Introduction
Starting with the stock market crash of October 1929, and worsening throughout the 1930s, the Great Depression ravaged the American population and the industrialized world at large. By 1933, the U.S. unemployment rate had reached a staggering 25%, and the American public was in desperate need of relief.
The New Deal
Franklin Delano Roosevelt introduced the New Deal as a proposed solution to the Great Depression in his speech accepting the Democratic nomination for president in 1932. Roosevelt pledged to “a new deal for the American people,” which came to mean a series of domestic policies, programs, and projects designed to address the Great Depression with a combination of relief, recovery, and reform efforts. Roosevelt began carrying out this promise immediately upon taking office in 1933, kicking off the First New Deal with a phase known as the First Hundred Days.
How It Worked
The First New Deal is often referred to as alphabet soup, in reference to its many programs titled with acronyms. Some of the most prominent programs in this phase include:
- Emergency Banking Act - This act followed a bank holiday, or a forced closure of all banks to prevent mass withdrawals, known as bank runs. This act increased governmental control over American banks, aiming to increase public confidence in the system.
- Civilian Conservation Corps - The CCC provided 3 million young men with jobs in land conservation and maintenance.
- Federal Emergency Relief Act - This act, and the resulting Federal Emergency Relief Administration, or FERA, provided employment opportunities and grants through state and local governments for immediate financial relief.
- Agricultural Adjustment Act - The AAA put subsidies and quotas into place to reduce agricultural surpluses.
- Tennessee Valley Authority Act - The TVA enlisted workers to build dams and power stations to provide the region with affordable energy and reduce flooding.
- Securities Act - This act required increased transparency in financial services to protect investors and increase public trust in the stock market.
- Glass-Steagall Act - Also known as the Banking Act, this act separated investment banking from commercial banking to protect individuals’ deposits and, again, restore confidence in the banking system. It also established the Federal Deposit Insurance Corporation, or FDIC, which insured bank deposits.
- National Industry Recovery Act - The NIRA established workers’ right to unionize and suspended some anti-trust laws, and allowed for government regulation of working conditions, prices, and wages. The National Recovery Administration was created to uphold these regulations, as well as the Public Works Administration, which created jobs through public works projects.
Beginning in 1935, the Second New Deal was characterized by stronger and longer-lasting programs and policies, some of which replaced actions taken in the first phase:
- Works Progress Administration - The WPA took the place of the Federal Emergency Relief Administration, employing millions on public works projects primarily related to the construction of infrastructure but also employed thousands of artists for the creation of public artwork.
- Wagner Act - Often referred to as the National Labor Relations Act, or NLRA, this act strengthened workers’ right to unionize and banned discrimination based on union affiliation, and created the National Labor Relations Board to support these protective measures.
- Social Security Act - This act set up a system of old-age benefits, unemployment insurance, aid for mothers and children, and people with disabilities.
- Fair Labor Standards Act - The FLSA established minimum wages and maximum hours, required overtime pay, and restricted child labor.
The New Deal came to a close in 1939. Though many New Deal programs provided much-needed immediate relief for Americans suffering throughout the Depression and generally improved income inequality at the time, historians do not credit these projects with the revitalization of the economy. In 1940, 15% of Americans were still unemployed - this is a significant step up from the 25% out of work when Roosevelt took office, but left room for much improvement. The New Deal is often linked to Keynesian economic principles, but taxation was generally favored as a method of funding programs over spending into extensive debt. World War II, though, required the immense government spending needed to drag the country out of the Depression once and for all in 1941.
Why Care?
Many of the New Deal’s legacies remain in place, including social security, unemployment insurance, and agricultural subsidies. In a more general sense, the New Deal expanded the role of the federal government in Americans’ minds. After enacting these programs, direct involvement in the economy and the lives of Americans, as well as efforts to protect the average man, became the expectation.
You have likely experienced a recession of a lesser magnitude than the Depression during your lifetime, and the government’s relief efforts may have mirrored the New Deal. The New Deal has set a precedent for these types of responses and is explicitly referenced in modern legislative proposals, most prominently in the Green New Deal, to address climate change. These programs and their ultimate effects are crucial to keep in mind as the U.S. and world at large navigate economic downturns in the years to come.
