The New Deal
During the 1930's, America witnessed a breakdown of the
Democratic and free enterprise system as the US fell into
the worst depression in history. The economic depression
that beset the United States and other countries was unique
in its severity and its consequences. At the depth of the
depression, in 1933, one American worker in every four was
out of a job. The great industrial slump continued
throughout the 1930's, shaking the foundations of Western
capitalism.
The New Deal describes the program of US president
Franklin D. Roosevelt from 1933 to 1939 of relief, recovery,
and reform. These new policies aimed to solve the economic
problems created by the depression of the 1930's. When
Roosevelt was nominated, he said, "I pledge you, I pledge
myself, to a new deal for the American people." The New Deal
included federal action of unprecedented scope to
stimulate industrial recovery, assist victims of the
Depression, guarantee minimum living standards, and prevent
future economic crises. Many economic, political, and
social factors lead up to the New Deal. Staggering
statistics, like a 25% unemployment rate, and the fact that
20% of NYC school children were under weight and
malnourished, made it clear immediate action was necessary.
In the first two years, the New Deal was concerned mainly
with relief, setting up shelters and soup kitchens to feed
the millions of unemployed.
However as time progressed, the focus shifted towards
recovery. In order to accomplish this monumental task,
several agencies were created. The National Recovery
Administration (NRA) was the keystone of the early new deal
program launched by Roosevelt. It was created in June 1933
under the terms of the National Industrial Recovery Act.
The NRA permitted businesses to draft "codes of fair
competition," with presidential approval, that regulated
prices, wages, working conditions, and credit terms.
Businesses that complied with the codes were exempted from
antitrust laws, and workers were given the right to organize
unions and bargain collectively. After that, the government
set up long-range goals which included permanent recovery,
and a reform of current abuses. Particularly those that
produced the boom-or-bust catastrophe. The NRA gave the
President power to regulate interstate commerce. This power
was originally given to Congress. While the NRA was
effective, it was bringing America closer to socialism by
giving the President unconstitutional powers.
In May 1935 the US Supreme Court, in Schechter Poultry
Corporation V. United States, unanimously declared the NRA
unconstitutional on the grounds that the code-drafting
process was unconstitutional. Another New Deal measure under
Title II of the National Industrial Recovery Act of June
1933, the Public Works Administration (PWA), was designed to
stimulate US industrial recovery by pumping federal funds
into large-scale construction projects. The head of the PWA
exercised extreme caution in allocating funds, and this did
not stimulate the rapid revival of US industry that New
Dealers had hoped for. The PWA spent $6 billion enabling
building contractors to employ approximately 650,000 workers
who might otherwise have been jobless. The PWA built
everything from schools and libraries to roads and highways.
The agency also financed the construction of cruisers,
aircraft carriers, and destroyers for the navy.
In addition, the New Deal program founded the Works
Projects Administration in 1939. It was the most important
New Deal work-relief agency. The WPA developed relief
programs to preserve peoples skills and self-respect by
providing useful work during a period of massive
unemployment. From 1935 to 1943 the WPA provided
approximately 8 million jobs at a cost of more than $11
billion. This funded the construction of thousands of
public buildings and facilities. In addition, the WPA
sponsored the Federal Theater Project, Federal Art
Project, and Federal Writers' Project providing work for
people in the arts. In 1943, after the onset of wartime
prosperity, Roosevelt terminated the WPA. One of the most
well known, The Social Security Act, created a system of
old-age pensions and unemployment insurance, which is still
around today. Social security consists of public programs to
protect workers and their families from income losses
associated with old age, illness, unemployment, or death.
The Fair Labor Standards Act (1938) established a federal
Minimum Wage and maximum-hours policy. The minimum wage, 25
cents per hour, applied to many workers engaged in
interstate commerce. The law was intended to prevent
competitive wage cutting by employers during the Depression.
After the law was passed, wages began to rise as the economy
turned to war production. Wages and prices continued to
rise, and the original minimum wage ceased to be relevant.
However, this new law still excluded millions of working
people, as did social security. However, a severe recession
led many people to turn against New Deal policies. In
addition, World War II erupted in September 1939. Causing an
enormous growth in the economy as war goods were once again
in great demand. No major New Deal legislation was enacted
after 1938.
The Depression was a devastating event in America, and
by regulating banks and the stock market the New Deal
eliminated the dubious financial practices that had helped
precipitate the Great Depression. However, Roosevelt's chief
fiscal tool, deficit spending, proved to be ineffective
in averting downturns in the economy.