Periodic spikes in unemployment are as American as the Big Mac.
From the early years of the nineteenth century through World War II, the American economy tanked at least every decade or two. U.S. history textbooks are filled with boldfaced subheadings that begin "The Panic of…" followed by an assortment of years, whether 1837, 1857, 1873, 1893 or 1907.
As the twentieth century progressed, the U.S. economy continued to sour with remarkable regularity: in 1914, 1920, and, of course, during the Great Depression. A long stretch of prosperity and stability followed World War II.
But by the end of the 1960s, the U.S. economy's historic case of the wobbles had returned. Hard times defined the '70s, the early '80s as well as the late '80s and the early '90s.
Now here we are again, dealing with the consequences of what is universally described as the worst economic crisis since the Great Depression. In the fall of 2009, the national unemployment rate peaked at 10.1 percent and today remains at a distressingly high level, just over nine percent.
What is just as American as all this, however, is providing help to the jobless during moments of mass unemployment. At least from the 1850s forward, during all of the downturns listed above, Americans took a variety of steps to aid the unemployed.
Nearly all of these efforts—including those that took place long before the New Deal—involved some degree of government action. However, before the 1930s, local governments, rather than Washington, took the lead in offering assistance.
Rediscovering this history underscores an important fact. Leaving the unemployed to fend for themselves, as some pundits and political leaders have recently proposed, would be a radical departure from the American past.
The Birth of a Policy Tradition
The possibility of truly widespread unemployment arose with the spread of manufacturing and wage labor in the decades leading up to the Civil War. Societies based primarily on agriculture do not experience "unemployment" in the same way as industrial ones do.
As the nation's first factories developed, primarily in the North, they increasingly forced self-employed craftsmen out of business and lured more and more Americans off the farm. By the time the South fired on Fort Sumter, cities like New York, Philadelphia, and Boston were filled with wageworkers. During every economic bust, those cities became filled with the unemployed.
Local governments were the first public entities to address mass joblessness. From early on, one of their leading strategies was increasing public employment.
When the ranks of the unemployed swelled after the economic panic of 1857, the mayor of New York put over a thousand men to work fixing up Central Park and gave others jobs constructing roads. Philadelphia pursued a similar but smaller program after thousands of protestors gathered in Independence Square demanding that public officials do something to help the jobless.
During the economic crisis of the 1870s, a number of cities increased spending on public works projects as a way to help the unemployed. Some also upped funding for public charity. In both the 1850s and the 1870s, public action supplemented the work of private organizations, such as churches and charitable societies.
The American economy crashed again in the early 1890s. Accurate employment statistics for the period are hard to come by, but according to some accounts, the national unemployment rate climbed as high as 17 percent.
During the especially harsh winter of 1893-94, many cities organized emergency committees to coordinate local campaigns on behalf of the unemployed. In some cities, mayors established these bodies. Elsewhere, they were founded and run by private organizations, like local chambers of commerce or large charities. Nonetheless, even privately run committees often collaborated closely with public officials and in many cases enjoyed quasi-public status.
Whether publicly or privately run, few if any of these emergency committees came close to meeting the needs of the unemployed. Nonetheless, they made sincere attempts to provide makeshift work on a number of public and private projects.
Unemployed men might find temporary employment crushing stone at nearby quarries, cleaning parks, building roads, laying sewers, or chopping wood. Some unemployed women found temporary jobs in laundries or sewing shops that were established specifically to provide work for the jobless. Most of the institutions that provided women with work were run by private charities but some received public subsidies as unemployment soared.
By the early twentieth century, local campaigns against mass unemployment had become commonplace.
When the First World War broke out in Europe, the American economy experienced a short but sharp economic downturn. As unemployment spread during the winter of 1914-15, nearly fifty American cities formed emergency committees to cope with surging unemployment.
According to one survey, almost a hundred cities accelerated construction on public works projects. Many cities sponsored "spruce up" or "odd jobs" campaigns to put the unemployed to work beautifying local surroundings or performing handiwork in private homes and at local institutions. Elsewhere, emergency committees ran "bundle days" to collect clothing for the destitute unemployed. Across urban America, cities combined public action and private effort to help the down and out.
By then, they were simply following tradition.
Enter the Federal Government — Hesitantly
During the First World War, the American economy kicked into overdrive to supply American and allied troops overseas. With the end of hostilities, thousands of wartime jobs threatened to evaporate at a moment when millions of American soldiers and sailors were about to return home in search of work. Commentators and public officials fretted that victory might come with a steep downside: yet another wave of unemployment.
These fears underpinned the federal government's first, ambivalent foray into fighting mass joblessness.
In his first major speech after the end of the war, President Woodrow Wilson called for the acceleration of public works projects in states and cities across the country to help the "large floating residuum of labor" that would likely accompany the country's adjustment from war to peace. He also endorsed a proposal of Secretary of the Interior Franklin Lane to allocate $100 million in federal money to put men to work reclaiming "arid, swamp, and cut-over lands" with the potential of making arable "some three hundred million acres" of farmland.
Congress refused to fund the multimillion-dollar program.
Still, even without congressional backing, a number of federal agencies took action in the months following the armistice. The War Labor Board, the Department of War, and the Department of Labor all put pressure on governors and mayors to forge ahead with as many public works projects as they could. The National Council of Defense established an Emergency Committee for Soldiers and Sailors in order to help returning military personnel find jobs. The committee also urged local governments to spend more and more on public projects.
By the fall of 1919, the economy seemed stable and the federal government turned to other concerns. As it turned out, however, a much worse economic crisis lay just around the bend. In the final months of 1920, the U.S. economy began to falter amid an international slump. By the following summer, the Secretary of Labor estimated that over five and a half million people were out of work – by most accounts the largest number of unemployed Americans in U.S. history up to that time.
As was the tradition, local governments were the first to respond to the unemployment epidemic of the early 1920s. A number of cities appropriated special funds to help tide the unemployed over by giving them food, coal, or cash while others once again pushed ahead public works projects. Some state governments also took action by boosting funding for public employment bureaus or authorizing cities to offer special bond issues for projects that would create jobs.
As the crisis persisted, however, the federal government once again entered the fray. In the fall of 1921, President Warren Harding convened a national conference on unemployment.
The meeting was the brainchild of Harding's Secretary of Commerce, Herbert Hoover. Hoover is usually remembered as the president who failed to help the unemployed in the early years of the Great Depression. Nonetheless, in 1921, he urged some form of federal action because it was "inconceivable" that the United States "could allow any suffering amongst those of our people who desire to work."
The President's Conference on Unemployment resulted in a number of federal innovations. Its members endorsed one of the first instances of what we now call federal stimulus spending: $75 million in matching grants to states for highway construction. The measure was meant to increase employment opportunities and also funnel money toward industries related to road building. Hoover successfully used the conference's endorsement to convince Congress to pass the plan.
Next, conference members established a standing committee to study how the United States could stave off future economic downturns. By the end of the 1920s, the committee had produced a set of landmark studies that signaled a new federal commitment to stabilizing the economy.
Finally, the conference established a special committee charged with overseeing emergency campaigns to offer support to the unemployed. The conference's final report stated emphatically that helping the unemployed was primarily a "community problem," rather than a federal one. Cities, and secondarily states, would remain at the front of the battle.
Nonetheless, conference members embraced a plan to use the power and prestige of the federal government to pressure state and local officials into intensifying their efforts as well as adopting a set of best practices.
In crafting their recommendations, the members of the President's conference explicitly rejected tactics that central governments in a number of European countries, especially Great Britain, had come to embrace to fight unemployment.
In 1911, Great Britain had adopted one of the world's first systems of unemployment insurance. It was funded by a combination of employer and employee contributions and state subsidies. At first the law covered only a small number of workers in the most economically volatile industries. In 1920, however, just before Harding and Hoover called the unemployment conference, Great Britain dramatically expanded the system so that it covered more than eleven million workers. Over the next decade, ten other countries would establish similar programs.
Hoover was strongly opposed to state-sponsored unemployment insurance, as were the majority of the men and women he invited to attend the unemployment conference. Thus, he and his fellow conferees championed new forms of federal action even as they resisted the creation of a truly powerful, centralized state.
Moreover, they feared that giving the unemployed public funds without making them perform some sort of productive labor would sap the nation's work ethic and create a class of Americans dependent on government handouts. In urging local governments to take action, members of the conference particularly underscored their belief that public employment was better than government charity.