The stock market crash of October 1929 initiated a long economic decline that accelerated into a world catastrophe, the DEPRESSION OF THE 1930s. By 1933, 14 million Americans were unemployed, industrial production was down to one-third of its 1929 level, and national income had dropped by more than half. In the presence of deep national despair, Democratic challenger Franklin D. ROOSEVELT easily defeated Hoover in the 1932 presidential election. After his inauguration, the NEW DEAL exploded in a whirlwind of legislation.
A new era commenced in American history, one in which a social democratic order similar to that of Western European countries appeared. The federal government under Roosevelt (and the presidency itself) experienced a vast expansion in its authority, especially over the economy. Roosevelt had a strong sense of community; he distrusted unchecked individualism and sympathized with suffering people. He nourished, however, no brooding rancor against the U.S. system. He sought to save capitalism, not supplant it.
Recovery was Roosevelt's first task. In the First New Deal (1933-35) he attempted to muster a spirit of emergency and rally all interests behind a common effort in which something was provided for everyone. Excessive competition and production were blamed for the collapse. Therefore, business proprietors and farmers were allowed to cooperate in establishing prices that would provide them with a profitable return and induce an upward turn (under the NATIONAL RECOVERY ADMINISTRATION and the AGRICULTURAL ADJUSTMENT ADMINISTRATION). By 1935, however, 10 million were still unemployed, the economy seemed lodged at a new plateau, and the U.S. Supreme Court was ruling such agencies unconstitutional.
The Second New Deal (1935-38) was more antibusiness and proconsumer. Roosevelt turned to vastly increased relief spending (under the WORKS PROGRESS ADMINISTRATION) to pump up consumer buying power. In 1933 he had decided to take the nation off the gold standard, except in international trade. Setting the price at which the government would buy gold at $35 an ounce, he induced so massive a flow of gold into the country that its basic stock of precious metal increased by one-third by 1940 (expanding by much more the currency available in the economy). This monetary policy and the spending to aid the unemployed succeeded in moving the economy toward recovery before 1940, when the impact of war-induced buying from Europe accelerated such movement.
The impact of the New Deal was perhaps strongest and most lasting in its basic reform measures, which profoundly altered the American system. Farm prices were supported and farm plantings centrally planned; the money supply became a federal, not private, responsibility under a strengthened Federal Reserve Board; and stock exchanges were put under regulation of the SECURITIES AND EXCHANGE COMMISSION. The FEDERAL DEPOSIT INSURANCE CORPORATION insured bank deposits, and banking practices were closely supervised under the Banking Act of 1933; the NATIONAL LABOR RELATIONS ACT made relations between employers and employees a matter of public concern and control; and under the direction of agencies such as the TENNESSEE VALLEY AUTHORITY government facilities supplied electrical power to entire regions, providing a standard for private utilities. Private utility monopolies were broken apart and placed under public regulation; antitrust efforts were reenergized; and economic recessions, then and afterward, were monitored by the federal government, which was ready to increase public spending to provide employment and ward off the onset of another depression.
For the majority of the population, New Deal legislation defined minimum standards of living: the Fair Labor Standards Act set MINIMUM WAGE and maximum hour limitations and included a prohibition on child labor in interstate commerce; the Social Security Act (see SOCIAL SECURITY) made provisions for old-age and disability pensions, unemployment insurance, monthly payments to mothers living alone with dependent children, and direct assistance to the blind and crippled.
In addition, the New Deal helped make it possible for organized unions to gain higher wages; in 1938 the Congress of Industrial Organizations (CIO) was formed; members were organized by industry rather than by craft. The New Deal also provided a sense of confidence that in a time of disaster the federal government would take positive action.
Meanwhile, totalitarian movements abroad were inducing world crisis. Congress, mirroring public opinion, had grown disenchanted with the U.S. entry into World War I. This spirit of isolationism led to the passage (1935-37) of a series of neutrality acts. They required an arms embargo that would deny the sale of munitions to belligerents during a time of international war and prohibited loans to belligerents and the travel of Americans on ships owned by belligerents. Congress thus hoped to prevent involvements like those of 1914-17.
A WORLD POWER
The spirit of isolationism eroded steadily as Americans watched the aggressive moves of Adolf Hitler and his allies. President Roosevelt and the American people finally concluded that the United States could not survive as a nation, nor could Western civilization endure, if Hitler and fascism gained dominance over Europe. During the world war that followed, the American nation rose to the status of a major world power, a position that was not abandoned but confirmed in the cold-war years of the late 1940s and the 1950s.
Total War: 1941-45
In September 1940, Congress established the first peacetime draft in American history, and 6 months later it authorized Roosevelt to transfer munitions to Great Britain, now standing practically alone against Hitler, by a procedure called LEND- LEASE. On Dec. 7, 1941, the Japanese reacted to stiffening American diplomacy against its expansion into Southeast Asia by attacking the U.S. fleet at PEARL HARBOR in the Hawaiian Islands. This thrust was aimed at immobilizing American power long enough to allow the establishment of a wide imperial Japanese perimeter including all of the western Pacific and China, henceforth to be defended against all comers. Japan, however, in one stroke had succeeded in scuttling American isolationist sentiment, forcing the United States into World War II, and unifying the American people as never before in total war.
The first American military decision was to concentrate on defeating Hitler while fighting a holding action in the Pacific. The next was to form an alliance with Great Britain so close that even military commands were jointly staffed. The year 1942 was devoted to halting, after many defeats, the outward spread of Japanese power and to keeping Hitler's forces from overwhelming America's British and Soviet allies. Large shipments of munitions went to both allies. In November an American force invaded North Africa; it joined the British in defeating the German armies in that region by May 1943.
In 2 months the Allies were fighting the Germans in Sicily and Italy; at the same time U.S. forces in the Pacific were pushing in toward the Japanese home islands by means of an island- hopping offensive. On the long Russian front, German armies were being defeated and pushed back toward their borders. In June 1944 a huge Allied force landed on the French coast, an invasion preceded by 2 years of intense day-and-night bombing of Germany by British and American aircraft. By August 1944, Paris was recaptured. Hitler's empire was crumbling; clouds of bombers were raining destruction on German cities; and on Apr. 30, 1945, with the Soviet troops just a few miles from Berlin, Hitler committed suicide. Peace in Europe followed shortly.
The Pacific war continued, the Japanese home islands being rendered practically defenseless by July 1945. American aerial attacks burned out city after city. In April, Harry S. TRUMAN had succeeded to the presidency on Roosevelt's death. Now, advised that the alternative would be an invasion in which multitudes would perish, including many thousands of young Americans, he authorized use of the recently tested atomic bomb. On Aug. 6, the city of Hiroshima was obliterated; on Aug. 9, the same fate came to Nagasaki. Within a week, a cease-fire (which later research suggests was reachable without atomic attack) was achieved.
The political shape of the postwar world was set at the YALTA CONFERENCE (February 1945) between Roosevelt, Joseph Stalin, and Winston Churchill. Soviet occupation of Eastern European countries overrun by the Red Army was accepted, in return for a pledge to allow democratic governments to rise within them. Soviet and Allied occupation zones in Germany were established, with Berlin, deep in the Soviet zone, to be jointly administered. In return for Soviet assistance in the invasion of Japan (which was eventually not needed), it was agreed that certain possessions in the Far East and rights in Manchuria, lost to the Japanese long before, would be restored to the USSR. Soon it was clear that the kind of democratic government envisioned by the Americans was not going to be allowed in the East European countries under Soviet control. Nor, as the Soviets pointed out, was the United States ready to admit the Soviets to any role in the occupation and government of Japan, whose internal constitution and economy were rearranged to fit American desires under Gen. Douglas MACARTHUR.
The breach widened steadily. Charges and countercharges were directed back and forth, the Soviets and Americans interpreting each other's actions in the worst possible light. Americans became convinced that the Soviets were thrusting out in every direction, seeking to communize not only the Soviet-occupied countries, but also Turkey, Greece, and Western Europe. In February 1946, Stalin declared in Moscow that there could never be a lasting peace with capitalism. Shortly thereafter, Churchill warned of the "iron curtain" that had descended across the middle of Europe. The COLD WAR had begun.
In March 1947, Truman asked Congress for funds to shore up Turkey and Greece, both under Soviet pressure, and announced the Truman Doctrine: that "it must be the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures." Then the MARSHALL PLAN (named for George C. MARSHALL, U.S. chief of staff during the war and at this time secretary of state), approved by Congress in April 1948, sent $12 billion to the devastated countries of Europe to help them rebuild and fend off the despair on which communism was believed to feed.
True to its Democratic tradition, the Truman administration stressed multilateral diplomacy; that is, the building of an international order based on joint decision making. Nationalism, it was believed, must be tamed. The United Nations received strong American support. Meanwhile, the United States continued the drive toward a lowering of world tariffs (begun in the 1930s). During the war, all recipients of Lend-Lease had been required to commit themselves to lowered tariffs. These commitments were internationally formalized in 1947 in the GENERAL AGREEMENT ON TARIFFS AND TRADE, when 23 nations participated in an extensive mutual lowering of trade barriers. In 1948, at American initiative, the ORGANIZATION OF AMERICAN STATES was established to provide a regional multilateral consultative body in the Western Hemisphere. Within Europe, the Marshall Plan required the formation of Europe-wide organizations, leading eventually to the Common Market.
Toward the USSR, the basic American policy was that known as containment: building "situations of strength" around its vast perimeter to prevent the outward spread of communism. Angered Americans blamed the USSR for world disorder and came to regard the peace of the entire world as a U.S. responsibility. After their immense war effort, many Americans believed that the United States could accomplish whatever it desired to do. Also, having defeated one form of tyranny, fascism, and now being engaged in resisting another, Stalinist communism, the American people assumed with few questions that, since their cause was just, whatever they did in its name was right. Critics of national policy were harshly condemned.
A series of East-West crises, most dramatically the Berlin Blockade of 1948-49, led to the creation (April 1949) of the NORTH ATLANTIC TREATY ORGANIZATION. The NATO alliance sought to link the United States militarily to Western Europe (including Greece and Turkey) by making an attack against one member an attack against all. As Europe recovered its prosperity, the focus of East-West confrontation shifted to Asia, where the British, French, and Dutch empires were collapsing and the Communist revolution in China was moving toward its victory (October 1949). In June 1950 the North Korean army invaded South Korea. The United Nations Security Council (which the Soviets were then boycotting) called on UN members jointly to repel this attack. Shortly afterward, a multinational force under Gen. Douglas MacArthur was battling to turn back North Korean forces in the KOREAN WAR. As the UN army swept northward to the Manchurian border, Chinese forces flooded southward to resist them, and a long, bloody seesaw war ensued. An armistice was not signed until July 1953, following 150,000 American casualties and millions of deaths among the Koreans and Chinese.