New Deal and the GND as Rapid Transition Stories

RapidTransition.org Story of change

The New Deal and a Green New Deal – turning economic and environmental disasters into an opportunity for national, public renewal, posted on 11 February 2019. See lessons

A proposal for a Green New Deal from the dynamic new Democratic representative Alexandria Ocasio-Cortez has become a rallying point for progressive politics and climate solutions in the United States.  If it makes anything like the impact of the original New Deal, pioneered by Franklin D Roosevelt on entering office in 1933, it could be a game changer among measures for rapid transition.

The original New Deal was a rapid, broad, nationally-designed and led transformation plan in response to massive market failure in the financial system. Roosevelt’s famous program delivered in his ‘first hundred days’ remains a benchmark against which the achievements of new administrations are measured. Few have come close. In his first three months in office Roosevelt passed 15 different bills through Congress.

It was a multi-faceted program. The vigour, confidence, breadth and imagination of the program is by modern standards extraordinary. A new bank holiday was created to calm fears and take action on the banks, America was taken off the gold standard, the Glass-Steagall Act separated retail from ‘casino’ speculative banking, new financial regulators were created, a huge programme of rural relief was complemented by an equally large public works programme, and 250,000 conservation jobs were created in national parks and forests. In addition to reforms of the banking system, the New Deal oversaw a period of compression of inequality generally, an improvement in gender equality, a major programme of new public housing and significant environmental works through the creation of the Civilian Conservation Corps.

Context and Background

Roosevelt and his administrators cut through the bureaucracy that had made this kind of emergency relief so difficult in the past. Roosevelt’s key ally Harry Hopkins at the Works Progress Administration, was able to meet and tackle fears of major winter poverty within months in 1934 by making the federal government the nation’s biggest employer. Hopkins hired 4.5 million unemployed workers over the winter of 1933-34. Overall, the Works Progress Administration put around 8.5 million people to work, providing jobs for roughly one third of America’s unemployed through the mid-1930s. Roosevelt even implemented these policies ahead of the formal publication of the theory that underpinned them, John Maynard Keynes only published his General Theory in 1936. The New Deal dominated US politics, through rival administrations for the next four decades. Divisions between liberals and conservatives over these programmes led to the Democrats losing control of Congress after the return of recession in 1937.

The Stock Market crash of 1929 led to the Great Depression – a period which overwhelmed the resources of most western nations, and the abilities of their leaders to tackle a downturn on that scale. By the time Roosevelt took office in March 1933, after 4 years of depression, a quarter of the banks in the USA had shut and about one in four Americans was out of work. Farmers were hit hard by the economic circumstances, but these also coincided with the ‘Dust Bowl’, in which large areas of farmland suffered loss of fertility due to drought conditions and farming practices that were poorly adapted to the environment.

The previous Hoover administration had attempted to rescue the economic situation with similar Keynesian ideas but on a much smaller scale. The New Deal showed what could be achieved with the political will – at least in a perceived emergency.

Enabling factors

The determination of the administration to make a real, rather than a symbolic, contribution to the problem was key to its success. It was Roosevelt’s ability to surround himself with a new kind of emergency official, like Hopkins, who was prepared to use presidential authority to break through legal and bureaucratic barriers to make things happen.

Hopkins was a social worker who had run Roosevelt’s unemployment relief programme when he was governor of New York. He made his national reputation from May 1933 setting up the Federal Emergency Relief Administration, which he ran from a makeshift desk in a corridor. He was a firm advocate of jobs not relief: “Give a man a dole and you save his body and destroy his spirit,” he said. “Give him a job and pay him an assured wage, and you save both the body and the spirit.”

Scope and evidence

  • It has been estimated that between January 1933 and December 1940, $21.1 billion was spent on public relief and federal works programmes under Roosevelt’s New Deal. Some might consider that a programme of this boldness today is politically unimaginable.
  • But the amount spent was equivalent to about 3.5 per cent of total GDP over the same period, and would have been equivalent to £50 billion a year in the UK in the post 2007-2008 crash period – an amount estimated at the upper end of the range of the cost of a contemporary ‘Green New Deal’, for the UK to shift the nation onto a rapid, job-creating, pathway of low carbon transition. In the US today it would be a fraction of the amount spent on fiscal stimulus and financial stability to maintain the economy after the recent crisis.
  • The latest version of the Green New Deal proposed by Alexandria Ocasio-Cortez specifies a number of goals, projects, and requirements. Like the UK proposal, it seeks to tackle the climate and economic crisis simultaneously and looks at job creation, decarbonizing electricity, renovating buildings for energy efficiency and much more. A Green New Deal today would cost no more than FDR’s New Deal, less than the 2008 bailouts, and see off the worst effects of the climate crisis.

Lessons for a rapid transition

  1. Determined and enlightened government can make a difference. Individual administrators who are prepared to ignore rules and put national interest ahead of ideology and vested interests are important in making things happen.
  2. Change is more possible where the influence of finance is constrained and banking is mandated to support the productive economy.
  3. In the end, the mainstream will go for new approaches to economic recovery if there is nothing left to try.

References