Bad Deal

How FDR made life worse for African Americans.

Damon W. Root from the October 2004 issue

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"Without doubt," wrote Justice James C. McReynolds, one of the "Four Horsemen of Reaction" who later struck down parts of the New Deal on "Black Monday," liberty "denotes not merely freedom from bodily restraint but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognized at common law as essential to the orderly pursuit of happiness by free men." This ruling is both strikingly libertarian and totally at odds with states' rights, a position McMahon seems unable to understand.

Most significantly, in 1917 the Court invalidated a Louisville, Kentucky, ordinance segregating residential housing blocks by race. The majority in Buchanan v. Warley noted that "property is more than the mere thing which a person owns. It is elementary that it includes the right to acquire, use, and dispose of it." The Court therefore held that the 14th Amendment "operates to qualify and entitle a colored man to acquire property without state legislation discriminating against him solely because of color." Although the Court at this time failed to reconsider the Plessy v. Ferguson (1896) decision ruling "separate but equal" to be constitutional in railroad accommodations, Buchanan demonstrates that liberty of contract could effectively challenge racist and discriminatory laws.

Sadly, the demise of Lochner in 1937 removed this potentially lethal weapon from the impending fight against Jim Crow. Although both libertarians and their critics frequently associate libertarianism with a states' rights position, liberty of contract demonstrates how an expansive reading of the federal Constitution that sometimes overrides states' rights can be quite consistent with libertarian principles.

This brings us to Jim Powell's FDR's Folly, an excellent counterweight to many parts of McMahon's book. Powell, a senior fellow at the Cato Institute and the author of The Triumph of Liberty, has gathered more than four decades of economic research, most of which has gone unreported by Roosevelt's flattering biographers, that systematically disproves the myth that the New Deal was a successful recovery program. Focusing on outcomes rather than intentions, Powell details the numerous ways the New Deal made life worse for African Americans in particular, and for poor people in general.

For example, the Agricultural Adjustment Act of 1933 authorized the secretary of agriculture to inflate prices by reducing farm acreage. This meant white farm owners were paid to let their land sit idle, often resulting in the eviction of sharecroppers and tenant farmers, a significant number of whom were African American. Powell reports that reduced acreage particularly affected sharecroppers, whose estimated annual cash income fell from $735 in 1929 to $216 in 1933. The Department of Agriculture, moreover, paid farmers to destroy crops and slaughter livestock. This occurred while millions of Americans went hungry. "This was just the sort of thing," Powell notes, "that John Steinbeck protested against in his 1939 novel The Grapes of Wrath."

Southern states, home to the nation's poorest citizens yet full of dependable Democratic voters, received less New Deal spending than comparatively richer Western states, whose voters perhaps required additional persuasion to support Democratic candidates. Powell cites one study showing that states with a higher percentage of black residents and a lower per capita income received fewer New Deal dollars than richer, whiter states. Thus blacks were directly injured by New Deal policies, then ignored when it came time to dispense New Deal dollars.

It was New Deal labor laws that had the most pernicious impact on African Americans. The National Industrial Recovery Act (NIRA), in effect from June 1933 until a unanimous Supreme Court declared it unconstitutional in May 1935 (in Schechter Poultry Corp. v. United States), was considered the hallmark of the New Deal. In addition to creating the Works Progress Administration, the NIRA authorized the National Recovery Administration (NRA), which organized cartels, fixed wages and prices, and, under section 7(a), established the practice of collective bargaining, whereby a union selected by a majority of employees exclusively represented all employees.

While such compulsory unionism is routinely celebrated as a milestone for the American worker, many African Americans saw things differently. The NAACP's publication The Crisis, for example, decried the monopoly powers granted to racist unions by the NRA, noting in 1934 that "union labor strategy seems to be to obtain the right to bargain with the employees as the sole representative of labor, and then close the union to black workers." Members of the black press had something of a field day attacking the NRA, rechristening it the "Negro Removal Act," "Negroes Robbed Again," "Negro Run Around," and "No Roosevelt Again."

NRA codes harmed other poor groups as well. By setting the price of food and goods above market levels, the agency's price controls made it that much more expensive for the nation's poor and unemployed to provide for themselves and their families. Struggling entrepreneurs also suffered. Jacob Maged, a 49-year-old immigrant dry cleaner, spent three months in jail in 1934 for charging 35 cents to press a suit, rather than the NRA-mandated 40 cents.

To meet the inflated payrolls required by New Deal minimum wage codes, employers eliminated unskilled and marginal positions, precisely the sort of jobs filled by African Americans and other disadvantaged groups. According to a Labor Department report, between 30,000 and 50,000 workers, primarily African Americans in the South, lost their jobs within just two weeks of the activation of the Fair Labor Standards Act (1938), which set a uniform minimum wage. Not surprisingly, both unions and industrialists in the North favored the minimum wage, since it undercut their competitors in the South.

In 1935 the National Labor Relations Act (or Wagner Act, after its sponsor, Democratic New York Sen. Robert Wagner) revived section 7(a) of the recently defunct NRA and granted monopoly bargaining power to unions selected by a majority of employees. Neither company-sponsored unions nor unions representing a minority of workers were permitted. The act's original draft contained a clause forbidding discrimination against African Americans by federally recognized unions, but the clause was removed at the behest of the American Federation of Labor, a notoriously racist outfit at the time.

Predictably, FDR failed to spend any of his considerable political capital to retain the clause. Empowered by the Wagner Act, American unions brazenly continued their decades-long discrimination against African Americans, the effects of which are still visible in racial disparities within unionized trades such as construction.

So Franklin Roosevelt's New Deal increased poverty and joblessness among African Americans, empowered discriminatory labor unions, and, when the Supreme Court overturned Lochner v. New York, removed an effective legal tool to challenge segregation laws and other racist state actions. McMahon's ambitious attempt to salvage FDR's record on race is clever, but his focus on the long-term and secondary effects of Roosevelt's judicial nominees and policies fails to convince in the face of the direct negative outcomes the New Deal produced for many American blacks.