As the world is swept up by a two fold crisis led by a global coronavirus pandemic and financial collapse, it is no wonder that America’s great president Franklin Roosevelt is on everyones’ mind. Faced with the collapse of the cultural, economic and social fabric of society after 4 years of depression, President Roosevelt launched a bold and courageous reform of the system led entirely by a love of the people, disrespect for the financial elite of Wall Street whose unbounded greed caused the 1929 collapse, and uncompromising commitment to the General Welfare.
A brief review of FDR’s March 4th Inaugural Address, his first Fireside Chat and broader emergency bank reform laws and longer term national reconstruction measures are incredibly important for a modern audience.
A New Hope
Breaking from a tradition of bailing out Wall Street gamblers and austerity which characterized the previous Hoover administration, FDR, threw down the gauntlet in his inaugural speech on March 4th saying: “The money-changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit”. His full address can be listened to here:
The new president declared a war on Wall Street on several levels, beginning with his support of the Pecora Commission which sent thousands of bankers to prison, and exposed the criminal activities of the top tier of Wall Street’s power structure who manipulated the depression, buying political offices and pushing a “fascist economic solution for America”. Ferdinand Pecora who ran the commission called out the deep state when he said “this small group of highly placed financiers, controlling the very springs of economic activity, holds more real power than any similar group in the United States.”
Pecora’s highly publicized success empowered FDR to impose sweeping regulation in the form of 1) Glass-Steagall bank separation, 2) bankruptcy re-organization under a Bank Holiday, and 3) the creation of the Security Exchange Commission to oversee Wall Street.
Most importantly, FDR disempowered the London-controlled Federal Reserve by installing his own man as Chair (industrialist Mariner Eccles) who forced the private central bank to obey national commands for the first time since 1913, while creating an “alternative” lending mechanism outside of Fed control called the Reconstruction Finance Corporation (RFC) which became the number one lender to infrastructure in America throughout the 1930s.
One of the most controversial policies for which FDR is demonized today was his abolishment of the gold standard. The gold standard itself constricted the money supply to a strict exchange of gold per paper dollar, thus preventing the construction of internal improvements needed to revive industrial capacity and put the millions of unemployed back to work for which no financial resources existed. It’s manipulation by international financiers made it a weapon of destruction rather than creation at this time. Since commodity prices had fallen lower than the costs of production, it was vital to increase the price of goods under a form of “controlled inflation” so that factories and farms could become solvent and unfortunately the gold standard held that back. FDR imposed protective tariffs to favor agro-industrial recovery on all fronts ending years of rapacious free trade.
FDR stated his political-economic philosophy in 1934: “the old fallacious notion of the bankers on the one side and the government on the other side, as being more or less equal and independent units, has passed away. Government by the necessity of things must be the leader, must be the judge, of the conflicting interests of all groups in the community, including bankers.”
The Real New Deal
Once liberated from the shackles of Wall Street and the Federal Reserve, FDR and his allies were able to start a genuine recovery by restoring confidence in banking. Within 31 days of his bank holiday, 75% of banks were operational and the FDIC was created to insure deposits. Four million people were given immediate work, and hundreds of libraries, schools and hospitals were built and staffed- All funded through the RFC. FDR’s first fireside chat was vital in rebuilding confidence in the government and banks, serving even today as a strong lesson in banking which central bankers don’t want you to learn about.
From 1933-1939, 45 000 infrastructure projects were built. The many “local” projects were governed, like China’s Belt and Road Initiative today, under a “grand design” which FDR termed the “Four Quarters” featuring zones of megaprojects such as the Tennessee Valley Authority area in the south east, the Columbia River Treaty zone on the northwest, the St Laurence Seaway zone on the North east, and Hoover Dam/Colorado zone on the Southwest. These projects were transformative in ways money could never measure as the Tennessee area’s literacy rose from 20% in 1932 to 80% in 1950, and racist backwater holes of the south became the bedrock for America’s aerospace industry due to the abundant and cheap hydropower.
The New Deal Solution for Today’s World
China and Russia’s leadership have demonstrated what competently-led nation states can accomplish through a philosophy of “win-win cooperation”, as well as long term productive credit tied to major infrastructure projects like the Belt and Road Initiative, Polar Silk Road, space exploration, and the new Health Silk Road announced by President Xi Jinping.
The question is: Do western powers have the ability to act according to a scientific (and moral) standard of value by aligning with this multipolar alliance or will they choose to remain in an intellectual cage of monetarism and succumb to a fate which FDR and other great leaders gave their lives to prevent?