Reinventing the American Economy

A Review of Robert McElvaine’s The Great Depression: America, 1929-1941

Robert S. McElvaine, editor of three books and author of seven, including The Great Depression: America, 1929-1941, is considered to be one of the world’s leading Great Depression historians. He received his Bachelor of Arts from Rutgers University and his Master of Arts from SUNY-Binghamton. Currently, he is the Elizabeth Chisholm Professor of Arts.

BY ROBERT FRIEDLAND

The Great Depression—the period of the largest economic collapse in the history of the United States—is a subject that draws much controversy among historians who debate as to both the causes of the collapse and the effectiveness of the New Deal in facilitating recovery. Causes of the Great Depression are often attributed to the uneven prosperity of the “Roaring Twenties” as well as the lack of government regulation of commerce based on classical economic theory. In The Great Depression: America, 1929-1941, Robert McElvaine discusses the events leading up to the stock market crash in October 1929 that shattered the illusion of prosperity and the New Deal policies that helped bring the United States out of “its worst crisis since the Civil War.”1

In the beginning, McElvaine discusses the years prior to and during Great Depression, along with the cyclical nature of both business and politics. Throughout the nineteenth century, economic slumps occurred roughly every twenty years with “disturbing regularity,” as the first slump of the twentieth century began “‘on schedule’ in 1914, when the outbreak of war […] revived the American economy.”2 Although Americans generally regarded American involvement in World War I as a mistake, historians note that the war postponed a major economic slump. Additionally, the cyclical pattern of politics is evident in the country’s history; periods of liberal reform herald brief periods of conservatism, although “no conservative era succeeds in wiping out all the gains of the preceding period of reform.”3 The 1920s was a conservative era, in which President Calvin Coolidge did little to sustain reform programs of the Wilson administration and took a hands-off approach regarding business. The American economy was “planless,” and many economists believed that the stock market was “governed by market forces in such a way that stocks can never be ‘overpriced’ or ‘underpriced.’”4 Another reason for the drastic effects of the economic collapse in 1929 was industrialization. As the United States became “less agrarian and more industrial,” more Americans became “susceptible to the vagaries of the market economy,” making them dependent on industry and business for employment and wages, and unable to protect themselves from the devastation of economic collapse.5 Additionally, the weakness of the international economy contributed to the causes of the Great Depression; Hoover claimed that the European financial collapse of 1931 was the “culprit that turned the ‘recession’ into the Great Depression.”6 When the economy collapsed, Hoover, renowned for his work as U.S. food administrator and director of the American Relief Administration, was unprepared to deal with failure. Although much of the Depression could be attributed to the Coolidge administration, Hoover takes the majority of the blame. Once the Depression had got well underway, the Hoover administration “remained adamantly opposed to federal relief.”7 The majority of Hoover’s fiscal policies, such as the Revenue Act of 1932, were failures; Hoover’s great failing was “not spending enough.”8 The United States was in a period of crisis, and Hoover was not the hero that the country required in its hour of need; that hero would arrive later, with the 1932 election.

The election of 1932 threw Hoover out of the White House and brought in Franklin D. Roosevelt who, although from a wealthy family, was “critical of businessmen” and called for government to be kept “out of the hands of professional money-makers.”9 As a result of his aristocratic heritage—the “single most important element in understanding Roosevelt’s career”—Roosevelt had a “fundamental security and self-assurance.”10 Roosevelt’s popularity was astounding; Americans tended to credit Roosevelt with every success and showered him with letters of praise, while they “blamed either Herbert Hoover or big businessmen for the Depression.”11 As a result, Hoover was a certain loser in the election of 1932, assuring Roosevelt’s victory. Meanwhile, the Great Depression continued, and the economy further collapsed until Roosevelt began his First Hundred Days, in which he passed numerous programs based on relief, recovery, and reform to ease the nation’s suffering. Roosevelt was determined to keep the faith of the people, and to do so “his policies would have to show results in easing the Depression.”12 Roosevelt called for the reorganization of government to increase efficiency and targeted the Department of Commerce. The Agricultural Adjustment Act was passed to include parts of various farm proposals, and resulted in subsidies given to farmers who agreed to lower production. In 1933 and 1934, the Public Works Administration (PWA) became the primary tool used to combat the Depression. Unfortunately, the PWA did not affect most of the impoverished Americans. The National Industrial Recovery Act created the National Recovery Administration (NRA), which planned to balance the economy; however, the NRA suffered from its “domination by business interests” and was ultimately a failure.13 The First Hundred Days was Roosevelt’s attempt to please America as his legislation covered every group but the middle class, whose increasing rate of home foreclosures posed a dangerous threat. In response, the Roosevelt administration created the Home Owners’ Loan Corporation to provide refinancing of mortgages. None of the massive legislation passed during the First Hundred Days included direct regulation of the stock exchange. After the Hundred Days, supporters of the New Deal focused on administering the Hundred Days programs. As Roosevelt’s failure to bring about recovery and reform became more apparent, Roosevelt faced increasing pressures from the Left.

As the Depression continued, unemployment continued to increase, and finding employment grew increasingly difficult. The employed developed negative attitudes toward the unemployed, and taxpayers complained “of paying for the upkeep of ‘thieves and lazy, immoral people.’”14 Unemployed Americans struggled to overcome the embarrassment of asking for help, preferring work over government handouts. Although men were often too proud or too ashamed to ask for assistance, many women wrote letters to Eleanor Roosevelt begging for help. Recipients of direct relief grew lethargic and indifferent, accepting their failure to find work as a fault of their own rather than of the economy. Families struggling to survive faced more troubles; unemployment meant that children were more likely to take up responsibilities and work. Although the First Hundred Days passed numerous legislations, it only focused on the economic crisis and ignored the specific concerns of blacks. NRA codes established wages in which blacks were paid less than other people doing the same work. Most early programs of the New Deal included a decentralized administration; however, it led to local elites who controlled federal programs. Eventually, Roosevelt shifted to oppose racism more directly and forcefully, and improvements for blacks became noticeable. In 1935, Executive Order 7046 banned discrimination on projects of the Works Progress Administration. Additionally, as the Depression continued, American values and culture changed. Although traditional societies believed that the economy should be based on morals, modern capitalism separated the two. American workers valued individualism and self-reliance, but they also supported equality and justice. During the Great Depression, Americans tended to value the subordination of ambition and greed in favor of the common good. Depression-era films attacked amoral individualism, implying that Americans needed to unify during the Great Depression in order to survive. Between 1934 and 1935, Roosevelt faced strong opposition from influential thinkers such as Senator Huey Long, Father Charles Coughlin, and Dr. Francis Townsend. Long called for a radical redistribution of wealth in the nation and denounced the New Deal as a complete failure. Townsend created his Townsend Plan, which proposed to give every citizen over sixty a check for $200 a month; the plan was opposed by the Liberty League, the Socialist party, Communist party, and American Federation of Labor. Although Townsend eventually met his downfall, the number of people who were attracted to the radical schemes was frightening and signaled growing unrest in the nation.

In 1935, Roosevelt made a clear shift to the left in order to follow his constituents. No longer able to rely on consensus government and with an election year approaching, Roosevelt “realized that he must…regain the support of those whose votes he needed to win” by easing the Depression and opposing business.15 Initially, Roosevelt launched an attack on the utility companies, which controlled 75 percent of the nation’s private power industries and charged overpriced fees to consumers. Faced with the Wheeler-Rayburn Bill, which compelled the dissolution of utility holding companies, the utility companies lobbied against the bill and managed to force the rejection of the bill in the House of Representatives. As a result of the negative effects of direct relief, Roosevelt passed the Emergency Relief Appropriation Act to create the Works Progress Administration (WPA). Under the direction of Harry Hopkins, the WPA created several work projects to employ unemployed Americans. Although the WPA faced criticisms for not creating legitimate jobs for its employees, the work relief was preferred by Americans who did not want to take government hand outs. Wages, however, for WPA projects were low, and the program itself cost more money than giving handouts. Additionally, the Administration failed to provide a sense of security to its workers or to build morale, and did not provide work for a majority of the unemployed. In 1936, Americans clearly shifted their political alignments and no longer put absolute faith in Roosevelt. When the Supreme Court threatened to destroy the New Deal in a series of court cases, Roosevelt submitted a court reform proposal, known as the court-packing plan, which aroused fears among liberals and conservatives alike that Roosevelt was trying to establish himself as a dictator. Due to the court-packing plan, Roosevelt lost a lot of his support. By the mid-1930s, American workers began to form effectively organized unions. The militancy of such labor unions terrified business leaders, who saw the unions as a threat to their businesses. The Congress of Industrial Organizations staged several strikes demonstrating the rebellious nature of the workers and channeled American discontent into constructive actions. Although many Americans felt that the nation had already recovered from the Depression, the stock market faced another collapse in 1937 that led to a call for a return to heavy spending. In 1938, the passage of the Wages and Hours Act marked the last major step of the New Deal, although many parts of the New Deal remained active and vital to the nation. The most notable program was the Social Security System, which provided social insurance to the middle classes. Despite the efforts of the New Deal, the nation’s industry and employment was most revived by the military buildup preceding World War II. The Great Depression forced a change to American economic theory, as Keynesianism—which emphasized deficit spending—provided no permanent solution to the Depression. American capitalism was saved by the New Deal, and Americans made a move away from individualism and toward community values.

Although he discusses several other causes of the Great Depression and offers several different solutions, McElvaine presents his thesis that the conservative approach advocating little government regulation of business during the 1920s was the major cause of the Depression, while heavy, increased government spending was the solution. Additionally, McElvaine recognizes that although the efforts of the New Deal to ease the Depression were numerous, “it took the danger [of World War II] to convince Roosevelt…to spend at the level necessary to bring about recovery.”16 Furthermore, McElvaine draws parallels between the practices of Calvin Coolidge in the 1920s which led to the Great Depression and the actions of the Reagan administration in the 1980s, predicting an economic collapse similar to the Depression.

Originally published in 1984, McElvaine studies the Great Depression looking for similarities between the causes of the Depression and the actions of the Reagan administration, implying an impending economic crisis and the failures of the Reagan administration. Although it is impossible to know definitively the true motives of politicians during the time, McElvaine makes assumptions based on his clearly left-leaning political alignment. While discussing Coolidge’s decision not to run for a third term of office in 1928, McElvaine makes note of and appears to favor “the possibility that [Coolidge] foresaw what was coming.”17 Although there is little evidence to substantiate the claim, McElvaine disparages Coolidge and belittles his presidency.

McElvaine is strongly influenced by New Left historiography, which champions a theme of conflict in the nation’s history. McElvaine notes the conflict between conservatives, who “fear the people, and wish to transfer all power to the higher classes,” and liberals, who “consider the people as the safest depository of power in the last resort.”18 McElvaine focuses on the mass of unemployed Americans during the Depression and the change of their cultural values.
However, some disagree with McElvaine’s approach. In his review of the book, Elliot A. Rosen states that McElvaine uses a “selective research base” and excludes “significant issues and massive bodies of evidence.”19 Although McElvaine’s selections are balanced, Rosen feels that McElvaine excludes the international economic collapse and implies that the New Deal began without any coherence. Additionally, Rosen feels that McElvaine’s exclusion of significant issues oversimplifies the complexities of the Great Depression and the New Deal. Rosen also finds McElvaine’s “frequent attacks on Ronald Reagan” to be out of place and annoying and sees little to praise in McElvaine’s work.20

On the other hand, critics like Richard Weiss praise McElvaine’s book. Weiss found it to be “a welcome new synthesis of the Great Depression” and a “provocative text [that] should receive a broad reception.”21 Weiss feels that McElvaine uses uncommonly used sources to enliven the book and makes noteworthy attempts to deal with the change in values of Americans during the Depression.

McElvaine draws several parallels from the causes of the Depression in the 1920s to the actions—or inactions—of the Reagan administration in the 1980s. Although he attempts to make a convincing argument, McElvaine’s constant ridicule of Ronald Reagan weakens his case. While explaining the positions of both the Democratic and Republican parties regarding taxes, McElvaine asserts that Reagan accepted “massive deficits” for their “short-run economic benefits” and “political benefits to him and his party.”22 Additionally, McElvaine focuses almost entirely on the domestic causes of the Depression and ignores the foreign causes, disregarding claims that the European economic collapse played a hand in the American collapse as solely “serv[ing] the purpose of absolving [Hoover].”23 McElvaine’s claims of change in American cultural values are often unsubstantiated; although he provides evidence of American values during the Depression, he neglects to make more than generalizations about American values during the 1920s. McElvaine’s one-sidedness overshadows any positives.

The Great Depression marks one of the most important changes in American social and economic policies. The failure of Keynesianism to provide a “permanent solution,” as well as the “fundamental problem in the…maldistribution of income” forced America to change its economic practices and put an end to laissez-faire.24 As the ultimate failure of laissez-faire, the Great Depression made Americans realize that the system did not work.

Furthermore, the New Deal programs passed under Roosevelt continue to be important today. Roosevelt’s New Deal “created the welfare state” and his Social Security continues to “provide social insurance to the middle classes.”25 The Securities Exchange Act, signed by Roosevelt, created the Securities and Exchange Commission which continues to regulate the stock exchange today.

The Great Depression remains the largest economic crisis the United States has ever faced. The largest economic collapse the country had seen, it threw the government into a position it did not know how to cope with. It resulted in major political and economic changes to American policies that have been sustained for decades. Although the specific causes and effects of the Depression may create controversy, its significance in the “direction of our social and economic policies…ever since” is indisputable.26

Endnotes

Student Bio

Robert Friedland is currently a junior at Irvine High School. He is enrolled in several Advanced Placement courses and enjoys pulling all-nighters. He uses his weekends to sleep. He does not yet know which college he would like to attend or what his major will be.