The Great Depression - Palomar College articles... · 15 INTO THE ECONOMIC ABYSS 261 Whatever the Great Depression '.< causes, there is no disputing its devastating impact. Be tween

VIII

The Great

Depression

The prolonged slump that descended on the American economy at the end ofthe 1920s was part of aworldwide crisis. Since the United State's had been moreprosperous than most countries in the 1920s, its fall was more dramatic, but notexceptional. The pattern of plunging production, prices, and employment wassimilar almost everywhere. It provided somber proof that by the early twentiethcentury a complex, intermeshed world economy had come into existence. Mostnational economies hit bottom in 1933, but the slump lasted, despite somespotty improvement and a few national exceptions, until the outbreak of WorldWar II in 1939. By that time, the world spolitical landscape had been profoundly altered. Western democracies, including the United States, responded tothe crisis by delegating to national governments the responsibility for providingjobs and relief to their beleaguered populations. Thus, the modern welfare statecame into its own. There was also amore ominous response. In Germany, Italy,and Japan, authoritarian governments took control amid the turmoil of the Depression. These repressive and militaristic regimes ended unemployment, butthey also destroyed democracy and eventually brought the world itself to thebrink of destruction.

Despite the global spread of "hard times" and its momentous internationalimpact, most histories of the Great Depression are resolutely national in focus.The selections in this chapter are exceptions. The first essay, taken from amultivolume world history by the British historian Eric Hobsbawm, analyzesthe causes and sketches some of the consequences of the "Great Slump of1929-1933." Hobsbawm writes within a thoroughly international frameworkthat allows him to situate the United States in the world economy and to consider its particular economic and political pattern as avariant of global trends.The second essay, by the American historian John A. Garraty. features a

259

260 THE GREAT DEPRESSION

provocative binational comparison between the United States and Germany.Comparing Nazism and the New Deal, Garraty uncovers surprising similaritiesin the leadership skills and economic programs of Franklin Roosevelt and AdolfHitler as they wrestled with the Depression. Hobsbawm's transnational surveyand Garraty's focused comparison not only offer contrasting assessments ofDepression-era events and movements; they also demonstrate two quite differentways to internationalize the study of American history. As you read them,try to assess the strengths and weaknesses of their different approaches as well asthe soundness of their insights.

Into the Economic Abyss

Eric Hobsbawm

In hindsight, it is easy to tell when the Great Depression began. On "Black Tuesday,"October 29, 1929, the NewYork stock market began a tumble that lowered stock prices byalmost halfwithin three wecks.The Wall Street crash demoralizedAmerican banks, investors,and consumers, whose curtailed activities deepened the economic crisis. It sent shock wavesaround the world, triggering declines in securities markets, decreasing lending, and deflatingprices in other industrialized countries. Yet the roots ofthe worldwide Depression go fartherback in time than the Great Crash and extend over a much wider area than the UnitedStates. As Eric Hobsbawm notes in his analysis ofthe world's descent "into the economicabyss" of the 1930s, historians and economists still argue over the causes of the Great Depression. Many explanations are basically enlarged descriptions ofthe capitalist business cycle,the recurring up-and-down syndrome by which good times inevitably lead to speculation andoverproduction, which are then ••corrected"by deflation and unemployment, until inventoriesare spent and investors and consumers resume the expansion. But, says Hobsbawm, otherfactors combined to deepen the crisis and to prolong it beyond any other international slump inmodern times. Western Europe's crushing debt from World War I (to be paid, supposedly, byGermany's impossibly high reparations), agricultural overproduction in the 1920s, the reluctance ofthe United States to take over Britain's role as the world's banker, and the wrong-headed nationalistic economic policies that many countries pursued — all these meant thatwhat looked like atypical economic downturn was really aworld catastrophe in the making.

15 INTO THE ECONOMIC ABYSS 261

Whatever the Great Depression '.< causes, there is no disputing its devastating impact. Between 1929 and 1933, over eleven thousand American banks failed; national productionwas cut in half; and thirteen million people (representing one-fourth ofthe laborforce) wereput out of work. Some European economies were hit even harder because they had not yetfully recovered from World War I. Throughout the industrialized world, unemploymentranged between 15 and 30percent ofthe workforce in the early 1930s. Ironically, agricultural countries tended to fare better. Plummeting crop prices hurt Brazil and India, for example, but peasants could grow their own food, and local businessmen recovered quickly bydeveloping textile manufacturing and other industries.

Hobsbawm acknowledges the immediate devastation caused by the "Great Slump of1929-1933,"but he steps back in order to note the Depression's long-term effects. First, hesays, the collapse of II csieru economies fatally discredited the orthodox economic theory thatfree trade abroad and government noninterference at home were the best guarantees ofprosperity. Even ifthe European and American economies rebounded by themselves after hittingbottom, massive unemployment made doing nothing politically unacceptable to angry voters.One by one, Western governments attacked joblessness with planned production, publicworks programs, and other deficit-spending measures. They were eg^ed on not only by thenew economic theories ofJohn Maynard Keynes, but also by the apparent success oftheSoviet Union's planned economy in avoiding the decade's economic woes. The modern wel

fare state had come, and with it came the second effect of the Depression: a move towardstronger centralgovernments. Throughout the West,frightened and desperate citizens anxiousto restore order and confidence ceded authority to powerful governments run by charismaticleaders. The new regimes were sometimes left-leaning, as in the case ofPresident FranklinRoosevelt's New Deal in the United States or Lazaro Cardenas's land-reform administration in Mexico. More often, however, they proved to be far-from-benevolent dictatorships ofthe Right. Economic depression prepared the ground for dangerous fascist regimes inGermany and Italy as well as acivil war that gave victory to thefascists in Spain.

Hobsbawm's international approach is afine corrective to textbooks that discuss theAmerican Great Depression in isolation. And his insight that fascism and the New Dealwere in a sense analogous responses to the Depression is agood preparation for the reading by John Garraty that follows it. As you move to the next essay, you should compareHobsbawm's generalizations about the Depression's political effects with the detailed comparison of Roosevelt's and Hitlers economic policies undertaken by Garraty.

GLOSSARY

COMMUNIST INTERNATIONAL (COMINTERN) An organization formed in1919 byV. I.Lenin to assert communist leadership over the international socialist movement and to promote communism around the world. It was disbanded in 1943 as agesture of support for the Allied coalition during World War II.

DEFLATION A time of falling prices, slower business activity, and high unemployment, the opposite of inflation.

ECONOMIC LIBERALISM The doctrines ofclassical economics as applied to governments and economies in the nineteenth century. In general, economic liberalism

262 THE C.REAT DEPRESSION

prescribed free trade internationally and a laissez-faire (noninterventionist) policy forthe domestic economy.

ELASTIC AND INELASTIC DEMAND Concepts that express how consumers respond to changes in the price of goods or services. Elastic demand is a situation inwhich a change in price produces a distinct change of the opposite direction in thequantity purchased; that is, if the price goes up, demand goes down. With inelastic demand, price changes do not affect the amount purchased.

FASCISM A political philosophy that glorifies the nation over the individual andencourages "benevolent" dictatorship. Its elements often include opposition to democratic and socialist movements, racist ideologies, aggressive military policy, and faithin an authoritarian leader who is said to embody the nation's ideals. The term wasfirst used by the party of Benito Mussolini in Italy, and it also applied to right-wingmovements such as National Socialism (Nazism) in Germany and the regime ofGeneralissimo Francisco Franco in Spain (1939-1975).

FORD, HENRY (1863-1947) A pioneer American automobile manufacturer. Fordused assembly-line techniques to produce the Model T, an inexpensive, standardized carthat made Ford's company the largest auto producer in the world.

GOLD STANDARD The practice of making gold thebasis of a monetary system bygiving a unit of currency, such as a dollar bill, the value of a particular weight of gold,for which, under certain conditions, it could be exchanged.

HOOVER, HERBERT (1874-1964) The Republican president elected in 1928 butsoon overwhelmed by the Great Depression. Hoover's response to the economic crisisreflected the limitations of Progressives' expansion of government: he insisted thatonlystate and local agencies and private charities deal with unemployment relief. By 1932Hoover was seen by many Americans as an aloofand uncaring leader, and shantytownsset up by the unemployed were called Hoovervilles.

INFLATION Apersistent and large rise inthe general price level ofgoods and services.Inflation often results from an increase in the amount of circulating currency due toshortages of goods or to heavy borrowing by individuals or government.

KEYNES, JOHN MAYNARD (1883-1946) An English economist whose theoriesdeparted from classical laissez-faire doctrines by advocating government intervention inthe market. Keynes argued that during depressions, government spending and easiermonetary policies would raise the employment level and stimulate business recovery.His theories influenced Western governments during the Great Depression and especially after World War II.

STALIN, JOSEPH (1879-1953) The ruthless and powerful head of the Soviet Unionfrom 1929 until his death. An early comrade of Bolshevik leader V. I. Lenin, Stalin returnedfrom exile in Siberia during the Russian Revolution and became the first editorof the Communist Party newspaper, Pravda. He emerged victorious from the five-yearpower struggle after Lenin's death in 1924. Once in control, Stalin forcibly collectivizedRussia's farms, ordered rapid industrial growth, and imprisoned or executed rivals ordissidents, including millions of ordinary citizens.


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I

The First World War was followed by one kind of breakdown that was genuinely worldwide, at least wherever men and women were enmeshed in, or

operated by, impersonal market transactions. Indeed, the proud U.S.A. itself, sofar from being a safe haven from the convulsions of less fortunate continents, becamethe epicenter of this, the largest global earthquake everto be measured in the economichistorians' RichterScale — the Great Inter-war Depression. In a sentence: between thewars the capitalist world economy appeared to collapse. Nobody quite knew how itmight recover.

The operations of a capitalist economy are never smooth, and fluctuations of various length, often very severe, are integral parts of this way of running the affairs of theworld. The so-called "trade cycle" of boom and slump was familiar to all businessmenfrom the nineteenth century. It was expected to repeat itself, with variations, everyseven to eleven years. A rather more lengthy periodicity had first begun to attractattention at the end of the nineteenth century, as observers looked back on the unexpected peripeties [sudden changes] of the previous decades. A spectacular, record-breaking global boom from about 1850 to the early 1870s had been foDowed by thetwenty-odd years of economic uncertainties . . . and then another evidently secularforward surge of the world economy. In the early 1920s a Russian economist, N. D.Kondratiev . . . discerned a pattern of economic development since the late eighteenthcentury through a series of "long waves" of from fifty to sixty years, though neither henor anyone else could give a satisfactory explanation of these movements, and indeedskeptical statisticians have even denied their existence. . . .

In the past, waves and cycles, long, medium and short, had been accepted by businessmen and economists rather as farmers accept the weather, which also has its ups anddowns. There was nothing to be done about them: they created opportunities or problems, they could lead to bonanzas or bankruptcy for individuals or industries, but onlysocialists who, with Karl Marx, believed that cycles were part ofaprocess by which capitalism generated what would in the end prove insuperable internal contradictions, thoughtthey putthe existence of the economic system as such atrisk. Theworld economy was expected togoongrowing and advancing, as ithad patently done, except for the sudden andshort-lived catastrophes of cyclical slumps, for over a century. What was novel about thenew situation was that, probably for the first, and so far the only, time in the history ofcapitalism, its fluctuations seemed to begenuinely system-endangering. . . .

The history of the world economy since the Industrial Revolution had been one ofaccelerating technological progress, of continuous but uneven economic growth, andof increasing "globalization," that is to say of an increasingly elaborate and intricate

From Age ofExtremes by Eric Hobsbawm. Copyright © 1994 by Eric Hobsbawm. Used by permission ofPantheon Hooks, a division of Random House, Inc.


worldwide division of labor; an increasingly dense network of flows and exchanges thatbound every part of the world economy to the global system. Technical progress continued and even accelerated in the Age ofCatastrophe [1914-1948] . . . land) economic-growth during these decades did not cease. Itmerely slowed down

Yet . . . [t]he globalization ofthe economy, it seemed, had stopped advancing in theinter-war years. Any way we measure it, the integration of the world economy stagnated or regressed. The pre-war years had been the greatest period of mass migration inrecorded history, but now these streams died out, or rather, were dammed by the disruptions of wars and political restriction. In the last fifteen years before 1914 almostfifteen millions had landed in the U.S.A. In the next fifteen years the flow shrunk tofive-and-a-half millions: in the 1930s and the war years it came to an almost completestop; less than three quarters ofa million entered the U.S.A. Iberian migration, overwhelmingly to Latin America, fell from one-and-three-quarter millions in the decade1911-20 to less than aquarter ofamillion in the 1930s. World trade recovered from thedisruptions of war and post-war crisis to climb alittle above 1913 in the late twenties,then fell during the slump, but at the end of the Age ofCatastrophe (1948) it was notsignificantly higher in volume than before the First World War

Why this stagnation? Various reasons have been suggested, for instance that thelargest of the world's national economies, the U.S.A., was getting virtually self-sufficient,except in the supply of afew raw materials; it had never been particularly dependent onforeign trade. However, even countries which had been heavy traders, like Britain andthe Scandinavian states, showed the same trend. Contemporaries focused on a moreobvious cause for alarm, and they were almost certainly right. Each state now did itsbest to protect its economy against threats from outside, that is to say against aworldeconomy that was visibly in major trouble. ...

The Anglo-Saxon world, the wartime neutrals and Japan did what they could to deflate, i.e. to get their economies back to the old and firm principles of stable currenciesguaranteed by sound finance and the gold standard, which had been unable to resist thestrains ofwar. Indeed, they more or less succeeded in doing so between 1922 and 1926.However, the great zone ofdefeat and convulsion from Germany in the West to SovietRussia in the East saw a spectacular collapse of the monetary system, comparableonly to that in part of the post-communist world after 1989. In the extreme case—Germany in 1923 —the currency unit was reduced to one million millionth of its 1913value, that is to say in practice the value ofmoney was reduced to zero. Even in less extreme cases, the consequences were drastic. The writer's grandfather, whose insurancepolicy matured during the Austrian inflation, liked to tell the story of drawing this largesum in devalued currency, and finding it was just enough to buy himself adrink in hisfavorite cafe.

In short, private savings disappeared totally, thus creating an almost complete vacuum of working capital for business, which does much to explain the massive relianceof the German economy on foreign loans in the following years. This made it unusually vulnerable when the slump came. . . . When the great inflation was ended in1922-23, essentially by the decision of governments to stop printing paper money inunlimited quantities and to change the currency, people in Germany who had relied


on fixed incomes and savings were wiped out, although at least a tiny fraction of thevalue of money had been saved in Poland, Hungaryand Austria. . . .

By 1924 these post-war hurricanes had calmed down, and it seemed possible to lookforward to a return to what an American president [Warren Harding] christened "normalcy." There was indeed something like a return to global growth, even though someof the producers of raw materials and foodstuffs, including notably North Americanfarmers, were troubled because prices of primary products turned down again after abrief recovery The roaring 1920s were not a golden age on the farms of the U.S.A.Moreover, unemployment in most of Western Europe remained astonishingly, and bypre-1914 standards, pathologically, high. It is hard to remember that even in the boomyears ofthe 1920s (1924-29) itaveraged between 10 and 12 percent in Britain, Germanyand Sweden, and no less than 17-18 percent inDenmark and Norway. Only the U.S.A.,with average unemployment of about 4 percent, was an economy really under fullsteam. Both facts pointed to serious weaknesses inthe economy. The sagging of primary-prices (which were prevented from filling further by building up increasingly largestockpiles) simply demonstrated that the demand for them could not keep pace with thecapacity to produce. Nor should we overlook the fact that the boom, suchas it was, waslargely fueled by the enormous flows of international capital which swept across the industrial worlds in those years, and notably to Germany That country alone, which tookabout half of all the world's capital exports in 1928, borrowed between 20,000 and30,000 billion Marks, half of it probably on short term. Once again this made theGerman economy highly vulnerable, as was proved when the American money waswithdrawn after 1929.

It therefore came as no great surprise to anyone except the boosters of smalltownAmerica, whose image became familiar to the Western world at this time through theAmerican novelist Sinclair Lewis' Babbitt (1922), that the world economy was in trouble again a few years later. The Communist International had indeed predicted anothereconomic crisis at the height of the boom, expecting it — or so its spokesmen believedor pretended to believe — to lead to a new round of revolutions. . . . However, whatnobody expected, probably not even the revolutionaries in their most sanguine moments, was the extraordinary universality and depth of the crisis which began, as evennon-historians know; with the NewYork Stock Exchange crash of 29 October 1929. Itamounted to something very close to the collapse of the capitalist world economy,which now seemed gripped inavicious circle where every downward movement of theeconomic indices (other than unemployment, which moved to ever more astronomicheights) reinforced the decline in all the others.

As the admirable expertsof the League of Nationsobserved, ... a dramatic recessionof the North American industrial economy soon spread to the otherindustrial heartland. Germany. U.S. industrial production fell by about a third from 1929 to 1931,German production by about the same, but these are smoothing averages. Thus in theU.S.A.. Westinghouse, the great electrical firm, lost two-thirds of its sales between 1929and 1933, while its net income fell by 76 percent in two years. There was a crisis inprimary production, both offoodstuffs and raw materials, as their prices, no longer keptup by building stocks as before, went into free fall. The price of tea and wheat fell bv


two thirds, the price of raw silk by three quarters. This prostrated — to name but thecountries listed by the League of Nations in 1931 —Argentina, Australia, the Balkancountries, Bolivia, Brazil, (British) Malaya, Canada, Chile, Colombia, Cuba, Egypt.Ecuador, Finland, Hungary, India, Mexico, the Netherlands Indies (the presentIndonesia), New Zealand, Paraguay. Peru. Uruguay and Venezuela, whose internationaltrade depended heavily onafew primary commodities. In short, it made the Depressionglobal in the literal sense.

The economies of Austria, Czechoslovakia, Greece, Japan. Poland and GreatBritain, extremely sensitive to the seismic shocks coming from the West (orEast), wereequally shaken. The Japanese silk industry had tripled its output in fifteen years to supply the vast and growing U.S. market for silk stockings, which now disappearedtemporarily —and so did the market for the 90 percent ofJapan's silk that then wentto America. Meanwhile the price of the other great staple ofJapanese agricultural production, rice, also plummeted, as it did in all the great rice-producing zones of Southand East Asia. Since, as it happened, the wheat price collapsed even more completelythan that of rice, and wheat was therefore cheaper, many Orientals are said to haveswitched from theone to theother Farmers triedto compensate forfalling prices bygrowing and selling more crops, and this made prices sink even further.

For farmers dependent on the market, especially the export market, this meant ruin,unless they could retreat to the traditional ultimate redoubt of the peasant, subsistenceproduction. This was indeed still possible in much of the dependent world, and insofaras most Africans, South and East Asians and Latin Americans were still peasants, it undoubtedly cushioned them. Brazil became abyword for the waste ofcapitalism and thedepth of the Depression, as its coffee growers desperately tried to prevent the price-collapse by burning coffee instead ofcoal on their steam railroad engines. (Between twothirds and three quarters ofthe coffee sold on the world market came from that country.)Nevertheless the Great Slump was far more tolerable for the still overwhelmingly ruralBrazilians than the economic cataclysms of the 1980s; especially since poor people'sexpectations ofwhat they could get ofan economy were still extremely modest. . . .

For those who, by definition, had no control over or access to the means of production (unless they could go home to apeasant family in some village), namely the men andwomen hired for wages, the primary consequence of the Slump was unemployment onan unimagined and unprecedented scale, and for longer than anyone had ever expected.At the worst period of the Slump (1932-33) 22-23 percent of the British and Belgianlabor force, 24 percent of the Swedish. 27 percent of the U.S., 29 percent of theAustrian. 31 percent of the Norwegian. 32 percent of the Danish and no less than44 percent of the German workers were out ofjobs. What is equally to the point, eventhe recovery after 1933 did not reduce the average unemployment of the 1930s below16-17 percent in Britain and Sweden orbelow 20 percent in the rest ofScandinavia,Austria and the U.S.A. The only Western state which succeeded in eliminating unemployment was Nazi Germany between 1933 and 1938. There had been nothing like thiseconomic catastrophe in the lives ofworking people as long as anyone could remember.

What made it even more dramatic was that public provision for social security, including unemployment relief, was either non-existent, as in the U.S.A., or, by late


twentieth-century standards, extremely meager, especially for the long-term unemployed. That is why security had always been such a vital concern of working people:protection against the terrible uncertainties of employment (i.e. wages), sickness or accident and the terrible certainties of an old age without earnings. That is why workingpeople dreamed of seeing their children in modestly paid, but secure and pensionablejobs. Even in the country most fully covered by Unemployment Insurance schemes before the Slump (Great Britain) less than 60 percent of the labor force were covered byit— and that only because Britain since 1920 had already been forced to adjust to massunemployment. Elsewhere in Europe (except for Germany, where it was above 40 percent) the proportion of working people with claims for unemployment relief rangedfrom zero to about one quarter. People who had been used to fluctuating employmentor to passing spells of cyclical unemployment were desperate when no job turned upanywhere, after their small savings had gone and their credit at the local grocer's shophad been exhausted.

Hence the central, the traumatic, impact of mass unemployment on the politics ofthe industrialized countries, for that is what first and foremost, the Great Slump meant,to the bulk of their inhabitants. What did. it matter to them that economic historians(and indeed logic) can demonstrate that the majority of the nation's labor force, whichwas in employment even at the worst moments, was actually getting significantly betteroff", since prices were falling throughout the inter-war years, and the price of foodstuffsfell more rapidly than any other in the worst depression years. The image which dominated at the time was that of soup kitchens, of unemployed "Hunger Marchers" fromsmokeless settlements where no steel or ships were made converging on capital cities todenounce those they held responsible. Nor did politicians fail to observe that up to85 percent of the membership of the German Communist Party, growing almost as fastas the Nazi Party in the slump years, and, in the last months before Hitler'saccession topower, faster, were unemployed. . . .

Curiously enough, the sense of catastrophe and disorientation caused by the GreatSlump was perhaps greater among businessmen, economists and politicians than amongthe masses. ... It was precisely the absence of any solutions within the framework ofthe old liberal economy that made the predicament of the economic decision-makersso dramatic. To meet immediate, short-term crises, they had, as they saw it. to undermine the long-term basis of a flourishing world economy. Ata time when world tradefell by 60 percent in four years (1929-32), states found themselves building increasinglyhigh barriers to protect their national markets and currencies against the world economic hurricanes, knowing quite well that this meant the dismantling of the worldsystem of multilateral trade on which, they believed, world prosperity must rest. Thekeystone of such a system, the so-called "most favored nation status" disappeared fromalmost 60 percent of 510 commercial agreements signed between 1931 and 1939 and,where it remained, it was usually in a limited form. Where would it end? Was there anexit from the vicious circle?

We shall consider the immediate political consequences of this, the most traumatic-episode in the history of capitalism, below. However, its most significant long-term implication must be mentioned immediately. In a single sentence: the Great Slump


destroyed economic liberalism for half a century. In 1931-32 Britain, Canada, all ofScandinavia and the U.S.A. abandoned the gold standard, always regarded as the foundation of stable international exchanges and by 1936 they had been joined even bythose impassioned believers in bullion, the Belgians and Dutch, and finally the veryFrench. Almost symbolically, Great Britain in 1931 abandoned Free Trade, which hadbeen as central to the British economic identity since the 1840s as the AmericanConstitution is to U.S. political identity. Britain's retreat from the principles of freetransactions in a single world economy dramatizes the general rush into national self-protection at the time. More specifically, the Great Slump forced Western governmentsto give social considerations priority over economic ones in their state policies. Thedangers of failing to do so — radicalization of the Left and, as Germany and othercountries now proved, of the Right — were too menacing.

So governments no longer protected agriculture simply by tariffs against foreigncompetition, though, where they had done so before, they raised tariff barriers evenhigher. During the Depression they took to subsidizing it by guaranteeing farm prices,buying up surpluses or paying farmers not to produce, as in the U.S.A. after 1933. . . .

As for the workers, after the war"full employment," i.e. the elimination of mass unemployment, became the keystone ofeconomic policy in the countries ofa reformeddemocratic capitalism, whose most celebrated prophet and pioneer, though not the onlyone, was the British economist John Maynard Keynes (1883-1946). The Keynesianargument for the benefits ofeliminating permanent mass unemployment was economicas well as political. Keynesians held, correctly, that the demand which the incomes offully employed workers must generate, would have the most stimulating effect ondepressed economies. Nevertheless, the reason why this means of increasing demandwas given such urgent priority —the British government committed itself to it evenbefore the end of the Second WorldWar— was that mass unemployment wasbelievedto be politically and socially explosive, as indeed it had proved to be in the Slump. . . .

[Ajnother prophylactic measure taken during, after and as a consequence of theGreat Slump [was] the installation of modern welfare systems. Who can be surprisedthat the U.S. passed its Social Security Act in 1935? We have become so used to theuniversal prevalence of ambitious welfare systems in developed states of industrialcapitalism —with some exceptions, such as Japan, Switzerland and the U.S.A. —thatwe forget how few "welfare states" in the modern sense there were before the SecondWorldWar. Even the Scandinavian countries were onlyjust beginning to developthem.Indeed, the very term welfare state did not come into use before the 1940s.

The trauma of the Great Slump was underlined by the fact that the onecountry thathad clamorously broken with capitalism appeared to be immune to it: theSoviet Union.While the rest of the world, or at least liberal Western capitalism, stagnated, theU.S.S.R. was engaged in massive ultra-rapid industrialization under its new Five-YearPlans. From 1929 to 1940 Soviet industrial production tripled, at the very least. It rosefrom 5 percent of the world's manufactured products in 1929 to 18 percent in 1938,while during the same period the jointshare of the U.S.A.. Britain and France, fell from59 percent to 52 percent of the world's total. What was more, there was no unemployment. These achievements impressed foreign observers of all ideologies, including a


small but influential flow of socio-economic tourists to Moscow in 1930-35, morethan the visible primitiveness and inefficiency of the Soviet economy or the ruthless-ness and brutality of Stalin's collectivization and mass repression. For what they weretrying to come to termswith was not the actual phenomenon of the U.S.S.R. but thebreakdown of their own economic system, the depth of the failure of Western capitalism. What was the secret of the Soviet system? Could anything be learned from it?Echoing Russia's Five-Year Plans, "Plan" and "Planning" became buzz-words in politics. Social Democratic parties adopted "plans," as in Belgium and Norway. SirArthurSalter, a British civil servant of the utmost distinction and respectability, and a pillar ofthe Establishment, wrote abook, Recovery, to demonstrate that a planned society was essential, if the country and the world were to escape from the vicious cycle of the GreatSlump. Other British middle-of-the-road civil servants and functionaries set up a nonpartisan think-tank called PEP (Political and Economic Planning). . . . Even the veryNazis plagiarized the idea, as Hitler introduced a "Four-Year Plan" in 1933.

II

Why did the capitalist economy between the wars fail to work? The situation of theU.S.A. is a central part of any answer to this question. For if the disruptions of war andpost-war Europe, or at least the belligerent countries of Europe, could be made at leastpartly responsible for the economic troubles there, the U.S.A. had been far away fromthe war, though briefly, if decisively, involved in it. So far from disrupting its economy,the First World War, like the Second World War, benefited itspectacularly. By 1913 theU.S.A. had already become the largest economy in the world, producing over one thirdof its industrial output —justunder the combined total for Germany, Great Britain andFrance. In 1929 it produced over 42 percent of the total world output, as against justunder 28 percent for the three European industrial powers. This is a truly astonishingfigure. Concretely, while US. steel production rose by about one quarter between 1913and 1920, steel production in the rest of theworld fell byaboutone third. In short, afterthe end of the first World War the U.S.A. was in many ways as internationally dominantan economy as it once again became after the Second World War. It was the GreatSlump which temporarily interrupted this ascendancy.

Moreover, the war had not only reinforced its position as the world's greatest industrial producer, but turned it into the world's greatest creditor. The British had lost abouta quarter of theirglobal investments during the war, mainly those in the U.S.A., whichthey had tosell to buy war supplies; the French lost about half of theirs, mainly throughrevolution and breakdown in Europe. Meanwhile the Americans, who had begun thewar as a debtor country, ended it as the main international lender. Since the U.S.A. concentrated its operations in Europe and the western hemisphere (the British were still byfar the biggest investors in Asia and Africa) their impact on Europe was decisive.

In short, there is no explanation of the world economic crisis without the U.S.A. Itwas, after all, both the premier exporting nation of the world in the 1920s and, afterGreat Britain, the premier importing nation. As for raw materials and foodstuffs, it


imported almost 40 percent of all the imports of the fifteen most commercial nations,a fact which goes a long way to explaining the disastrous impact of the slump on theproducers ofcommodities like wheat, cotton, sugar, rubber, silk, copper, tin and coffee.By the same token, it was to become the principal victim of the Slump. If its importsfell by 70 percent between 1929 and 1932, its exports fell at the same rate. World tradedipped by less than a third from 1929 to 1939, but U.S. exports crashed by almost half.

This is not to underestimate the strictly European roots of trouble, which werelargely political in origin. At the Versailles peace conference (1919) vast but undefinedpayments had been imposed on Germany as "reparations" for the cost of the war andthe damage done to the victorious powers. To justify these a clause had also been inserted into the peace treaty making Germany solely responsible for the war (the so-called"war-guilt" clause) which was both historically doubtful and proved to be a gift toGerman nationalism. The amount Germany was to pay remained vague, as a compromise between the position of the U.S.A.. which proposed fixing Germany's paymentsaccording to the country's capacity to pay, and the other Allies —chiefly the French —who insisted on recovering the entire costs of the war. Their, or at least France's, realobject was to keep Germany weak and to have a means of putting pressure on it. In1921 the sum was fixed at 132 billion Gold Marks, i.e. S33 billion at the time, whicheveryone knew to be a fantasy.

"Reparations" led toendless debates, periodic crises and settlements under Americanauspices, since the U.S.A.. to its former Allies' displeasure, wished to link the questionofGermany's debts to them, to that of their own wartime debts to Washington. Thesewere almost as crazy as the sums demanded of the Germans, which amounted to oneanda half times the entire national income of the country in 1929; the British debts tothe U.S. amounted to half the British national income; the French debts to two-thirds.A "Dawes Plan" in 1924 actually fixed a real sum for Germany to pay annually; a"Young Plan" in 1929 modified the repayment scheme and, incidentally, set up theBank of International Settlements in Basel (Switzerland), the first of the internationalfinancial institutions which were to multiply after the Second World War. . . .

There was the question of how reparations were to be paid. Those who wanted tokeep Germany weak wanted cash rather than (as was rational) goods out ofcurrent production, or at least out of the income from German exports, since this would havestrengthened the German economy against its competitors. In effect they forced Germanyinto heavy borrowing, so that such reparations as were paid came out of the massive(American) loans of the mid-1920s. For Germany's rivals this seemed to have the additional advantage that Germany ran into deep debt rather than expanding its exports toachieve an external balance. . . . However, the whole arrangement, as we have alreadyseen, made both Germany and Europe highly sensitive to the decline in American lending which began even before the crisis and the shutting ofthe American loan-tap, whichfollowed theWall Street Crisis of 1929. The entire house of cards of reparations collapsedduring the Slump. . . .

However, wartime and post-war disruptions and political complications in Europecan only partly explain the severity of the inter-war economic breakdown. Speakingeconomically, we can look at it in two ways.


The first will seechiefly a striking and growing imbalance in the international economy, due to the asymmetry in development between the U.S.A. and the rest of theworld.The world system, it can be argued, did not work, because, unlike Great Britain,which had been its center before 1914, the U.S.A. did not much need the rest of

the world, and therefore, again unlike Great Britain, which knew that the world payments system rested on the Pound Sterling [the British unit of currency] and saw to itthat it remained stable, the U.S.A. did not botherto act as a global stabilizer. The U.S.A.did notneed the world much, because after the First World War it needed to import lesscapital, labor and (relatively speaking) fewer commodities than ever —except for someraw materials. Its exports, though internationally important — Hollywood virtuallymonopolized the international movie market — made a far smaller contribution to thenational income than in any other industrial country. How significant this . . . withdrawal of the U.S.A. from the world economy was, may be debated. However, it is quiteclear that this explanation of the Slump was one which influenced U.S. economists andpoliticians in the 1940s, and helped to convince Washington in the war years to takeover responsibility for the stability of the world economy after 1945.

The second perspective on the Depression fixes on the failure of the world economyto generate enough demand for a lasting expansion. The foundations of the prosperityof the 1920s, as we have seen, were weak, even in the U.S.A., where farming was virtually already in depression, and money wages, contrary to the myth of the great jazzage, were not rising dramatically, and actually [were] stagnant in the last mad years ofthe boom. What was happening, as often happens in free market booms, was that, withwages lagging, profits rose disproportionately and the prosperous got a larger slice ofthe national cake. But as mass demand could not keep pace with the rapidly increasingproductivity of the industrial system in the heyday of Henry Ford, the result was overproduction and speculation. This, in turn, triggered off" the collapse. . . .

When the collapse came, it was of course all the more drastic in the U.S.A. becausein fact a lagging expansion of demand had been beefed up by means of an enormousexpansion of consumer credit. . . . Banks, already hurt by the speculative real-estateboom which, with the usual help ofself-deluding optimists and mushrooming financialcrookery, had reached its peak some years before the Big Crash, loaded with bad debts,refused new housing loans or to refinance existing ones. This did not stop them fromfailing by the thousands, while (in 1933) nearly half of all US. home mortgages wereindefault and athousand properties aday were being foreclosed. Automobile purchasesalone owed SI,400 million out of a total personal indebtedness of S6,500 million inshort- and medium-term loans. What made the economy so much more vulnerable tothis credit boom was that customers did not use their loans to buy the traditional massconsumption goods which kept body and soul together, and were therefore pretty inelastic: food, clothing andthe like. However poorone is, onecan't reduce one's demandfor groceries below a certain point; and that demand will not double if one's incomedoubles. Instead they bought the durable consumer goods of the modern consumersociety which the U.S.A. was even then pioneering. Butthe purchase of cars and housescould be readily postponed, and, in any case, they had and have a very high incomeelasticity of demand.


So,unless a slumpwasexpected to be brief, or was short, andconfidencein the futurewas not determined, the effect of such a crisis could be dramatic. Thus automobile production in the U.S.A. halved between 1929 and 1931 or, at a much lower level, the pro

duction of poor people's gramophone records ("race"records andjazzrecords addressedto a black public) virtually ceased forawhile. Inshort, [according to W. W Rostow] "unlike railroads or more efficient ships or the introduction of steel and machine tools —which cut costs — the new products and way of life required highand expanding levelsof income and a high degreeof confidenceabout the future, to be rapidly diffused." Butthat is exactly what was collapsing.

The worstcyclical slump sooneror laterconies to an end, and after 1932 there wereincreasingly clear signs that the worst was over. Indeed, some economies roared ahead.Japan and. on a more modest scale, Sweden, reached almost twice the pre-slump levelof production by the endof the 1930s, and by 1938 the German (though not the Italian) economy was 25 percent above 1929. Even sluggish economies like the Britishshowed plenty of signs of dynamism. Yet somehow the expected upsurge did not return. The world remained in depression. This wasmost visible in the greatest of all theeconomies, the U.S.A., for the various experiments in stimulating the economy undertaken under President F D. Roosevelt's "New Deal" — sometimes inconsistently — didnot really live up to their economic promise. A strong upsurge was followed, in1937-38, by another economic crash, though on a rather more modest scale than after1929. The leading sector of American industry, automobile production, never regainedits 1929 peak. In 1938 it was little more than it had been in 1920. Looking back fromthe 1990s we are struck by the pessimism of intelligent commentators. Able and brilliant economists saw the future of capitalism, left to itself, as one of stagnation. . . .

Ill

The Great Slump confirmed intellectuals, activists and ordinary citizens in the beliefthatsomething was fundamentally wrong with theworld they lived in.Who knew whatcould be done about it? Certainly few of those in authority over their countries, andcertainly not those whotriedtosteer a course by the traditional navigational instrumentsof secular liberalism or traditional faith, and by the charts of the nineteenth century seaswhich were plainly no longer to be trusted. How much confidence dideconomists deserve, however brilliant, who demonstrated, with great lucidity, that the Slump in whicheven they lived, could not happen in a properly conducted free-market society, since(according to an economic law named after an early nineteenth century Frenchman[Jean-Baptiste Say]) no overproduction was possible which did not very soon correctitself"? . . . Economists who simply advised leaving the economy alone, governmentswhose first instincts, apart from protecting the goldstandard bydeflationary policies, wasto stick to financial orthodoxy, balance budgets and cut costs, were visibly not makingthe situationbetter. Indeed, asthe depression continued, it was argued with considerable


force not least by J. M. Keynes who consequently became the most influential economist of the next forty years —that they were making the depression worse. . . .

It is therefore not surprising that the effects of the Great Slump on both politics andpublic thinking were dramatic and immediate. Unlucky the government which happened to be in office during the cataclysm, whether it was on the right, like HerbertHoovers presidency in the U.S.A. (1928-33), or on the left, like Britain's and Australia'slabor governments. The change was notalways as immediate as in Latin America, wheretwelve countries changed government orregime in 1930-31, ten of them by militarycoup. Nevertheless, by the middle 1930s there were few states whose politics had notchanged very substantially from what they had been before the Crash.

Probably nothing demonstrates both the globality of the Great Slump and the profundity- of its impact more than . . . the virtually universal political upheavals it produced within aperiod measured in months orsingle years, from Japan to Ireland, fromSweden to New Zealand, from Argentina to Egypt. Yet the depth of its impact is notto be judged only, or even mainly, by its short-term political effects, dramatic thoughthese often were. It was acatastrophe which destroyed all hope of restoring the economy, and the society, of the long nineteenth century. The period 1929-33 was acanyonwhich henceforth made a return to 1913 not merely impossible, but unthinkable. Old-fashioned liberalism was dead or seemed doomed. Three options now competed forintellectual-political hegemony. Marxist communism was one. After all, Marx's ownpredictions seemed to be coming true[,] . . . and. even more impressively, the US.S.R.appeared to be immune to the catastrophe. Acapitalism shorn ofits belief in the opti-mality offree markets and reformed by asort of unofficial marriage orpermanent liaison with the moderate social-democracy of non-communist labor movements was thesecond, and, after the Second World War, proved to be the most effective. However, inthe short run it was not so much a conscious program or policy alternative as a sensethat once the Slump was over, such athing must never be allowed to happen again and,in the best of cases, a readiness to experiment stimulated by the evident failure ofclassical free-market liberalism An alternative theory to the bankrupt free marketeconomics was only in the process of elaboration. J. M. Keynes' General Theory ofEmployment, Interest and Money, the most influential contribution to it, was not published until 1936. An alternative government practice, the macro-economic steeringand management of the economy based on national income accounting did not develop until the Second World War and after, though, perhaps with an eye on theU.S.S.R., governments and other public entities in the 1930s increasingly took to seeing the national economy as a whole and estimating the size of its total product orincome.

The third option was fascism, which the Slump transformed into aworld movement,and, more to the point, a world danger. Fascism in its German version (NationalSocialism) benefited both from the German intellectual tradition which . . . had beenhostile to the neoclassical theories of economic liberalism thathadbecome the international orthodoxy since the 1880s, and from aruthless government determined to get ridofunemployment at all costs. It dealt with the Great Slump, itmust be said, rapidly and


more successfully than any other (the record of Italian fascism was less impressive)But as the tide of fascism rose with the Great Slump, it became increasingly clear that inthe Age of Catastrophe not only peace, social stability and the economy, but also thepolitical institutions and intellectual values ofnineteenth century liberal bourgeois society,were in retreat or collapse. . . .

QUESTIONS TO CONSIDER

1. Analyze the international causes of the Great Depression. How did the peace settlement following World War I contribute to Europe's economic woes? What waswrong with agricultural production and prices after tlie war? What trends damagedthe world economy in the 1920s? How did nationalistic economic policies, such ashigh tariffs and currency deflation, contribute to the problem?

2. According to Hobsbawm, what role did the United States play in causing, or at leastnot preventing, the Great Depression? How did American "hard times" affect othercountries? Why was the United States, the world's wealthiest nation, among thosehardest hit by the Depression?

3. Hobsbawm says that the Great Depression "destroyed economic liberalism for half acentury." In what sense did the Depression cause acrisis for the conventional wisdom ofclassical (liberal) economics? Which national economic policies helped thepublic to weather the crisis, and which failed? Why? How did the experience of theDepression change governments' economic role after World War II?

4. Discuss the impact that the "Great Slump" had on different peoples. Why were somenations less affected by it than others? Which occupational groups suffered the most?Which groups prospered? Which remained the same?

5. Analyze today's debates in the United States over the government's role and its economic policies. In what ways have attitudes toward unemployment and government'sresponsibility for the economy changed since the 1930s? How have they remainedthe same? Ifanother severe depression were to occur today, would its economic andpsychological impact be as devastating as in the 1930s? Do you think that Americanpolitics would shift to the left or the right? Why?

Roosevelt and Hitler: New Deal and

Nazi Reactions to the Depression

John A. Garraty

It is not surprising that people adrift inpoverty, resentment, and despair would turn to confident and charismatic political leaders during the Great Depression. Two such men wereFranklin Roosevelt and Adolf Flitlei; whose personalities and programs are compared by

John Garraty in this selection. Both leaders came to power at almost precisely the same time,following inept and unpopular predecessors. Neither had a consistent economic program toend the crisis, Garraty shows. Their improvised policymaking reflected their ignorance abouteconomics as well as their political pragmatism whenfaced with pressures from various interest groups. But both Roosevelt and Flitter symbolized "energy and commitment," andthey were willing to experiment with government initiatives on an unprecedented scale inorder to bring economic recovery.

Putting aside obvious differences between the American political system and Hitler'sThird Reich, Garraty finds that New Deal and Nazi economic policies were remarkablysimilar. From government work programs and youth camps to farm subsidies and rural resettlement, both combined deficit spending on modern improvements with an old-fashionedidealization of rural life. Both leaders began by advocating a form of "corporatism," orgovernment-supervised cooperation between business and labor. By the mid- 1930s this relationship had broken down and was replaced by anti-business rhetoric and new programspromising economic and social security for the nation's workers. In the end, Garraty says,neither Roosevelt nor Hitler solved the riddle of the Great Depression, although Flitter wasmore successful at restoring full employment. Yet the sense ofaction, confidence, and purposeboth men brought to their roles — highlighted by their skillful propaganda — kept themasses on their side and helped to carry the common people through the crisis.

Comparing the most revered American president of the twentieth century with its mostevil dictator should raise some eyebrows; emphasizing similarities between them may wellcause outrage. Garraty intends his comparison to be provocative, and hecertainly succeeds.Do his parallels cynically equate democracy and dictatorship by suggesting that their resultswere essentially the same? Was Roosevelt's desire to preserve the American way of lifethe equivalent ofHitler's dreams ofworld conquest, or do policymakers' motives not matter?

275


Is Garraty suggesting that the New Deal was aform offascism or that Nazism had apositive side? Can Hitler's economic policies be separated from his destruction ofdemocratic institutions or his extermination of German Jews? (Between 1933 and 1938, the Nazisboycotted Jewish businesses, established anti-Jewish quotas in professions and schools,forbade intermarriage between Jews and Gentiles, and built the first concentration camps,although Hitler's order to exterminate theJews was not given until 1941.)

However you answer these questions, it is hard to deny that Garraty's comparison uncovers striking similarities between the two nations' anti-Depression policies. What does itmean that industrial nations ofvarious ideological stripes, from democracies to dictatorships,adopted similar strategies during the Depression? Do economic laws limit modern policymakers to only a few options, or is a failure of imagination responsible? Do depressionsalways lead to more authoritarian governments? Can economic prosperity be maintainedwithout military buildups and war? Garraty's essay is rooted in the context ofthe 1930s,but it poses by implication questions that are crucialfor thefuture as well as the past.

GLOSSARY

AGRICULTURAL ADJUSTMENT ACT (AAA; 1933) Part of President Roosevelt'sNew Deal program, a law seeking to eliminate surplus farm production and maintaincrop prices. Farmers were paid to reduce crops or acreage voluntarily, the money coming from a tax on food processors. Key features of the AAA were declared unconstitutional by the Supreme Court in 1936.

BRUNING, HEINRICH (1885-1970) The leader of Germany's Catholic CenterParty who was appointed chancellor in 1930 and governed for two years without aparliamentary majority. Briining's deflationary economic policies did not mitigate theDepression and made him unpopular. When President Hindenburg was reelected in1932, he replaced Bnining with the ineffective Franz von Papen, who helped to negotiate Hitler's appointment in 1933.

CARTELS Organizations of producers who act in concert to fix prices, limitsupply,or divide markets. Cartels seek to maximize profits by preventing competition amongmembers, eliminating external competitors, and limiting production in times of over-supply.

CORPORATISM An economic philosophy stipulating that government-supervisedassociations of employers and employees administer various sectors of the nationaleconomy. Corporatism was adopted in modified form by fascist regimes in Europe during the Great Depression.

DEUTSCHE ARBEITSFRONT (GERMAN LABOR FRONT) A Nazi organization unitingemployers and employees and claiming to represent all working Germans.Formed in 1933 after the government abolished trade unions, the front was primarily apropaganda instrument to integrate the German working class into the Nazi regime.

ERBHOF A German landedestateof a specified size that could not be sold or mortgaged, but had to be bequeathed to particular heirs.

FAIR LABOR STANDARDS ACT (1938) A New Deal law that established a minimum wage of twenty-five cents an hour and a maximum work week of forty-fourhours and forbade labor by children under sixteen. These provisions applied only to

16 ROOSEVELT AND HITLER 277

workers engaged directly or indirectly in interstatecommerce, and they exempted farmlaborers and domestic servants. This was the first federal wages and hours law applyingto nongovernment workers.

FARM SECURITY ADMINISTRATION (FSA) A New Deal agency, establishedin 1937, that offered loans to farm tenantsand laborers, regulated the wages and hoursof migrant workers, and built model migrant camps and health clinics. Its HistoricalSection hired photographers such as Dorothea Lange and Walker Evans to documentand publicize the plight of small farmers.

FASCISM A political philosophy that glorifies the nation over the individual and encourages "benevolent" dictatorship. Its elements often include opposition to democraticand socialist movements, racist ideologies, aggressive military policy, and faith in an authoritarian leader who issaid to embody the nation's ideals. The term was first used bythe party of Benito Mussolini in Italy, and it also applied to right-wing movements suchas National Socialism (Nazism) in Germany and the regime of Generalissimo FranciscoFranco in Spain (1939-1975).

HITLER, ADOLF (1889-1945) The leader of the National Socialist movement whobecame dictator of Germany. Born in Austria, Hitler won the Iron Cross for service inthe Bavarian army during World Wir I. He was enraged by the Treaty of Versailles andblamed Germany's defeaton Jews and communists. In 1920 Hitler helped to found theNational Socialist Party, and he was arrested after the "beer hall putsch," the Nazis'failed attempt to seize the Bavarian government in 1923. In prison Hitler wrote MeinKampf (My Struggle), which publicized his ideas of racial purity, his amoral worship ofpower, and his vision of German domination of the world. The Great Depressionbrought Hitler mass support. President Hindenburg named him chancellor in 1933, andthe Reichstag (the German parliament) gave him dictatorial powers. After 1933 Hitleras "Fuhrer" (leader) consolidated his political control, persecuted German Jews andothers, and began building the economic and military machine that in 1939 wouldinvade Poland to begin World War II.

KEYNES, JOHN MAYNARD (1883-1946) An English economist whose theoriesdeparted from classical laissez-faire doctrines by advocating government intervention inthe market. Keynes argued that during depressions, government spending and easiermonetary policies would raise the employment level and stimulate business recovery.His theories influenced Western governments during the Great Depression and especially after World War II.

KRAFT DURCH FREUDE (STRENGTH THROUGH JOY, KDF) Founded in1933 as the recreational organization of the German Labor Front. The KdF helpedfinance workers' vacations and provided other cultural benefits.

MUSSOLINI, BENITO (1883-1945) The leader of the Fascist movement who became dictator of Italy. Mussolini broke with the Socialist Party during World WarI andbecame an aggressive nationalist. In the troubled postwar period, his Fascist Partypreached forcible restoration of order and opposition to leftists. Once named premier in1923, Mussolini transformed the government into a dictatorship. During the 1930s, heinvaded Ethiopia and Albania and formed an alliance with Hitler, which eventuallvtook Italy into World War II.

ROOSEVELT, FRANKLIN DELANO (1882-1945) President of the United Statesduring most of the Depression and WorldWar II. Born into a wealthy New York family, Roosevelt became a Progressive Democrat who campaigned for Wilson, served asassistant secretary of the Navy, and ran as vice president when the Democrats lost to


Warren Harding in 1920. The next year he was stricken with polio and regained onlypartial use of his legs, but his energy was undiminished. In 1928 he was elected governor of New York, where he signedinto lawold agepensions, publicworksprojects, andunemployment insurance. In 1932, in the depths of the Great Depression, Americanvoters chose him over President Herbert Hoover. Within months, Roosevelt rushedthrough Congress a series of reform measures and new programs aimed at reviving theeconomy, which eventually became known as the New Deal.

TENNESSEE VALLEY AUTHORITY (TVA) A government-owned corporationestablished by New Deal legislation in 1933 that built dams and powerplants alongtheTennessee River and provided electricity to nearby farms and villages. A celebrated example of government planning, the TVA coordinated regional development and undertook improvements in health and education as well as land use.

WAGNER LABOR RELATIONS ACT (1935) A New 1)eal law that createda federal agency to supervise workers' elections and certify the winning union as a collectivebargaining agent. Important sections of the law upheld employees' right tojoin a labororganization and to bargain collectively, and defined unfair labor practices that thecourts could order stopped. This was the most important law putting the federal government's support behind labor unions.

WORKS PROGRESS ADMINISTRATION (WPA) A New Deal program thatfunded extensive building andimprovement projects to provide work for theunemployed.The WPA (1935-1943) constructed overone hundred thousand buildings, seventy-eightthousand bridges, and six hundred and fifty thousand miles of roads, and also providedwork for actors, writers, and artists.

-k "& ~k k -k ~k ik

In early 1933, the GreatDepression was at its low point, and the worst-hit countrieswere Germany and the United States. In both nations, industrial production hadplumbed the depths. Unemployment was in the area of 25 percent of the work

force, somewherebetween 13and 16 million in America,6 millionor more in Germany.Both countries had experienced periods of poor or at best, uninspired, leadership.Herbert Hoover lacked both political skill and popularappeal. One biographermentionshis "inability to master the political techniques of leadership," and the NewYork Timescolumnist Arthur Krock, who admired Hoover and shared hispolitical philosophy,spokeof his "awkwardness of manner and speech and lackof mass magnetism."

Like Hoover, the German chancellors in 1932 proved incapable of dealing with thedeepening depression. Heinrich Briining was too rigid to be a good politician and tooreserved to win the affection of the public. . . .

Briining's successor, Franz von Papen, was a political lightweight. When a friend saidto General Kurt von Schleicher, who had recommended Papen to President Hindenburg,

Excerpts from "Roosevelt and Hitler: New Deal and Nazi Reactions tothe Depression"' in The Great Dcpressiou,copvnyht © byJohn Garraty, reprinted by permission of Harcourt. Inc.


that "Papen did not have much of a head." Schleicher replied with a smile, "He neednot have, but he'll make a fine hat!" ... As for Schleicher, who replaced Papen inDecember 1932, he was primarily a behind-the-scenes manipulator. He soon resigned.

On January 30, 1933, Adolf Hitler became chancellor, and on March 4, 1933, in the

midst of a financial panic that had caused thousands of banks to close their doors,

Franklin D. Roosevelt took the oath as president of the United States. Thus, barely amonth apart, the two most powerful and effective depression leaders of the westernworld took office. Although it is possible to argue that the long-sought economic upturn had already begun, their rise marked, if it did not cause, the beginning of the endof the Great Depression. Their methods and their personalities had enormous effects,both on their own nations and on the rest of the world.

Although two more different people than Roosevelt and Hitler would be hard toimagine, at the time neither seemed particularly well suited for his position. Roosevelthad been born to wealth and social prominence. He had attended elite privateschools (Groton, Harvard, Columbia Law). His political career, culminating in twoterms as governor of New York, had been successful but not particularly brilliant. Hewas widely regarded as an intellectual lightweight; the political commentator WalterLippmann, in a now-famous phrase, described Roosevelt in 1932 as "a pleasant manwho, without any important qualifications for the office, would very much like to bePresident."

Roosevelt had only the sketchiest understanding of economics, and that outdated, aswitness his referring toJohn Maynard Keynes as "a political economist," a term rarelyused since the nineteenth century. That such a person could be elected president at atime when entrenched wealth was in disrepute and when everyone believed that solving complex economic problems was the nation's top priority is best explained byHoover's inadequacies and the widespread public feeling that no matter what, it wastime for a change in the White House and in Congress.

Hitler was the son of an Austrian customs official of modest means. He had been a

poor student and lazy. He dropped out of school at the age of 14. Later he loungedaround Vienna for five years, pretending to be studyingart but mostly absorbing his ul-tranationalist, anti-Semitic ideas. He spoke a most uncultivated form of German, and of

course with an Austrian accent — not the kind of speech that one would expect to appeal to German voters. After serving in the army in the Great War, Hitler became involved in reactionary political movements. His National Socialist Party was scorned bymost decent Germans in the 1920s, both for its ideology and because of the rowdy,violent behavior of its members.

Yet despite all these apparent disadvantages. Hitler became the leader of a countrywhose citizens were supposed to have an exaggerated respect for hard work, education,high culture, and family lineage, and who had a reputation for orderliness and rigidobedience to the law.

For some reason, Roosevelt and Hitler were especially appealing to their social andeconomic opposites: Roosevelt to industrial workers, farmers, the unemployed, Hitlerto hard-workingshopkeepers and peasants and then (after he achieved power) to industrialists, large landowners, and the military.


These strange contradictionsmay not be significant. Probably any Democrat wouldhave defeated Hoover in 1932, and what Hitler did after he became chancellor was ac

complished without the formal consent (though not necessarily without the approval)of a majority of the German people. Yet the personal impact of Roosevelt and Hitleron the two societies in the depths of the depression was very large.Their policies aside,both exerted enormous psychological influence on the people.

Roosevelt's patrician concern for mass suffering, his charm, his calm confidence, hisgaiety, even his rather cavalier approach to the problems of the day had an immediateeffect on most Americans. Hitler's resentment of the rich and well born, while proba

bly psychotic in origin, appealed powerfully to millions of Germans. His ruthless, terrifying determination, always teetering on the brink of hysteria, combined with theaura of encapsulated remoteness that he projected to paralyze his opponents and turnhis supporters into toadies. He inspired awe among millions of ordinary Germans. Boththe euphoria of the early days of Roosevelt's New Deal and the nationalistic fervor thatswept over Germany in early 1933 made millions almost incapable of organizedthought, let alone of judgment. . . .

The sweeping approval that Roosevelt and Hitler won on first taking office was dueto a spontaneous public reaction based mostly on the hope that things would get better.But not entirely. Both Roosevelt and Hitleremployed the latest technologies to dramatize themselves and to influence public opinion. When the Democratic conventionnominated him in 1932, Roosevelt flew to Chicago in order to make his acceptancespeech on the floor of the convention. Both the flying and the personal appearance before the delegates were unprecedented acts for a presidential nominee. Hitler pioneeredin making whirlwind speaking tours. By using airplanes, he spoke at 21 different citiesin a seven day period, 50 in two weeks on another occasion. Here is how the Germanhistorian Joachim Fest has described the effect: "Hitler descended likea saviour to theseething crowds of despairing people; on one day alone he wouldaddress several hundred thousands, sweeping them into a 'forward-thrusting hysteria,' as he called it himself. The collective feelings, the fascination of the vast mass, of which each individualcould feel himself a part, gave people a sense of powerwhich they had long lacked andwhich found fulfillment in Hitler's rhetoric in this atmosphere of rapturous emotion:extreme self-elevation was brought about by extreme self-surrender."

Roosevelt and Hitler were masters at speaking on radio, a skill that was still quite undeveloped by politicians in the early 1930s. Roosevelt specialized in low-key "firesidechats." Hitler in shrill harangues delivered before huge audiences. . . .

The depression-oriented policies of New Deal America and Nazi Germany also displayed many remarkable similarities. Both gave providing aid to the unemployed a toppriority. Building on a program begun by Papen. the Nazis offered subsidies and tax rebates to private companies that hired new workers. They granted marriage loans to persuade women to leave the work force and to encourage consumer spending, and theylaunched a huge public worksprogram that included numerous railroad and navigationprojects, the building and repair of private homes, the construction of public buildings,and the Motorisierung [motorization] program that involved the design and construction


of the autobahn [superhighway] network. Soon wits in Germany were saying thatHitler was going to put the unemployed to work painting the Black Forest white andlaying linoleum on the Polish Corridor.

American work creation programs were relatively smaller — at no time were morethan one-third of the unemployed enrolled. The programs were nonetheless impressive.Besides swiftly appropriating federal funds for direct relief for the jobless, in 1933Congress set up a $3.3 billion program under which more than 4 million people wereput to work. Somewhat later came the Works Progress Administration (WPA) and the

Public Works Administration (PWA), which employed more millions building roads,

schools, bridges, and similar public structures. . . .... It is fashionable, and also accurate, to note the military aspect of Nazi public

works policies, although in tact, the Nazis spent relatively little on arms before 1935. Itis less fashionable, but equally correct, to point out that in the United States, PWAmoney — more than SS24 million of it — went into armaments. The aircraft carriers

Yorktoum and Enterprise, four cruisers, many lesser warships, as wellas more than a hundred army airplanes and about 50 military airports were built with these funds.

Another way that both regimes dealt with the jobless was by opening work camps:

one of Roosevelt's firstactions in March 1933was to propose the creation of the CivilianConservation Corps [CCC]. Unlike the German and American public works projects,these camps did not employ many idle industrial workers. They were not expected tohave much stimulating effect on private business. Both used enrollees for forestry andsimilar projects to improve the countryside, and both were intended primarily to keepyoung men out of the overcrowded labor market. Roosevelt described work camps asa means of getting youth "off the city street corners." Hitler said they would keepyoung men from "rotting helplessly in the streets." In both countries, much was madeof the beneficial social results of mixing thousands of young people from differentwalks of life in the camps, and of the generally enthusiastic response of youth to thecamp experience.

Furthermore, both wereorganized on semimilitary lines, with the subsidiary purposesof improving the physical fitnessof potential soldiers and stimulating public commitmentto national service in the emergency. . . .

Army authorities soon concluded that six months in the CCC was worth a year'sconventional military training, and the secretary of war, George Dern, said that runningthe camps had given the army the best practical experience in handling men that it hadever had. . . .

New Deal and Nazi attempts to stimulate industrial recovery also resembled eachother. Despite the "Socialist" in National Socialist and the charge of American moss-backs |ultraconservatives| that Roosevelt was a "traitor to his class," neither administrationsought to destroythe capitalistsystem.In both cases, there wasat the start much jockeyingfor positions of influence between small producers and large, between manufacturers andmerchants, between inflationists and deflationists, between planners, freeenterprisers, andadvocates of regulated competition.

In Germany the great financiersand the heads of cartels, most of them determinedlyantidemocratic, demanded an authoritarian solution that would eliminate the influence


of organized labor and increase their own control over the economy. Small operators,shopkeepers, and craftsmen wanted to reduce the power of bankers and to destroy notonly the unions but the industrial monopolies and the chain stores.The tycoons soughtto manipulate the Nazis, the others comprised the Nazis' most enthusiastic supporters,but Hitler and the party responded to pressure from both camps.

In the United States, most big-business interests had no open quarrel with the existing order. But because of the depression, by 1933 many were calling for suspension ofthe antitrust laws in order to end competitive price cutting. Other interests wanted tostrengthen the antitrust laws. Still others favored some attempt at national economic-planning. All clamored for the attention of the new administration.

The goals of these groups were contradictory, and neither Roosevelt nor Hitler tried

very hard to resolve the differences. Roosevelt's method was to suggest that the contestants lock themselves in a room until they could work out a compromise. But Hitler,who freely admitted to being an economic naif, was no more forceful. "I had to let theParty experiment," he later recalled in discussing the evolution of his industrial recovery program. "I had to give the people something to do. They all wanted to help. . . .Well, let them have a crack at it."

Out of the resulting confusion came two kinds of that conservative, essentiallyarchaicconcept of social and economic organization called corporatism. . . .

In Germany the concept of government-sponsored cartels that regulated output and

prices had a long tradition. Before 1933, however, the existence of powerful tradeunions precluded the possibility of an effective corporatist organization. Hitler's successchanged that swiftly. The Nazis created a complex system of 13 "estates" governing allbranches of industry. These estates were, in effect, compulsory cartels. Each was subdivided into regional organizations, and at least in theory, the whole system was controlledby the Nazi minister of economics.

In America the process did not go nearly so far. But the system of self-governing industrial codes established under the National Recovery Administration (NRA) was in

the same pattern. No less an authority on corporatism than Benito Mussolini saw therelationship. "Your new plan for coordination of industry follows precisely the lines of

our cooperation," he told an American reporter in June 1933, though elsewhere hepointed out that Roosevelt had refused to go to the root of the problem by setting uplabor-management associations and labor courts and by outlawing strikes. . . .

Under the law, the code system was voluntary. Each industry was supposed to draftits own code, tailored to its particular needs. But when the codification progress bogged

down, a generalized "blanket" code called "the President's Re-employment Agreement" was drafted. The blanket code exempted arrangements made by previously competing companies from the antitrust laws so that they could fix prices and limit output.It also provided for minimum wages and maximum hours of labor, and it supposedlyguaranteed workers the right to form unions and bargain collectively.

Production controls to prevent gluts, limitation of entry of new companies to lessencompetition, and price and wage manipulation were characteristics of industrial policyin both countries. So were the two governments' justifications of drastic and possiblyillegal or unconstitutional changes in the way the economy functioned on the ground


that a "national emergency" existed, and so were the enormous propaganda campaignsthey mounted to win public support.

Duringthe early stages, big-business interests dominated the new organizations andsucceeded in imposing their views on government. In Germany the radical Nazi artisansocialists who wanted to smash the cartels and nationalize the banks, led by GregorStrasser and Gottfried Feder, lost out to the bankers and industrialists, represented bythe financier Hjalmar Schacht. In the United States, victory went to the large corporations in each industry, which dominated the NRA code authorities. . . .

But bewildering crosscurrents of interest and persistent factional rivalries hamperedthe functioning of corporatist organizations. In theory the system promised harmonyand efficiency within industries. In practice itseldom provided either. Itdid not even pretend to solve interindustry problems, yet these were often more disturbing to government authorities. Under corporatism workers were supposed to share fairly in decisionmaking and in profits resulting from the elimination of competition. In both countries,industrialists resisted allowing them todoso, with the consequence that thegovernmentsfound themselves under pressure toenforce compliance. In America workers were apotent political force and vital to the New Deal coalition. German workers did not count

as voters after 1933, but their cooperation andsupport remained essential to Nazi ambitions. Small businessmen also maintained a drumfire of complaint, and New Dealers andNazis were sensitiveto their pressure too. . . .

To the Nazis, corporatism seemed at first compatible with the political process calledGleichschahung, or coordination. This was a process by which nearly every aspect of lifewas brought under the control of Hitler and the party. It quickly became apparent,however, that the autonomous character of any corporatist organization made precisecontrol from above difficult. America, fortunately, was never gleichgeschaltei. But in anycase, by 1935 and 1936, the Roosevelt and Hitler governments were abandoningcorporatism and taking a more anti-big-business stance.

In America, after the Supreme Court declared NRA unconstitutional [in 1935], thismeant the passage of the Wagner Labor Relations Act, a far more effective guarantee ofthe right of workers to unionize and bargain with their employees ingood faith. Agovernment board was created to supervise elections and empowered to issue cease-and-desist orders when employers engaged in unfair labor practices. The Public Utility Holding Company Act made thepyramiding of control of gas and electric corporations illegaland gave the government power to regulate utility rates. In addition, the Social SecurityActof 1935, which provided forboth oldage andunemployment insurance, was financedin partbya tax paid by employers, and other taxes paid by corporations were raised.

In Germany, although the cartel structure was retained, the Nazis limited the size of

corporate dividends. The government constructed and operated steel, automobile, andcertain other facilities in competition with private enterprise and imposed higher taxeson private incomes and corporate profits. As in the United States, but to a muchgreaterdegree, freedom of managerial decision making was curtailed.

After 1935 the increasing emphasis of the Nazis on preparing for war had much todo with the new restrictions on private business interests. They placed strictcontrols onimports in order to conserve the foreign exchange needed to buy raw materials used in


the manufacture of munitions andother military necessities. These controls put nearlyall industries at the mercy of the regime, whether theywere making military or civiliangoods. Underthe Four-Year Plan of 1936, Hitlermade AirMarshall Hermann Goringa kind of economic czar. The government undertook the manufacture of synthetic oiland rubber as well as steel and motor vehicles. Some businessmen earned profits fromthis activity, but their influence shrank, and their freedom of action disappeared. . . .

This kind of ruthless subordination of economic interests did not occur in the

United States. Nevertheless, when military considerations began to dominate Americanpolicy after 1939, Roosevelt was also prepared to substitute guns for butter. One needonly mention his famous announcement that he was replacing "Dr. New Deal" with"Dr. Win the War" as his prime consultant. . . .

New Deal and Nazi labor policies were also shaped by the Great Depression in relatedways. On the surface, this statement may seem not merely wrong but perverse, but onlyif one identifies labor with unions. Hitler destroyed the German unions and forced allworkers into the Deutsche Arbeitsfwnt (German Labor Front) controlled by the ReichTrustee (another euphemism) forLabor. It isalso true thatRoosevelt, in partunwittingly,and withsome reluctance, enabled American unions to increase their membership andinfluence enormously.

However, New Deal and Nazi policies toward unions had little to do directly withthe depression, and they do not throw much light on national policies toward workers.Hitler would no doubt have destroyed the German unions as autonomous organizationsin any case — he destroyed all autonomous institutions in Germany. But it was becausethey wereanti-Nazi that he smashed the unions so quickly. Roosevelt was at first indifferent to the fate of organized labor. He encouraged the American unions in order togain labors support, not because he thought doing so would speed economic recovery.In each instance the decision was essentially political.

The importantNew Deal laborlegislation, especially the Social Security Actof 1935and the Fair Labor Standards Act of 1940, benefited workers, notmerely those who happened to belong to unions. Although the immediate effects of these laws were not dramatic, in the long run, they had an enormous impact. It is also possible to demonstrateNazi concern for industrial workers. The "battle against unemployment" had first priority in Germany in 1933. and it was won remarkably swifdy. By 1936 somethingapproaching full employment existed. Soon thereafter an acute shortage of labordeveloped. Of course the militarydraft siphoned thousands of men out of the German labormarket. But thiswas also true in the UnitedStates after 1940. Full employment was neverapproached in America until the economy was shifted to all-outwarproduction. . . .

. . . Nazi ideology (and Hitler's prejudices) inclined the regime to favor the ordinary German over any elite group. Workers — as distinct from "Marxist" members ofunions — had an honored place in the system. . . . The Nazis created what were calledCourts of Social Honor. These courts may be compared with the New Deal NationalLabor Relations Board. They did not alter power relationships between capital andlabor theway the National Labor Relations Board did in the United States; they represented the interests of the Nazi partyrather than those of labor. But theydid adjudicate


disputes between workers and bosses, and there isconsiderable evidence that the Courtsof Social Honor tended more often than not to favor workers in these disputes. Fur

thermore, the very existence of the courts put considerable psychological pressure onemployers to treat labor well. . . .

It is beyond argument that the Nazis encouraged working-class social and economicmobility. They eased entry into the skilled trades by reducing the educational requirements for many jobs and by expanding vocational training. They offered large rewardsand further advancement to efficient workers. In the Kraft dutch Freude (KdF) StrengthThrough Joy movement, they provided extensive fringe benefits, such as subsidizedhousing, low-cost excursions, sports programs, and more pleasant factory facilities. Itwas under Hitler that the famous Volkswagen ("the Bug") was developed as part of theMotorisienuig policy. The name of course means "people's automobile." ... In a speechat the Berlin Motor Show in 1934, Hitler promised that besides "giving bread and workto thousands of men," Mototisiemng would "offer ever greater masses of our people theopportunity to acquire this most modern means of transport."

Eventually the Nazi stresson preparation for war meant harder work, a decline in boththe quantity and quality of consumer goods, and the lossof freedom of movement forGerman workers. But because of the need to win and hold the loyalty of labor, the hier

archy imposed these restrictions and hardships only belatedly and with great reluctance.If the question is: "Did the Nazi system give workers more power?" the answer is that itdid not. But that question, albeit important, has little to do with the economic position

of workers or with the effectiveness of the Nazi system in ending the depression.

New Deal and Nazi methods of dealing with the agricultural depression also had

much in common. Both sought to organize commercial agriculture in order to increasefarm income. The New Deal Agricultural Adjustment Act set up supposedly democratic county committees to control production. In Germany the centralized Estatefor Agriculture (RcichiialtcrstaiHi) did the job. The purpose was to raise agriculturalprices and thus farm income through a system of subsidies, paid for in each instanceby processing taxes that fell ultimately on consumers. Both governments also made

agricultural credit cheaper and more readily available, and they protected farmersagainst the loss of their land through foreclosures.

These similarities are not remarkable. . . . Under the impact of the depression, farmers everywhere, large and small alike, were expressing the same resentments and demands and . . . these affected governments in related ways. What is remarkable, giventhe profound differences between American and German agriculture, is the attitude of

the two governments toward the place of farmers in society.Both Roosevelt and Hitler tended to idealize rural life and the virtues of an agricul

tural existence. Each hoped to check the trend of population to the cities and to disperse

urban-centered industries. Roosevelt spoke feelingly of the virtues of close contact withnature and of the "restful privilege of getting away from pavements and from noise."Only in the country, he claimed, did a family have a decent chance "to establish a real

home in the traditional American sense." Roosevelt did not deny the attractions of city

life. He reasoned that electricity, the automobile, and other modern conveniences madeit possible for rural people to enjoy these attractions without abandoning their farms. . . .


Because they were property owners, had large families, and were, in general, goodNazis, Hitler called the German peasants "the foundation and life source" of the state,"the counterbalance to communist madness," and "the source of national fertility." Thesuperiority of rural over urban life was a Nazi dogma — especially the life of the self-sufficient small farmer, free from the dependency and corruption of a market economy."The fact that a people is in a position to nourish itself from its own land and throughthat to lead its own life independent ot~ foreign nations has always in history been significant," a Nazi agricultural expert wrote in 1935. To make sure that the peasants remained as they were, a law of 1933 (the Efbhqjgesetz) forbade the sale or mortgaging offarms of a size "necessary to support a family . . . independent of the market and thegeneral economic situation." About a third of the farms in Germany were thus entailed.As the historian J. E. Farquharson notes, this law,along with Nazi agricultural price supports, made the possessor of an Etbhofz member of "a privileged class, sheltered fromall the worst effects of free market forces."

Nazi leaders described Berlin as a den of iniquity and deplored the influx ofGermans from the east into the capital. Nazi housing policy sought to stimulate suburban development in order to bring industrial workers closer to the land and to reduceurban crowding. They placed all construction under government control and madefunds available for low-interest, state-guaranteed mortgage loans.

The New Deal Tennessee Valley Authority and the rural electrification program madeimportant progress toward improving farm life, but efforts to reverse the population trendin the United States yielded limited results. Despite Roosevelt's dreams of decentralizingindustry and relocating millions of city dwellerson farms, during the whole of the NewDeal, his Resettlement Administration placed fewer than 11,000 families on the land.The Resettlement Administration had a Greenbelt Town program for planned suburban

development. It produced minuscule results. . . . |0]nly three of the 60 originallyplanned greenbelt towns were built.

Nazi rural resettlement efforts proved equally disappointing. Between 1933 and1938, the Nazis resettled about 20,000 families, but this was barely more than half the

number that the Weimar government had managed to relocate between 1927and 1932.In both the German and American cases, efforts to check the movement of the people

to the cities foundered on the opposition of real estate and construction interests. Theunwillingness of the politicians to allocate sufficient funds to enable much progress tobe made was another reason for the failure of rural resettlement. . . .

There were significantdifferences between the objectives of American and NationalSocialist agricultural policies: the former, plagued by surpluses, sought to limit output;the latter, seeking to become self-sufficient, sought to increase it. All in all, the NewDeal was the more successful in solving farm problems; far less was accomplished inGermany toward modernizing and mechanizing agriculture during the thirties. On theother hand, Nazi efforts on behalf of farm laborers were more effective than those of

the New Deal. As is well known, the AAA programs actually hurt many American agri

cultural laborers and also tenants and sharecroppers. In both nations, agricultural relief

brought far more benefits to large land owners than to small. . . .


There is still another way in which New Deal and Nazi practices were similar, anddifferent in degree from those of other industrial nations. This was in the way the twogovernments tried to influence public opinion. The Nazi use of parades, banners, rallies, and of every instrument of propaganda are well known. During the New Deal, theAmerican government never went so far, but it did make efforts to sell its policies to thepublic that were unprecedented in peacetime. The NRA slogan "We Do Our Part"served the same function as the Nazis' incessantly repeated Gemeinnutegeht wtEigennutz(the public interest before the individual's interest). With Roosevelt's approval. GeneralHugh Johnson, head of NRA and designer of its Blue Eagle symbol, organized a massive campaign to muster support for the NRA. Like the Nazi swastika in the Reich, theBlue Eagle was plastered everywhere — on billboards, in shop windows, even on cansof beans and applesauce.Johnson's office blanketed the land with posters, lapel buttons,and stickers. ...

This was the positive side of the NRA campaign. There was also a negative side.

"Those who are not with us are against us,"Johnson orated. "The way to show that youare part of this great army of the New Deal is to insist on this symbol of solidarity." Hedenounced opponents of NRA as "chiselers" and "slackers," thereby suggesting thatdisagreement was equivalent to criminality and cowardice. President Roosevelt himself,in a fireside chat, compared the Blue Eagle to a "bright badge" worn by soldiers innight attacks to help separate friend from foe.

Placed beside the overpowering Nazi displays at Nuremburg, even the ten-hour,250,000-person NRA parade up Fifth Avenue in September 1933 would not appear especially impressive. But it and other NRA hoopla were designed to serve the samefunctions: rousing patriotic feelings and creating in the public mind the impression ofsupport for government policies so extensive as to make disagreement appear unpatriotic. AsJohnson himself explained, the purpose was to "put the enforcement of this lawinto the hands of the whole people."

Another example of New Deal propaganda is provided by the efforts of the Resettlement Administration and the Farm Security Administration. Pare Lorenz's documentary films. The PlowThat Broke the Plains (1936) and The River (1938), and the still

photographs of sharecroppers taken by Dorothea Lange, Walker Evans, MargaretBourke-White, Gordon Parks, and others were aesthetic achievements of the highestorder. They were also a form of official advertising designed to explain and defend theNew Deal approach to rural social and economic problems. They differed from Leni

Riefenstahl's Triumph of the Will (also a cinematic masterpiece) and the annual volumesof photographs celebrating National Socialism chiefly in style — "soft" rather than"hard" sell — and point of view.

New Deal efforts at masspersuasion reflect the attitude of Roosevelt's government —an attitude shared by Hitler's government — that the economic crisisjustified the castingaside of precedent, the nationalistic mobilization of society, and the removal of traditional restraints on the functions of the state, as in war. The two regimes also agreed that

the crisis called for personal leadership more forceful than that needed in normaltimes. That all these attitudes were typical of Hitler goes without saying, but Roosevelt


held them too. When we think of Roosevelt's first inaugural nowadays, we tend to remember his fatherly reassurance, "the only thing we have to fear is fear itself." But healso said:

Our true destiny is not to be ministered unto but to minister to ourselves. ... I assume un

hesitatingly the leadership of thisgreatarmyof our people. ... In the eventthat the Congressshall fail ... I shall ask the Congress for the one remaining instrument to meet the crisis—

broad Executive power to wage a war against the emergency, as great as the power that would

be given to me if we were in fact invaded by a foreign foe.

This last sentence evoked the loudest cheering that Roosevelt's speech produced.Eleanor Roosevelt found the response "a little terrifying." Commenting on it later, shesaid. "You felt that they would do anything — if only someone would tell them what to do."

Roosevelt was neither a totalitarian nor a dictator, real or potential, but his tactics

and his rhetoric made it possible for anti-New Dealers and outright fascists to claim thathe was both. Many of the accusations of both conservatives and communists in the

United States were politically motivated, as were, of course, Nazi comments on thepresident. But during the first years of the New Deal German newspapers praised himand the New Deal to the skies. Before Hitler came to power, he was contemptuous ofthe United States, which he considered an overly materialistic nation dominated by-

Jews, "millionaires, beauty queens, stupid [phonograph] records, and Hollywood."

Nevertheless, Hitler and the Nazi party hierarchy were impressed by Roosevelt's success during the Hundred Days in dominating Congress and pushing through the New

Deal depression policies so swiftly. "Mr. Roosevelt. . . marches straight toward his objective over Congress, over lobbies, over stubborn bureaucracies," Hitler told AnneO'Hare McCormick of the New York Times in July 1933. The Volkischer Beohachter[People's Observer, the official Nazi newspaper] announced smugly that Roosevelt's lead

ership proved that representative government, which the paper described as "government without a head." had "outlived its usefulness generally, not only in Germany." By

July 1934, that newspaper was describing Roosevelt as "absolute lord and master" of thenation, his position "not entirely dissimilar" to a dictator's. Roosevelt's collected

speeches, Looking Forward (1933) and On OttrWay (1934) were translated into German

and enthusiastically reviewed, the critics being quick to draw attention to parallels inNew Deal and National Socialist experiences. . . .

At the end of Roosevelt's first year in office, Hitler sent him a private messagethrough diplomatic channels offering sincere congratulations for "his heroic efforts in

the interests of the American people. The President's successful battle against economicdistress is being followed by the entire German people with interest and admiration,"

Hitler claimed. . . .

This friendly attitude ended in 1936, although even after Roosevelt made his famousspeech denouncing the dictators and calling for a "quarantine" of Germany and Italy,the Nazi propaganda machine refrained for tactical reasons from attacking him personally. It is clear, however, that New Deal depression policies seemed to the Nazis essen

tially like their own and the role of Roosevelt not very different from the Fiihrer's.


So far as the Great Depression is concerned, Roosevelt and Hitler, the one essentiallybenign, the other malevolent, justified far-reaching constitutional changes as being necessary for the improvement of economic conditions in a grave emergency. But theyused change also as a device for mobilizing the psychic energies of the people. Boththeir administrations were plagued by infighting and confusion, partly because of genuine conflicts of interest and philosophy within the two diverse societiesand partly because of ignorance. No one really knew how to end the depression or even how best toserve the different interests that the governments presumed to represent. Time aftertime, major American and German policies produced results neither anticipated nordesired. Some of them were directly contrary to the leaders' intentions — the effect of

New Deal farm policy on sharecroppers and of its public housing policy on racialsegregation, and that of Nazi rearmament on urban concentration, for example.

Hitler papered over confusion, doubts, and rivalries with the Fiihrcrpriiizip, command from above, unquestioning obedience to one's leader, who was presumed toknow what was best. Roosevelt, on the other hand, made a virtue of flexibility andexperimentation. Both, however, masterfully disguised the inadequacies and internal

disagreements in their entourages and to a remarkable extent succeeded in convincingordinary citizens of their own personal wisdom and dedication.

The differences in the degree and intensity with which psychological pressures were

applied by Nazis and New Dealers were so great as to become differences in kind.Nevertheless, the two movements reacted to the depression in similar ways, distinct fromthose of other industrial nations. Of the two, the Nazis were the more successful in cur

ing the economic illsof the 1930s.They reduced unemployment and stimulated industrial

production faster than the Americans did. Considering their resources, they handled theirmonetary and trade problems more successfully, certainly more imaginatively. By 1936 thedepression was substantially over in Germany but far from finished in the United States.

This was partly because the Nazis employed deficit financing on a larger scale.Between 1933 and 1939 the German national debt nearly quadrupled, the American

rose by less than 50 percent. It was also partly because the Nazi totalitarian system better lent itself to the mobilization of society, both by force and by persuasion. There wasno German parallel to the combination of timorousness and stubborn resistance tochange characteristic of American business interests. Unlike the New Dealers, the

economist H. W. Arndt wrote while Hitler was still in power,

the Nazi Government . . . was not hampered in its expansionist policy by "low business

confidence." . . . German businesswhich, rightly or wrongly, had thought itself threatened by

imminent social revolution, breathed again under a government which . . . appeared as the

saviour and benefactor of private property. . . . During the later years of the Nazi regime

when profit expectationsof a good many business men must have been low, State control of

investment insured that private investment absorbed what factors of production and savings

were not required by the demands of the State.

Yet neither regime solved the problem of maintaining prosperity without war. TheGerman leaders wanted war and used the economy to make war possible. One result


was "prosperity": full employment, increased output, hectic economic expansion. TheAmericans lacked this motivation. But when war was forced upon them, they took thesame approach and achieved the same result.

QUESTIONS TO CONSIDER

1. What similarities does Garraty find between Roosevelt's and Hitler's economicstrategies against the Depression? Describe each leader's public works programs,"corporatist" pacts with industry, and farm policies. How did Hitler and Rooseveltdeal with workers and labor unions? Are there important differences in their programs that Garraty minimizes or neglects?

2. How did Roosevelt's and Hitler's personal qualities contribute to their success? Whywere both able to exert tremendous psychological influence on the masses? Whatsimilarities and differences do you see in their personalities, propaganda skill andtechniques, and constituencies?

3. Kate Brown, author of Selection 4, warns that "comparisons . . . can be misleading."Is it misleading to compare Roosevelt and Hitler? Is Garraty suggesting that the NewDeal was a form of fascism? Does Garraty contend that Nazism had positive effectsin Germany? Why do you think he omits Hitler's persecution of the Jews? Can

Hitler's economic policies be separated from his destruction of democracy or his attacks on Jews? What view would Eric Hobsbawm (Selection 15) take of Garraty'sparallels between Roosevelt and Hitler?

4. In what ways, if any, does Garraty s account of Roosevelt and his New Deal help toexplain why the United States had no change of government or drastic social upheaval during the 1930s? Does the evidence support the claim often made thatRoosevelt "saved American capitalism"?

5. On the basis of Garraty's comparison of Roosevelt and Hitler as well as EricHobsbawm's international survey in Selection 15, what generalizations can youmake about the impact of depressions on a nation's political climate? Why do depressions tend to produce authoritarian leaders and expanded national government?How are war and economic depression related to each other?

Documents

The Great Depression - Palomar College articles... · 15 INTO THE ECONOMIC ABYSS 261 Whatever the Great Depression '.< causes, there is no disputing its devastating impact. Be tween