The United States of Sanctions
The Use and Abuse of Economic Coercion
In the summer of 1932, in the depths of the Great Depression, Franklin Roosevelt flew to Chicago to accept the Democratic Party’s nomination for president. His campaign theme song, “Happy Days Are Here Again,” rang out in the arena where the convention was being held, but few there would have agreed with the song’s chirpy lyrics: “The skies above are clear again.” One in four Americans was out of work, and millions more were enduring wage cuts. Hundreds of thousands were homeless. Disease was on the rise, especially in African American communities, where the prevalence of tuberculosis was five times as high as it was in white communities. Mob violence was spiking, too, with Black men and labor organizers the most frequent victims. In his acceptance speech at the convention, Roosevelt, then governor of New York, promised a way out of the national crisis—“a new deal for the American people.”
Weeks later, his opponent, President Herbert Hoover, doubled down on his failed approach to the Depression. Tens of thousands of impoverished World War I veterans had set up a shantytown in Washington, D.C., to petition Congress for an advance of the bonuses they were due to receive for their service. The idea of paying the veterans had some support in Congress, but not enough, and even less in the White House. The president opposed any kind of federal relief—“prosperity cannot be restored by raids on the public treasury,” he liked to say—and soon he ordered the U.S. Army to clear out the camps. Soldiers were sent in with drawn bayonets, tear gas, tanks, and blowtorches. Two men died from gunshots. “Why didn’t Hoover offer the men coffee and sandwiches?” Roosevelt asked an aide.
Roosevelt’s private musings reflected more than his preferred tactical approach to the protesters; they embodied his overall strategy for lifting the United States out of the Great Depression. Once he became president, they would form the basis of a radical departure in American public policy. Through an unprecedented burst of legislative and executive activity, the New Deal redistributed political and economic power to the most downtrodden. It sought to provide help to everyone who needed it: the out-of-work veteran, the tenant farmer, the migrant vegetable picker, the textile mill hand, the coal miner, the assembly-line worker, and millions more.
More than is often remembered, Roosevelt’s policies generated intense pushback from critics who thought the federal government was straying dangerously far beyond its mandate. But what the president knew—and what those contending with the United States’ contemporary difficulties would do well to remember—was that the biggest mistake one can make in a crisis is not to do too much. It is to not do enough.
As Roosevelt delivered his inaugural address, on a cold, gray Saturday in March 1933, he made it clear that he would be a different kind of president. He asked for “broad executive powers to wage a war against the emergency, as great as the power that would be given to me if in fact we were invaded by a foreign foe.” But even with such powers, FDR could not wish away a depression that had sunk the country so low. At the very moment he was telling the country, “the only thing we have to fear is fear itself,” panicked Americans were withdrawing their life savings from banks and forcing governors to declare bank holidays to stop the runs. Thousands of small-town banks had already failed, and now Wall Street itself faced insolvency.
FDR wasted no time. On the Monday after his inauguration, he declared a national bank holiday, and on Thursday, he signed legislation insuring deposits. The following Sunday, in the first of many “fireside chats,” he implored Americans to leave their money in banks rather than stashing it under their mattresses. “Capitalism was saved in eight days,” the political scientist Raymond Moley, a member of Roosevelt’s so-called Brain Trust, would remark.
But what about the unemployed and the hungry? Within the first 100 days of his administration—a new benchmark for future presidents—FDR set up the Civilian Conservation Corps, putting 250,000 young men to work tending the land; “Roosevelt’s Tree Army,” they were called. And for those who had walked the breadlines and relied on charity, Congress created the Federal Emergency Relief Administration, which provided grants to the states to feed the hungry. On his first day on the job, Harry Hopkins, one of FDR’s closest advisers and the head of that agency, set up shop at a hallway desk and, within his first two hours, spent $5 million. The approach signaled a stark departure from Hoover, who had relied on loans to big business in the vain hope that prosperity would trickle down.
The biggest mistake one can make in a crisis is not to do too much. It is to not do enough.
To get people through the winter of 1933–34, Hopkins oversaw the creation of the Civilian Works Administration, which by Roosevelt’s first Christmas in the White House had given jobs to more than three million Americans. Roosevelt also established two job-creation programs that lasted throughout the New Deal—the Public Works Administration and the Works Progress Administration—and handed them budgets bigger than any previous public outlay in peacetime. While the PWA worked through private contractors and focused on large-scale projects, the WPA hired the unemployed directly—8.5 million, all told—and put them to work immediately.
These programs not only supplied relief but also laid the groundwork for economic growth for decades to come. Each year, the PWA purchased nearly half the concrete and a third of the steel in the United States. From the 650,000 miles of roads and 800 airports to the thousands of dams and sewers, the PWA and the WPA created a massive infrastructure, especially in the underdeveloped South and West. The PWA built new schools in nearly half of all counties, including African American schools in 24 states, mostly in the South.
These programs alleviated the worst of the Great Depression. But a fundamental question remained: What would it take to avoid another one?
From the beginning of his presidency, Roosevelt repeated the same message: the economy was out of balance. The 1920s had witnessed phenomenal growth, with Fords and Chevys flying off assembly lines and the stock market reaching new heights. But income and wealth remained concentrated at the top. Years before the Keynesian revolution awakened economists to the importance of sustaining demand, liberal policymakers saw a crisis of capitalism in the modern consumer economy and argued that only the state could fix it. “Our task now is not discovery or exploitation of natural resources, or necessarily producing more goods,” Roosevelt said. “It is the soberer, less dramatic business . . . of meeting the problem of underconsumption, . . . of distributing wealth and products more equitably, of adapting existing economic organizations to the service of the people.”
At the top of the list of those needing a bailout were farmers, who had suffered terribly throughout the 1920s and were now up in arms. Having leveraged their land to expand and purchase modern equipment during World War I, they found themselves deep in debt and caught in a vicious cycle. As they dumped more and more of their crops onto the market, commodity prices fell ever lower. Between 1929 and 1932, the average per capita income of farm families dropped by more than two-thirds. By the day of FDR’s inaugural, it would have taken a football field’s worth of wheat to buy a $4 pair of shoes.
Roosevelt was determined to rescue the farmers. By creating the Agricultural Adjustment Administration, he allowed them to enter into contracts with the federal government to receive direct cash payments in exchange for limiting their production. In a fireside chat to push the bill through Congress, over the opposition of skeptical senators who feared a federal takeover of agriculture, Roosevelt tried to paint the program as democratic rather than radical. Pointing to its voluntary nature and its provision for local committees that would decide on quotas for each farm, he called it “a partnership between government and farming, not a partnership in profits.” Still, everyone knew that the Agricultural Adjustment Administration represented an unprecedented level of federal involvement in the oldest of businesses.
Roosevelt’s opponents hated him because he made a radical break with traditional public policy.
There were problems, to be sure. Most immediately, there were the troubling optics of paying farmers to plow under their crops at a time when so many were going hungry. The government bought six million hogs, some of which were killed in what critics called “the slaughter of the innocents.” Moreover, to quell opposition from southern legislators, who controlled the key committees in Congress, the final program gave checks to landowners, who in turn decided what fields to allow to lie fallow, instead of giving the aid directly to farmers. That meant that nearly a million tenant farmers and sharecroppers got kicked off the land. But the New Deal boosted farmers’ incomes, and thus consumer demand, as well. Without such a plan, Roosevelt explained, “millions of people engaged in industry in the cities cannot sell industrial products to the farming half of the nation.”
Some in agriculture were even more impoverished. FDR offered grants and loans to resettle hundreds of thousands of destitute farmers and built federal camps for migratory workers. In The Grapes of Wrath, John Steinbeck captured a sense of collective hope at these clean camps with running water and free medical care, one of which housed the fictional Joad family, who, like thousands of other so-called Okies, had lost their farm and come to California. “This is the beginning—from ‘I’ to ‘we,’” Steinbeck wrote. When large landowners banned and burned the best-selling novel, the first lady, Eleanor Roosevelt, lauded it in her syndicated column. Her husband received Steinbeck at the White House twice.
To spur regional development and deliver cheap power in the South, FDR established the Tennessee Valley Authority. From the time he had spent in Warm Springs, Georgia, convalescing from the polio that had left him paralyzed from the waist down, Roosevelt knew firsthand how rural America had been left out of the Roaring Twenties. In the Tennessee River basin, only a handful of families had electricity. Few had indoor bathrooms or even outhouses, and many farm wives had to walk hundreds of yards to get household water.
The Rural Electrification Administration brought even greater changes to the lives of farmers. Private utilities had long neglected rural America because there was no profit in connecting an isolated farmhouse to the grid, and so the program funded local cooperatives that distributed cheap power to the most remote ranches and cabins. Crews strung power lines across the country, wired millions of homes and barns, and installed lighting fixtures and electrical outlets in every room of the most rundown shacks. Electricity revolutionized rural life. Thanks to “liberty trees for farmers,” as utility poles became known, families could refrigerate food and pump water. Diets improved, and infant mortality declined. In the two years after the creation of the Rural Electrification Administration, 350 cooperatives across 45 states delivered electricity to 1.5 million farms.
The New Deal also revolutionized the United States’ factories, mills, and mines. Like farmers, industrial workers had been left out of the 1920s boom; the bottom 40 percent of nonfarm families earned an average of just $725 a year at a time when a radio, the newest consumer item, cost $75. Over the course of the 1920s, disposable income declined for the lower 93 percent of nonfarm workers; for the top one percent, it rose by 75 percent.
To boost their income, Roosevelt sought to grant workers the right to form unions; he wanted to solve the problem of underconsumption not through government spending but by expanding workers’ bargaining power, which would allow them to wrest higher pay from their bosses. That, he argued in a fireside chat, “is better for the employer than unemployment and low wages, because it makes more buyers for his product.” FDR presented this rationale as a matter of fact, but it signaled a historic departure from the 1920s, when court injunctions and state militias had suppressed labor activism.
The National Industrial Recovery Act, also passed in Roosevelt’s first 100 days, suspended antitrust laws to allow businesses to coordinate production and wages. It proved to be a failure, used mostly by business leaders to keep cutting hours and pay. But the law protected the right of workers to organize, thus planting the seed for one of the most far-reaching reforms of the New Deal: bringing democracy to the workplace.
It helped that workers had Roosevelt on their side. “The president wants you to join a union,” declared John Lewis, the president of the United Mine Workers of America. In coal-producing states, miners who had long feared the consequences of joining rushed to organize. New rights, especially ones that challenged the prerogatives of big business, didn’t come easily. In the spring and summer of 1934, striking workers, demanding that their employers recognize their right to organize, took to the streets in Toledo, Minneapolis, and San Francisco, clashing violently with police. But by the time Americans cast their ballots in the midterm elections that November, New Deal programs had succeeded in lowering unemployment by millions and generating a sense of national purpose. The Democrats increased their majority by nine in the House of Representatives and ten in the Senate—only the second time since the Civil War that the incumbent party had expanded its representation in Congress.
The electoral victory laid the groundwork for more far-reaching reforms. In the summer of 1935, Senator Robert Wagner of New York, the leading congressional liberal, had the votes needed to push through what would become known as the Wagner Act. For the first time, workers not only had the right to speak freely, to petition, and to assemble; they could also choose their own union in elections, free from employer interference, that the federal government would now supervise. In the two years after the act’s passage, nearly five million workers went on strike to force employers to live up to the new law of the land. The most famous strike took place at General Motors in Flint, Michigan, where, beginning in 1936, autoworkers staged a “sit-down strike,” physically occupying plants and eventually winning union recognition. As one GM employee said, “Even if we got not one damn thing out of it other than that, we at least had a right to open our mouths without fear.”
Along with the right to organize, the New Deal gave workers the right to social insurance with the passage of the Social Security Act. At a time of massive unemployment, FDR argued, the government had to offer protections against the vicissitudes of life, such as the loss of a job or penury in old age.
The act had its flaws. For one thing, it excluded domestic and agricultural laborers, thus leaving out the vast majority of African American workers, a price that southern legislators in the Jim Crow South extracted for their support of the bill. For another, it created a two-track system that offered earned pensions to largely male breadwinners but stingier, means-tested public assistance to widows, people with disabilities, and children without wage-earning fathers.
Yet as much as Social Security and the other New Deal programs rested on existing assumptions about race and gender, which privileged white male workers, they still brought the federal government into every town in the country, depriving local officials of their historical power to rule with unquestioned authority over the existing social order. From the farms to the factories, a new link had been created between the federal government and the poor, with the potential to upend economic relations. In Aliquippa, Pennsylvania, where anti-union steel barons had ruled over this company town and dominated its politics for decades, steelworkers marched in support of Roosevelt. “America is yours,” read their signs. “Organize it and claim it!”
FDR believed that the New Deal would work to prevent future depressions in part by encouraging citizens to claim a new set of economic rights, protected by a new “economic constitutional order,” as he called it. The goal, he had explained when he first ran for president, was to empower Americans to achieve a “more equitable opportunity to share in the distribution of national wealth.” After a decade of Wall Street speculation and a sky-high stock market, one that Roosevelt’s predecessor did little to rein in, everyone understood the radicalism of these words.
Although many remember him as a great hero today, Roosevelt was not universally loved in his day. For the millions who revered him and returned him to office three more times, there were millions who despised him. They called him a dictator, a traitor to his class. Some, unwilling to even utter his name, referred to him as “that man in the White House.”
This came as no surprise to Roosevelt. “There is one issue in this campaign,” he said in 1936, not long after a poll found that 83 percent of Republicans believed that his administration might lead to dictatorship. “It’s myself, and people must be either for me or against me.” On Halloween, he held a mass rally at Madison Square Garden. “Never before in all our history have these forces been so united against one candidate as they stand today,” he defiantly proclaimed. “They are unanimous in their hate for me, and I welcome their hatred.” Three days later, Roosevelt won reelection with 60 percent of the popular vote, the biggest landslide since 1820.
Roosevelt’s opponents hated him not because he had abandoned the allegiances of his aristocratic upbringing, nor because he was bent on accruing unprecedented executive power, both of which were true. They hated him because he made a radical break with traditional public policy. The New Deal was so popular that the Democratic Party drew in millions of new working-class, immigrant, and African American voters, leading to an enduring coalition that propelled him and then his final vice president, Harry Truman, to victory. It gave the Democrats control of both houses of Congress for most of the next 50 years, allowing them to set the legislative agenda for decades to come. But Roosevelt’s policies, by design, created winners and losers. As he himself put it, “Economic royalists complain that we seek to overthrow the institutions of America. What they really complain of is that we seek to take away their power.”
Like Roosevelt, the new Democratic president faces a choice between the incremental and the bold.
In a time of national emergency, with so much desperation at home and the rise of dictators abroad, Roosevelt sought to rebuild the U.S. economy as a way of restoring prosperity and preserving democracy. As he surveyed the devastation in 1932, he told the country that it would not do to take “stopgap” measures. “A real economic cure must go to the killing of the bacteria in the system rather than to the treatment of external symptoms,” he said. A true solution required what he called “building from the bottom up.” If Roosevelt stoked animosities, he did so because he believed that to succeed, the New Deal had to replace an ethos of individual self-reliance with an expansion of government powers that could boost the incomes and wherewithal of the millions at the lowest rung of the economic ladder. It was no time for restraint.
Nearly a century later, the United States again faces epic threats to the body politic: the COVID-19 pandemic, a sharp economic downturn, and attacks on its democratic institutions. An unpopular Republican president, seen as having done too little to solve the nation’s crisis, has been voted out of office. Like Roosevelt, the new Democratic president faces a choice between the incremental and the bold. In dealing with the trauma before it, Washington could decide to confine itself to the limited role it has traditionally played in recent years, hoping that more of the same will somehow get the country out of its current rut. But desperate times call for desperate measures, and so the wiser path is to err on the side of action rather than inaction.
“Governments can err, presidents do make mistakes, but the immortal Dante tells us that divine justice weighs the sins of the cold-blooded and the sins of the warm-hearted in different scales,” Roosevelt said in 1936, as he accepted his party’s renomination in Philadelphia. “Better the occasional faults of a government that lives in a spirit of charity than the consistent omissions of a government frozen in the ice of its own indifference.”