Cooking the Books I: Big Deal!

When Boris Johnson announced the bringing forward of a modest package of public works, he remarked that,  ‘it sounds positively Rooseveltian. It sounds like a New Deal. All I can say is that if so that is how it is meant to sound to be’ (Times, 30 June). He was referring to the policies pursued by the Roosevelt administration in America in the 1930s.

When Roosevelt assumed office as President in 1933 the US was confronted with an unprecedented economic crisis – a huge fall in output, mass unemployment, a frozen financial system. To try to deal with this, his administration adopted a programme of public works (for which he is remembered) and of restricting production until stocks cleared (which is not remembered, but which is essential before capitalism can recover from a slump).

Re-elected in 1936, he expanded the public works programme. Capitalist production recovered to some extent but in 1937-38 there was another recession. As for unemployment:

‘When Roosevelt ran for re-election in 1936, the unemployment rate was 16.9 per cent, almost twice what it had been in 1930. (…) When Roosevelt ran for the unprecedented third term [in 1940], unemployment was 14.6 per cent.’ (

No wonder a Times sub-editor, in a note explaining Roosevelt’s New Deal to readers who might not have been familiar with it, wrote:

‘The extent to which it helped the US economy to recover from a deflationary recession remains a matter of debate. Some argue that FDR, as the president was known, did not spend enough and that it was the Second World War that finally put the US economy back on track as government spending soared.’

The ‘some’ referred to who wanted FDR to spend more are left-wing reformists, and currency cranks, who do not understand how capitalism works. The Roosevelt administration could in theory have spent more on putting people to work on infrastructure projects but this would have had to have been at the expense of private capitalist investment, a fall in which would have had the opposite effect of more unemployment. But it is true that mass unemployment in the US only ended when the government mobilised resources to fight a war.

The New Deal was opposed by some sections of the capitalist class who regarded it, as Johnson’s hero Churchill put it in an appeal to Roosevelt in 1937, ‘this war on wealth and business, this war on private enterprise’ (quoted in the Guardian, 29 June). Most capitalists, however, were more level-headed. Roosevelt himself was reported as having said, in May 1935, that ‘I want to save our system, the capitalistic system.’

By capitalism he meant private capitalism as production for profit by private capitalist enterprises. This survived as the dominant form of capitalism in the US. It was never really in need of ‘saving’. Nor was capitalism in its more accurate sense of production for profit on the basis of wage-labour, since those Roosevelt wanted to save private capitalism from – the fascists who wanted America to emulate Hitler’s Germany and the ‘communists’ who wanted it to emulate Stalin’s Russia – were merely advocating alternative ways of operating this.

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