Alan Brinkley: The New Deal, Then and Now

Roundup: Historians' Take

[Alan Brinkley is the Twentieth Provost and the Allan Nevins Professor of History at Columbia University in the City of New York.]

Well before Barack Obama’s election, the New Deal was emerging as an instructive model for those trying to understand, and address, what is now known as the “worst financial crisis since the 1930s.” But is the New Deal in fact a useful model for our own troubled times?

In some respects, the New Deal – and in particular its first hundred days – have important lessons for our time, lessons that President Obama seems already to have learned. Franklin Roosevelt’s first and most important contribution to solving the great economic crisis he inherited in 1933 was to exude confidence and optimism and to invite frightened Americans to put their trust in his energy and activism. In his Inaugural Address, Roosevelt promised “action, and action now,” and to a large degree he delivered on that promise. The frenzy of activity and innovation that marked those first months, a welcome contrast to the seeming paralysis of the discredited Hoover regime, helped accomplish the first, and perhaps most important, task he faced: ending the panic that was gripping the nation.

Roosevelt also moved quickly and effectively to address the most dangerous financial crisis of the Great Depression – a wave of bank failures that was threatening shut down the financial system altogether. The banks were in trouble in part because the financial markets were in trouble; the massive stock market collapse that began in October 1929 erased massive amounts of wealth – and because many banks had invested heavily in the markets, and had leant recklessly to speculative investors, the banks found themselves without sufficient capital and in many cases without reserves. The biggest wave of failures occurred in the weeks just preceding Roosevelt’s inauguration....

Economic orthodoxy – which rested on the assumption of scarcity and gave high priority to balanced budgets and fiscal prudence – was a powerful force in the 1930s despite its failures, just as the rollicking and now staggering orthodoxy of free and unregulated markets is today. The great achievements of the New Deal helped pave the way to an understanding of how to address severe deflation, but it never itself came to a point where it could use the tools at its disposal aggressively and effectively enough or quickly enough. As the Obama administration tackles a new financial catastrophe, it makes sense to look at the history of the New Deal – as the President reportedly is doing. There is much to learn from it – not just from its achievements, but also from its failures.
Read entire article at Gilder Lehrman Institute's historynow.org

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