Why The New Deal Was Significant to America

It is hard to imagine an America without major social programs such as social security or the SEC for example, but for Americans before the 1930s this was their harsh reality. After the stock market crash of 1929, America fell into the worst economic depression in the history of the nation, affecting the entire world. President Hoover who had won his election in a landslide was suddenly caught in a situation he was not prepared to confront. His efforts were perceived as weak and inadequate. He did not make enough of an effort to fix the catastrophic problem which caused a massive realignment in American politics. A nation that was once united to the Republican Party was immediately outraged with Hoover, and subsequently voted him out of office in the following election. His opponent was the beloved Franklin Delano Roosevelt who won by a massive 472 electoral votes surpassing Hoover’s 444 votes the previous election. FDR famously instilled hope in the American people in his inaugural address by saying that “The only thing we have to fear is fear itself.” His plan began as soon as he got elected, organizing a group of elites known as the brain trust to devise policies that would end the depression. These policies would later be known as the new deal. Over the course of his presidency, FDR fundamentally changed the relationship between the American people and their government. Before the new deal, the vast majority of Americans didn’t expect the government to assist them in times of need or economic distress. However, after Roosevelt’s term, the narrative had shifted. No longer did Americans wonder if their government was going to intervene, instead they wondered how.

One of the primary reasons President Roosevelt appealed to the vast majority of the American public was because he promised to do something to end the economic crisis the country was facing. Unlike Hoover who believed the government should refrain from getting too involved. Many historians like to divide FDR’s policies into three categories known as the three R’s, Relief, Reform, and Recovery. First, he hoped to provide relief to the poor and the unemployed. During the depression, no one was hit harder than farmers, and the poor. To put things in perspective, people would go to their local banks and find that their entire life savings had vanished from one day to another. “When President Roosevelt wheeled into the Oval Office on 5 March 1933 the economic crisis was at its most terrifying. The number of people officially unemployed now stood at a quarter of the workforce, and in many cities the proportion was far higher.” Second, he wanted to recover the American economy to its pre depression status. America was going through the roaring twenties, a period of time in which America saw great economic wealth following the First World War, only to be abruptly halted by the great depression. Finally, he hoped to reform the financial systems to reduce the risk of another economic catastrophe from happening again. To accomplish these goals Roosevelt implemented a series of programs known as the new deal. The new deal is typically broken into the first new deal and the second. In his first hundred days in office from March to June of 1933, Roosevelt did most of his heaviest work getting these programs approved by congress or sometimes even passing them via an executive order. “After Franklin D. Roosevelt became president in March 1933, he guided a flurry of major new Depression-fighting laws and policies through Congress. Many of these policies and programs were implemented during his first one hundred days in office, and they addressed a wide range of problems facing the American people.” The first new deal, which was implemented between 1933 and 1934, was mostly concerned with changing the structure of the nation’s economy and offering relief to the banking industry. The second new deal which was implemented from 1935 to 1938 sought to improve the nation’s use of resources, provide relief for farmers, and create various work programs. “In the spring of 1935 President Franklin D. Roosevelt launched an ambitious new set of federal programs and initiatives to restore the United States to good economic health. Since his first round of reforms were widely known as the New Deal, his 1935 proposals came to be termed the Second New Deal.”

The first step Roosevelt took was the bank holiday. Where he closed all the banks and only allowed the strong, and secure banks to re-open. ”The Roosevelt administration addressed the crisis immediately by declaring a bank holiday, allowing only secure banks to reopen and offering aid to others.” This ensured that the weaker banks which were in greater danger of losing their clients’ money would have a better chance of survival. Following the bank holiday, Roosevelt began implementing programs of relief to the poor and needy who desperately needed help. Programs such as the works progress administration (WPA), the civilian conservation core (CCC), and the Tennessee Valley Authority (TVA) designed to put unemployed people to work. The CCC, for example, specifically targeted unemployment in the cities, and created jobs for the youth to occupy. It would take 18-25 year olds and sent them to rural areas where they would clean beaches and clean the environment. Thus, in Roosevelt’s eyes, creating a chain reaction of mutual benefits. The money would get sent to the parents who would then use it to inject back into the economy, and the environment would also get cleaner. Meanwhile, the Tennessee Valley Authority (TVA) allocated much needed electricity to rural areas in the south. The social security act was designed to give financial aid to the elderly when they were retired and could no longer contribute to the work force. The federal deposit insurance corporation (FDIC) was another important agency created by the new deal. The FDIC was designed to instill confidence in the American people in their banks. It guarantees the safety of your money in a bank account if anything were to happen to the bank. The FDIC is still in operation today to insure bank accounts of $5,000 or more. Much like the FDIC, there are many government agencies that were created by the new deal that still exist today. Agencies such as the federal housing administration (FHA), which provides mortgage insurance on loans. The federal crop insurance corporation (FCIC) which protects farmers from losing their crops to natural disasters, and the security exchange commission (SEC) which acts like a referee for the stock market. Not everyone was a fan of Roosevelt’s new deal however. Many felt that Roosevelt was taking the country down a path of socialism. Other say that the new deal actually prolonged the great depression.

No matter your opinion on Roosevelt’s answer to the great depression, the fact of the matter is that Roosevelt realigned the Democratic Party and created a dependence for the national government that was not seen before. He created these safety nets that people needed after the free market had failed to police itself, and left the American people desperate and hungry. Although Roosevelt created policies that are still in effect today, and set to end the great depression, he failed to accomplish his original intention of ending the depression. By 1940, over 15% of Americans remained unemployed, which was still a vast improvement over the 25% he inherited in 1932. In the end, what brought the great depression to its end according to many economists was the massive spending effort during the Second World War. So, if Roosevelt failed to end the great depression, why was it so significant? The new deal was significant because it fundamentally changed the overall dynamic in the economy of the country, and its relationship to its citizens. It turned the government into an institution that directly impacted American’s daily lives by taking their economic welfare under consideration. Americans no longer had to worry about things like retirement, or people cheating the stock market. In short it changed the expectations we have for our government. Before the great depression, Americans did not expect the government to step in and help during times of need. After the great depression, when things go wrong in our economy, we expect the government to intervene. A great example would be the subprime mortgage crisis of 2008. Americans immediately looked to the government to do something about it. We can try to imagine an America without the policies of the new deal. What would this version of America look like? Without regulations or safety nets, it is safe to assume we would be susceptible to fall into another great depression. “It would be a fight for economic survival with no coordinated effort at recovery.”