugural address, he proclaimed:
  • Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men. ... The money changers have fled from their high seats in the temple of our civilization.[18[[http://en.wikipedia.org/wiki/New_Deal#cite_note-17|]]]
He closed all the banks in the country and kept them all closed until he could pass new legislation.[19[[http://en.wikipedia.org/wiki/New_Deal#cite_note-18|]]] On March 9, Roosevelt sent to Congress the Emergency Banking Act, drafted in large part by Hoover's top advisors. The act was passed and signed into law the same day. It provided for a system of reopening sound banks under Treasury supervision, with federal loans available if needed. Three-quarters of the banks in the Federal Reserve System reopened within the next three days. Billions of dollars in hoarded currency and gold flowed back into them within a month, thus stabilizing the banking system. By the end of 1933, 4,004 small local banks were permanently closed and merged into larger banks. (Their depositors eventually received on average 86 cents on the dollar of their deposits; it is a common false myth that they received nothing back.) In June 1933, over Roosevelt's objections, Congress created the Federal Deposit Insurance Corporation (FDIC), which insured deposits for up to $2,500 beginning January 1, 1934; this amount was increased to $5,000 on July 1, 1934. To deal with deflation, the nation went off the gold standard. In March and April in a series of laws and executive orders, the government suspended the gold standard for United States currency.[20[[http://en.wikipedia.org/wiki/New_Deal#cite_note-19|]]] Anyone holding significant amounts of gold coinage was mandated to exchange it for the existing fixed price of US dollars, after which the US would no longer pay gold on demand for the dollar, and gold would no longer be considered valid legal tender for debts in private and public contracts. The dollar was allowed to float freely on foreign exchange markets with no guaranteed price in gold, only to be fixed again at a significantly lower level a year later with the passage of the Gold Reserve Act in 1934. Markets immediately responded well to the suspension, in the hope that the decline in prices would finally end.[21[[http://en.wikipedia.org/wiki/New_Deal#cite_note-20|]]]
The economy had hit bottom in March 1933 and then started to expand. Economic indicators show the economy reached nadir in the first days of March, then began a steady, sharp upward recovery. Thus the Federal Reserve Index of Industrial Production sank to its lowest point of 52.8 in July 1932 (with 1935–39 = 100) and was practically unchanged at 54.3 in March 1933; however by July 1933, it reached 85.5, a dramatic rebound of 57% in four months. Recovery was steady and strong until 1937. Except for employment, the economy by 1937 surpassed the levels of the late 1920s. The Recession of 1937 was a temporary downturn. Private sector employment, especially in manufacturing, recovered to the level of the 1920s but failed to advance further until the war. Chart 2 below shows the growth in employment without adjusting for population growth. The U.S. population was 124,840,471 in 1932 and 128,824,829 in 1937, an increase of 3,984,468.[22[[http://en.wikipedia.org/wiki/New_Deal#cite_note-21|]]] The ratio of these numbers, times the number of jobs in 1932, means there was a need for 938,000 more 1937 jobs to maintain the same employment level.
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Chart 2: Total employment in the U.S. from 1920 to 1940, excluding farms and WPA.

[edit] Economy Act

The Economy Act, drafted by Budget Director Christian McDonald was passed on March 14, 1933. The act proposed to balance the "regular" (non-emergency) federal budget by cutting the salaries of government employees and cutting pensions to veterans by fifteen percent. It saved $500 million per year and reassured deficit hawks such as Douglas that the new President was fiscally conservative. Roosevelt argued there were two budgets: the "regular" federal budget, which he balanced, and the "emergency budget", which was needed to defeat the depression; it was imbalanced on a temporary basis.[23[[http://en.wikipedia.org/wiki/New_Deal#cite_note-22|]]]
Roosevelt was initially in favor of balancing the budget, but he soon found himself running spending deficits in order to fund the numerous programs he created. Douglas, however, rejecting the distinction between a regular and emergency budget, resigned in 1934 and became an outspoken critic of the New Deal. Roosevelt strenuously opposed the Bonus Bill that would give World War I veterans a cash bonus. Finally, Congress passed it over his veto in 1936, and the Treasury distributed $1.5 billion in cash as bonus welfare benefits to 4 million veterans just before the 1936 election.[24[[http://en.wikipedia.org/wiki/New_Deal#cite_note-23|]]]
New Dealers never accepted the Keynesian argument for government spending as a vehicle for recovery. Most economists of the era, along with Henry Morgenthau of the Treasury Department, rejected Keynesian solutions and favored balanced budgets.[25[[http://en.wikipedia.org/wiki/New_Deal#cite_note-24|]]]

[edit] Women and the New Deal

At first the New Deal created programs primarily for men. It was assumed that the husband was the "breadwinner" (the provider) and if they had jobs, whole families would benefit. It was the social norm for women to give up jobs when they married; in many states there were laws that prevented both husband and wife holding regular jobs with the government. So too in the relief world, it was rare for both husband and wife to have a relief job on FERA or the WPA.[26[[http://en.wikipedia.org/wiki/New_Deal#cite_note-25|]]] This prevailing social norm of the breadwinner failed to take into account the numerous households headed by women, but it soon became clear that the government needed to help women as well.[27[[http://en.wikipedia.org/wiki/New_Deal#cite_note-26|]]]
Many women were employed on FERA projects run by the states with federal funds. The first New Deal program to directly assist women was the Works Progress Administration (WPA), begun in 1935. It hired single women, widows, or women with disabled or absent husbands. While men were given unskilled manual labor jobs, usually on construction projects, women were assigned mostly to sewing projects. They made clothing and bedding to be given away to charities and hospitals. Women also were hired for the WPA's school lunch program. Both men and women were hired for the arts programs (such as music, theater and writing). The Social Security program was designed to help retired workers and widows, but did not include domestic workers, farmers or farm laborers, the jobs most often held by blacks. Social Security however was not a relief program and it was not designed for short-term needs, as very few people received benefits before 1942.

[edit] Artist Programs

An unusual branch of the WPA, Federal One, gave jobs to writers, musicians, artists, and theater personnel. Under the Federal Writer’s Project, a detailed guide book was prepared for every state, local archives were catalogued, and writers such as Margaret Walker, Zora Neale Hurston, and Anzia Yezierska were hired to document folklore. Other writers interviewed elderly ex-slaves and recorded their stories. Under the Federal Theater Project, headed by charismatic Hallie Flanagan, actresses and actors, technicians, writers, and directors put on stage productions. The tickets were inexpensive or sometimes free, making theater available to audiences unaccustomed to attending plays.[28[[http://en.wikipedia.org/wiki/New_Deal#cite_note-27|]]] One Federal Art Project paid 162 trained woman artists on relief to paint murals or create statues for newly built post offices and courthouses. Many of these works of art can still be seen in public buildings around the country, along with murals sponsored by the Treasury Relief Art Project of the Treasury Department.[29[[http://en.wikipedia.org/wiki/New_Deal#cite_note-28|]]][30[[http://en.wikipedia.org/wiki/New_Deal#cite_note-29|]]]
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WPA employed 2 to 3 million unemployed at unskilled labor

[edit] Farm and rural programs

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Pumping water by hand from sole water supply in this section of Wilder, Tennessee (Tennessee Valley Authority, 1942)
Many rural people lived in severe poverty, especially in the South. Major programs addressed to their needs included the Resettlement Administration (RA), the Rural Electrification Administration (REA), rural welfare projects sponsored by the WPA, NYA, Forest Service and CCC, including school lunches, building new schools, opening roads in remote areas, reforestation, and purchase of marginal lands to enlarge national forests. In 1933, the Administration launched the Tennessee Valley Authority, a project involving dam construction planning on an unprecedented scale in order to curb flooding, generate electricity, and modernize the very poor farms in the Tennessee Valley region of the Southern United States.
Roosevelt was keenly interested in farm issues and believed that true prosperity would not return until farming was prosperous. Many different programs were directed at farmers. The first 100 days produced the Farm Security Act to raise farm incomes by raising the prices farmers received, which was achieved by reducing total farm output. The Agricultural Adjustment Act created the Agricultural Adjustment Administration (AAA) in May 1933. The act reflected the demands of leaders of major farm organizations, especially the Farm Bureau, and reflected debates among Roosevelt's farm advisers such as Secretary of Agriculture Henry A. Wallace, M.L. Wilson, Rexford Tugwell, and George Peek.[31[[http://en.wikipedia.org/wiki/New_Deal#cite_note-30|]]]
The aim of the AAA was to raise prices for commodities through artificial scarcity. The AAA used a system of "domestic allotments", setting total output of corn, cotton, dairy products, hogs, rice, tobacco, and wheat. The farmers themselves had a voice in the process of using government to benefit their incomes. The AAA paid land owners subsidies for leaving some of their land idle with funds provided by a new tax on food processing. The goal was to force up farm prices to the point of "parity", an index based on 1910–1914 prices. To meet 1933 goals, 10 million acres (40,000 km2) of growing cotton was plowed up, bountiful crops were left to rot, and six million baby pigs were killed and discarded.[32[[http://en.wikipedia.org/wiki/New_Deal#cite_note-31|]]] The idea was the less produced, the higher the wholesale price and the higher income to the farmer. Farm incomes increased significantly in the first three years of the New Deal, as prices for commodities rose. Food prices remained well below 1929 levels.[33[[http://en.wikipedia.org/wiki/New_Deal#cite_note-32|]]] A Gallup Poll printed in the Washington Post revealed that a majority of the American public opposed the AAA.[34[[http://en.wikipedia.org/wiki/New_Deal#cite_note-Rethinking1-33|]]]
The AAA established an important and long-lasting federal role in the planning on the entire agricultural sector of the economy and was the first program on such a scale on behalf of the troubled agricultural economy. The original AAA did not provide for any sharecroppers or tenants or farm laborers who might become unemployed, but there were other New Deal programs especially for them.
In 1936, the Supreme Court declared the AAA to be unconstitutional, stating that "a statutory plan to regulate and control agricultural production, [is] a matter beyond the powers delegated to the federal government..." The AAA was replaced by a similar program that did win Court approval. Instead of paying farmers for letting fields lie barren, this program instead subsidized them for planting soil enriching crops such as alfalfa that would not be sold on the market. Federal regulation of agricultural production has been modified many times since then, but together with large subsidies it is still in effect in 2010.
The last major New Deal legislation concerning farming was in 1937, when the Farm Tenancy Act was created which in turn created the Farm Security Administration (FSA), replacing the Resettlement Administration.
A major new welfare program was the Food Stamp Plan established in 1939. It survives into the 21st century with little controversy because it benefits the urban poor, food producers, grocers and wholesalers, as well as farmers, thereby winning support from both liberal and conservative Congressmen.[35[[http://en.wikipedia.org/wiki/New_Deal#cite_note-34|]]]

Repeal of Prohibition

In a measure that garnered substantial popular support for his New Deal, Roosevelt, on March 13, 1933, moved to put to rest one of the most divisive cultural issues of the 1920s. Just nine days later he signed the bill to legalize the manufacture and sale of alcohol, an interim measure pending the repeal of Prohibition, for which a constitutional amendment (the 21st) was already in process. The repeal amendment was ratified later in 1933. States and cities gained additional new revenue, and Roosevelt secured his popularity in the cities, which were overwhelmingly wet, for supporting or permitting the legal production and sale of alcoholic beverages.[36[[http://en.wikipedia.org/wiki/New_Deal#cite_note-35|]]][clarification needed]

Puerto Rico

A separate set of programs operated in Puerto Rico, headed by the Puerto Rico Reconstruction Administration. It promoted land reform and helped small farms; it set up farm cooperatives, promoted crop diversification, and helped local industry. The Puerto Rico Reconstruction Administration was directed by Juan Pablo Montoya Sr. from 1935 to 1937.

Tax increases

In 1935, Roosevelt called for a tax program called the Wealth Tax Act to redistribute wealth, in which he proposed to increase inheritance tax, a gift tax, a severely graduated income tax, and a corporate income tax scaled according to income. However, Congress watered it down, by dropping the inheritance tax and only mildly increased the corporate tax.[37[[http://en.wikipedia.org/wiki/New_Deal#cite_note-36|]]]
A tax called the Undistributed profits tax was enacted in 1936. The idea was to force businesses to distribute profits in dividend and wages, instead of saving or reinvesting them. Business profits were taxed on a sliding scale; if a company kept 1% of their net income, 10% of that amount would be taxed under the UP Tax. If a company kept 70% of their net income, the company would be taxed at a rate of 73.91% on that amount.[38[[http://en.wikipedia.org/wiki/New_Deal#cite_note-37|]]] Facing widespread and fierce criticism, the tax was reduced to 2½% in 1938 and completely eliminated in 1939.[39[[http://en.wikipedia.org/wiki/New_Deal#cite_note-38|]]]

The First New Deal

Roosevelt's "First 100 Days" concentrated on the first part of his strategy: immediate relief. From March 9 to June 16, 1933, he sent Congress a record number of bills, all of which passed easily. To propose programs, Roosevelt relied on leading Senators such as George Norris, Robert F. Wagner and Hugo Black, as well as his Brain Trust of academic advisers. Like Hoover, he saw the Depression caused in part by people no longer spending or investing because they were afraid.
His inauguration on March 4, 1933, occurred in the middle of a bank panic, hence the backdrop for his famous words: "The only thing we have to fear is fear itself."[71[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-bartleby-70|]]] The very next day Congress passed the Emergency Banking Act which declared a "bank holiday" and announced a plan to allow banks to reopen.[74[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-73|]]] This was his first proposed step to recovery. To give Americans confidence in the banks, Roosevelt signed the Glass–Steagall Act that created the Federal Deposit Insurance Corporation (FDIC).
  • Relief measures included the continuation of Hoover's major relief program for the unemployed under the new name, Federal Emergency Relief Administration. The most popular of all New Deal agencies – and Roosevelt's favorite – was the Civilian Conservation Corps (CCC), which hired 250,000 unemployed young men to work on rural local projects. Congress also gave the Federal Trade Commission broad new regulatory powers and provided mortgage relief to millions of farmers and homeowners. Roosevelt expanded a Hoover agency, the Reconstruction Finance Corporation, making it a major source of financing for railroads and industry. Roosevelt made agricultural relief a high priority and set up the first Agricultural Adjustment Administration (AAA). The AAA tried to force higher prices for commodities by paying farmers to take land out of crops and to cut herds.
  • Reform of the economy was the goal of the National Industrial Recovery Act (NIRA) of 1933. It tried to end cutthroat competition by forcing industries to come up with codes that established the rules of operation for all firms within specific industries, such as minimum prices, agreements not to compete, and production restrictions. Industry leaders negotiated the codes which were then approved by NIRA officials. Industry needed to raise wages as a condition for approval. Provisions encouraged unions and suspended anti-trust laws. The NIRA was found to be unconstitutional by unanimous decision of the U.S. Supreme Court on May 27, 1935. Roosevelt opposed the decision, saying "The fundamental purposes and principles of the NIRA are sound. To abandon them is unthinkable. It would spell the return to industrial and labor chaos."[75[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-74|]]] In 1933, major new banking regulations were passed. In 1934, the Securities and Exchange Commission was created to regulate Wall Street, with 1932 campaign fundraiser Joseph P. Kennedy in charge.
  • Recovery was pursued through "pump-priming" (that is, federal spending). The NIRA included $3.3 billion of spending through the Public Works Administration to stimulate the economy, which was to be handled by Interior Secretary Harold Ickes. Roosevelt worked with Republican Senator George Norris to create the largest government-owned industrial enterprise in American history, the Tennessee Valley Authority (TVA), which built dams and power stations, controlled floods, and modernized agriculture and home conditions in the poverty-stricken Tennessee Valley. The repeal of prohibition also brought in new tax revenues and helped Roosevelt keep a major campaign promise.
  • Executive Order 6102 made all privately held gold of American citizens property of the U.S. Treasury. The goal was to counter the deflation which was paralyzing the economy.[76[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-75|]]]
Roosevelt tried to keep his campaign promise by cutting the federal budget, including a reduction in military spending from $752 million in 1932 to $531 million in 1934 and a 40% cuts in spending on veterans' benefits. He removed 500,000 veterans and widows from the pension rolls and reduced benefits for the remainder. He cut the salaries of federal employees and reduced spending on research and education.[77[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-76|]]] On the other hand, veterans groups like the American Legion and the Veterans of Foreign Wars won their campaign to transform their benefits from payments due in 1945 to immediate cash when Congress overrode the President's veto and passed the Bonus Act in January 1936.[78[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-77|]]]
Roosevelt also kept his promise to push for repeal of Prohibition. In April 1933, he issued an Executive Order redefining 3.2% alcohol as the maximum allowed. That order was preceded by Congressional action in the drafting and passage of the 21st Amendment, which was ratified later that year.

The Second New Deal

After the 1934 Congressional elections, which gave Roosevelt large majorities in both houses, there was a fresh surge of New Deal legislation. These measures included the Works Progress Administration (WPA) which set up a national relief agency that employed two million family heads. However, even at the height of WPA employment in 1938, unemployment was still 12.5% according to figures from Michael Darby.[79[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-78|]]] The Social Security Act, established Social Security and promised economic security for the elderly, the poor and the sick. Senator Robert Wagner wrote the Wagner Act, which officially became the National Labor Relations Act. The act established the federal rights of workers to organize unions, to engage in collective bargaining, and to take part in strikes.
While the First New Deal of 1933 had broad support from most sectors, the Second New Deal challenged the business community. Conservative Democrats, led by Al Smith, fought back with the American Liberty League, savagely attacking Roosevelt and equating him with Marx and Lenin.[80[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-79|]]] But Smith overplayed his hand, and his boisterous rhetoric let Roosevelt isolate his opponents and identify them with the wealthy vested interests that opposed the New Deal, setting Roosevelt up for the 1936 landslide.[81[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-80|]]] By contrast, the labor unions, energized by the Wagner Act, signed up millions of new members and became a major backer of Roosevelt's reelections in 1936, 1940 and 1944.[82[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-81|]]]
Some historians disagree with the prevailing belief that there were two New Deals in the Roosevelt administration.[83[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-82|]]] They argue that there is no evidence of any such blueprint for Roosevelt's programs; these contrarians assert that abundant evidence shows FDR's policies were formulated and executed haphazardly, and fluctuated in the hands of a revolving cast of presidential advisors.[84[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-ReferenceA-83|]]] Biographer James M. Burns as well indicates Roosevelt's policy decisions were replete with sudden reversals, and that FDR was "like the general of a guerilla army, fighting blindly through a jungle."[85[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-84|]]] Schweikart and Allen maintain that the two New Deals concept serves well to explain away the ineffectiveness of FDR's programs to improve the nation's economy and contradictory decisions by FDR in his first six years in office.[84[[http://en.wikipedia.org/wiki/Franklin_D._Roosevelt#cite_note-ReferenceA-83|]]]

Opposition to the New Deal

For all the credit Roosevelt has been given for the success (or otherwise) of the New Deal, there was opposition in America to both what he was doing with regards to his economic policies to combat unemployment and to the beliefs he was perceived to have held.
Though Roosevelt had enormous success in the elections of 1936, 1940 and 1944, this success is somewhat disguised by the structure of America’s elections whereby a presidential candidate can win a state with the bare majority of votes but win all of what are called Electoral College seats for that state. Once a presidential candidate has a majority of Electoral College seats for the states that have announced their election result, they win the election and any state that has yet to announce its results does so to go through formalities.
Roosevelt’s own social class was horrified by the actions of the president. The president had been born in to a privileged family who lived a rich lifestyle on the east-coast of America – Roosevelt had been born at Hyde Park in New York State and spent his summer holidays at Campobello Island where the family had a summer holiday home.
To finance his first New Deal, Roosevelt had introduced higher taxes for the rich. They felt that he had betrayed his class and he was expelled from his social club for letting down "his people".
Roosevelt's response was typically blunt claiming that the policies he was pursuing would tread on the toes of the few while the majority benefited.
The New Deal also faced a lot of opposition from the Supreme Court.
The Supreme Court took its stance from a legal viewpoint and in 1935 it effectively declared the National Recovery Administration (NRA) illegal.
In the following year it declared the Agricultural Adjustment Act (AAA) unconstitutional thus killing off the AAA. The point made by the Supreme Court was that any efforts made to help farmers etc. should come at a state level and not federal level and that these parts of the New Deal went against the powers given to the states by the Constitution.
11 out of 16 of the Alphabet Laws were decreed unconstitutional in cases heard by the Supreme Court. The argument of the Supreme Court was that Roosevelt had tried to impose the power of the federal government on state governments – and this was unconstitutional. If a state deemed that there was a crisis is farming then it had the right to tackle this crisis as laid down by the Constitution but the federal government did not have the right to impose its decisions onto states.
Some politicians realised that the New Deal was not overwhelming popular with all the people and that there was a chance to make political capital out of this. The 1936 election result certainly showed that there was mileage in such an approach.
The most famous opponent of the New Deal was Huey Long, a Senator from Louisiana. He criticised Roosevelt for not doing enough for the poor. His alternative to the New Deal was called "Share Our Wealth". By the standards of the time, Long was politically left of centre and his unpopularity was such that he had to surround himself with a gang of ‘heavies’ to protect him – and to deal with any hecklers he might come across at public meetings.
Long promised to confiscate any personal fortune over $3 million and that he would use this money to give each family in America between $4000 to $5000 so that they could buy a home and a car. Long also promised a national minimum wage, old age pensions and cheap food for the poor. Long also promised to make all education free in America.
Within Louisiana, Long essentially ran the state. Opponents were suitably dealt with; local elections were fixed and the police were bribed. In the state he was known as the "Kingfish".

However, he had his enemies and in 1935 he was killed, ironically by one of his bodyguards who shot a man who was planning to kill Long. A bullet fired at the would-be assassin by one of the bodyguards, missed its target, ricocheted off of a corridor wall and hit Long in the stomach. Whether Long’s views would have had any appeal to the voters of 1936 (if he had stood for president) we will never know. He was, in fact, targeting the one group, the poor, whose input into elections has historically been poor. Those who he planned to attack financially, the better off, historically vote the most at elections, so it is highly improbable that Long would have beaten Roosevelt in the 1936 election.


Another vocal opponent of Roosevelt was a Catholic priest called Charles Coughlin. He set up the National Union for Justice and used his weekly radio programme to attack Roosevelt for being "anti-God". Coughlin wanted the less well off to be paid what he described as a "fair wage". He teamed up with Frances Townsend who also opposed the New Deal. Townsend wanted the federal government to give all citizens aged 60 and above $200 a month to be financed by a 2% sales tax. These 2 men allied themselves to Gerald Smith, Huey Long’s successor, and the three of them planned in 1936 to tap the voting strength of the less well off in America.
The 1936 election result showed that a substantial number of people voted against Roosevelt.
In November 1936, Roosevelt got 27 million votes while his Republican opponent, Alf Landon, got 16 million votes. Landon’s support represented 37% of the total number of voters. Roosevelt’s victory was described as a landslide, which it was in electoral terms as he only lost the states of Vermont and Maine, but 16 million voters clearly were not convinced by the New Deal. This election obviously took place after the "100 Days" of what the first New Deal. That over 1/3rd of voters voted against Roosevelt gives some indication that not all of America was behind him.
However, Roosevelt brushed aside this with the comment
|| "Everybody is against me except the voter."
||

US Economy: The Impact of WW2


Well the impactr of world war 2 on the US economy was during the war many factories such s Ford motors was turned into a war production thus allowing wages to rise rapidly and creating more employment opportunities- 17,000,000 jobs were created in the USA. Also the war meant an increase in demand for farm products and prices rose. the USA arose from the war as an industrial giant its economy was heads and shoulders above the rest of the other ruined economies of other nations. Lastly the standard of living rose for all uUS citizens as a result of all the above.