Economic hardship prompted popular unrest. Large numbers of the unemployed and economically distressed frequently took to the streets in the early 1930s. Their desire for change swelled the ranks of socialist, communist, and other opposition parties. Left activists gained certain influence among labor ranks, and workers’ movement for unionization, illegal in many industries until 1935, spread rapidly. Here is how the late Studs Terkel describes that turbulent situation:
In the early thirties, there was a resurgence of an almost dead labor movement. There were various radical activities: the Trotskyites up in Minneapolis, the communists over there in Toledo, the Socialists there, Wobblies in Cleveland, Detroit and so on. The union literature was like the labor literature of a century ago—looking toward a successor to capitalism. . . . The literature carried a vision [2].
Labor and other grassroots’ support for third party candidates in the 1932 presidential election resulted in unprecedented number of votes for those candidates. Third-party votes were even more impressive in congressional and local elections [3].
Business and government leaders clearly understood the gravity of the situation and the need for reform to fend off revolution: “F.D.R. was very significant in understanding how best to lead this sort of situation. . . . The industrialists who had some understanding recognized this right away. He could not have done what he did without the support of important elements of the wealthy class” [4].
The core principle of the ensuing big business-government consensus reforms, known as the New Deal, was that government intervention must be limited to stimulative and distributive measures, and that the management of industries and businesses should be left to the private sector. While this would provide relief to the economically hard-pressed, and thus reduce social tension, it would also stimulate the economy and promise stable growth and rising profitability.
Judgments of the New Deal efficacy in terms of turning the economic contraction of the 1930s to expansion are far from uniform. While the majority of economic historians tend to (romantically) idealize and exaggerate its effectiveness, others tend to err in the opposite direction by downgrading the positive effects of the New Deal reforms.
Actual achievements of those reforms, however, seems to lie somewhere in between: while the U.S. economy remained anemic until 1941, and the long post-war expansion did not start until late 1940s, the fact remains that the reforms did succeed in stemming the declining tide of the Depression and restoring the waning confidence in the market and the government.
For the purposes of our discussion in this essay, the degree of the effectiveness of the New Deal reforms is of secondary importance. The primary point is, rather, to show that crisis periods also provide opportunities for change; and that meaningful change in favor of the working class and other grassroots requires pressure from below.
2. Stagflation of the 1970s and Reaganomics
The long economic expansion of the immediate post-World War II period, known as the Golden Age of the U.S. economy, came to an end by the late 1960s and early 1970s. The expansion was then followed by a decade of economic difficulties that came to be known as the “stagflation” of the 1970s, which meant a combination of stagnation and inflation, or high rates of both unemployment and inflation.
As the twin evils of stagnation and inflation dragged along throughout the 1970s, and the purported “self-correcting powers” of the market mechanism proved incapable of reversing the worsening economic crisis, the ruling elites (once again) rolled up their sleeves and rushed to the rescue of the bedeviled market.
The long contractionary economic cycle of the 1970s was, of course, not nearly as severe an economic problem as the Great Depression of the 1930s. Accordingly, the economic hardship of the grassroots and, therefore, the people pressure for reform was not as compelling or threatening to the established order as it had been during the Great Depression.
These differences in the social and economic conditions between the two crisis periods of the 1930s and 1970s help explain why the reforms or restructuring measures that were implemented in response to the Great Depression were more radical and more attentive to the needs of the masses than those that were implemented in response to the economic difficulties of the 1970s.
The overwhelming grassroots’ reaction to the economic hardship of the Great Depression, and the concomitant threat to the capitalist order, had forced various factions of the ruling class to put their differences aside and mobilize behind FDR’s New Deal reforms that, as mentioned earlier, were designed to both rescue the capitalist system and alleviate poverty, unemployment and economic distress.
By contrast, the neoliberal or supply-side restructuring measures that were put into effect by the business and government leaders in response to the 1970s stagflation took place nearly free of any significant pressure from below. Not surprisingly, the interests of the workers and other economically-distressed classes were relegated to be served through the so-called trickle-down economics.
In the absence of effective people pressure in the late 1970s and early 1980s, even a large segment of the Democratic Party, the so-called Reagan Democrats, joined the Republican Party in an orchestrated effort to undermine the New Deal and other safety net programs and promote President Reagan’s “trickle-down” economics.
