Roosevelt's "New Deal" (1934)

From the June 1934 issue of the Socialist Standard

The whole world has been watching with interest the progress and results of President Roosevelt’s “New Deal,” more correctly described as American capitalism’s strenuous effort to rescue itself from the morass of depression.

After three years of deepening crisis, falling prices and wages, increasing bankruptcies, and unemployment that reached the unheard of total of from 15 to 17 millions, the country was seething with political unrest. The Hoover regime, which had attempted to conjure the depression away by wish-magic and optimism, but had otherwise done practically nothing to alleviate the economic dislocation, was overwhelmed in the democratic landslide of the 1932 elections. Roosevelt and his party swept the country with their attacks on the “criminal inactivity” of the Republicans, and with lavish promises of a New Deal that would bring back “ Prosperity.”

In general, although there is much intertwining of interests in the propertied class the Republican Party stands for big business and the financial interests. The Democrats are the party of the smaller business men and the mass of the farmers. The most voluble, agitated and organised of all those adversely affected by the depression were precisely these latter groups. Millions of small property owners were hopelessly in debt, their savings gone or tied up in closed banks. The farmers’ earnings and standard of life had been declining for years before the crisis which but intensified their problems. Amongst the workers cut after cut in wages, plus mass unemployment and the constant threat of it, had generated a great volume of discontent. This was, however, largely unorganised and inarticulate, notwithstanding sporadic outbursts. All these elements looked to Roosevelt as to a messiah. Emotional tension at the time of the elections was intense and enthusiasm for the victorious “hero” almost universal, even amongst many of the rank and file Republicans.

Immediately after its inauguration in March, 1933, the new Government was granted extraordinary emergency powers by the overwhelmingly Democratic Congress. Then came the passing, almost without criticism, of a series of drastic laws drawn up by Roosevelt and his group of economic advisers which set up a whole battery of new administrative bodies for a concerted attack upon the problems of ”recovery” and “relief.” Of these bodies the Agricultural Adjustment Administration and the National Industrial Recovery Administration (the N.R.A.) are the most important. As we are chiefly concerned with the interests of the industrial workers, it is the N.R.A., and particularly its labour provisions, that we shall mainly consider.

The N.R.A. came into existence in June, 1933. First it established a General or “Blanket” Code of Fair Competition, which all employers were asked to sign and adhere to. A national propaganda campaign, using all means of ballyhoo, mobilised the vast pro-Roosevelt sentiment behind the scheme. By August 1st over 700,000 employers had signed and received the badge of the Blue Eagle. Compulsion was threatened if persuasion failed—a piece of bluff characteristic of many aspects of the New Deal.

The Blanket Code established a maximum working week of from thirty-five to forty hours, minimum wages varying from twelve dollars to fifteen dollars per week, and made certain classes of child labour illegal. Section 7a of the code guaranteed workers the right of collective bargaining through representatives of their own choosing. The N.R.A. further called upon each industry to draw up a code adapted to its own special needs, each code to be in harmony with the Blanket Code and approved in its details by the N.R.A. The following condensed account of the Steel Industries Code is given as a sample:—

  “The Steel Code . . . provided for a trial period of ninety days. At the end of this period the steel companies declared it workable . . . It provided for a forty-hour week of labour averaged over three months, with a maximum for each employee of not more than forty-eight hours in a 6-day week. The right of collective bargaining was conceded. Representatives of the N.R.A. were empowered to inspect the records of the Iron and Steel Institute to obtain full 'information concerning production, shipment, sales and unfilled orders, hours of labour, rates of pay and other conditions of employment,’ in order to stabilise production.” (The World Almanac, 1934.)

To date, over 400 codes have been put into force and it is estimated that about 20 millions of workers or 90 per cent. of those eligible come within their regulations.

A primary feature of the whole “recovery” programme has been the efforts to artificially stimulate a general rise in prices by credit and currency schemes, and by limiting price-cutting and controlling production through the codes. Because the crisis was accompanied by falling prices it has been assumed by almost all capitalists that if only prices could be pushed up “prosperity” would be here again. Yet it is evident that unless rising prices result from a growing demand for goods, the effect must be to curtail sales. This fact is recognised by the recovery administration. Roosevelt and his economist advisers have, for perhaps the first time in the history of capitalist politics, insisted on the need for greater purchasing power amongst the masses if "prosperity" is to be regained and maintained. This attitude is partly, no doubt, a political manoeuvre to attract working class support. It is certainly emphatic enough, and none of the New Dealers have more clearly expressed it than H. A. Wallace, the present Secretary of Agriculture. In his pamphlet, "America Must Choose" reprinted in part in the New York Times, February 25th, 1934, he says:—

   "There can be little doubt that the trouble traces, in whole or in part, to a maldistribution of income. That doctrine is implicit in our New Deal, which seems to me to rest on irresistible logic. We are trying to build up consumption per capita at home as a substitute for new consumers abroad. Our new method involves a planned redistribution of the national income, in contrast with the unplanned redistribution that takes place regularly, usually unhappily, in every major economic crisis the civilised world over. ...
  "Our New Deal seeks to promote consumption more soundly. It directs purchasing power to those in need by wage advances and alleviations of debt. It lessens the need to force exports. It looks toward balancing production with consumption at home."

In considering this aspect of the New Deal it is important to note that the schemes of the administration to raise wages have been timid in the extreme. Compare them with the bold experiments in banking control, crop reduction and business control through the codes. The fixing of minimum wage-rates affects only the lower-paid strata of workers, directly at all events. How higher-paid workers may be affected is well shown by A. Epstein, a writer on reform questions, in ah article, "Is it a New Deal?" (Current History, March, 1934): —

   "Under the new dispensation, many less efficient workers were completely cast out of industry. On the other hand, many of those who were formerly considered cheap and inefficient were discovered to be able to do almost as good work as that formerly done by employees who received more than the minimum wage in the codes.
  "Since the codes did not abolish the employer's right to hire and fire, he was able either to dismiss entirely his most expensive help or to rehire them later at wages more nearly approaching the minimum. The endless possibilities in such reductions were quite unexplored. Even now there is no way of estimating whether or not the meagre accruals in purchasing power of the lowest-paid wage-earners exceed the reductions in the wages of higher-paid employees. There is no conclusive evidence whatsoever that the N.R.A. . . . with its unwieldy mechanisms for enforcement, has actually resulted in increasing labour's total purchasing power. The contrary is more likely to be true."?

Unorganised white-collar workers are especially liable to be affected in the above manner. L. W. Zimmer, in charge of the employment bureau of New York University, reported last October that "The $20 to $22 job is now about a $15 job, because employers tend to keep their wages around the N.R.A. minimum." He added that the number found jobs was not appreciably above that of the same period of the preceding year. (N.Y. Telegram, October 11th, 1934.)

Despite the fact that one of the avowed objects of the N.R.A. is the abolition of "sweating," the minimum wage rates are only about one-half of the figure, $26.77, which in 1932 was declared by the Department of Labour to be a bare subsistence wage for a family of five. It is well known, moreover, that great numbers are receiving less than the minimum. Fear of unemployment and victimisation effectively prevents complaints to the local N.R.A. Similar evasions in hours of labour are widespread.

The actual increase in individual earnings where there has been a growing demand for workers owing to increasing business has been very small. The American Federation of Labour in its annual review of industry for 1933 reports average weekly wage rates in 16 industries as being $20.53 in November, 1932, $20.56 in November, 1933, and $20.83 at the end of January, 1934. Retail food prices, according to Bureau of Labour Statistics, had risen 20 per cent. between April, 1933, and February, 1934, whilst clothing and furnishings had risen 27 per cent. It is thus evident that the average worker’s standard of living and purchasing power was actually declining during the first seven months of the N.R.A.

The attempt to absorb any large proportion of the unemployed by the reduction of hours to 35-40 weekly is futile so long as business continues at a low ebb. So great had been the spread of short time prior to the New Deal, that the average hours worked in June, 1933, were: crude petroleum industry, 42.6 hours; iron and steel, 37.9 hours; soft coal, 28.5. (Monthly Labour Review, August, 1933.) The average over all manufacturing industries for the first five months of 1933 is estimated at 34.7 hours.

It is, moreover, almost certain that with industrial recovery, machinery and speeding up will enable output at the code hours to equal or even surpass that reached with the longer hours of the pre-depression period. It is extremely significant that the makers of machinery are experiencing what is perhaps the sharpest pick-up shown in any industry. The New York Times (September 24th, 1933) reported that makers of machine tools did 400 per cent. more business in August than in the preceding March. This report further says: “The largest call for new equipment comes from textile mills, which are seeking high-speed machinery to replace the obsolete looms they find too expensive to operate under present high production costs. Producers of men’s and women’s garments are also investing freely in machinery capable of producing more goods in the limited working time allowed under the recovery codes. . . . Manufacturers of machinery attribute the present demand for labour-saving machinery to the desire of producers to keep up previous production schedules while remaining within the limits of the working hour provisions of the recovery programme.” Could anything show more clearly the tangle of contradictions in which the N.R.A. is involved, how its provisions are nullified even when obeyed to the letter, by the inescapable trends of capitalist “enterprise” ? It may be added that so great have been the advances in machinery and other means of production during the years of depression that students of the question agree in believing that with industry restored to its high 1929 level of output, 4,000,000 workers would remain unemployed. Only a further expansion of total production would reduce that figure.

Especially significant is the recent decision to close all of the 900 silk mills for one week on account of large unsold stocks. The textile code authorities have given this order, and violators are threatened with legal penalties. Hundreds of thousands of workers will be laid off.

During the first four months of the Roosevelt administration there was a swift improvement in business. This is generally attributed, in part at least, to the endeavour of manufacturers to lay up stocks before the rise in the costs of production which were expected to result from the Roosevelt policies. The New York Times index of business activity registered its lowest point, of 47.9, in March, 1933. (100 is the estimated “ normal,” but this, to-day, is arbitrary, and a return to it would still be under slump conditions.) The index rose rapidly, and momentarily touched 99 in mid-July, one month after N.R.A. was born. Then began a slow decline, reaching 72.5 in early November. Since then there has been a slow, wavering advance to 87.5 on May 5th. As there has been an improvement in business over most of the capitalist world in the past few months, it is doubtful, to say the least, to what extent the N.R.A. has been instrumental in assisting recovery in America.

There has been a moderate reduction in unemployment. The A.F. of L. report for May, 1934, states that unemployment was reduced from its peak of 13.6 millions in March, 1933, to 10.1 millions in October, but that between October, 1933, and March, 1934, 780-thousand had lost their jobs again. Statistics on unemployment in the U.S. are, however, notoriously incomplete and unreliable. The A.F. of L. figures do not take into account agricultural and certain other classes of workers. The estimate of the Alexandra Hamilton Institute, which does take these into account, places the high point of unemployment at 17 millions. The A.F. of L. estimates that the total wages paid per week increased by 23.7 per cent, between March, 1933, and March, 1934.

Let us now look at the way in which the trend to recovery is affecting the capitalists. In the aforementioned A.F. of L. report it is stated that "the first fifty-one companies to report for the first quarter of 1934 showed total profits of $18,740,000, compared with $6,332,000 in 1933. Dividends, the Federation said, were $15,000,000 higher in March. 1934, than in March, 1933.” (New York Times, May 6th, 1934.) This tendency is precisely what one would expect. It is inevitable that, with the upward trend of production, the increase in returns on capital will be more rapid than the increase in income to the workers. Just as the slump in production was due to conditions which forced down the rate of profit, so the expansion of production can only result from conditions which cause the rate of profit to rise. Profit is the sole motive to production under capitalism, N.R.A. or no N.R.A.

It is evident, therefore, that the principle upon which the labour policy of the New Deal is in theory based, that a greater proportion of the national purchasing power must go to the workers, is not materialising, and it is not likely to.

Next month we will consider the N.R.A. and Trade Unionism.

R. W. Housley

Workers’ Socialist Party (U.S.A.)