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Authors'
argument
New Deal
Federal Response (under Hoover)
Social unrest
FDR's response
Some major results
Ensuing period of 'stability'
Just what does this
mean, you say?
Let's look at
the authors' argument.
First, We have a
capitalist system, which is dynamic. Unemployment
and change are chronic features of this system. Full employment actually
leads to problems, at least for the capitalists, who must then pay higher
wages because there is no surplus pool of labor available to them.
Second, change is
a relative thing. Take earthquakes, for example. There is such a thing
as a power
law which attempts to explain differences in the magnitude of earthquakes
(or for that matter, change in stock markets, Internet use, distribution
of human settlements, etc.). On a log-linear scale, the frequency of
an earthquake is inversely proportional to its magnitude. In other words,
there are thousands of little tremors, and (thankfully) only a few 'big
ones.' Now, this suggests that Turkey,
which has had a few 'big ones' in our lifetime, may be in trouble--it
could be that their big one would be a real whopper, or that they won't
have another large earthquake for thousands of years. Who knows? Trying
to predict the movements of tectonic plates and the odds and severity
of earthquakes is extremely difficult without a great amount of information
(that we don't have). So when you hear someone say the 'big one' is
just around the corner, they're probably seismologists looking for federal
research dollars.
With respect to
economies, they go through minor changes and disruptions, but like earthquakes,
occasionally forces convene to create major disruptions. The two that
the authors focus on are economic depression and modernization (mostly
technology--if you want a deeper understanding of how social change
might be examined, check out this link
to the POET model). They can create major disruption. Here's the
scenario:
- Capitalist economies
are dynamic. People may go in and out of employment, but relief is
generally only for those who are not able to work to support themselves.
Relief for the 'able-bodied' is made so unattractive (e.g., workhouses)
that they will seek low-wage work in the private sector before accepting
it.
- Relief has historically
been a local phenomenon, available to the 'worthy';
- Major economic
disruptions sometimes occur (but are difficult to predict because
economies are so complex), and may affect employment;
- Mass unemployment
and lack of social safety nets are likely to lead to civil unrest;
- Unchecked, unrest
may lead to social movements, the mobilization of those most affected
by the disruption;
- The problem can
be so massive that no amount of tinkering can resolve it (unemployment
hit 25% during the Great Depression);
- The government,
in order to preserve the capitalist system, may have to intervene
directly (offer direct relief).
- If the direct
relief addresses the problems and eases the unrest, the relief system
tends to contract, leaving a shell (mainly of services available to
the 'deserving'--those unable to work and support themselves), and
enforcing once again low-wage work among the able-bodied by making
welfare benefits unattractive or difficult to receive.
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Let's examine their
thesis in light of the 1930s and what was happening.
The New Deal
What was it? In
very general terms, a series of policies and laws representing a massive
federal effort at economic recovery.
Recovery from what?
The Great Depression, which was largely precipitated by the stock market
crash on Black
Thursday, October 24, 1929, was unprecedented, and some would say
unanticipated (at least in its catastrophic scope).
What were some
of the effects of the stock market crash, Depression?
- Unemployment.
It increased dramatically over time:
Spring '29 3 million
Jan '30 4 million
Sept '30 5 million
Spring '31 8 million
Spring '33 15 million (hit 25%)
Those still working saw their wages go down 1/3.
- Mass destitution,
as the authors put it. This was not a case of individuals' lack of
incentive or initiative-it was a social problem on a grand scale.
- Overburdened
relief agencies
By 1932, local relief offices were closing down-the situation was
a social, political and economic MESS.
- Near-bankrupt
localities (hence the problems delivering on local relief efforts)
What was the
Federal response (from President Hoover)?
- Denial - encouraged
local action (relief had always been a local phenomenon)
- Supply side economics
- what is it? Money in the hands of the capitalists, entrepreneurs
('trickle down')
- Hoover wanted
to keep profits high (assuming capitalists would reinvest)
- 'Nobody' knew
then the scope of the disaster--there were few statistics to gauge
the problem, fewer sources of media, it was difficult to piece together
the comprehensive nature of the disaster. There was surely local unemployment
(plenty to see . . . ), but few historical precedents to look at,
learn (or not) from;
- Hoover's aides
recommended investing in public works-he refused, was fixated on having
a balanced budget-people were calling for greater efficiencies, even
in relief distribution. But this wasn't just a matter of mismanagent--it
was a failure of the economic system);
- Congress voted
down several relief packages (democrats mostly put them forward--Hoover
was a republican). Any that passed, Hoover vetoed;
- The private sector
was asked to maintain payrolls (any problems with that? Especially
now, what would stockholders say? CEOs get rewarded for downsizing).
Remember, wages of those who kept their jobs dropped one-third.
As one politician
said, 'if we don't give [security] under the current system, the people
will change it.'
Social unrest,
movements
Who were the populations?
Who would you suspect (who are the most vulnerable in society)?
Elderly
Veterans
Followers of Huey Long ('rednecks,' people bought out through political
machine)-'share out wealth' (a populist movement seeking redistributive
tax reform)
Unemployed (the 'able-bodied') - groups often attacked relief agencies
(in NJ, things got so bad that relief shut down and governments began
issuing licenses to beg)
Are there any
modern parallels with what happened in the 20s and 30s?
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The Federal response
(this time, from Franklin Roosevelt, elected in 1932): Direct relief
What did Roosevelt
give them?
- Social security
(this didn't start til '42, and it didn't turn out to be the $200/month
the Townsendites were seeking--why wouldn't it start until 1942?)
- The Social
Security Act of 1935 included old age pensions, unemployment insurance,
and assistance for the disabled, elderly dependents, widows and
orphans
- Tax reform (it
was progressive, graduated, and shifted burdens away from the poorest
to wealthier classes)
- Section 7a-right
for labor groups to organize and right to bargain collectively--businesses
never forgave FDR for this . . . of course, from Roosevelt's point
of view, he was saving capitalism.
- FERA--Federal
Emergency Relief Act--this was big, and it was direct relief.
People were given monthly subsidies, in many cases people whose households
had been without work for months, even years, surviving on whatever
social capital and local relief they could muster. This was by far
the biggest direct relief program, and unprecedented in the U.S. 20
million people were on the welfare roles by 1934. As one of the administrators
remembered it, the goal was 'to distribute as much as possible, as
fast as possible, to as many as possible.' What a concept . . .
Most of these efforts
appeased the opposition--FDR was able to 'co-opt' some groups who had
been protesting, by giving them some but never all of what they wanted,
and things began to quiet down, though unemployment remained high for
a long time. As stability began to return, there was a movement, in
some ways almost immediately, away from direct relief, toward work relief.
The direct relief, remember, is there to quell unrest, but the second
function of welfare--regulating labor markets--requires that governments
make sure that relief never replaces the need to populate the work force.
Initiatives included the CWA-civil works administration-which built
roads, schools, government structures (4 million workers, mostly men),
and the WPA--Works Project Administration, which built many public works.
Ever heard of the Civilian Conservation
Corps? Many of the dam projects took advantage of these programs,
as well as building infrastructure in national parks. In other words,
not only did these projects employ people, but they made lasting contributions
to the country's infrastructure. Also there was the CCC, the Civilian
Conservation Corps, which sent people out into the national forests.
There were other
policies and laws passed as well. For instance, Federal Deposit
insurance (FDIC), that guarantees money in banks, the Federal Securities
Act, Tennessee Valley Authority, Homeowners'
Refinancing Act, etc.
Results of New
Deal
- Direct relief
subsides, especially the FERA, but the 'shell' remains-what shell?
Who were the recipients of direct relief after the initial period
of intervention? Remember the distinction we talk about between 'deserving'
and 'undeserving' populations . . .
- Co-opted opposition,
unrest settled, unemployment declined (slowly), Roosevelt took all
the credit
- Opposition from
business interests
- They claimed
interference in private sector, market economy
- relief should
be local--it always had been
- price deflation,
not inflation, was a problem--prices of goods were going down,
because no one had money to buy much. This sort of federal
intervention--to address deflation--is okay, apparently.
- workers'
right to organize (section 7a of NIRA)-companies wanted to form
their own unions
- big names--Alfred
P Sloan, Howard Pew, DuPonts, E.F. Hutton, William Hearst, Henry
Ford--were strong voices of opposition to FDR's policies (there's
a quote in the book from Ford, talking about boys 'riding the
rails', i.e., trains: 'why it's the best education in the world
for those boys, traveling around!' I imagine the contemporary
version would be what an advantage children who've worked in sweatshops
have in today's competitive job market ... ).
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Period of 'relative
stability'
As the unrest subsided
and direct relief began to contract, the government, through WPA and
other mechanisms, returned to playing a role in enforcing low-wage employment
(we do this even now, with the earned income tax credit, or EITC,
and low minimum wage requirements). As you've read, it wasn't a period
of stability for most blacks, especially in the South, but one of dire
poverty. Had they had a political power base, history might have looked
differently. This was to come later.
How did government
use welfare in this instance to regulate labor?
- seasonal agriculture
work-making sure farmers had cheap labor. When it was time for work
in the fields, blacks were often summarily kicked off of the welfare
rolls. There were few reasons given--it was just understood that they
would be forced to work for whatever the going wages were in the fields
for as long as local farmers need them.
- Welfare rolls
declined during the growing season (so did people's welfare)
- What did many
states do?
- Enforced
residence laws (these kept people from moving and receiving benefits
in their new locale--essentially it forced them into indentured
servitude)
- Adjusted
benefit levels to local labor markets (much lower in the south,
where wages were lower, ag sector more important to economies)
- Poor families
with two parents excluded from AFDC until 1961 (able-bodied …)
- Single-mothers-'man
in the house' rule to exclude recipients, keep men working;
- Midnight
raids (morality grounds, dependency)
- Women and
children in workforce in large percentages (well over 50)
- Illegitimacy
punished--women having children out of wedlock often forfeited
rights to local aid;
- Lower benefit
rates for able-bodied (ADC less than SSI)
- racism
- 'work
training' is low-wage labor (training in dishwashing, housecleaning
for blacks)
- black
women and work in the fields ('employable mother' rule)
- other
assistance denied unless they could show proof of employment
- 'man
in the house' rules
- illegitimacy
meant denial of public benefits for black families
- Florida
example: 15,000 families removed from roles-91% black (only
180 deemed 'unsuitable' due to abandonment, neglect)
- Bottom
line? Southern agriculture was labor intensive, depended on
cheap labor (blacks were essentially 'free' slaves-p. 143)
- Regional
differences-the dynamics in the South were different than other
areas of the country, because of?
- Race
- Economy
(labor-intensive agriculture, low wage employment)
While there was
little unrest in the South, it doesn't mean in this case there wasn't
mass destitution. But the cause was different, according to the authors--modernization
of agriculture. A few facts:
- Between 1950-69,
1 million farms disappeared (meaning, were consolidated);
- farm output increased
by 45%;
- farm labor decreased
by 45%;
- the resulting
waves of migration saw 20 million blacks leave for cities, mostly
in the North, a process that actually started after WWII.
Why was there little
or no protest? The authors list several reasons:
- The migration,
though massive, was gradual--it didn't occur all at once, as migration
during the Dust Bowl did;
- Unemployed in
agriculture are generally a dispersed population, not concentrated
in the cities, making mobilization and organization more difficult;
- Racism--coercive
force has and still is used in parts of the South, merciliessly used
to deal with anyone who did not like the power structure;
- Migration--people
merely left.
But they concentrated
in cities, which changed the whole landscape of civil rights and race
relations, and the implications for welfare. We'll discuss this as the
next period of unrest (they're setting up their argument by documenting
the migration that took place). Keep in mind, there would have been
unrest during this period, except for the fact that blacks had little
if any political power to make their grievances known, or to publicize
the deplorable living conditions and poverty that were an everyday fact
of life for many.
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Any Modern parallels?
(I'll list some, but you should think them through and add)
- Unemployment
increases
- People invested
in stock market (last time so many were was 1929), many with pensions
- Messing with
taxes (this time, Tax cuts that favor the wealthy? Why? Think supply-side
economics)
- Huge budget deficits
- Shift of tax
burden to the poor
- Welfare 'reform,'
designed to decrease welfare rolls
- Financially stressed
cities, states, welfare offices
- we have some
additional factors at work:
- Increased
burden on the states-tax linking, unfunded mandates
- impending
war
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