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THE NEW DEAL
There is always a boom and a gloom in a county’s economy and the Great Depression, following the
booming twenties, was the biggest and worst gloom in the U.S history. As the saying goes “It is always
dark before the dawn” America was truly going though its darkest time before the New Deal came to
the rescue of the economy. The New Deal provided relief to struggling Americans and tried to recover
the collapsed American economy. Even though it was unable to end the depression, the New Deal
expanded the role of government and left people expecting more from the government for the years that
followed.
Series of different events caused the great depression. The most memorable and devastating
event was the crash of the stock market in 1929. The stock market had risen so high after WWI that
when it crashed it hit the rock bottom. Once the Great War was over, stock prices were rising steady.
Investors were sure that the prices would keep rising and so they began to make risky investment,
hoping to make it gain big. They just kept buying stocks at any cost only to sell them in greater prices
later. Not all people were able to afford those stocks, and so investors used a margin system. Buying
stocks on margin meant that investors paid in cash for small amount of the price and borrowed the rest.
Soon enough companies called Investment Trusts began to buy stocks on credit. It got even more risky
when people began to buy stocks of those companies by burrowing money. It was loans, loans and
loans everywhere to buy stocks that weren’t stable for life. By the end of the 1920s investors finally
realized that they burrowed too much money that they won’t even be able pay with their shares that
weren’t worth their cost. Many went on selling spree, selling their shares almost at the same time and
the market ended up collapsing. People were unable to pay all the money they burrowed. As a result,
many companies and banks went out of business.
Another crisis to contribute to the great depression occurred in the farm sector. During the
Great War American farmers produced crops in great amounts to sell to the war-devastated European
countries. When those countries recovered and began to produce on their own, American farmers were
stuck will the surplus crops they didn’t find market for in Europe. As a result crops prices began to fall
in American markets. Farmers were unable to pay the money they burrowed. They thought by
producing more they would be able to sell more and eventually pay the debt, but reality said otherwise.
Prices just kept decreasing and Farmers got in to further debts.
Unemployment was one great devastating result of the great depression. The reason was once
again debt obtained by manufacturing companies. During the 1920s many people were buying a lot
consumer durable goods. They actually couldn’t afford them so all those goods were bought on credit
and to satisfy their consumers, most manufacturing companies had take out loans to buy their supplies.
Around 1927 consumers most consumers reached their limit and were no longer buying goods and as a
result purchase of good began to fall. This put manufacturing factories in a bind and they were forced
to lay off some of their employees. With people losing their jobs, buying of products declined and
factories fired more people. This process kept on repeating leaving a mass of unemployment crisis in
its wake.
As mentioned above middle-class citizens burrowed to buy things like company shares,
consumer durable goods and farm supplies. Most of the money was burrowed from banks. With little
government regulations, banks were lending way more than their limit. Banks failed to think of the
consequence if something was to go wrong in the stock market or if employees were to lose their job.
When the stock market crashed people everywhere rushed to banks to get a hold of their money, the
money that banks have loaned off to people that made risky investment. Banks were unable to give out
all the deposits and as a result many people that came late lost their life savings. In 1929 about 650
banks failed. Even for those who haven’t loaned that much money, panicking depositors tried to get
their money all at once which made the banks go out of business. For the following years the things just
got worse and the depression deepened as more banks failed, factories closed, and stock prices
continued to fall.
By 1930 many people had lost their houses due to the immense debt they were in. Without a job head
of families were unable to put food on the table. People stood in long lines just to get their daily meal,
which in fact it wasn’t even enough to make them full but kept them alive. All around the country
Americans moved from place to place trying to find jobs. Many children were malnourished. Marriage
rate along with birthrate fell. America was stuck in a very deep slump.
The president at that time, Herbert Hoover, didn’t want to directly interfere and believed that the
citizens should get up with their own strength. However Americans were unable to do just that. The
president believed the depression “cannot be cured by legislative action or executive pronouncement.”
(“The American Odyssey”, 677). At this point most Americans were helpless. Around the end of his
term the president pushed for stronger reform measures, wasn’t that popular. Americans wanted a new
president, someone that can help them get out of the mess they were in. That exact person became
president in 4th of March 1933; he was President Franklin D. Roosevelt.
When president FDR took office in 1933, the country was in a very big mess. Many people
were waiting for an immediate action by the government. FDR knew that very well and was ready to
take any necessary action. He told his citizens, “I pledge you, I pledge myself, to a new deal for the
American people.”(“Franklin Delano Roosevelt and the New Deal”)
Right after his inauguration he began to work non-stop to create the “New Deal” he promised
his citizens. He set up a group of advisers that had the best of lawyers, economists and political science
scholars to discuss the problems and come up with solutions. He called his group the “Brain Trust.” In
the first 3 month of his presidency known as the “Hundred days,” he continuously passed series of
legislatures approved by the government. FDR kept a close relation with the press. He did interviews
from the White House twice a week. This helped people to understand what was really happening and
what the government was doing to fix the problem. The president also held radio chats called the
Fireside Chat. Americans eagerly waited for those chats as the president usually gave important
announcements about any changes made. FDR held 30 Fireside throughout his Presidency.
FDR’s New Deal attempted to fix the problem from different sectors and the result was
unorganized and confusing set of laws. Even though historians and political scientists were and are still
unable to specifically categorize them, those programs can be simplified by grouping them in to three
themes; Recovery, reform and Relief. Programs under recovery were supposed to get the economy
moving again. The purpose of relief programs was to provide money and create jobs to the unemployed
so that they can provide for their own basic needs. Grouped under Reform were the laws that set out to
change the flaws that led to the depression and new laws to shape the American capitalism and
American society.
The first of the New Deal laws addressed the banking crisis in the country. In March 6 the
president announced a national bank holidays for 4 days. During those 4 days congress approved the
Emergency Banking act that gave the president powers to re-open banks that were doing fine, reorganize the banks that had hope of recovering and close those that were completely out of business.
After cleaning the banking mess FDR created the Federal Deposition Insurance Corporation or as it
was know the FDIC. This new agency was set up to protect the deposits of citizens. It kept a tab on the
amount of loans banks gave. The president then held the first of the famous Fireside chats. In his
interview he addressed his fellow citizens and assured them that, the new law would make it safe for
them to keep their money in the banks again. He encouraged them that “It is safer to keep your money
in a re-opened bank than under the mattress.” (Peters and Woolley, “Franklin D. Roosevelt: Fireside
chat on Banking)
The people trusted the president and the new law and began to deposit their money in banks
again. “For the following weeks, Americans returned nearly $1 billion dollars to the bank vaults.”
(“American President: Franklin D. Roosevelt”) The withdrawing rash stopped and the economy picked
up a little. The president also created the Securities and Exchange act as well as the Securities and
Exchange Commission. With the SEC the buying and selling of shares was regulated by the
government. Under this new act stockbrokers were obliged to release accurate prices.
Now that the banking and finance of the country was stable, the next problem to address was
the unemployment. The Civilian Conservation Corps was one of the relief new deal programs.
Established in 1933, its main purpose was to provide temporary jobs to the unemployed. Members of
the CCC worked in reserving forests by planting trees. They built parks and wild reserves. They built
bridges, maintained roads and trails and fought forest fire. The CCC enlisted around 250,000 people in
just two month after its establishment. “Workers were paid $30 dollars per month in which$25 of it was
sent home.”(Ganzel, CCC: The Civilian Conservation Corps”)
Workers lived in camps. They worked for 8 hours and went back to their camps in the evenings
were they got educational courses. Within 9 years 40,000 illiterate men learned to read. The CCC was
dissolved in 1942 when the economy got better and WWII started. Over the course of 9 to 10 years the
CCC employed about 2 million people and planted about 3 billion trees all over the country.
Another New deal program that dealt with unemployment was the Works Administration
Progress (later changed to Works Project Administration) or WPA for short. The WPA is usually known
as the second New Deal. It was one of the biggest and popular new deal programs. It began working in
1935 and was closed in 1943. The program is mainly known for building many hospitals, schools,
houses, roads, bridges, and highways. Structures that were built by the WPA were marked with the
same words, “WPA”. This program also employed women, which usually did work like making cloth,
binding books, taking care of elders and the sick. The unique thing about the WPA was that it hired
writers, artists, musicians, and actors. The WPA set up many projects that helped develop the America
culture. During this time a lot of stories, paintings, plays and dramas were produced. From the start
until the end of the WPA around 8.5 million people were employed with an average pay of $41.57. It is
believed that women workers were paid less. Tennessee Valley Authority or the TVA was also a
program created to provide jobs. This program worked on building Dams and renewing old dams. The
TVA build hydroelectricity source and expanded it to rural population. It played a great role in rural
development.
Just like the other sectors, the farm sector was struggling. FDR’s first step was eliminating
surplus crops from the market. By doing this he then would be able to raise the price on the domestic
market. With the approval of the Congress, FDR passed the Agricultural Adjustment Act as part of the
New Deal. The AAA offered farmers to pay them in cash if they agree to cut down their production.
This program was popular with farmers and it seemed to have worked well with increase in the income
of the farmers. However the problem with this act was that only rich large farm owners benefited from
it. Sharecroppers and other poor farmers didn’t actually get the money and with the government strictly
insisted they cut production, their poverty worsened. Then followed the FSA or the Farm security
administration which lent farmers money so they could either buy farms or livestock or even tractors
that plow their fields. The best thing about the FSA was that the loans had very low interests. The
government also made efforts to teach the farmers how to keep sales book, which ended up being really
useful to the tenant farmers.
Only one of the New deal programs lasted and is still used today. The Social Security act was
Signed to help the people who were completely unable to provide for themselves either from old age or
any disability and were suffering from the depression. This act provided insurance payment and
provided pensions.
The programs of the New deal weren’t unconditionally accepted. There were protests by the
public because they believed the government was intervening too much with the civilian’s lives. People
were scared that their capitalist cultures were disappearing with the government regulating everything
from banks to stocks, farms and even the industry sectors. Moreover the many corporate leaders
wanted more of a lazier-fair treatment so they sued to the Supreme Court to stop acts like the National
recovery programs which gave government more power to do anything with business. Eventually the
economy began to fall again until the start of WWII where America found market in Europe.
Roosevelt’s New Deal wasn’t able to stop the great depression, but it showed people that the
government had a duty to step up in the worst of times and work help out its citizens.
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