Did Roosevelt’s New Deal End the Great Depression?

The Skeptics Guide to American History

Episode 18 What Did Roosvelt’s New Deal Really Do?

Film Review

In this lecture, Stoler argues that contrary to popular perception, Franklin Roosevelt was a wealthy, aristocratic conservative in the traditional European sense (see Who Were the First Populists ). Stoler claims he is falsely credited with ending the Great Depression (according to Stoler, World War II ended it). Stoler blames this failure on FDR’s unwillingess to incur debt (as recommended by British economist John Maynard Keynes) to stimulate the US economy. I disagree. In my view, FDR’s failure stemmed from his unwillingness to instruct the US Treasury to create money to spend into the economy (instead of borrowing it), as occurred in Canada and New Zealand.*

When Roosevelt was inaugurated on March 4, 1933, the US was experiencing the worst economic crisis in its history, with an unemployment rate of 25%. An estimated 40-60% of the US population earned below the marginal subsistence income of $2,000 a year. The day after his inauguration, Roosevelt shut all the banks, Wall Street and the Chicago Board of Trade – to prevent investors from collapsing them by withdrawing all their money.

He then called a special session of Congress to pass a banking bill (written by the banks), to cut World War I veterans benefits, to reduce federal salaries and to enact a new tax on beer and wine.

During their first six weeks in session, Congress passed seven major New Deal bills to create jobs and help pump money into the US economy and to better regulate Wall Street to better protect it against future financial crashes. These include the Agricultural Adjustment Act, the National Industrial Recovery Act (suspended US anti-trust laws to encourage price fixing and cartels and allowed for federal regulation of wages and prices), the Home Owners Loan Act, the Civilian Conservation Corps (creating 300,000 jobs for young men 17-28) and bills creating the Securities and Exchange Commission (to better regulate Wall Street), the Federal Deposit Insurance Corporation (which protects depositors’ saving if their bank fails) and the Tennessee Valley Authority (TVA).**

As a result of these measures, the US economy began to recover in 1934.

However in 1935, the recovery stalled as unemployment crept upward towards 1929 levels. In 1935-36, Roosevelt responded with the Second New Deal, which included legislation creating the Works Progress Administration (employing 8 million Americans – 1/3 of the jobless), Social Security and unemployment insurance, the National Labor Relations Board (guaranteeing US workers the right to collective bargaining), a rural electrical electrification program, as well as higher taxes on the weathy and greater regulator control over banks and utilities.

This new swathe of laws generated major claims from business that Roosevelt was a communist and socialist.*** Disturbed by these attacks, Roosevelt began to cut federal spending following his 1936 reelection. Around the same time, the Federal Reserve reduced the amount of money in circulation. These cutbacks totally wiped out the economic gains the US had made between 1933 and 1936, leading to a 33% drop in industrial production, a 35% drop in wages, a 13% drop in national income and an increase in unemployment to 18%.

The New Deal essentially ended in 1938 after 1) the Supreme Court declared it unconstitutional and 2) Roosevelt lost the support of Congress. The Depression would only end in 1941, as military production ramped up following US entry into World War II.

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*Contrary to popular belief, most new money isn’t created by the US Treasury or the Federal Reserve (except in the case of Quantitative Easing, in which the Federal Reserve creates new money to buy back Treasury bonds from private banks). Most new money is created by private banks out of thin air when they make loans.

**The Tennessee Valley Authority is a federally owned corporation created by congressional charter on May 18, 1933, to provide navigation, flood control, electricity generation, fertilizer manufacturing, and economic development to the Tennessee Valley (a region disproportionately affected by the Depression).

***Stoler makes no mention of assassination attempt against Roosevelt exposed by retired general Smedley Butler. See https://constantinereport.com/smedley-butler-and-the-fascist-plot-to-overthrow-fdr/

****By increasing the reserves required for private banks to create new money.

The film can be view free at Kanopy

https://pukeariki.kanopy.com/video/what-did-roosevelts-new-deal-really-do

Hidden History: The Legacy of President Herbert Hoover

A Skeptics View of American History

Episode 17 Hoover and the Great Depression

Film Review

In this lecture, Stoler attempts to separate fact from mythology in evaluating the presidency of Herbert Hoover. The latter is commonly blamed for the deep economic depression Americans experienced during the 1930s.

I was very surprised to learn that prior to his election in 1928, Hoover was considered to be a progressive humanitarian, based on his work in international relief programs. As Secretary of Commerce in Woodrow Wilson’s Democratic administration, he embraced the progressive ideal of using business-government cooperation to abolish poverty. He first came to public attention for organizing food relief to Belgium during World War I and to Central and Western Europe following the war.

Stoler lists a number of economic causes for the Great Depression (aka The Banker-Engineered Deflationary Crisis of 1927-40), but fails to mention the most important: namely the deliberate contraction of the money supply by private banks.*.

Stoler enumerates a number of New Deal  programs started by Hoover but mistakenly credited to Roosevelt. These include the Reconstruction Finance Corporation. the Emergency Relief and Reconstruction Act (providing loans to states to help them create jobs), the Federal Farm Board (created to buy surplus crops from farmers) and the 1932 Glass-Steagall Banking Act. The latter allowed banks to offer commercial paper* and mortgage contracts as collateral on federal loans.

According to Stoler, Hoover’s biggest mistake was ordering the Army attack on the Bonus Army protest in Washington (see The US Government Assault on World War I Veterans and Their Families)

His second biggest mistake was his passage of the Smith-Hawley Act, which significantly reduced international trade through punitive tariffs.

Hoover’s policies, as would Roosevelt’s, would prove ineffective in ending the Great Depression. As Stoler points out in a later lecture on FDR, only US entry into World War I would end the Depression. Yet, owing to Roosevelt’s far greater political experience (the US presidency was Hoover’s first elected office), the former would be revered for failed New Deal policies – while the latter would be demonized.

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*During the early 20th century, as now, private banks created the vast majority of the money in circulation. Carroll Quigley outlines their role in triggering the Great Depression in his masterpiece Tragedy and Hope. See The Real Vampires: An Insider’s View of Banks

**Bank commercial paper is an unsecured form of promissory note that pays a fixed rate of interest

The film can be viewed free on Kanopy.

https://pukeariki.kanopy.com/video/hoover-and-great-depression-revisited

Civilian Conservation Corp: Lessons from the Great Depression

“American Experience”: Civilian Conservation Corp

Directed by Robert Stone (2009)

Film Review

Between the COVID19 lockdown, curfews in many cities, and impending martial law if the riots continue, the US economy is taking a severe hammering – which many predict will produce higher unemployment than the Great Depression.

This 2009 documentary looks at the Civilian Conservation Corp (CCC) Roosevelt created when he took office in 1933. It served the dual the dual purpose of putting 2-3 million men to work and repairing the vast environmental damage wreaked by 200 years of laissez-faire agriculture. Prior to the 1930s, US farmers were unaware of the importance of using windbreaks to prevent erosion, replenishing soil nutrients with fertilizers, or rotation cropping. Until 1900, farmers and plantation owners simply abandoned their land when it became infertile and moved west.

In the 1930s, thousands of US farmers were forced to abandon their land, due to droughts, brought on by rampant deforestation, and massive topsoil loss in dust storms.

Roosevelt’s CCC was the very first national environmental program in the US. CCC members planted 2.3 billion trees, created 800 billion state parks, fought forest fires, and restored healthy pastures on thousands of farms. In addition to cutting ski trails in New England (thus launching the US ski industry), the CCC built Camp David,* the Carlsbad Caverns National Park, and the Appalachian Trail.

Closed to women, the CCC was run by the Army with rigid army discipline. There were 200 men each camp and all US states had several. They received $1 a day for six hours work, plus all the meat and eggs they could eat.** All recruits who were illiterate learned to read. There was also an opportunity to undergo vocational training in the evening (mainly typing, plumbing and electrical work.

Most men sent $25 a month to their families, which was instrumental in reviving many local economies.

After Pearl Harbor in December 1941, the CCC was dissolved, and nearly all 2.3 million recruits were mustered into the US Army.

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*Camp David is the country retreat for the US president.

**As with the COVID19 lockdown, farmers were forced to slaughter most of their cattle prior to the formation of the CC. Owing to massive unemployment, no one could afford to buy their meat.

 

 

Hidden History: How the New Deal Ripped Off Farmworkers and Blacks

The Great Depression – Part 5 Mean Things Happening

PBS (1993)

Film Review

While the National Recovery Administration, created in 1933, theoretically guaranteed workers the right to unionize, company bosses continued to fire (and shoot) employees who went on strike for the right to form unions.

In 1933 John L Lewis formed the Congress of Industrial Organizations (CIO). Unlike the American Federation of Labor (AFL), membership in the CIO was open to blacks, immigrants and communists (women continued to be shut out of the union movement until World War II).

For political reasons, the New Deal right to unionize didn’t extend to agricultural workers. The primary New Deal farm program was the Agriculture Adjustment Act, which gave plantation owners direct payments for destroying surplus cotton crops. Despite federal requirements that owners share their payments with tenant farmers* and sharecroppers,** they rarely did so.

Both approached socialist leader Norman Thomas, who helped them organize the Southern Tenant Farmers Association (STFA), which had 1,000 members by the end of 1935. Arkansas lawmakers responded by evicting tenant farmers and share croppers suspected of organizing, murdering black members and passing ordinances banning public gatherings.

Despite white terrorism, the STFA organized a successful cotton pickers strike (for higher wages) in 1935.

By 1935, the STFA had 25,000 members in Arkansas, Mississippi, Missouri and Tennessee and ongoing terrorist activities by whites began to receive national attention. The same year, FDR declined to meet with union leaders during a trip to Little Rock.***

In 1938, Congress finally passed legislation granting direct federal relief to tenant farmers and sharecroppers – plantation owners responded by evicting 251 families in order to keep the relief payments for themselves.

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*A tenant farmer used his own seed and animals to cultivate an owner’s land and paid him 1/4 of his crop for this privilege.

**A sharecropper used the landowner’s seed and animals and paid him 1/2 of his crop for this privilege.

*** Aside from FDR’s inherent racism, southern tenant farmers and sharecoppers didn’t vote because they couldn’t afford the $1 poll tax. More importantly the President relied on the votes of southern Democrats to pass New Deal legislation.

The Lost Science of Money – Wars Are Won By Bankers, Not Armies

The Lost Science of Money: The Mythology of Money – The Story of Power

by Stephen Zarlinga

American Monetary Institute (2002)

Book Review

This book, by co-author of Congressman Dennis Kucinich’s HR 2990 to abolish the Federal Reserve (see HR2990: Historic Bill to Abolish the Federal Reserve), is one of the most amazing books I’ve ever read. At 775 pages, the lowest price I could find for a used copy was $225 from Alibris. Fortunately it’s also available in PDF format at The Lost Science of Money

It’s clear from Zarlenga’s extensive documentation and footnotes that the research for this book took decades. He essentially rewrites western history dating back to the ancient Sumerians. His goal is to expose and correct all the distortions and myths introduced into official history historians in the pay of merchants and bankers. Both are fiercely committed to perpetuating our current global monetary system in which private central banks create and control the money supply.

Among many others, two of the myths Zarlenga explodes are that the Roman Empire collapsed due to barbarian invasion (he demonstrates very convincingly that Rome collapsed due to a debasement of their currency) and the often repeated claim that excessive government printing of money was responsible for the deadly inflation in the early years of the Third Reich – as Zarlenga points out, it was actually the privately owned central Reichsbank that issued the money and created the inflation.

The Concept of “True Money,”

Zarlenga begins by establishing a clear difference between “true money,” which he defines as money with a fixed value set by law and “commodity money,” in which private merchants and banks issue and control the value of money. In the rare historical periods where governments have issued and controlled money by law, the result has been long periods of political stability and flourishing industry and culture.

The Romans enjoyed the longest continuous period (200 years) of monetary stability. Roman leaders maintained control of their money by prohibiting silver and gold coinage for domestic use – issuing fixed value copper and bronze coinage instead. In this way they prevented foreign merchants from capturing control of their money supply and manipulating the value of their currency.

He Who Controls the Money Controls the World

Zarlenga carefully traces how after the fall of the Roman Empire, control of western money shifted from Constantinople (after the 4^th Crusade which sacked Constantinople – see link), to Venice, to Portuguese traders in Antwerp (after they opened the trade route around the southern tip of Africa), to Amsterdam (following the civil war splitting the Netherlands into Holland and Belgium), to London (after the Dutch prince William of Orange seized the English throne). In each case, control of the money supply was far more important than military strength in consolidating political control.

Zarlinga also clarifies, though careful research, the historical role played by the Knights Templar and Jewish merchants and money lenders in the development of global monetary centers.

The Dutch Usurper Who Chartered the Bank of England

One of the sections that interested me most concerned the founding of the Bank off England – which set the global standard for all private central banks – in 1694. Previously I hadn’t realized that the Bank of England was started by a Dutch king (William of Orange), who usurped the English throne from James II. Nor that his purpose for chartering the Bank of England was to advance the interest of the Dutch merchants and bankers who initially controlled it.

“True Money” in the Americas

I also enjoyed the detailed section outlining the history of government issued money in the US. Again Zarlenga presents extensive and convincing evidence that it was the ability of colonial governors to issue their own money that enabled commerce and industry in the 13 original colonies, as well as enabling them to organize a successful war of independence against England.

Zarlenga also describes in detail the battle Jefferson, Andrew Jackson and their allies fought against the creation of a privately controlled central bank, as well as the immense popularity of the Greenback Congress issued during the Civil War – and the immense national uprising (the populist movement) launched at the end of the 19^th century to save them.

The Federal Reserve Engineers the Great Depression

Obviously the book wouldn’t be complete without a chapter on the criminal conspiracy that lead to the formation of the Federal Reserve in 1913, the Federal Reserve’s role in engineering the Great Depression 26 years later, and Roosevelt’s prolonged battle with Wall Street to implement the New Deal recovery.

How to Build an Alternative to Capitalism

How Do We Build Movements That Can Win

Naomi Klein (2017)

In this presentation, Naomi Klein  outlines the strategy she feels grassroots activists need to pursue to resist the growing attacks on working people while building build a genuine alternative to post industrial capitalism. It’s very similar to the one Kali Akuna proposes (see Don’t Just Fight, Build).

While she begins by focusing on climate change, she heavily emphasizes that environmentalists alone can’t solve the crisis of catastrophic climate change – that it will require a large diverse coalition of activists organizing around a broad array of environmental and social justice issues. While she doesn’t state directly that it’s impossible to prevent climate change under capitalism, this is strongly implied.

Another concept Klein stresses is the importance of radical ideas in creating the conditions for major reform. She gives the example of the calls for socialist revolution following the 1929 Depression and during the Vietnam War – how serious discussion of revolution scared the corporate elite so much that they granted major economic reform (the New Deal) under Roosevelt and major environmental reform under Nixon (creation of the Environmental Protection Agency, the Clean Air Act, the Clean Water Act, etc.).

Klein also gives the example of the Leap Coalition in Canada, which is working for bold social and environmental justice reforms, as well as the development of community controlled energy systems (similar to Germany’s) – where the profits from energy production fund community services, such as teaching, daycare and senior care – rather than distant corporations.

How Bill Clinton Tried to Privatize Social Security in 1998

In this presentation, author Thomas Franks talks about his recent book Hey Liberal, Listen Up: Or, What Ever Happened to the Party of the People. The focus of his latest book is the blue collar backlash that has resulted in the probable selection of fake populist Donald Trump as the 2016 Republican presidential candidate. Franks places the blame for this squarely on Democrats, owing to their abandonment of working people.

As Franks describes it, the pro-Wall Street swing of the Democratic Party is based on a very deliberate strategy by Bill Clinton and his supporters to “screw over” their traditional power base (ie African Americans and organized labor).  Clinton proudly justified this strategy with the observation, “they have nowhere else to go.”

Franks most shocking revelation is that Clinton took office in 1992 with a deliberate determination to repeal the New Deal. In 1997, he made a secret deal with Republican House Speaker Newt Gingrich to ram a bill through Congress privatizing Social Security (which Clinton mentions in his 1998 State of the Union address). Thanks to the Monica Lewinsky scandal, this bill never happened.

 

The Tea Party: Brought to You by Wall Street

Pity the Billionaire: the Hard Times Swindle and the Unlikely Comeback of the Right

By Thomas Frank

Havill Secker (2012)

Book Review

Pity the Poor Billionaire describes how the right wing corporate elite used the 2008 economic crash to build a pseudo-populist movement (aka the Tea Party) to build blue collar support for harsh free market austerity policies that benefited Wall Street at the expense of working people.

According to Frank,  the Tea Party was the fourth conservative uprising in the last half century. The first was the backlash against the anti-Vietnam war movement that resulted in Nixon’s election in 1968 and 1972. The second was the Reagan revolution in 1980; the third the Contract with America revolution that won Republican control of Congress (in 1994) during Clinton’s first term.

The Demise of Unions and the Left

With each of these movements, US political and economic life became increasingly conservative, with all public institutions – churches, hospitals, universities, museums, the US Post Office and even the Army and CIA – succumbing to pressure to operate according to free market principles.

The same period saw the virtual demise of both labor unions and any organized US left. Nevertheless, according to Frank, right wing strategists managed to flood the media with rhetoric ramping up popular fear the left was “on the march.” It mainly  focused on a fictitious behind-the-scenes conspiracy to provoke a crisis – through overspending that would collapse the US economy.

Swaying Popular Anger from Wall Street to the Government

This messaging, crafted by right wing think tanks funded by right wing billionaires like the Koch brothers and delivered by Glenn Beck, Russ Limbaugh and similar right wing celebrities, was spectacularly effective in convincing a majority of Americans that the neoliberal corporatist Obama is really a socialist.

Oil billionaire Charles Koch warned back in 2008 that the global economic downturn could lead to the same “loss of liberty and prosperity” (for billionaires) as the Great Depression did. He and his brother David went on to deliberately manufacture an “astroturf”* movement (ie the Tea Party) to thwart Obama from enacting the same type of public spending projects Roosevelt used to reverse the 1929 depression.**

They did this by using Tea Party protests and right wing media to sway public anger away from Wall Street and onto the government. Via sophisticated psychological propaganda, working people were systematically conned into believing their interests coincide with those of Wall Street corporations.

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*Astroturfing is the practice of masking the sponsors of a message or organization to make it appear as though it originates from grassroots participants.

**Frank challenges (with data) the common Tea Party assertion that Roosevelt’s New Deal reforms failed to halt the 1929 depression (ie that it took the World War II mobilization to lift the US out of depression). Between 1929 and 1933 (when Roosevelt took office), the US GDP dropped by more than 50 percent. Following the enactment of the New Deal, it increased by 11% in 1934, 9% in 1935, 14% in 1936 and 13% in 1937. Overall GDP growth 1933-37 was the highest the US has seen outside of war time.

A Natural Solution to Drought

In the video below, Australian permaculture guru Geoff Lawton challenges the energy intensive system of water management employed in the southwestern US and California.

He gives the example of the canal off the Colorado River, which presently transports water 300 miles to Tucson. Increasing evaporation has made the water so saline that it’s useless for irrigation – except for golf courses. A sinking water table means massive energy is required to elevate the water prior to transporting it. In fact, providing water to Tucson is the single biggest consumer of electricity in the state of Arizona.

Lawton contrasts this energy intensive approach to water management with a system of swales* built in the Sonora Desert 80 years ago under the Works Project Administration (Roosevelt’s New Deal job creation program). After 80 years, the swales are full of lush grasslands and trees that have self-planted.

This low-energy design approach, which works with nature rather than against it, can be used to transform any desert region into productive food forests.

The video has been censored from YouTube, but you can see it at http://www.geofflawton.com/fe/73485-an-oasis-in-the-american-desert

In the second video Lawton takes viewers through a food forest he built, by constructing swales, in the Jordanian desert.

*A swale is an artificial ditch on contour used to slow and capture water runoff by spreading it horizontally across the landscape, thus facilitating runoff infiltration into the soil