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

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.