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The New Deal

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Franklin D. Roosevelt’s “New Deal” is the “sequence of programs and promises he initiated between 1933 and 1938 with the goal of giving reform to the people and economy of the United States during the Great Depression.”1 But what was more explicitly contained in this “New Deal” and what spurred its creation? What did this plan accomplish? This essay intends to briefly examine the history leading up to the New Deal, discuss factors that lead to its creation, and examine what it accomplished.

In the years prior to World War I (WWI) many parts of the world had been experiencing some of the fastest economic growth in history. In the United States, this growth continued through WWI as industries began to produce greater quantities of goods for the war effort taking place in Europe. After the war ended, the overall global economy began to decline. The worst year of this economic recession was with the steep decent of the global economy in 1921. The recession was largely caused by the termination of wartime production. This factor, combined with troops returning home to re-enter the workforce in jobs that were largely unavailable, was responsible for a high level of unemployment. Economists also argue that wartime inflation caused by government borrowing and printing of money to pay for wartime efforts helped lead to this recession. This relative low point was short lived however as industries learned to adapt to changing conditions and began to produce new products and services. With this reignited economic growth, the economy started to rebound and showed a consistent growth from 1922 until 1929, but still had not returned to pre-war levels.2

On October 29, 1929, a day known as “Black Tuesday,” the U.S. stock market experienced a severe crash; a crash that arguably sparked The Great Depression. This crash caused a panic among Americans and they rushed to banks to withdraw their savings fearing their money would be lost with banks losing money or closing down. The Great Depression that ensued was a period of time marked by the drastic world-wide economic crisis, near failure or severe reductions in many industries, high unemployment levels, and a severe drop in trade.3 This crash effected the U.S. first, but as the nation’s industry began to falter, it created a domino effect in other countries that relied on U.S. trade.

In 1932, the American people wanted to see a change of leadership. They chose to elect Franklin Delano Roosevelt to the office of the presidency.4 Roosevelt had gained a great deal of support with social reform plans as a New York governor. He drew much of his inspiration for his reform plans from the writings of British economist John Maynard Keynes, who believed that a government’s deficit spending could prime the economic pump and jump-start the economy. With the support of a panicked Democratic Congress, Roosevelt created a number of “alphabet agencies” to carry out his “New Deal” reform within his landmark “First Hundred Days” in office.6 His first act as president was to declare a five day national bank holiday. Soon after, on March 12, 1933, during his first “fireside chat” broadcast, he spoke in calm and comforting words to the American people to try to ease the woes of the public. He explained the crisis of the banking industry and how when the public rushed the banks to withdraw funds that it was not realistic for a bank to have funds available for every investor to withdraw at once due to the nature of how funds were invested. He then listed steps that were being taken for the government to help with the reorganization of banking and to promote a renewed “faith” in the government to help in this emergency time of need. He also encouraged Americans to go redeposit their money into the banks as soon as the government could reopen them.

On May 7th, 1933 during his second “fireside chat” radio broadcast he announced his reform plan known as the New Deal to the American public. To summarize President Roosevelt’s address, his plan entailed: creating 250,000 jobs in the forestry and flood prevention services that were to be offered to the unemployed; Congress passing legislation to ease mortgage distress by giving breaks to homeowners so as to not cause massive foreclosures; granting a half billion dollars to state aid to provide immediate relief to those that really need it; authorizing the sale of beer in such states as desired so that it may generate tax revenue and jobs; and restricting capital flight and withdrawal of gold and silver reserves to private citizens.5 These were the first real signs of hope to the American public on a recovery effort to get out of the depression. To carry out these reforms, several of the aforementioned вЂ?alphabet agencies’ were created to manage different aspects of the changes. These include: the Federal Deposit Insurance Corporation (FDIC) which ensures deposits made to banks; the Civilian Conservation Corps (CCC) which was responsible for hiring unemployed young men to work on environmental conservation projects; the Federal Emergency Relief Administration (FERA) which was responsible for delivering the relief monies to the states; the Agricultural Adjustment Administration (AAA) which temporarily reset prices



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