The New Deal as a Success - Essay Example

The New Deal as a Success Introduction Economic downturn can be detrimental to the growth and development of a nation. On October 29, 1929, the Great Depression commenced. The American stock-market that had been on a steady increase for about ten years crashed. This plunged the U.S into its lowest economic downturn with the money supply in the nation reducing and banks failed. Most firms went bankrupt and started to fire their employees in masses. In the meantime, President Herbert Hoover administration was of the belief that the crisis was just a passing incident and it was not the duty of the federal government to resolve the crisis. By 1932, an estimated one-quarter of the American labor force was unemployed. In 1933, when President Franklin Delano Roosevelt took over office the rate of unemployment had increased from 4 percent to 25% between 1929 and 1932 and inflation was at an all-time high. The effects of the great depression resulted in the New Deal for the American people. President Roosevelt came up with various projects and policies that were collectively aimed at addressing the economic downturn both in the short-run and long-term. They comprised of laws passed by the Congress along with presidential executive orders. To that effect, the paper will discuss how the New Deal was successful in addressing the various problems that led to the Great Depression. Discussion President Roosevelt initiated an unprecedented number of reforms that were aimed at addressing the deleterious effects of the Great depression. The programs were to be a success because Roosevelt engaged university scholars and liberal theorists for the best course of action. The New Deal was based on “relief, recovery, and reform” (Venn 23): relief on the millions of American populace affected by poverty and unemployment, recovery of the economic and social infrastructure; reform of the laws on social security, labor relations, and minimum wage, and protect the rights of the ordinary people to increase employment and speed up economic recovery. The New Deal came in two different successions. The first New Deal was between 1933 and 1934 while the second New Deal was between 1935 and 1938. By spending public money on a bigger scale, the New Deal was aimed at getting Americans back to work, protecting their property and savings, providing relief for the sick and unemployed, and getting the American industries back on their feet. Most of these programs were a success. The first act of President Roosevelt was the declaration of the four-day bank. It worked since people were prevented from withdrawing money. This was reinforced by the Emergency Banking Bill of 1933 that was passed by the Congress on March 9, 1933. The Act addressed the banks’ failure and protected the people’s savings. More to the point, the statute reorganized banks in addition to closing those that were insolvent. By the end of the month, about three quarters of them had reopened. The people were confident that they had elected someone who was bold enough to tackle the Great Depression. It worked because most of the banks were saved. The rest were promised government’s backing in order for the nation to regain confidence. Roosevelt rescued the banking system from collapse. Second, in the following 100 days, Roosevelt and his advisors together with the Congress created policies in trying to cope with the effects of the economic downturn by reducing rate of unemployment. Most opponents of the New Deal used the unemployment statistics to point out that the New Deal did not work. In 1933, about 13 million people were unemployed. To alleviate this problem of unemployment, various agencies were created, including Civilian Conservation Corps (CCC), Public Works Administration (PWA), and Federal Emergency Relief Administration (FERA). In the first place, the PWA used unemployed skilled persons on large scale public construction projects, such as roads, hospitals, and dams. Secondly, the FERA gave money to both local and state governments to assist them provide relief for the unemployed. This is considered as an emergency measure. Lastly, the CCC provided work for the unemployed individuals, especially young people on various environmental projects. Men under the age of 25, about 3 million of them were, given first experience of their work. This not only gave them work experience, but also gave them employment. As a result, the unemployment rate reduced. Next, the New Deal improved the lives of the America farmers that had suffered significantly during the economic downturn and did not experience economic boom during the 1920s (Hamilton 108). The Agriculture Adjustment Act (AAA) ensured that farmers were paid and destroyed the surplus produce that was holding down prices. This not only assisted in the increase the prices, but also encouraged soil conservation. The farmers were also given loans to buy equipment and gave financial support to the indebted farmers. In fact, by 1934 the income for the farmers was increasing. This shows the positive effect of the program that empowered the farmers economically. Another effective New Deal measure was the National Industrial Recovery Act. It created a code of practice for the working conditions (Winkler 3). The Act stabilized wages and working hours as detailed in the code. The Act suspended some anti-trust laws. This improved the working conditions of the American employees. It also resulted in the creation of the PWA. The PWA used skilled unemployed individuals in big infrastructure projects. Similarly, the PWA was successful in reducing rate of unemployment. The Roosevelt administration second New Deal in 1935 introduced reforms that were directed towards changing the American life permanently. The election victory of Roosevelt in 1936 showed the extent unto which the New Deal had impressed itself upon the American populace only in its four years. Roosevelt carried his election victories at both Congressional and state level. These victories gave Roosevelt the mandate to continue with his New Deal reforms. If the New Deal had failed, Roosevelt would not have been re-elected together with a Democratic Congress to work with him. Proceeding further, very many people benefited from the New Deal, especially the business community. Also, in the New Deal was the Works Progress Administration (WPA) program. Kennedy writes, “The WPA provided employment for 8.5 million people worked in projects such as the Triborough Bridge, Licoln Tunnel, San Fransisco, Overseas Highway, and LaGuardia project among others” (252). Also, the WPA gave work to the writers, artists, and musicians, as well as theater directors. The WPA created a return to the unemployed labor force, and in turn, reduced unemployment and boosted economic growth. Winkler (3) posits that the New Deal tackled the problems of structural reform. The Wagner Act that created the National Labor Relations was a significant step towards providing the workers with the right to bargain collectively. It also established fair and open elections to choose a bargain agent. By 1937, of the 4700 strikes, 3760 (80%) were settled in favor of the workers. The Act also gave the workers more voice during the economic downturn. It is important to note that through this Roosevelt provided the optimistic environment that was wanted most by the American people in the 1930s. In the U.S, there was no welfare program. Winkler (3) argues that the Social Security Act of 1935 is among the most crucial New Deal measures. It provided security for the old by coming up with a plan that self-supported the retired persons. The Act set up a national insurance scheme that provided old age pension and monetary support for the handicapped. One way of reducing inflation is by means of reducing the money supply in the economy. The Social Security taxes that came into effect in 1937 reduced the supply of money in the economy. By reducing the money supply, inflation reduced that in turn reduced the depression. The Securities Act as well as Securities and Exchange Commission came up with regulations that ensured the Wall Street Stock Market would never crash again. In fact the regulations were successful because it never crashed. Next, unable to pay mortgage, the Home Owner’s Loan Corporation (HOLC) gave low interest loans to the homeowners who struggling to afford mortgage repayments. As a result, HOLC assisted people to save their homes from foreclosure. The other successful remedy to the economic downturn is that the Roosevelt administration steered the U.S along the safe path of when economic spirits were at a record-low. The Tennessee Valley Authority Act assisted the locals and improved agriculture. The Act helped construct dams along the Tennessee River which not only controlled flooding, but also provided inexpensive hydroelectricity for the people in the region. To date the project is still useful to the nation. Even though the opponents of the New Deal argued that the American government was a novice at macroeconomic policies, the Roosevelt administration did try out a true Keynesian stimulus program. A rapid increase in the federal spending was matched by a rise in the collected taxes. As a result, the financial systems were rescued. This shows how the changes and programs of the New Deal successfully addressed the problems of the economic recession. In spite of its shortcomings, President Roosevelt and the New Deal assisted the United States to muddle through the tough times strong enough to try and address the greater risks that lay ahead as a result of the Great Depression. Fraser and Gerstle claim that “The New Deal saved the American democracy as well as the economy (75). The sweeping objectives of the New Deal preserved the free-market economy. Additionally, the various programs and policies led the creation of jobs in addition to sponsoring a range of public works projects that reached in almost county across the United States. More to the point, to demonstrate the effectiveness of President Roosevelt New Deal programs and policies, some of them are still with us today, including the Social Security System, federal agricultural subsidies, Securities, and Exchange Commission, and unemployment insurance operating under their original names. The successes of the New Deal influenced the British labor government as it tried to introduce new laws to assist the poor people in 1998. It termed it as the New Deal. It can be concluded Britain copied the New Deal because it was successful in addressing the problem of economic depression. Conclusion In summary, the New Deal stopped the economic recession from becoming worse, gave protection workers, saved the U.S from the threat of dictatorship, reduced unemployment, and redistributed wealth among the American society. Therefore, the New Deal can be considered as a success despite its shortcomings. Certainly, the New deal softened the effects of the depression of the American people. Roosevelt was the people’s hero and was elected four times. The New Deal became a model of the manner in which a democratic government is supposed to behave. Even though the comprehensive New Deal failed to attain its core objective of ending the severe economic down turn, it brought people to work thus reducing unemployment, increased economic growth, saved the banking system from collapse, saved capitalism, and restored faith in the American economic system. At the same time, it also revitalized a sense of hope in the American people. Since the successes outweigh the disbenefits, the New Deal had a lasting impact on the American politics and society. Works Cited Fraser, Steve and Gary Gerstle. The Rise and Fall of the New Deal Order, 1930-1980. Princeton: Princeton University Press, 1989. Print. Hamilton, Cravens, Great Depression: People and Perspectives, ABC-CLIO, 2009. p. 106 Kennedy, E. Freedom From Fear, New York: Routledge, 1999. p. 87. Print. Venn, Fiona. The New Deal. New York: Routledge, 2013. Print. Winkler, Allan. The New Deal: Accomplishments and failures. http://www.banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=1022a46e-33f1-4d4d-ac38-381541c0d2ff>. Web. March 31, 2009. Accessed April 20, 2015. Read More