The New Deal in Brief

The New Deal in Brief Richard Walker The New Deal was one of the great public experiments in American history. Crafted pragmatically by the Roosevelt administration to fight the Great Depression of the 1930s, it helped the country recover from economic disaster and put millions of people back to work. In the long run, it ratcheted up the role of the federal government in national affairs and injected a unprecedented measure of responsibility for the welfare of all people. It also marked a dramatic shift in power over the workings of U.S. democracy. President Franklin Delano Roosevelt’s inauguration on March 4, 1933 heralded the New Deal. The famous Hundred Days of new initiatives followed. Measures passed by a solidly Democratic Congress included banking and monetary reform, the Federal Emergency Relief Act (FERA) to support the states, the National Industrial Recovery Act (NIRA) to stabilize prices, and the Agricultural Adjustment Act (AAA) to bolster farms and farm prices. New policies and laws continued to appear throughout FDR's first term and more were added in the second term. Most commentators speak of a First New Deal in 1933-34 and a Second New Deal in 1935, and there is good reason to refer to a Third New Deal in 1937-38, after FDR's 1936 reelection. The New Deal had five major effects on the country: stimulating economic recovery, creating jobs for the unemployed, building public works across every state, investing in public education and civic culture, and transforming the American federal system. 1. Economic Recovery The Great Depression was the deepest and longest economic downturn in American history. By the time the economy hit bottom in 1933, GNP had fallen by a third. The proximate trigger for the collapse was the Great Crash of October 1929 on the New York stock exchange, but there were deeper problems of industrial overproduction, falling prices in agriculture (still constituting half of total U.S. output), and popping real estate bubbles from California to Florida. Industrial production hit the wall in 1930, falling by 25%. The banking system imploded in 1931-32, as savings, investment, and buying withered, and went into free-fall in early 1933. Multitudes lost their life savings as thousands of banks closed their doors on panicked clients. A long-standing myth holds that recovery was painfully slow, but in fact GNP grew very fast from 1933 on (with the exception of 1938). By 1942, before World War II kicked into high gear, the U.S. economy had already climbed all the way back to normal (i.e., the trend line of the 1920s). (see figure)