After World War I, America experienced a period of time when the country was riding high. It was called the Roaring Twenties. Prohibition had been enacted, drying up the source of liquor to the general populace. To the rescue came the bootleggers to fill the void. Fast money and fast women were on the rise. Even the stock market expanded its sales by allowing small investors to buy on margin and thus attempt to achieve financial wealth. This period of plenty lasted more than a decade, until October 1928. On that fateful October day, Wall Street experienced a financial disaster.
Investors woke up one morning to find that their financial gains had gone with the wind. This was the cataclysm that sent America into the Great Depression. The President Elect, Herbert Hoover, tried to quell the panic by treating the crash as a market correction. He did not intervene in the process, but as time passed, the situation worsened.
Ordinary Americans found themselves not able to meet the demands of everyday life. They looked to government to supply the answers, causing general unrest in the population, which then selected Franklin D. Roosevelt to replace Hoover in the next Presidential election.
When FDR assumed Presidential power, he knew he had the tiger by the tail and could not let go. A Wall street market correction was not the answer. A change in governmental policy was imminent. To address the nation’s problems on a systemic basis, FDR consulted with leading economists as to the cause of our financial collapse. In addition, he and his advisors had to institute preventive measures to restore the trust of the populace in a system that aspired to restore order in the country.
In FDR’s first few years in office, the country had witnessed massive unemployment. Industrial production had declined by 45%, homebuilding sank by 80%, and more than 1 million families lost their farms. On the corporate front, profits declined by 10%. 11,000 of the country’s 25,000 banks failed, wiping out 9 million savings accounts. At the same time, approximately 2 million people were migrating throughout the country, desperately searching for work on the remaining farms.
In 1933, Roosevelt’s administration initiated The New Deal or NRA, bringing sweeping changes to the workforce as well as banking and financial institutions. Wage and price controls and the FDIC restored the nation’s trust in banking. That trust was bolstered by the installation of the SEC as the governmental watchdog of the banking industry. These were the moves that we needed to re-establish the order and move forward.
The President was a firm believer in the principle that the economy was based upon the spending power of its people. With that in mind, he instituted the WPA to bring “shovel-ready” jobs to the unemployed. These jobs, in turn, supplied consumer money to encourage entrepreneurs and business to expand their horizons.
The NRA that ended in 1939 ushered in:
1. The mandating of maximums on prices and wages, and competitive conditions in all industries
2. Encouragement of unions to raise the wages of working class by 93%
3. A decrease in farm production, thus escalating consumer demand and causing higher prices to make
farming more profitable
In the later years of the Depression (1934 to 1936), the Second New Deal added Social Security. This was a pension fund established by a Federal directive and paid for by the American workforce.
The economy slowly recovered until 1937, when it had a downturn caused by the Federal Reserve tightening the money supply. The Administration’s response was to ignore balancing the budget and launch a $5 billion spending program to increase mass purchasing power in the spring of 1938.
This program came without the consent of the Republican conservatives. Meanwhile, under the direction of Adolph Hitler, Germany decided to expand its borders. This decision on the part of that madman sparked World War II. With the defeat and occupation of France, European Allies looked to America to supply the materials needed to wage war. This need created a job market that spurred on our the suffering economy.
With the Japanese attack on Pearl Harbor, the United States entered World War II. Able bodied men aged 18 to 45 were conscripted into the armed services, leaving women to step in and assume the jobs of the men sent off to war, ’til Johnny came marching home. From 1941 through 1945, America had drafted 17 million men.
During the war years, government invested in cost-plus contracts with employers, to stimulate development of on the job training of unskilled workers. By 1942, the New Deal no longer existed. With the exception of Social Security, which was saved by the conservative Southern Democrats, the NRA laws were repealed.
Today, historians still debate the pros and cons of Franklin Delano Roosevelt’s New Deal. Despite the criticism of socialism, his legacy led America through the Great Depression and World War II, and endeared him to the hearts of most American workers.
During his four elected terms of office, he used the media to talk to the American people in what he called Fireside Chats. His was the calming voice in the depths of the Great Depression. His was the rallying voice when the Japanese attacked Pearl Harbor. And his was the reverent voice when he called our nation to prayer on June 6th 1944 as our sons crossed the English Channel to establish a beachhead on France’s Normandy coast, leading to the liberation of France and the destruction of Hitler’s Europe.
On April 12th 1945, Franklin D. Roosevelt passed away, not knowing that victory was but a few short months off into the future. However, his dream still lingers on, the dream of a vibrant society empowered by the spending power of its people to keep the engines of industry regenerating.
To many of the children that lived through the Great Depression and later fought and won World War II, that era still holds fond memories of peaceful days spent enjoying family and friends. It was a time when a penny purchased two pretzels with mustard from a street vendor. To echo the words of former President George H. Bush, “Life was simpler and kinder then.”
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