The Great Depression and the Welfare State
The Great Depression
- manufacturing output declined 50%
- production of durable goods fell 80%
- farm prices fell 65%
- manufacturing unemployment was 40%
Hoover and the Great Depression
- associational strategy - develop industry standards
- resistance of corporations to sacrifice profit
- protectionism vs. need for international markets
Roosevelt and the Great Depression
- New Deal coalition - 1932 election -
- control of business or cooperation?
- coalition of interests brought into policy process
The New Deal - new institutions, policies and political-economy relations - structural reforms - progressive era foundation
- National Labor Relations Act
- Social Security Act
Impact of New Deal policies
- limited role of market in distribution of wealth and power
- changed relationship of labor and capital
- government role in promoting economic stability
- reduced competition, provided guaranteed returns
- integration of economic associations into policy making
- government supervised self-regulation
National Industrial Recovery Act - NRA (1933-1935)
- delegated authority to self-regulating code authorities
- industry groups established codes of fair conduct to promote high prices
- plagued by corporate self-interest
- failed attempt to establish corporatist ethic
Agriculture policy - production controls via cartels to reduce oversupply of commodities
- government payments to reach parity (commodity sales equal to purchasing power 1909-1914)
- Agriculture Adjustment Act invalidated by Supreme Court - processor tax illegal
- 1938 Second Agriculture Adjustment Act - without processor tax
- Commodity Credit Corporation - loans tied to production levels
- USDA to establish production quotas at the request of commodity producers
- close ties between commodity producers and House and Senate subcommittees
- majority of benefits go to large farmers
- top 20% receive 63% of benefits - 1970's
Financial Regulation
- Securities Act of 1933 - register and prospectus over $100,000 - FTC
- Securities Exchange Act of 1934 - quarterly reports, dealer registration, margins limits
- emerging industry self-regulation - SEC
Airlines
- subsidized to carry mail
- Civil Aeronautics Act of 1933 - CAA
- approve routes, mergers, limit destructive competition, duplication
Labor - reduced conflicts through collective bargaining - promoted stability
- National Industrial Recovery Act - Section 7(a)
- promoted collective bargaining, union membership
- National Labor Relations Act - 1935
- NLRB - enforcement powers of NLRA
- right of workers to elect exclusive representatives
- prohibited unfair labor practices - interference, discrimination
- neutral
The National Welfare State
Short term relief - Roosevelt opposed to dependence on government relief
- Federal Emergency Relief Act - 1933 - direct relief funds
- Civil Works Administration - emergency public works program for unemployed
- Civilian Conservation Corps
- Emergency Relief Appropriation Act - 1935
- Work Progress Administration - replaced FERA
Long term relief
- Social Security Act of 1935 - social insurance
- "insurance" instead of relief
- basis for welfare legislation in US - except food stamps
- old age-pensions
- mandatory contributions
- regressive payroll tax
- excluded workers
- state autonomy
- unemployment compensation
- federal relief for aged, blind and dependent children - contribution with state
- aged and blind $1 to $1
- dependent children $ to $2
- restrictions kept minorities off ADC
Growing Costs of Welfare State
- elderly is 12% of population - receive 27% of budget (45% of domestic spending)
- demographic trends
- indexing benefits
- higher medical costs
International Comparisons
- US spends less than most industrialized countries
- no national health insurance
- other countries had better performing economies during 1970's - wage restraint
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