During the 1930s, the United States faced the formidable task of recovering from the Great Depression. This period of economic hardship prompted the introduction of several policies under Presidents Herbert Hoover and Franklin D. Roosevelt, each with varying degrees of success.
The Hoover Administration's Approach (1929–1933)
President Herbert Hoover, serving from 1929 to 1933, is often critiqued for his response to the Great Depression. His policies reflected his belief in limited government intervention and the principle of 'rugged individualism.'
Hoover's Initial Response
- Optimism and Individualism: Hoover was initially optimistic and believed the economy would naturally recover. He promoted the idea that individuals should be able to thrive without government support.
- Federal Farm Board: Established to stabilize prices and promote the sale of agricultural products, but its impact was minimal as agricultural prices continued to fall.
Key Policies Under Hoover
- Reconstruction Finance Corporation (RFC): A federal agency providing financial support to banks, building-and-loan societies, railroads, and other businesses. While it was a step towards government intervention, it was widely seen as benefiting corporations more than individuals.
- Emergency Relief and Construction Act: The first time the federal government provided direct relief funds, signifying a departure from Hoover's earlier stance on government aid.
Limitations of Hoover's Policies
- Lack of Direct Aid: Critics argue that Hoover's policies were too conservative and failed to provide adequate direct relief to the unemployed and those in poverty.
- Public Perception: Hoover's seeming insensitivity to the suffering of ordinary Americans led to a decline in his popularity.
The New Deal Under Franklin D. Roosevelt
Franklin D. Roosevelt introduced the New Deal, a series of programmes, public work projects, financial reforms, and regulations. The New Deal was implemented in two phases: the First New Deal and the Second New Deal.
The First New Deal (1933–1934)
Emergency Measures
- Bank Holiday and Emergency Banking Act: A temporary closure of banks to prevent further runs, followed by inspections and assistance, restored public confidence in the banking system.
Financial Reforms
- Glass-Steagall Act: Established the Federal Deposit Insurance Corporation (FDIC) and included banking reforms to control speculation.
Employment and Relief Programmes
- Civil Works Administration (CWA): Provided temporary jobs during the harsh winter of 1933–34.
- Civilian Conservation Corps (CCC): Offered young men employment in environmental projects, combining the need for environmental conservation with job creation.
Agricultural and Industrial Recovery
- Agricultural Adjustment Act (AAA): Sought to end overproduction in agriculture and raise prices through subsidies funded by a new tax on food processors.
- National Industrial Recovery Act (NIRA): Aimed to stimulate industrial recovery by encouraging industry-wide agreements on production limits and fair labor practices.
The Second New Deal (1935–1936)
Labour and Social Welfare
- National Labor Relations Act (Wagner Act): Legalised union practices such as collective bargaining and led to a significant increase in labor union membership.
- Social Security Act: Introduced unemployment insurance, aid to dependent children, and old-age pensions.
Reform and Taxation
- Wealth Tax Act: Imposed higher taxes on the wealthy and big corporations, which was a move towards income redistribution.
- Banking Act of 1935: Further reformed the banking sector and strengthened the Federal Reserve's control over the economy.
Continued Relief and Employment Efforts
- Works Progress Administration (WPA): The largest and most ambitious New Deal agency employed millions in public works projects ranging from construction to the arts.
Assessing the Impact of the New Deal
The New Deal's impact was multifaceted, influencing various aspects of American life and governance.
Employment and Economic Growth
- Reduction in Unemployment: While the New Deal reduced unemployment, it did not eliminate it.
- Gross Domestic Product (GDP): There was a significant increase in GDP during Roosevelt's first term, although full economic recovery was not achieved until World War II.
Changes in American Government
- Expansion of Power: The New Deal resulted in a significant expansion of the power of the federal government, setting a precedent for future interventions in the economy.
- Establishment of Welfare State: The foundations of a welfare state were laid, with programmes such as Social Security becoming a permanent part of American society.
Criticisms of the New Deal
Despite its successes, the New Deal attracted substantial criticism from various quarters.
From the Political Right
- Concern Over Big Government: Conservatives argued that the New Deal represented an overreach of federal authority, stifling individual freedom and enterprise.
- Economic Impact: Some believed that the New Deal’s regulatory and tax policies hindered economic recovery.
From the Political Left
- Insufficient Relief: Critics such as Huey Long argued that the New Deal did not go far enough in redistributing wealth and providing for the poor.
- Calls for More Radical Change: Some progressives and socialists felt that the New Deal should be a stepping stone towards more systemic change in American capitalism.
Legal Challenges
- Supreme Court Decisions: The Supreme Court declared several New Deal measures, including the AAA and NIRA, unconstitutional, leading to conflicts between the executive and judicial branches.
Conclusion
The New Deal's legacy is complex and enduring. While it did not end the Great Depression, it changed the American governmental and economic landscape, introduced social safety nets, and provided a blueprint for dealing with economic crises. The breadth of responses to the New Deal underscores the diverse perspectives on the role of government in society and the economy. The New Deal era remains a fundamental study topic for students of history, economics, and politics.
FAQ
The New Deal had a mixed impact on minorities and women. Some New Deal programs, like the Civilian Conservation Corps and the Works Progress Administration, did offer employment opportunities to African Americans and women. However, discrimination persisted, with many programs either excluding minorities or offering them lower wages. Social Security initially excluded domestic and agricultural workers, occupations heavily populated by minorities and women. The Indian Reorganization Act of 1934 was a positive step, ending the policy of assimilation and recognizing Native American tribal governments. Overall, while the New Deal offered some advances, its impact was often limited by existing societal prejudices.
The New Deal's banking reforms were comprehensive, starting with the Emergency Banking Act of 1933 which provided for the inspection and restoration of solvent banks. The Glass-Steagall Banking Act of the same year established the Federal Deposit Insurance Corporation (FDIC), insuring deposits to prevent bank runs and restore public confidence. The Banking Act of 1935 further strengthened the Federal Reserve's control over the money supply and interest rates. These measures were instrumental in stabilising the banking system, restructuring the Federal Reserve, and ensuring that future banking practices were more cautious and regulated.
Critics of the New Deal's economic policies argued that they extended beyond the government's constitutional authority and created an unsustainable fiscal burden. Economists such as Friedrich Hayek and later Milton Friedman contended that New Deal policies interfered with market forces and prevented economic adjustments. Critics also pointed out that despite massive spending, the New Deal did not end the Great Depression; it took the economic mobilisation of World War II to fully recover. The New Deal’s detractors believed it expanded the federal government's role in the economy to an unprecedented and, in their view, dangerous degree, laying the groundwork for future government overreach.
The New Deal approached the agricultural crisis with the Agricultural Adjustment Act (AAA), which aimed to raise crop prices by reducing supply. It paid farmers to cut production of staple crops like cotton and wheat, thus elevating prices due to lower available quantities. The Farm Credit Act provided loans to prevent farm foreclosures, and the Rural Electrification Administration brought electricity to rural areas, modernising farming. Although controversial, and despite some of its measures being declared unconstitutional in 1936, the AAA fundamentally shifted American agricultural policy and aimed to secure the livelihoods of farmers.
The Second New Deal's labour reforms were centred around empowering workers and ensuring fair labour standards. The Wagner Act, or National Labor Relations Act of 1935, was pivotal in these reforms, guaranteeing workers' rights to unionise and engage in collective bargaining. This led to a significant increase in union membership and power. Additionally, the Fair Labor Standards Act introduced in 1938 set maximum hours and minimum wages for workers, addressing long-standing issues of unfair labour practices. These acts were groundbreaking, establishing fundamental workers' rights that had previously been unregulated at the federal level.
Practice Questions
The New Deal, orchestrated by President Franklin D. Roosevelt, profoundly impacted American society by redefining the role of the federal government in economic recovery and welfare provision. Its introduction of social safety nets, such as the Social Security Act, provided a lifeline to the elderly and unemployed, instilling a sense of security. Moreover, employment initiatives like the CCC and WPA alleviated unemployment and infused the economy with purchasing power, stimulating demand. While not eradicating the Great Depression, the New Deal mitigated its worst effects and left a lasting legacy in the establishment of a welfare state.
President Herbert Hoover's policies during the onset of the Great Depression were marked by a belief in minimal government intervention. Initiatives like the RFC showed a progressive move towards federal involvement; however, they were often deemed too little and too late. The public perception of Hoover's approach was generally negative, as the lack of direct aid for the suffering population contrasted starkly with the widespread destitution. Ultimately, while Hoover laid groundwork for future federal economic intervention, his administration's policies were largely ineffective in reversing the downward economic spiral, leading to a loss of public confidence and paving the way for Roosevelt's New Deal.
