2-02-09, 10:09 am

A recent article for Money magazine trivializes the New Deal's role during the Great Depression. It reflects, in a simplistic and factually inaccurately way, what conservative historians have sought to argue about the New Deal, namely that it made the depression worse by its intervention in the economy and by undermining business confidence and preventing a revival.

The article states that '[t]he New Deal was actually a combination of socialism and cartelization of industry with price controls. These policies failed to stimulate growth and actually helped plunge the economy into a 'Depression within a Depression' in 1937.' The article then goes on to say that it wasn't until 1938 when those policies were reversed and the NRA was 'relegated' to a minor role that 'growth returned.' Finally, the excerpt dredges up Milton Friedman's old contention that the Federal Reserve monetary policy played a significant role in the the depression crisis.

As economist Dean Baker points out, data from the government's Bureau of Economic Analysis further contradicts right-wing claims about the 1937 'recession.' In an effort to rein in the deficit, FDR and Congress contracted federal spending contracted that year by 10 percent. That effort led to a 3.4 percent decline in GDP. By comparison, in the years since FDR took office, a massive growth federal spending led to annual increases in GDP of between 5.7 percent and more than 13 percent.

Truth be told, this claim actually reflects Milton Friedman's view of the depression along with the Bush-Rove fidelity to factual accuracy. The NRA was abolished by the Supreme Court in 1935, and simply didn't exist when it was supposedly relegated to a minor role after 1937. New Deal policies did bring about a significant revival of the economy in the period 1933 to 1937 from the disastrous lows of 1932. The 'recession' of 1937 (the term was coined then) most non-conservative historians contend resulted from the administration's attempts to reduce spending and restrict the deficit. In fact, FDR's failure to 'pump prime' as the term went then or 'stimulate' the economy enough caused the crisis in 1937.

'Boom' times didn't return immediately in 1938, and Congress that year increased spending for jobs programs like the WPA overcoming the 1937 'recession.' This despite the fact that the 'recession' and a massive counterattack by big business against the CIO organizing drives and strikes – which conservatives at the time also blamed for the 'recession' – enabled Republicans to make significant gains in the 1938 congressional elections and strengthen their 'conservative coalition' with many Southern Democrats. This conservative coalition then opposed new progressive legislation and also sought to undermine existing New Deal programs like the WPA, the National Labor Relations Act, the Farm Security Administration and other agencies and policies, policies that hurt working people and did nothing to stimulate 'economic growth.'

It was this political opposition by the conservatives in blocking New Deal programs that allowed the Depression to drag on into the World War II period.

Current revisionist readings of the New Deal like the one described above also seem to struggle with basic terms and definitions. While there were aspects of 'cartelization' n the NRA, it lasted only two years. The New Deal also was not 'socialism,' although it borrowed specific social programs from progressive movements like unemployment insurance, old age pensions, support for public housing, protection for workers rights to join unions, along with progressive capitalist programs to regulate industry and finance in order to both save and reform the existing capitalist system.

Above all, the New Deal did work, in that its policies improved the quality of life for the majority of Americans, overcame the worst of the Depression, and established institutions that would enable the working class to benefit from the wartime and postwar economic expansion. (The war economy and right-wing Cold War ideology compromised those gains in the long-run, however, and set the stage for the last 30 years of reaction.)

We can expect mass media and selected pundits of the right, including academics, to seek to denigrate the history of the New Deal, since, as the progressive historian Charles Beard understood, history is always about finding a 'usable past,' or rather the struggle to use the past to influence the course of events in the present. And Marxists, who understand that, also understand that history is history for whom? For those who see the New Deal as a failure and want to see the Obama administration also fail, it is history for the exploiting classes. For those who see the New Deal as an example of major victories for labor and the people, it is history that the working class can and must learn and a history that can help teach the Obama administration to succeed and help to forge a new politics in the US.

--Norman Markowitz is a contributing editor of Political Affairs.