Great Depression: FDR and the New Deals

THE GREAT DEPRESSION: NATURE AND EFFICACY OF SOLUTIONS IN THE UNITED STATES

FDR and the NEW DEALS

Historical context

Stats about unemployment, bank failures, and something that hoover made worse

In all, since 24% of the population was unemployed by 1933, the public was desperate; any legislation was better than no legislation.

Successes

FDR restored confidence in the people during a period of uncertain future.

6 facts

1.       Upon assuming Presidency on March 4 1933, FDR introduced the idea of a program for relief, recovery and reform and declared to the public that “the only thing we have to fear is fear itself”

a.        He believed that a government should adopt an interventionist position in the nation’s economy. The public approved of this because it was a complete shift away from the inadequacies of Hoover’s laissez-faire policies.

2.       In his ‘First One Hundred Days’, FDR delivered thirty fireside chats—two weekly, twice a week.

a.        This use of the media marked an unprecedented openness by government officials. Roosevelt was able to reassure Americans that the current situation would improve and that the nation would pull itself out of the crisis.

3.       Upon entering office, FDR’s first measure was to declare a ‘banking holiday’ and pass the Emergency Banking Relief Act. Banks and stock markets were closed and investigated, and only those that were sound could reopen.

a.        FDR addressed one of the major causes of the depression—the poor banking system.

b.       These measures helped to restore confidence in the banking system amongst the public. This was further reinforced bu his fireside chat on March 12, when he said that re-opened banks would be safer than the proverbial ‘money under the mattress.’

c.        By the end of the month, the public had returned two-thirds of American currency back into the banks.

The New Deal effectively brought relief and reform to all aspects of society.

4.       Upon entering office, FDR’s first measure was to declare a ‘banking holiday’ and pass the Emergency Banking Relief Act. Banks and stock markets were closed and investigated, and only those that were sound could reopen.

a.        These two measures t re-established the integrity of the U.S. payments system and demonstrated the power of credible regime-shifting policies.

b.       Roosevelt reassured the public of these measures on his first Fireside chat on March 12, when he said that re-opened banks would be safer than the proverbial ‘money under the mattress.’

c.        By the end of the month, the public had returned two-thirds of American currency back into the banks.

5.       Passed in March 1933, the Civilian Conservation Corps (CCC) targeted unemployed men aged 17-24 for jobs in public works programs.  By 1942, the CCC had provided jobs for 2.5 million people.

a.        The CCC was an extremely successful program. Since the program accepted men from families on relief, it ensured that large portions of the income would be sent to the families. In a way, the CCC allowed money to be made by a single contributor and its benefits would ‘trickle down’ to the rest of the family and society. This concept, first seen in the CCC in early 1933, would be extremely successful in future New Deal Programs.

b.       Several similar public works programs for the unemployed followed—e.g. the Civil Works Progress Administration (1933), the Public Works Administration (1933), and the Works Progress Administration (1935).

6.       In May 1933, FDR established the Federal Emergency Relief Act which gave direct relief in the form of money as aid to states and localities for distribution to the unemployed.

a.        Ultimately FERA distributed about $3-billion in relief to 8 million families -- one-sixth of the population.

b.       Though the aid was unable to make a significant difference, FERA was a pre-curser to many other social welfare programs offered by the state. The government clearly moved away from a laissez-faire economic approach and provided direct relief for the first time in the Depression.

7.       The Tennessee Valley Authority was initiated in 1933, which helped reform and modernize rural areas. 20 dams were built along the Tennessee River, and the area was electrified.

a.        The TVA is an example of how FDR’s government combined immediate relief with long-term reform within the power industry.

b.       Ultimately the average regional household income by 200% by 1949.

Failures

8.       Passed in June 1933, the National Recovery Administration was created to regulate prices, conditions and wages.

a.        557 codes were created before its close in 1935.

b.       Codes were adopted too quickly and often contentious. Big businesses were favoured and small firms were placed at disadvantages with clauses such as a minimum wage of $11 per week, which they could not afford.

c.        However, the NRA addressed private companies which were often disadvantaged by the new legislations of the New Deal.

9.       The Agricultural Adjustment Act, created May 1933, set ‘parity prices’ of crops to those of WWI in order to generate more money for the farmers.  Also farmers were paid to decrease production levels.

a.        The cost of processing foods increased and food prices rose quickly. The already poor citizens had more difficulty purchasing food.

b.       Unemployment increased as farmers lost work when production was halted

Results

10.    Unemployment in 1933 was at 25% and by 1936, it dropped to 15%

11.    Increased national debt from $19.487 million in 1932 to $40.440 million by 1939

12.    The government accepted responsibility for the welfare of Americans

13.    Demonstrated that a big government could be concerned with the “forgotten man”

14.    Just as there were many Fascist and Communist regimes spreading throughout Europe, America showed that bold reforms could be achieved without a bloody revolution

John Braeman, The New Deal: the national level. 1975.
“Effective public mechanisms had been perfected during the New Deal”

“I never worry about action, but only inaction.” Winston Churchill

JM Keynes, The Means to Prosperity. 1933. “multiplier effect”
When the economy has high unemployment, an increase in government purchases creates a market for business output, creating income and encouraging increases in consumer spending, which creates further increases in the demand for business output.