 
The Depression shook the belief
of the capitalist faithful.
By the end of the 1920s, people
were calling it a new era.
It was going to be a time
of unbounded prosperity.
Wages would rise forever.
Stocks would always go up.
Cars would only get faster.
And yet with the Great Depression,
everything had fallen apart.
Hoover hadn't fixed the economy, and
so when FDR came into the presidency,
people were hopeful that
he would be able to fix it.
In his inaugural address,
FDR told the American people
that the crisis of capitalism,
the crisis of the Great Depression
was both unprecedented and within
the ability of Americans to fix it.
"It was not," he said,
"a plague of locusts
sent by an angry God, but the
result of the stubbornness
and incompetence of the rulers of
the exchange of mankind's goods."
The Depression was a
result of the choices
that people had made over their
financial system and the economy
as a whole.
Faith in bankers and capitalist
institutions in general was slim.
And so as FDR explored options
for righting the economy,
he was, of course, elected on a
platform of balanced budgets, which
he very quickly went away from.
He explored many options.
Now, Hoover had been a man
of principle, a man who
believed in reasoning
from first principles,
whether or not those principles
were right in describing the world.
FDR's genius perhaps was in
fact, in his lack of genius.
His ability to create new policies,
the policies we call the New Deal,
came out of an assumption
that there were
many different ways
to right the economy.
And so the New Deal as we
conventionally remember
it is one of direct government
spending-- building stadiums, clearing
brush, digging holes,
and filling them, again.
And certainly, this
is one important part
of the New Deal-- not the digging
holes, but the building of buildings.
But there's another New
Deal, another New Deal
that focused less on directly
spending government money
and more on re-orienting the
process of capitalist investment.
And I think this actually
matters more, because it's
out of these methods, methods that
we often don't hear as much about,
that many of the great post-war
achievements of American capitalism
were realized.
You get suburbia.
You get the aerospace
industry, electronics industry.
In fact, you get most of the signature
features of post-war capitalism
coming out of the state
policies of the 1930s.
And so as we think
about the New Deal, it's
not simply in terms of priming
the pump, of restoring consumption
to the economy.
It is also about building a new pump,
building a new place to invest capital
during the 1930s and
especially after the 1940s.
FDR was denounced on both the left
and the right as inconsistent.
But yet as he told people, he believed
the economy was a condition and not
a theory, that they were confronting
something that was unprecedented.
And so on the left, he was
seen as insufficiently radical,
not transitioning the country
from capitalism to socialism.
And on the right, he was
denounced as a fascist
for not trusting in markets
to correct themselves.
And so through the 1930s, he steers
a course that is inconsistent,
multitudinous, but always
focused in practical results.
As late as 1935, 90% of rural
Americans had no electricity.
What did this mean?
It meant that they couldn't
buy electrical goods.
It meant that their farms
couldn't use electrical machines.
It meant fundamentally that they
were left out of modern society.
Now, there was one program in the
New Deal called the Tennessee Valley
Authority that built a
large dam and provided power
for large segments of the
southeastern United States.
But there was another program that
didn't rely on direct government
spending called the Rural
Electrification Administration, or REA.
And what's amazing about
the REA is that it set up
sessions of locally
controlled cooperatives
to bring electrical
power to rural America.
Now, think about how
exciting this would be.
If you were in a town driving your
car, all around you are bright lights.
There's a movie theater, there's
diners, there's everything else.
And as soon as you hit the boundary
of that town, the lights went out.
Suddenly there's only darkness.
These rural cooperatives literally
brought light to the darkness.
And along that, they
also brought the ability
to buy all of these electrical
goods, of washing machines
and other kinds of both household
and agricultural implements,
bringing up the productivity
of American farmers
as well as the consuming power of
the American farming household.
And these cooperatives relied on
government loans that came ultimately
out of banks, the government
acting as an intermediate.
But these were not direct spending.
These were things that
were self-sustaining.
And through this process nearly
all rural Americans within 10 years
received electricity, allowing them to
buy the goods made by American workers
and to increase their production.
 
