The New Deal

Surbjit Singh 10sk

Coursework Unit 1 The USA – Boom, Bust and Recovery

During the 1930’s, the USA witnessed a breakdown of the Democratic system as the USA fell into the worst depression in history, but of course the depression was caused and influenced by another major factor, which was the Wall Street crash. The economical depression that affected the USA and other countries was unique in its severity and consequences. At the time of when the depression, many Americans where unemployed. The great industrial decline continued throughout the 1930’s that affected Americans majorly. Poverty and unemployment were increasing rapidly, because of this people wanted relief and not promises. In 1932, President Hoover lost in the presidential election to Franklin D Roosevelt. Hoover lost mainly due to the fact that, he failed in being able to solve the great depression that was beginning to get worse. Roosevelt was then faced with a number of problems which he had to deal with thick and fast. Unemployment and poverty levels were always rising, and people needed action and relief to happen quickly. Roosevelt went about solving this problem by saying that America needed what he called a ``New Deal’’.

When Roosevelt first became president he faced alot of problems, mainly from the disaster of the Wall Street Crash. After the crash, people at first weren’t clear about what the impact of the crash would be. In the short term, the large speculators were ruined. The rich lost most because they had invested alot of money into the stock market. They also were the main buyers of American goods, so there was an immediate downfall in spending. Many others borrowed money in order to buy shares that were not worth nothing. They became bankrupt, banks also went bankrupt due to the fact that they participated in speculation, especially with the ‘’buy on margin’’ scheme which allowed speculators to put down a deposit of 10% and then speculators borrowed the rest from banks, banks then lent too much money. A short period later, President Hoover at the time reassured the country that prosperity was coming again. He cut taxes to make people buy more goods and by mid 1931 production of goods started to rise again slightly and there was hope that the situation was resolved. President Hoover was incorrect. It was the worst depression that was ‘just around the corner’ meaning that it was going to happen, and happen quickly for a number of reasons but mainly it was because the crash had destroyed the one thing that was important to the prosperity of the 1920’s (which made that prosperity happen which was confidence). This was mostly what caused banks to go bust. In 1929, 659 banks failed, as banks failed people stopped trusting them and quickly withdrew their savings. In addition, in 1920 another 1352 banks went bankrupt. To make matters worse in 1931, there were escalating problems in the European banks, which made the USA and its people panic. Around the country about 1 billion dollars where withdrawn from banks and put into safe deposit boxes or stored at home. Another 2249 banks failed in 1931. By this time Americans were expressing their feelings. They now kept their money instead of buying new goods or shares. This showed the loss of confidence had set in even more. Businesses cut productions and fired and made unemployed more workers. People, who were still working, had their wages reduced. Between 1928 and 1933 both industrial and farm production fell by 40%, average wages fell by 60%. As workers were made redundant or fired, they bought even less goods. By 1932 the USA was experiencing the most serious economical depression the word had ever witnessed. By 1933 there were 14 million unemployed and 500 banks went bankrupt. Farm prices had fallen very low that the cost of transporting animals to market was higher than the price of animals themselves, this was showing how bad the economical depression had got. The USA’s international trade had been reduced by a big margin from $10 billion in 1929 to just $3 billion in 1932. This was a big, big difference that showed the state the economy was in at the time. People in the farming industry were hit hardest by the depression. The 1920’s didn’t really let them prosper which meant they lost out whilst everyone else was making large amounts of money. Huge numbers of farmers were unable to pay off their mortgages and some farmers organised themselves to resist banks seizing their homes. To make matters worse for farmers, over farming and droughts turned millions of acres of land into a dust bowl and drove farmers off their land because the conditions where to poor and bad to farm in. This was a big problem Roosevelt had to turn around and fix as if it was left as it was, the USA would be in deep, deep trouble in terms of its severity and there would be more consequences as a result to follow.

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Roosevelt began to take action by making a ‘’New Deal’’, which meant that he would by this sort the short term problems out such as unemployment and poverty. He took decisive action in his infamous “first hundred days”. His first aim was to bring confidence back into banks. A short time later, Roosevelt ordered all banks to close and to remain closed until government officials had checked them over to see whether they would be stable enough to carry on working and to see if they where trustable. A few days later 5000 banks were allowed to reopen. They were supported by government money if it was needed, which was something Hoover didn’t allow in his Republican Policies. At the same time Roosevelt’s advisers had come up with ways to stop the Wall Street crash from happening again. The Emergency Banking Act and the Securities Exchange commission gave some idea of what the New Deal was going to be like. The Federal Emergency Relief Administration was set up to meet the need of the poor. About $500 million was spent on soup kitchens, blankets, employment schemes and nursery’s. Roosevelt began to win the confidence of the people of America. Americans were impressed by the way he was handling the problems. Although, Roosevelt did know that there was a long way to go before America could recover from the depression. He maximized the opportunities available to interact with the citizens of America. He uses the radio and started “Fireside Chats”. By broadcasting to people throughout America, he ensured them that he was sorting the problems. Roosevelt gave them the impression that he cared about their welfare and understood different views of the people about the situation America was currently in. The Civilian Conservation Corps was mainly aimed at unemployed young men. They would be signed up for 6 months, which would be renewed if they couldn’t find work. Most of the work done by the CCC was spent on environmental projects in nation parks. The money that was made went back into men’s families. Around 2.5 million young men benefited from this scheme. The Agricultural Adjustment Administration tried to take a long-term view of the problems that were faced by farmers. It reduces the farm production in order to force prices upwards, this meant that over production wouldn’t happen again. At the same time the AAA helped farmers to use modern methods that would conserve and protect the soil. If they were ever in deep trouble, they were eligible to receive help with their mortgages. The AAA helped farmers, although the modern methods of farming put more farm labourers out of work. The National Industrial Recovery Act setup 2 organisations which were, The Public Works Administration and The National Recovery Administration. The PWA used government money to build schools, roads, dams, bridges and airports. These would create alot of jobs once the US economy had become stable. The NRA improved working conditions in industry. It also set fair wages and good levels of production. In addition, this was created to give workers money to spend without over producing, which then would stimulate the economy and make it become stronger. However, it was voluntary, but firms which joined used the blue eagle symbol as an approval from the president. Over 2 million employers joined this scheme. This gave assistance, and recovered parts of America which were heavily affected by the Wall Street Crash, which gave America a big confidence boost and faith in their new president.

Roosevelt also faced alot of criticism. Some said that the New Deal was doing too little or doing too much. The USA was recovering less quickly than Europe from the Depression. Businesses were losing its enthusiasm and confidence for the NRA and started to dock people’s wages. Roosevelt had hoped to transform the USA from the Great Depression, but it didn’t seem to be working as he had hoped for. On Tuesday 14th May 1935, Roosevelt met with a group of close advisers who shared his opinions and aims. They persuaded him to take steps to achieve what he hoped for and make the USA an equal place for all Americans. One month later, on 14th June he presented a large range of laws he wanted to be passed. This became known as the Second New Deal. This included, The Wagner Act. This forced all employers to allow trade unions to operate in their companies and to let them make deals with employers for better pay rates and working conditions. The new act made it illegal to sack workers for being in the Union. The Social Security Act provided state pensions for the elderly and for widows. It also allowed governments to provide help for the sick and the disabled. More importantly, the Act setup a scheme for unemployment insurance this meant that employers and workers made a small contribution to a special fund each week. However is workers became unemployed, they would receive a small amount of benefit to help them out until they could find work. The Works Progress Administration brought together all the organisations that created jobs for people. It also extended this work beyond the building projects to create jobs for office workers, unemployed actors, artists and photographers. The Resettlement Administration also helped smallholders and farmers who had not been helped by the Agricultural Adjustment Administration. This organisation moved from 500,000 families to better quality land and housing. The Farm Security Administration replaced the Resettlement Administration in 1937. It also gave special loans to small farmers to help them to buy land to farm on also it built camps to provide decent living conditions and work for migrant workers.

The impact of the “New Deal” was huge for the unemployed, for people that were in poverty and also people in agriculture. People began to get back into work. The economy was slowly recovering and parts of America, which were damaged by the depression, were also recovering through the actions Roosevelt took. Although, some groups and organizations rejected claims that the “New Deal” was a good idea. Businesses owners such as the prolific Henry Ford thought that the laws put in place where harming the amount of production done and that government funding were being used insufficiently. They also thought that Roosevelt was taking too much control of the situation in America. Groups like the Supreme Court & the Republicans where highly critical of the “New Deal”. They were also joined by Louisiana Governor Huey Long. Long thought that the “New Deal was not helping everyone in America. He thought that the Black Americans and the farmers were struggling to make any breakthroughs in getting jobs and improving living conditions. He objected the “New Deal” and started helping Black Americans & farmers. He also helped the young and the old by offering benefits and free education. Indeed, people supported Long and had he not been assassinated in 1935, he would have stood a good chance of challenging Roosevelt for presidency. Despite this many Acts where put into place in the Second New Deal. The Wagner Act made fair solutions for workers to work in because they allowed workers to negotiate fair wages and conditions. The Social Security Act gave support to the Elderly and Widows. The Works Progress Administration created jobs for office works and other people that were unemployed. The Resettlement Administration gave smallholders and farmers help who didn’t receive any from the AAA. This was a big improvement from the First New Deal and silenced many critics. However the Fireside chats gave Americans a real boost in confidence as the President gave regular updates about the US. The Federal Emergency Relief Administration provided relief for the people who were homeless and were starving. Overall the Second New Deal was a big improvement for America as a country and it gave Americans more freedom in which the job they were working in.

However there was alot of opposition to the New Deal. A Number of high-profile figures raised the complaint that the New Deal wasn’t doing enough to help the poor. Despite the New Deal measures, many Americans remained desperately poor. The black Americans were the hardest hit and the poor in farming areas. A key figure in arguing on the behalf of these people was Huey Long. Long was an important figure during this time. He became the Governor of Louisiana in 1928 and a senator in 1932. His methods of gaining and achieving power were unusual and sometimes classed as illegal. He used methods such as bribery and intimidation. However, once he gained power he used it to help the poor. He continuously taxed big corporations and businesses in Louisiana and used the money to build roads, schools and hospitals. He employed black people on the same terms as the whites ad clashed the Ku Klux Klan (KKK). He supported the New Deal at first, but by 1934 he was criticising it for being too complicated and not doing enough. He put forward a scheme called Share Our Wealth, this meant all personal fortunes would be reduced to $3 million maximum and the maximum income would be $1 million per year. He suggested to have pensions for people over 60 and free washing machines and radios. Long was an aggressive and forceful man, Roosevelt regarded him as one of the two most dangerous men in the USA. Others also criticised the New Deal for not doing enough. Dr Francis Townsend created a number of Townsend clubs to campaign for a pension of $200 per month for people who were over 60 years of age. In addition a Catholic Priest used his own radio programme to attack Roosevelt, his name was Father Coughlin. He setup the National Union for Social Justice and it had a large membership. Although, by the 19240’s the movement had started to fade out. Many other people said that the New Deal wasn’t doing enough. The New Deal became criticised by businesses and from the Republicans. They said that the New Deal was complicated, and there were too many codes and regulations. They said that the Government shouldn’t support Trade Unions and it shouldn’t support calls for higher and decent wages they said that the market should deal with this. In addition they said that the New Deal schemes ere like economic plans being carried out in the Communist USSR (Russia) and were claimed unsuitable to be used in the free market of the USA. They started claiming that Roosevelt was acting like a dictator. As a result Roosevelt was upset from these criticisms, but also because the tactics used were against him by big businesses and the Republicans. They said that he was disabled because of a sexually transmitted infection rather than polio. As a result Roosevelt turned on these enemies bitterly. In addition American people were with him. As a result of this he won the 1936 election with 27 million votes the highest margin ever achieved by a US president, he then joked happily to wipe the smiles off the opposition. As a result this conclusion became clear that everyone is against the New Deal except the voters. It was clearly obvious as he got the highest number of votes ever achieved from the public of American society. But, Roosevelt also faced problems with the most powerful opponent of the New Deal, the American Supreme Court. The court was dominated by Republicans who were against the New Deal. It could overturn laws if those laws had been against the courts terms of constitution. This was a big disadvantage for Roosevelt. Roosevelt became angry that the group of old Republicans could pass laws and yet, Roosevelt had been elected to do that. He asked if he could appoint 6 new judges who were more sympathetic towards the New Deal. But Roosevelt also misjudged the mood of the public. They were shocked at what they saw as Roosevelt was attacking the American system of government. Roosevelt had to back down and his plan was rejected. The Supreme Court had been shaken by Roosevelt’s actions and was less obstructive in the future. There was alot of opposition to the New Deal from many people. There were many reasons for this. Many fiscal conservatives attacked the New Deal policies because of the tremendous cost. Others felt the government was becoming too big. Some of the New Deal agencies, like the TVA and REA, were opposed because conservatives felt they were socialistic. Big business also was concerned that the government was getting into production and distribution of things that were previously done by private business and industry. Groups like the American Liberty League were formed which accused FDR of trying to destroy the capitalistic (free enterprise) system. Some also felt that the executive branch was assuming too much power.

So in conclusion, I do agree to some extent that Roosevelt’s “New Deal” was not a complete success. Although, Roosevelt did take a mature approach to act on the disastrous situation, he was unable to give solutions to the long-term problems. His Alphabet Agencies did make inroads into solving unemployment and decreasing poverty levels, but in true consideration, the “New Deal” was never really thought about as the way for the future. Indeed, after Roosevelt made a political mistake by cutting the amount of government spending on “New Deal” programs. This led to a recession and America was plunged back into Depression. Although the “New Deal” started off as a real success, it steadily declined. The decline mainly came from the opposition. However in early 1937, prosperity seemed to be coming back and Roosevelt did what all conservatives had wanted. He cut the New Deal budget. He fired many workers who had been employed by the New Deals own organisations and the cut in spending triggered other cuts through the economy. This meant that unemployment yet again increased. Overall only one president had faced the problems confronting and then tried to fix the problems which was Roosevelt. He tackled the problem alot better than Hoover did. There were many benefits however as the result of the New Deal. The New Deal restored faith and confidence of the American people in their government. But this was later changed as the result of when he took alot of constructive actions against the Supreme Court and, as a result American people were shocked. Roosevelt then knew he had miscalculated the mood of American People. In addition, there was alot of opposition that Roosevelt had to deal with. In the industry big businesses remained immensely powerful in the USA despite being challenged by the government. However, many big businesses and corporations were against the New Deal. Many blacks benefited. Around 200,000 black Americans gained benefits from the CCC and other New Deal agencies. However, many New Deal agencies discriminated against black people, they either got no work or received worse treatment or lower wages. The New Deal saw women achieve high positions. However many women were attacked for example, Frances Perkins was attacked in the press as a Jew and a Russian spy. The Indian Reorganisation Act in 1934 provided money to help Native Americans to buy and improve their land. However Native Americans remained poor and excluded section of society. So to sum up, I agree to some extent that Roosevelt’s New Deal wasn’t a complete success, but at least he had tried to tackle the problem and make the USA a better place to live, he in the end started to bring prosperity again into America, many of his New Deal agencies were successful however, he had faced alot of opposition which in turn, the public lost faith and confidence in their President. Although the actions taken by Roosevelt and the Democrats helped America gain some respectability after the dramatic collapse of the economy (Wall Street Crash). So, finally, although the “New Deal” started off as a real success, it steadily declined.

The New Deal

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