Was FDR’s The New Deal Plan the Real Deal?
The Great Depression was one of the most devastating periods in American history. It lasted from 1929 until 1939 and was triggered by the stock market crash in October 1929. This event led many Wall Street investors to be wiped out. Over the next few years, people stopped investing which caused sudden declines in manufacturing output and employment as dwindling businesses laid off workers.
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After Franklin D. Roosevelt took office in 1933, he enacted several programs to combat the depression. These initiatives were part of his New Deal plan to restore America back to its livelihood and prosperity. However, was this New Deal plan the real deal? Was this program alone responsible for ending the Great Depression and helping America to recover? Or was it the start of World War I that eventually led America to overcome the economic despair that the Great Depression caused?
The Great Depression
During the 1920’s, the economy of the U.S. rapidly expanded and the wealth of the nation nearly doubled. Because of this, the stock market experienced swift growth and development. This all came to crashing halt in October 1929. “But the market soon stuttered and then collapsed, as panicked investors dumped their stocks at any price” (Goldfield, Abbott, & Argersinger, 2013). In just 5 hours of trading, over 10 billion dollars were lost. Thus, the Great Depression began.
Countless Americans who were forced to purchase goods on credit, instead of cash, fell into debt, and the number of foreclosures and repossessions gradually increased. As shopping confidence disappeared, the slump in earnings and investment led manufacturers and other businesses to halt production and begin terminating their employees. For the lucky people that were still employed, however, earnings fell and buying power diminished. According to Roth (2009), “Business is at an absolute standstill and the big stores are deserted even tho they are all running sales and giving the merchandise away”. Soup kitchens and a growing number of down-and-out people became more commonplace. Farmers who were unable to afford to keep their crops were forced to stand by and watch them rot away in the fields.
During the fall of 1930, banking panics began as large numbers of stockholders lost assurance in the creditworthiness of their banks and wanted deposits in cash, thus compelling banks to discharge loans in order to supplement their inadequate cash assets on hand. Banking problems occurred throughout the United States yet again in both spring and fall of 1931 as well as the fall of 1932, which forced thousands of banks to close their doors.
The New Deal Initiative
In early 1933, Franklin, D. Roosevelt took office after defeating Herbert Hoover to become President of the United States. In his acceptance speech were the infamous words “I pledge you, I pledge myself, to a new deal for the American people” (Powell, 2004). F.D.R. took direct action to address the country’s monetary afflictions.
The New Deal Roosevelt had assured the American people started to take form instantly after his appointment in early spring 1933. Based on the notion that the authority of the federal government was necessary to lift the country out of the current depression, the initial days of the government saw the passage of banking reorganization laws, emergency assistance agendas, work relief plans, and agricultural programs.
Some of the changes that were put in place by the New Deal included the launch of the labor movement, which promoted wage growth and continued the purchasing control of the people, the formation of Social Security and the federal guidelines levied on the financial business. The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation, which effectively insured the savings of Americans in the event of a bank failure, which was all too common at the time (Davis, 1986).
The current labor movement was created from some of the New Deal ingenuities. The National Labor Relations Act of 1935 permitted for collective bargaining, which essentially protected the rights and wages of workers. Additionally, in 1935, the Works Progress Administration was credited with employing more than 8 million Americans in building projects ranging from bridges and airports to parks and schools (Rauchway, 2018).
The New Deal’s first big steps helped to calm the sense of panic that had seized America in the early 1930’s. But FDR knew that many people were still teetering on the edge of hopelessness and that time was running out (Favreau, 2018).
Later, a second New Deal was to develop. This comprised union protection agendas and plans to aid farmers and migrant employees. Several of the New Deal actions/agencies came to be known by their abbreviations. For example, the Works Progress Administration was known as the WPA, while the Civilian Conservation Corps was known as the CCC. Countless individuals commented that the New Deal plans reminded them of alphabet soup (Davis, 1986).
Did the New Deal Programs Really Work?
Critics argue that even if Roosevelt did aid to lift the spirits of the American public during the depression, this success was only an illusion. The initial cause of the prevalent discontent was the continuation of the depression. Had the people actually realized that the New Deal was only extending the depression, they would have had worthy reason to discard it (Higgs, 1998).
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Had Roosevelt only kept his harmless campaign promises to cut federal expenditure, balance the budget, preserve a strong legal tender, and stop governmental domination in Washington, the depression might have been crushed. Because of its confusing, jumbled form of new expenses, taxes, grants, rules, and uninterrupted government involvement in productive actions, the New Deal generated so much misperception, anxiety, ambiguity, and anger among manufacturers and investors that private venture never recuperated enough to reestablish the high levels of manufacture and employment seen in the 1920s.
In 1939, ten years after its onset and six years after the commencement of the New Deal, 9.5 million persons, or 17.2 percent of the labor force, remained officially unemployed (of whom more than 3 million were enrolled in emergency government make-work projects) (Higgs, 1998). FDR was a brilliant politician, but regrettably, for the American public exposed to his strategies, he had no clue how to end the Great Depression. His impractical, politically molded agendas so unsettled the revival of the economy and so dispirited the growth of money that they hindered the full recuperation that would have occurred. His supporters admired him then, and many people respect him still, as a great president.
Or did WWII end the Great Depression?
It could be claimed that World War II, which finally lowered unemployment and improved the GNP (gross national product), through weapons manufacturing, really played a far greater role in ending the Great Depression. During the war, more than 12 million Americans were deployed into the military, and a comparable number labored in defense-related jobs. Those war jobs took care of the 17 million unemployed in 1939 (Powell, 2004). Many of the New Deal programs certainly helped end the Great Depression, but were inadequate because the sum of government reserves for stimulus was not sufficient. Many argue that only World War II, with its stresses for enormous war fabrication, which in turn eventually created a surplus of jobs, ended the Depression.
Almost half of everything that was manufactured in the U.S. was used on fighting the war. National spending on many of FDR’s New Deal programs such as in education, training and social services plunged more than 90 percent. FDR had paused many of his New Deal agendas during the war. He also allowed Congress to end such programs as the WPA and the CCC, among others, because winning the war was the main priority. In the years amid the introduction of the New Deal program and the occurrence of the incident at Pearl Harbor, FDR amplified the national debt by $3 billion.
While Roosevelt and his New Deal unsuccessfully ended the depression, they were successful in transforming the foundations of American political and commercial life. Today, 60 years after the New Deal failed, its ideology remains. You only need to look at some of the current organizations/agencies of our national government. Some of these include the Export-Import Bank, the Farm Credit Administration, the Rural Development Administration, the Federal Deposit Insurance Corporation, the Federal Housing Administration, the National Labor Relations Board, the Rural Utility Service, the Securities and Exchange Commission, the Social Security Administration, and the Tennessee Valley Authority. All of these administrations were born out of the New Deal.
Much of the discussion surrounding how the Great Depression ended rests on how one explains recovery/recoup and which documents are applicable to that characterization. The most current examination by some historians proposes that the New Deal only played a trivial role, if any at all, in the recovery of the nation from the Great Depression. Still others commend FDR and his brilliant philosophies, steadfast determination and resilience to keep pushing forward at all costs.
- Davis, Kenneth S. FDR, the New Deal Years, 1933-1937: a History. Random House, 1986.
- Favreau, Marc. Crash: the Great Depression and the Fall and Rise of America. Little, Brown Books for Young Readers, 2018.
- Goldfield, David R., et al. Twentieth-Century America: a Social and Political History. Pearson, 2013.
- Higgs, R. (1998, September 1). The Mythology of Roosevelt and the New Deal | Robert Higgs. Retrieved from http://www.independent.org/publications/article.asp?id=176
- Powell, Jim. FDRs Folly: How Roosevelt and His New Deal Prolonged the Great Depression. Forum, 2004.
- Rauchway, Eric. Winter War: Hoover, Roosevelt, and the First Clash over the New Deal. Basic Books, 2018.
- Roth, Benjamin, et al. The Great Depression: a Diary. Public Affairs, 2009.
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