Country Case Studies and Links

United States

by Patricia Dinsmore

A Comparison

During the Great Depression of the 1930's, Americans finally fashioned a series of social reforms that far surpassed the local and regulatory reforms of the progressive era and brought the federal government into a position of policy prominence. Government institutions, the presidency, politics, and the courts were also transformed during this important decade, which changed social welfare policy in the United States forever. Even though these changes were considered ambitious by American standards, the reforms were relatively timid by international and today's standards.

Reforms in the Great Depression can best be understood by analyzing the unfolding of reform in four periods. These four eras have been called the Era of Denial (1929 to March 1933), the Period of Emergency Reforms (March 1933 to January 1935), The Era of Institutionalized Reform (January 1935 to January 1937), and The Era of Policy Stalemate (January 1937 to December 1941).

Already prior to 1929, the progressive reform momentum was shattered when Americans focused on preparations for World War I, the war effort, and postwar economic problems. This period did yield only few reforms such as federal directives requiring recipients of war contracts not to use child labor. In the 1920's, many Americans believed that private enterprise, if left alone by government, would result in unlimited prosperity.

A Second American industrial revolution occurred during the 1920's. Steel, mining, and railroad industries had developed during the first revolution; the second focused on consumer products- such as cars, radios, and refrigerators- and on the electrification of homes and industries. A trickle-down economic philosophy was dominant. Officials believed that economic assistance to affluent persons and industry stimulated investments that could bring jobs to poor and working-class Americans. The low tariffs of the prewar era were supplanted by protective tariffs for American industry; federal taxes had been increased to pay off the nations debt in the wake of World War I, but new tax laws reduced them to one-quarter of their previous level; and many regulations that had been enacted in the progressive era were relaxed, not implemented, or struck down by the courts. Policies that empowered industry and affluent persons were supplemented by vigorous suppression of organized labor. Companies sought to obtain the goodwill of employees by stock sharing-schemes, providing fringe benefits, and starting company unions that gave workers a mechanism for negotiating higher wages and benefits. When unions tried to organize, their leaders were often intimidated or forcible removed from the work place. Strikes were frequently squashed by relying on scabs, local police, the National Guard, and injunctions from courts that were usually favorable to management.

Social reformers were on the defensive in the 1920's; some were stigmatized as radicals, communists, or traitors. African Americans were still living under the oppressive Jim Crow laws in the South, and facing mass unrest and residential segregation in the North as they were trying to find jobs in Northern industries that were now producing consumer goods in the second industrial revolution. The situation for Latinos and Asian Americans was much the same as they too continued to experience rampant prejudice in the West and Southwest. However, women had managed to improve their situation as they experienced new sexual freedoms in the flapper era. However, they too, discovered that their new found voting rights did not lead to major policy reforms that would give them better social and economic status.

Americans were intrigued by social change but were also fearful of new ideas. The profession of social work grew rapidly during the 1920's, with casework emerging as the most important aspect in this. Its practitioners far outnumbered other types of social workers and were often employed in not-for-profit agencies. Frequently, caseworkers were contemptuous of public agencies, which, they believed, should only aid paupers and persons with chronic or severe mental conditions. There were still those who proposed more fundamental reforms, but who remained on the fringes of American society.

After 1929, the country faced massive unemployment, depressed stock prices, lost fortunes, a wave of bankruptcies, and deflated prices. At first, President Herbert Hoover believed, like most Americans, that modest tinkering with the economic system would bring the nation out of its economic crisis. He also felt that private agencies, such as the Red Cross and family service agencies, could address the needs of unemployment and poverty-stricken Americans without governmental assistance. Hoover shared Franklin Pierce's philosophy that welfare issues belonged to local governments and private philanthropy.

Hoover clung doggedly to his views as the nation gradually moved toward more progressive ideas. An inflexible man who was isolated from, and insensitive to, political realities, he resorted to budget balancing and various monetary remedies to complement his woefully inadequate solutions. He bitterly attacked liberals, who, he believed, advocated socialist measures that would compound the nations economic problems.The nation's confidence in business- and in Hoover- began to waiver by 1930. Democrats were as confused by the situation as Hoover. They too tended to favor budget cutting, tax reduction, and trickle-down economics to cope with the Depression.

Franklin D. Roosevelt (FDR) sounded not very different form Hoover at first; he too, advocated a balanced budget and conservative fiscal policies and even derided Hoover for spending too much federal money. Although few believed that Roosevelt favored policies strikingly different from those of Hoover, some who knew him believed that his policies would prove more liberal than his rhetoric.

The third period was that of emergency reforms. When FDR won his decisive victory in November 1932, it was initially unclear what he would do with his mandate. Policy drift was no longer possible, because the banking system threatened to collapse due to insufficient funds to cover withdrawals from panic-stricken depositors. Local governments encountered staggering welfare burdens because 20-60% of Americans were unemployed in many areas. American business was in disarray and many farmers lost their farms when they could not make their mortgage or loan payments. Prices of products decreased as demand from European nations dried up. Consumer demand decreased further when employers reduced their workforce.

Roosevelt faced several difficult choices which would mark the next and the fourth periods. He had to decide whether to focus on the victims of economic distress or to seek a range of reforms to improve the economic system. When addressing the problems of destitute persons, he had to decide what combination of funds, goods, and jobs to provide. He had to decide whether to define the situation as an emergency or as a set of conditions that required permanent programs. He also had to decide whether to give the federal government major policy roles or to provide funds to state and local governments so that they could address social and economic problems within their boundaries. Some forces pushed Roosevelt and his advisors towards limited, localistic, and temporary reforms, but other pressures prompted him to consider ongoing federal programs. The actual reforms that were enacted in 1933 and 1934 can be understood only in the context of this set of contradictory forces. Out of these decisions came what was to be known as the New Deal.

The strongest pressure for reform derived, however, from the magnitude of human suffering that existed during the 1930's. Persons of all social classes were devastated by economic suffering and resorted to desperate and improvisational survival strategies. This widespread suffering persisted throughout the decade, despite periodic upturns in the economy. The catastrophe of the depression shook the nation to its foundations; confronted with such widespread and prolonged suffering, Americans looked for bold leadership and were willing to contemplate policies that would have been unthinkable several years earlier.

Roosevelt created a variety of programs that propelled the federal government for the first time into the social welfare arena. These programs provided jobs and food to Americans who needed them. Many states and localities were verging on bankruptcy in 1932 because of mounting welfare costs and diminishing revenues. Roosevelt's solution was the Federal Emergency Relief Administration (FERA). This emergency program provided funds to states for persons who needed financial assistance. The FERA was a startling departure from prior American welfare traditions. It represented the first major welfare program in the nation's history. It is to the credit of the FERA administrators that they put this massive program in place with remarkable speed and efficiency. He also created programs such as the CWA (Civilian Works Administration), which was a part of the FERA. This was basically a public works program that gave the federal government a substantial new welfare role. This massive program was nonetheless an emergency measure that gave minimal benefits to destitute persons and reimbursed unskilled labor at significantly lower levels than skilled labor. Yet, another approach was taken by the PWA (Public Works Administration), which favored technically complex projects, such as airports, dams, flood-control projects, and military installations. This represented the first massive peacetime involvement in such projects by the federal government. There was the CCC (Civilian Conservation Corps), which was enacted in 1933 and provided assistance to 2.5 million young men. This was the most popular reform measure during the New Deal.

There was also economic reform to the system. Programs such as the NIRA (National Industrial Recovery Administration) that enabled business leaders to get together and agree on prices they would charge for products in their sectors, so as to arrest the destructive slashing of prices and the erosion of profit margins. Depressed prices were also a problem in rural areas, where millions of farmers were verging on bankruptcy. To address this agricultural depression, Roosevelt established the Agricultural Adjustment Agency (AAA). It convened producers of the same crop to negotiate the amounts of acreage they would grow, and then reimbursed farmers for NOT planting some of their land.

Roosevelt tried to provide assistance to millions of farmers and homeowners threatened with foreclosure. Farm mortgages were directly purchased and refinanced by the government when the Emergency Farm Mortgage Act and the Farm Relief Act were enacted in 1933. As for the homeowners, the Roosevelt Administration decided to take an indirect role; rather than helping homeowners directly, the National Housing Act of 1934 established the Federal Home Administration (FHA) to insure mortgages and home improvement loans, so banks could refinance them at lower interest rates. The first prominent use of legislative power over regional development came about with the TVA (Tennessee Valley Authority) that was initiated in 1933 and governed by a commission that was established to oversee development of a network of dams and generating plants.

Federal social programs evolved as much from necessity as from philosophy. As the nation's citizens and its local and state governments teetered on the brink of bankruptcy, Americans had to take action. However, socialism, which extolled major governmental roles and redistribution of resources from the rich to the poor, had no strong roots in the United States. So the question was would the Americans institutionalize their social reforms of 1933 and 1934 or dismantle them at the first opportunity?

Policies and ideas that had been taboo or restricted to a few reformers were now both acceptable and operational. Federal authorities could develop national programs with speed and efficiency. These programs were widely perceived to mean the difference between life and death for millions of Americans. Once the new policies were in place, there was no turning back to the restrictive welfare traditions of the 19th century; Americans had seen that the new policies, though imperfect, were preferable to the traditional approaches, which now seemed mean-minded and anachronistic.