Who Made the New Deal?

Comparisons between Barack Obama’s assumption of power and Franklin Delano Roosevelt’s in 1933 have been many and varied.

Following Obama’s first press conference as president-elect, New York Times business reporter Joe Nocera wrote a November 7 column titled “75 Years Later, a Nation Hopes for Another FDR.” Others, like the writers and editors for the liberal Nation, openly endorse a “new New Deal” from the Obama administration to help working people.

None of this is surprising. Roosevelt’s New Deal is remembered today for signature programs that seem very relevant in light of the economic disaster spreading from Wall Street through the rest of the economy.

The New Deal is synonymous with Social Security; with the “alphabet soup” agencies like the WPA (Works Progress Administration, which created jobs for the unemployed constructing public buildings); and with the government’s recognition of the right of workers to join unions.

But the New Deal didn’t come about because of some hitherto hidden enthusiasm among American political leaders for giving working people new rights and programs. The New Deal was, first and foremost, a program to save a U.S. economy in crisis. That American workers made gains was the result of huge struggles that gave a radical content to that program.

The 1929 stock market crash and the onset of the Great Depression followed a decade-long employers’ offensive against the labor movement that reduced union membership from 19.4 percent of the nonagricultural workforce in 1920 to 10.2 percent in 1930.

The labor movement seemed dead, with no new strategies in place and nowhere to turn for new members. By 1933, when Roosevelt took office, unemployment hit one-quarter of all workers.

Roosevelt didn’t run for president with the intention of championing workers’ rights or creating a welfare state. For much of his campaign against the incumbent president, Herbert Hoover, he attacked the Republican for “reckless” spending and pledged to balance the budget by cutting federal spending by 25 percent.

The 1932 Democratic Party platform affirmed the call for a balanced budget and huge cuts in federal spending, and it included a call for the states to follow suit. In words that would be familiar from today’s free-market ideologues, it also called for “the removal of government from all fields of private enterprise, except where necessary to develop public works and natural resources in the common interest.”

The depth of the economic crisis forced a different response. Roosevelt enlisted the help of some of the country’s leading businessmen, including General Electric’s Gerard Swope and Walter Teagle of Standard Oil of New Jersey, who argued that deteriorating business conditions required state intervention to control the excesses of private capitalism.

The “New Deal capitalists” also urged Roosevelt to adopt reforms modeled on private-sector benefit and insurance plans. The Social Security Act, passed in 1935, took as its inspiration a number of “welfare capitalism” programs established in the 1920s by some of the country’s leading corporations.

Despite some capitalists’ complaints that the New Deal represented a step toward “socialism,” Roosevelt and the New Dealers had no such intention. In fact, Roosevelt wrote in one letter about “the failure of those who have property to realize that I am the best friend the profit system ever had.” In campaign speeches when he ran for reelection in 1936, he proclaimed himself the “savior” of “the system of private profit and free enterprise.”

Roosevelt’s “New Deal” coalition was launched in this context. While popularly perceived as an alliance of Blacks, labor, urban dwellers and other “popular” constituencies, behind it all was a fundamental recasting of the alignment of business forces in American politics. The New Deal coalition, wrote political scientists Joel Rogers and Thomas Ferguson, involved not:

[T]he millions of farmers, Blacks and poor that have preoccupied liberal commentators, nor even the masses of employed or striking workers who pressured the government from below . . . but something else — a new power bloc of capital-intensive industries, investment banks and internationally-oriented commercial banks.

Roosevelt’s first tentative steps toward addressing the crisis in the economy bore a number of similarities to initiatives the discredited Hoover administration had taken. But circumstances forced Roosevelt’s hand.

Though it represented, in essence, a political rearrangement of American capital, the New Deal could only succeed by striking a new arrangement with the system’s traditional victims. Thus, included in the National Recovery Act (NRA), the New Deal’s first major economic plan, was Clause 7a, which allowed workers to bargain collectively with their employers.

Clause 7a had the unintended consequence of spurring an explosion of union organizing. “There was a virtual uprising of workers for union membership,” the American Federation of Labor (AFL) executive council reported to the federation’s 1934 convention. “[W]orkers held mass meetings and sent word they wanted to be organized.”

The consequences of this new period of union organizing ushered in by the NRA’s Clause 7a was immense. Existing unions tripled, quadrupled or quintupled in size. New unions seemed be formed overnight. Between 1933 and 1937, the number of workers who were union members jumped from 2.7 million to more than 7 million.

Driving these numbers upward was a quantitative and qualitative leap in the class struggle.

The number of strikes jumped from 1,856 in 1934 to a peak of 4,740 in 1937, with the number of strikers involved leaping from 1.1 million to 1.9 million in the same period. A large number of the stoppages were for union recognition against employers who refused to follow Clause 7a’s recognition of collective bargaining. A further number of these strikes, especially the three 1934 general strikes in Toledo, San Francisco and Minneapolis, took on a near-insurrectionary character.

Roosevelt responded to the pressure of the rising class struggle by legalizing collective bargaining rights for workers who were using the strike weapon to demand them. But he didn’t do so enthusiastically.

Liberal Democratic Sen. Robert Wagner introduced what became the National Labor Relations Act in 1934. The bill aimed at creating permanent procedures so that union recognition and employer-union relations would be something regulated by the government, instead of fought out on the shop floor between workers and bosses.

Industry opposition to the bill made FDR withhold his support, causing Wagner’s legislation to stall in Congress. But the 1934 strike wave “confirmed Senator Wagner in his conviction that the nation needed a new labor policy,” as one history put it. Wagner reintroduced the bill, and it won overwhelming support in Congress. Roosevelt then backed it as a way to rein in a labor movement that showed signs of getting out of control.

Roosevelt did succeed, ultimately, in reining in the struggle. But it wasn’t a one-way proposition. He had willing collaborators among union leaders whose vision for organized labor offered them a “seat at the table” alongside the nation’s policymakers.

Even before the formation of the Congress of Industrial Organizations (CIO)–a newly formed coalition of unions in the mass industries that served to challenge the conservatism of the AFL–a labor leader like Sidney Hillman of the Amalgamated Clothing Workers represented “a labor statesman in waiting, waiting for a movement to represent and a regime to accept that representation,” as his biographer put it.

This observation isn’t to take away from the initiative and courage that top CIO leaders like Hillman and John L. Lewis of the United Mine Workers of America (UMWA) exhibited when they launched the CIO.

But it does make clear what they, or at least what New Deal loyalists like Hillman, ultimately wanted from the industrial union movement. Rather than seeing it as a means by which workers could organize an independent voice to win their demands, these union leaders saw it as a means to give labor leverage in the halls of power.

Thus, the leadership of the CIO was “connected by a thousand threads to a newly emergent managerial and political elite, an elite which in collaboration with the CIO would foster a permanent change not only in the national political economy, but in the internal political chemistry of the Democratic Party and in the prevailing politics of production in basic industry,” commented labor historian Stephen Fraser .

It wasn’t long before these leaders’ commitment to remain credible in the halls of power rendered them opponents of rank-and-file initiatives.

Roosevelt shrewdly used his power to cement the loyalty of the trade union officialdom to the New Deal and to the Democratic Party. That’s why mineworkers’ leader Lewis complained about the difficulty of organizing a labor-based opposition to the administration:

[FDR] has been carefully selecting my key lieutenants and appointing them to honorary posts in various of his multitudinous, grandiose commissions. He has his lackeys fawning upon and wining and dining many of my people…

In a quiet, confidential way he approaches one of my lieutenants, weans his loyalty away, overpowers him with the dazzling glory of the White House and appoints him to a federal post under such circumstances that his prime loyalty shall be to the President and only a secondary, residual one to the working-class movement from which he came.

Rank-and-file union activists — especially those on the front lines of the class struggle–were far less loyal to the Democrats, or even to Roosevelt.

By 1933, pressure began to mount among unionists for the creation of labor’s own political party to end the unions’ collaboration with both Democrats and Republicans. Calls for a labor party reflected a newly confident working class and its desire to fight on its own.

CIO leaders Lewis and Hillman made a priority of garnering CIO support for Roosevelt in the 1936 election. But in order to do so, they had to squelch pro-labor party sentiment among CIO members. This meant sabotaging unionists’ own initiatives independent of the Democrats.

When the newly formed United Auto Workers (UAW) voted in 1936 to support the creation of a national farmer-labor party, CIO leaders threatened to remove funding for organizing the rest of the auto industry if the union didn’t rescind the vote and back Roosevelt. The UAW caved and endorsed Roosevelt. From then on, organized labor has been a loyal lieutenant of the Democratic Party.

The New Deal left behind a set of programs that, while certainly an advance over the pre-Depression lack of social provision, fell far short of erecting a European-style “welfare state.”

The Social Security Act established a divide between “social security” and “welfare.” Unemployment and old-age insurance would not be paid out immediately, but only after employer and employee taxes had been collected in federally managed funds for workers. A regressive payroll tax, capped at a fixed amount, assured that workers would pay more to finance the system than would the rich–despite the fact that the rich also would be eligible to receive benefits from the old-age pension program.

Nevertheless, the “universalism” of Social Security–on offer to every worker–accounts for its enduring and widespread support ever since.

By design, the New Deal set up a distinction between those who “deserved” old-age or disability benefits because they worked, and the “undeserving poor” who were viewed as too lazy to work. Millionaire FDR himself called welfare “a narcotic, a subtle destroyer of the human spirit.”

For a generation, the memory of the New Deal sustained the Democratic Party as the majority party of American capital. This political order began unraveling in the 1960s and 1970s as the turmoil of the period, the war in Vietnam and the struggles of the era fractured the Democratic Party. This opened the door to the conservative period of the last generation, which seems, finally, to have run its course.

What Else to Read

* Lance Selfa’s The Democrats: A Critical History examines the two-party system in the U.S. and focuses on a socialist history of the Democratic Party.

* To learn more about the labor struggles that have shaped U.S. history, Sharon Smith’s Subterranean Fire: A History of Working-Class Radicalism in the United States is an excellent history of the working class movement.

* For an account of the 1934 Minneapolis Teamster strikes that ushered in the high point of 1930s struggle, see Teamster Rebellion by Farrell Dobbs, who became a socialist through his participation at Minneapolis.

* Labor’s Giant Step by Art Preis gives an account of the first 20 years of the CIO, starting with the federation’s roots in the turbulent 1930s. Jeremy Brecher’s Strike! is the place to start for a survey of U.S. labor history.

Lance Selfa writes for the Socialist Worker where this article first appeared. Read other articles by Lance, or visit Lance's website.

10 comments on this article so far ...

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  1. Slack said on November 20th, 2008 at 4:15pm #

    Fantastic background on the New Deal in this article. I suppose it’s hard not to draw comparisons between FDR’s vague promise of a “New Deal” and Obama’s vague promise of “Change”.

    Like FDR, Obama seems to want to maintain the status-quo (filling his staff with Clinton neo-liberals and DLC people), but I don’t think he will be able to because of how severe this crisis is.

    The big x-factor is how the dynamic between the high hopes and expectations for “change” combined with the severity of the crisis will play out. In the 1990s, liberals with hopes in Clinton became cynical and simply threw their hands up. This time I don’t think that will happen because people feel that momentum is on their side now rather than on the side of christian conservatives and neo-liberals; also the problems are so much more severe that people will have to fight back to protect their homes from foreclosure and jobs from being cut.

  2. Max Shields said on November 20th, 2008 at 6:36pm #

    Again, this is not the Great Depression, Obama is not Lincoln nor is he FDR.

    Roosevelt went to war, the US is at war in two countries when this happened. The underlying energy crisis did not exist in the 1930s. The GDP didn’t even exist. The GDP is the fallacious indicator that keeps this financial insanity going – it grows as people’s circumstances worsen.

    It’s understandable that people look to compare, but history only offers a sense of the unknown future; it tells us something about a general trend but it cannot speak to NOW.

  3. Doug Rogers said on November 20th, 2008 at 9:03pm #

    Comparisons to the New Deal are helpful in showing how things are different but also in showing that the myth isn’t quite what we thought it was. In the two articles I wrote in September about the New Deal I pointed out a subtle schism that developed within the Roosevelt administration. It wasn’t between liberals and conservatives but between those who thought that big consolidated business, even monopolies were okay as long as there was big government to manage it; and on the other side were those that thought bigness itself was the problem and the government should work to break up concentrated economic power.

    This is the lesson I hope that people could bring to bear on our current situation. The bigness group was led by Rex Tugwell and the Brains Trust. They enacted programs like the NRA, which was cumbersome, ineffective, tolerant of monopoly power and came to be pretty unpopular, eventually being (appropriately) over-turned by the Supreme Court.

    The breaking-up-of-economic-power faction was led by Louis Brandeis and Felix Frankfurter, who as head of the Harvard Law school groomed countless idealistic lawyers who manned the Roosevelt ramparts. Their work brought us the Securities and Exchange Commision, the Glass-Steagall Act and what may have been the greatest confrontation with entrenched power, the Public Utilities Holding Companies Act.

    When every day we are getting fleeced by corporations that are “too big to fail”, the breaking up of concentrated economic power ought to be our loudest battle cry and a fairly easy case to make.

  4. Lloyd Rowsey said on November 21st, 2008 at 5:55am #

    Thanks for this excellent synthesis of the history of the New Deal, Lance Selfa. I’ve been thinking about the impact of photography and poetry on politics, and mistakenly thought Let Us Now Praise Famous Men was published in time to have an effect on the New Deal. But the Libray of Congress lists the book first published by Boston, Houghton Mifflin Company, in 1941.

    It could probably be said with justification, however, that the famous book by James Agee and Walker Evans had more to do with the accepting the main features of the New Deal by the wealthy of America, than any other book ever written.

  5. cemmcs said on November 21st, 2008 at 3:35pm #

    When I tell people that Roosevelt was actually pretty conservative and that the captilists should be down on their knees thanking God for FDR, they look at me like I am nuts. After a while, I start to wonder if they are right. It’s nice to have some reassurance as well as some good background information.


  6. Max Shields said on November 21st, 2008 at 3:55pm #

    Corporations are like all human inventions – thoroughly expendable. They were created during the time of waning monarchies to control empire expansionism; and yet, even here we talk as if their existence must be accommodated through government management. Shocking!!

    Entrepreneurialism has its value as do small community based and owned businesses and cooperatives. These belong to a place and people and serve the community. The role of public governance is, and should be to subsume all monopolies. Monopolies must be put in and maintained within the public domain. These should never be (or have been) for-profit businesses. These are the commons and they must be de-privatized.

    That is neither socialism nor capitalism. Neither FDR (and his symbol) nor the Democratic Party (and its current branding) were then, nor now capabable of doing this work…at least they have failed over the last 200 years they have shared most of the power.

    Until corporations are and their predatory nature is undone, the issue of boom and bust, speculation and endless war will be forever with us.

  7. Ron Horn said on November 21st, 2008 at 5:33pm #

    Excellent portrayal of how labor union leaders were cynically co-opted by the ruling class. This will always be a problem for the working class to deal with as they go up against them, as I expect will, and must happen. Only a bottom-up control of organizational power can cope with this. Leadership must always serve at the behest of the organizational units below them, and must always be subject to immediate recall if they fail to do so. Instead of hierarchy I propose “subarchy”.

  8. Mao Knows Best said on November 21st, 2008 at 9:14pm #

    Remember, everything you enjoy today – computers, iPods, food, cars – is of a higher quality and at a cheaper price than royalty could have even imagined a few hundred years ago thanks to free enterprise.

    Before capitalism, there wasn’t a middle class.

    Those of you who think wealth and prosperity can be legislated by politicians who are short-sighted, power hungry, and incompetent will be in for a shocking surprise when we have a repeat of Mao’s “Great Leap Forward.” Many may not like their jobs under capitalism, but millions more have lost their lives under totalitarian regimes.

    Many liberals think FDR and The New Deal are the gold standard in government. It isn’t – It’s the the bottom of the toilet. Ask yourself this:

    Why is the government bankrupt with $40 trillion in debt? Because of the New Deal programs and Keynesian deficit spending.

    Why is the auto industry bankrupt? Because of the New Deal and its overwhelming preference for”unions” AKA cartels. US automotive pays double for its labor than the rest of the auto industry.

    Why is manufacturing dead in the US? Because of the New Deal and it’s ilk that legislated and taxed them to death.

    Wealth and prosperity comes from people doing what’s best for them, not government officials who think they know what’s best for you.

  9. Hue Longer said on November 22nd, 2008 at 12:04am #

    So Know’s Best, are you appealing to the workers to appreciate the welfare of the 20-30 percent in the middle class?

  10. Slack said on November 22nd, 2008 at 9:29pm #

    Thanks “Mao Knows Best” for not reading the article or understanding history or economics.

    I almost feel bad that your side is beginning to loose and your ideology is being completely discredited now by both history and current economic problems. Then again mostly I am sad that Milton Friedman died before he could see this economic collapse – seeing Greenspan say that his ideology was flawed was some consolation though.

    I could counter your claims. How exactly was manufacturing declining in the 60s when US capitalism was on the Keynesian model and unionization was much much higher than it is now? How come unionization rates and wages have decreased for 30 years and yet auto industry is bankrupt? But what good will it do? You’re like the woman at the McCain rally believing that Obama is secretly Muslim.

    I do agree on one thing: people should fight for what’s best for them – in fact that’s what this article was implying: Obama won’t make things better for workers if left to his own devices and the needs of capitalism, but fighting back from below and could force him to make concessions.