An Unsound Economy - Americas Socio-Economic Gap and the Coming of the Great Depression - Essay Example

An ‘Unsound Economy America’s Socio-Economic Gap and the Coming of the Great Depression The 10-year period between the end of World War I and the great stock market crash in 1929 was a period of transformative socio-economic change unprecedented in U.S. history. The gap between rich and poor widened, labor unrest became commonplace and basic social services were largely unavailable to those that needed them most. The “Mellon Plan,” passed by Congress in 1928, lowered income taxes for the wealthy from 50 to 25 percent, while coal miners and textile workers, encouraged by Communist organizers, found themselves embroiled in violent labor battles over wages and working conditions (Zinn, 384). Irresponsible financial speculation, trade imbalances and a profoundly vulnerable banking and finance system created a vortex of financial instability exacerbated by social ferment that threatened to plunge the United States into a class war. This dual social-economic problem and the economic disequilibrium it engendered is central to Howard Zinn’s book A People’s History of the United States. Zinn quotes the renowned economist John Galbraith, whose reference to a “bad distribution of income” in which just 5 percent of the population controlled one-third of the nation’s personal wealth addressed this fundamental flaw in America’s capitalist system. It seems that a republic founded on the principle that all men are created equal had embraced an industrialized, capitalist ethos that trivialized the individual and was, in truth, as class conscious as the old system Americans claimed to have rejected. Poor decisions among the nation’s banks and financiers and at the government level simply exacerbated the problems of the country’s underclass, problems that had always been present. Forced to take desperate measures to survive, many Americans were radicalized by the Depression and took matters into their own hands. Zinn offers a socialist explanation for the particular vulnerability of the nation’s banking and investment system, the Great Depression and of the capitalist system in general. This model sees American capitalism as “driven by the one overriding motive of corporate profit and therefore unstable, unpredictable, and blind to human needs. The result of all that: permanent depression…and periodic crises for almost everybody” (Zinn, 393). Indeed, the depth and severity of the depression seemed symptomatic of something fundamentally flawed in the American economic system. More than 80 years later, the results are still shocking: more than 5,000 banks closed and industrial production dropped by 50 percent, leading to as many as 15 million Americans unemployed (Zinn, 397). The sheer severity of the problem demanded a sea change in every aspect of the country’s economic system; the country’s survival required nothing less. One of the primary themes in “Self Help in Hard Times,” Chapter 15 in Zinn’s book, is that the apparent prosperity of the 1920s, which on the surface seemed to certify the efficacy of capitalism, was misleading in the extreme. True, American manufacturing was more productive than ever before, but demand did not rise accordingly. Overinvestment followed, as did the over-extension of credit. It is perhaps unsurprising, given the high spirits and enthusiasm of the period, that over-exuberance should have ruled the day but the bubble that was produced proved catastrophic. The wealthiest of Americans would come to know what poverty truly meant, and understand the circumstances in which the poor lived. It is, in part, to this state of perpetual poverty and of wealth inequity that Galbraith referred when he asserted that the American economy was unsound. But this was America in the early 20th century. America’s financial instability and social inequity was manifested in a tradition of financial and labor exploitation by the country’s business owners and major investors. In the country’s urban centers, working conditions ranged from squalid to life-threatening. In 1911, a fire at the Triangle Shirtwaist Company in New York caused the deaths of 146 workers, who were trapped on floors that were too high for the city’s fire company ladders to reach, in rooms that were locked in violation of the law (Zinn, 326). Efforts by the Communist party to alleviate such conditions was met with a campaign by the government and nation’s business owners to destroy the IWW, an indicator of the status quo and attempts by those who wielded power to maintain the “norm.” The Communist leadership’s campaign to effect change from within the labor movement also met with a violent response. Communist organizer Ben Gold was knifed and beaten when he challenged the AFL to adopt a more militant stance toward capital (Zinn, 385). Those who controlled the means of production were determined to maintain their stranglehold on wealth, and it was the perpetuation of this gap that Zinn identifies. A People’s History of the United States is also remarkable for its consideration of dissenting views of America’s economic system, and its vulnerability to the events that led to the Great Depression. Zinn writes of 19th century Massachusetts writer and lawyer Edward Bellamy, who penned a novel entitled Looking Backward, which speculated as to what a socialistic America might look like in the year 2000. Bellamy’s paean to an idyllic socialist order struck a chord among Americans. More than 100 groups were formed around the country with the intention of making Bellamy’s vision come true (Zinn, 264). It is interesting to note that even in 1887 there was a strong sense that the America envisioned by the nation’s founding fathers bore little resemblance to a country increasingly owned by large landowners and business moguls. It was in the long-term interests of the monied classes that this system should be reinforced among the general population in order to prevent the kind of dissension that Bellamy’s novel successfully tapped into. This took the form of “education,” in which ostensibly American principles were taught, principles that commended the value of hard work and thrift. “It was in the middle and late nineteenth centuries that high schools developed as aids to the industrial system, that history was widely required in the curriculum to foster patriotism” (Zinn, 263). During this period textbooks and the teaching of subversive principles were restricted, with the states of Idaho and Montana going so far as to ban books that espoused “‘political’ doctrines” (Zinn, 263). It was the reinforcement of a pro-government, pro-business environment that laid the groundwork for exploitation and freed corporate America from the kind of oversight that might have prevented disaster in 1929. In A People’s History of the United States, Howard Zinn indicates that post-World War I America was the culmination of a historical progression, which fed directly into what occurred in October 1929. Much has been made in recent years of the existence of “two Americas,” one rich, one poor; yet this was the case more than 100 years ago. This is the elusive truth upon which Zinn seeks to shed light. In this environment, the wealthy were free to make profits and to attack attempts by the Communists and other dissenters to create a more equitable economic landscape. Their irresponsible speculation and the unrestrained search for profit laid the groundwork for economic disaster the likes of which no other modern industrial nation has experienced. Name Class Instructor Date Engineering a New Social Order: FDR and the Great Depression The mass closing of banks, home and farm foreclosures and record levels of unemployment forced Americans in all classes of society into a brutal struggle for survival. A too-friendly environment for business and finance had made it impossible for the Hoover administration to enact policies and programs capable of turning things around. Hoover and his cabinet developed initiatives that provided the framework for many of the programs Roosevelt would put into practice, but the presence of men like Andrew Mellon, secretary of the treasury in the Harding and Coolidge administrations and one of the nation’s wealthiest businessman, had helped to secure a comfortable position for big business (Zinn, 384). When the stock market bubble burst in 1929, there were few safeguards in place and it was left to President Roosevelt to create an entirely new and authoritative regulatory regime. More importantly, it was up to the Roosevelt administration to reinvigorate the American economy, reinstill confidence in the American people and bridge the gap between rich and poor that had done so much to send the nation spiraling into depression. The Roosevelt administration addressed the problem at the regional level through initiatives such as the TVA and nationally through programs like the NRA, which were designed to both stabilize the social order and restore economic health. This went far beyond any previous notion of the role the executive branch should play in American society, and Roosevelt used the situation to reinvent the role of government itself. “The Roosevelt reforms went far beyond previous legislation. They had to meet two pressing needs: to reorganize capitalism in such a way to overcome the crisis and stabilize the system; also to head off the alarming growth of spontaneous rebellion in the early years of the Roosevelt administration…” (Zinn, 392). The first measure enacted by the administration was the National Recovery Act (NRA), a blueprint of sorts for stabilizing the nation both economically and socially. However, according to Zinn, the NRA did little to wrest control from big business. Zinn quotes Barton Bernstein, author of Towards a New Past, who wrote that the NRA “reaffirmed and consolidated” the power of the nation’s major business interests, and that Roosevelt “surrendered an inordinate share of the power of government, through the NRA, to industrial spokesmen throughout the country” (Zinn, 393). After two years, the Supreme Court decided the issue and declared the NRA unconstitutional. The government’s establishment of the Tennessee Valley Authority (TVA) was, if anything, an even more overt attempt at social engineering. Ostensibly a move to boost employment and provide affordable power throughout the nation’s poorest region, the TVA amounted to something quite new: a direct intrusion by the federal government into the previously sacrosanct world of American business (Zinn, 285). Zinn notes that the creation of the TVA was nothing less than a thinly veiled form of socialism, but that its true aim was, in addition to stabilizing the economy, to avert a social rebellion at the grass roots level and keep the nation’s poor taking matters into their own hands. In other words, initiatives like the TVA were enacted to prevent the kind of violence and anarchy that has for centuries produced socio-political instability and revolution throughout Europe and other parts of the world. Indeed, there were indications that by the end of the Hoover administration, Americans had had enough. “People organized to help themselves, since business and government were not helping them in 1931 and 1932” (Zinn, 394). Ordinary citizens were exhibiting a remarkably high degree of coordination in an attempt just to survive. Zinn cites several examples of an incipient barter system. In Seattle, fishermen and vegetable growers exchanged goods, while doctors, seamstresses and barbers began exchanging a wide range of disparate services (Zinn, 394-95). Similar activities were noted in Pennsylvania, where miners simply mined their own coal to sell, while widespread protests broke out along the West Coast (Zinn, 395). After a massive textile hit the South, the government was forced to take harsh measures to control the spread of civil unrest. Congress moved to control the situation in 1935 with passage of the Wagner Act, which established the National Labor Relations Board. The Wagner Act proved facilitative to union organizers, a situation that employers had hoped to avoid but which ultimately helped stabilize the impending breakdown of America’s entire social order (Zinn, 395). So it was with most programs initiated by the New Deal. Social order and economic restoration were the primary goals, but in most cases some members of society benefited while others were slighted. Zinn points out that the Minimum Wage Act of 1938 established the 40-hour work week and abolished child labor but set very low wage levels; the Social Security Act provided retirement benefits and unemployment insurance but neglected farmers and the aged, among others (Zinn, 403). Such programs had a stabilizing effect, but big business emerged predominant. Zinn notes that the benefits of the Social Security Act were insignificant in comparison to the aid it ultimately provided for big business. As a means of social engineering, the New Deal reached into nearly every facet of society, including the arts. The Federal Theater Project, Federal Writers Project and Federal Arts Project provided funding and opportunities not only for writers, actors and musicians but also put laborers to work painting murals and performing other essential tasks. Consequently, the New Deal gave rise to a flowering of creative activity the likes of which the country had never seen, though federal subsidies for the arts were discontinued in 1939. Nevertheless, by the time the United States entered World War II, New Deal initiatives had succeeded to a large extent in fostering an environment of social renewal. As such, the Roosevelt administration proved remarkably successful at walking a delicate line between economic revitalization/social engineering and the maintenance of America’s capitalist system. The scion of one of America’s wealthiest and most influential family dynasties, Franklin Roosevelt had no choice but to take unilateral action to prevent populist rebellion and the destruction of what had come to be known as the American way of life. The economic and social activism of the New Deal served to uphold America’s status quo, an ironic state of affairs given the charges of socialism (and communism) leveled at Roosevelt at the time. In this sense, the New Deal may have been a revolution, but if so it was a conservative revolution, aimed at short-circuiting radicalism and the threat of revolution that had begun to manifest itself throughout the United States. The country was saved, but rather than emerging a new, more equitable society, America came out of the Great Depression more staunchly pro-business and economically stratified than before. Read More