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THE NEW DEAL

THE NEW DEAL

In his first inaugural address, United States President Franklin Delano Roosevelt, made an attempt to assess the enormous damage: “The withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone. More important, a host of unemployed citizens face the grim problem of existence and an equally great number toil with little return.” He was speaking of the Great Depression of 1929 to 1940, which began and centred in the United States but spread quickly throughout the industrial world. The United States had never felt such a severe blow to its economy. President Roosevelt’s New Deal reshaped the economy and structure of the United States and the programmes under it proved effective and extremely beneficial to the American society.

Background

On October 29, 1929, a day known forever after as “Black Tuesday,” the Great Depression hit the United States. It was the day when American stock market, which had been roaring steadily upward for almost a decade, crashed, plunging the country into its most severe economic downturn yet. Speculators lost their shirts, banks failed, the nation’s money supply diminished and companies went bankrupt and began to fire their workers in droves. The Great Depression, which lasted from 1929 to 1939, was the largest and most significant economic depression to affected both the US and all Western countries.

President Hoover’s Stolidity

At that time, the US President was Herbert Hoover. Being a supporter of a free market economy that would self-correct, he decided that the government should not take stringent action to deal with heavy losses by investors and the subsequent effects that rippled throughout the economy. ​He was also concerned that economic assistance would make people want to stop working. As the Depression wore on, government revenues fell. To keep from running a deficit, Hoover cut spending.

A New Deal for America

Reacting to the ineffectiveness of the Hoover Administration in meeting the ravages of the Great Depression, American voters, the following November, overwhelmingly voted in favour of Franklin D. Roosevelt’s promise “I pledge you, I pledge myself, to a new deal for the American people.”

Opposed to the traditional American political philosophy of laissez-faire, the New Deal generally embraced the concept of a government-regulated economy aimed at achieving a balance between conflicting economic interests.

Roosevelt’s Plans

Roosevelt had three basic aims which directed his actions:

1. Help the victims

Millions of ordinary Americans faced unemployment, hunger and poverty. Roosevelt was determined to help them. Of course, he had the additional aim of preventing future disasters. The New Deal aimed to increase employment through public works projects. This is what economists call fiscal policy – when the government attempts to stimulate the economy by spending money. Such fiscal policies provide a very powerful benefit to the economy, especially in the short run.

2. Encourage economic recovery

The Great Depression was a disaster for America. Roosevelt knew that he had to take action to encourage recovery, to get the nation back to work. The government pumped billions into various public works programmes. These programmes created jobs that allowed Americans to begin to buy items. The Tennessee Valley Authority (TVA) helped bring electricity to the South. This would help with the industrialization of the region.

3. Reform the economic system

The whole economic system would have to be altered so that there would never again be a Depression as bad as that of the 1930s. Changes such as Glass-Steagel and tighter government regulations were intended to prevent another economic disaster.

To achieve these objectives, Roosevelt decided that direct action and intervention by the federal government would be necessary. The days of laissez-faire of the government doing as little as possible were over.

Top 10 Programmes (The “Alphabet” Agencies)

1. Civilian Conservation Corps (CCC)

It was created in 1933 by President Roosevelt to combat unemployment. The CCC was responsible for building many public works projects. It created structures and trails in parks across the country.

2. Civil Works Administration (CWA)

It was also established in 1933 to create jobs for the unemployed. Its focus on high-paying jobs in construction sector resulted in a much greater expense to the federal government than originally anticipated. The CWA ended in 1934 in large part because of opposition to its cost.

3. Federal Housing Administration (FHA)

The FHA was created in 1934 to combat the housing crisis of the Great Depression. It was designed to regulate mortgages and housing conditions and still plays a major role in the financing of houses for Americans.

4. Federal Security Agency (FSA)

Established in 1939, the FSA was responsible for oversight of several important government entities. Until it was abolished in 1953, it administered Social Security, federal education funding and the Food and Drug Administration (FDA), which was created in 1938 with the Food, Drug and Cosmetic Act.

5. Home Owners’ Loan Corporation (HOLC)

The HOLC was created in 1933 to assist in the refinancing of homes. The housing crisis created a great many foreclosures, and FDR hoped this new agency would stem the tide. In fact, between 1933 and 1935, one million people received long-term, low-interest loans through the agency, which saved their homes from foreclosure.

6. National Industrial Recovery Act (NIRA)

The NIRA was designed to bring the interests of working-class Americans and businesses together. However, the NIRA was declared unconstitutional in a landmark Supreme Court on the grounds that it violated the ‘separation of powers’.

7. Public Works Administration (PWA)

The PWA was created to provide economic stimulus and jobs during the Great Depression. It was also tasked to create public works projects. It ended in 1941.

8. Social Security Act (SSA)

The Social Security Act of 1935 was designed to combat widespread poverty among senior citizens and to aid the disabled. The government programme, one of the few parts of the New Deal still in existence, provides income to retired wage-earners and the disabled who have paid into the programme throughout their working lives via a payroll deduction. It has become one of the most popular government programmes ever.

9. Tennessee Valley Authority (TVA)

The TVA was established in 1933 to develop the economy in the Tennessee Valley region, which had been hit extremely hard by the Great Depression. The TVA was and is a federally-owned corporation that still works in this region. It is the largest public provider of electricity in the United States.

10. Works Progress Administration (WPA)

The WPA was created in 1935. As the largest New Deal agency, the WPA affected millions and provided jobs across the nation. It was renamed the Works Projects Administration in 1939, and it officially ended in 1943.

How the New Deal worked?

This is a serious question for historians. The United States did eventually recover from the Depression of the 1930s – but how much of this recovery was the result of the New Deal?

As the Depression gathered pace after 1929, Americans had lost confidence in their government’s ability to deliver prosperity. The New Deal helped to restore that confidence. Roosevelt’s public image was one of strength and assurance of a powerful and reassuring leader.

Through the New Deal measures he gave the impression of a man who was taking charge, who knew what he was doing. At that time, this was immensely important.

Benefits of the New Deal

1. Economic recovery

The New Deal stabilized the banks and cleaned up the financial mess left over from the Stock Market crash of 1929. It stabilized prices for industry and agriculture and aided bankrupt state and local governments. Most of all, it injected a huge amount of federal spending to bolster aggregate incomes and demand. American banks were regulated and properly vetted. This helped restore public confidence in them and helped place them on a more secure and stable footing – ready to support steady and sustained economic growth.

2. Unemployment

One in four Americans was out of work by 1933, after four years of depression. The New Deal created a multitude of agencies to provide jobs for millions of workers and paid wages that saved millions of destitute families. The numbers of out-of-work people fell steadily – from 14 million in 1933 to under 8 million by 1937. It also recognized the rights of workers to organize in unions.

Clearly, the New Deal, through the work of the “Alphabet” agencies, did help restore confidence and help alleviate poverty.

3. Relief from poverty

In its efforts to help the poor and the destitute, the New Deal had many successes. The many relief schemes provided jobs and support for millions of people. The help itself may have been fairly basic, but, at least the government was now taking responsibility for the welfare of US citizens. The days of laissez-faire were gone.

4. Public works

Under the New Deal, the country gained much from public works projects. Hundreds of thousands of highways, bridges, hospitals, schools, theatres, libraries, city halls, homes, post offices, airports and parks were built across America. These investments helped underwrite post-war prosperity and brought lasting benefits to local communities as most of the New Deal infrastructure is still in use today.

5. Civic uplift

The New Deal touched every state, city and town, improving the lives of ordinary people and reshaping the public sphere. New Dealers and the men and women who worked on New Deal programmes believed they were not only serving their families and communities, but building the foundation for a great and caring society. In less than a decade, the New Deal changed the face of America and laid the foundation for success in World War II and the prosperity of the postwar era.

6. Political effects

The New Deal restored the confidence of the American people in their government. They retained their belief in democracy at a time when, in Europe, democracy was facing major challenges from far-right, anti-democratic politics.

Conclusion

It can be safely concluded that Roosevelt’s New Deal helped restore confidence to American companies and citizens. The New Deal identified problems, such as banking irregularities, and tried to address them. Roosevelt’s public work schemes also helped to ease the burden of unemployment.

Although the actual amount of success of the New Deal can be argued over, Roosevelt’s measures had at least held together the US economy and provided relief to the victims of the Depression. Also, while some European nations turned to extreme totalitarian political systems as a response to the Depression, Roosevelt had preserved the democratic tradition of America.

Realistically, the economy of the USA only fully recovered with the outbreak of World War II. With European industry and agriculture shattered by the conflict, American factories and farmers reaped the benefits. The need to raise a US army also solved the unemployment crisis.

Interesting Facts

  • People who lost their homes during Great Depression often lived in what were called “Hoovervilles,” or shanty towns, that were named after President Herbert Hoover.
  • There was also “Hoover Stew” (food dished out in soup kitchens), “Hoover Blankets” (newspapers that served as blankets), “Hoover Hogs” (jack rabbits used as food), and “Hoover Wagons” (broken cars that were pulled by mules).
  • “Black Thursday,” “Black Monday,” and “Black Tuesday” are all correct terms to describe the Wall Street Crash of 1929.
  • On “Black Tuesday,” October 29, 1929, the market lost $14 billion, making the loss for that week an astounding $30 billion.
  • Eleanor Roosevelt, the wife of President Roosevelt, influenced many of the New Deal policies.
  • President Roosevelt is the only president to be elected to four terms. He served as President for an unprecedented twelve years, dying during his fourth term before victory was secured in Japan.
  • Fifteen major new laws were passed during Roosevelt’s first hundred days of office.
  • The New Deal is sometimes referred to as “Alphabet Soup” because it started many new government agencies that went by letters.
  • The National Industrial Recovery Act protected the rights of workers to form unions and to strike.
  • The Tennessee Valley Authority Act (TVA) built dams along the Tennessee River providing jobs, controlling flooding and providing cheap power to the people of Tennessee.
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