New Deal

The motivation to pick this book was to actually know about the circumstances around and during the New Deal era and then try and draw some sort of comparison between then and now as the world recovers from the Covid-19 shock.

My main preference was a book that was comprehensive and did not have a few volumes - and this fit the bill. Also, I have noticed that the foundations of a lot of influential institutions were laid during that time and that era is supposed to be considered as a prime, rare example of how the government actively stepped in to help and rebuild the society after it was decimated by the 1930s depression. No wonder we hear terms thrown around like the “Green New Deal” - a New Deal’s 21st century version of what many believe should sound like. Also, this program helped cement F.D.R’s position as one of the most successful Presidents. Historical Rankings of presidents of United States

Here is my attempt of what I could find the main features of the New Deal, the similarities and differences between then and now.

Standouts -

• 100 days of any presidency are the most pivotal in terms of setting the tone and agenda for the 4 years.

• Under the New Deal the foundations of quite a few institutions and laws were laid - some of which remain like FDIC, Glass-Steagall Act, NRA, SEC, CWA, FSA.

• Organizations like NRA did standardize code and practices but ended up policing a lot more. It prevented things from getting worse but did little to speed recovery.

• Gold buying was a mistake from FDR. Eventually, he abandoned the Gold standard.

• The Social Security Act was conservative and inept in the context that at that time there was no other welfare system in which the state shirked all responsibility for old age indigency and insisted funds  be taken out of the current earnings of the workers. Sickness, in normal times the main cause of joblessness was disregarded.

• Laid the foundation of Social Security in the form of Old Age Revolving Pensions and later Social Security Act of 1935. 

• FDR’s comment is also remarkable that -  the employee share of taxes was to ensure that the contributors had a legal, moral and political right to collect it (a way of having skin in the game). And with taxes in there, no one could dare scrap it. 

• Building infrastructure helped give employment to so many people. Master-stroke!
  CWA built/improved 500,000 miles of roads, 40,000 schools, over 3,500 playgrounds and 1,000 airports and renovated multiple govt. buildings.
  Unfortunately, alarmed at how much CWA was costing - FDR ended it as quickly as he could.

• Initially, the African American community wasn’t supportive of the New Deal specially because the Congress at that time failed to pass Civil Rights Legislation.Not a single piece of Civil rights legislation was adopted in FDR’s four terms in the White House.

• The big Crossover happened between 1934-36 when they finally became pro-Democratic.

• Lots of tussle between Globalists v/s Isolationists w.r.t WWII. One faction wanted intervention, the other didn’t. The U.S did adopt the policy of indifference/neutrality which did play a little role in things getting out of hand. And ultimately the Pearl Harbor attack forced it to join the war.

• FDR was initially sympathetic to the cause of labor (unions).

• In the late 1930s, there were fears that fascism which was popping its head in Europe might raise its ugly head here in the U.S itself.

• The U.S was desperate to stay out of WWII.

• FDR interacted with the press freely. Monumental in changing the perception of the government - it made them think of the government.

  Similarities

• Heading into 1932, most Americans had come to a despair of the whole political process, a contempt for Congress and political institutions. The country was facing peak unemployment, run on the banks and stock market crash. 
  
  

• The stories in the newspapers of that time and remarks of the observers tell us about abundance for one half and the other half struggling. This is very similar to how the situation is post Covid-19 in the US except for the banks and the stock market. There however remains a high number of unemployment and the main street is reeling from the year that has gone by.

• Plus, the landscape of the world and how it conducts business might have changed forever putting lots of jobs in peril.

• Even in 1933 - the sentiment to forgive debt was very popular. Same as what it is now - in terms of student loan debt, housing.

• I saw some criticism that POTUS 46th took a long time to get the Stimulus Bill passed. But even back then, March 4th FDR was inaugurated and in May - Industrial Recovery Bill passed. Turns out passing legislation is a time consuming process!

• FDR surrounded himself with experts - something happening now too.

• Even in the 1930s - policies were being dictated by interest groups.

• Lots of struggle by the Unions - FDR was not sure about them.

• Same political playbook in elections - fear, exaggeration and distortion.

• Govt. help back in the 1930s was criticized by the same arguments that it violated traditional American assumptions of self-help, self-denial and individual responsibility.

• Met a lot of resistance to tax the inheritance and top 1% and regulate big companies (power utilities in those days).

• America First was still a thing back then. As the world political temperature grew hot and clouds of war assembled, a lot of advisors wanted the U.S to sit out (isolationism). FDR even in his inaugural address said “the putting of first things first”.

• Even back in the 1930s war was considered to be a willful distraction from troubles at home.

• Talk of packing the courts.

• The recession in 1937 - raised concerns of inflation and heavy taxation due to federal spending. FDR did cut WPA rolls and PWA funding being paranoid about inflation.

• Anti-monopoly sentiments.

• It was a widely believed perception in the 1930s that the decade before (1920s) had seen obscene wealth building.

• Quoting from the book verbatim - 

  During the upturn of 1935-37, conservatives argued that, since the crisis had passed, reforms were no longer appropriate.

  Sounds familiar to the rhetoric we are beginning to hear?

• Another line that caught my eye -

  In the early years of the depression, the nation was united by a common experience. People felt genuine compassion for the victims of hard times. By Roosevelt’s second term, as it seemed that the country might never wholly recover, the burden of the unemployed had become too exhausting a moral and economic weight to carry.
  Sounds familiar?

• Tussle over balancing immigration versus high rate of unemployment amongst U.S citizens.

Differences -

• 1934 elections were one-sided. Republicans were almost erased as a national party. Dominating the legislature helped FDR execute his policies without any opposition.

  It doesn't seem one-sided in 2020.

• Looking back from 2021 the jolt in 2020 seemed short-lived compared to how it was in the 1930s. Ofcourse, we don’t know what unknowns lie ahead - variants, inflation, debt-to-GDP ratio.

  
  

• Economics in the 21st century is quite different than 100 years ago.

Then v/s Now

Conclusion -

Finally, it is quite clear that the policies of the New Deal era were quite successful. Almost every big monument, bridge, institution was conceived as part of the New Deal. It is remarkable that it had something for everybody. It had a Federal Art Project under which the artists were paid to pain murals outside government buildings! 

If I were to pick 3 key-takeaways from then - 

1. Government spending is not as bad as it is made out to be.

It generates jobs and touches the lives of more people than we can imagine. The main thing is to go big and not timid in terms of vision.

2. Spending on infrastructure is worth it.

I say that because many of the bridges, highways built under that scheme are now the main tourist attractions and would have probably generated tonnes of jobs, and billions in revenues.

3. Fight the monopolies.

There was an active measure to fight the monopolies during that time and yes, it did face lot of pushback. It didn't do as well as other policies but this is something I wish would have happened.