The term “capitalism”, in simple words, refers to an economic system in which country’s trade and industries are controlled by the private owners for the sake of profits. As FDR was quick in response to Great Depression and was in favor of active government and experimentation, therefore, he took some steps to reduce depression. His aim was to bring a balance between different interests, save capitalism but many of his programs were denounced by capitalists.Bank Holiday (March 6 to March 10) which saved and assisted banks which were on brink of collapse and FDIC were clear examples of it. Federal Deposit Insurance Corporation was created through Glass Steagel Banking Act signed on June 16, 1933. The depositors of member banks were given the security that in case of failure of banks, federal government would return the losses. Thus $2500 was 100% safe. One of FDR’s advisor equipped; “Capitalism was saved in eight days” FDR was of the view that government should play a major role in changing lives of the people and should introduce mega public welfare projects.
Capitalists were of the view that most of the public welfare works would benefit the workers and taxes would be taken in huge numbers to meet the costs of such projects. They believed that new taxation would lower their profits and social security packages in which employers also had to pay for their employees was another main case in this regard. Moreover, the legislations related to labors; their duty hours, joining of labor Unions were also not going in favor of them. These acts reduced their control on labors and industries. He not only increased taxation but also closed several loopholes in the taxation system. Huey Long, a populist Democratic Governor criticized the New Deal for not doing enough to redistribute wealth. Main programs which irritated the capitalists were;
- National Recovery Act
- National Labor Relations Board’s establishment
- Social Security Act
- Tennesse Valley Authority
- Abandonment of Gold Standard
a. National Recovery Act (NRA-1933):
This was mainly to target industries involved in gaining money through unfair means or unfair competition. It set up codes for industries to discourage unfair competition, raise wages and fix prices and matters related to labor rights. It was overturned by Supreme Court in 1935.
b. Tennessee Valley Authority (TVA-1933):
Created in May 1933, it was an effort to modernize the poor region (mostly Tennesse) and was authorized to build dams on Tennessee River to generate electricity. It also included programs to teach locals better soil management. Twenty new dams were constructed and electricity produced by these stations was given to the public of this area at lower prices than those of private power stations. The establishment of TVA almost solved the problem of floods of this area. It still exists.
c. Social Security Act (SSA-1935):
Social Security Act became a law in 1935 and was described as a “contract between generations”. The concept was that the current generation would pay a small percentage (one percent envisioned to be three) and the elder retirees would get them. Those who pay would start getting it back after they reach the age of 65; based on the amount they had paid. The basic aim was to help the elder, handicapped and unmarried women with dependent children. Although this program had many flaws at that time but it was revolutionary in a sense that it paved the way for future governments and enhanced the relationship between government and its public. This program still exists.
d. National Labor Relations Act:
In 1935, Congress passed the Wagner Act under which the employers could not interfere with the worker’s right to join labor Union. National Labor Relations Board was set up for this purpose and employers were forced to bargain with the union in any dispute. It was established to protect the right of collective bargaining. These unions were greatly supported in 1930’s due to which the persons organized in these unions rose from 7.8 % in 1933 to 21.9 % in 1938. It still exists but in a modified form (Taft-Hartley Act-1947).
e. Abandonment of Gold Standard:
Capitalists also opposed the abandonment of gold standard by FDR’s administration. Gold exports forbidden, gold coins, gold certificates etc were withdrawn. Gold Reserve Act passed in 1934 reduced the gold content of dollar to 59.06 % of its previous content.
f. Other Reforms:
Other reforms which irritated the capitalists in one form or another were the Works Progress Administration, Civilian Works Administration, Agricultural Adjustment Act etc. Capitalists were of the view that federal government is using its powers to interfere in almost every matter which does not fall in its domain.
Although there were many capitalists who opposed New Deal, there were many who supported it. They wanted to have a balance in economic system as FDR claimed in his address; “what we seek is the balance of our economic system, balance in agriculture and balance in induatry between the wage earner, the employer and the consumer.” The chief objective of New Deal was not to destroy capitalism but to preserve it by keeping balance between different interests.