During the 1930s, America witnessed a breakdown of the Democratic and free enterprise system as the US fell into the worst depression in history. The economic depression that beset the United States and other countries was unique in its severity and its consequences. At the depth of the depression, in 1933, one American worker in every four was out of a job.
The great industrial slump continued throughout the 1930s, shaking the foundations of Western capitalism. The New Deal describes the program of US president Franklin D. Roosevelt from 1933 to 1939 of relief, recovery, and reform.
These new policies aimed to solve the economic problems created by the depression of the 1930s. When Roosevelt was nominated, he said, “I pledge you, I pledge myself, to a new deal for the American people.” The New Deal included federal action of unprecedented scope to stimulate industrial recovery, assist victims of the Depression, guarantee minimum living standards, and prevent future economic crises.
Many economic, political, and social factors lead up to the New Deal. Staggering statistics, like a 25% unemployment rate, and the fact that 20% of NYC school children were underweight and malnourished, made it clear immediate action was necessary. In the first two years, the New Deal was concerned mainly with relief, setting up shelters and soup kitchens to feed the millions of unemployed. However, as time progressed, the focus shifted towards recovery.
In order to accomplish this monumental task, several agencies were created. The National Recovery Administration (NRA) was the keystone of the early new deal program launched by Roosevelt. It was created in June 1933 under the terms of the National Industrial Recovery Act. The NRA permitted businesses to draft “codes of fair competition,” with presidential approval, which regulated prices, wages, working conditions, and credit terms.
Businesses that complied with the codes were exempted from antitrust laws, and workers were given the right to organize unions and bargain collectively. After that, the government set up long-range goals which included permanent recovery, and a reform of current abuses. Particularly those that produced the boom-or-bust catastrophe. The NRA gave the President power to regulate interstate commerce. This power was originally given to Congress.
While the NRA was effective, it was bringing America closer to socialism by giving the President unconstitutional powers. In May 1935 the US Supreme Court, in Schechter Poultry Corporation V. United States, unanimously declared the NRA unconstitutional on the grounds that the code-drafting process was unconstitutional.
Another New Deal measure under Title II of the National Industrial Recovery Act of June 1933, the Public Works Administration (PWA), was designed to stimulate US industrial recovery by pumping federal funds into large-scale construction projects. The head of the PWA exercised extreme caution in allocating funds, and this did not stimulate the rapid revival of US industry that New Dealers had hoped for. The PWA spent $6 billion enabling building contractors to employ approximately 650,000 workers who might otherwise have been jobless. The PWA built everything from schools and libraries to roads and highways.
The agency also financed the construction of cruisers, aircraft carriers, and destroyers for the navy. In addition, the New Deal program founded the Works Projects Administration in 1939. It was the most important New Deal work-relief agency. The WPA developed relief programs to preserve people’s skills and self-respect by providing useful work during a period of massive unemployment.
From 1935 to 1943 the WPA provided approximately 8 million jobs at a cost of more than $11 billion. This funded the construction of thousands of public buildings and facilities. In addition, the WPA sponsored the Federal Theater Project, Federal Art Project, and Federal Writers’ Project providing work for people in the arts. In 1943, after the onset of wartime prosperity, Roosevelt terminated the WPA.
One of the most well-known, The Social Security Act, created a system of old-age pensions and unemployment insurance, which is still around today. Social security consists of public programs to protect workers and their families from income losses associated with old age, illness, unemployment, or death. The Fair Labor Standards Act (1938) established a federal Minimum Wage and maximum-hours policy.
The minimum wage, 25 cents per hour, applied to many workers engaged in interstate commerce. The law was intended to prevent competitive wage cutting by employers during the Depression. After the law was passed, wages began to rise as the economy turned to war production. Wages and prices continued to rise, and the original minimum wage ceased to be relevant. However, this new law still excluded millions of working people, as did social security.
However, a severe recession led many people to turn against New Deal policies. In addition, World War II erupted in September 1939. Causing an enormous growth in the economy as war goods were once again in great demand. No major New Deal legislation was enacted after 1938. The Depression was a devastating event in America, and by regulating banks and the stock market the New Deal eliminated the dubious financial practices that had helped precipitate the Great Depression. However, Roosevelt’s chief fiscal tool, deficit spending, proved to be ineffective in averting downturns in the economy.