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How were the different programs proposed after Roosevelt's new deal tackling the problems created by the Great Depression?


As we all know, the Great Depression was an economic slump in The United States, Europe, and other industrialized areas of the world that lasted about a decade. It was caused by a huge collapse of stock-market prices on the New York Exchange in October 1929. During the next three years stock prices in the U.S continued to fall. Besides ruining a lot of investors, the decline of the value of the assets strained banks and other financial institutions. The failure of so many banks, combines with a general and nationwide loss of confidence in the economy, led to much-reduced levels of spending and demand and hence of production. The result was a drastically falling output and the rising of unemployment.

The trading floor of the New York Stock Exchange just after the crash of 1929.


By 1932 the situation was getting worse and that led to the election of Democrat Franklin D. Roosevelt at the end of the year. The economic policy implemented by Roosevelt, had the objective of getting the U.S out of the Great Depression. It's measures included employment support and employment generation measures, initiatives for public work and incentives for private investment. The package of legislative reforms that came to be known as the New Deal  transformed the politics and economy of the United States. In his first "hundred days" he proposed a program to bring recovery to business and agriculture, relief to the unemployed and those in danger of losing farms and homes, and reform, especially through the establishment of the Tennessee Valley Authority.

When Roosevelt started his first term as president, the banking and credit systeml of the nation was in a state paralysis. The administration adopted a policy of moderate currency inflation to start an upward movement in commodity prices and to afford some relief to debtors. New governmental agencies brought credit facilities to industry and agriculture. The Federal Deposit Insurance Corporation (FDIC) insured savings-bank deposits and severe regulations were imposed upon the sale of securities on the stock exchange.

In the field of relief, the New Deal was successful. A lot of unemployed Americans might have literally starved to death if not for the government checks they earned by working for new agencies like the Civilian Conservation Coprs (CCC). In the CCC, young men participated in a variety of conservation projects like planting trees to combat soil erosion and mantain national forests; eliminating stream pollution, etc.
In 1933, Congress passed the Agricultural Adjustment Act (AAA) to provide economic relief to the farmers. The AAA plan was to raise crop prices by paying farmers a subsidy to compensate for voluntary cutbacks in production. Between 1932 and 1935, the farm income increased more than 50 percent.

In that year, the National Recovery Administration (NRA) and the National Industrial Recovery Act (NIRA) were established. They attempted to end cut-throat competition by setting codes of fair competitive practice to generate more jobs and thus more buying. Although the NRA was welcomed at the beginning, business complained bitterly of over-regulation as recovery began to take hold.



By 1935 the Nation had achieved some measure of recovery, but businessmen and bankers were turning more and more against Roosevelt's New Deal program. They feared his experiments, were appalled because he had taken the Nation off the gold standard and allowed deficits in the budget, and disliked the concessions to labor. In response to this pressures, President Roosevelt backed a new set of economic and social measures: Social Security, heavier taxes on the wealthy, new controls over banks and public utilities, and an enormous work relief program for the unemployed.

In spite of Roosvelt's attempts to restore the economy, during the decade of the 30s, unemployment remained high, while economic growth remained slow. Recovery only came with Roosevelt's third term, when the heavy demands of movilization for the World War II finally restored the country to full employment. Even though the New Deal failed in its most important objective, this program changed America. Roosevelt built a dominant new political coalition, bringing many more members into the Democratic Party. The strcutural stability and social security provided by the New Deal's reforms caused a postwar economic boom that many economists and historians have described as the "golden age of American capitalism". Besides that, the New Deal gave everyone a better understanding of the economic consequences of taxation, debt and spending. This knowledge helped the federal government to limit the impact of later recessions.

References: 

  • About the Great Depression. http://www.english.illinois.edu/maps/depression/about.htm . Taken in March 22 of 2013 
  • The Depression in the United States- An Overview. http://www.english.illinois.edu/maps/depression/overview.htm . Taken in March 22 of 2013. 
  • Franklin D. Roosevelt . http://www.whitehouse.gov/about/presidents/franklindroosevelt . Taken in March 22 of 2013. 
  • FDR's New Deal. http://www.shmoop.com/fdr-new-deal/summary.html 
  • McGEEHAN, John. The New Deal. http://www.netplaces.com/american-history/the-great-depression/the-new-deal.htm 


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