As the current financial crisis has unfolded, Franklin D. Roosevelt has been frequently traduced for the economic policies he used to lead the country out of the Great Depression.
In 1933, there was great disagreement about how to deal with an economic recession or depression, and Roosevelt’s administration, and the president himself, had conflicting impulses. Herbert Hoover had made the worst possible selection of policy options: higher taxes and tariffs and a shrunken money supply. The unemployment rate was approximately 33 percent, more than four times what it is now (not the 25 percent the revisionist Right now claims), and there was no direct relief for the unemployed. They could beg, steal, or starve, though Hoover claimed that they prospered selling apples.
On Inauguration Day 1933 (then March 4), there were machine-gun nests at the corners of the great government buildings in Washington, for the only time since the Civil War. Almost all banks in 38 states had been closed sine die. In most of the other states and Washington, D.C., withdrawals were limited to 5 percent of deposits, and in Texas to $10 per day. The New York Stock Exchange and the Chicago commodity exchange had been closed, indefinitely. The financial system had effectively collapsed. In a fever of activity, Roosevelt guaranteed bank deposits, made the federal government a temporary non-voting preferred shareholder in thousands of suddenly undercapitalized banks (more than half the banks in the country), refinanced millions of residential and farm mortgages, put millions of people to work in relief programs, tolerated cartels and collective bargaining in order to raise prices and wages, increased the money supply, effectively departed the gold standard, repealed Prohibition of alcoholic beverages (wrenching one of the nation’s largest industries out of the hands of the underworld), and legislated reduced working hours and improved working conditions for the whole work force. In the next two years, he set up the Securities and Exchange Commission, created the Social Security system, broadened the powers of the Federal Reserve to equal those of other nations’ central banks, and imposed some entirely political tax changes to stave off Huey Long and other extremists, in what became known as the Second New Deal.
The Hoover agricultural policy had been to dump surpluses abroad, lend foreign governments the money to buy them, and then pursue the debtor countries aggressively when they defaulted. Roosevelt had farmers vote, by category of what they produced, on agreed production cutbacks, assuring sustainable agricultural prices, and compensated farmers for the production they had curtailed. The more extreme revisionists now claim that Roosevelt should not have stabilized food prices and financed, through public-works projects, flood and drought control and rural electrification, because it would have been better to starve these people off the land and to the cities, where, a generation or more later, they would have had higher standards of living. Apart from the fact that the resulting human misery would have been morally and politically unacceptable in the United States, the already militant farm unions would have disrupted the nation’s food supply. Such a policy would have put Roosevelt in the same general category of agrarian reformers as Stalin and Mao.
The key to evaluating Roosevelt’s performance at combating the Depression is the statistical treatment of many millions of unemployed engaged in his massive workfare programs, which were called “internal improvements” in Jackson’s time, and are called “infrastructure” now. The government hired about 60 percent of the unemployed in public-works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York City’s Lincoln Tunnel and Triborough Bridge, the Tennessee Valley Authority, and the heroic aircraft carriers Enterprise and Yorktown. They also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. They employed 50,000 schoolteachers, rebuilt the entire rural school system of the country, and employed 3,000 writers, musicians, sculptors, and painters, including the young Willem de Kooning and Jackson Pollock.