The New Deal (1933-1945)

The New Deal (1933-1945) Overview

• Centers on the nature and efficacy of solutions in the United States.
• Highlights Franklin D. Roosevelt and the New Deal.
• Addresses critics of the New Deal.

Franklin D. Roosevelt (1933-1945)

• 32nd President of the United States.
• Born on January 30, 1882, in Hyde Park, New York.
• Nicknamed "FDR".
• Graduated from Harvard College in 1903, then Columbia Law School.
• An Episcopalian.
• Married Anna Eleanor Roosevelt on March 17, 1905.
• Career was public official and lawyer.
• A Democrat.
• Died on April 12, 1945, in Warm Springs, Georgia.

The New Deal (1933-1941)

• FDR promised a "New Deal" and was swept into office.
• During his inaugural address, he assured Americans they had "nothing to fear but fear itself".
• Three periods: First New Deal (1933-34), Second New Deal (1935-36), Third New Deal and Roosevelt Recession (1937-41).
• FDR's policies were similar to Hoover's, recognizing economic and psychological reasons for government intervention.
• FDR's scope of intervention was broader than Hoover's.
• The New Deal aimed to redress imbalances and create equilibrium among groups/classes.
• The New Deal coalition powered the Democratic Party for the next 30 years because of social, political and economic changes.

Keynesian Economics (1936)

• Government intervention can stabilize the economy.
• Aggregate demand (spending by households, businesses, and the government) is the most important economic driving force.
• Free markets don't have self-balancing mechanisms for full employment.
• Government intervention is justified through public policies for full employment and price stability.
• During recessions, forces often dampen demand as spending goes down.
• State intervention is necessary to moderate economic activity (business cycle stability).

Bank Holiday and Emergency Banking Act (March 1933)

• FDR proclaimed a banking holiday, closing all American banks for four days.
• The Emergency Banking Act stabilized large banks, gave the Federal Reserve Bank additional powers, began the dollar's separation from the gold standard and mandated bank inspections.
• Many Americans returned to the banks and deposited savings upon their reopening.

Civilian Conservation Corps (CCC) (April 1933)

• Enlisted men aged 17-24.
• Paid $30 a month ($25 was sent home).
• Provided with room and board.
• Involved in massive soil conservation, reforestation and forest management projects.
• 1.3 billion trees were planted.
• Initially funded to 1935, it was extended due to its success until the outbreak of war.

Agricultural Adjustment Act (AAA) (May 1933)

• Formed in May to stabilize the farming sector.
• Purpose was to raise farm prices and halt the abandonment of farms.
• The government identified corn, cotton, milk, pigs, rice, tobacco, and wheat as essential to the economy.
• Farmers would be paid not to grow with Taxes on processed-food companies used to subsidize this.
• AAA ordered slaughter of over six million pigs beginning in July 1933.
• Achieved objective of stabilizing the US rural economy.
• In 1935, farm income had risen to $6.9 billion from $4.5 billion in 1932.

Tennessee Valley Authority (TVA) (May 1933)

• Created in 1934 to provide power and flood control.
• Created a government-owned network of dams and hydroelectric plants.
• These controlled flooding and produced electric power where few had access.
• Policies resulted in court cases to determine federal government involvement in economy.

Glass-Steagall Act and FDIC (June 1933)

• Congress passed the Glass-Steagall Banking Reform Act to renew confidence in banks.
• Act prohibited banks from underwriting securities.
• Created the Federal Deposit Insurance Corporation (FDIC) funded by banks and insured individual bank deposits up to $2500.
• FDIC brought confidence to depositors, inviting trust in banks, thus helping to stabilize and rebuild the banking system.

Securities Exchange Act (1934)

• The Securities and Exchange Commission (SEC) is responsible for enforcing federal laws concerning any tradable financial asset.
• SEC was founded in 1934 largely to regulate the Stock Market.

Social Security Act (1935)

• Direct government assistance was part of a worker's right and Created old-age pensions, funded by employer and employee payroll taxes.
• Provided unemployment compensation, financed through contributions of both worker and employer.
• Farm workers and domestic servants were excluded from this legislation.

Works Progress Administration (WPA) (1935)

• Formed in April 1935.
• The largest of all New Deal agencies.
• Employed millions of previously unemployed people in public work projects across the US.
• Paid average wages of $52 per month.
• Workers were used in the Rural Electrification Administration (REA).
• Built airport landing fields, schools, playgrounds, roads, bridges, courthouses, hospitals, post offices, parks, swimming pools, community centres and city halls.
• A sub-component was Federal Project Number One which employed artists, musicians, playwrights and photographers.
• WPA cost the government $13.4 billion and It was dissolved in 1943 once US involvement in the war made it unnecessary.

Wagner Act (1935)

• Congress passed the Wagner-Connery National Labor Relations Act in July 1935.
• Guaranteed workers the right to collective bargaining through unions of their choice.
• Established a three-man National Labor Relations Board to provide government oversight.
• This was the first law enacted in the USA that gave unions legal rights and committed the government to investigate the treatment of labour.

National Youth Administration (NYA)

• A WPA agency focused on providing work and education opportunities for 16-25-year-olds.
• Encouraged education through providing part-time work to young people aged 16-25 who stayed in school.
• Targeted African Americans.
• Unlike the CCC, girls were employed on local projects.

Rural Electrification Administration (REA)

• A New Deal Agency created in May 1935.
• Aim was to provide electricity to rural and remote areas.
• Created 773 power grid systems.
• Ran 348,000 miles of transmission lines in the Midwest and southwest of the USA.

Challenges from the Left (1934-1937)

• Political left was represented by men such as Upton Sinclair, Huey Long and Floyd Olsen.
• Sinclair sought to end poverty in California and supported state-run cooperatives.
• Long's programme was called 'Share Our Wealth' and included the redistribution of wealth.

Challenges from the Right (1934-1937)

• Large groups opposed Roosevelt's policies for a number of reasons.
• Industrialists felt that his policies were too pro-labour and limited their ability to recover fully from the Depression.
• Farm labourers and sharecroppers in the south opposed him because his policies excluded them.
• Free marketeers opposed extensive government intervention.

Court-Packing Plan (1937)

• Refers to Roosevelt's 1937 plan to reorganize the US Supreme Court.
• Proposal stated the president could appoint a new Supreme Court Justice every time one of the incumbents reached the age of 70.
• Critics argued that Roosevelt was using this to force through legislation ruled unconstitutional by the sitting justices and the proposal failed.

New Deal Coalition (1932 - 1968)

• President Franklin D. Roosevelt's victory in the 1936 election revealed a shifted American political landscape.
• The Democratic Party put together a formidable coalition whose main components were lower-income groups in the great cities
• African-Americans, union members, and ethnic and religious minorities, many from recent immigrant groups.
• Traditional source of Democratic strength.

Roosevelt Recession (1937-1938)

• By 1937 the economy had recovered to levels not seen since 1930, and had risen considerably since bottoming out in 1933. GDP was up 80% and private investment went from a low of $1 billion in 1932 to $12 billion in 1937.
• Beginning in May, the growth of the economy reversed and a recession began. Unemployment rose back up to 19% from a low of 14%, as close to 3 million jobs were lost. Manufacturing fell to 1934 levels and private investment fell by 40%.
• In response to the downturn, Roosevelt increased government spending to 1936 levels. The recession eased in July 1938 and the economy grew in the second half of the year. By the end of the year, GDP surpassed that of the year preceding the recession.

Critics and Supporters of the New Deal

• Reform encountered significant opposition.
• The administration's policies were developed to prevent events that led to the Great Depression.
• During the 1920s, there were, on average, about 553,000 paid civilian employees of the federal government. By 1939 there were 953,891 paid civilian employees, and in 1940 there were 1,042,420.
• The Keynesian view became the dominant view in the economics profession.
• The New Left political movement saw the Great Depression as a missed opportunity for radical change.
• Roosevelt won the election because the public thought the government cared.