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  • Published on: 21st September 2019
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Final Synthesis Paper: The New Deal

The hardship felt by Americans during the Great Depression was unbearable. Mothers and Fathers were out of work, families had to move onto the streets or into secluded suburban neighborhoods, and many people lost their live savings in the stock market. The crash of the American stock market would not just affect our trade partners, it would affect our largest allies as well. Over the next twelve years Great Britain, Germany, Russia, Japan, and many other nations would have economic depressions of their own. By early 1932 the unemployment rate in America had reached 23.53%, almost 12,100,000 Americans. President Herbert Hoover was to blame for most of the problems that caused the crash. The election of 1932 would ultimately be a referendum on Hoover’s performance when it came to the economy; his opponent, New York Governor Franklin D. Roosevelt (FDR) defeated him in a landslide. As soon as FDR took office in March of 1933 he implemented new reforms and expanded executive powers to attempt to save the nation’s declining economy. The reforms in his first few weeks and throughout the first several years of his presidency would be called “The New Deal.” The debate over the effects of the New Deal in America is one that occurs in every high school, college, and workplace from California to Connecticut. The short and long term effects are discussed with tenacity and flair. The programs of the New Deal focused on what historians refer to as the "3 Rs", Relief, Recovery, and Reform: relief for those in poverty and without jobs, recovery of the nation’s economy, and reform of the financial system overall to prevent another depression. In addition to the various effects, there is also a lot of discussion regarding the overall effectiveness, strengths and weaknesses, and legacy of the New Deal.

There were five major causes to the Great Depression; the stock market crash of 1929, the failure of America’s banks, the reduction in purchasing across the board, disgruntled American economic policy with Europe, and finally, the drought conditions in the midwestern and southern parts of the United States. A large majority of the nation today believes that the stock market crash that occurred on October 29, 1929 is the sole cause of the Great Depression. Although it was a major cause, it was not alone. Several months after the initial crash in October, stockholders and Wall Street investors had lost more than $40 billion dollars. Even though the American market started to recover some of its losses, by the end of the year 1930, it was not enough to bring us out of the hole and America entered into what is known as the Great Depression. During the first few years of the 1930’s a little over 9,000 banks had failed completely. Deposits into many of America’s banks were not protected and did not have insurance and, ultimately as the banks failed, people lost their entire savings. The banks that were able to survive had become unsure of the economic state of America and grew worried about their existence as a bank.  In addition, many banks were no longer willing to establish or create new loans for individuals. This aggravated the situation which lead to less payouts and less expenditures. Now that the stock market had crashed, people had fears of more deeper economic adversity, so they stopped purchasing items. The free market had now come to a halt. The number of items produced would now reduce and this resulted in a reduction of the American workforce. As Americans lost their jobs, they were unable to remain on track with their payment installment plans for items they purchased. At 25%, the unemployment rate was a testament to the end of consumer spending all over the nation, alleviating the situation in America’s economy. As businesses began to fail, the government enacted in 1930 what was called the Smoot-Hawley Tariff to help guard and take care of companies in America . This act implemented a high tariff for imports from America’s trade partners, ultimately causing less trade between American and other nations. This would lead to some retaliation, economically speaking. In addition, the droughts that spread throughout the Mississippi Valley in 1930 were causing people to close down or sell their farms. Farmers and ranchers were unable to pay taxes and had very little to no profit of their own. This would be known as the “Dust Bowl,” spreading across the borders of Texas, Oklahoma, Kansas, New Mexico, Colorado, and Nebraska. All of these aspects, negative in their own way, would lead to the Great Depression in the United States of America. Citizens would be rocked to their core and feel the pain of the economic crisis, it would be a long time until the country would turn around and head on another course.

From the very beginning, President Roosevelt had the incredible burden of skyrocketing unemployment and the nationwide economic crisis. In his inaugural address he reassured the American people that he was the captain of their ship and he was not going to let it sink. He rallied the nation with a unifying message that no one should be afraid of any obstacle in front of them. In addition to that, he asked the American people if they would put their trust in him and allow him to lead them the way he wanted to.

“The only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance...I am convinced that you will again give that support to leadership in these critical days.”

The day after his inauguration on Sunday March 5, 1933, President Roosevelt “issued two proclamations, one calling Congress into a special session on March 9, the other invoking the Trading with the Enemy Act to halt all transactions in gold and declare a four-day national banking holiday.” Although a hectic week for the new President and his administration, they knew what they had divulged in and were ready to take the bull by the horns. On March 9th he would sign the Emergency Banking Relief Act, “the banking bill, together with the pending securities and mortgage legislation, would stanch the bleeding from the nation’s financial system.” Soon after his first major programs and laws were put into place, Roosevelt would unveil what would be called “The New Deal.” The first New Deal in 1933 included a total of 14 new programs all aimed at reviving the American market, government, and society out of the Great Depression. Some major programs were the Civilian Conservation Corps, the Public Works Administration, and the National Recovery Administration (NRA). The NRA in particular grew support and criticism from a variety of individuals across the nation.

“For much of 1933 and 1934, however, both monetary and agricultural policy were overshadowed by the aggressively publicised endeavors of another agency: the National Recovery Administration. Though it was created virtually as an afterthought on the one hundredth day of the special congressional session that ended on June 16, 1933, the NRA almost instantly emerged as the signature New Deal creation.”

Some members of Roosevelt’s administration felt that the NRA had overpowered the New Deal and that it was doing too much. Frances Perkins, FDR’s Labor Secretary, observed that “the New Deal and the NRA were almost the same thing.” Others like Harry Hopkins, one of FDR’s closest advisers, believed that the nation “would soon witness the fullest triumph of the New Deal’s reform agenda.” Although over a dozen programs would be implemented in the first New Deal by the end of 1934, many of them fell short of their goal and FDR’s vision was slowly slipping into an abyss.

In many ways the New Deal had failed in its objectives. Roosevelt did not fully understand the causes of the Great Depression. A doctor who does not see any correct symptoms cannot write a prescription for the right medicine. Similarly, Roosevelt only wrote the New Deal a prescription to cure the U.S. economy from the Great Depression, not for the other causes. Roosevelt argued that the government was not blame and that capitalism was the problem. He advocated for the idea that it was created by bad investments and market manipulations by wealthy individuals. In addition to that, to make matters worse, the NRA fixed prices which ultimately damaged businesses in America. Although Americans had access to cheaper products in price, they were poorly made and not very well constructed. The NRA believed, without justification, that the consumer industry was motionless and that is was not going to change, therefore it fixed prices. When prices were fixed, companies on the smaller scale were unable to compete with larger companies because those smaller ones had to raise their market prices. Eventually, they lost their standing in the competitive market, causing them to close their doors. The New Deal ultimately did not work because FDR created uncertainty by protecting huge government regulations and rapidly raising taxes and tariffs. With the raising of taxes, many businesses were discouraged to expand. At the end of the first New Deal, the top tax rate was at 79%, the national debt had doubled completely, and the Federal budget was totally imbalanced. The New Deal did in fact benefit many Americans, however, it was not successful overall. Its greatest weaknesses were that during the roll out of it, unemployment dramatically rose, the United States did not initially recover its trade partners, African Americans gained very little from the New Deal, and FDR was unsuccessful in attempting to convince his supporters of the urgency to stop the Supreme Court from opposing his reforms. There were only three major strengths or successes of the New Deal; the New Deal prevented a radical takeover of the government unlike Russia or other Eastern states, millions of jobs were created over time, and crucial relief like food, shelter, and clothing was supplied to the poor, and finally, the agriculture industry benefited from productive and effective infrastructure.

Although the New Deal did not have any major immediate change or effect on the nation in terms of economics or social culture, it did have a huge impact on the way Americans today perceive government’s role and responsibilities. The rollout of the New Deal resulted in the balance of power between the Executive and Legislative branches shifted with the President gaining a notable amount of power. The debate today over the New Deal is no longer just about economics, it is about politics and ideology. Republicans refer to the New Deal as a combination of socialistic programs and overbearing government reach. Democrats consider the New Deal their crowning achievement and the stepping major point to building the new modern Progressive Democratic party. The first New Deal was a major setback for the America economy; stagnation, high unemployment continued, and cheaper products were sold. However, by the end of the second New Deal in 1938, 3.5 million jobs had been created and the pathway to economic sustainability was looking moderately strong. In terms of American society and the legacy of the New Deal, it goes hand in hand with New Deal Liberalism and the modern progressive democratic party. The party would remain controversial and important during the next few decades. The concept of a strong executive branch, created by FDR and the New Deal, would come into play 35 years later when President Lyndon Johnson expanded and created many new government programs in what was called “the great society.” Critics of the New Deal have come in all shapes in sizes; attacking FDR on his politics, economics, and personal beliefs. Robert Higgs, the American economist and historian from Johns Hopkins University in Baltimore wrote an essay entitled FDR: Opportunistic Architect of Big Government. In this essay he critiques and attacks FDR’s politics and considers him a “political opportunist.”

“He was not a man to deal in fundamentals...The positions he took on political and economic questions were not taken in accordance with deeply rooted political beliefs but under the influence of political necessity...He was in every sense purely an opportunist.” (Higgs 219)

Finally, the effects of the New Deal come in both short and long term scales. Because of the New Deal, there are many programs still around today; most notably, the Social Security Administration enables people to retire with pensions. Created by the Wagner Act, the National Relations Board still monitors labor union disputes in the American workplace. In addition, the Federal Depository Insurance Corporation protects deposits up to $100,000. In addition to the programs, the fireside chats on national radio President Roosevelt used to tell the American people about the New Deal, would make politicians over the next few decades utilize radio to their advantage. And finally, again, the ongoing political debate about radical socialism in America, New Deal Liberalism and modern conservatism, all dates back to 1933. In conclusion, although the New Deal did not end the Great Depression completely, many of its programs including the Farm Credit Act, NIRA, Civil Works Administration, did, in short term, reduce the severity and enormity of it from the very beginning. Most importantly, above all else, FDR motivated people in America to get back on their feet and find something to do. He gave them a call to action and told them that it is time for America to get back to work.

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