The Great Depression and the New Deal Phenomenon Essay
The Great Depression was a phenomenon that did significant damage to the American economy. Before that, the economy grew on an unseen scale under President Hoover, but the growth was marked by excess and inequity, which eventually caused the Wall Street Crash. Hoover, clinging to the laissez-faire policy, was completely unable to alleviate the depression; on the contrary, F. D. Roosevelt introduced numerous steps (which became known as “the New Deal”) and provided significant governmental assistance to the population, which allowed the country to recover from the depression.
The Great Depression came to the USA in October 1929, with the bloated stock market crash known as the Wall Street Crash. In the preceding years, the U.S. had experienced a major growth in its economy under the President Herbert Hoover, a Republican.
However, the growth was extremely intense. While the level of life of an average American increased significantly, the owners of businesses, especially large ones, benefited the most. With time, due to the highly unequal distribution of income, as well as to the depression in farming regions, the buying capacity of Americans decreased significantly; this led to the inability to purchase the goods present in the market. It meant that companies could no longer sell their products; the products accumulated in the markets, unsold.
The businesses also could not hire employees or pay them salaries, so the unemployment rose. Everything “exploded” with the Wall Street Crash; tremendous amounts of money were withdrawn from the banks, and the latter were not able to collect debts from stagnating European banks. Numerous investors were wiped out of the market, and many businesses went bankrupt, while the surviving ones introduced layoffs and salary cuts, deepening the depression further (Foner 800).
President Hoover response to the Depression was controversial. He listened to his advisers who stated that crises were a normal part of capitalism (which they are), and that people should “tighten the belt” so that the unproductive firms die out and the moral virtue among the poor is born in large quantities (which is a doubtful point of view, though it apparently does follow from the logic of capitalism).
It was not realized by the government that the lower and middle classes constituted a crucial part of the people’s buying capacity, and that without the “less fortunate” being able to earn money, the depression would be only likely to worsen. Hoover strongly opposed any governmental aid to the needy, and continued hoping that the situation would solve on its own, as a result of voluntary steps of the business.
The Republican Congress under Hoover took a number of unsuccessful attempts to resolve the situation (in 1932 such as increasing taxes, which only further reduced the buying power of Americans); finally, in 1932, Hoover admitted that his politics had failed, and took some steps to help businesses, but not the unemployed (Foner 802-803).
On the other hand, when Roosevelt won the election in 1933, he took numerous steps which were almost opposite to what Hoover proposed. Before the elections, he offered the Americans “a new deal”; even though the notion was vague at the time, his policy became known under that name.
FDR significantly changed the relationship between businesses and the government, limited the actions of banks, and introduced significant governmental help to the population. In the first 100 days of his rule, Roosevelt adopted a large number of laws and established various national agencies aimed at addressing the crisis (Foner 812-813).
Among the acts adopted by the Congress under FDR, there were AAA (Agricultural Adjustment Act) and NIRA (National Industrial Recovery Act). AAA provided subsidies for farmers for not planting crops on a part of their territory, and for killing excess domesticated animals, which would defeat the excess of the farming products in the markets and increase their price.
NIRA established NRA (the National Recovery Administration) which was to set standards “for output, prices, and working conditions,” so that “‘cutthroat competition’… would be ended”; still, corporations turned NRA to their advantage, so it did little to help the situation (Foner 813-814).
The Federal Emergency Relief Administration (FERA) was an agency that provided states with finances to run relief programs and create jobs. In March 1933, CCC (the Civilian Conservation Corps) was created to employ young men in projects such as forest preservation or improvement of nature reserves, which allowed them to earn at least some wages from the government.
In November, the Civil Works Administration (CWA) was established to provide temporary jobs (such as construction of roads, tunnels, etc.) to larger numbers of unemployed people to help them survive the winter. CWA, however, became too costly to the government, and was dismissed in spring 1934 (Foner 813-815).
In 1934, FDR decreased governmental employment for the needy. In 1935, however, he restored his politics. The Works Progress Administration (WPA) was established; it provided jobs for nearly 3 million people who built bridges and buildings, organized art projects, etc.; WPA worked until 1943 and provided help to great numbers of people who were in the desperate need of a job (Foner 825).
To sum up, it should be stressed that the Great Depression came to the U.S. as a result of the highly unequal distribution of income, which meant that the population, the main purchasing power of the people, could buy not nearly enough products from the market, so the goods were left unsold, and the production stopped.
While the Hoover’s laissez-faire policy proved impotent in fighting the crisis, Roosevelt’s “New Deal,” which included numerous programs of social security, governmental jobs for the unemployed, etc., alleviated the situation and allowed the country to recover from the economic disaster.
Foner, Eric. Give Me Liberty!: An American History. Vol. 2. 4th ed. 2013. New York, NY: W. W. Norton & Company. Print.
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