Whether the New Deal Led to the Road to Recovery or Not

Did the New Deal Lead to the Road to Recovery?

Approximately 75 years ago, President Franklin D. Roosevelt created and implemented the “New Deal” in an effort to jump-start the economic recovery after the devastating effects of the Great Depression. Major public works projects were designed to remove people from the unemployment rolls, and social programs were started that supported the elderly and the poor. In spite of the apparent improvements that resulted, the New Deal did not end the depression, nor did it help the average worker. In reality, the government sent troops to break up striking workers, and some union leaders were imprisoned. The unemployment rate remained quite high, and the only ones able to claim any profits were the larger corporations. In fact, after June of 1937, President Roosevelt eliminated many public works projects as well as numerous government jobs. This caused the economy to tumble quicker than in the economic crash of 1929. Finally, with the onset of World War II, the government began pouring significant money into wartime production, and the economy rebounded. The “New Deal” that should have created and sustained a stronger economy actually caused more hardship than anyone could ever have imagined.
America was struggling to find its way through economic recovery after the stock market crashed in 1929. Under the presidential reign of Herbert Hoover, the “bottom had dropped out of the stock market and industrial production had been cut more than half,…steel plants were operating at a sickening 12 percent of capacity,…and unemployment numbered upward of thirteen million. Many lived in the primitive conditions of a preindustrial society stricken by famine.” (Leuchtenburg 1) Families across the country were struggling simply to survive. Whether they were forced to live in tents or makeshift shantytowns, cook without electricity, or wander from town to town looking for any kind of work, Americans were in a crisis.
America’s hope was stirred when the governor of New York, Franklin D. Roosevelt ran as the democratic candidate in 1932. While he was governor, he “created the first comprehensive system of unemployment relief, sponsored an extensive program for industrial welfare, and won western progressives by expanding the work Al Smith had begun in conservation and public power.” (Leuchtenburg 4) Roosevelt appealed to the “forgotten man at the bottom of the economic pyramid.” (Leuchtenburg 4) After a long and bitter battle to win the presidential nomination, Roosevelt told those in attendance at the democratic convention that he intended to move away from the candidates who were out of touch with the citizens. Rather, he thanked them for the nomination, and stated that it signified a new way of doing things. He wanted to set the government on to a new path. Roosevelt told the convention, “Let it be from now on the task of our Party to break foolish traditions…I pledge you, I pledge myself to a new deal for the American people.” (Leuchtenburg 8) Roosevelt had committed himself to improve the lives of all Americans, but not all people had confidence in his abilities.
Roosevelt believed that constant communication with the American people was paramount to an economic turn-around. Eight days after his inauguration, he gave his first fireside chat, which was a more informal conversation. These chats “achieved a bond of sympathetic understanding and reassurance between the president and his people.” (Hamby 124) His effort to gain the trust of the Americans was highly successful. In his first and most successful fireside chat, he reassured the American people that “we have provided the machinery to restore our financial system, and it is up to you to support and make it work…Together we cannot fail.” (Hamby 124-125) One of Roosevelt’s first efforts was to shut down all of the country’s banks, declaring a “banking holiday” and “halted all transactions in gold.” (Leuchtenburg 42) Congress passed the “Emergency Banking Act” which allowed the federal government to inspect the economic health of all banks. On March 13, 1933, only the “sound banks in Federal Reserve cities went back into business…followed by banks in all cities with clearinghouses.” (Hamby 125)
The result of his attempt to gain the confidence of the Americans was highly successful. “The market reopened to heavy trading volume and record percentage gains.” (Hamby 125) This set the scene for the many new programs and initiatives that Roosevelt would implement during the first several months of his presidency, all of which would become known as the “New Deal.”
The Emergency Banking Act was only the first of many sweeping changes that occurred during the special session of Congress that lasted 100 days. “It had produced an outpouring of legislation unprecedented in American history.” (Hamby 129) All of these programs were driven by Roosevelt’s economic philosophy. He believed that the “private enterprise-private profit economy should not be abolished, but retained. However, its operations were not always benevolent and did not always promote the general welfare.” (Fusfeld 251) Roosevelt followed the beliefs of the Hudson River gentry: “Less fortunate members of the community should be helped by the more fortunate;…Society owed a debt to those who suffered economic misfortunes; provision should be made for those persons as a duty of society and as a right of the individual, rather than as charity.” (Fusfeld 251)
Roosevelt stood on the belief that people needed to work and not simply be given charity. With this in mind, he created the Civil Works Administration (CWA), which became a public works program that employed numerous people across the country who were out of work. The CWA was in charge of building or repairing roads, repairing parks, as well as building schools and airports. However, critics decried “leaf raking and other ephemeral enterprises as unproductive and ultimately as demoralizing to workers at the dole.” (Hamby 148) In spite of what the critics thought, “One-half a million miles of secondary roads, 40,000 schools, and 1,000 small airports, along with other lasting works were built.” (Hamby 148) It provided workers with a much-needed psychological and physical boost.
Another program that Roosevelt implemented was the Civilian Conservation Corps (CCC), which reflected his belief of the importance of maintaining and improving the environment. This program was designed to maintain and restore forests, beaches, and parks. The government employed “primarily young men leaving high school and provided money, discipline and initiation into the world of work.” (Hamby 148) These men were paid a minimal wage while receiving free room, board, and job training. This program was later expanded to included women. The ultimate goal was to produce citizens who could live independently, which would also improve their self-esteem.
Roosevelt also believed in the important role that private industry played in the economic survival of the country. In an effort to improve working conditions and wages, as well as the stability of trade associations and industries, the National Industrial Recovery Act (NIRA) was established. Declining prices were given a boost, which in turn helped both the workers and the businesses. The NIRA established the National Recovery Administration (NRA) in order to “oversee industry-by-industry self-regulation through the adoption of codes of fair competition that would stabilize prices while providing collective bargaining, better wages, and improved working conditions for labor.” (Hamby 129) The thought process behind the NRA was that workers would be united, working conditions would improve, and industry, as a whole, would benefit.
The Public Works Association (PWA) was formed as a part of the NIRA. This was responsible for projects such as the Grand Coulee Dam on the Columbia River. “The biggest immediate beneficiary of the PWA was the U.S. Navy, which had plans ready for new warships (and a sympathetic president).” (Hamby 162)
In an effort to regulate the stock market, Roosevelt implemented the Federal Securities Act (FSA), which was the “first significant regulation of the stock and bond markets, requiring full disclosure of relevant information to investors and the registration of new issues with the government.” (Hamby 127-128) People buying stocks were now to be provided with all pertinent information. After the FSA, the Securities and Exchange Commission was formed in order to regulate the stock market. This move was critical for the success for businesses over time.
A major problem facing people in the 1930’s was the fact that they were losing their homes. In an effort to help keep people in their homes, Roosevelt introduced the Home Owners Loan Corporation, which helped middle-income homeowners by offering them refinancing of their existing mortgages. This agency had more power than the Home Owners Refinancing Act, which was put in place during the Hoover administration.
The Tennessee Valley Authority (TVA) Act was implemented to create jobs and help farmers in poorer areas of the South. Some of its goals included “wide-ranging flood control programs, generating and selling electricity, and producing nitrogen-based fertilizers.” (Hamby 127) These efforts resulted in the creation of numerous jobs, the reactivating hydroelectric power plants, which helped maintain lower electricity costs, and opened up more recreational areas in the Tennessee River Valley.
While Roosevelt was governor of New York, he wanted to create a system of interdependence between the industries in the cities and the agricultural communities. This interdependence would guarantee that one would benefit from the other. As part of his New Deal, he established the Agriculture Adjustment Administration (AAA). Farmers were really suffering because of the declining prices of their products. So the AAA paid farmers to either not grow certain crops, or to destroy a percentage of their crops or animals. The thinking behind this was that a decrease in the production would raise the prices of what was available. This would provide farmers with more income to keep their farms operational.
One of the most far-reaching policies that Roosevelt implemented was the Social Security Act, in which a program providing for old-age insurance and was fashioned after the system used by the British. It called for “old age and survivor’s annuities funded by compulsory payroll deductions, (of which) one-half of one percent paid by employee and one-half of one percent paid by employer on the first $3,000 of earnings, provided retirees over the age of 65 payments of $10 to $85 a month, that, after the accumulation of a substantial reserve fund, would begin in 1942.”(Hamby 273) Benefits would also include payments for persons injured in industrial accidents, payments to dependent mothers with children, and people with physical disabilities. Roosevelt called this act “the cornerstone in a structure that is being built but is by no means complete…a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness.” (Hamby 274) Even though adding a tax to people while the economy was still struggling to recover would not be the wisest economic move, Roosevelt was confident that people would understand that the benefits would be long-term. “The use of the word ‘insurance’ and the reliance on worker contributions gave political protection to a system the president and a host of New Dealers desperately wanted to institutionalize as a permanent aspect of American like, even if it got in the way of economic recovery.” (Hamby 274)
Roosevelt had created and implemented these programs in an effort to gain the confidence of Americans and to move people toward economic recovery, but not everyone believed that his actions were the best for the country. For example, while the PWA and the TVA focused on creating many jobs, these jobs did not develop immediately. In fact, it took months to complete the hiring process. It was a very slow process to create the number of promised jobs.
Another criticism was the fact that in order to keep the projects within the budget, materials and workmanship was of a poor quality. In addition, certain projects were denied because they were considered too expensive. In one case, a schoolhouse in Palermo, North Dakota, had burned down, and the residents requested that the Works Progress Administration (WPA) build a new one. The WPA responded with an offer to “develop a golf course and a bird sanctuary.” (Hamby 277)
Creating projects simply for the sake of providing jobs was not the same as placing Americans in meaningful jobs. In fact, many jobs were short-lived. As soon as projects were finished, these jobs were no longer needed, so people were once again unemployed. Some workers were learning skills that could keep them gainfully employed. However, many were just doing “ditch diggers” jobs that provided temporary income. While Roosevelt’s goal was for people to learn how to live independently, many never realized this dream.
There were also some significant problems with the NIRA. With a minimum wage in place, and newly established codes for workplace safety, prices for goods had to increase. As prices rose higher, people stopped purchases things. This resulted in a cycle of higher production and lower sales, which caused businesses to begin experiencing an economic slump all over again. Even though working conditions needed to improve so that worker safety could be ensured, the higher costs proved to be too much for some businesses to survive. As businesses closed, people were once again unemployed.
One program that resulted in a huge outcry from the public was the AAA, which allowed farmers to destroy crops and purposefully reduce the amount of their productions. It was unbelievable that this type of waste was occurring while there were still people around the country literally starving to death. Many believed that the federal government could create a better program that would provide food for the poor while supporting farmers. The AAA was eventually declared unconstitutional.
By 1939, the country had seen the beginnings of economic growth slowly decrease. Many of the programs created by Roosevelt no longer existed and people were once again unemployed. In fact, the economy took an even harder fall than that of the Stock Market Crash in 1929. “The more successful the New Deal was, the more it undid itself. The more prosperous the country became, the more people returned to the only values they knew, those associated with an individualistic, success-oriented society.” (Leuchtenburg 273) People no longer felt any compassion for their neighbors who may have fallen on bad times. The number of unemployed became a burden. Economic recovery seemed to be an impossible task for the president and for the country.
Roosevelt effectively moved the country towards a more humane way of thinking. The country had an improved infrastructure: national parks, improved roads, new schools and airports. Industry had new codes and regulations, minimum wages were set, and the government played a more active role in everyone’s lives. However, the New Deal did not solve everything. In fact, it even presented some new, more complicated problems. Unemployment never really diminished. Almost six million people remained without work. It was not until the onset of World War II that the unemployment rate dramatically decreased. The Roosevelt administration found it necessary to shift its focus from domestic programs to wartime production. As America’s involvement in WWII increased, more people became gainfully employed than ever before. This resulted in a stronger economy.
The presidential administration had delivered many benefits to the American people but had not ended the Depression. “For many Americans, it was more like a phenomenon of nature than a mechanical problem subject to quick repair—say, a smallpox epidemic rather than a blown automobile engine. As the New Deal busied itself addressing the symptoms with displays of concern and activity that exceeded those of the Hoover administration, the people responded with support. Others imagined that the Depression had been caused by the actions of bad people…The national scene presented many scapegoats…Roosevelt and the New Deal prosecuted some and denounced others with gusto…” (Hamby 417-418) Throwing money at a problem doesn’t solve it if you don’t change the behaviors that created the problem in the first place. Judging by our recent history, it does not seem like we have learned from our mistakes.

Works Cited
Fusfeld, Daniel Roland. The economic thought of Franklin D. Roosevelt and the origins of the New Deal. New York: Columbia University Press, 1956.
Hamby, Alonzo L. For the survival of democracy : Franklin Roosevelt and the world crisis of the 1930s. New York: Free Press, 2004.
Leuchtenburg, William Edward. Franklin D. Roosevelt and the New Deal, 1932-1940. New York: Harper & Row, 1963.
Olson, James Stuart. Historical dictionary of the 1920s: from World War 1 to the New Deal. New York: Greenwood Press, 1988.

Cited: Fusfeld, Daniel Roland. The economic thought of Franklin D. Roosevelt and the origins of the New Deal. New York: Columbia University Press, 1956. Hamby, Alonzo L. For the survival of democracy : Franklin Roosevelt and the world crisis of the 1930s. New York: Free Press, 2004. Leuchtenburg, William Edward. Franklin D. Roosevelt and the New Deal, 1932-1940. New York: Harper & Row, 1963. Olson, James Stuart. Historical dictionary of the 1920s: from World War 1 to the New Deal. New York: Greenwood Press, 1988.