Confronting the Economic Crisis: The New Deal at 75 — Lessons for Today

When I was growing up in the 1950s, a photo of President Franklin Delano Roosevelt (1932-1945) still hung in the homes of some family members and friends.  Our only four-term president was remembered by them as the leader — and even the savior — of the country.  Those like my parents, who experienced the Great Depression and World War II, were transformed by the experience of Roosevelt’s New Deal into lifelong Democrats.  Union members, immigrants, and African Americans, and then their children, stuck with the Democrats through thick and thin for fifty years, largely held in place by their experience of the New Deal.

Seventy-five years ago, President Franklin Delano Roosevelt began to put together that series of social and economic institutions that he called the New Deal, measures that profoundly transformed American society.  At the same time under FDR’s leadership, the Democratic Party succeeded in constructing that bloc of social classes, ethnic groups, and organizations that came to be called the New Deal Coalition and that constituted the party’s social base of political power into the 1970s.  FDR’s New Deal — both the program of reforms and the coalition of forces — represented the most dynamic, durable, and ultimately successful political achievement of America in the twentieth century.  FDR’s New Deal also laid the basis for what Henry Luce of Time Magazine called the American Century, less than a century, but more than fifty years of American supremacy.

A New New Deal?

Today, as the nation once again confronts an economic crisis, some are turning to look back at Roosevelt’s New Deal in the hope of finding a solution to our country’s current problems.  Perhaps this is in part because some see in Barack Obama a Rooseveltian figure, one who might be the broker of new social pact.  We naturally then look back to the 1930s.

The Nation, for example, under the heading “Toward a New New Deal,” recently asked a dozen prominent Americans, including Rev. Jesse Jackson, SEIU President Andy Stern, and historian Howard Zinn, to comment on the New Deal on its anniversary.  By and large, those commentators suggested that we might turn to the New Deal for inspiration, as a model for taking political power, and as a program to resolve the country’s economic difficulties.  Zinn suggested that today’s presidential contenders might ask the American people to undertake a new New Deal and wondered if “Perhaps the momentum of such a project could carry the nation past the limits of FDR’s reforms, especially if there were a popular upsurge that demanded it.”

But does the New Deal of the 1930s represent the way forward for America in the 2000s?  Did it even represent the best way forward for America in the 1930s?  Do we want to go that route again?  And, if we did, would it even be possible? The answers to these questions, I think, point in another direction.  What we need today is not a New New Deal but a different sort of coalition under different leadership and with altogether different objectives: a Different Deal.  Turning to look back at the New Deal of the 1930s, we find that there was another path, a road not taken, an alternative for the country which we might pursue today.

The Crash, the Depression, Roosevelt

Many think of Roosevelt as a man who took office planning to help workers and to create a fairer economic system.  In truth, Roosevelt had no plan.  The New Deal emerged from a series of conflicts between the government, the corporations, and working people.  And much of the initiative for change came from below.

The Great Crash of 1929 devastated the American economy: banks failed, businesses closed, and within a short time 25 percent of workers were unemployed.  The government of Republican Herbert Hoover failed to respond to the economic crisis, so in 1932 voters elected to the presidency Franklin D. Roosevelt, descendant of a patrician family, cousin of former president Theodore “Teddy Roosevelt,” and governor of New York.  FDR, who took office without a plan, surrounded himself with advisors of differing ideologies and indicated his willingness to experiment.  His approach would be pragmatic; he would see what worked.  What was clear from the beginning was that Roosevelt’s goal, while alleviating some of the pain of the depression, was to save American capitalism.

The Crash and the Depression set America’s working people in motion.  The Communist Party organized the unemployed to demand relief and jobs under the slogan “Fight Don’t Starve!”  Farmers formed the Farm Holiday Association and, carrying signs reading “Be a Picket or a Peasant,” struck and rioted in the Midwest.  American veterans, unemployed and desperate, descended on Washington, D.C. in the Bonus March of 1932 — only to be driven out of town by tanks and troops with bayonets.  Socialists, Communists, and Trotskyists formed unemployed workers councils in cities throughout the country.

By 1934 a new labor movement began to emerge as workers succeeded in organizing city-wide general strikes in San Francisco, Minneapolis, and Toledo and won recognition for new unions of industrial workers.  Conservative leader of the United Mine Workers John L. Lewis jumped in front of the workers parade and proclaimed the founding of the CIO, the Congress of Industrial Organizations.  Many people throughout the country wondered if capitalism had failed and would now be replaced by socialism through a working-class revolution.

The New Deal resulted from the interplay between the Roosevelt administration, the corporations, and the mass movements of farmers and workers.  FDR’s particular genius was in his ability to contain and capture the energy and ideas of those mass movements and to use them for his own ends.  Forces that initially chartered their own path, or that challenged or threatened his administration, were brought around to support it through a brilliant combination of populist rhetoric, social reforms, and the building of a multi-class coalition.

The Roosevelt Style: Pragmatism and Experimentation

Breaking with the conservative past, Roosevelt was willing to use government to inhibit the market, to restrain corporations, and to build social welfare programs, though, as would soon become clear, he would not threaten the fundamental capitalist character of the economy.  His creativity in using the government, the Democratic Party, and the mass media, through his famous fireside chats, allowed him instead to become the broker of a new coalition and the author of a new social pact.

Roosevelt was imaginative and dynamic.  During his first 100 days he pushed through Congress an unprecedented series of measures that provided emergency assistance, jobs, and mortgage relief for homeowners and farmers.  By the mid-1930s, programs such as the Civil Works Administration, the Works Progress Administration, and the Civil Conservation Corps employed millions in planting trees, building roads and bridges, schools and airports.

Roosevelt’s attention was particularly focused on the problem of preventing capitalist competition from bringing down the entire system.  He used the Federal Trade Commission to regulate big business and then the National Industrial Recovery Act to stop cutthroat competition by imposing market shares, production levels, prices, and wages on the corporations.  After the Supreme Court declared the NIRA/NRA unconstitutional, Roosevelt continued to try to use government to regulate capital, to build public works programs, and to expand social welfare.  To do so, however, he had to rebuild the Democratic Party.

The Roosevelt Coalition: The Cross-Class Alliance

Some think that Roosevelt transformed the Democratic Party into a progressive coalition of unions, immigrants, and blacks in order to move America to the left.  But that was simply not what happened.

True, Roosevelt realized that if he was to succeed in reforming and reconstructing American capitalism, he would have to broaden the social base of the Democratic Party.  The Democratic Party that had elected him in 1932 had been based on the corrupt political machines of big cities like Chicago and New York, on the white votes of the Solid South, on the American Federation of Labor, and on financiers like Bernard Baruch who reportedly “owned” sixty congressmen whose campaigns he had financed.1  That base was simply too narrow to deal with the upheavals in the industrial cities of the Great Lakes region and among the farmers of the Midwest.

The patrician Roosevelt had by 1936 adopted a populist discourse, calling for the overthrow of America’s “economic royalists,” as symbolized in the public mind by the Morgan Bank.  But his radical rhetoric belied the reality, for FDR was also courting capitalist power.  Unlike the Republicans who saw the revival of the economy coming through heavy industry and high finance, FDR and his inner circle had become convinced that revival would come through capital-intensive industry and consumer goods.  He was constructing a new coalition that included Rockefeller’s Chase National Bank, other non-Morgan banks, Lehman Brothers, Standard Oil, Sears Roebuck, Remington Rand, Bendix, and other corporations like them.  Roosevelt worked with capital-intensive industries which were driven by consumer demand to find a way to save the capitalist system.2  The key to reviving those industries would be through Keynesian policies of deficit spending, programs providing jobs for workers, and welfare benefits for the unemployed and the elderly.

At the same time FDR also worked to expand his coalition by incorporating more plebeian forces.  Roosevelt, his Secretary of Labor Frances Perkins, and Senator Robert Wagner carefully maneuvered to contain the worker upheaval — sit-down strikes, mass picketlines, conflicts with the police and National Guard — that swept the nation.  At the same time, Congress passed the Wagner Act which for the first time at the federal level gave workers the right to unionize, but also channeled their organizing efforts into legal structures that subordinated the unions to the corporations whose workers they represented.  The National Labor Relations Board shaped a pattern of industrial relations that brought about a management-labor partnership in the principal industries.  Roosevelt’s labor policies, ambivalent as they were, nevertheless succeeded in bringing into his coalition the Congress of Industrial Organizations with its new unions made up of millions of immigrant and African American workers.

Roosevelt, however, refused to reach out to African Americans, believing that he could not even appear to sympathize with them — that was his wife’s role — since any gesture toward blacks would jeopardize political support in the Solid South where blacks were not permitted to vote.  Consequently, African Americans in the South remained trapped in Jim Crow segregation and disfranchisement and continued to be the victims of lynching, all of which enforced the labor regime based on low wages.  Blacks got no New Deal from FDR, but they voted for him because some of the jobs and relief programs, though rife with racism, still improved their situation.  By 1936 they had left the party of Lincoln for the party of Roosevelt where they have stayed ever since.

A New Social Pact

Roosevelt succeeded in expanding the Democratic Party to include not only industrialists from the capital-intensive industries — the dominant force — but also the workers of the CIO unions, immigrant communities, and even African Americans.  And he did so without giving up the backing of the corrupt big-city machines or the southern white supremacists.  This broadened support made it possible for Roosevelt to win large majorities in the 1934 congressional and the 1936 presidential elections.  By the end of the 1930s, Roosevelt and the Democratic Party in Congress had succeeded in laying the foundation of a new social pact based on the pillars of the National Labor Relations Act and Social Security.

Some believe that Roosevelt’s New Deal ended the Great Depression, but that was not the case.  By 1938 unemployment levels had risen once again to nearly 20 percent.  Roosevelt only brought the country out of the depression by leading the United States into war, the same war for the division of the planet between the great powers that had begun in 1914, paused between 1918 and 1939 so that the rival powers could rearm and harvest a new generation of youth, and then started up again, this time not only in Europe but also in Asia.  The multi-class coalition of the Democratic Party and the social pact between capital and labor that Roosevelt had begun to bring together were forged in the crucible of the war.  Government brought capital and labor together to win the war of production and that led to a capital-labor partnership that would last into the 1970s.

The war which destroyed European and Japanese capitalism through massive bombing, and which did away with a whole generation of class-conscious workers, left the United States virtually the only capitalist power on the planet.  Just after the end of the war, the United States with 5 percent of the world’s population collected 50 percent of its wealth.  The U.S. domination of the world economy allowed American corporations to produce the revenues that financed the New Deal social pact, but its continuation was possible only through the adoption of a permanent war economy, military Keynesianism, the production of weapons for the permanent war on Asia: from Japan to Korea and Vietnam.

What Was the Social Pact?

Roosevelt’s social pact, breaking with the laissez-faire past, represented a profound reform of American capitalism.  Government regulated corporations to a much greater degree and established the first major national social program: Social Security.  At the same time the NLRB created the framework in which labor unions came by the 1950s to represent 35 percent of America’s work force.  The American prosperity which lasted from 1940 to roughly 1970, based on U.S. dominance in the world economy, meant that many Americans’ lives improved first under the New Deal and later under its expansion with Johnson’s Great Society.

Yet the New Deal pact was not all it seemed to be or might have been.  While about one-third of working Americans came to benefit from labor unions with their pensions and health and welfare funds, two-thirds of Americans remained in the other economy of the Old Deal.  The New Deal, augmented by the Great Society, congealed into a system that could not deliver America from the capitalist boom-bust economic cycle and that could not be separated from the American drive to militarism and war.  By the early 1960s, writers like Michael Harrington had discovered The Other America of profound poverty in the nation’s inner cities and the rural hollers.

Even the expanded version of the American welfare state, however, never approximated the programs of the social democratic governments of Western Europe with their four- to six-week vacations for all, national public health programs, and free higher education.  Western European states created those social programs during the post-war period in competition with Soviet and Eastern European Communism where workers had guaranteed jobs, nearly free housing, and free medical care.  The New Deal was not such a great deal when compared to the European states where labor and socialist parties had led the fight for change.

Most importantly, the New Deal turned out to be not only a social pact; but also a social trap. Roosevelt had succeeded in capturing the CIO unions and the left as well; the Socialists joined the Democrats virtually en masse, and the Communists, who came to see in the New Deal an American version of the Popular Front, were absorbed into the coalition, too.  Once inside the Democratic Party, the unions and social movements found that it became impossible to reassert their independence.  The Democratic Party was not just a coalition; it was also a kind of cage.

That New Deal Coalition evolved into the contemporary alliance of the Democratic National Committee, banks and corporations, bureaucratic labor unions, African American civil rights organizations bereft of the movement that had made them, and the National Organization for Women which institutionalized the former feminist movement.  By the 1980s the Democrats has lost the social support they once had and had given up on fighting to defend and expand the welfare state.  Ronald Reagan and the Republicans, adopting the neoliberal model, committed themselves to dismantling the New Deal social welfare programs and returning to laissez-faire.

New Deal Redux?

Is a New New Deal Possible?  To envision another New Deal is to envision a reform that makes possible the continuation of capitalism with its periodic economic crises and its foreign wars.  It is to conjure up another cross-class coalition dominated by capital and subordinating labor.  It is to imagine a system that makes life somewhat better for some, but leaves many with the Old Deal.  In any case, it is not clear that such a path is possible.

A modern replication of the New Deal would require not only the construction of a new regulatory system and new social welfare programs, but also the bolstering of the American economy sufficient to produce the revenues and the profits to pay for it.  The expansion of American capitalism today can only come through economic victory in the competition with the European Union, Japan, and China and the gaining of control over the world’s natural resources and raw materials.

Central to an American victory in the economic realm is the struggle to control the oil fields of the Middle East and the geopolitically strategic trade routes of the Persian Gulf and the Red Sea.  That is, the Democrats’ hope for a New New Deal lies through the Republicans’ dream of a New American Century. This is precisely the reason that the Democratic candidates can give no straight answers about the future of the U.S. in Iraq.

The Road Not Taken

How do we find the right road forward this time?  Well, that is our project.  Looking back on the 1930s, we find that there was also a road not taken, a trail that was being blazed by the industrial unions, independent workers’ parties, and an incipient socialist movement.  We might take the path not taken in the 1930s.  The alternative to the New New Deal involves envisioning a society founded on equality, democracy, and a peaceful foreign policy.  The way forward does not lie through a New New Deal, but through the struggles of the social movements and the building of a working people’s party to fight for a Different Deal: the end of capitalism and the construction of a democratic socialist society.


1 Jordan D. Schwarz, The New Dealers: Power Politics in the Age of Roosevelt (New York: Knopf, 1993) 97.

2 Thomas Ferguson, “The Coming of the New Deal,” in: Steve Fraser and Gary Gerstle, The Rise and Fall of the New Deal Order (Princeton, N.J.: Princeton University Press, 1989), 3-31.

Dan La Botz is a Cincinnati-based teacher, writer and activist.  He can be contacted at <>.

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