How successful was Roosevelt in delivering relief, recovery and reform during the New Deal?
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How successful was Roosevelt in delivering ‘relief, recovery and reform’ during the New Deal?
The Great Depression is now considered as one of the greatest global economic crises in world history. It began with the stock market crash in New York in 1929, and had a detrimental effect on the U.S. economy; due to globalisation, other economies were influenced as well. Therefore, the Great Depression is a topic of considerable interest among historians and it needs accurate and objective evaluation. This essay discusses how F.D. Roosevelt, the President of the United States, tried to address the economic decline in America, and to what extent Roosevelt was successful in delivering promised ‘relief, recovery and reform’. However, to start with, it is worth considering the circumstances and some causes of the Wall Street Crash. It is important to understand what kind of country America was; this explains such a massive shift in economic policies and views on the role of government.
Above all, the beginning of the 20th century nowadays is seen as the time of the birth of modern America. Despite a sense of frustration and anger present in society since the end of the First World War, the war did not affect the U.S.A. to the same extent as it affected other countries. Apparently, America was in the advantageous position of being distanced from battlefields and thus able to overcome the war with far fewer economic and civilian losses. From the end of the World War, America experienced economic growth which acted in conjunction with the development of technologies and consumerism. Businesses were developing rapidly and became an important part of American society. Taking this into account, the stock market had significant interconnections with people’s daily life, even those who did not own any shares. Moreover, regardless of the fact that by 1929 some regulations and restrictions had been implemented, the U.S.A was still one of the most economically free countries. It was outstanding because of its very little control over the private sector, its independent central bank system and self-regulated stock market, which had no effective control over its actives (Clements, p. )).
The stock market, located on Wall Street, by some critics was referred to as The Great Bull Market. Nowadays it is known as a phenomenon which occurred and developed between 1924 and 1929. In this period, extreme optimism and high speculation on the part of investors helped some common stocks to generate extremely high levels of profit.
When it comes to discussing the collapse of the stock market, it is popularly believed that the Wall Street Crash led to the Great Depression. However, many historians have argued that it was simply a sign of a depression already approaching (Clements, p. ). Many other factors caused the crash of the market, which in the long term also contributed to an overall economic decline during the 1930s. Such factors as overconfidence in the economy (which was experiencing continuous growth since the 1870s), persistent media encouragement of buying shares (participation in the stock market was widely promoted in the popular press and on television), and also the culture of buying goods, including shares, ‘on the margin’. Whatever were the reasons behind the crash, its effect cannot be underestimated: altogether, 16,410,030 shares were sold on ‘Black Friday’, 29. October 1929. This caused loss of confidence in the market: historians point out that the market structure was maintained largely by the confidence that people had in it (Clements, p. ).
When the Great Depression hit the economy, President Herbert Hoover was a newly elected president from the Republican party, who blamed the depression on external events. His response to the Great Depression mainly consisted of a combination of business-stimulation policies and voluntary relief programmes. This approach proved itself unpopular amongst the electorate in 1932 elections, when F.D. Roosevelt, the Democrat, received a mandate for “one of the great public experiments in American history” (Walker, p. ). Roosevelt presented his New Deal, which he mentioned during his acceptance speech after receiving the nomination (Clements, p. ). This programme focused ...
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When the Great Depression hit the economy, President Herbert Hoover was a newly elected president from the Republican party, who blamed the depression on external events. His response to the Great Depression mainly consisted of a combination of business-stimulation policies and voluntary relief programmes. This approach proved itself unpopular amongst the electorate in 1932 elections, when F.D. Roosevelt, the Democrat, received a mandate for “one of the great public experiments in American history” (Walker, p. ). Roosevelt presented his New Deal, which he mentioned during his acceptance speech after receiving the nomination (Clements, p. ). This programme focused on what historians refer to as the ‘3 Rs,’ - Relief, Recovery, and Reform; relief for the unemployed and poor, recovery of the economy to normal levels, and reform of the financial system to prevent a repeat depression (Berkin, p. ). This is the starting point of his attempt to ‘fix’ the economy and help Americans to overcome the crisis.
Relief
As mentioned, the ‘relief’ stage aimed to provide aid to a vast number of people, who were unemployed because of the economic decline (approximately 12,060,000 people, which is 23.5% of an overall labour force[6]).
In order to deliver relief, Roosevelt expanded Hoover's Federal Emergency Relief Administration (FERA) work relief programme which gave loans to states to operate relief programmes (National Archives). FERA's principal aim was the reduction of household unemployment by creating mostly unskilled government-funded jobs on the local level.
From May 1933 until it closed in December 1935, FERA gave states and localities $3.1 billion. By January 1934 about four million people were given temporary low-skilled jobs funded by this organisation (Brogan, p. ).
Regardless of this and further attempts to reduce unemployment, relief measures appeared to be nothing more than a short-term work occupation for some unemployed people. In the period between 1933 and 1935, many citizens covered by the relief programmes hoped that the federal government would take more responsibilities, also providing long-term employment. Instead, this was left to states, cities and counties (Brogan, p. ), which often were unable to cover massive spending.
Later, in 1935, the strategy of addressing this issue was slightly changed and one more programme was created. The Works Progress Administration – led by Harry Hopkins, who was also the head of the FERA) – aimed to “create an army of workers demonstrating their employability by actually working on projects” (as defined by Corrington Gill, the programme’s Assistant Administer). In other words, it aimed to restore some degree of certainty in the market and also to increase an amount of employed people to give a push to the economy. However, WPA has been criticised for failing to provide actual employment rather than temporary jobs. It can be claimed that this was more an attempt to create an impression of recovery. In theory, this should have been stimulating investments and economic growth to restore some confidence in the market and economy.
On the other hand, this dummy measure cost the government a huge amount of money. To avoid bankruptcy, Roosevelt’s government signed legislation known as the ‘soak the rich’ law. FDR …spoke explicitly of the need for ‘very high taxes’ (Shlaes). The strategy for raising extra money to fund a range of relief programmes was the undistributed profit tax - up to 79%. Inevitably this caused deterioration of the crisis: “horrified by what they [businessmen and industry owners] perceived as an existential threat, businesses stopped buying equipment and postponed expansion. They hired lawyers to find ways around the tax” (Shlaes).
Normal tax rates were raised from a range of 1.5% to 5% to a range of 4% to 8%, surtax rates from 20% to a maximum of 50%. Corporation tax rates were boosted from 12% to 13.75% and 14.5%. Estate taxes were raised. Gift taxes were imposed with rates from 0.75% to 33.5%. A 10% gasoline tax was imposed, a 3% automobile tax, a telegraph and telephone tax, a 2¢ check tax, and many other excise taxes; postal rates were increased substantially [9]. These taxes were needed to cover increasing government spending.
Recovery
Moreover, Roosevelt’s original aim of 2.5 million jobs was not remotely achieved during his first term as president (Brogan, p. ). This was only achieved by 1939 when growing military industries assisted FERA and WPA to provide 3 million jobs to American people.
The problems brought by the Great Depression in agriculture could not be ignored either. In 1933 the First Agricultural Adjustment Act was introduced, whose aim was to raise farm income. This was done through such measures as reduction of the acreages planted or destruction of the crops in the fields, reduction of crops (paying the farmers not to plant anything), organising marketing and introducing more regulation to improve distribution.
In 1933 FDR persuaded Congress to pass the National Industrial Recovery Act (NIRA), which set up the National Recovery Administration (NRA). It was designed to “meet a continuing emergency [...] which has a demoralising character” (Brogan, p, ) by the means of making business regulate itself. Fair codes of prices, wages, hours, and working conditions were developed, a minimum wage of 40¢ an hour ($12 to $15 a week in smaller communities), a 35-hour working week for industrial workers and 40 hours for white-collar workers, not to mention a ban on all youth labour [9].
These codes proved themselves ineffective: many small firms found it particularly difficult to follow some of these regulations, especially the minimum wage clauses. After passage of the act, unemployment rose to nearly 13 million. The South, especially, suffered severely from the minimum-wage provisions. The act forced 500,000 black people out of work [9]. Later an investigation by Congress found out that codes were favouring big corporations while small businesses were disadvantaged (Clements, p. ). This attempt to increase purchasing power was psychologically important to keep the morale of the nation and encourage further effort in overcoming the Depression but did not bring real results either in relieving or recovering the country.
There were other attempts to create additional employment for Americans. For example, the Civilian Conservation Corps, which employed young men (aged 17-24) in the agricultural sector. Meanwhile, other organisations aimed to have a more direct influence: the Civil Works Administration provided emergency relief and aid during the hard winter of 1933-1934. Nevertheless, these organisations often failed to work properly on the local level; they hardly covered a sufficient amount of people to have a noticeable effect on the situation. Moreover, their actions were not coordinated and were delivered disproportionately: not all states received the same amount of aid from the federal government.
These might be some reasons for why the implementation of the New Deal programmes can be seen as rather chaotic and reactionary.
Overall, the Recovery section of Roosevelt’s promise mostly aimed to reassure industries, big businesses and investors that the U.S. economy was on track towards overcoming the Great Depression.
The graphs above represent a continuous improvement of the economic situation in the 1930s. After the Wall Street Crash in 1929, when the market had collapsed, we can see an apparent correlation between the decrease of GDP and growing unemployment. Later on, the situation starts improving gradually. The GDP had been continuously growing up until the beginning of World War II. Many argue that the improvement of the economic situation is attached to the Lend-Lease acts and was not the result of recovery programmes. There is another peak in unemployment rates and a downturn in GDP in 1938. According to some economists, this is seen as the next cycle of crisis, which is often called ‘Roosevelt’s recession’. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938 (Lee, p. 236). This reflects the federal government’s failure to create an environment in which future economic depressions would be avoided.
This brings us to the last section, where the aim of reform is being assessed.
Reform
The last target set by Roosevelt’s administration was Reform. What is meant by this is that the government should take actions to improve the current legislation system in order to prevent economic depressions in future. http://thgreatdepression1929-1939.weebly.com/uploads/4/7/6/3/47630875/3019445_orig.png
Nevertheless, riots and protest marches were to be continued in 1937-1938.
Since the beginning of the Great Depression, the New Deal had brought some positive labour market legislations which contributed to the development of the civil rights movement - mostly due to pressure from the trade unions, which now were granted more powers and had the right to be recognised by employers. As parts of various programmes of the New Deal, some up-to-date regulations on businesses were implemented. For example, one of the FERA’s most significant legislations was the abolition of child labour. Some pieces of legislation were pushed through the parliament by the democratic majority; for example, maximum working hours were set at the level of 36 per week.
However, during the New Deal the government faced quite a few serious challenges in addressing the aim of reforming federal laws. Because of increasing poverty and economic decline, the electorate was radicalising, which caused more extreme congressmen in the parliament after the 1934 mid-term elections (Berkin, p. ). For example, the Farmer-Labour Party could rely on nearly 50 supporters in both of the Houses (Clements, p. ). These parties were pushing for a more radical approach to the Depression. Thence, the climate in the congress had changed.
Some historians argue that politics at the time in the U.S.A. had become more extreme. A major opposition from the right (resistance to the New Deal from industrialists and the Supreme Court) might have urged Roosevelt to provide a response in order to keep his political mandate (Clements, p. )… Despite Roosevelt's recognition of the importance of large companies (Clements, p. ), he wished to be seen to be on the side of the people in this conflict of interests. This might be the explanation for these left-wing economic policies brought by the New Deal: pressure from the electorate and Congressmen for radical reforms were reflected in Roosevelt’s policies.
Conclusions
The American economy simply could not recover from these successive onslaughts by first the Republican and then the Democratic administrations [9]. Having said this, Roosevelt’s overall performance during the Depression presented him as a pragmatic politician: he relied on support from the left of the political spectrum in society because of his understanding of the sympathy of the electorate towards a more active state. The large majority favoured and voted for policies that made the disaster inevitable: inflation and credit expansion, protective tariffs, labour laws that raised wages and farm laws that raised prices, and ever higher taxes on the rich and distribution of their wealth. FDR was successful in delivering his intentions and aims to the electorate, contributing to the development of trade unions and civil rights movements, but he struggled to formulate a clear-cut strategy behind his vague campaign claims.
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