Gone with the wind

The New Deal

The New Deal is the name given to the series of programmes carried out in the US under the presidency of Franklin D. Roosevelt with the aim of stabilizing, reforming and stimulating the United States economy during the Great Depression. The causes of the Great Depression (under Hoover’s presidency and recovered by the New Deal) were as follows:

Speculation in the 1920s caused many people to by stocks with loaned money and they used these stocks as collateral for buying more stocks. Broker's loans went from under $5 million in mid 1928 to $850 million in September of 1929. The stock market boom was very unsteady, because it was based on borrowed money and false optimism. When investors lost confidence, the stock market collapsed, taking them along with it.
Short signed government economic policies were one of the factors that led to the Great Depression. Politicians believed that business was the key business of America. Thus, the government took no action against unwise investing. Congress passed high tariffs that protected American industries but hurt farmers and international trade.
The economy was not stable. National wealth was not spread evenly. Instead, most money was in the hands of a few families who saved or invested rather than spent their money on American goods. Thus, supply was greater than demand. Some people profited, but others did not. Prices went up and Americans could not afford anything. Farmers and workers did not profit. Unevenness of prosperity made recovery difficult.

The Depression reached its top with the "Stock Market Crash" of 1929.

Relief, recovery, and reform of the New Deal

The New Deal had three main components:

direct relief
economic recovery
financial reform.

Relief: the immediate effort to help the one-third of the population hit by the depression. Roosevelt expanded Hoover's Federal Emergency Relief Administration (FERA) work relief program, and added the Civilian Conservation Corps (CCC), Public Works Administration (PWA), and (starting in 1935) the Works Progress Administration (WPA). Later the social security and unemployment insurance programmess were added. Separate programs were set up for relief in rural America, such as the Resettlement Administration (RA) and Farm Security Administration (FSA).
Recovery: the goal of restoring the economy to pre-depression levels. It involved "pump priming" (deficit spending), dropping the gold standard, efforts to re-inflate farm prices (because they were too low), and to increase foreign trade.
Reform: based on the assumption that the depression was caused by the inherent instability of the market and that government intervention was necessary to rationalize and stabilize the economy, and to balance the interests of farmers, business and labor. It included the National Recovery Administration (1933), regulation of Wall Street, the Agricultural Adjustment Act farm programmes (1933 and later), insurance of bank deposits (Federal Deposit Insurance Corporation, 1933) and the Wagner Act encouraging labor unions (1935). Despite urgings by some New Dealers, there was no major anti-trust program. It is still a debate if the New Deal was successful in achieving the three "Rs", and especially whether the programme should be a model for government action. The New Deal also saw the birth of the so-called "New Deal Coalition" that Roosevelt created to support his programmes, made up by the Democratic party, trade unions, European and African-American minorities or ethnics, and farm groups. By 1934, the Supreme Court began declaring significant parts of the New Deal unconstitutional. This led Roosevelt to propose the Court-packing Bill in 1937. Roosevelt soon had the opportunity to appoint 8 new Justices in the Supreme Court when some judges died or retired.

(from: English Wikipedia)

The New Deal agenda:

United States bank holiday 1933: closed all banks until they became certified by federal reviewers
Abandonment of gold standard, 1933: gold reserves no longer backed currency; still exists
Civilian Conservation Corps (CCC), 1933: employed young men to perform unskilled work in rural areas; under Army supervision; separate program for Native Americans
Tennessee Valley Authority (TVA), 1933: effort to modernize very poor region (most of Tennessee), centered on dams that generated electricity on the Tennessee River; still exists
Agricultural Adjustment Act (AAA), 1933: raised farm prices by cutting total farm output of major crops (and hogs)
National Recovery Act (NRA), 1933: industries set up codes to reduce unfair competition, raise wages and prices;
Public Works Administration (PWA), 1933: built large public works projects; used private contractors (did not directly hire unemployed)
Federal Deposit Insurance Corporation (FDIC) / Glass-Steagall Act: insures deposits in banks in order to restore public confidence in banks; still exists
Securities Act of 1933, created the SEC, 1933: codified standards for sale and purchase of stock, required risk of investments to be accurately disclosed; still exists
Civil Works Administration (CWA), 1933 - 34: provided temporary jobs to millions of unemployed
Social Security Act (SSA), 1935: provided financial assistance to: elderly, handicapped, paid for by employee and employer payroll contributions; required years contributions, so first payouts were 1942; still exists
Works Progress Administration (WPA), 1935: a national labor program for 2+ million unemployed; created useful construction work for unskilled men; also sewing projects for women and arts projects for unemployed artists, musicians and writers.
National Labor Relations Act (NLRA) / Wagner Act, 1935: set up National Labor Relations Board to supervise labor-management relations; In 1930s it strongly favored labor unions. Modified by Taft-Hartley (1947); still exists
Judicial Reorganization Bill, 1937: gave President power to appoint a new Supreme Court judge for every judge 70 years or older; failed to pass Congress
Fair Labor Standards Act (FLSA), 1938: established a maximum normal work week of 40 hours, and a minimum pay of 40 cents/hour; it still exists.

The New Deal: definitions of key terms

Here you can find some of the terms (and protagonists) useful to understand

the New Deal

speculation

Undertaking risk on stocks or real estate for the chance of profit

buy on margin

Practice of buying stocks by paying 10 to 50 percent of the full price and borrowing the rest; common in the 1920s before the stock market crash of 1929

Black Tuesday

On this day, Oct 29, 1929, a record 16.4 million shares were sold, compared with 4 to 8 million shares a day, earlier in the year

Father Divine

African American minister; his Harlem soup kitchens fed the hungry during the Great Depression

Twenty-first Amendment

Constitutional amendment of 1933 repealing the Eighteenth Amendment, thus ending prohibition

Hawley-Smoot tariff

Import tax levied in 1930, the highest in United States history; produced the opposite of its intended effect when international trade slowed

Reconstruction Finance Corporation

Government corporation set up by President Herbert Hoover in 1932 that gave government loans to banks

John Maynard Keynes

British economist who believed that government spending could help a faltering economy; his theories helped shape New Deal legislation

Eleanor Roosevelt

First Lady 1933-1945; tireless worker for social causes, including women’s rights and civil rights for African Americans and other groups

hundred days

First one hundred days of President Franklin D. Roosevelt’s term of office where he feverishly pushed program after program through Congress to provide relief, create jobs, and stimulate economic recovery Federal Deposit Insurance Corporation (FDIC), established by Congress to insure deposits of $5000

public works programs

Government-funded projects to build public facilities; central to President Franklin Roosevelt’s New Deal job programs

National Industrial Recovery Act

of June 1993 sought to bolster those prices and thus help businesses and individuals. The NIRA allowed trade associations in many industries to draw up codes to regulate wages, working conditions, production, and even prices.

Wagner Act

National Labor Relations Act of 1935; legalized union practices such as collective bargaining and the closed shop and outlawed certain antiunion practices such as blacklisting

Fair Labor Standards Act

set the minimum wage at twenty-five cents an hour which was well below what most covered workers already made

Social Security Act

Legislation of 1935 that established a social welfare system funded by employee and worker contributions; included old-age pensions, survivor’s benefits for victims of industrial accidents, and unemployment insurance

political right

Those who wish to preserve the current social and political system or power structure

political left

Those who wish to change the current social and political system or power structure

Father Charles Coughlin

"Radio Priest" who supported and then attacked President Franklin Roosevelt’s New Deal; prevented by the Catholic church from broadcasting after he praised Hitler

court-packing plan

Roosevelt asked Congress to pass a bill that would allow him to appoint 6 new justices to clean up the court system

national debt

Total debt of the federal government

Successes and failures of Roosevelt's "New Deal" programmes:

When President Roosevelt took office in 1933, he planned many programmes to give relief, create jobs, and stimulate economic recovery for the U.S. These programmes are better known as "the "New Deal."

PROGRAMME:	DESCRIPTION:	OUTCOME:
Emergency Banking Act/Federal Deposit Insurance Corporation (FDIC)	On March 6, 1933 he shut down all of the banks in the nation and forced Congress to pass the Emergency Banking Act which gave the government the opportunity to inspect the health of all banks. The Federal Deposit Insurance Corporation (FDIC) was formed by Congress to insure deposits up to $5000.	These measures re-established American faith in banks. Americans were no longer scared that they would lose all of their savings in a bank failure. Government inspectors found that most banks were healthy, and two-thirds were allowed to open soon after. After reopening, deposits had exceeded withdrawals.
Federal Emergency Relief Administration (FERA)	Led by Harry Hopkins, a former social worker, this agency sent funds to depleting local relief agencies. Within two hours, $5 million were given out. Mr. Hopkins believed that men should be put to work and not be given charity. His programme also funded public work programmes.	Revitalized many deteriorating relief programmes.
Civil Works Administration (CWA)	This public work programme gave the unemployed jobs building or repairing roads, parks, airports, etc.	The CWA provided a psychological and physical boost to its 4 million workers.
Civilian Conservation Corps (CCC)	This environmental programme put 2.5 million unmarried men to work maintaining and restoring forests, beaches, and parks. Workers earned only $1 a day but received free board and job training. From 1934 to 1937, this programme funded similar programmes for 8,500 women.	The CCC taught the men and women of America how to live independently, thus, increasing their self esteem.
Indian Reorganization Act of 1934	This act ended the sale of tribal lands and restored ownership of unallocated lands to Native American groups.	The outcome was obviously positive for the Native Americans.
National Industrial Recovery Act (NIRA) of June 1933	The decline in the industrial prices in 1930s caused business failures and unemployment. The NIRA was formed in order to boost the declining prices, helping businesses and workers. The NIRA also allowed trade associations in many industries to write codes regulating wages, working conditions, production, and prices. It also set a minimum wage.	The codes stopped the tailspin of prices for a short time, but soon, when higher wages went into effect, prices rose too. Thus, consumers stopped buying. The continuous cycle of overproduction and underconsumption put businesses back into a slump. Some businesses felt that the codes were too complicated and the NRA was too rigid. Declared unconstitutional later on.
Public Works Association (PWA)	The PWA launched projects such as the Grand Coulee Dam on the Columbia River.	One of the best parts of the NIRA.
Federal Securities Act of May 1993/ Securities and Exchange Commission (SEC)	This act required full disclosure of information on stocks being sold. The SEC regulated the stock market. Congress also gave the Federal Reserve Board the power to regulate the purchase of stock on margin.	Not pleasing for businesses.
Home Owners Loan Corporation (HOLC) / Agriculture Adjustment Administration (AAA)	In order to help people keep their houses, the HOLC refinanced mortgages of middle-income home owners. The AAA tried to raise farm prices. It used proceeds from a new tax to pay farmers not to raise specific crops and animals. Lower production would, in turn, increase prices.	Farmers killed off certain animals and crops as they were told to by the AAA. Many could not believe that the federal government was condoning such an action when many Americans were starving. Declared unconstitutional later on.
Tennessee Valley Authority (TVA) (May 1993)	The TVA helped farmers and created jobs in one of America s least modernized areas.	Reactivating a hydroelectric power plant provided cheap electric power, flood control, and recreational opportunities to the entire Tennessee River valley.
Works Progress Administration (WPA) 1935-1943	This agency provided work for 8 million Americans. The WPA constructed or repaired schools, hospitals, airfields, etc.	Decreased unemployment.
Farm Security Administration (FSA)	The FSA loaned more than $1 billion to farmers and set up camps for migrant workers.
National Labor Relations Act (Wagner Act)	It legalized practices allowed only unevenly in the past, such as closed shops in which only union members can work and collective bargain. The act also set up the National Labour Relations Board (NLRB) to enforce its provisions
Fair Labour Standards Act of 1938	This banned child labour and set a minimum wage.	This law was a long awaited triumph for the progressive-era social reformers.
Social Security Act	This act established a system that provided old-age pensions for workers, survivors benefits for victims of industrial accidents, unemployment insurance, and aid for defendant mothers and children, the blind and physically disabled.	Although the original SSA did not cover farm and domestic workers, it did help millions of Americans feel more secure.

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