USA - Roosevelt's "New Deal" - big state bailout of big business

Nov/Dec 2008

Since the present crisis broke out, there have been numerous references to the "New Deal", the policy implemented in the 1930s under president Roosevelt. More often than not, particularly in trade- union and Labour circles, this policy was presented as a model of sorts and the best possible way to help the working class to weather the crisis. However, this was neither the aim nor the result of the "New Deal" - as is shown in this article, originally published by the comrades of the American Trotskyist group 'The Spark', in their quarterly journal ('Class Struggle' - #59 - Aug-Sept 2008)

This spring marked the 75th anniversary of the introduction of Franklin Delano Roosevelt's New Deal. In the depths of the Depression, the Democrats swept into the White House, took control of Congress, and in 100 days pushed through 15 massive bills. Two years later, Roosevelt and Congress pushed through a second phase of the New Deal. Ever since, the Democrats have taken credit for rescuing the economy, carrying out massive public works that put the jobless to work, starting up new social programs for the aged and poor, and - last but not least - granting new rights to labour unions.

In this election year, 75 years later, with the economy in a state of free-fall and the gap between rich and poor at pre-1929 levels, many might be tempted to look to what Roosevelt did during the Depression as a model of how government intervention can ride to the rescue of the economy and the "common man." But they would be mistaken.

The economic plunge

When Roosevelt took office on March 4, 1933, he pronounced those now famous words: "The only thing we have to fear is fear itself".

In fact, there was plenty to fear. The October 1929 stock market plunge had detonated an unprecedented economic crisis. In three years, stocks fell 83% from their peak. Huge amounts of fictitious value, built up during the 1920s speculative boom, evaporated, bringing on a general liquidity crisis, that is, greatly reducing companies' access to money. Companies couldn't pay their bills or wages. Production dropped. Bankruptcies rose sharply. The whole financial system began to crumble, driving down production even further in a vicious, self-reinforcing cycle.

The depressive forces spread and reverberated throughout the US, as well as internationally, since the US was already the world's richest economy.

The economic plunge was momentous. Between 1929 and 1933, the US Gross National Product (GNP) declined by 33%. Investment declined by 89%. The value of residential construction fell 75%. Iron and steel production fell 59%. Auto production fell 65%.

Corporations had made close to $10bn in profits in1928. In 1932, they registered a net loss of over $3bn. Smaller companies were hit the hardest. The larger the company, the greater the chance that it was still able to make a profit, even though it was usually smaller than before the Depression.

Amidst this collapse, the capitalist class protected itself from the consequences of its own system's crisis. In the first four years of the Depression, corporations paid out $17bn dollars more in dividends than they made in profits after taxes. That is, they were draining their corporate assets and weakening the financial health of their companies. The capitalists used their control over the corporations to cannibalise them.

Poverty amidst plenty

The working class was not so lucky. Workers were thrown out on the street with no means to make a living. Historians estimate that unemployment rose from 9% in 1929 to 25% in 1933. Counting the families of the unemployed, this hit 30 million people out of a population of 122 million. Over half of all employed workers were working part-time. Those who worked suffered wage cuts - on top of the cuts in hours. The most hard-hit were those in agriculture, where it is estimated that wages declined about 50%. Manufacturing workers had their wages cut by 9% between 1930 and 1931. Bituminous coal miners' wages were cut by 16% in the same period.

Between wage cuts and unemployment, the total income of the working class was slashed drastically. The total income earned by auto workers declined in 1932 to 38% of 1929 earnings, with comparable declines in other industries. In an industrial city like Birmingham, Alabama, in one congressional district with 108,000 wage and salary workers, only 8,000 had their normal incomes.

As awful as it was, in many ways, the Depression was nothing new. Much of the US population already suffered what some historians call the "old poverty". At least one-third of the population, more than 40 million - the "ill-housed, ill-clad, ill-nourished" that Roosevelt referred to in a famous speech in 1937 - had already been destitute for years before the Depression hit. This included almost the entire black population, a large part of the Southern white population, and most of the aged. Throughout the 1920s, major sectors of the economy had already been in a depression, including agriculture and older industries such as mining and textiles.

What the Depression did was to amplify the already existing chronic, endemic poverty. In city slums and small mining and rural towns, malnutrition worsened, as well as tuberculosis, typhoid, diphtheria and pellagra. Millions were forced to live in tents or ersatz shacks, often called "Hoovervilles."

What had broken down was not the ability to produce, but the economic system. While the jobless wore threadbare clothing, farmers could not market their cotton. While children trudged to school in shoes soled with cardboard, shoe factories in Lynn and Brockton, Massachusetts had to close down six months of the year. While people went without food, crops rotted in the fields. Western ranchers, unable to either market their sheep or feed them, slit the animals' throats and hurled their carcasses into canyons. In the Plains states, breadlines marched under grain elevators heaped high with wheat.

Thus, misery and want grew exponentially amidst overflowing plenty.

Government failure under Hoover

Contrary to popular belief, the Hoover administration did try to deal with the stock market crash and economic plunge. The Federal Reserve increased its emergency lending to banks through its discount window. Hoover tried to put together a government-business partnership to coordinate efforts to stop the slide. The Federal Farm Board tried to support prices for agricultural products by buying up crop surpluses. Hoover tried to come to the aid of the construction business by encouraging stepped up public works program on roads, bridges, public buildings. As the economic situation became more serious, the Hoover administration created the Reconstruction Finance Corporation (RFC), which made loans to the states for public works, as well as to private banks, railroads and agriculture credit organisations. Hoover also started the Federal Home Loan Bank system to assist the financing of homes.

Such measures didn't begin to stem the crisis.

Moreover, protectionist measures to try to prevent the international economic crisis from reverberating in the US, most famously the Smoot-Hawley tariff measure that Hoover signed into law in 1930, only helped instigate retaliatory measures from other governments, drastically reducing world trade and investment, thereby considerably aggravating the Depression.

Even worse, the government did nothing to protect those hardest hit by the Depression. Relief for the poor had traditionally been the responsibility of state and local governments and local charities. While local, state and business leaders did increase relief measures, their combined resources were negligible. In New York City, for example, relief increased from $9m in 1930 to $58m in 1932 and charitable giving increased five times. But it all came to less than one month's loss of wages for the 800,000 New Yorkers out of work. And it was much, much worse in other cities, not to speak of in smaller towns and rural areas, where there was almost no relief or charitable aid.

Hoover became the symbol of the Depression. There were "Hoovervilles" and the "Hoover salute," empty pockets out. When Hoover campaigned for president, he and his entourage were often met by catcalls and pelted with rotten fruits and vegetables. He could not venture out of the White House without an extraordinary, beefed up escort by the Secret Service to protect him from an angry and desperate population.

The first New Deal: rescuing private ownership

Upon taking office, Roosevelt appeared to attack big business. In his March 4 inaugural address, he lashed out at "the money changers [who] have fled from their high seats in the temple of our civilisation". Roosevelt then pledged: "We may now restore that temple to the ancient truths". And he promised to "wage a war against this emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe".

The first law of the New Deal was aimed at the banking crisis. By the end of 1932, 5,200 commercial banks had failed, more than one out of five. Virtually every bank in the country had closed by the spring of 1933. In a sense, most of the financial institutions that remained open were failing. The banks' loans were not being repaid. And they were not able to provide further credit. The entire banking system was almost frozen.

Roosevelt's emergency banking legislation extended government assistance to private bankers to reopen their banks. The law enabled the Reconstruction Finance Corporation (set up under Hoover) to buy preference shares of banks, expanded the capacity of the Federal Reserve Board to issue currency, and authorised the reopening of the banks under strict government regulation. It was a thoroughly conservative measure, which had been drafted largely by private bankers and former Hoover administration officials, including Arthur Ballantine, Hoover's Under Secretary of the Treasury, who continued in the same post under Roosevelt. This government support allowed the banks to reopen, and the same bankers were back in business "subscribing" to Roosevelt's "ancient truths" of making money.

Three months later, Congress passed the Home Owners Loan Act (HOLA), which bailed out the real estate and financial interests rather than the homeowners. Without having to scale down the debt that was owed, the banks could turn in defaulted mortgages for guaranteed government bonds. The HOLA gave no relief to homeowners who were unemployed and foreclosed more mortgages than the lenders themselves.

What followed were more laws to rescue the major branches of the economy, written by the big companies in those industries. An omnibus law to address the agriculture crisis, the Agricultural Adjustment Act (AAA), was aimed at lifting prices to farmers by restricting production and paying farmers not to grow crops. Since it was based on acreage, the biggest farmers reaped the lion's share of the benefits from the bill. The small farmers got very little, and the tenant farmers and sharecroppers who owned no land got nothing. On top of that, the reduction of crop acreage dictated by the new legislation drove the tenant farmers and sharecroppers off the land.

To address the crisis of private industry, Roosevelt pushed through the NIRA, the National Industrial Recovery Act. This act was written under the influence of such business leaders as Gerard Swope of General Electric and Henry I Harriman of the US Chamber of Commerce. It codified the government-corporate partnership that Hoover had tried to champion, with the government overseeing a vast process of cartelisation. The antitrust laws were suspended. The biggest companies divided up whole industries and markets among themselves. They fixed prices and wages. And they drove out the smaller companies.

The two laws, the AAA and the NIRA, were aimed at increasing the profits of the capitalist class, agricultural and industrial. The biggest companies in each industry were induced to negotiate a kind of non-aggression pact in which they all agreed not to undercut each other by lowering prices, while they all cut production and boosted prices together.

Thus, the government rode to the rescue of corporate profits, by encouraging an even greater reduction in production and construction. That could only worsen unemployment.

Roosevelt's international financial policy was also set in the first hundred days. Under Roosevelt, the US government tried to devalue the dollar and to take it off the gold standard. Not only would the US government pay off its debts in cheap dollars, but it also would allow US exports more easily to undersell foreign competition. When the big European powers tried to set up a conference in London in June 1933 to decide how to stabilise the major currencies in order to boost foreign trade, Roosevelt refused to participate. This not only killed the London conference, but ratchetted up the international economic warfare that, in the end, was a prelude to World War 2, five years later.

Public works for the capitalists

Finally, the government initiated massive public works projects, stepping in to do what the capitalists themselves had failed to do over the previous decades.

Much of US infrastructure was mired in the 19th century: unpaved roads, rickety bridges, inadequate water and sewage treatment systems or none at all, national parks and forests damaged by deforestation and erosion, lack of flood control for entire regions of the country. And while the cities had electricity, most of the countryside remained in the dark, leaving 80% of the rural population without electricity.

One of the first acts of the New Deal was the creation of the Tennessee Valley Authority (TVA). The Tennessee River cut through seven states of the impoverished and underdeveloped South. By 1933, more than 30% of the population there was affected by malaria, and annual income was only $639 per year, with some families surviving on as little as $100 per year. Much of the land had been farmed too hard for too long, eroding and depleting the soil. Crop yields had fallen along with farm incomes. The best timber had been cut. In Mississippi, only one farm in 100 had access to electricity. The TVA would build multipurpose dams to serve as reservoirs to control floods and at the same time generate cheap hydroelectric power. The Authority, which became a public corporation, would manufacture fertilizer, dig a 650-mile navigation channel from Knoxville to Paducah, engage in soil conservation and reforestation. The TVA, with its cheap electricity, also drew new industries into the region.

The Army Corps of Engineers built the Grand Coulee dam along the Columbia River, which backed up water into a lake 150 miles long, generating power to allow the industrialisation of the Pacific Northwest. The dam made possible the reclamation of more than a million acres for agriculture.

The Civilian Conservation Corps (CCC), using unemployed young workers mainly from the big cities, built parks and planted trees. Under the CCC an estimated three billion trees were planted from 1933 to 1942. This was crucial, especially in states affected by the Dust Bowl, where reforestation was necessary to break the wind, hold water in the soil, and hold the soil in place. The CCC was responsible for more than half the reforestation, public and private, accomplished in the nation's history.

The biggest public works program was the Works Progress Administration, which was responsible for building the Triborough Bridge and Lincoln Tunnel in New York, the San Francisco Bay Bridge, Hoover Dam and Washington's National Airport (now named after Ronald Reagan). It gave Texas the port of Brownsville and San Antonio its River Walk. It linked Key West to the Florida mainland and spanned rivers for Oregon's Coastal Highway. All told, the WPA built 78,000 bridges and viaducts and improved 46,000 more. It constructed 572,000 miles of rural roads and 67,000 miles of urban streets. It also built and improved 39,000 schools, 2,500 hospitals and 12,800 playgrounds.

In other words, the government was doing for society what the capitalists did neither for society nor for themselves. They did not use their vast wealth to invest in the infrastructure nor in industry. This lack of investment blocked their own development. So, the government stepped in, using taxpayers' money.

Aggravated working conditions

Nonetheless, all of these public works projects did not even begin to put a dent in the unemployment rate. Nor did they improve the situation of the working class. Government projects may have employed, at different times, millions of workers laid off by private industry. But even at their height, this constituted only a small fraction of the unemployed. Moreover, the projects were set up in such a way as to keep down wages in private industry. For example, any worker who refused a job in private industry was not eligible for a WPA job. And of course, the wages these programs paid were minimal and much lower in the poorest regions of the country, thus leaving in place low wage bastions for the capitalist class.

Hiring was carried out along the lines of Jim Crow racial segregation. And the conditions of work were often difficult, the hours long. The Nation magazine called them "federal work gangs". To cap it all, the projects were controlled by local political bosses who ran them as a patronage machine to consolidate and extend their power. For instance, in New Jersey, everyone working in the WPA had to kick back a 3% "tithe" to the Democratic political machine of Frank Hague.

The Roosevelt administration did almost nothing to expand the social safety net for the rest of the unemployed. The Federal Emergency Relief Administration, FERA, headed by Roosevelt's lieutenant, Harry Hopkins, was an extension of unemployment relief efforts of the Reconstruction Finance Corporation set up by Herbert Hoover and the US Congress in 1932. While it was supposed to provide states and local governments with some extra money to extend relief benefits to the unemployed, the money was negligible. In its first year, the FERA disbursed about half a billion dollars for the 15 million unemployed, which amounted to an average of $33 per person annually, less than a pittance.

And the government continued other attacks. One of the first acts of the New Deal was to grant Roosevelt sweeping powers to slice $500m from payments to veterans and the pay of federal employees, cutting them in half! This was done in the name of being "fiscally responsible." In other words, working people were paying for the expensive New Deal programs that served the interests of Wall Street and the capitalist class.

In this sense, Roosevelt's New Deal was not doing anything different than private business. Both were using the Depression to push down the cost of labour. In no way did the New Deal try to end nor suspend the capitalists' war on labour.

The government confronts a social explosion

In different ways, the working population and the poor responded to the attacks.

In the earliest periods of the Depression, the responses had been isolated and less organised, reflecting the worst desperation. These included hunger marches, collective efforts to stop foreclosures on homes and farms and take food and fuel from warehouses and businesses. In the South, tenant farmers and sharecroppers thrown off the land organized themselves into such groups as the Southern Tenant Farmers Union, which often defied Jim Crow by bringing together black and white farmers. Some of these fights were successful. More often, they were beaten back by the organised terror of the police and vigilantes - as during the Ford Hunger March in 1932, when 4,000 unemployed workers in the Detroit area marched from downtown to the Ford River Rouge plant demanding jobs. The Dearborn police and Henry Ford's private army greeted the marchers with machine gun fire, killing five and wounding over two dozen more.

Perhaps one of the most famous of these early protests was the Bonus March of 1932 in which 20,000 veterans, along with their families, descended on Washington DC. In 1924, Congress had promised veterans of WW1 a bonus, but withheld payment until 1945! The march was started by unemployed and penniless veterans in Portland, Oregon who decided to demand this payment and who then trekked across the country. As word spread of their march, they were joined by thousands more. The veterans and their families camped out near the Capitol, awaiting Congress's decision. When Congress gave them a cold shoulder, most of the veterans refused to leave. Hoover ordered US troops led by Douglas MacArthur to drive them and their families out at bayonet point and using tear gas, while setting their encampments on fire.

The Democratic Roosevelt administration differentiated itself from the Republican Hoover administration by openly courting the cooperation of union officials. It got them to support the wage and price codes under the National Recovery Administration (NRA), pretending that the New Deal was a partnership between government, private corporations and unions. The NIRA made a token promise to all industrial workers to allow them "to organise and bargain collectively through representatives of their own choosing" in the famous Section 7A of the NRA. The NRA also set up a number of labour boards, supposedly to "help" the workers set up unions.

Many union officials declared that this marked a historic shift - that Roosevelt and the New Deal were on their side. In Roosevelt's speeches, he seemed to confirm this:

"The workers of this country have rights under this law which cannot be taken from them, and nobody will be permitted to whittle them away", said Roosevelt. But there was a catch, said Roosevelt: "No aggression is necessary now to attain these rights.... The principle that applies to the employer applies to the workers as well and I ask you workers to cooperate in the same spirit".

It was all a lot of double talk, just like the NRA and its labour boards were little more than bureaucratic red tape meant to slow and divert union organising. Very quickly many union organisers bitterly referred to the NRA as the "National Run Around".

There was a sharp rise in strikes, which jumped from 841 in 1932 to 1,695 in 1933, the first year of Roosevelt's term in office. Even more dramatically, the number of strikers almost quadrupled from 324,000 to 1,168,000. Many strikes were in protest of the new low wages that industries were trying to impose under Roosevelt's NRA and the discriminatory "merit clauses" which employers used to fire workers and impose harsh working conditions and speed-up.

When workers went on strike, the companies and the government dropped all pretense and responded with furious violence. In reporting on six months of the "New Deal", from July 1, 1933 to January 1, 1934, the American Civil Liberties Union charged that "At no time have there been such widespread violations of workers' rights by injunctions, troops, private police, deputy sheriffs, labour spies and vigilantes. More than 15 strikers have been killed, 200 injured and hundreds arrested since July 1. More than 40 injunctions of sweeping character have been issued.... Troops have been called out in half a dozen strike districts. Criminal syndicalist charges are being used against active strike leaders...."

1934: The general strikes

Nonetheless, the workers movement grew. The following year, 1934, marked a giant leap forward with four major strikes.

The largest was the Textile General Strike, called by the United Textile Workers (UTW). From February 1933 to June 1934, the UTW grew spectacularly, going from a membership of 25,000 to 250,000. In the months preceding the general strike, the workers had already carried out smaller, local strikes, dry runs that pushed the UTW national leadership to call the general strike. The general strike spread like wildfire, often with flying squadrons of pickets in trucks and on foot who went from mill to mill, calling the workers out. Within a week, the strike had spread to more than 400,000 workers in 20 states from New England to the southern Piedmont, in big cities and small company towns, shutting down the entire textile industry. In the South, it included black and white workers, thus taking on Jim Crow and the Klan. The workers confronted cops, tens of thousands of national guardsmen, and company goons, who carried out mass arrests of picketers and tried to drown the strike in blood. After 16 days, the strike was defeated. But it was still the biggest strike since 1877, and it shared many similarities to the insurrectional character of the 1877 strikes.

A general strike also shut down San Francisco. This strike began when 10,000 to 15,000 longshoremen tried to gain a union. Every day for weeks, the workers battled cops and company goons. The strike then spread to the other workers on the San Francisco waterfront, including seamen and warehousemen, and also to other ports on the West Coast. After the cops opened fire on a demonstration, killing two workers and wounding several hundred, martial law was declared and the national guard was brought in. The workers responded with a four-day general strike, involving over 150,000 workers, not just in large workplaces, but also in barber shops, laundries, theatres and restaurants. Highways were blockaded and all incoming shipments were barred. The workers were militarily driven from the streets and the capitalists at first stonewalled. But the enormous power of the strike eventually pushed the capitalists to agree to major concessions, propelling the spread of unions to the rest of the ports on the West Coast, as well as the East Coast.

Some of 1934's strikes were out-and-out victories.

In Toledo, Ohio, strikers at an auto parts company were joined by unemployed workers. They fought pitched battles for more than eight days against the cops and the national guard which was armed with tanks and artillery. Eventually, the company and government ceded, forced to grant a union, giving an early toe-hold to mass organising in the auto industry.

In Minneapolis, Minnesota, a strike by coal haulers spread to truck drivers and warehouse workers throughout the city. Over a period of seven months, these workers carried out four strikes that grew in size, organisation and militancy. When company goons and cops murdered two strikers, the governor called in the national guard and declared martial law. But here too, the strikers did not back down, but forced the local bosses to grant union recognition, this time to the Teamsters. This victory opened up the northern Plains states to union organisers.

Throughout the country, strikes were growing more militant, workers were taking on the forces of order, including the national guard and its tanks. In effect, there was a burgeoning civil war.

On the Labour Day weekend of 1934, a full-page New York Times article posed the problem for the capitalist class and government: "What can be done to stop strikes?... It is not a new issue, but in 1934, it is one which is raising, as it never has raised before...." In other words, how could the Roosevelt administration bring about " labour peace"?

The second New Deal

The workers' movement had changed the relationship of forces. The bosses and government could no longer impose their order on the workers as they wished. To try to buy time and slow the movement, the Roosevelt administration presented a new package of reforms in 1935, its Second New Deal.

The first reform was the Social Security Act, an omnibus set of provisions that included national old-age pensions, survivors' benefits, unemployment benefits, and welfare aid to families with dependent children.

The Social Security Act constituted an historic concession. For the first time, the government had been forced to offer social rights, known as "entitlements." It promised to provide a social safety net, so that at least people would not starve to death.

Nonetheless, Social Security had severe limits. Domestic workers and farm labourers were not eligible for old-age pensions, nor were most of the black population! Besides that, Social Security pensions were not to be funded out of the general fund, but a special fund set apart, based on the principle of a kind of private insurance policy, in order to try to limit the growth of benefits. A flat tax was to be taken out of wages from the first dollar earned - a regressive tax (favouring the rich over the poor), if ever there was one. And, the first old age pensions would not begin to pay benefits until half a decade after the act was passed, which meant that the government got to keep the taxes that it collected, in those first years, without paying anything out. It was a backdoor way of increasing the revenue that the government had at its disposal.

Other portions of the act were just as limited. The unemployment benefits, for example, were not set at standard national levels, but at the state level and were funded by the state and federal governments. In effect, this allowed the low-wage states to keep their unemployment benefits much lower than the national average. When the benefits were exhausted, usually after 15 weeks, the plans offered no other forms of relief - except perhaps a very low-paying job with the WPA.

And obviously, the small benefits the government added were aimed at slowing down and disorienting the growing mobilisation of the very working class that had won these concessions.

The second big piece of the Second New Deal was the National Labour Relations Act, sponsored by New York Senator Robert Wagner Sr. In May 1935, the Supreme Court ruled unanimously to strike down the NRA, which had included Section 7A, the government's token recognition of "collective bargaining" for unions. Almost immediately afterwards, Congress enacted Wagner's National Labour Relations Act which restored the provisions of Section 7A, and proposed to set up a National Labour Relations Board with the power to determine whether workers who had organised a union would be allowed to have it recognised. And, it would also decide whether a company had committed an "unfair labour practice." In other words, it was moving de facto, across the board, to block strikes.

Of course, these questions are really decided by the relationship of forces. By telling workers that they had to look to the government for authorisation of their unions, it was a way of saying that they couldn't have a union unless government bureaucrats authorised it, instead of the workers deciding on their own how they organised themselves.

The capitalists' turn

Congressional support for the 1935 National Labour Relations Act was overwhelming, with the Senate voting 63-12 for it. But the new law was opposed by the National Association of Manufacturers, indicating that as late as 1935, an important part of the capitalist class did not support all of Roosevelt's policies. They distrusted what they saw as the growing interference of government under Roosevelt. They wanted the government to crack down on labour with a much firmer hand in order to forestall the threatening unionisation of their workforces.

The Du Pont family, which controlled General Motors, and conservative leaders of the Democratic and Republican parties, which included Al Smith, one of Roosevelt's old backers, formed the American Liberty League in open opposition to the Roosevelt administration, under the guise of "upholding the constitution" and "private property" and "opposing radicalism."

However, in 1936 and 1937, the workers movement surged ahead with sit down strikes and factory occupations, which began in rubber and culminated in auto. GM, controlled by the same Du Pont family that had opposed Roosevelt's policy, was hit by sit down strikes. Unable to defeat the strikes, GM shifted gear and agreed to "grant" union recognition. But it refused to negotiate an agreement with the actual leaders of the massive strikes. Instead, it chose John L. Lewis, the long-time head of the United Mine Workers, with whom to strike a deal, behind the workers' backs.

Abandoning their position of opposing unions, a significant section of the US capitalist class had come to see the advantage of what Roosevelt had set up, that is, a policy of seeking officials inside the union movement with whom to collaborate. This was confirmed almost immediately after the GM agreement, when US Steel, by far the largest steel company in the country, offered union recognition - without a strike - to Lewis's old United Mine Workers apparatus, which had been reconstituted as the Steel Workers' Organising Committee, thus imposing a union bureaucracy on the steel workers from the beginning.

Four years later, this policy took root, after a massive strike shut down Henry Ford's River Rouge complex employing close to 80,000 workers in Dearborn, Michigan, Ford's fiefdom. Unable to defeat the strike, Ford offered to "grant" unionisation - but only if the workers agreed to take part in a ballot organised by the government. The idea that workers could not organise unless they had government authorisation was being set in stone.

In 1940, Leon Trotsky characterised this as "the degeneration, of modern trade union organisations... their drawing closely to and growing together with the state power." He drew especial attention to the strike movement in the US and the formation of the new unions. "In the United States the trade union movement has passed through the most stormy history in recent years. The rise of the CIO is incontrovertible evidence of the revolutionary tendencies within the working masses. Indicative and noteworthy in the highest degree, however, is the fact that the new "leftist" trade union organisation was no sooner founded than it fell into the steel embrace of the imperialist state".

As soon as the workers built their unions against the opposition of the companies and the government, the officials of these unions were integrated into a partnership with both. This partnership would contain and channel the militant fights and organisations with the promise that the companies and government had been "convinced" to be more "reasonable." They pushed the idea that it would now be possible to get the government to take their side, and, amongst the politicians in high places, there were supposedly powerful "friends of labour", who were not to be "alienated" by the workers taking their struggles too far.

A balance sheet

Of course, this "New Deal" with the union bureaucracy did not at all spell an end to the attacks against the working class and its activists. On the contrary, these continued, often under the guise of an anti-communist witch-hunt. In 1938, a newly formed House Committee for the Investigation of Un-American Activities led by a Texas Democrat, Congressman Martin Dies, held hearings into the CIO, supposedly a seminary for Communist sedition. Two years later, Roosevelt signed the Smith Act stipulating that non-citizens had to register with the government and that anyone convicted for advocating communist ideas could be prosecuted as a threat to national security. These acts were aimed at the workers' organisations, since most of the organisers of that time were communists.

The government continued to break strikes. In 1941, Roosevelt's government actually sent in federal troops to put down a strike of aircraft workers at North American Aviation in Los Angeles. One of the leaders of this strike was Wyndham Mortimer, a member of the Communist Party, who had been one of the original organisers of the UAW at many GM plants in Michigan and Ohio. Later that year, the government used the Smith Act to prosecute and imprison leaders from the Socialist Workers Party (SWP) and those allied with them in the Teamsters union, which had led the 1934 Minneapolis strikes and had just successfully organised long-haul drivers in the northern Plains states.

What became known as the McCarthy witch-hunt did not start with the conservative Republican McCarthy in the 1950s, but with the liberal Democrat Roosevelt in the late 1930s.

Nor were Roosevelt's New Deal programs able to end the Depression. Certainly, there was a partial economic recovery, between 1933 and early 1937. But above all, it was a recovery in corporate profits, which went from a net loss in 1933 to a net profit of $7bn in 1937. Despite these profits, businesses invested almost nothing and hired even less, leaving the unemployment rate stuck at over 14%.

Against this backdrop, Roosevelt reduced government outlays in June 1937, especially on public works. He cut the WPA rolls drastically, claiming "fiscal responsibility," and additionally cut hundreds of thousands of government jobs. The economy plunged. In October 1937 a new panic cracked the stock market, and it fell much faster than after the October 1929 crash. Steel production in the last quarter of the year fell to one-fourth the level of the previous year, pacing a 40% decline in industrial output. By the end of that winter, more than 2m workers had received layoff notices, raising the unemployment rate to 20%. In Detroit, the claimants register ballooned to four times their 1937 size. The worst conditions from the earlier part of the decade reared their heads again.

Some called it the "Roosevelt Recession." It was a depression within the Depression. Only when the Roosevelt administration began to pour record amounts of money into production for war did the economy begin to recover. In other words, all the New Deal programs, all the public works projects did not pull the capitalist economy out of its crisis. Economic recovery was finally a product of the war. What came out of that new investment and production, of course, was the slaughter of tens of millions of people, the destruction of numerous cities, towns and villages, mass starvation and homelessness, along with death camps.

Humanity had to pay an unbelievable price, twice over, for the break-down of the capitalist system. First, in the form of the Great Depression, and then an even bigger price for the supposed "cure" from the Depression, the mass slaughter of World War 2. So no, the Roosevelt New Deal cannot be held up as a model of how to ameliorate conditions for humanity from the insane workings of capitalism.