By John Henry, Professor of Economics at UMKC.
UPDATE Comments are now working on this post. Readers, thanks for the heads-up!
Lambert here: This post is an important contribution to the debate, because the history of the WPA gives the lie to the oft-heard claim that “the government can’t create jobs.” It can and it has.
* * *
In the current debates surrounding various job guarantee programs (in association with the Chartalistor Modern Money perspectives), it might prove helpful to review some aspects of the Works Progress Administration (renamed in 1939 as Work Projects Administration). While the WPA was not a “job guarantee” program, it nevertheless points to a number of issues that are under current discussion, including those of the nature of the projects undertaken, impact on the larger economy, concerns surrounding bureaucratic impediments, etc. Let’s begin with an introductory statement pertaining to the political and economic orientation of Franklin Delano Roosevelt (and his Administration).
Roosevelt was not a progressive. He ran on a balanced budget platform, and initially attempted to fulfill his campaign promise of reducing the federal budget by slashing military spending from $752 million in 1932 to $531 million in 1934, including a 40% reduction in spending for veteran’s benefits which eliminated the pensions of half-a-million veterans and widows and reduced the benefits for those remaining on the rolls. As well, federal spending on research and education was slashed and salaries of federal employees were reduced. Such programs were reversed after 1935. And one might recall that Roosevelt attempted to return to a balanced budget program in 1937, just as the economy appeared to be slowly recovering. The result was a renewed depression that began in the fall of that year and ran through 1938.
Thus, the Roosevelt Administration was forced into progressive activism because of massive—and organized—popular discontent based mainly in working class and small farmer organizations. The union movement was rejuvenated through the formation of the CIO, farmers organized to prevent the forced sales of their properties (and this often included the threat of armed action), rent strikes were rampant, etc. Chicago, New York, other cities saw massive demonstrations. “Riots” shook the Kentucky coal fields. One must remember that the communist party was large (as these parties go), active, and popular. The specter of revolution was in the air and some politicians responded. Hamilton Fish Jr. instructed his fellow Congressmen, “(i)f we don’t give (security) under the existing system, the people will change the system. Make no mistake about that.”
The WPA was one of several programs developed to respond to this supposed threat. Initially, the Roosevelt Administration authorized the Federal Emergency Administration of Public Works in 1933 (renamed in 1939 as the Public Works Administration). The PWA allocated over $6 billion to private firms that actually undertook the large scale projects ordered by government. Dams, including Grand Coulee, hospitals, bridges (the Triborough Bridge and Lincoln Tunnel in New York City), etc.
In the same year, the Civilian Conservation Corps (ostensibly Roosevelt’s favorite such program) was organized. Exceptionally active in erosion control, reforestation, the creation of public parks, etc., the CCC hired 2 million young men over the course of its history. The fundamental difference between the CCC and the PWA was that workers on CCC projects were hired directly by the government. And this funding relationship served as the model for the WPA.
The WPA was under the direction of Harry Hopkins, a notable figure in his day. While the program was officially terminated in 1943, U.S. entry into WWII effectively ended its existence. On average through 1941, the WPA employed about 3 million people each month. If we include employees in the CCC and the National Youth Administration (a separate program under the WPA), total employment in government contracted work came to roughly 4.3 million per month. This represented 8-9% of the U.S. labor force. Originally, the WPA was an extension of the Federal Emergency Relief Administration—the first federally-funded welfare program in the U.S. One rationale for the WPA was that it was better to put people to work performing useful tasks rather than merely receiving assistance: off the dole and on the job.
A maximum work week was set at 30 hours, and pay was set at “the prevailing wage.” This latter standard raised some unintended humorous criticism. Senator Richard Russell of Georgia complained that: “In the State of Tennessee the man who is working with a pick and shovel at 18 cents an hour is limited to $26 a month, and he must work 144 hours to earn $26. Whereas the man who is working in Pennsylvania has to work only 30 hours to earn $94, out of funds which are being paid out of the common Treasury of the United States” (In Couch, 2008).
The WPA was not intended as a “full employment” program. Only one household member could be employed under the program (it was usually males), though one does find female heads of households so employed. It should also be noted that state and local governments were required to contribute 10-30% of the costs of the various projects undertaken. Over its life, total spending on WPA projects amounted to about $13.4 billion, roughly 2% of GDP over those years.
And what were those projects? Was this simply a “make work” program that made little difference in the long run? Or, was the WPA integral to the larger economy and its contributions socially useful? A truncated tally follows. (See below for a slideshow of projects under the WPA)
- 560,000 miles of roads built or improved
- 20,000 miles of water mains, sewers constructed
- 417 dams built
- 325 firehouses built; 2384 renovated
- 5,000 schools constructed or renovated
- 143 new hospitals, 1,700 improved
- 2,000 stadiums, grandstands built
- 500 landing fields; 1,800 runways (including participation in the construction of LaGuardia Airport, NYC)
- State and municipal parks, including the foundation of the extensive California state park system.
- 100 million trees planted
- 6,000 miles of fire and forest trails created
- Education: Through 1941, 1 million enrolled in adult education courses, 37,000 children in classes and nursery schools; 280,000 received music instruction, 67,000 art instruction.
- Libraries were built. These were especially directed toward poor and rural communities.
- Zoo buildings constructed
In addition to the above, one should note the WPA’s contribution to the cultural life of the country. Under the direction of Hallie Flanagan, the Federal Theatre Project mounted 1,200 productions including 300 new plays. Audiences were estimated at 25 million in forty states, many of whom had never before seen a play. As well, WPA programs included Federal Music, Federal Arts, and Federal Writers’ Projects. This latter program produced the most notable “Slave Narrative Collection,” consisting of 10,000 pages of interviews with former slaves, a continuing treasure-trove for researchers. Last, let us not forget the famous murals that were produced by artists hired by the WPA. These dot the country from post offices (though these were mainly funded by the Treasury Department through a grant from the government) to college buildings, to government buildings. Included in this array were those painted by Diego Rivera for the City College of San Francisco, Anton Refregier in the Rincon Annex Post Office, San Francisco, and Thomas Hart Benton in the Missouri State Capitol rotunda.
Let us now turn to some numbers and tell something of a story about some of the macro effects of the jobs programs.
|
YEAR
|
FEDERAL
GOVERNMENT SPENDING (BILLIONS $)
|
GROSS DOMESTIC PRODUCT
(BILLLIONS $)
|
INF
RATE
|
FEDERAL
DEFICIT
(BILLIONS $)
|
UNEMPLOYMENT
RATE
(ESTIMATED)
|
ADJUSTED
|
WAGE RATE
MANUFACTURING
(1923-25=100)
|
|
1930
|
4.0
|
91.2
|
-2.7
|
-0.9
|
8.7
|
8.9
|
92
|
|
1931
|
4.1
|
76.5
|
-8.9
|
0.1
|
15.9
|
15.7
|
78
|
|
1932
|
4.3
|
58.7
|
-10.3
|
1.6
|
23.6
|
22.9
|
66
|
|
1933
|
5.1
|
56.4
|
-5.1
|
1.8
|
24.6
|
21
|
73
|
|
1934
|
5.9
|
66.0
|
+3.5
|
2.1
|
21.7
|
16.2
|
86
|
|
1935
|
7.6
|
73.3
|
+2.6
|
3.0
|
20.1
|
14.4
|
91
|
|
1936
|
9.2
|
83.8
|
+1.0
|
4.0
|
16.9
|
10
|
99
|
|
1937
|
8.8
|
91.9
|
+3.7
|
2.6
|
14.3
|
9.2
|
109
|
|
1938
|
8.4
|
86.1
|
-2.0
|
1.2
|
19.0
|
12.5
|
91
|
|
1939
|
9.3
|
92.2
|
-1.3
|
2.1
|
17.2
|
11.3
|
100
|
|
1940
|
10.1
|
101.4
|
+0.7
|
3.1
|
14.6
|
9.5
|
108
|
|
1941
|
14.2
|
126.7
|
+5.1
|
4.7
|
9.9
|
6.0
|
—–
|
|
1942
|
35.5
|
161.9
|
+11
|
19.5
|
3.9
|
3.1
|
—–
|
Source: Historical Statistics of the United States
The first matter to note is the unemployment rate. Official estimates did not count WPA (or CCC) workers as employed. Rather, they remained on the unemployed lists as they were not working in private sector jobs. The adjusted rate includes these workers as working—as they were. This results in a roughly 6% differential and paints a much rosier picture of the effects of the WPA and other programs in reducing unemployment.
The second issue is that of the relation between government deficit spending and inflation. Observe that in the 1930-32 period, when private sector spending fell precipitously and government spending was flat, the economy suffered deflation and tumbling GDP—the worst possible development in a capitalist economy as the specter of a declining price level and GDP generates pessimistic “animal spirits” (à la Keynes). The growing federal government deficits of 1932-33 were not the result of increased spending, but declining tax revenues that resulted from declining incomes and spending in the private sectors. With increased government spending and accompanying deficits, GDP began to increase as did prices. But observe that in the heyday of the WPA, the CPI rose to a mere 3.7% rate: this is in the normal range for a capitalist economy and clearly does not represent “real” inflation, but merely rising prices which is necessary to induce more optimistic animal spirits. Indeed, though this is not shown, private investment was rising during this period. As well, with rising investment and rising employment (private as well as public), real wages also rose, reaching their 1923-25 level by 1936. (Here, I use wages in manufacturing as a proxy for economy-wide real wages, as most commentators focus on manufacturing, then a much larger portion of the economy, as a key indicator of economic health.)
We also observe that when the Roosevelt Administration returned to its balanced budget program in 1937, things deteriorated: GDP fell, unemployment rose, real wages fell, private investment fell (though not shown here), and deflation once again reared its ugly head. And, as is well known, with U.S. entry into WWII, government spending and deficits soared, but the economy finally recovered. Had the federal government spent as much in the 1930’s to generate useful, constructive activities, rather than destructive activities associated with war, it can be argued that the depression would have been over within a year, even with the financial debacle of the late 1920’s.
Last, let’s consider two standard complaints about government bureaucracies: they are too large, unwieldy, thus inefficient; and they are prone to “capture” by private interests, thus do not serve the “public good.” Dealing with the second issue first, I have no doubt that this is a problem in the present period at a minimum. If one puts industry pimps in charge of the various bureaus, if one perpetrates a campaign denigrating public service, if one treats “public servants” as slaves, then government bureaus are ripe for such capture. Indeed, an argument can be made that over the last 30 years that has been the objective of various administrations—Democrat as well as Republican. The public servants of the 1930’s seem to fit a different mold, at least in the main. If one reads about the self-sacrificing work of a Harry Hopkins, of a Hallie Flanagan, of the government employees in the trenches, a quite altered picture emerges. These people were, again, in the main, public-spirited, rather selfless, quite competent, and hard-working. We should not hypothesize about the behavior and character of people of different eras using the rather depraved standard of the current period. (See Quinn, 2008 for some insight into the character of WPA personalities.)
The other issue is that of the size of such bureaucracies. The WPA had a central administrative personnel of around 2,000 people (depending on month and year). Most of WPA employees were at the state and district offices where the projects were actually undertaken and the hiring of project employees took place. Again, depending on month and year, this number ranged from 15 to 35 thousand. The ratio of government employees to project workers—a more telling figure—ranged from 11 to 21 per 1,000 project workers, with the average running about 13/1,000 (Final Report of the WPA Program, p. 10). That is, less that 2% of the total number of workers in the WPA program consisted of administrative personnel. How would that ratio compare with, say, General Motors?
An examination of previous government programs such as the WPA assists in developing a clearer understanding of various versions of a job guarantee program, in both its positive and negative features. Obviously, the WPA was not such a program, but it points in that direction. Taking account of the differences in the eras of the 1930’s and the 21st century, what lessons can be drawn from previous experiments—and the WPA was an experiment—and what can current imaginations produce in the present period. As Keynes stated at the beginning of the Great Depression: “As soon as we have a new atmosphere of doing things, instead of one of smothering negation, everybody’s brains will get busy, and there will be masses of claimants for attention, the precise character of which it would be impossible to specify beforehand” (Keynes [1929] 1972, 99).
Who Says the Gov’t Can’t Create Jobs
View more presentations from Mitch Green
References:
Couch, Jim. “Works Progress Administration”. EH.Net Encyclopedia, edited by Robert Whaples. March 16, 2008. URL http://eh.net/encyclopedia/article/couch.works.progress.administration Federal Works Agency. Final Report on the WPA Program, 1935-43. Washington, D.C.: U.S.
Government Printing Office. 1947
Keynes. J. M. [1929] 1972. “Can Lloyd George Do It?” In Collected Works, Vol. 9. Pp. 86-125.
Quinn, Susan. Furious Improvisation. New York: Walker Publishing Co. 2008
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I have no problem with generous infrastructure spending; let’s fix and spruce up the US with US Notes. But let’s not pay men to waste their time by say requiring them to use a shovel for bulldozer jobs.
If the goal is to inject new money into the economy (so people can pay their debts to the counterfeiting cartel) and legitimate infrastructure spending is inadequate then let’s just send out bailout checks to the entire population and let THEM decide how to spend their time if there are not enough legitimate jobs to go around. The banking system has certainly cheated the entire population so restitution is in order.
As for FDR, he did not save capitalism; he saved banking.