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Why the New Deal was a success

A period of rapid economic growth 1890 was finished by the Great Depression. Because on the 24 October 1929, a catastrophic collapse of stock began and continued for the next five days leading to market prices the New York Stock exchange, after the collapse, banks in the U.S. started revoking credit, within a month over 30,000 million dollars market value was lost, and it had continuously been declined for 3 years until its value shrink to 20 percent of the market peak, eventually the depression spread out over North America, Europe, and other industrialized areas of the world (Brinkley, 1997, 703-704). President was Franklin D. Roosevelt launched plans to encounter the economic collapse called New Deal, in order to solve this problem. The focus of the first New Deal was on recovery from immediate effects of the Great Depression, and seconds was focused on structural reform of the system that led to imbalance and the Great Depression itself. They had great impacts on the recovery of U.S. economy. In this essay, I will prove that the New Deal was successful in terms of agriculture, labor, and banking.

Agriculture

Firstly, agriculture was one of the most parts that the New Deal had affected on. The agricultural problems, such as strike and protesting, had occurred for a long time before the Great Depression hit America, and during the Great Depression it seemed more serious and chronic.

The first cause of agricultural problems was that many agricultural products were unsalable, so they created a huge over-production. Moreover, the United States of America had to let overseas agricultural products into its markets because they were cheaper than America’s products, and the wage of oversea labor was cheaper. A case in point, America had to import petroleum from South American and Africa (Nitunprapart, 1982, p. 91-111). The second cause of agricultural problems was that the price of agricultural products was lower than consumer goods, and it decreased the farmers’ buying ability, so from 1920 to 1933, the debt of farmers had increased to 12 billion dollars (The depression, n.d.). Therefore, these two causes stimulated Roosevelt’s government to found Farm Credit Administration or F.C.A. in order to give loans to farmer. This administration gave loans about 5 million dollars per day, so the farmers could redeem their farmlands and buy seeds, tools, and fertilizer. In fact, normally many farmers use their own farmlands as a guarantee for loaning money, so when the depression hit, and agricultural products were unsalable, they could not earn money. Therefore, their lands would be taken, so they could not do agriculture. However, not only farmers would be gloomy, but also creditors who gave a loan to them because even they got farmers’ farmlands, they would suffer form loss. Therefore, F.C.A. have made themselves as a huge creditor, a long-term loan, to solve problems between farmers and creditors. Moreover, the government also legislated Agricultural Adjustment Act indicating in order to get rid of over-production that farmers had to grow main crops, such as rice, cotton, and sugar canes because these crops profitable and easy to transmute more than the other crops, and the farmers had to limit the number of crops according to the demand of the market. In that time, when prices of agricultural products were low, farmers might be afraid that if they did not grow more crops in order to gain profits or prevent losing money, their farmlands might be taken. Therefore, many of them try to expand their lands or borrow money to grow more crops, but when the time came, their products were unsalable and then their farms and money were gone. Therefore, Agricultural Adjustment Act responded to solve unsalable agricultural products. For example, they spend more than 34 million dollars buying corn and pork in order to make food to relieve starvation in almshouses (Wannapin, n.d, p. 145-150).

The third cause of agricultural problems was that most farmers had expanded their farms and areas because after the Civil War the government supported them to produce more, and the technology for agriculture had been improved. For instance, during the World War I they expanded the farms about 50 million acres because agricultural products had a good sale in Europe, and although the price of real estate was increasing, they did not stop expanding. Some of them even borrowed money in order to invest the real estate. However, after WWI other countries started to emphasize in agriculture, so agricultural products in America were unsalable. Therefore, in 1935 the Roosevelt government founded the Resettlement Administration or R.A. The main purpose of this administration was reducing areas for agriculture. The administration had bought farms about 9 million acres. Therefore, as mention above that Agricultural Adjustment Act responded to solve unsalable agricultural products by buying them for cooking for jobless people, Resettlement Administration or R.A. was launched to buying wasteful farmlands from some farmers who could not mange their lands, and they gave it to a good farmer, who had a good conduct and could manage the areas beneficially, as a long-term loan. Not only areas that the government gave to a good farmer, who had efficient ability but no money, as a loan but 10 million dollars were also gave to them under the Farm Security Administration by setting very low rate of interest, so they would have encouragement to improve their farms. Also, this administration created cooperatives and residential camps for them (Nitunprapart, 1982, p. 91-111).

The fourth cause of agricultural problems was dust bowl, and it was a big and vast problem for farmers. For instance, in State of Nebraska gained about 20 inches of rainfall a year, and its corn crop averaged 25 bushels per acre. However, the dust bowl was caused by farmers, such as poor farming practices, over farming and over grazing of animals, and plowing under of tall natural grasses. Therefore, the government issued The Soil Conservation Act and its purpose was preserving ground layers and strata and making them better by forbidding some crops that made depleted soil (Krug, 1972, 682-694). If farmers still did poor farming practice without knowledge and government policy, such as The Soil Conservation Act, the problems would be continuous. Besides, on May 1933, the Roosevelt government had launched the policy called Tennessee Valley Act by giving power to Tennessee Valley Authority in order to build dams and power plant along the Tennessee River to provide electric to rural areas in seven states. Because there were 400,000 people living along with the Tennessee River, 29 dams, 11 coal power stations, and 3 nuclear were built. From my point of view, if the government builds dams, although the average of rain falls is little or decreasing, there will be water supply for agricultural, and the resources, such as rivers, will be really beneficial. I want you to think that if government could use their recourses to compete with private companies, people would gain advantages. Like Tennessee Valley Act, government has owned and created electricity, so the price of it would be cheaper than electricity produced by private companies (Nitunprapart, 1982, p. 91-111).

Labor

Secondly, labor was one of the most parts that the New Deal had affected on. The first major cause of labor problems was oppression from the capitalists. For example, the capitalists did not care about laborers because in that time many companies set the agreement called Trust, which means setting the board of trustees to look after other companies yielding control of their stock like a big company creating monopoly, so if workers and labors did not accept the low rate wage, they could lose their job (Wannapin, n.d, p. 145-150). Let imagine that many workers and laborers were very unsatisfied with the capitalists and then they could gather to make strikes and if the strikes occurred, it would cause a lot of destruction to American. Then, on June 1933, Roosevelt had an idea to revive America industry by issuing The National Industrial Recovery Act or N.I.R.A. implemented by A National Recovery Administration. The main reasons was regulating working standard, declaring of industrial of fair competition, certifying trade union right, and protecting cooperative bargaining rights, such as prohibition of child labor and reduction of working interval. In my thought, this policy could give fairness and compromise between laborers and capitalists (Nitunprapart, 1982, p. 91-111). If National Industrial Recovery Act or N.I.R.A. was not launched, the labor system could be destroyed. For instance, when farmers lost their farmlands, most of them would go around country to find a job, but not only farmers but also normal people that lost their jobs wanted to get work to survive. Therefore, if one day there were 1,000 people in a city, and employers said that he wanted to hire100 workers 45 cents per hours, which is very low and oppressing rate, but no one could deny or protest it because if you were not satisfied with it and rejected the jobs, other 999 people would take it.

Another cause of labor problems was a large number of unemployment. About 13 million people were losing jobs and could not find jobs locally, so some of them had to travel from place to place by hitchhiking hoping to find a job one of the town along the way. For example, there were a lot of farmers, who lost their farms going to California because they just heard the rumors that there were agriculture jobs there. In my own thought, if many people moved to one city to snatch a job, the labor system would be collapse. For instance, if a worker in a city gains 10 dollars per hour, I would ask employees that I just want 2 dollars per hour, so I will have more chance to get a job, but it would create a conflict and ruin the system. For example, if workers walked out the job, picketed the building, and stayed in there, managers could not bring new workers to break a strike or replace them. Therefore, Roosevelt realized about this problem, so he found F.E.R.A. or The Federal Emergency Relief Administration by admitting more than 500 million dollars in order to relieve the suffering. The whole expenses for this project were more than 4 billion dollars. Moreover, the government tried to help young people aged 18-25 by founding C.C.C. or The Cevilian Conservation Corps (The New Deal, n.d.). It requires them to work at the camps created by the government, such as monitoring forest to prevent wildfire, building roads and dams, cleaning park, and afforesting. Also, the government provided some residents and library for them and gave salary about 30 dollars per month. Also, on April 1935, there was an emergency relief projects named Work Progress Administration. Over the time about next 8 years, W.P.A. had given jobs to 8.5 millions people in American on 1.3 million projects, such as building airports, high ways, parks, and bridges, with average salary of 41.75 dollars a month although the average salary at that time was about 102 dollars per month (Nitunprapart, 1982, p. 91-111). However, the government established the United States Hosing Authority or U.S.H.A. to provide a power to brokers of buildings and construction to borrow long tern money from the government at low interest rates in order to build cheap and standard housings and buildings (The New Deal, n.d.). Not only a job that people needed at that time but also residents and meals. Because these people had to travel town-by-town to find a job, so they could make public places or things dirty or broken, and it looked bustling when many people walked along on street without hope. These people also had no hope to find stable jobs. Therefore, C.C.C., Work Progress Administration, and U.S.H.A. were created to keep people stay in one place to have foods, rest, and stable jobs. Moreover, the jobs that C.C.C. offered were about improving public places. Furthermore, slums were cleaned, forests were revived, electrical power was extended, there were over 650,000 miles of streets and high ways, and over 124,000 bridges, 125,000 public buildings, 8,100 parks, and 850 landing fields were repaired, built, and refurbished. I think that the projects not only reduced the unemployment rate but also improve the country in public benefit and social norm.

Banking

Finally, banking was one of the most parts that the New Deal had affected on. During 1930s there were over 9,000 banks closed or went bankrupted, and over 9 million people lost savings and investment. Try to imagine that if one-day Siam Commercial Bank, a huge bank in Thailand that is really reliable, would go bankrupted, what Thais will be going to do? I think that most of them would withdraw their money in their saving accounts and then the Thai banking system will fail after all. Plus, because of inactiveness of Federal Reserve System inflating money supply by 60 percent during 20s and increasing interest rates from 5 to 6 percent, there was too much money in the system creating banking failure. The Roosevelt’s government wanted to strengthen and restore the banking system. Then, they legislated the Emergency Banking Act, which was giving power to the government to closed banks temporarily about two weeks in order to help and inspect the finance system in the banks until they were able to continue their business. In my thought, this act would make Americans trust and be more confident to do business with banks again because after 5,102 banks went bankrupted during 1930-1932, Americans did not trust about saving and depositing money in the banks, and most of them withdrawn their money and gold to keep with themselves, so they were afraid to spend money. These projects want to restore consumer confidence because if people are panic and lose confidence, they including foreigners will withdraw money from their saving accounts, banks will not be able to give a loan, and system will be collapsed.

Another banking problem that created the Great Depression was that there were a lot of number of individuals about 4-8 million investing; rising stock dividends (Nitunprapart, 1982, p. 91-111). For example, normal people started an idea of buying stock and making money because they had surplus money to put into savings or invest in stock market. In addition, banks provided a low interest rate for loan, so people took that loan not only purchasing cars but also buying stock, and if price of stock market was low, they had to pay to cover it or sell it, and investment in the stock market did not really exist, pure speculation. Therefore in my opinion, if there was too much speculation or unreal money, the government should not try to regulate the money that is unreal, but they should stimulate people to put or save money in banks. In 1933, FDIC or Federal Deposit Insurance Corporation that was obtained initial loan of 289 million dollars by U.S. Treasury and the FRB played a role as a temporary government corporation and insured saving accounts in private banks about 5,000 dollars at the time and now up to 10,000 dollars. Moreover, FDIC was created Glass-Steagall Act that prohibited and separated investment and commercial banking (Learning bank, 2010). FDIC wanted to make people feel that at least they could get the insurances when they deposited money in banks. Moreover, the government tried to manage many small banks and change them in to a small number of very huge banks because these banks were easy to controlled and regulated. Therefore, the government could put more concentrate on them.

In conclusion, Roosevelt had reformed the country for 5 years, and the New Deal may be considered successful or not depending on people’s point of view. For me, I think that the New Deal was quite successful, but it could not solve the problems completely just healed and relieved. One important thing that could make many Americans liked Roosevelt government was that the New Deal stressed on farmers, laborers, and poor people that were a huge number. For example, when the government just helped or strengthened farmers about price of their agricultural products, they would really be content and satisfied, they would select this government next session, and this was really simple to the government to get favors. Unlike capitalists, they had and required many things to the government, such as oil price and public utility. Plus, they claimed that the New Deal really wasted of money, and it created the nation debts from 19,487 million dollars to 42,967 million dollars (Nitunprapart, 1982, p. 91-111). Moreover, it stressed on laborers and workers too much that made the government system deteriorated, such as charging and imposing more tax depending on income and that made capitalist upset with the Roosevelt government.

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