The Philosophy Behind the New Deal - Term Paper Example

The New Deal was the government’s response to the exigencies brought about by a collapsed stock market that started on October 29, 1929, and made worse by panic selling in stock prices that were pushed down further by opportunistic traders who used short selling. The net effect was that a lot of people saw their savings and investments wiped out resulting in massive losses in wealth; many people lost their jobs as well. Other negative effects were a very high unemployment rate conservatively estimated at 25% of the total workforce and big asset deflation cycles resulting in a worldwide economic depression not seen in history. 

The Driving Ideas – ideas behind the New Deal program of the FDR administration was contained in the so-called three R’s, namely: immediate relief for the millions of people who were thrown out of their jobs and their homes, recovery for the economy in the shortest time possible by stimulus spending (like what Pres. Barack Obama did just two years ago) and reforms for the entire banking, financial and economic systems of the United States of America. It paved the way for a strong reason and justification for government intervention.

The New Deal of FDR actually consisted of two parts – the first part was during 1933 for relief and recovery efforts while the second part was between 1934 and 1937 for purposes of reforming major aspects or industry segments of the economy such as railroads, banking, industrial manufacturing, and the farming sector. Two centerpiece programs were:

Agricultural Adjustment Administration (AAA) – passed into law on May 12, 1933, this was the administration’s chosen response to help revive the faltering economy by asking farmers not to plant certain crops to prevent a surplus that was driving down farm price; they were also requested to kill off excess livestock. It was in effect the first modern farm bill that authorized the payment of farm subsidies and the AAA was the main agency tasked to orderly distribute these subsidies as compensation for the farmers (Bowman 97).  

Public Works Administration (PWA) – this was the agency tasked to revive the weak economy through a vigorous Federal spending program. The idea was to provide useful jobs for the millions of unemployed with the intention of eventually reviving the economy in the process. An example of a massive public works project spending program was the creation of the Tennessee Valley Authority (TVA) as a regional economic development agency. Further, it helped to finally finish the huge Hoover Dam at Boulder City (near Las Vegas in Nevada) and it also provided a good number of well-paying construction jobs for low-skilled workers. It was signed into law on June 6, 1933, and was responsible for building thousands of miles of roads, numerous airports, sewage disposal plants, and thousands of public school buildings.

Conclusion

The intent of the New Deal programs was to prevent a repetition of the depression (Milkis & Mileur 313) but historians generally agree FDR failed in this aspect because of the wrong response of the Federal government by raising interest rates instead of lowering them. However, a number of successful programs are retained even today such as a Social Security System, food stamps, minimum wage laws, maximum working hours (through Fair Labor Standards Act), and a bloated budget because of welfare capitalism using safety nets. The political agenda was to rein in and control big business interests to prevent abuses such as that seen in Wall Street today (the “too big to fail” concept that necessitates government bailouts and is used as justification for financial aid). The New Deal went beyond the original economic reforms agenda and helped to push through controversial political reforms as well as people were a bit more receptive at the time for changes to occur; the economy was reformed as well in order to break up monopolies and business trusts. Governmental activism was by interventions in the market such as imposing price controls and granting subsidies to certain industries. The perception was that the government tended towards socialism by adopting liberal reforms for the sake of economic recoveries like regulating private enterprise and unbridled individualism. Economic reforms were soon extended to political and social equity initiatives that gave birth to the Civil Rights Movement and various affirmative action programs (Patterson 562).