A good portion of Franklin Roosevelt’s immortality rests upon the New Deal’s physical works; but even more rests upon its transformation of the nation’s social and economic structures.
Here we must consider Americans’ relationship with what is, after all, their government. The New Dealers did not think about government in the limited terms of their predecessors, as an agency of national defense and little else. They did not perceive it as an antagonist of the common man, an enemy of liberty, or an entity interested in its own growth for growth’s sake. They understood that it was a powerful force and that its power could be exercised by inaction as well as action, to very different ends. The condition of the American people when the New Dealers assumed office demanded ameliorative action, and this they strived to deliver. They did not invariably achieve their goals, but in appraising their performance it is important to acknowledge that the crisis they addressed was uniquely cataclysmic in American history, and that suitable precedent for addressing it simply did not exist.
Federal deposit insurance, by eliminating bank runs even in times of economic crisis, cut the number of bank failures from the peak of 4,000 in 1933 to nine the next year. Bank failures would not exceed 75 in any one year until the savings-and-loan crisis of the 1980s, and for a three-decade stretch beginning in 1943 never exceeded single figures. The importance of this record for depositor confidence and the safety of the nation’s monetary stock is incalculable.
The reforms implemented under the Securities Exchange Act of 1934, which established the Securities and Exchange Commission, professionalized an industry burdened in the aftermath of 1929 with a reputation for insider transactions and sharp dealing. The transparency of financial reporting mandated by the act for public corporations and brokerages set the foundations for the explosive growth of the U.S. capital markets and corporate economy ever since.
The New Deal instilled in Americans an unshakable faith that their government stands ready to succor them in times of need. Put another way, the New Deal established the concept of economic security as a collective responsibility. As of this writing, Social Security, by any measure the outstanding domestic achievement of the Roosevelt administration, serves 54 million beneficiaries. Over the decades the program has kept many tens of millions of American workers and their families out of poverty. The promise of corporate pensions has largely disappeared from the employment contract and the investment markets have disappointed many workers’ expectations of comfortable retirements, but Social Security endures, providing retirees with benefits that grow with inflation and that cannot be outlived. Social Security began as an “awkward and insufficient” program, as Rexford Tugwell would observe; but it was expanded in succeeding decades, under Republican and Democratic presidents alike, in a continuing effort to uphold its original promise. Its 1960s addendum, Medicare, sprang organically from that promise.
The New Deal effectively ended in 1939, amid doubts about Roosevelt’s leadership and under the shadow of war, as a work in progress. To a great extent it is still unfinished.
Bank failures periodically surge because of outbreaks of imprudent management inadequately monitored by federal regulators, as occurred in the savings-and-loan crisis of the 1980s and the financial crisis of 2008. The business reforms of the ’30s have proven unequal to chicaneries of later ages, and periodically must be updated. The physical infrastructure bequeathed by the ‘30s has been allowed in many places to crumble from inattention. The public debate about the proper role of the federal government in Americans’ lives is never-ending, as perhaps it should be. Yet, because the New Deal’s principle of collective security has become so ingrained in the American system, efforts to roll back the programs founded under Franklin Roosevelt almost always seem invested with nostalgia and the scent of unreality. Catastrophe snuffed out the economic and governmental structures of the 1920s and the march of modernity buried them.
Buy Michael Hiltzik’s new book, The New Deal: A Modern History.