From Normalcy to New Deal: industrial structure, party competition, and American public policy in the Great Depression

TLDR

Industrial partisan preference may be formally modeled as the joint consequence of pressures from labor and the differential impact of the world economy on particular businesses. The study uses a basic static model extended to the money market to examine political development and test its predictions against New Deal institutions and public policy, reexamining major initiatives from this perspective. The authors extend a basic static model to the money market and apply it to New Deal institutions and public policy, using primary sources to test its predictions. The authors find that the New Deal coalition emerged from 1920s industrial growth, WWI‑induced financial reversal, and 1930s labor militancy, producing a Democratic coalition dominated by capital‑intensive multinational firms favoring free trade and capable of managing industrial upheavals without force.

Abstract

Industrial partisan preference may be formally modeled as the joint consequence of pressures from labor and the differential impact of the world economy on particular businesses. This “basic” and static model, when extended to cover the money market, can be used to examine questions of political development, including the effects of fluctuations in national income on political coalitions. American institutions and public policy during the New Deal are used to test the theory against empirical evidence, much of it from new primary sources. The rise of the New Deal coalition is traced to changes in the American industrial structure deriving from the boom of the 1920s and the reversal of the U.S. financial position that resulted from World War I, in addition to the well-known labor militancy of the 1930s. The effect of these changes was the rise of a (Democratic) political coalition dominated by capital-intensive, multinationally dominant firms and industries with a strong interest in free trade and a historically unprecedented ability to cope with major industrial upheavals without resort to force. The major public policy initiatives of the New Deal are reexamined from this standpoint.