Regulating the poor?

(this is based on Frances Fox Piven and Richard Cloward’s book, Regulating the Poor)

Authors’ argument
New Deal
Federal Response (under Hoover)
Social unrest
FDR’s Response
Some major results
Ensuing period of ‘stability’

Just what does this mean, you say? Let’s look at the authors’ argument.

Okay, get a drink. Splash cold water in your face. This is an important argument about the functions of welfare–from a more cynical viewpoint than we’ve discussed so far in class. You should read it critically, but with an open mind. It’s the closest brush with theory we’ll have in this class.

First, We have a capitalist system, which is dynamic. Unemployment and change are chronic features of this system. Full employment actually leads to problems, at least for the capitalists, who must then pay higher wages because there is no surplus pool of labor available to them.

Second, change is a relative thing. Take earthquakes, for example. There is such a thing as a power law, which attempts to explain differences in the magnitude of earthquakes (or for that matter, change in stock markets, Internet use, distribution of human settlements, etc.). On a log-linear scale, the frequency of an earthquake is inversely proportional to its magnitude. In other words, there are thousands of little tremors, and (thankfully) only a few ‘big ones.’ Now, this suggests that Turkey, which has had a few ‘big ones’ in our lifetime, may be in trouble–it could be that their big one would be a real whopper, or that they won’t have another large earthquake for thousands of years. Who knows? Trying to predict the movements of tectonic plates and the odds and severity of earthquakes is extremely difficult without a great amount of information (that we don’t have). So when you hear someone say the ‘big one’ is just around the corner, they’re probably seismologists looking for federal research dollars.

With respect to economies, they go through minor changes and disruptions all the time. But like earthquakes (or global pandemics), occasionally forces convene to create major disruptions. The two that the authors focus on are economic depression and modernization (mostly technology–if you want a deeper understanding of how social change might be examined, check out this link to the POET model). They can create major disruption. Here’s the scenario:

  1. Capitalist economies are dynamic. People may go in and out of employment, but relief (welfare) is generally only for those who are not able to work to support themselves. Relief for the ‘able-bodied’ is made so unattractive (e.g., workhouses) that they will seek low-wage work in the private sector before accepting it.
  2. Relief has historically been a local phenomenon (that is, managed by localities), available to the ‘worthy’ or ‘deserving,’ as opposed to the seemingly ‘able-bodied’ who are not working;
  3. Major economic disruptions sometimes occur–but are difficult to predict because economies are so complex–and may affect employment;
  4. Mass unemployment and lack of social safety nets are likely to lead to civil unrest;
  5. Unchecked, unrest may lead to social movements, the mobilization of those most affected by the disruption, and opposition to government policies;
  6. The problem can be so massive that no amount of tinkering can resolve it (unemployment hit 25% during the Great Depression);
  7. The government, in order to preserve the capitalist system, may have to intervene directly (offer direct relief, often in the form of cash or employment). It’s also possible the government might respond aggressively, even violently (the latter perhaps less likely in a relatively stable democracy, though, but we’ll discuss evidence).
  8. If the direct relief addresses the problems and eases the unrest, the relief system tends to contract. But it doesn’t disappear–it leaves a shell (mainly of services available to the ‘deserving’–those unable to work and support themselves), and thus slowly, over time, the welfare system expands slightly more than it contracts, and grows. But when it contracts, it serves once again to enforce low-wage work among the able-bodied by making welfare benefits less attractive than the lowest-wage work, or difficult to claim..

Let’s examine their thesis in light of the 1930s and what was happening.

The New Deal

What was it? In very general terms, a series of policies and laws representing a massive federal effort at economic recovery.

Recovery from what? The Great Depression, which was largely precipitated by the stock market crash on Black Thursday, October 24, 1929, was unprecedented, and some would say unanticipated (at least in its catastrophic scope).

What were some of the effects of the stock market crash, Depression?

  1. Unemployment. It increased dramatically over time (US population in 1930 was around 123 million):
Spring ’29
3 million
Jan ’30
4 million
Sept ’30
5 million
Spring ’31
8 million
Spring ’33
15 million (hit 25%)

Those still working saw their wages go down 1/3.

    1. Mass destitution, as the authors put it. This was not a case of individuals’ lack of incentive or initiative-it was a social problem on a grand scale.
    2. Overburdened relief agencies
      By 1932, local relief offices were closing down-the situation was a social, political and economic MESS.
    3. Near-bankrupt localities (hence the problems delivering on local relief efforts)

What was the Federal response (from President Hoover)?

    1. Denial – encouraged local action (relief had always been a local phenomenon, managed by cities mostly)
    2. ‘Supply side economics’ – what is it? Money in the hands of the capitalists, entrepreneurs (‘trickle down’), e.g., through tax cuts, subsidies
    3. Hoover wanted to keep profits high (assuming that capitalists would reinvest a portion of profit)
    4. ‘Nobody’ knew then the scope of the disaster–there were few statistics to gauge the problem, fewer sources of media, it was difficult to piece together the comprehensive nature of the disaster. There was surely local unemployment (plenty to see . . . ), but few historical precedents to look at, learn (or not) from;
    5. Hoover’s aides recommended investing in public works–he refused, not realizing this was more than a minor economic crisis, and was fixated on having a balanced budget-people were calling for greater efficiencies, even in relief distribution. But this wasn’t just a matter of mismanagent–it was a failure of the economic system;
    6. Congress voted down several relief packages (democrats mostly put them forward–Hoover was a republican). Any that passed, Hoover vetoed when they arrived at the White House for signing into law;
    7. The private sector was asked to maintain payrolls (any problems with that? Especially now, what would stockholders say? CEOs get rewarded for downsizing). Remember, wages of those who kept their jobs dropped one-third.

As one politician said, ‘if we don’t give [security] under the current system, the people will change it.’

Social unrest, movements

Who were the populations? Who would you suspect (who are the most vulnerable in society)?

  • Elderly (the ‘Townsendites’)
  • Veterans
  • Followers of Louisiana politician Huey Long (‘rednecks,’ people bought out through political machine)-‘share out wealth’ (a populist movement seeking redistributive tax reform)
  • Unemployed (the ‘able-bodied’) – groups often attacked relief agencies (in NJ, things got so bad that relief shut down and governments began issuing licenses to beg)

Are there any modern parallels with what happened in the 20s and 30s?

The Federal response (this time, from Franklin Roosevelt, elected in 1932): Direct relief

What did Roosevelt give them?

  • Social security (signed in 1935, this didn’t start paying out til ’42, and it didn’t turn out to be the $200/month the Townsendites were seeking–why wouldn’t it start until 1942?)
    • The Social Security Act of 1935 included old age pensions, unemployment insurance, and assistance for the disabled, elderly dependents, widows and orphans
  • Tax reform (it was progressive, graduated, and shifted burdens away from the poorest to wealthier classes)
  • Section 7a of the National Labor Relations Act gave workers the right to organize and to bargain collectively for employment contracts. Many in the business community never forgave FDR for this . . . of course, from Roosevelt’s point of view, he was saving capitalism.
  • FERA–Federal Emergency Relief Act–this was big, and it was direct relief. People were given monthly subsidies, in many cases people whose households had been without work for months, even years, surviving on whatever social capital and local relief they could muster. This was by far the biggest direct relief program, and unprecedented in the U.S. 20 million people were on the welfare roles by 1934. As one of the administrators remembered it, the goal was ‘to distribute as much as possible, as fast as possible, to as many as possible.’ What a concept . . .
  • Overall, the investment in FDR’s and Keynes’ demand-side policies was huge. And at a time when there wasn’t much income tax revenue coming in. So how did they finance it? Borrowing and new tax structures (that put more burden on the wealthy and businesses).

Families on Relief 1936-41

Relief Cases 1936-1941
(monthly averages in 1,000: 1,995=1.995 million)
Workers employed (add ,000):
Other federal work projects
Public assistance cases:
Social security programs
General relief
Total families helped
Unemployed workers (Bur Lab Stat)
coverage (cases/unemployed)

(from Wikipedia, Bureau of Labor Statistics )

So, total families helped averaged well over 5 million for six years.

Most of these efforts appeased the opposition–FDR was able to ‘co-opt’ some groups who had been protesting, by giving them some but never all of what they wanted, and things began to quiet down, though unemployment remained high for a long time. As stability began to return, there was a movement, in some ways almost immediately, away from direct relief, toward work relief. The direct relief, remember, is there to quell unrest, but the second function of welfare–regulating labor markets–requires that governments make sure that relief never replaces the need to populate the work force. Initiatives included the CWA-civil works administration-which built roads, schools, government structures (4 million workers, mostly men), and the WPA–Works Project Administration, which built many public works. Ever heard of the Civilian Conservation Corps? Many of the dam projects took advantage of these programs, as well as building infrastructure in national parks. In other words, not only did these projects employ people, but they made lasting contributions to the country’s infrastructure. Also there was the CCC, the Civilian Conservation Corps, which sent people out into the national forests.

There were other policies and laws passed as well. For instance, Federal Deposit insurance (FDIC), that guarantees money in banks, the Federal Securities Act, Tennessee Valley Authority, Homeowners’ Refinancing Act, etc.

Results of New Deal

  • Direct relief subsides, especially the FERA, but the ‘shell’ remains-what shell? Who were the recipients of direct relief after the initial period of intervention? Remember the distinction we talk about between ‘deserving’ and ‘undeserving’ populations . . .
  • Co-opted opposition, unrest settled, unemployment declined (slowly), Roosevelt took all the credit
  • Opposition from business interests
      • They claimed interference in private sector, market economy
      • relief should be local–it always had been
      • price deflation, not inflation, was a problem–prices of goods were going down, because no one had money to buy much. This sort of federal intervention–to address deflation–is okay, apparently.
      • workers’ right to organize (section 7a of NIRA)-companies wanted to form their own unions
      • big names–Alfred P Sloan, Howard Pew, DuPonts, E.F. Hutton, William Hearst, Henry Ford–were strong voices of opposition to FDR’s policies (there’s a quote in the book from Ford, talking about boys ‘riding the rails’, i.e., trains: ‘why it’s the best education in the world for those boys, traveling around!’ I imagine the contemporary version would be what an advantage children who’ve worked in sweatshops have in today’s competitive job market … ). There was evidence of the makings of an attempt to plot against the government as well (using front groups, no less …).

Period of ‘relative stability’

As the unrest subsided and direct relief began to contract, the government, through WPA and other mechanisms, returned to playing a role in enforcing low-wage employment (we do this even now, with the earned income tax credit, or EITC, and low minimum wage requirements). As you’ve read, it wasn’t a period of stability for most blacks, especially in the South, but one of dire poverty. Had they had a political power base, history might have looked differently. This was to come later.

How did government use welfare in this instance to regulate labor?

  • seasonal agriculture work-making sure farmers had cheap labor. When it was time for work in the fields, blacks were often summarily kicked off of the welfare rolls. There were few reasons given–it was just understood that they would be forced to work for whatever the going wages were in the fields for as long as local farmers need them.
  • Welfare rolls declined during the growing season (so did people’s welfare)
  • What did many states do?
    • Enforced residence laws (these kept people from moving and receiving benefits in their new locale–essentially it forced them into indentured servitude)
    • Adjusted benefit levels to local labor markets (much lower in the south, where wages were lower, ag sector more important to economies)
    • Poor families with two parents excluded from AFDC until 1961 (able-bodied …)
    • Single-mothers-‘man in the house’ rule to exclude recipients, keep men working;
    • Midnight raids (morality grounds, dependency)
    • Women and children in workforce in large percentages (well over 50)
    • Illegitimacy punished–women having children out of wedlock often forfeited rights to local aid;
    • Lower benefit rates for able-bodied (ADC less than SSI)
    • racism
      • ‘work training’ is low-wage labor (training in dishwashing, housecleaning for blacks)
      • black women and work in the fields (’employable mother’ rule)
      • other assistance denied unless they could show proof of employment
      • ‘man in the house’ rules
      • illegitimacy meant denial of public benefits for black families
      • Florida example: 15,000 families removed from roles-91% black (only 180 deemed ‘unsuitable’ due to abandonment, neglect)
      • Bottom line? Southern agriculture was labor intensive, depended on cheap labor (blacks were essentially ‘free’ slaves-p. 143)
    • Regional differences-the dynamics in the South were different than other areas of the country, because of?
      • Race
      • Economy (labor-intensive agriculture, low wage employment)

While there was little unrest in the South, it doesn’t mean in this case there wasn’t mass destitution. But the cause was different, according to the authors–modernization of agriculture. A few facts:

  • Between 1950-69, 1 million farms disappeared (meaning, were consolidated);
  • farm output increased by 45%;
  • farm labor decreased by 45%;
  • the resulting waves of migration saw 20 million blacks leave for cities, mostly in the North, a process that actually started after WWII.

Why was there little or no protest? The authors list several reasons:

  1. The migration, though massive, was gradual–it didn’t occur all at once, as migration during the Dust Bowl did;
  2. Unemployed in agriculture are generally a dispersed population, not concentrated in the cities, making mobilization and organization more difficult;
  3. Racism–coercive force has and still is used in parts of the South, merciliessly used to deal with anyone who did not like the power structure;
  4. Migration–people merely left.

But they concentrated in cities, which changed the whole landscape of civil rights and race relations, and the implications for welfare. We’ll discuss this as the next period of unrest (they’re setting up their argument by documenting the migration that took place). Keep in mind, there would have been unrest during this period, except for the fact that blacks had little if any political power to make their grievances known, or to publicize the deplorable living conditions and poverty that were an everyday fact of life for many.

Any Modern parallels? (I’ll list some, but you should think them through and add)

  • Unemployment increases
  • People invested in stock market (last time so many were was 1929), many with pensions
  • Messing with taxes (this time, Tax cuts that favor the wealthy? Why? Think supply-side economics)
  • Huge budget deficits
  • Shift of tax burden to the poor
  • Welfare ‘reform,’ designed to decrease welfare rolls
  • Financially stressed cities, states, welfare offices
  • ‘Great Recession’ of 2008
  • we have some additional factors at work:
    • Increased burden on the states-tax linking, unfunded mandates
    • impending war

And now …

We’ve had in the US a few examples of changes in the welfare state over the last two decades. The first however was an effort to dismantle ‘entitlements’ like AFDC (renamed TANF and converted from entitlement to lump sum block grant), via the bipartisan ‘Personal Responsibility and Work Opportunity Reconciliation Act’ of 1996.

The second was Medicare Part D, which added prescription drug coverage to Medicare’s complement of care for the elderly (over 65 years). That bill was partisan (supported exclusively by republicans), was passed by two votes, late at night after some arm-twisting in the House of Representatives. The politics behind the bill were driven as much by the pharmaceutical industry as the Medicare lobby. The government was prevented from using the vast purchasing power of a growing class of Medicare-eligible to negotiate lower drug prices. In some ways, the bill provided a means for pharmaceutical companies to expand their markets. Suffice it to say it wasn’t a bill prompted by economic disruption.

Then came the Affordable Care Act (often known as ‘Obamacare’), which was mostly a bill supported and passed by democrats that expanded care to cover an additional 20 million or so Americans (but did not offer universal coverage for all citizens, making the US the only industrialized welfare state not to provide universal health care). The ACA was part of a campaign promise made by President Obama, so it wasn’t really the result of public pressure either. But we have seen efforts to repeal the law, and short of that to remove its funding, strip away the requirement to purchase insurance (meant to expand the risk pool to include younger, healthier people), offer no assurances that a person could be denied coverage because of pre-existing conditions, and charge a deductible that makes insurance little more than some minimal protection from catastrophic illness. This should resemble to you the pressure the business community can exert on government to ‘contract’ or ‘rein in’ expanded welfare intervention after a period of severe economic disruption has subsided. Except in this case there was no civil unrest driving the changes, it was more part of a conventional political, electoral process (rather than via protests or social activism, for instance).

Frances Fox Piven and Richard Cloward. 1993. Regulating the Poor. New York: Vintage Books.