To what extent was Roosevelt’s New Deal the reason why America was able to overcome the great depression?
Even today, almost 70 years after Roosevelt introduced his New Deal the question of whether or not it was a success is still unanswered. “This nation asks for action and action now…. we must act, and act quickly” 1 Roosevelt came to his position as president at a time of crisis and had promised a ‘New Deal’ for the American people which would help America rebuild herself after the great depression. Roosevelt wanted to revive the economy and provide support for those who had been hit the hardest by the depression.
He promised to end prohibition, cut unemployment by creating new jobs for people and help the industries; businesses and farms recover from the depression2 The Roaring Twenties From America the 1920’s were an era of prosperity. America had wanted isolation from the rest of the world so tariffs had been introduced on all imported goods, which would have encouraged Americans to buy US goods. American would then be able to supply itself and consequently reduce overseas competition.
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This demand for goods led to a period of mass production. The First World War had provided an opportunity for American companies to make large profits by selling weapons to America’s allies whose industrial production was comprised by their war economies. Also during WW1 France and Britain had relied on America to loan them money to fund the manufacture of their weapons to enable them to keep fighting the opposition in the war, these loans were still being paid off well after the war had ended. 3 The Fragility of the Boom
However this affluence could not last for ever, America was over producing which meant that the market would soon become saturated. Industries had produced thousands of goods but the demand was no longer there, as those who could afford the goods already owned them so consumption began to decline. The market for goods was also reduced due to the economical divide; America had been split into two halves; on one side the wealthy and on the other poverty stricken farmers and blacks that were working, so socialists would argue, so that the rich could indulge in luxuries.
Mass production contributed greatly to the downfall of the country, as it was not equally matched by mass consumption, which is a major factor in what caused the Wall Street crash of 1929. 4 “Billions of dollars’ worth of profits- and paper profits- had disappeared. The grocer, the window cleaner and the seamstress had lost their capital. In every town there were families which had suddenly dropped from showy affluence into debt”5 The end of an era
Although some experts had predicted the economical crash, the majority of people believed that the USA was so wealthy and so powerful that the boom would never end. Share prices had soared and people were encouraged to go on buying on credit. Hire purchase was so easily obtainable that few people realised that it was very dangerous to go selling on credit, as eventually people would not be able to make the repayments. Due to overproduction the market was gutted, and companies were going ‘bust’. The market could be ‘played’ by anyone, from a baker to a postman; they didn’t need any experience.
When it was realised that the stocks and shares were not doing as well as previous years, despite warnings from experts that they would improve, there was a massive loss in confidence and a mass panic. People became unsure of their investments and wanted to retrieve their shares. Panic stricken people were selling their stocks for a great deal less than what they were actually worth, prices plummeted and on October 24th 1929prices crashed. Over 13 million shares were sold and a further 500,000 on 29th October.
Shares dramatically lost value, ‘Electric bond and Share’ shares had fallen from $186 to $50 in just 2 months6; many had lost all that they had invested. 7 “The stock market was shaken to its foundations yesterday by the severest break in the history of Wall Street. The immediate cause of the debacle, which was entirely unexpected, was the forced liquidation of large brokerage accounts and furious bear attacks that chopped from $5,000,000,000 to $7,000,000 in values from shares. Trading on the floor of the Stock Exchange was virtually paralyzed…
For many people, the shock of the Wall Street crash was too much for them to take and some even committed suicide as they believed they had lost everything and would not be able to rebuild their life. The wealth and prosperity that America had gained during the ‘roaring’ twenties had not been shared equally between the American citizens, which had caused a lot of inequality, and resentment from the lower classes. As a result of this America plunged into depression, people began to realise that the economic problems would not go away unless they did something about it.
Wages fell and soon people did not have enough money to feed and clothe themselves and their family, the American population was no longer self-sufficient. “I have two boys to go to work. They haven’t got any shoes, no clothes. They can’t go to look for a job because they haven’t any shoes”9 Lower annual incomes had forced wives and older children who had not previously had to work, look for jobs. 10 Banks collapsed because people withdrew all their money from banks and kept it at home.
People had lost confidence in the financial system and instead of investing and spending people now began to save. 1 Roosevelt’s New Deal After the Wall Street Crash, the American people were looking for someone to pull them out of depression and so when Roosevelt offered them his New Deal they weren’t reluctant to oppose him, they saw him as their ‘saviour’12 Roosevelt promised the American public rapid action “The country needs, and unless I mistake its mood, demands bold experiments. Above all, try something”13 He knew that he had no time to waste and that the only way to relieve America from depression was to act quickly.
He guaranteed that his ‘New Deal’ would revive the economy and improve the standard of living in America. 14 An important factor we have to consider when discussing the success of the New Deal is that Roosevelt was and still is an extremely popular American figure so much of the evidence that is available for us to study is biased towards him. Due to this we have to make sure we consider the reliability and consistency of the sources we are studying. Roosevelt built up an incredibly respectable and honest image of himself so most of the sources, which are available to us, are biased towards him.
One of the sources that I have studied15 described the success of the TVA, however the director of the TVA wrote this source so is obviously going to be biased towards the new deal. Even though it contains facts and figures there is no way of telling if they are true. Roosevelt had the power to censor all kinds of media and also use the radio, television and newspapers as propaganda. However there was some opposition to Roosevelt although there are no sources to support their views; large businesses were not fond of Roosevelt or the New Deal as they saw it as the government interfering in things that were not their concern.
Also the wealthier members of society believed that because Roosevelt was a rich man they expected him to help them but instead he raised taxes on the well off and ignored their desires. 16 The start of WW2 would have had a dramatic effect on the economy of America although people tend to forget this and suggest that the recovery of America’s financial system was initiated solely by Roosevelt’s New Deal. Reforming the financial system Roosevelt decided that his New Deal would consist of different schemes and programs, and laws (known as the alphabet laws), which would bring about economic recovery.
Before Roosevelt could pass any new laws the banking emergency needed to be sorted out. On March 6th 1933 the Emergency Banking Act and Federal Deposit Insurance Corporation (FDIC) was enforced and all banks were shut down. This gave the government the opportunity to inspect the health of all banks and almost two thirds were re-opened soon after, as they were declared acceptable. The FDIC was formed by the congress to insure deposits up to $5000 and people began to put their money back into the banks and confidence gradually returned.
Faith had been re-established in American banks and people were no longer scared that they would lose all of their savings in a bank failure. After the Wall Street Crash all confidence in the banks had been lost but by introducing the FDIC and the Emergency banking Act Roosevelt was able to restore this trust. “Confidence and courage are the essentials in our plan. You must have faith; you must not be stampeded by rumours. We have provided the machinery to restore our financial system; it is up to you to support and make it work. Together we cannot fail”17.
The Federal Securities Act of May 1933 and the Securities and Exchange Commission (SEC) were set up to regulate the stock market and required full disclosure of information on stocks being sold. The Congress also gave the Federal Reserve board the power to regulate the purchase of stock. Modernization of American Agriculture The Agriculture Adjustment Administration (AAA) was introduced to try and raise farm prices and used proceeds from a new tax to pay farmers not to raise specific crops and animals, lower production would in turn increase prices.
In May 1933 the Tennessee Valley Authority (TVA) was established to help farmers and to create jobs in one of America’s least modernized areas. A hydroelectric power plant was reactivated and provided cheap electric power, flood control and recreational opportunities to the entire Tennessee River Valley. 18 The TVA involved ordinary people in the planning so that they would be taking part in making decisions, which affected their own future. “In ten years the dams TVA has built have made this region the second largest producer of power in the United States.
In 1944 the system will produce nearly half as much electricity as the utilities of the entire country produced in 1914. “19 Between 1935 and 1943 the Works Progress Administration (WPA) was set up and provided work for 8 million Americans, it decreased the rate of unemployment and the workers constructed or repaired schools, hospitals and airfields. 20 The Farm Security Administration (FSA) loaned more than $1 billion to farmers and set up camps for migrant workers. The FSA aimed to assist sharecroppers, tenant farmers and migrant labourers.
One success of the FSA was that it brought the problem of poverty to national attention. Supporting the people of America The Federal Emergency Relief Administration (FERA) was led by Harry Hopkins who believed that men should be put to work and not be given charity. This agency sent funds to depleting local relief agencies and also funded public work programs, within two hours $5million were given out and deteriorating relief programs were revitalized. The Civil Works Administration (CWA) gave the unemployed jobs building or repairing roads, parks, airports and other public places.
This not only provided a physical boost to its 4million workers but also a psychological one. 21 Roosevelt had succeeded in creating more jobs, which helped reduce the number of unemployed, to 7. 7 million by 1937 from 12. 83 million just 4 years before. 22 The CWA and FERA also helped repair many public places, which was a beneficial, step in rebuilding America. The National Industrial Recovery Act (NIRA) of June 1933 was formed to boost declining prices and to help businesses and workers. NIRA allowed trade associations in many industries to write codes regulating wages, working conditions, production and prices.
If all employers in each competitive group agree-to pay their workers the same wages-reasonable wages-and require the same hours-reasonable hours-then higher wages and shorter hours will hurt no employer. Moreover, such action is better for the employer than unemployment and low wages, because it makes more buyers for his product. That is the simple idea which is the very heart of NIRA”23 The Public Works Association (PWA) was a part of the NIRA and often regarded as one of the best parts launched projects such as the Grand Coulee Dam on the Columbia River and gave the unemployed jobs helping enforce these new programs.
Roosevelt placed a lot of efforts into reducing the rate of unemployment, which is why so many of his proposals were focused around creating new jobs. The Civilian conservation Corps (CCC) was an environmental program, which positioned 2. 5million unmarried men in work, maintaining and restoring forests, beaches and parks. The workers only received $1 a day but they also got free board and job training. During 1934 and 1937 the CCC funded similar programs for over 8,500 women. These programs taught men and women to live independently and significantly increased their self-esteem. We have here one of the best [CCC] camps that could possibly be established. The country and the hills here make you think there is no such thing as a city…. It sure beats ‘Brother can you spare me a dime’. “24 The great depression had left many people homeless, which was why the Home Owners Loan Corporation (HOLC) was set up. It helped people keep their houses by refinancing the mortgages of middle- income homeowners and also tried to help those without a home find suitable accommodation.
During the depression many people families had been forced out of their homes because they could no longer afford to keep their houses, the HOLC can be considered as a success as the number of homeless people did decrease and the problem had been largely overcome. In 1935 the National Labour Relations Act (Wagner Act) was launched to legalise practices allowed only unevenly in the past, such as closed shops in which only union members could work. It authorized workers to form trade unions and the act also set up the National Labour Relations Board (NLRB) to enforce its provisions.
The Fair Labour Standards act of 1938 was a long awaited triumph for the socialists who wanted to reform American society. The act enforces a set minimum wage and a maximum number of hours that people are allowed to work and also banned child labour. The depression had caused a lack of confidence among the people and the Social Security Act of 1935 helped millions of Americans feel more secure. It established a system that provided pensions for workers, benefits for survivors of industrial accidents, unemployment insurance and aid for mothers, children, the blind and the physically disabled.
The Black community had always been severely discriminated against so Roosevelt displayed genuine sympathy for Black aspiration so to gain support from the minority groups. The National association for the advancement of coloured people (NAACP) brought an impressive number of churches, academics, labour unions and other liberal groups into the anti lynching mob. 26 In 1934 the Indian Reorganization Act was passed which ended the sale of tribal lands. This act restored ownership of unallocated lands to Native American Groups, which caused a very positive outcome for Native Americans.
Benefits of the New Deal Roosevelt’s New deal was considered a great success by the people of America, he had managed to convince them that it would be able to overcome the great depression and his confidence reflected upon them and everyone had great faith in his New Deal. “Nothing can stop the President’s program, nothing will even hamper the presidents program… the power of this people, once aroused and united in a fixed purpose, is the most irresistible force in the world”27 On the surface it appeared that the New Deal had been a victory.
It gained such dedicated support from the American public that their confidence had been fully restored. A noticeable achievement of the New Deal was the Fair Labour Standards Act, which had established a minimum wage and a maximum hours policy. President Roosevelt had carefully planned his New Deal in such a way that the problems of the depression would be overcome as soon as possible and restore America’s financial status. All of the schemes in Roosevelt’s New Deal were aimed to bring relief to as many people as it could and to bring the support quickly.
One of the main reason’s why the New Deal did achieve some significant changes was that the American public was convinced that it would work and trusted Roosevelt and believed he would be able to rebuild the economy. When the Banks reopened after the Emergency banking act, many people began to reinvest their money in the reopened banks, which showed that they had confidence that there would not be another economical collapse. Opposition to the New Deal However, the New Deal was not entirely a success; it faced a lot of opposition primarily from the rich and the republicans.
The republicans opposed the increase in presidential power and believed it was leading to dictatorship and critised Roosevelt for high government spending. The Supreme Court was constantly suggesting that the laws which were included in the New Deal were unconstitutional. Full employment and dramatic reductions in poverty were not achieved until 1942-43, when 13,000,000 men and women were serving in the armed forces and the United States were supplying huge amounts of war materials and food to America’s allies, which meant that America’s economic power was being restored. 28
The New Deal failed to promote real economic recovery and it had taken massive government borrowing, investment and spending to end the depression. Despite Roosevelt’s numerous attempts to restore America’s economy with the NRA and the AAA the New Deal never completely succeeded in overcoming the economical problems caused by the depression. The National Industrial Recovery Act stopped the tailspin of prices for a short while although as wages rose so did prices and consumers began to buy fewer goods. The Continuous cycle of overproduction and under consumption put business back into a slump.
Some businesses felt that the codes enforced by the NIRA were too complicated and difficult to understand and believed the act was too rigid. The Agriculture Adjustment Administration was quite a controversial program as farmers were told to kill off certain animals and destroy crops; many people could not believe that the government was condoning such horrific action when there were American people who were starving. Although the Tennessee Valley Authority had been successful in creating new jobs for hundreds of people the results were not as dramatic as the government had claimed.
Only 3 out of every 100 farms had electricity and the levels of Malaria and vitamin deficiency had increased and at a dangerous level. The average wage of a farmer was 40% of the national wage and many farmers were in a great amount of debt. The TVA had been very much involved with the richer farmers who didn’t really did its help and had ignored the needs of the poorer, less fortunate farmers, “The land-grant colleges were closely tied to the interests of the richer farmers. They had little or nothing to do with the poor, mainly black tenant farmers.
The services offered by the TVA-advice on new farming developments, fertilisers and marketing- were monopolised by the richer, white farmers. “29 Most of the programs and schemes which were put forward by Roosevelt had limited funds and only made slight differences to the state of America. The New Deal did not extend to all deprived Americans and excluded the minority groups. There was never a Civil Rights program, which caused massive Black demonstrations and pressurized the government to establish fair employment practises although it refused to end discrimination in the armed forces.
The New Deal was an extremely difficult period of time for black families, by 1933 half of black workers were without a job and those who did have jobs were discriminated against as the National Recovery Administration had made it legal to pay white people more than the blacks. 30 Republican opponents of Roosevelt criticised the Social Security Act, as they believed that it was destroying the traditional culture of America. Many thought that the government did not have the right to intervene with people’s lives by making them pay taxes for Social Security.
However contradicting to this some liberals felt that the payments should have been bigger to provide more social security to the American people. The New Deal had given assistance to those on the border of poverty like the blue collar workers and commercial farmers but had offered much less to those who were in permanent poverty. The New Deal did not succeed in lifting the nation entirely out of depression and in 1939 there were still 10 million people unemployed. 31 “Although much of the advances that were made came as a result of government spending… he nation had barely reached the 1929 level of production a decade later, and there were still nearly ten million men and women unemployed. “32 Was the New Deal a success? The New Deal undoubtedly brought changes to the economy of America although there were most probably other factors, which contributed to the restoration of the American financial system. The economy of America had always previously, and still today been very unsteady, the national income is forever changing and sometimes falls and often rises.
There is no proof, and we will never know whether the wealth of America would have restored itself without the help of Roosevelt’s New Deal. Also the start of the Second World War would have brought a remarkable change to the nation’s revenue. The country would have concentrated on producing military goods for their allies, which would have provided more jobs and in turn would have slowly revived America’s financial system. “During Franklin Roosevelt’s first term, the New Deal did not cure the underlying economic problems.
It was the war that did that. Within a matter of months, six million workers found new jobs”33 By 1943 unemployment had been reduced to just 1. 07 million from almost 13 million at the height of the depression. 34 Without the New Deal, however, the country would still have been in a state of recession, and might have been unable to help with the war effort at all. Generally, Roosevelt’s New deal had been a success; it had brought to America a great change, which contributed greatly to the restoration of the country.
Child labour was prohibited and a national wage and maximum hours legislation was established. By the time that the New Deal had ended organised labour had more imperative and influential position in American society than it had ever had before. The New Deal had to a great extent reduced the reputation and power of big businesses and put a significant number of measures to stabilise America’s economy. It had re-established the public’s assurance in society introduced new laws and schemes to help prevent a new depression.
In conclusion, the extent of which Roosevelt’s New Deal was a success will forever remain unknown. President Roosevelt was a great inspiration to the American people in the 1930’s and still today is remembered as one of America’s greatest and most influential presidents. Although many may critise the New Deal and the way that Roosevelt dealt with the problems of the depression, there is no way of telling whether or not America would be the super power it is in the present day if Roosevelt hadn’t have proposed his schemes and policies which were contained in his New Deal.