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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.

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