New Deals

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Colin Gordon. New Deals: Business, Labor, and Politics in America, 1920-1935. New York: Cambridge University Press, 1994. Pp. xii, 329. ISBN 0-521-45755-6. (pbk.).

Summary

Colin Gordon begins his study by stating that "The New Deal is the central landmark of the modern U.S. political economy." (1) Accepting the centrality of the New Deal as a given, Gordon investigates the particular aspects of the political economy of the United States which are a product of the decentralized nature of the federal system. The peculiar nature of that system creates instability in the political economy due to multiplicity of power centers. During the early twentieth century, that instability was magnified because the national government was weak and largely abstained from an active role in the national economy, and the rapid industrialization of the economy was creating new economic and social imbalances which were unanticipated and unprecedented.

Industrial capitalism was increasingly productive, thanks to technical innovations and improved management techniques, but this rapidly increasing productivity was not coupled with increasing efficiency or stability. Even as industrialization was increasing the productivity of the manufacturing sector, the movement from skilled to unskilled labor meant that a decreasing share of the workforce were able to negotiate what would later be called a "living wage." At a time when American society was also beginning to transition from a producer-based economy to a consumer-based economy, America wasn't producing enough consumers for everything it produced.

These issues had been developing through the first two decades of the century, the full impact of this instability and looming economic slowdown was temporarily abated due to the increased demand for the full production capacity of America's industrial and agricultural capacity during World War I, the resulting national organization of the economy on a war footing, and the increase in organized labor's clout as the war increased wages and the demand for labor. However, when the war ended labor lost much of its leverage, and at the same time agricultural America found itself deeply in debt, as farmers had sought to meet wartime demand by plowing up millions of acres of marginal farmland and buying mechanical farm machinery on credit. The end of the war soon closed foreign markets, and left farmers burdened with mortgages incurred to fill a demand that the Armistice took away.

So while the 1920s was a decade of overall prosperity, that prosperity was not evenly distributed, and it masked a fundamental instability in the economy which the business community sought to address within the confines of America's federal political system. Business leaders sought to simultaneously create mechanisms to regulate the market and rationalize competition and development while also keeping themselves free of unwanted government control and regulation. This process was both contradictory and a rational development of the federal, decentralized system of government. Many different schemes were tried, including associationalism, the creation of voluntary, self-policing organizations between competing firms in the same industry; however, such efforts were impossible to enforce and usually collapsed in the face of economic hardships. Despite the defeat of labor unions in the wake of the 1920 Red Scare and failed strikes, some business leaders turned to conservative unions such as Gomper's AFL and the Teamsters to rationalize the labor market within their industries. But the legal and judicial environment of the time severely limited union strength, and the situation varied from industry to industry depending on factors such as how labor-intensive the field was, whether or not radical unions such as the IWW or radical elements derived from it would be involved, etc.

The New Deal, then, was a continuation of that ongoing dynamic, which partly explains why so much of the New Deal was business-friendly--in theory. Gordon notes that many radical critics of the New Deal have failed to understand the distinction between being pro-business intentions versus pro-business results. While some business opposition to New Deal reforms might indeed have been as hypocritical and self-serving as they appeared, in many cases the results were not all that business might have hoped for.

Commentary

Kirk Johnson, Spring 2013

Gordon's analysis falls somewhere between radicals who see the New Deal as a conservative tool of the business establishment, and those who see in the New Deal an orderly and systematic co-optioning of the market by the national government. In his account, the New Deal was the messy product of compromise and improvisation firmly grounded not in the ideals of the Progressive era but in the efforts in the private sector to organize and rationalize the national economy. As he puts it, "just as neoclassical economists routinely exaggerate the ability of the market to generate optimal outcomes, radical theorists too often mistake business's organizational advantages for lasting organizational success." (13)

The main theme here is that while it is true that business interests held strong advantages in the competition for power within America's decentralized federal system, those advantages weren't always decisive, and business leaders were hardly a unified class who were able to work together towards a common purpose. Different industries had different interests, and within industries there were regional variations, ethnic, racial, and even gender divisions, and approached the prospect of cooperating with unions to varying degrees.

His accounts of the National Recovery Act, the Wagner Act, and the Social Security Act document the important role that business interests played in crafting each respective effort to rationalize national markets and labor conditions, as well as the limits of those efforts. The dynamic of the New Deal era strongly shaped the shape the emerging American welfare state would take. It is uniquely reliant on private benefits and politically quite vulnerable.

As for labor relations, the New Deal reforms ultimately codified a business-friendly, productivity-oriented model. The outbreak of World War II put a hold on future development, but immediately after the war ended the "managerial" nature of New Deal reforms was reasserted, a situation encapsulated by the Taft-Hartley Act of 1947. Gordon states that "the road from Wagner to Taft-Hartley to the present clearly marked the boundaries of labor's political and economic power." (302).

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