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Commentary :: Social Welfare
America Before a New "New Deal"
21 Aug 2007
The laissez-faire capitalism as practiced in the US turned out to be a flop. The New Deal and the welfare state built by Roosevelt and his direct successors marked by a relative income leveling was slandered, delegitimated and then destroyed.

By Frank Unger

{This article published in: Sozialismus 34, July/August 2007 is translated from the German on the World Wide Web,, Dr. Frank Unger is a guest professor for North American politics at the John F. Kennedy Institute at the Free University of Berlin.]

“In the year 1936 in the midst of a great economic crisis, a demoralized and disorganized Democratic Party was used to bring about the greatest change of the state in American history. This happened because no other instrument was available, not because the Democratic Party was an ideal vehicle for this project. The elections of 1932 were far more than the defeat of one long-governing political party; they were like the crushing of a ruling party. In the 1930s, the Democratic Party was the reluctant instrument for a revolution that was neither planned nor generated. A party that could have been less prepared for a new responsibility than the Democratic Party of Roosevelt’s first term of office can hardly be imagined. [1]

The American political scientist E. E. Schattsschneider wrote this in his 1960 book “The Semi-Sovereign People” about the beginning of the Roosevelt administration and the turn in America’s political culture carried out by this president from a plutocratic watchman state to something like a modern welfare state where union organization was commended and not hindered by the highest authority, where a president worked on obligating the political-economic actors of the US to a new social contract, communicated directly with the people via weekly radio broadcasts and was not afraid of scorning the representatives of big capital in certain situations as “royalists of our economic order.” To understand the subtlety of his choice of words, one must know that aristocrats were the only whites categorically excluded by law (of 1795) from acquiring American citizenship during the first century of the republic. The battle against monopolies and lazy aristocrats was one of the central rhetorical figures of the great democratic movement of populism toward the end of the 19th century.

What was astonishing in Roosevelt’s policy was that absolutely nothing in his personal or political biography and little in his 1932 election program intimated this. The slogan “New Deal” was invented by Roosevelt’s election campaign manager as a standard public relations phrase to suggest a plan for a new beginning given the desolate situation in the country. However in reality there was no new beginning. The election campaign strategists also chose the word “liberal” to characterize the new policy. The administrations of the 1920s, particularly the last administration with Herbert Hoover under whom the land fell in economic crisis understood themselves as “conservative.” People used the underlying term “progressive” with which the predecessors of the conservative governments had labeled themselves at the beginning of the 20th century and which remains a bad memory for many Americans. In contrast, the term “liberal” was largely unused. In American colloquial-political language, “liberal” was known mainly from theology as a humanistic worldly and non-dogmatic practice of the Christian religion.

The elections gave the presidency and solid majorities in Congress four times, the most in the 20th century, to Roosevelt and the democrats. Roosevelt understood the message very well. The laissez-faire capitalism as practiced in the US turned out to be a flop. Despite potential material surplus, it obviously failed in providing adequate food to all American citizens or even things making life easier. The people of the United States wanted and needed reforms, a change in the system. Yielding to this democratic pressure, he was the most popular president in American history after Lincoln.

At the beginning, this political direction was not very important to him. However he soon understood the justification and unavoidability of these democratic needs. The party of democrats changed over night from the appendix of the old slave-holding party of the South incapable of action to a quasi-social democratic mass party of the northeast and Midwest working class and thus with one blow was the structural majority party for the next 50 years.


Then the New Deal and the welfare state built by Roosevelt and his direct successors Truman and Lyndon Johnson and marked by a relative income leveling was systematically slandered, de-legitimated and then destroyed by the strategists of “neo=conservatism” (or “neoliberalism,” the term used in Europe). Since the 1970s, the domestic policy of the ruling class in the US has been strategic ally obsessed by the upgrading of the wage-earning part of the population and its return to the control of private owners of money and capital. The demoralization of the working class by the de-legitimation and shattering of their organization, the unions, is closely allied substantively with that obsession.

As one result, the real wages of wage-earners in the US have fallen continuously since the middle of the 1970s to less than 80% of the 1975 level. Since this time, practically all the growth of the real household income of US-Americans went exclusively to the top fifth of households and disproportionately to the top 5%. The top 1% of the population today receives the largest share of the produced wealth since 1928. 300,000 persons presently earn as much as the 150 million on the lowest rungs of the income ladder. In 2005, nearly 47 million US-Americans were without any health care, 16% of the population. 37 million live officially below the absolute poverty line. [2]


Not a few political observers see signs that something is now brewing reminiscent of the time before the turn of 1932. Firstly, there is the president George W. Bush who is judged contemptuously by the people like the president from the time of the Great Depression, Herbert Hoover, unable or unwilling to act. Secondly, we have an economic situation in which ever-larger parts of the so-called middle class feel the costs of globalization in their own living standards while the stock market simultaneously booms. [3] The incomes of certain financial operators have long surpassed the obscenity limits and the balance of trade deficit of the United States promises nothing good for the future. purchasing power of the dollar. Thirdly, the land is in an unwinnable war that has plunged the respect of the US in nearly all parts of the world to an historical all-time low.

The republicans and their scandalously incompetent and unscrupulous president are politically at an end. Many political observers are convinced an overwhelming victory of democrats in the 2008 presidential- and congressional elections is not only possible but probable – whatever candidates are finally sent into the race. As in 1932, the candidates of the democrats do not have an agenda corresponding to the majority sentiment in the population, for example on the question of the war. Of the eight officially declared candidates for the office, only Dennis Kucinich has emerged as a principled opponent of the Iraq war. John Edwards declared himself a “changed” ex-supporter and apologized for his earlier vote of approval in the Senate. None of the promising candidates (Kucinich is unfortunately not one!) demands the immediate withdrawal of troops from Iraq – apparently out of fear of being called unpatriotic. In the meantime for the majority of Americans, above all those with relatives or friends in the troops in Iraq, an immediate withdrawal has long been the patriotic command of the hour given the fabulous profits pocketed by contracting private firms day after day from the Bush administration for practically all functions aside from direct fighting while the poorly paid troops have to do the dangerous dirty work.


The following very probable scenario results from all this. The president who takes the highest office in the United States in 2008 – flanked by a congress ruled by a majority of democrats – can be strengthened that the majority of the American people support reforms. Many radical changes in the system of the United States carried out under the presidency of George W. Bush will be cancelled. This includes the changes in the American constitutional reality whipped through Congress under the title Patriot Act in the course of the reaction to September 11. Many common liberal freedom rights treasured also by conservative Americans were practically annulled. The repeated attempts to replace the hallowed basic principles of the American constitution, namely the separation of powers, with the absolute power of the executive, the furtive implementation of a kind of Enabling Act by suggesting a permanent state of emergency, could be named here.

However all these things would not be enough to really “bring about a revolutionary change.” In addition, as the well-known American historian Lawrence Goodwyn, chronicler of populism, recently remarked in an article in “The Nation.” There is a new factor for which “our political language had not coined an adequate term in the past.” He meant the momentous change in the experience and expectation of common Americans in the land and their life. For a long time, Goodwyn said, all generations (with the exception of the special situation of the Great Depression) shared the firm conviction one could advance in the world through hard work and find a new job elsewhere quickly and without problem if one lost one’s job so that a loss in income and living standards would only be very temporary. This is not true any more today. The humiliating and demoralizing conditions of the late 1920s do not prevail today but a very comparable mood of despair and helplessness is manifest.

The austere reality of economic conditions brings more and more US citizens to have serious thoughts about the possibilities of political democracy. “Although most people still work loyally for private firms,” Goodwyn writes, “they have learned to be skeptical when their boss tells them what is good for the nation and what is not. The consistency of lies of the Bush administration producing nausea has increased this skepticism exponentially. But a long time is now needed before the citizens regain confidence to stand up and resist in a corporate culture where the arrogance of the rulers is continuously rubbed into people for years both in their jobs and in politics.” [4] There could be violence, Goodwyn says.

Signs for this can be seen. In many parts of the land, activists from self-help groups and newly founded grassroots organizations have taken over leadership in preparation for the 2008 elections. Their goal is to place candidates on the democratic lists who want to uncompromisingly defend the interests of wage-earners, precarious workers and others interested in the disappearance of the neocons from positions of political leadership. Their medium-term goal is to bu9ild a kind of leftist counterpart to the “Christian Right.” This rightwing alliance played a decisive role for the election victories of the republicans only on account of the organizational strength and nationwide bonds in the last years, not so much because of their ideology. The unions played an analogous role for democrats up to the 1970s – at least in northern and Midwestern states. If the left succeeds in forging firmly established networks and organizational connections all over the country as the “Christian Right” succeeded, this will be very decisive for rehabilitating the democrats as a structural majority party in both houses of Congress. [5]

Everything depends on what additional people pressure is exerted on the newly constituted Congress. It is very conceivable and possible that laws could be passed by the Congress under the pressure of the people against the will of Corporate America with the support of a wise president undermining the basic dogmas of neoliberalism, for example laws that make difficult the further boundless export of American capital for highly productive branches of production and thus neutralize a basic element of “globalization.” This boundless export of capital does not really benefit everyone as Thomas Friedman and the other defenders of plutocracy tirelessly claim. The word is out even in the heartland of “neoliberalism.” The constantly growing economic polarization of society can become a danger for the political stability of the country. This is already seen by worried far-sighted representatives of Corporate America.

The great question is whether the new executive taking over in 2008 from a Bush administration totally bankrupt economically, politically and morally will have the stature and courage of Roosevelt to start a New Deal against the embittered resistance of the elites still euphoric over their Midas-experiences. A universal health care for all American citizens could be part of that New Deal.

In his time Roosevelt was hated as a “traitor to his class” on account of his policy promoting the public welfare. In certain circles, he still has this reputation today. Whether for example a president Hillary Clinton would risk a breach with the “royalists of the economy” is doubtful. However it is at least as likely as the opposite. Sometimes the will of the majority cannot be stopped and politicians temporarily become its instruments in a liberal democracy where normally property governs as it pleases.

The self-deceit of the “good social” Europe and the wicked neoliberal America popular in the Berlin republic could be quickly unmasked – when some leaders of the European Union suddenly accuse the US of violating the rules and principles of the “free market.”


1] E. E. Schattschneider: The Semi-Sovereign People, New York 1960, S. 86.
[2] Siehe hierzu: The Nation, Editorial, April 23, 2007, S. 3.
[3] Siehe hierzu: Eyal Press: The New Suburban Poverty – Struggles of the far-flung poor, in: The Nation, April 23, S. 1.
[4] Lawrence Goodwyn: The Coming Party Realignment, in: The Nation, April 30, 2007, S. 19
[5] Laura Flanders: Bottom Power. Grassroots Dems Take Back Politics From the Politicians, in: The Nation, April 23, 2007, S. 11-16.

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