Security — The New Deal’s Gift to America
America’s New Deal under the tenure of President Franklin Delano Roosevelt can be summed up in one word: security. While scholars can argue about the effectiveness of Keynesian economics, government spending and intervention in the economy, and increased regulation of the business and financial sectors of the economy, no one could argue that Americans were not more secure economically as a result of President Roosevelt’s New Deal. It was during this troubling time in American history that one of America’s greatest political leaders, Franklin Delano Roosevelt, used the turmoil of the Great Depression as a rare political opportunity to create a greater and more secure American society for more of its citizens.
Perhaps the finest example of how the New Deal meant security for the American people can be found in New Deal policies in the financial sector. In 1934, President Roosevelt named Joseph P. Kennedy the first chairman of the Securities and Exchange Commission. By doing so, the Roosevelt administration heeded the cry for Wall Street reform. This new regulatory body provided Wall Street with the data it needed to make rational decisions in the marketplace. Prior to the Security and Exchange Commission’s regulatory framework and reporting requirements, there was no reliable data in the marketplace. After 1934, Wall Street had data that was relevant, accessible, and comparable across all of the investment firms. While these regulations have often been demonized in contemporary political circles, they hardly constituted a full frontal assault on capitalism or the free market. If anything, this new regulatory framework made capitalism more rational and reasonable. It enabled the free market to work in the way in which the free market was supposed to work.
One of the structural changes that the Roosevelt administration made to the financial sector was contained in the Glass-Stegall Banking Act of 1933. Glass-Stegall separated America’s investment banks from its commercial banks. This, coupled with the newly created Federal Deposit Insurance Corporation, helped to secure the savings of everyday Americans. This prevented the banking interests from using the money of everyday Americans in highly speculative ventures. Guaranteeing the bank deposits of average Americans and using minimal subscription fees to fund the program, the Federal Deposit Insurance Corporation virtually eliminated the future possibility of bank runs or financial panics.
The Great Depression was a shot across the bow of modern capitalism. For some, it was living proof that modern capitalism did not work. However, rather than reinventing the wheel, Roosevelt’s administration used a few modest reforms to create investment security in the American banking system. Instead of reinventing the financial sector, FDR left the American banking system in place and created these structural changes to the existing system to create stability. It is amazing that the only real changes that FDR made to the financial institutions was the addition of the Glass-Stegall Act into law and the creation of the Securities and Exchange Commission and the Federal Deposit Insurance Corporation.
In addition to shoring up the financial system through regulatory reforms, the New Deal also sought to provide increased security to the American people through a whole host of programs designed to provide increased security on the micro level. One of these programs was the Federal Housing Administration. The FHA, a government agency created as part of the National Housing Act of 1934, helped to stabilize the mortgage markets by insuring mortgage loans. This program revolutionized the housing industry by stabilizing the real estate market and creating thousands of new potential customers. Because the housing had to be up to code in order to qualify for FHA financing, this also helped to improve the value of existing properties.
In order to be in the market to buy a home and experience the security that comes with owning a home, the American worker had to first have job security. The New Deal helped to provide the American worker with some degree of job security through a variety of programs. The National Labor Relations Board provided the American worker with security by enabling the worker to join a union and collectively bargain for wages. For those who were not fortunate enough to belong to a trade union, the Fair Labor Standards Act of 1938 provided workers with minimum wages guarantees and a forty hour work week. In addition, for those who were elderly or unable to work, the New Deal provided income security to the American people through the Social Security Act of 1935.
All of these New Deal reforms — the SEC, the FDIC, the FHA, the NLRB, the FLSA, and Social Security — helped to provide increased security for the American people for the generations to come. The Roosevelt administration did not simply ameliorate the immediate conditions that the American people were suffering from, but instead, sought to create a framework that would help to provide the necessary security to ameliorate future generations from that same kind of suffering by making life its own self less risky and predictable. Some have tarred Roosevelt with the label of socialist and dismissed the New Deal as American socialism. However, the Roosevelt administration did not redistribute America’s wealth in any substantial way. The income profile of Americans in 1940 is very near that of Americans in 1930 and substantially similar to that of Americans in 1920. In addition, other than the electric power of the Tennessee Valley Authority, no state owned businesses emerged from New Deal America.
Historians and political pundits often argue about the effectiveness of the New Deal. Granted, the New Deal was unable to bring America out of the Great Depression until World War II (eight years after Roosevelt took office) however, one could argue that America could not deficit spend on a level necessary to bring about economic recovery without the threat of Germany and Japan ending America’s grand democratic experiment. Irregardless of the conditions that brought about America’s economic recovery, the New Deal provided generations of Americans with a kind of prosperity grounded in security that the world had never known before. And the Roosevelt administration was able to do this without destroying capitalism, but instead, reinvented it so that it was less volatile, less predatory, and more fair and equitable for all Americans.
