Excerpt from my book
Let's Do What Works and Call it Capitalism
Chapter 5. The Second Progressive Period: Union Rights, WPA, Social Security WWII
“I remember '29 very well. We had it made (I didn't but most people did). I remember the drugged and happy faces of people who built paper fortunes on stocks they couldn't possibly have paid for....
In our little town bank presidents and track workers rushed to pay phones to call brokers. Everyone was a broker, more or less. At lunch hour, store clerks and stenographers munched sandwiches while they watched the stock boards and calculated their pyramiding fortunes. Their eyes had the look you see around the roulette table.”
- John Steinbeck, “Living With Hard Times,” 1960.
“The downward pressure continued relentlessly. In less than four years, the national income was slashed in half. The 1931 forecasts of General Motors and General Electric for 1932, for example, were horrendous. At best they might operate at about 25 per cent of capacity.
The only institution capable of stopping this economic descent was the federal government.”
- Alfred D. Chandler, The Visible Hand
“The Only Thing We have to Fear is Fear Itself.”
- Franklin D. Roosevelt, Inauguration Address, 1933
"In the past, when liberalism has resolved the crisis and restored tranquility, conservatism has recovered power by the laws of political gravity; then it makes a new botch of things, and liberalism again must take over in the name of the nation. But the object of liberalism has never been to destroy capitalism, as conservatism invariably claims - only to keep the capitalists from destroying it."The first Progressive era began because of a single violent act, the assassination of William McKinley that thrust Theodore Roosevelt into the Presidency. The second came about because of another calamity, the Great Crash of the stock market in 1929, which caused the Great Depression and the election of Franklin Roosevelt three years later. Theodore had set the table for his cousin by changing the nature of the Presidency and the role of the federal government. FDR took both to new levels of reach and breadth. And in the 24 years that separated the two Presidencies, America and the world had changed dramatically,
- Arthur M. Schlesinger, Jr. The Age of Jackson, 1945
World War I, which began in 1914 with cavalry on horseback and ended in 1918 with tanks and airplanes in combat, accelerated technological advances and spurred economic growth in the United States as both industry and agriculture expanded to meet the wartime demands of England and France.
The U.S. government seized German dye patents and turned them over to the chemical companies. A small chemical and munitions company, du Pont, grew by 27 times and emerged from the war the major company it remains to this day. Dow Chemical also expanded dramatically, benefiting from wartime technology.
The sale of horses by American farmers for military use early in the war began the conversion to tractors, and acceleration of the conversion after the war resulted in significant production increases. As evidence of the rapid technological changes in farming, there were 80,000 tractors in use in 1918 and 890,000 in 1929.
In 1914, Henry Ford introduced his eight-hour workday and the highest pay ever given to industrial workers, $5.00 per day – equivalent to about $107 per day in 2010 dollars. That is comparable to the starting wages negotiated for auto workers at General Motors following the company's recent “managed” bankruptcy, and almost 50 per cent more than the average pay of current Walmart employees. He said he wanted his workers to be able to buy his cars. By the early 1920s the Ford Model T had become the dominant American car. Ford's philosophy caught on with other manufacturers, and in the 1920s there was a general improvement in the incomes of factory workers.
After the 20 years of progressive government policies that increased regulation of business, the Republicans in the 1920s restored the laissez-faire policies of the Gilded Age that favored business over all other interests. During Warren Harding's three years as President, and during the five years of the Coolidge Presidency, the federal government operated almost as if the progressive and activist period of Roosevelt, Taft and Wilson had not occurred.
Harding may have been the most ignorant, passive and naïve President in U.S. history. A personally honest man, he was far too trusting of others he thought were his friends. He surrounded himself with men he thought knew more than he did, and could run the government competently. Some did, but others took advantage of him and perpetrated some of the worst scandals ever to occur in a Presidency. The worst was the Tea Pot Dome scandal, diversion of strategic naval oil reserves to private interests; it was not exposed until after his death in 1923.
Harding, who had no strong beliefs about much of anything, simply didn't want to do anything. Coolidge, on the other hand, strongly believed in laissez-faire capitalism and in providing support to business. His administration probably was the most openly pro-business in American history.
The major exception to laissez-faire passive government was Prohibition. The federal government's efforts to enforce the increasingly unpopular ban on alcohol – except in the White House – was often at odds with state and local governments. Prohibition made crime more profitable, and organized crime expanded on a scale not seen before. There are many who are arguing today that the nation's anti-drug campaigns similarly are responsible for the enormous growth of organized crime violence without decreasing the consumption of drugs.
Prohibition had a significant effect on Progressive thought as well. The faith in government that Progressives had before World War I had been shaken by the vicious crackdown by Wilson on antiwar activists, and the federal government's efforts to suppress free speech. It was further shaken by the restriction on personal freedom that Prohibition represented.
(S)ome Progressives now acquired a new appreciation for civil liberties – rights an individual may assert against government – as essential elements of American freedom. In effect, they rediscovered Madison's warning that democratic government itself could endanger freedom. The result was the beginning of a subtle shift from the language of majority rule and effective democracy to a discourse of rights, checks on state power, and individual autonomy. In the name of a “new freedom for the individual,” the 1920s saw the birth of a coherent concept of civil liberties, and with it, the beginnings of meaningful legal protection for freedom of speech against the actions of the state.While higher tariffs protected American industry they prolonged the financial disaster in post-World War I Europe by choking off European imports. President Harding had no understanding of the implications of his actions. His response to a question from a reporter about his policy of increasing tariffs stands as one of the most bizarre by a President in American history.
“We should adopt a protective tariff of such a character as will help the struggling industries of Europe to get on their feet,” he said.
While Europe stagnated, providing fodder for new radical movements such as Hitler's National Socialists, America experienced another boom, driven by the auto industry, and dramatic expansion of the consumer economy. Significant technical advances made automobiles cheaper, safer and more reliable. Henry Ford's assembly line innovations enabled him to lower his prices and raise his salaries.
The J.P. Morgan bank and du Pont took over General Motors early in the 1920s and they hired Alfred P. Sloan to manage it. He turned out to be one of the greatest management geniuses of American business history. He not only revolutionized corporate management, establishing a system of professional management that was copied throughout business and industry for most of the 20th Century, he changed the way cars were designed and marketed.
GM's assets grew tenfold between 1917 and 1930, going from $133.7 million to $1.3 billion. Ford had assets of $165 million in 1917, but grew only to $781 million by 1930. GM had passed Ford as the world's biggest car manufacturer.
Financing of car purchases was introduced, and installment purchasing of other products rapidly followed. Automobile ownership grew from 2.6 million in 1915 to 9 million in 1920 and then to more than 27 million by the end of the decade. With the mobility that the automobile provided, America's economy, culture and daily life were transformed.
The rapid growth of auto manufacturing also spurred the growth of many related businesses and industries. The auto industry was the most important purchaser of rubber, plate glass, nickel and lead; it bought 15 per cent of the steel output of the nation and spurred the petroleum industry to a tremendous expansion. There was scarcely a corner of the American economy that the auto industry did not touch; it stimulated public spending for good roads, extended the housing boom into the suburbs, and created dozens of new small enterprises from hotdog stands to billboards. Eventually, for every employee of the auto companies there were four working for companies supporting the industry.
With advances in various technologies, communications and electricity, the American industrial base rapidly expanded during the 1920s and set the stage for the American victory in World War II and global dominance afterward. However, foreshadowing what would happen towards the end of the 20th Century, the new, more efficient, methods of manufacturing eliminated hundreds of thousands of jobs in traditional industries.
There also were industries, such as textiles, that still operated as most had at the turn of the century. In 1928, male textile workers in Gastonia, NC were making only $18 for a 70-hour workweek, and women were making only half as much. Children were working 11-hour days. This more traditional industry did not grow in the 1920s like the newer ones, such as autos, that employed more modern management methods, and better treatment of employees.
If the automobile provided people with greater freedom and mobility, radio brought them closer together because, for the first time, information could be broadcast live to most of the population who now had electricity in their homes. Companies quickly discovered the value of radio advertising. It was the beginning of the mass market, and mass-market brand name products.
At the beginning of the 1920s, Baker's Chocolate was the best known of the few brand-name consumer products on the market. Generic foods were sold out of barrels and bins by the general stores. Suddenly, products such as Kellogg's Corn Flakes and Quaker Oats, as well as brand-name manufactured clothes appeared on the market and were sold through intense, image-building advertising on radio, in the mass appeal magazines and in newspapers. It was a conscious, nationally coordinated effort among many businesses to generate higher consumer demand, and it worked. There was a massive expansion of brand-name products. And by the time of the stock market crash in 1929 almost two thirds of autos, radios and furniture were being purchased on credit.
The GDP nearly doubled during the 1920s. Unemployment generally remained around 5%, and despite the fact that union membership declined, average incomes slowly increased, possibly due in part to a significant drop in immigration that lowered competition for jobs. Restrictions placed on immigration following the end of World War I caused a large drop in immigration from the pre-war numbers, and those restrictions were further tightened during the 1920s.
The Harding and Coolidge Administrations reduced income taxes three times, bringing the top rate down to 25% by 1925 from Wilson's top rate of 91%. The dramatic reduction in the top rate, combined with other factors such as weakness of unions and expansion of the financial markets, had an effect similar to what happened under Presidents Ronald Reagan and George W. Bush. There was a huge increase in the disparity of incomes between the wealthy and the rest of the population, reaching a peak at the time of the 1929 Crash that was a record until 2007.
The dramatic economic growth of the 1920s mostly benefited a minority of the population. In 1929, 71 per cent of Americans earned less than $2,500 a year ($33,000 in today's money) and 41 per cent – about 12 million - earned less than $1,500 (about $20,000 today). By contrast, the earnings of the 36,000 richest people equaled the total of those 12 million.
There were warning signs of problems to come. Farm production soared, causing prices to drop. Farm failures increased and that caused significant numbers of rural bank failures. In some rural areas of the country the Depression already had started when the stock market crash occurred.
Modern American culture took shape in the 1920s, a culture of optimism, relaxed social mores and greater egalitarianism. While there was status consciousness, there were few rigid social barriers – except at the very top, and those that divided the races. Opportunities for financial success expanded. Corporations needed a mass market of people with money to spend on the huge number of products they could produce. Henry Ford proved that paying workers higher wages yielded greater financial benefits than keeping wages low, and most companies soon learned that lesson. Through higher wages, and mass-market brand name advertising, the American mass consumer market was created.
The children of the immigrants who slaved in the meat packing and steel plants at the turn of the 20th Century were growing up, and entering the workforce as literate, English-speaking Americans whose lives were going to be greatly improved over what their parents had experienced. There was a general belief that things were getting better for most people, and could get even better. The war not only had dramatically improved the domestic U.S. economy, it had opened the eyes of the nearly two million men sent to Europe, most of whom probably had never been more than 50 miles from their homes. There was a drive for success, for money, and for pleasure, that permeated the population.
The demographics of the nation changed significantly in the 1920s because of the mobility afforded by the automobile, the increased economic opportunities of expanding industries, and the decline of farming income. As farm profits dropped, both whites and blacks left rural areas for the cities, mostly in the North. For the first time more Americans lived in urban than in rural areas. And with the automobile came the beginning of the suburbs.
A huge change occurred inside American industry in the late 1920s, “a program of welfare capitalism.” Modern plants were built with safety features to safeguard employees. Perhaps to discourage union organizing, many fringe benefits began to be added to wages, including profit sharing and employee stock plans. Many companies shortened working hours to eight and work weeks to five days without reducing wages. The dramatic expansion of consumer products meant that people who had a little money to spend had far more things they could buy than ever before. Despite the continuing huge number of people at the lower end of the economic scale, millions did benefit from the economic growth. As a result, business achieved its highest level of prestige it ever had experienced.
“The more or less unconscious and unplanned activities of businessmen,” noted Walter Lippman, “are for once more novel, more daring, and in general more revolutionary than the theories of the progressives.” “Big business in America,” wrote Lincoln Steffens, who had long been a fierce critic of American capitalism, “is producing what the Socialists held up as their goal; food, shelter and clothing for all. You will see it during the Hoover Administration.”What Lippman and Steffens failed to note was this explosion of consumerism was a direct descendant of the Progressive era push to improve the lives of the vast majority of the people. Many of the new products were labor-saving devices, or provided pleasures, capabilities, and opportunities to the average person either never before available to anyone, or previously available just to the rich.
New Era publicists argued that a new kind of “economic democracy” had been established...”We are reaching the position,” declared Coolidge as early as 1919, “where the property class and the employed class are not separate, but identical.”
...a new civilization appeared to be emerging. Without the class hatred or bureaucratic despotism of communism, the United States, it seemed was on its way toward the final abolition of poverty.
Published in 1931, after the Depression began, James Truslowe Adams' bestselling, The Epic of America, coined the phrase, “the American Dream,” to describe the spirit that had gripped the American psyche. Although the concept of the uniquely American opportunity of increasing economic success and greater personal freedom had existed since the Pilgrims arrived at Plymouth, it never before had a name, and it has continued to have significant meaning to great numbers of Americans, as well as to the continuing flow of immigrants.
Life not only improved in the 1920s, it sped up, and so did the stock market. For the first time middle class Americans were buying stocks in quantity, often on margin, and that caused the market to rise to all-time levels before it crashed.
While the causes of the Great Crash, the crash of 2008, and the panics of 1893 and 1907, were different from each other, each was made possible by a lack of adequate regulation of Wall Street and the financial markets. As previously noted, despite the various horrors perpetrated on workers and the public by unregulated industrial capitalism, no industrial corporation ever has caused the economic damage to the nation, and to the people, that has resulted numerous times from collapses of the financial markets.
The Great Crash was different from the stock market crash of 2008 in both its cause and duration. Unlike the rapid recovery of the stock market from the 2008 crash, the stock market was very slow to recover from the 1929 Crash, not reaching its pre-Crash level until 1954.
The 2008 crash primarily was the result of the sub-prime mortgage derivative collapse that caused the failures of Lehman Brothers, Merrill Lynch and Bear Stearns. The 1929 crash occurred because there was a stock market bubble resulting from a speculative frenzy that accelerated during the previous 18 months. There were no significant regulatory controls on the stock market or Wall Street.
In two days of 20+ percentage drops in the market in 1929, much of the money invested in those stocks on margin was wiped out. About $30 billion was lost, a staggering amount for the time, and about 30% of the nation's GDP. That $30 billion today would be worth about $380 billion, less than a third of the $1.2 trillion lost in the one-day drop of the market on Sept. 29, 2008, after Congress initially refused to approve the Wall Street bank bailout bill. While that $1.2 trillion represented just a little over 8% of the nation's GDP, several trillion more dollars were lost in the continuing market declines that followed the Sept, 29, 2008 drop, the total losses eventually reaching, or exceeding the proportions of the 1929 crash. That pushed the nation into the greatest recession since the Great Depression. However, the Great Recession did not become another Great Depression because, with the support of hundreds of billions of federal government dollars, the markets recovered swiftly, unlike the market in 1929 when no such government intervention in the markets occurred.
In 1929, the loss of an amount of money representing nearly a third of the nation's GDP, caused an immediate drop in economic activity. Consumer demand continued dropping month after month. Factories cut back on production. Unemployment increased. There was a liquidity crisis because of a very tight money supply. The U.S. still backed the currency with 40% gold, which limited the amount of money that could be in circulation. Instead of priming the pump through significant deficit spending, or increasing the money supply by abandoning the gold standard, as every other country did fairly quickly following the Crash, the Hoover administration, while increasing deficit spending to some extent, did very little else. It wasn't until 1933, after Franklin Roosevelt became President, that the U.S. abandoned the gold standard.
The Smoot-Hawley Tariff, enacted under Hoover with the intent of protecting domestic products from foreign competition, further slowed down the economy because retaliatory tariffs by other countries caused a worldwide drop in trade, killing American exports. Then banks started to fail, first several hundred, and eventually, thousands. Unemployment soared, eventually reaching a peak of 25%, or, possibly, more.
When he took office in 1933 with his famous “the only thing to fear is fear itself” inauguration address that was broadcast to the nation, Franklin Roosevelt took charge of the economy. While Wilson had done this in World War I, no President ever had done this in peacetime, and FDR forever changed the relationship between the federal government and the economy. The national economy has been part of Presidential responsibility ever since.
Roosevelt changed the mood of the country. By taking charge, he stabilized the country by making people believe things would get better, and that there would not be a repeat of the Crash. A nation in the condition the U.S. was in 1933 needed strong leadership at the federal level, and active federal intervention in the economy. As always, when there is a crisis, laissez-faire was the last thing the people wanted, or the country needed. Roosevelt assembled a brain trust in Washington of experts in a wide range of areas. They developed the New Deal programs that forever altered the role of the federal government.
Even though the National Industrial Recovery Act was declared unconstitutional in 1935, most of its pieces were reconstituted and withstood challenges. Between 1933 and 1937 the American economy grew faster than it ever had in peacetime. Unemployment dropped from 21 percent to 9 per cent. The TVA extended electricity to millions. The Works Progress Administration program of hundreds of thousands of public works projects resulted in everything from the Grand Coolee Dam to New York's Triborough Bridge and Midtown Tunnel, to 639,000 miles of roads and streets to 36.900 schools and 2,552 hospitals. There never had been anything like this in American history.
Steinbeck wrote, “I can't think of any decade in history when so much happened in so many directions. Our country was remodeled, our lives remolded, our Government rebuilt, forced to functions, duties and responsibilities it never had before and can never relinquish. The most rabid, hysterical Roosevelt-hater would not dare to suggest removing the reforms, the safeguards and the new concept that the Government is responsible for all its citizens.”
Roosevelt encouraged unions, and his National Labor Relations Act finally gave unions the federally protected right to organize, and to collectively bargain with employers. During the late 1930s, the late 1940s and the early 1950s, unions won the right to represent millions of American workers and through collective bargaining and many strikes, they won substantial increases in wages, hours and working conditions for their members.
While the “New Deal” provided economic stimulus through the WPA, electrification projects such as the TVA, and other activities, government expenditures were not dramatically increased. The percentage of the GDP represented by federal government expenditures remained about 20 per cent for the entire decade of the 1930s. In 1940 the GDP was almost exactly the same as it was in 1929.
It is interesting to note that despite the litany from Republicans about increasing spending by Democrats, federal government expenditures in 2013 were 21 percent of GDP. In fact, federal government expenditures, as a percentage of the GDP, decreased under President Obama, which, unfortunately, was not what the economy needed.
Among the more lasting actions of the New Deal were the new government agencies, regulations and programs designed to prevent future crashes and depressions, and provide financial security to the people.
The Glass-Steagall Act created the Federal Deposit Insurance Corporation to protect commercial bank depositors. Many other bank reforms were put in place, including limits on the relationships between commercial and investment banks. Those restrictions prevented a financial panic for more than 70 years. But Steinbeck was wrong. Congress did dare to remove Roosevelt's safeguards, and the barriers between investment and commercial banking, and we all have paid the price for their loss of historical memory. Some key restrictions on banks were repealed in 1999 and with those barriers no longer in place, the 2008 collapse of the sub prime mortgage derivative market, operated by the investment banks, nearly brought down the entire commercial banking system. Many believe that would have caused a worldwide economic calamity, the likes of which we never have seen, and probably cannot fully imagine. At the least, the economic disruption would have been enormous.
The Roosevelt Administration also created the Securities and Exchange Commission to regulate and monitor the securities market, and to protect investors from frauds. In 2012, Congress, apparently still oblivious to history, passed legislation weakening some restrictions on stock sales.
Various other controls were put in place to limit stock market downturns, many of which have been modified since. The key tool was the ability to stop trading and prevent unlimited declines, and there have been none since it was adopted.
Roosevelt drew intense criticism from the right for proposing to implement Social Security, which, along with some of his other reforms, was called “socialistic” by conservatives. Social Security and other safety net programs had been advocated by socialists for decades, but their first actual implementation was by Imperial Germany in the 1880s under the “Iron Chancellor” Otto von Bismarck. He implemented them to reduce the appeal of the socialists. Those programs survived the Nazis and World War II, and modern versions today provide universal health and retirement insurance to the German people.
By adopting Social Security and other programs, Roosevelt protected the U.S. from the radical agitation that occurred from both the right and the left in the 1930s. The votes for socialist and communist candidates in the Presidential elections of the period of the Great Depression never approached the size of the votes Eugene Debs received in 1912 and 1920.
Like his cousin, Theodore, Franklin Roosevelt was trying to save capitalism from itself by putting regulations and controls in place to limit its excesses, and provide safety nets to protect the mass of Americans from becoming its innocent victims. When Roosevelt thought the Depression was about over in 1937, he went back to more conservative practices, such as cutting expenditures to try to balance the budget. That threw the country right back into the Depression, and it didn't emerge until after the country was engaged in World War II. The “Sequester” that was implemented in 2013, cutting federal spending, is reminiscent of Roosevelt's 1937 mistake, and like the cutbacks in 1937 it has slowed down the recovery from the Great Recession.
Steinbeck said the proof that Roosevelt was successful could be seen when people starting criticizing him.
I guess Mr. Roosevelt was called more names and accused of more crimes than any man in history, but no one ever thought or said he was afraid. Furthermore, he spread his fearlessness about among the whole people. Much later, when business picked up, and business leaders howled with rage against Government control, and Mr. Roosevelt, they seemed to forget that they had laid their heads in his lap and wept, begged him to take over, to tell them what to do and how to do it, that they had marched and shouted and fought for the Blue Eagle, that system of Government control – but they had.A little later in the essay, he added:
One of the indices of improvement was that the men who had begged the Administration to take over and tell them what to do were now howling against Government control and calling Mr. Roosevelt highly colored names. This proved that they were on their feet again and was perfectly natural. You only tolerate help when you need it.Steinbeck's novel, The Grapes of Wrath best depicted the horrors of the Great Depression and the Dust Bowl, much as The Jungle was the novel that best depicted the horrors of laissez-faire capitalism. The Mississippi Valley drought of the early 1930s caused farmland to blow away, creating what was called “the Dust Bowl.” Destitute farmers by the thousands moved west, mostly to California. Steinbeck portrayed the tragic and terrible conditions these American migrants faced, and their enormous grit and determination that enabled them to survive.
Economists and historians still debate what might have been done to prevent the Great Crash from becoming the Great Depression. However, nearly all authorities agree that what was done by the Hoover Administration was wrong, especially enacting the tariff, and keeping the money supply tight. While Hoover did expand the federal budget, it wasn't enough. With consumer demand dramatically reduced, and businesses not expanding, the only way of achieving economic expansion was for the government to engage in substantial deficit spending, with various types of stimulus expenditures. A similar, but not as dire, situation has existed in the U.S. since 2008, but Republicans blocked most programs that might stimulate the economy.
The lessons of the Great Depression seem to have been forgotten – or never learned – by many today. A laissez-faire approach to business can cause considerable economic growth, as occurred during the Gilded Age and during the 1920s and for some of the period since 1980, but without regulation, the avarice of capitalism causes excesses – enormous disparities in wealth, reckless and dangerous investments, and disregard for the welfare of the nation. This eventually leads to disasters like the 1929 Crash and Great Depression, and the 2008 bank meltdown and Great Recession.
When the stock market crash of 1929 wiped out a third of the national wealth, it took many years for the economy to recover, even with the New Deal programs in effect. The combination of the stock market crash of 2008 and the collapse of the housing bubble wiped out an even higher percentage of national wealth. Even though the stock market recovered much faster from the 2008 crash than it did from the Great Crash, the economy has been slow to recover, and for millions, it has not. Those who lost their homes, or were forced to sell at huge discounts to what values had been, never will recover the money they lost. The recovery of the stock market primarily benefited only the wealthy. Since 1979, according to the Congressional Budget Office, the top 10 per cent of the wealth hierarchy garnered 75% of all capital gains.
The decline in the middle class, the loss of housing values, unemployment and under employment stalled consumer spending. These are the reasons why there has been weak expansion of businesses. The situation since 2007 has been the classic case of a recession that traditionally would have been overcome by increased government spending. But Republicans in control of the House, and in blocking position in the Senate, would not approve any stimulus program after the first rather modest one.
The second progressive period effectively ended the same way the first one did, with U.S. entry into a world war. However, what the federal government did with American industry during the war provides the strongest evidence ever of the value of economic stimulus.
Federal government regulation of industry and business became federal government management when the United States entered World War II following the Japanese attack on Pearl Harbor in December, 1941. Under close government supervision, most major industries in the U.S. soon were converted to the manufacture of war materials, especially those companies producing steel, autos, aircraft, ships, rubber, chemicals and anything related to munitions and military supplies.
In May, 1942, prices were frozen on nearly all consumer goods. Ration books and tokens were issued to each family, limiting the amount of each product that could be purchased by each person. The restrictions were administered by 8,000 rationing boards across the country. Recycling drives were organized for materials that were in short supply, such as rubber. Special editions were published of the American Women's Cook Book to provide advice on dealing with food shortages.
In the largest financial stimulus the federal government has ever committed to the national economy, $100 billion - the equivalent of about $1.5 trillion in 2011 dollars but equal to the entire GDP of the nation in 1940 - was invested in private industry during the war. This was over and above the actual cost of fighting the war. The federal money built new plants, converted old ones, paid for the raw materials needed for war goods manufactures, and for the salaries of the expanded work forces. Virtually every able-bodied working age adult in the nation not in the military was employed in some form. The National Debt soared to nearly 120 % of the GDP, the highest percentage of the GDP it ever has reached.
Imagine the impact on today's U.S. economy if the federal government committed an investment into the economy of an entire year's GDP – more than $15 trillion. The impact on the U.S. economy in the 1940s was tremendous. Proving that financial stimulus, when it is substantial, gets results, the huge deficit expenditures by the federal government ended the Depression and positioned the nation to dominate the world's post-war economy. The industrial production of the nation expanded by 25 times its pre-war level, compared to expansions of the economies of other major nations of only three or four times their pre-war capacities.
There never was a time in the history of the United States when there was so much unity of purpose among the American people. There was a broad consensus that the war had to be won to save the country, and that almost every citizen could play a part in achieving that victory. The nation was in danger, and anything that would save the country was tolerated, even things that shouldn't have been, such as the internment of Japanese-Americans, and the seizure of their property.
The Depression caused all major Allied governments to acknowledge that they had to take responsibility for their economies, that laissez-faire policies ultimately led to excesses that caused financial disasters. The rise of the fascists, extreme nationalism, and the Nazis – which led to World War II - were blamed on the worldwide economic chaos of the Depression. There was a universal understanding that to avoid another Great Depression, and the horrors that resulted from it, governments had to assume the responsibility for maintaining employment, economic stability and growth. A system was needed to prevent some of the nationalistic and isolationist actions that nations took in the 1930s that only made the situation worse.
At the Bretton Woods Conference in 1944, only a few weeks after D-Day, 44 Allied countries agreed on an international economic system to govern after the war. With the U.S. economy the strongest in the world, all currencies were tied to the dollar, which was backed with gold. The U.S. had about 60% of all the gold in the world at the time. The International Monetary Fund was created, along with the International Bank for Reconstruction and Development, which now is part of the World Bank. That international economic system kept the world economy relatively stable for nearly 30 years until the oil crisis of the early 1970s.
The many regulatory actions taken by FDR resulted in an alphabet soup of federal agencies that Woodrow Wilson probably would have admired. Nearly all still are functioning, although the time may have come for a reappraisal. There still is no effective regulation of Wall Street. Corporate regulation is so splintered that while it frustrates businesses, it really doesn't prevent some terrible abuses, including enormous concentration of ownership within industries, and control of vital industries outside of American hands. The Federal Communications Commission has allowed the public airwaves to become monopolized by a handful of corporations and relieved them of any obligation to provide public service, or equal time.
The single greatest contribution of the FDR Presidency is Social Security. It now is the bedrock of retirement for the vast majority of Americans, and for many the only barrier to destitution.
 Steinbeck, John. “Living with Hard Times.” Esquire. June, 1983, p 27-28 (reprint of an essay, “A Primer on the Thirties,” first published in 1960.
 Chandler. The Visible Hand. p. 496
 Schlesinger, p. 522
 Leuchtenburg, William. E. The Perils of Prosperity 1914-32. Chicago: University of Chicago Press, 1958. p. 181.
 Ibid. p 96-97.
 Foner, p183.
 Leuchtenburg. p. 110.
 Chandler. Scale and Scope, pp. 642 and 649.
 Allen, p. 124
 Leuchtenburg, p. 186
 Stillman, Edmund. The American Heritage History of the 1920s & 1930s. New York: American Heritage/Bonanza, 1987. Reprint of work first published in 1970. p. 158.
 Chandler. Scale and Scope. pp. 639, 645.
 Rifkin, Jeremy. The End of Work. New York: Putnam, 1995. pp. 19-25.
 Strikes in the steel and coal mining industries failed, also causing significant declines in union membership.
 Saez, Emmanuel. “ Striking it Richer: The Evolution of Top Incomes in the United States
(Updated with 2009 and 2010 estimates).” March 12, 2012. http://elsa.berkeley.edu/...
 Leuchtenburg, p. 194.
 Leuchtenburg p 201
 Ibid. p.202-203
 Lind, Michael. Land of Promise. An Economic History of the United States. New York: Harper Collins, 2012. pp. 303-306.
 Steinbeck. p 27
 Ibid. p 30
 Ibid p. 32. An echo of the fact that banks opposed reforms proposed by the Obama Administration to try to prevent future bailouts of banks of the type that were required in 2008 and 2009 to save the banking system.
 Steinbeck, John. The Grapes of Wrath. New York: Viking, 1939. Winner of the 1940 Pulitzer Prize, and cited as a primary reason for Steinbeck being awarded the Nobel Prize for Literature in 1962.
 Cited by Paul Krugman, March 25, 2014.
 Berolzheimer, Ruth (editor). The American Woman’s Cook Book Victory Edition. With New Material on Economical Food Substitutes and Wartime Recipes. Chicago: Culinary Arts Institute, 1942 (reprinted as the Wartime Edition with a different dust jacket design in 1943, also reprinted by Consolidated Book Publishers in 1943).
 Evans, p. 314.