FDR became the president of United States of America as a result of 1932 elections in which he won by a wide margin from Republican candidate Hoover. FDR got 57.7 % popular votes. In his inaugural address delivered on March 04, 1933 he said. “This great nation will endure as it has endured, will revive and prosper…….the only thing we have to fear is fear itself….”.
He believed in active government and experimentation. USA was suffering from Great Depression at the time of his election. He criticized Republicans of not handling the Depression in a better way and said, “While [Republicans] prate of economic laws, men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings.” His approach to the Great Depression changed the role of the U.S. government by increasing its power in unprecedented ways. Roosevelt gathered a “brain trust” which could advise him on various policies especially economic issues. To deal with the Great Depression, he pioneered a term “New Deal”. These were the various actions taken by FDR’s administration to deal with the depression. Some of them were for first 100 days, some of them finished around 1943 and some of them continued and still exists. All these actions were guided by three principles; Relief, Recovery and Reform. Some of the major programs under the New Deal which was also called as “alphabet soup” by its detractors are briefly explained as follows;
1. First 100 Days- First New Deal:
After taking oath, Roosevelt was quick to respond. During the first 100 days, main programs introduced were Bank Holiday, Abandonment of Gold standard, the Agricultural Adjustment Act, National Recovery Act (NRA), Public Works Administration, Federal Deposit Insurance Corporation, Tennessee Valley Authority (TVA), Civilian Conservation Corps and programs which refinanced mortgages, provided emergency relief and regulated stock market through security and exchange commission.
1.1 Bank Holiday (March 1933):
Up till 1933 more than 5000 banks were out of business. Roosevelt declared bank holiday from March 6 to March 10. Transactions were suspended except for change. FDR introduced “Emergency Banking Act” which gave President the power to reopen banks that were solvent and assist those which were not. This plan divided banks into four categories; first one included banks which were fit for reopening, second category included banks which could withdraw part of transactions, 3rd one included banks which could only accept deposits as they were on the brink of collapse, category 4 included five percent of banks totally unfit for reopening. These measures raised confidence of the nation and on first day of reopening; deposits exceeded withdrawal. Gold standard was abandoned as a result of which it did not back currency anymore. It still exists.
1.2 Agricultural Adjustment Act (AAA-1933):
The aim of this program was to raise the prices of agricultural products to benefit the farmers. For this purpose, the government paid farmers to reduce the production of seven basic commodities which included wheat, corn, cotton, tobacco, rice, hogs and milk. This program was overwhelmingly received by farmers but was declared unconstitutional by Supreme Court in 1936.
1.3 National Recovery Act (NRA-1933):
This was mainly to target industries involved in gaining money through unfair means or unfair competition. It set up codes for industries to discourage unfair competition, raise wages and fix prices and matters related to labor rights. It was overturned by Supreme Court in 1935.
1.4 Public Works Administration (PWA-1933):
Started in 1933, this was mainly responsible for construction projects like parks, buildings, schools, roads etc. main purpose of this was to provide loads of jobs to the already unemployed and deserving. For these projects, government used private contractors (did not directly hire unemployed). Itended in 1941. Another similar department “civil works administration” was also started to provide temporary jobs to millions of unemployed. But it wasclosed in 1934 due to its high burden of salaries on government treasury.
1.5 Federal Deposit Insurance Corporation (FDIC-1933):
Glass Steagall Act, signed on 16th June, 1933, created Federal Deposit Insurance Corporation to rebuild confidence of public on member banks. According to this Act, the deposits of people were insured i.e. in case of failure of banks, the federal government will be responsible to return the deposits ($2500 were 100% safe). It is still functional in USA.
1.6 Tennessee Valley Authority (TVA-1933):
Created in May 1933, it was an effort to modernize the poor region (mostly Tennesse) and was authorized to build dams on Tennessee River to generate electricity. It also included programs to teach locals better soil management. Twenty new dams were constructed and electricity produced by these stations were given to the public of this area at lower prices The establishment of TVA almost solved the problem of floods of this area. It still exists.
1.7 Securities Act of 1933:
It established Security and Exchange Commission and it main purpose was to set standards for sale/ purchase of stocks and clarifying risks of investment. In simple words, it was acting as a watchdog on stock market. It still exists.
1.8 Civilian Conservation Corps (CCC-1933):
This program targeted young and unmarried people (17-25 years of age) and gave around 02 million jobs. It was under supervision of US Army and the main task of this agency was to make bridges, cutting trees and arrange for fire mostly in rural areas. It lasted until US joined World War 2.
2. Second New Deal:
After the rigorous actions taken in first hundred days, FDR’s administration started introducing programs 1934 onwards. Most notable among them included Social Security Act, Work Progress Administration, National Labor Relations Act/ Wagner Act, Federal Security Agency, Federal Crop Insurance Corporation etc.
2.1 Social Security Act (SSA-1935):
Social Security Act became a law in 1935 and was described as a “contract between generations”. The concept was that the current generation would pay a small percentage (one percent envisioned to be three) and the elder retirees would get them. Those who pay would start getting it back after they reach the age of 65; based on the amount they had paid. The basic aim was to help the elder, handicapped and unmarried women with dependent children. Although this program had many flaws at that time but it was revolutionary in a sense that it paved the way for future governments and enhanced the relationship between government and its public. This program still exists.
2.2 Work Progress Administration (WPA-1935):
It was considered as one of the largest relief programs of New Deal and started in 1935. It provided jobs to around 2 million unskilled people across the nation and most of its projects were related to construction of roads, buildings, parks etc. However, jobs were also given to unemployed artists, musicians through art projects and sewing related jobs to women. It was renamed as Works Project Administration in 1939. It officially ended in 1943.
2.3 National Labor Relations Act:
In 1935, Congress passed the Wagner Act under which the employers could not interfere with the worker’s right to join labor Union. National Labor Relations Board was set up for this purpose and employers were forced to bargain with the union in any dispute. It was established to protect the right of collective bargaining. These unions were greatly supported in 1930’s due to which the persons organized in these unions rose from 7.8 % in 1933 to 21.9 % in 1938. It still exists but in a modified form (Taft-Hartley Act-1947).
2.4 Federal Crop Insurance Corporation (1938):
FCIC was established in 1938 to insure crops and livestock against loss of production or revenue. It is still functional in a modified form (Risk Management Agency 1996).
Other important programs were the Federal Security Agency (FSA) to administer social security, food and drug safety, Federal Housing Authority (FHA) which provided low interest loans, United States Housing Authority (USHA) , Fair Labor Standard Act (FLSA), Home Owner Loan Corporation (HOLC) and many more.
Was the New Deal Effective?
New Deal cannot be called a full failure or grand success. It had many positives but its critics also point out the negatives. Although it did created millions of jobs, ended bank failures, protected investments and programs that acted as watchdogs on stock market, introduced Social Security and public projects throughout the country BUT at the same time it failed to reduce unemployment rate to pre depression level i.e. it was 19 % in 1939, doubled the national debt in two terms, gap between rich and poor still existed. The Great Depression ended when the Americans entered into World War 2 and historians are of the view that it ended in 1943 when unemployment rate reached pre depression levels. Regardless of the various flaws, FDR and New Deal brought Americans close and taught them how to take big decisions to face tough time and solve the problems. FDR enjoyed the support of his people due to his various reforms and he is the only President to be elected for four consecutive terms.