Roosevelt called a special session of Congress that sat until June, in what became known as “the hundred days.” Roosevelt slashed government salaries and pensions to correspond to deflation, repealed Prohibition, and attacked joblessness with programs that directly, and through grants to states and municipalities, absorbed more than seven million of the 17 million unemployed in conservation and public works (what would today be called infrastructure) projects. Farm prices were supported by a program of voting among groups of farmers (according to what they farmed) a roll-back of production in exchange for payments that assured an adequate food supply at survivable prices. A competitive government alternative to private hydroelectric power was provided by the Tennessee Valley Authority, which was the forerunner of massive rural electrification, and included a general plan of flood and drought control, irrigation, canals, and industrialization across seven southern states. More than a million urban home mortgages and several hundred thousand farm mortgages were refinanced. There was a complicated system of agreeing on codes for pay scales by industry, cartels in pricing and collective bargaining to raise both prices and wages were tolerated, and basic wages and working conditions and hours were improved. The country departed the gold standard, though gold was retained to complete intergovernmental transactions. The stock market reacted very appreciatively to all this, and it was clear throughout that Roosevelt was carrying public opinion for his program, which initially enjoyed almost universal support.
There had been very little inflation in Western Europe or America from the late eighteenth century to the World War I, but there had been intermittent severe economic retractions. Roosevelt was moving decisively to alleviate a terrible economic depression, but he was using public spending and the devaluation of the dollar to fight deflation. It was a justifiable decision; public morale firmed up and the country endowed itself with immense accretions of assets: parks, highways, airports, public buildings, bridges and tunnels, and ultimately warships and munitions, while unemployment was massively alleviated, all at bargain cost. Roosevelt was a traditional hard-currency advocate, but he started the United States, following the major European powers, down the slippery slope away from stable currency value and into the temptations of inflation.
In 1934, Roosevelt set up the Securities and Exchange Commission to regulate stock exchanges and the sale of securities issues, and various corporate practices. It responded to general disgruntlement with the excesses of Wall Street in the twenties, but was not intended to be too restrictive. Roosevelt installed as its first chairman the flamboyant (and ethically doubtful) financier Joseph P. Kennedy, answering the question of an incredulous journalist about his nominee: “Set a thief to catch a thief.” In 1935, the administration established the Social Security Board to preside over a comprehensive, joint-contributory system of unemployment and old-age and survivor insurance and pensions, and relief for the destitute, and assistance to a range of social services for the most needful. This brought the United States fairly level with social programs in other advanced countries and completed a program of providing a safety net for all the victims of the Great Depression.
By late 1936, unemployment had declined from about 17 million, 33 percent of the work force, to about 10 million, 18 percent of an expanded work force, and the vast New Deal workfare programs absorbed more than seven million more in public works and conservation projects, another 14 percent of the work force, and the remaining 4 percent were supported by unemployment insurance. Comparative statistics with other countries are misleading, as, from 1935 on, Britain, France, Germany, Italy, and Japan were drawing steadily larger numbers of people into their armed forces and defense industries, who were counted as employed, while American participants in workfare programs, doing more productive work for the state than military drilling and munitions making, were not. Yet each category of state employee was, in strict economic terms, artificial, and a form of public sector pump priming. Workfare benefits were distributed equally to whites and African Americans, though the work units were segregated, and this was something of an upward revolution for the black communities.
In 1935 and 1936, Roosevelt put through modest tax increases on large personal and corporate incomes to fend off redistributionist movements that sprang up outside the traditional political parties. He engaged in a certain amount of rhetorical fireworks about completely imaginary groups of wrongdoers—“economic royalists, malefactors of great wealth, munitions makers, war profiteers,” and so forth. There were no such groups, but by channeling the anger and frustration of the time into a cul de sac of fictitious categories of unnamed people, Roosevelt preserved the moral integrality of the nation, so he could concentrate its hostility on the true enemies of America, Nazi Germany and Imperial Japan. Had he named wealthy people, as some of his opponents did, as public enemies, civil strife would have ensued. By the end of 1935, the immediate crisis of food and shelter for millions of families was under control, and industrial production and consumer prices had increased more than 40 percent and stock prices had more than doubled since inauguration day.
There was no question of the strength of the U.S. currency or its financial system generally. The president was set at the head of a broad political coalition and enjoyed the support of a larger percentage of Americans than leaders in other important democratic countries commanded.
3. FRANKLIN D. ROOSEVELT AND THE WORLD
By the mid-thirties, foreign affairs were resuming an importance they had not had since the dying days of the Wilson administration. The new secretary of state was 11-term Tennessee congressman and then senator Cordell Hull. He had no particular qualifications for the position, but Roosevelt thought his popularity in Congress would be helpful. The president had a low opinion of the State Department from his service in World War I, and intended to conduct his own foreign policy. Roosevelt was fluent in French and German and knew Britain and the other principal Western European countries well. He had many friends and connections in the British Isles, France, and Germany.
In his inaugural address, Roosevelt exercised in many places his knack for the catchy phrase, including by promising the hemisphere that America would be a “good neighbor.” This was not altogether the conception of the country that Latin Americans had held. In December 1933, Hull supported a pact at the Montevideo hemispheric conference that abjured armed intervention, which Roosevelt publicly endorsed as henceforth the policy of the United States, a revocation of his cousin’s attitude and a considerable relief to many of the Latin American countries accustomed to the arrival of the U.S. Marines on the feeblest pretext. Roosevelt and Hull’s emphasis was on pan-American solidarity against any outside interference. Roosevelt was always concerned about German and Italian penetration of the large ethnic communities of those nationalities in Argentina and Brazil.
Roosevelt sent his school friend, and one of the few American diplomats he respected, Sumner Welles, as ambassador to Cuba in 1933, and Welles negotiated a truce between feuding factions and virtually installed what would prove a nearly 30-year preeminence of Fulgencio Batista as the Cuban leader. Roosevelt arranged a reduction in the tariff on Cuban sugar and approved the repeal of the Platt Amendment of 1901, which had constrained Cuban finances and authorized the United States to intervene in that country under almost any pretext. Roosevelt withdrew all American forces from Haiti in 1934, and in 1936 agreed to the renunciation of many of the inequities of the Hay-Bunau-Varilla Treaty of 1903 with Panama. Roosevelt effectively acknowledged the full sovereignty of the Latin American states on condition that they resisted any influences from outside the hemisphere.
The London Economic Conference opened in June 1933. The gold bloc, led by France, Italy, and the Netherlands, but joined by Britain, although it had abandoned the gold standard, sought a fixed rate of exchange with the dollar, which Roosevelt profoundly suspected as an effort to overprice the American currency, and which he considered impractical between gold-backed and free-floating currencies. He thought the other leaders, like Hoover, were focusing on secondary issues and that each nation had to put its own unemployed back to work by stimulating its own economy and reviving the velocity of transactional activity. He instructed Hull to avoid any agreement except bilateral tariff reductions, as he was, at heart, more a free trader than a protectionist, favoring lower prices for lower income earners over special protection for manufacturers, as long as the dollar was fairly valued opposite other currencies. Roosevelt effectively blew up the conference with messages sent via the cruiser
Indianapolis
from his summer home at Campobello, New Brunswick, Canada, to which he had returned, by self-navigated sailboat (through dense fog in a remarkable feat of memory of the waters and sail navigation), for the first time since he had been evacuated from it with polio 12 years before. The
Indianapolis
fired a 21-gun salute as Roosevelt’s sailboat emerged from the fog, and thousands of well-wishers lined the shore and welcomed him back.
In November 1933, after Stalin, on Roosevelt’s invitation, had sent foreign affairs commissar Maxim Litvinov to Washington, the United States and the Soviet Union exchanged embassies, under a treaty in which the USSR. promised not to disseminate propaganda or otherwise interfere in domestic American affairs. There were also promises of fair treatment of American citizens in Russia and a supposed prospect of agreement on Russian indebtedness to the United States. In a pattern that was to become familiar, Stalin reneged on all aspects of the agreement, and the anticipated spike in trade between the two countries did not materialize. Stalin discouraged imports, apart from sophisticated military hardware, which Roosevelt was not prepared to sell him (until conditions had changed radically almost a decade later), and Russian goods were not of sufficient quality to be marketable in the United States. Neither country lacked raw materials or natural resources.
Roosevelt received a steady stream of prominent Europeans, and followed European affairs closely. He believed from the beginning that Hitler would prove impossible to contain, and urged a robust resistance to Nazi advances on Britain, France, and even Italy, until Mussolini delivered himself over to Hitler like a trussed-up partridge. British prime minister Ramsay MacDonald visited in 1933, essentially on economic matters, but he was already very worn down and had no real support in the coalition the king had created for him. The talks were cordial, but came to nothing. The visit of French premier Edouard Herriot was no more productive, as French premiers came and went with great frequency. German finance minister Hjalmar Horace Greeley Schacht (his father had lived in the United States during the Civil War) also visited early in Roosevelt’s term, and advised that Germany would not be paying any debts or reparations. Roosevelt conversed with him in German, and concluded that although he was not a militant Nazi, and was economically literate, he was an authentic German nationalist of the kind that Roosevelt had known since his mother had taken him to the Wagner Ring Cycle in Bayreuth in 1896 (when he was 14 and concluded that the Germans were falsely romantic racist warmongers), and Schacht confirmed Roosevelt’s conviction that Germany was bent on a terrible revenge on her former foes.
Roosevelt listened to Hitler’s principal speeches in his office, with his entourage. The Fuehrer was interrupted frequently with massed shouts of “Sieg heil!” (Victory), and the Germans only provided the translation at the end of his remarks, sometimes in a sanitized form. While the Nazi crowds were screaming their support, Roosevelt would give his colleagues his own translation. He well knew how to stir an audience, but was appalled by what he described as Hitler’s “shrieks, and the huge crowd responding like animals.”
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Italy invaded Ethiopia in May 1935, and the League of Nations again failed to take any action. The Ethiopian emperor, Haile Selassie, was jeered disgracefully by Italian delegates when he addressed the League of Nations. Roosevelt urged Britain and France to intervene, but those powers, instead, placated Mussolini in the hope of wooing him away from the embrace of Hitler. The Hoare-Laval Pact, partitioning Ethiopia and deferring to Mussolini, was so distasteful in both countries when it was leaked by a French newspaper that both foreign ministers lost their jobs, but the policy of appeasement continued.
The U.S. Congress was heavily influenced by western isolationists, who were fierce supporters of the New Deal but parted company with Roosevelt’s Atlanticist inclinations. As tensions increased in Europe and the Far East, Roosevelt deftly moved to conciliate the southern conservatives in his party who had been unenthused by the New Deal but favored a strong military and were, for reasons going back to the Civil War, well-disposed to the British and the French.
Congress passed a Neutrality Act in 1935 and again in 1936, which urged the president to embargo arms shipments and loans to belligerents. Roosevelt signed the measures, but warned that they were more likely “to drag us into war than to keep us out.” There was a new Neutrality Act in 1937 that extended the law to the Spanish Civil War, as the previous acts were confined to wars between nations. Roosevelt was under heavy pressure from the liberal community, which was his principal constituency, to support the Republican Loyalists in Spain, the leftist parliamentary majority that resisted the fascist rebels led by Franco and were generally known as the Nationalists.