These postwar accord relationships between employers, unions, and governments, which sustained high productivity growth, high real wage growth, and low unemployment, differed across countries. In Scandinavia, Austria, Belgium, Netherlands, Switzerland, and West Germany, wage-setting was either centralized in a single union, or coordinated among unions or employers’ associations, resulting in wage restraint. In technologically advanced sectors in France and Italy, governments intervened to set wages in dominant state-owned firms, creating wage guidance across the economy. The outcome was similar to the result in the countries with centralized wage-setting.
Yet while Hoover’s failure to restore the economy led to his political ruin, Roosevelt seized upon the enduring economic crisis as a matchless opportunity to achieve objectives whose scope far transcended the immediate woes of the Depression decade. FDR used the Depression crisis to break the untamed bronco of let-’er-rip, buccaneering, laissez-faire capitalism that had gone unbridled since the dawn of the industrial revolution in America more than a century earlier. He and his fellow New Dealers invented new governmental institutions like the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission (SEC), and the National Labor Relations Board (NLRB) to bring stability to the historically shaky banks, the casino-like stock exchanges, and the often violently tumultuous world of labor relations. They gave birth to other institutions as well, including the Federal Housing Authority (FHA) and the Federal National Mortgage Association (“Fannie Mae”) to make mortgage lending more secure, thereby unleashing the money and the energy that made a majority of Americans homeowners and built the suburbs of the Sunbelt after World War II. They passed the Fair Labor Standards Act, abolishing at last the scourge of child labor and establishing minimum wage guarantees. Most famously, with the Social Security Act of 1935 they erected a comprehensive system of unemployment and old-age insurance to protect laid-off workers and the elderly against what FDR called “the hazards and vicissitudes of life.”
David Kennedy is Donald J. McLachlan Professor of History, Emeritus at Stanford University. His scholarship is notable for its integration of economic and cultural analysis with social and political history. Over Here: The First World War and American Society (1980) used the history of American involvement in World War I to analyze the American political system, economy, and culture in the early twentieth century. Freedom from Fear: The American People in Depression and War (1999) recounts the history of the United States in the two great crises of the Great Depression and World War II.